Manulife Financial Corporation Stock

Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation Third Quarter 2026 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead.

Thank you. Welcome to Manulife's earnings conference call to discuss our third quarter 2026 financial and operating results. Our earnings materials, including webcast slides for today's call, are available in the Investor Relations section of our website at manulife.com. Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 34 for a note on the non-GAAP and other financial measures used in this presentation. Please note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated.

Turning to Slide 4. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide a highlight of our third quarter 2026 results and a strategic update. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail. After their prepared remarks, we'll move to the live Q&A portion of the call.

With that, I'd like to turn the call over to Phil.

Thanks, Hung, and thank you, everyone, for joining us today. Before we begin, I'd like to take a moment to remember our dear friend and colleague, Stephanie Fadous, who passed away unexpectedly in September. Stephanie was an exceptional leader and a deeply valued member of our team. Many of you had the opportunity to interact with Stephanie directly. Over more than 2 decades at Manulife, she made countless contributions and made a lasting impact on our organization. We will miss the warmth, perspective, wisdom and care she brought to those around her. Our thoughts and the full support of the Manulife community remain with Stephanie's family and friends.

As we move into today's discussion, I want to recognize Sinead O'Connor, who's on the call with us and was recently appointed Chief Actuary. I'm incredibly proud to welcome her as the newest member of our executive leadership team. Sinead brings a wealth of experience and proven leadership, and I'm confident that she will build on the strength and momentum of our actuarial in-force and reinsurance functions and our tremendously talented colleagues within them.

With that, I'll begin with an overview of our third quarter financial performance, starting on Slide 6. We delivered strong results this quarter, demonstrating the strength and benefits of our diversified global portfolio. Our insurance segments delivered resilient new business results, broadly in line with the strong prior year comparative. In Asia, APE sales remained robust with both Hong Kong and Japan delivering year-over-year growth of approximately 40%, offset by lower sales in the Chinese Mainland.

We also saw strong growth in individual insurance sales in Canada, reflecting a large sale in Affinity Markets and continued momentum in participating life sales. Growth in our top line value metrics remained stable year-over-year, while our CSM balance increased 9%, further supporting future earnings generation.

In Global WAM, net outflows of $3.6 billion were driven by retirement. However, we saw a notable improvement in retail and continued to generate net flows in our institutional business, including meaningful contributions from Manulife Comvest. From a profitability standpoint, we delivered record core EPS, up 6% year-over-year, driven by continued double-digit core earnings growth in Asia and meaningful contributions from our North American insurance businesses.

While core earnings in Global WAM was impacted by the eMPF transition in Hong Kong, the overall results demonstrate the value of our global operating model. We also delivered strong core ROE of 17.8%. In addition, our adjusted book value per share increased 9% from the prior year, while we continue to return significant capital to shareholders.

Finally, active risk management of our balance sheet is important, particularly in the current macro environment. And during the third quarter, we sold over $1 billion of equities, which you will notice is reflected in our go-forward sensitivities.

Turning to Slide 7. One year ago, we announced our refreshed enterprise strategy anchored in our ambition to be the #1 choice for customers. Since then, we have been executing at pace and delivering on our strategic priorities. I want to underscore a few of our achievements before turning to our strategic highlights for this quarter.

Our winning team and culture are our greatest strengths, and we continue to invest in equipping our colleagues with the right skills, tools and opportunities to power long-term growth. This commitment to our people continues to be validated externally with Manulife consistently ranking in the top quartile for employee engagement in our industry while earning recognition around the world as a top place to work.

Over the past year, we've taken decisive actions to further diversify our portfolio and continue positioning Manulife for high-quality, sustainable growth. We established a joint venture with Mahindra to enter the life insurance market in India. We acquired Schroders in Indonesia, and we successfully acquired and integrated Comvest Credit Partners. And as we work to become the most trusted partner in health, wealth and financial well-being, we have taken meaningful strides this year to expand our wellness offerings and simplify access to health care.

We activated our partnership with Bupa to expand our medical specialist network in Hong Kong, providing customers with convenient, affordable and personalized access to high-quality care. We expanded access to cancer testing through 2 important initiatives, First, by broadening access for customers in North America to the GRAIL Galleri Multi-Cancer Early Detection test; and second, by establishing an exclusive partnership with Guardant Health to offer the Shield multi-cancer detection test to customers across multiple markets in Asia.

Becoming an AI-powered organization is key to improving experiences, transforming process, creating greater competitive differentiation and delivering value. Our recognition by Celent as a Model Insurer for the use of AI in underwriting underscores the meaningful progress we've made in driving AI innovation across the enterprise. As we continue to scale these capabilities, we are well on track to achieve and exceed our $1 billion in cumulative enterprise AI value by 2027.

Strengthening our distribution capabilities is another strategic differentiator for Manulife. And over the past year, for example, we renewed our bancassurance partnership with Chinabank in the Philippines. In Global WAM, we partnered with L&G, bringing together our complementary capabilities and expanding access to differentiated investment solutions for institutional retirement and retail clients globally. And in the U.S., we expanded our wholesaling team to accelerate our penetration in the high net worth and emerging high net worth markets.

On to Slide 8 and an overview of our progress in the third quarter. In Canada, we enhanced our segregated fund lineup and expanded access to existing funds, increasing investment choice and flexibility while helping customers diversify their portfolios and build long-term wealth. In Global WAM, Manulife Comvest raised USD 5.4 billion through the close of Comvest Credit Partners Fund VII, representing the largest fundraise in Comvest's history and expanding the platform's global investor reach.

And in the U.S., we expanded our protection portfolio with enhanced index universal life capabilities and additional differentiated term life solutions, providing financial professionals with greater flexibility to meet evolving customer needs. We also made meaningful progress scaling and advancing our AI capabilities this quarter.

We expanded our strategic partnership with Microsoft by extending Copilot to more than 30,000 colleagues and deploying Microsoft Agent 365 to enhance productivity, support innovation and strengthen enterprise AI governance.

In Asia, we expanded our AI-enabled advisory capabilities to the Chinese Mainland and Malaysia, helping agents analyze customer needs, identify protection gaps and provide more personalized customer service. And in Global WAM, we completed the rollout of an AI-enabled adviser engagement platform across North America retail, identifying 4x more product opportunities, capturing richer adviser insights and increasing productivity through automated documentation.

Finally, we are leveraging innovative partnerships to reinforce our health and longevity leadership. In Asia, we're working with Ant Health to improve access to health care for customers. Our first initiative with Ant Health was launched in October, offering cashless direct billing through Alipay for eligible customers at participating health care providers in the Chinese Mainland. And in Canada, we partnered with Sword to offer AI-enabled virtual physiotherapy to eligible group benefits members, supporting faster recovery and return to work outcomes. Together, these initiatives demonstrate our commitment to helping customers live longer, healthier and more financially resilient lives.

To close, I'm pleased with our performance this quarter. Our results underscore the strength and resilience of our diversified global portfolio, especially in an uncertain operating environment while also demonstrating the meaningful progress we've made in delivering on our enterprise strategy over the past year. I'm excited about the opportunities ahead as we continue to help make decisions easier and lives better for our customers while creating long-term value for our shareholders.

With that, I'll hand it over to Colin to discuss our quarterly results in more detail. Colin?

Thanks, Phil, and good morning, everyone. We delivered strong results this quarter, underpinned by the resilience of our global franchise. The third quarter is also when we complete our annual review of actuarial assumptions or the basis change, which produced an overall favorable result and reinforces our confidence in the robustness of our reserves. Further details of this are on Slide 23 of the appendix.

Before opening the line to questions, I'll walk through our financial performance. Let's begin with our top line results on Slide 10. Our new business metrics were broadly in line with the prior year. As Phil mentioned, we saw strong APE sales growth in Hong Kong, Japan and individual insurance in Canada, partially offset by factors I'll discuss in a moment. In Global WAM, while flows improved compared to the prior year, we experienced net outflows of $3.6 billion, driven by retirement.

Turning to Slide 11 on core earnings. Our core net insurance service result increased year-over-year, reflecting continued strong business growth in Asia and the U.S., favorable claims experience in U.S. Life and Canadian individual insurance and the net favorable impact of the basis change. This was partially offset by unfavorable U.S. Life lapse and Canada Group insurance claims experience.

Moving down, our core net investment result decreased from the prior year, primarily driven by increased ECL provisions, which were in line with our medium-term guidance, but compared with the release in the prior year. Lastly, Global WAM pretax earnings were broadly in line with the prior year as higher net fee income from growth in AUM over the past 12 months and contributions from the Comvest acquisition offset the impact of the eMPF transition in Hong Kong.

Moving to Slide 12. Core EPS increased 6% year-over-year, reflecting 4% growth in core earnings and benefits of continued share buybacks. This quarter, net income came in at $1.4 billion, reflecting lower-than-expected albeit improved ALDA returns as well as lower-than-expected public equity returns and losses from derivatives and hedge accounting ineffectiveness. ALDA charges were mainly related to private equity, real estate and farmland investments. While it was encouraging to see sequential improvement, the current environment will likely continue to weigh on ALDA returns in the near term.

You'll also note that we've included some supplemental information on our ALDA portfolio in the appendix of today's presentation to give you a sense of why our expected long-term returns of 9% to 9.5% continue to remain appropriate. Net income was also impacted by the basis change and the write-down of an acquired intangible asset related to a Vietnam distribution agreement entered into in 2021 before the market challenges and subsequent contraction.

Moving on to results by segment. Let's start with Asia on Slide 13. APE sales were largely consistent with the prior year as year-over-year sales growth of 45% in Hong Kong and 39% in Japan were offset by lower sales in the Chinese Mainland. In the Chinese Mainland, the decline was driven by lower participating savings product sales compared with strong sales in the prior year and consistent with trends we're seeing across the industry. And in Hong Kong, strong sales reflect higher savings product demand from global high net worth customers.

Our value metrics were broadly in line with the prior year quarter as growth in Hong Kong and Japan was offset by a decline in the Chinese Mainland and Singapore. Core earnings in Asia were strong once again, increasing 17% from the prior year quarter, largely driven by continued business growth and a few smaller items, including this year's basis change. This was partially offset by increased ECL provisions.

Now moving on to Global WAM on Slide 14. We saw continued headwinds in net flows this quarter, primarily in our retirement business. In U.S. Retirement, net outflows were mainly driven by higher plan sponsor redemptions, while net outflows on the Canadian retirement side were modest and reflected lower new plan sales.

We also saw net member withdrawals due to higher account balances from market appreciation across North America. This was partially offset by net inflows in our institutional channel, led by continued strength from Manulife Comvest. Retail flows were largely neutral this quarter as strength in Canada Wealth and Asia retail helped to offset outflows through third-party intermediaries in North America.

Core earnings decreased 5% from the prior year as higher net fee income from favorable market impacts over the past 12 months and contributions from the Manulife Comvest business were more than offset by the impact of the eMPF transition in Hong Kong, higher workforce-related expenses and investment in business growth, the nonrecurrence of favorable tax true-ups in the prior year and lower performance fees.

Next, turning to Canada on Slide 15. This quarter, APE sales increased 3% year-over-year, reflecting higher sales in individual insurance, including a large affinity market sale and higher participating life sales, partially offset by lower group insurance sales. Strong sales in individual insurance, along with higher margins in annuities drove 5% growth in new business CSM, though this was partially offset by lower margins in individual insurance.

Core earnings grew a modest 3% year-over-year, reflecting more favorable claims experience in individual insurance, higher Manulife Bank earnings and higher investment spreads. This was partially offset by unfavorable claims experience in group insurance as well as increased ECL provisions. While overall insurance experience was positive this quarter, group benefits experience remained challenged, though we saw modest sequential improvement in claims experience.

Lastly, let's discuss our U.S. segment's results on Slide 16. APE sales were in line with the strong prior year quarter, while changes in product mix led to a decrease in our value metrics. Core earnings increased 5% year-over-year, reflecting favorable life insurance claims experience, including net positive impacts from this year's basis change, business growth and favorable tax items. These were partially offset by increased ECL provisions and unfavorable lapse experience.

Moving on to Slide 17. We continue to grow our adjusted book value per share, which increased 9% year-over-year to $41.78. We delivered this growth while returning $5.3 billion of capital to shareholders over the past 12 months.

Now let's turn to our balance sheet on Slide 18. We continue to maintain a strong capital position with a LICAT ratio of 136%, representing $25 billion in excess of the supervisory target ratio. Our financial leverage ratio of 23% remains comfortably below our medium-term target of 25%. These metrics underscore the strength of our balance sheet and capital position, providing significant financial flexibility and supporting our ability to continue driving long-term growth.

Lastly, Slide 19 highlights our performance against our 2027 and medium-term targets. We are pleased with the momentum we generated this quarter towards our financial objectives, led by strong results in Asia. Our core ROE was 17.8%, reflecting continued progress towards our 18% plus target. While there is still work to do to achieve this goal, we are encouraged by the progress we have made this year.

This concludes our prepared remarks. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of 2 questions including follow ups and to requeue if they have additional questions. Operator, we will now open the call to questions.

[Operator Instructions] The first question is from John Aiken with Jefferies.

It was good to see the strong Hong Kong demand offsetting Mainland China, but I was a little bit surprised to see a little less growth in Singapore. Can you talk to what's driving the demand issues between Hong Kong versus Singapore?

Sure, John. Thanks for the question. Yes, we were pleased with the growth, as you note, in Hong Kong with all our new business metrics up double digits. And what was the biggest driver of the growth there that we were seeing was in the high net worth space. Manulife is the leader in the high net worth space. And the demand in Hong Kong from global customers has been very strong. So that was the biggest driver for the quarter in Hong Kong.

In Singapore, we've got a leading franchise there, leadership positions across channels. And we -- if you look year-to-date, I think look over a longer period of time, year-to-date, we've had strong double-digit growth. I would chalk up Q3 to normal variability. We continue to have confidence as we look forward in Singapore, including in the high net worth space as well. Singapore is one of the leading international financial hubs, and we're seeing that growth there as well.

Thanks, Steven. And while I have you, I'll follow up with the second question. In terms of the performance in Japan, how sustainable do we think this is? And what generally is the outlook for the region?

Yes. Thanks, John. So Japan, as you know, continued strong growth. Similar to previous quarters, the driver there has been a favorable macro environment, higher interest rates. We've been expanding our product propositions to serve a wider range of customers. And that's resonated. We've seen strong growth across channels.

There is an element of macro factors providing support to the new business results, and that's been there for the past few quarters. The underlying growth, though, is strong. We would expect some normalization in the results as the macro conditions normalize, but continue to have a favorable outlook to meet the demands in Japan.

The next question is from Gabriel Dechaine with National Bank Financial.

I'll just keep going with that sales in Asia topic. And yes, the Hong Kong sales were up, and you gave us an explanation as to what type of products we're selling that. But if I -- my first ever NBV margin question, I think. But your margin is down like sub-40. Last year, you were in the 50s. So the mix is less profitable. And I assume that's because you're selling more of this offshore high net worth stuff and less of the Mainland Chinese visitor stuff. So is there an outlook for that more profitable business mix to rebound anytime soon?

Yes. Thanks for the question, Gabe. As we noted, the high net worth proposition has resonated and we're seeing strong sales there. And the product that is the choice for customers in that space is the savings-oriented product. And it's a competitive space. It's got somewhat lower margins. To be clear, we're happy with the margins on the product, right? We're driving absolute dollars of value creation, whether it's NBCSM or NBV. And we do expect this business to be accretive to the company's ROE target of 18% plus.

So that's really the driver of why we're seeing the margin down, but we're pleased with the results. And looking forward, our focus is we've got a very diversified business in Hong Kong. We're focused on meeting the customer needs. And we'll meet those customer needs and drive value -- to drive the value metrics. It's less about a focus on higher margin. It's more about meeting the customer need and generating value.

Okay. I'll move over to the actuarial review. And I guess a question for Sinead. Slide 23, top left, just to make sure when we see the total impact is a negative number, that's a good thing. And I want to drill into the mortality component of it, which is a negative number, so a good thing, but it's also quite small. That could be the net result of some large moving pieces. I'm just -- wondering if there was any material adjustment to CSM or anything like that related to the life block in the U.S. that has been not this quarter, but in prior quarters has been generating some notable mortality losses such that going forward, they should smooth out that experience rather?

John, thanks for the question. This is Sinead speaking.

This is Gabriel. John was the last guy.

I apologize. Look, I'm not off to a great start here. We did complete our annual review of methods and assumptions this quarter, as you pointed out. And you're right that the top left, $128 million. Overall, we saw a reduction to fulfillment cash flows of $128 million. So a decrease in reserves.

And in terms of your question on the mortality in general, I would say that the $75 million is the net impact. We looked at a couple of things in that. We looked at mortality, morbidity in Vietnam. And then we also looked at the U.S. mortality. But I would say, in general, quite modest changes to both of those. And in the U.S., we have -- we are in the large case market, and we have some claims variability. We've said that the experience in the recent past has been driven by a handful of large cases. And our review considered all recent experience. We reflected that. Again, a modest increase in reserves there.

The way we book our basis changes, our assumptions, it is effective on July 1. So starting in Q3, we did see a small pickup in the U.S. on experience. But I would say even net of that, our U.S. mortality experience for this quarter was positive, and we are now positive year-to-date.

The next question is from Doug Young with Desjardins.

I guess, Sinead, this is for you as well. Maybe we can stick on the same slide. But it looked like in the actuarial assumption review, you had a charge for lapses, which I kind of get. But it appears that you also had negative lapse experience in the quarter related to the U.S. And so I'm just trying to reconcile.

I'm only seeing the bigger picture, but I'm trying to reconcile why you would continue to have negative lapse experience when you took a charge for lapses in your annual review of actuarial assumptions, and I'm sure there's a good rationale behind it. And then just what you're seeing that's driving the adverse lapse experience, both in the ongoing P&L, but also in the actuarial review.

Thank you, Doug. Again, Sinead here. So the lapse review for this year was actually in our Singapore block. And so we last did U.S. lapses in 2024. That was the last time we did a review. And up until this quarter, I would have said that we were on average neutral from a lapse experience. Now this quarter, we did see some adverse lapse experience in our U.S. life block, but I would consider that just normal variability and certainly not something that we see as a trend. And so that's really the explanation there.

Okay. And then in the life block, the negative lapse experience, what product did that relate to?

It's our U.S. life business, and it's a small -- it's quite -- what we would consider normal variability.

Okay. And then, Steve, maybe you could just go back to yourself in Asia. I mean, APE sales were flat, new business value flat. The contribution to CSM from new business increased, I think, 2% year-over-year in the quarter. So -- I guess some could question the growth outlook here. And I just wanted to get your thoughts on how you would kind of push back on that. Obviously, I think the core earnings for Asia was up 17% year-over-year. Just trying to get a sense, is that sustainable? What -- why shouldn't we be concerned that some of those metrics are flat in terms of what's going to drive your bottom line growth going forward?

Yes, Doug, thanks for the question. As you know, we're pleased to see the core earnings grow 17%, continuing some strong growth that we've seen this year. I'd point out growth in CSM year-over-year is also up 10%, which is indicative of future earnings. In terms of the sales, Colin covered it in his opening, but just a quick recap is we saw the growth in Hong Kong and Japan, very strong growth. It was offset in the quarter by a decline in the Chinese Mainland. And that was a trend we saw across the industry.

There had been effectively an acceleration of sales in Q3 of prior year that made a very tough comparable. So as we look forward, certainly in China, expect a materially stronger Q4 than in Q3. And while there can be variability in sales quarter-to-quarter, and we would expect that, one of the nice features of IFRS 17 is it doesn't result in core earnings variability. And as we look to the future across Asia, we continue to be optimistic about the prospects for growth and Manulife's multichannel distribution, multi-market presence, and we expect to continue to capture that growth looking forward.

So no, you don't feel like there's any kind of anything that's kind of impeding your ability to -- as you've done in the past, like grow, essentially, you don't think that's...

Yes. As we look to the future, we see the growth, yes, I think we would expect normal variability. We've had such strength in Hong Kong. It's not unreasonable to expect short-term variability, but we look past that and look to the future with confidence.

The next question is from Tom MacKinnon with BMO Capital.

Two questions. First, just on the Canadian Group LTD experience. You noted modest improvement quarter-over-quarter. How are you tracking in terms of -- I think you expect that to be neutral perhaps by the end of the year? Just progress in terms of tracking towards that pricing environment and perhaps any other color?

Tom, it's Patrick here. I appreciate the question. So yes, we had a good quarter in terms of overall policyholder experience with a gain of $15 million for the Canadian segment. That was driven largely by positive experience in individual insurance, which we view as normal quarter-to-quarter variability. That was offset with continued morbidity pressure in group.

We have continued to see quarter-on-quarter sequential improvement off the back of the investments we've been making, and we continue to be optimistic about the overall policyholder experience trending towards neutral for year-end.

In terms of the pricing environment, on the second part of your question, the market remains competitive. We continue to be disciplined in terms of pricing and taking a very responsible and disciplined approach to how we price new business.

The second question is probably for Steve Finch with respect to Hong Kong. MCV business, there's certainly a lot in the news throughout the summer months and into the fall. I think you mentioned that's 25% of your Hong Kong sales. Can you -- any color as to what you've been seeing since the noted clampdown, if you will, from the regulator in terms of taxing these policies? What are you hearing from your distribution with respect to how this might be implemented? And any color with respect to further regulatory changes, perhaps with regulating to some extent how much premium financing can be used in these policies. So a little bit of an update there.

Thanks, Tom. Yes, I'll start with the CMV business. And as you know, there's been a variety of regulatory changes, I think, all in the direction of making this business more professional, more sustainable as we go forward. We have seen since last year, a slowdown in CMV business as the market is adjusting to some of these new regulations.

In terms of the tax news that you're referring to, I wouldn't call it a clamp down. This is -- I view it as a signal to enforce existing tax rules. And what we're seeing is, in the short term, we are seeing slower decision-making, maybe some pausing as people are trying to understand. And I think that's expected over the short term.

I think really importantly, as we look to the future, a lot of conviction that this flow of wealth that has been occurring will continue. It's a structural trend that will continue as customers are looking to Hong Kong for products and services that they can't get on the Mainland, currency diversification, a variety of different investments. So we expect this to continue to be an important part of our multichannel business going forward.

And Tom, this is Phil. If I could make one supplement to what Steve has said, and that is that we are seeing Hong Kong emerge more strongly, not only as a financial center for Greater China or Asia, but actually on the global scale. And increasingly, when we look at the sources of international business, offshore business, it's much broader than only the Chinese Mainland.

Yes. And any color with respect to premium financing? How much of these policies would be premium financed? Is there any regulatory risk around that?

Yes. So the regulator has published a circular really just clarifying their expectations, which I would consider good practice around premium financing. It is a common practice in the market in the high net worth space for financing, but it also depends on market conditions and how the banks are feeling about their lending.

And do you know what percentage of the policies you would sell that would have premium financing? Or are you -- or is it hard to tell because you don't necessarily know where the source of the funds come?

It does vary quarter-to-quarter. Historically, it's been a meaningful part of the high net worth business. But again, there's quite a bit of variability. I don't have the numbers top of mind. Like I said, it varies.

Right. Okay. And I assume you have high surrender charges with respect to this business if there was any kind of lapse, if you will.

Yes. We looked and considered all the various risks in the policies.

The next question is from Bart Dziarski with RBC Capital Markets.

Question on AI. So we're seeing the benefits from AI, specifically in health care and improving longevity. And when I look at the retained long-term care block active life reserves, it's fairly young at 74 years. So could you help us understand that dynamic? Was that factored into your actuarial review this year? Or is that a go-forward item we should be thinking about?

Bart, thanks for the question. I think your question was, in particular, AI and advancements in medical improvement.

Improving longevity exactly, like people are living longer. It's got positive health care benefits.

So particularly in our LTC business, I would say that we are quite confident in the prudency of our reserves. And in particular, longevity is something that we have considered in that. And I would also say that these are long-term assumptions and morbidity is driven by a number of different factors. So we don't know necessarily when or where the next medical advancements will come. But in general, I think that we -- and have shown it through our reinsurance transactions recently, the prudency of our overall reserves.

And Bart, this is Phil. Maybe I also make a contribution here, and I'll ask Brooks to comment specifically on what's being done in the long-term care business in the U.S. But a year ago, we identified being AI-powered as an important strategic priority. And since then -- in fact, before that, but since then, we have accelerated investment into various initiatives.

And those initiatives cover many different parts of our business, and there are many examples we could walk through. I think underwriting is a really good example of where we can extract benefits not only from what you may traditionally expect through cost reduction, but actually grow the business by responding to customers more quickly, and we can improve experience by actually having higher quality underwriting as a result. But specifically in long-term care, there are very interesting use cases that we already have rolled out and are delivering tangible benefits. But Brooks, I hand over to you for that.

Thanks, Phil, and thanks, Bart, for the question. I think it's a really important sort of macro question for the industry. It's funny, every day, someone will send me an article saying AI is going to end humanity or something. And I respond with an article that says AI is going to cure cancer and do all these other things. And we see tremendous tailwinds to longevity long term. So what does that mean for our business? We're not just observing those trends. We're leaning into them and looking to capitalize on them for the benefit of our customers and our shareholders.

So life insurance is pretty obvious. For over 10 years now, we've taken steps to engage our customers and offer them latest innovations, which AI is just going to accelerate to help them live longer, healthier, better lives. With LTC, in particular, we're taking a variation of that approach and engaging our existing LTC customers with tools, incentives, support programs to help them age in place. If you assume they will live longer, how do we keep them aging in place? No one wants -- looks forward to the day they need assisted living facilities or services. So we're leaning in on this mega trend, I would say, and I think it will ultimately be a very positive tailwind for the industry.

And just on -- just sort of stat on one area of long-term care benefit that we have seen. When it comes to fraud reduction, we have reduced the level of claims by 6 percentage points as a result of our fraud initiatives that leverage AI capabilities. So there are very tangible financial benefits emerging from our AI-powered strategy.

Awesome. That's very helpful color. And a follow-up on, I guess, maybe for Colin on -- you talked about financial flexibility having a significant amount just given leverage capacity and excess capital. And how should we be thinking about you deploying that financial flexibility to drive growth?

Bart, thanks for the question. Look, it's something that we spend a lot of time talking about. We've got $10 billion above our operating limit, and that we have to spend on a number of items. Our #1 use for capital is organic uses. So we're investing a lot in the business. You just heard Phil talk about AI. Then it's dividend and steady dividend increases, and we have a good track record of stable and steady dividend increases, double digit actually recently.

And then it's -- then we look at inorganic. We've done Comvest. We bought Schroders Indonesia, and we have consistently been buying back shares, and that's been helping the core ROE. So it is really helpful that our balance sheet is so strong. We have this excess capital, but we also want to be judicious with it. And so that we have a very high bar when it comes to things like inorganic, and we've seen the benefit of share buybacks. So nothing really new to talk about today, but it's just -- we feel we're in a great place, and we want to capitalize on that.

The next question is from Mike Rizvanovic with Scotia Capital.

First question for Colin. Just wanted to go back to the ALDA portfolio. So thanks for the additional disclosure. And you did mention potentially some more headwinds in the near term. And I'm just wondering, I know that long term, when the long end of the curve is higher, rates are higher, ALDA is eventually supposed to recover. And I'm wondering if you can provide maybe a bit of a time line or maybe describe the environment that would be conducive to ALDA getting back to its historical performance?

Mike, thank you. This is Phil. We'll just pass that one to Trevor to respond to.

Mike, it's Trevor. Thanks for the question. So first, just for color on the quarter. Obviously, we were quite happy with the improved performance. The annualized return for the quarter was sort of around 7.5%. That being said, there are, I think, both short-term geopolitical and interest rate headwinds that obviously read about in the papers each day, but also longer-term tailwinds, I think, given the impact of higher rates, market expectations and I think some of the portfolio repositioning that we have been doing over the last little while.

My expectation is that if rates sort of stay at this level, there will be some near-term headwinds. There'll be sort of a decline in near-term ALDA valuations that may be for a couple of quarters, I would think. But then I think we would start to trend back to our long-term assumptions. And I think higher rates are actually supportive of us trending back to our long-term assumptions. Thanks for the question.

Okay. Appreciate the color. And then maybe for Phil, I just wanted to -- just high level, just a question on core versus reported. When I look at the trend or just cumulatively what the differential has been since the transition to IFRS 17, it's still in that high 20% range. And I'm just wondering, I know that markets are always volatile. I know interest rates have been volatile in recent years. But is there a certain type of environment, whether it's macro or something MFC specific that would maybe close that gap over time? I'm just trying to interpret how I should perceive this persistent gap that we've seen between core and reported.

Yes, Mike, this is Phil, and thanks for asking that question. I think what we're seeing in the third quarter is somewhat of an unusual quarter because there are various items contributing to what I would describe as a larger variance between core to net income than I would typically expect to see. The one feature that we have seen for a good number of quarters now, and you tackled that in your prior question has been ALDA performance.

And to Trevor's point, we do expect really a continuation of what we have seen, if you look over the course of 2026, I think that's a good indication of the sort of variance -- what we've seen this year, I think, is what you could expect to see in the next few quarters. However, we do have confidence that the long-term assumption remains appropriate, and we will trend to that long-term assumption beyond the immediate term.

And I refer to the immediate term largely because of the impact of interest rates being elevated relative to where they were a few years ago. When I reflect on your question on what would we -- what would it take to see a normalization or an alignment of net income with core earnings, I think that is the one item. It's transitioning ALDA back to our expected long-term assumptions of 9% to 9.5%. And I do feel that's very reasonable. And as Trevor said, consistent with a higher interest rate environment once the short-term impacts of rates has been worked through the system.

Okay. So then it's fair to say you don't believe there's any structural reason why this gap should persist on a go-forward basis. It's really just ALDA and then markets doing what they do every quarter. Is that fair?

I think that's fair. But what I would highlight is that there are some asymmetries in accounting, whereby gains are deferred into the future and charges are recognized more quickly. And you see that. I think this quarter, this year's basis change is a good example, where it's a net release of reserves, it's an overall positive, but negative items end up going to net income and positive items end up sitting in OCI and CSM and get amortized into the income statement over time. But I think to a large extent, your hypothesis is correct. There's nothing materially structurally that should create a long-term disconnect between the two.

The next question is from Mario Mendonca with TD Securities.

Plenty of things in the quarter that sort of leads me toward buying into the 18% ROE target for 2027. There's one in particular that does not, and I want to focus on that today. The Global Wealth and Asset Management business, there have been some clear changes in net flow trends over the last couple of years. Let's call it last year. This is a business that consistently delivered positive flows and recently has not. Is there anything that you would point me to in terms of Manulife's performance, like performance in their funds and what you're delivering for your customers in that business? Or would you say this is all macro driven, markets have been strong, so retirement flows are going to be negative? That's the first part of my question. Help me understand this recent deterioration in flows.

Great. Thanks, Mario. It's Paul here. I'll take that one. I would say just to answer the question, it's probably a combination of both. Definitely, there's industry headwinds. Strong markets is a negative in terms of flows as it relates to retirement, but it's a positive from an earnings perspective. And you have seen some of the -- just the volatility in terms of just the active market in North America and this transition, more ETF structures from funds. And I think that's more been an industry-wide phenomenon. I would say we feel pretty good about our resiliency on that.

As Colin mentioned, in terms of our flows, there's a lot of momentum underneath our flows. Gross flows, $56 billion, that was an increase of 16% over prior year. We had the second highest quarter on record of ETF on gross, and it was very strong ETF flows. And then even just looking within the business a little bit more, institutional, we've been 21 out of the 22 quarters positive now.

Our retail business was neutral, and that's been an improving trend and one we actually feel quite good about in terms of outlook for retail. And then retirement, we did see some headwinds with some plan redemptions in Canada, U.S., but we do get that variability from time to time. Again, just putting the franchise into perspective, Canada, we're a top 2 player, 30% market share. Hong Kong, leading player there. In the U.S., we're a top 5 player. We're in our kind of core markets, which is under $50 million, and we continue to invest.

So we actually feel good about the underlying momentum from an industry. We did have a few performance challenges last year with some of our third-party managers and a few internal, which we have since kind of turned around, and we did have some talent changes, which does kind of disrupt a few things at the margin. But overall, we feel really optimistic about the outlook here and feel good just about the underlying momentum of the business looking forward.

Mario, this is Phil. I'll add one thing, if I could, and that is that we are investing in GWAM for the future. And we've spoken about the Comvest investment as part of that, but that's inorganic. When we look at organic investments, the structural investments we have made in launching active ETFs is something that is translating through to positive flows, the gross flows that Paul referenced and the strong performance in retail, and we will continue to invest. And that's why you've actually seen some slightly higher expenses in GWAM in recent quarters.

Well, expenses is where I was going to go next because, again, this is a business, you look at it over time, there's just a long stretch of positive operating leverage and like very good operating leverage. And more recently, that's also turned negative or a lot weaker. These investments in the business, how much longer would you expect to see negative operating leverage or weak operating leverage as you invest? Is this something that persists for a few more years? Or is this a short-term thing?

Yes. Thanks, Mario. I would say it's more of a short-term thing. And keep in mind, when you look at the expense growth, if you actually adjust for the acquisitions of Comvest and Schroders, the expense growth year-over-year is less than 3% in the business, and those are contributing some earnings. I think what you've seen over the last year is just the transition to eMPF obviously had an impact on the top line.

But if you look at our core earnings year-over-year and look at it adjusting for the tax items, look at core EBITDA, it's relatively flat year-over-year, and that absorbs the impact of eMPF with the acquisition. So almost think of it like -- we've gone through the transition. We're basically where we were last year, and now we're well positioned for growth, and we're sitting at a margin of 29.6% in the quarter. So we would expect to continue to see operating leverage continue from this point forward as we grow the business and continue to manage expenses prudently.

The next question is from Paul Holden with CIBC.

I'll try to be quick with just 2 -- just to follow on Mario's question on GWAM. Just looking back at the Investor Day deck, it was planned to be the second largest contributor to ROE expansion. So important as we think about the 18% target next year. Like, has there -- is there anything to suggest that's kind of off plan versus what you presented in Investor Day, whether it's eMPF or really higher expenses? Or would you say you're on plan?

Yes. Thanks for the question, Paul. I would -- it's Paul Lorentz here. We're on plan from what we had anticipated at Investor Day. And again, keep in mind, we did anticipate the transition to eMPF and the targets we set. We set a number of targets around ROE, around margin and also efficiency ratio. We're tracking well on margin, which I just highlighted, and we're in the range of the efficiency ratio. So we feel quite good about the targets we set and our track record of delivering those next year.

And Paul, this is Phil. I think your question also touches on the ROE question. We set ourselves at Investor Day an 18% plus ROE target for 2027. And I do want to highlight that, yes, there are clearly some challenges, and we've seen that through, for example, earlier this year, experience in Canada.

But as a leadership team, we have conviction in the 18% target, and we're very much working towards delivering that in 2027. And beyond 2027, our focus is on not only sustaining it, but scaling the business at that ROE. So I just want -- don't want to be any ambiguity that we continue to work towards it.

That's important. And then I just want to ask one final one on ALDA. Maybe you help convince us that the 9% to 9.5% is the right return. Maybe you can give us some sense of what kind of returns are being underwritten on new investments?

Paul, it's Trevor. So yes, as we talked about in the past, our ALDA portfolio is 6 different asset classes. And so the underwritten returns for each of those obviously varies depending on the particular space that we're investing in. I think for sort of asset classes, real estate, timber, farmland, it's probably a little bit below that overall long-term target, the 9%, 9.5%. I think when you look at infrastructure and private equity, it's a little bit above that. Both infrastructure and private equity, I think I would look at sort of 12% to 15% is kind of what we're seeing in the market and sometimes even higher. So the combination of all of those asset classes in the overall portfolio, I think we remain comfortable that the long-term return of 9%, 9.5% is something that we will get back to.

Thanks for the question.

This concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Hung Ko for any closing remarks.

Thank you, operator. We'll be available after the call if there are any follow-up questions. Have a good day, everyone.

This brings to close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Awesome. So we'll get started here again. My pleasure to introduce our next guest speaker, Phil Witherington, Chief Executive Officer of Manulife Financial. Hey, Phil.

Hi, Mike. Good to see you as always. Thank you for hosting us. It's great to be back a year on.

Thank you for joining us today. And I'd love to start with maybe just your sort of high-level reflections. I think you've been the CEO for about a year and a few months now. I know it's been an interesting journey for you for sure, a lot of changes. Maybe just talk about some of the ups and downs and as you reflect back on that sort of 18 months.

Well, the ups and downs. It has been an action-packed year. I mean it was a year ago, we were here. I was 3 months into the role. And reflecting back on what we have achieved since then, one of the milestones was the release of a refreshed enterprise strategy, and that was very deliberate.

It's a strategy that is right up to date with what's happening in the external environment, where Manulife is today. And it really emphasizes priorities such as being AI-powered, empowering customer health, wealth and longevity. So right up to date. And a year in from the release of that strategy, we are already seeing the emergence of strong financial and operating results. So just look at this year, for example, year-to-date, core EPS up 14%.

Year-to-date, contractual service margin, the value we generate from new insurance sales, up 16%. This year, we've already returned $2.6 billion of capital to shareholders through dividends and share buybacks. So really strong financial performance. But the strategic milestones alongside that have been really important. We announced the entry into the India life insurance market through a joint venture with Mahindra. That's a really important big strategic milestone.

We announced and completed our largest acquisition in a decade with the acquisition of Comvest Credit Partners, and that's already accretive to our earnings and a material contributor to net flows of the organization. And more recently, and the list could go on, but I'll just give one for example, last month, when we released our second quarter results, we announced our third long-term care transaction. And that was an innovative transaction. It's good for shareholders.

It's good for Manulife and actually a very limited impact on ongoing future earnings. So that's all positive. But I think you were asking me to be balanced in my perspective and what's gone right, what's not gone to expectations. And one area that in the interest of balance that I will call out and own is that relative to where I was a year ago, when I sat on this stage, I am less -- or we are, as an organization, less far down the line on our progress towards 18% plus core ROE than I would like to have been at this stage.

Now our base scenario is still that we get to ROE of 18% in 2027. But there are certain things, certain headwinds that we had not anticipated when we set that target. We've had some long-term disability experience in our Canada segment. We've seen a weakening of the Canadian dollar relative to the U.S. dollar, and we have more capital in U.S. dollars. So that's increased the denominator.

And we've seen some variability in U.S. life experience as well. But to get to 18% over the course of the next 12 to 18 months, it's reasonable. I believe we can get there. It's a base scenario. And we essentially need Asia and Global Wealth and Asset Management to continue to grow at mid-teens growth rates. We need to see a normalization of disability experience in Canada. And we need to continue our deployment of capital, which share buybacks alongside dividends are important elements of that.

That's very helpful. Maybe switching gears to the segments, and I'd love to start with the Asia business, obviously very topical for investors these days. The segment's performed very well. Can you maybe talk about some of the larger trends and where you're most optimistic in your Asia business?

Yes. We've seen very strong performance in our Asia business, and it's coming from multiple markets, and it's driving strong double-digit earnings growth actually above 20%. And I would expect typically mid-teens for our Asia segment. So that's been very strong. But that's been supported by consistent new business growth, again, across multiple markets. The trends in the region, I think, are important in contributing to that growth. And when I reflect on the trends, maybe I'll just highlight 3.

The first is the aging populations of Asia and the impact that, that has in driving demand for the products and services that we offer. So driving demand for protection, driving demand for retirement solutions, driving demand for health solutions, wealth management solutions. So that demand is really important, that aging population dynamic. The second trend that I will call out is the rise of Asia regional financial centers on the world stage.

So Hong Kong and Singapore and the role that they play in global wealth management and capturing wealth flows is incredible. And actually, just this year, Hong Kong has overtaken Switzerland as the largest cross-border wealth hub in the world. That's an incredible milestone. The third trend that I will highlight that we are seeing across Asia is the emergence of third-party distribution channels, more strongly than we have seen before. So we have, as an organization, very well-established channels in proprietary agency, in exclusive bancassurance.

We've seen third-party channels become more relevant. And that's built, if you like, a third leg of the stool that we have balanced distribution across agency, bancassurance, and third-party channels. And that actually creates more opportunity because it provides more access to a wider range of customer segments. So I actually see that as a positive and a strategic opportunity. So they are the key trends that I will highlight.

When I think about what's happening in some of the key markets, Hong Kong is doing incredibly well. There's strong domestic demand. And that's the majority of our business in Hong Kong. The strong demand from Mainland Chinese visitors to Hong Kong. It's about 25% of our business. That's a stat that we gave on our recent earnings call. But Hong Kong remains a very attractive market because it has become this global financial hub on the world stage.

If we think about Japan, we have a big business in Japan, hugely successful. The Japan outlook has become more positive over the course of the last year. The macro factors from interest rate yield curve to equity markets, public policy encouraging the people of Japan to not just hold cash, but invest for the long term, that's favorable to our business. We doubled new business in Japan. You look at our Q2 results, doubled over the course of the past year. Mainland China, an interesting market, huge potential in Mainland China.

I referenced earlier the emergence of third-party distribution channels. We have expanded over the course of the past 5 years from agency distribution channels into nonexclusive bank channels. That's a big opportunity, can create some variability in new business from quarter-to-quarter, but the long-term trends remain intact. And Singapore, really important financial hub in Asia. We're a market leader in Singapore, generates significant value.

And just to give an indication of the pace of growth that we are seeing in Singapore at the moment, in the second quarter, if you look at this year, we've seen new business CSM growth close to 40%. So really strong momentum in these businesses. And they're just examples of what we're seeing across the region. Asia is a key driver of growth.

Okay. And Phil, how should investors think about the megatrends that are clearly favorable for Manulife and all your peers in that region versus what Manulife is doing specifically differently than peers, winning market share. And it's not an easily quantifiable dynamic, but between megatrends and what you're doing specifically, what's the balance there?

This is actually something I feel very strongly about that just being present in Asia is not the key to success. It is necessary to differentiate ourselves and actively unlock the opportunity that exists. So when you look at the refreshed strategy that we have, we -- a new strategic priority that we called out is superior distribution.

We are investing in our distribution, not only to get access to a broader range of customers, but to help make our distributors more productive, we can actually sell more business as well as being able to, of course, satisfy our customers, please customers, get them to a decision more quickly. And that's in their interest and it's in our interest. So I think that's one important strategic unlock. Another example of a strategic unlock is our AI-powered priority. Again, one of our 5 enterprise-wide strategic priorities, investing in AI enables us to make decisions more quickly, say, underwriting decisions.

If we can get back to our customers with an underwriting decision instantly, they are much more likely to buy a Manulife policy than either forget about the whole thing or go with a competitor. So I think these factors are investments that we're making that will help drive value to our Asia business and win in a region that is naturally growing from those megatrends we discussed.

And then maybe if you can just sticking to Asia, just touch on the MCV business in Hong Kong. And I think you guys were clear on the call that it's structurally -- the demand is there. This is not going to get derailed because of the tax dynamic that's happening now. And that was never the driver of why these sales were happening in the first place.

I feel like the markets treated Manulife better than some of your nondomestic peers on that specific dynamic. And I think a large part of that is the message that was clear on the Q3 call -- or Q2 call, sorry. Maybe just remind investors what are the structural dynamics that will keep that business growing in the long term?

Yes. So where I will start is actually Hong Kong. Hong Kong in total, you look at our business, we're well diversified across channels. The majority of our business is our domestic business. And the Mainland Chinese visitor component, the stat we gave on the call was approximately 25% of sales in 2026. So I think all of that provides for robust resilience.

Now just for clarification, the tax that we had seen -- tax enforcement news we had seen being reported early in August, that was reports of Mainland tax authorities pursuing tax enforcement for individuals that held assets internationally. I think some of the clarifications since then have been very helpful. Clarification that there are no new tax rules. This is about enforcement of existing rules, and it's not targeted at Hong Kong, and it's not targeted at insurance.

And for reference, that is exactly what we see in other jurisdictions such as here at home in Canada. The tax authority is pursuing enforcement of tax collection where individuals hold international assets. So I actually think that is a good example of what we should expect to see as markets continue to develop and the regulatory environment becomes more robust.

When I think about the fundamentals that will drive future demand for insurance solutions by Mainland Chinese visitors to Hong Kong, I think the drivers of demand remain intact, and they are compelling when you reflect on them. So the opportunity to invest in and find protection in U.S. dollars, which comes with it higher yields than RMB yields in Mainland China.

The opportunity to deploy that capital into long-term savings solutions that are supported by diversified participating portfolios that have access to real estate, other categories of private assets such as private equity, public equities, international bonds, the sophistication of the products in the Hong Kong market that enable generational wealth transfer of accumulated wealth.

Policies can pass from one generation to the next in a simple and efficient manner. Currency denomination of policies can be switched at policy anniversary dates. So Hong Kong is a very sophisticated insurance market. And therefore, it's a natural pull not only for Mainland Chinese, but for other international wealthy individuals as well.

Maybe just on the LTC transaction with Munich Re, obviously, structured differently than the previous 2. Just maybe walk investors through why that was the right structure. And then you can maybe sort of dovetail that into some of the organic initiatives that you're taking to reduce risk in the LTC historical legacy blocks and maybe what the upside is on those initiatives?

Yes, I'm happy to touch on that, Mike. And for us, it was actually important to have a third LTC transaction within 3 years, but we didn't want it to be something that simply does what we had done with the first 2. So this is different because it is a stand-alone long-term care transaction of biometric risk only.

And what that means is that we've reinsured the morbidity risk to Munich Re, but we have retained the asset portfolio that attaches to those liabilities. And so when we think about the earnings impact of this transaction, yes, there is $30 million of forfeited earnings of forfeited earnings that reduces over time as the portfolio runs off. But naturally, that effectively goes to Munich Re.

But the earnings on the assets we retain, the capital release that will come from the maturity of the asset portfolio we retain and the margin uplift or the yield uplift opportunity through the potential opportunity to look at how we manage that portfolio stays with Manulife. So I think this is a really good deal for Manulife shareholders, and it demonstrates that we can derisk or reduce risk in our portfolio with actually very modest earnings implications for shareholders.

And you think about the impact of retaining those assets, we continue to generate earnings on the assets. We continue to generate capital and capital release on those assets as the portfolio matures. That's a great scenario in the context of our strategy, which is to deliver long-term growth for Manulife shareholders and sustainable growth for Manulife shareholders.

That's helpful. Maybe switching to GWAM. Just in terms of the flows, you had net inflows last quarter, mostly on institutional strength, obviously, some pickup with Comvest and CQS. And then when you think about going forward, like the segment has taken a little bit of a step down in earnings a couple of quarters ago, a bit of a rebound last quarter. What's the trajectory from here? I know there were some onetime-ish items in Q1 that impact the results. But just getting back to that $500 million plus and then resuming that strong growth trajectory that you had previously, what gets you back there?

Yes. Thank you for listening so carefully to our messaging. I appreciate that, Mike. And the performance in GWAM has been very strong. And I think Q2 is a good run rate indicator for where we go from here. There was a slight dip in Q1 for various reasons. As expected, that came back in Q2. Year-on-year earnings growth, 6%. That is after the impact of the transition to eMPF in Hong Kong, which was a onetime reduction in earnings. So I think shows tremendous resilience.

And the -- we're coming up to the 1-year anniversary of that. So soon that will drop out of the run rate, which has depressed the year-on-year growth rate, but performance has been good. And I'll highlight that we have already achieved our Investor Day target of 30% plus EBITDA margin. So that's a measure of efficiency in the portfolio and it's naturally a margin measure. So I think that's a positive move. And then in the second quarter, positive net flows. And I think that's a really important milestone. I do expect variability in net flows from quarter-to-quarter.

But to your point, when I look at the overall portfolio, global wealth and asset management portfolio that we have across different lines of business, retirement, retail and institutional as well as the geographical mix, I do see a portfolio that supports medium-term generation of positive net flows. And why is that the case? We consistently see positive net flows from Asia. We consistently see positive net flows from our institutional business. A

nd it's -- look back over the past 21 quarters, 20 of those quarters have delivered positive institutional net flows. The Canadian wealth business consistently delivers positive net flows. The areas of the Global Wealth and Asset Management portfolio where flows are negative or offset some of that positive flow. If we look at the North American retirement businesses, given where demographics are, retirement schemes are in outflow mode. The nature of the aging population, the maturity of the pension schemes, withdrawals are a real thing.

We still have contributions, but withdrawals and redemptions are where we are in that life cycle. And I don't think any of us would deny that the active management, retail active management has been facing pressures in recent years. And I think what will define success is our ability to innovate. And for example, the shift away from mutual funds to ETFs, the second quarter was our highest ETF flow quarter on record. And I think that does illustrate that it's necessary to be innovative, creative and some of the emerging developments, the shift to tokenization are ways in which it's possible to win in North America retail.

Appreciate that color. Maybe just on the Comvest platform, you did allude to the opportunity there. And now that some of the perceived risk around private credit has sort of diminished in terms of the investment community and how they think about it, what's your sort of long-term ambition to scale that combined business now in the private credit?

Yes. Comvest was a great acquisition. The business is thriving as part of Manulife. There are so many synergies that we're able to unlock. And we said on the earnings call actually that Comvest was delivering or contributing approximately $30 million to core earnings in the second quarter. And that's -- so that's already financially accretive to the organization. And I talked about positive net flows in institutional business.

Comvest is a really consistently really important contributor to our institutional net flows. And anyone following the news just last week, we announced the closure of our latest private credit fund and capital commitments of $5.4 billion for that fund. That's very significant. And we -- that doesn't immediately flow into net flows because we recognize those commitments as and when we receive the funding. But I think it shows that the momentum in Comvest is very, very strong, and there is more to come.

Okay. Switching to the U.S. business. You've alluded to the type of earnings that you're generating in the U.S. It's less investment spread and more from the insurance policies themselves. Maybe just talk about the U.S. and sort of where you see things going from here. You've obviously repositioned the business in a meaningful way the last couple of years. What's in store for the U.S. for Manulife?

And the repositioning is a really important point. As we refreshed our enterprise strategy, one of our priorities is diversified portfolio. And yes, Asia and GWAM important drivers of growth, but we clarified that both Canada and the U.S. are important markets in our portfolio and markets that we have the appetite to invest in.

So specifically on the U.S., we are investing in building continued differentiation, differentiation in wealth transfer solutions, differentiation in protection solutions and critically important, differentiation in wellness solutions so that we encourage longevity. We help customers live longer, healthier and better lives. And that's something that in the U.S. market, I believe, genuinely differentiates John Hancock from its peers.

Now in terms of earnings shift, we have already seen very strong momentum in new business generation as we expand into product adjacencies and customer segment adjacencies and have built a deeper presence in distribution. So that -- those strategic actions are delivering new business growth. We've seen 8 quarters of consistent new business growth in the U.S., double-digit new business growth.

And this really sets us up for success in terms of future core earnings because we have seen the contractual margin, the CSM in the balance sheet grow, that will support CSM amortization into the earnings statement, higher earnings in the future.

And your comment on mix of earnings, yes, we will continue to see this shift from core investment margin to core insurance margin in the years to come. That will be a gradual shift, but it's a natural outcome of the new business transition that we're making.

Okay. That's great. On the ALDA portfolio, ALDA exposure, I get questions from investors on this often. Just in terms of that -- the assumptions that are used that 9% to 9.5% return long term, I know it's through the cycle. It's a long-term view. But are you -- can you maybe provide us some color on your confidence in that number today versus maybe a year ago? It's just the consistent negative experience is something that's been flagged by a few investors. And how do you sort of see that gravitating to a positive contribution at some point in the future?

It's a great question. And the alternative long-duration asset portfolio is a great match for our long-term liabilities. It extends the duration of the overall asset portfolio. We have seen in recent years, lower than target returns. And when I reference target returns, they are very long-term expected return assumptions. And over the long term, we expect a 9% to 9.5% return.

What we've seen this year and over the past few years has been closer to 6% than 9%. So still generating positive returns, but lower than we would expect. I think it's really important to highlight the impact of the interest rate environment because for asset classes such as real estate, such as private equity and even infrastructure, the higher interest rate environment does create a short-term headwind. The cost of debt, for example, is higher for those equity-like vehicles.

But in the long term, higher interest rates support higher returns. So I do expect a convergence to our long-term assumptions over the medium term. But you asked how my view has changed from a year ago. The fact that we have seen higher long-term rates and if anything, pressure on interest rates to rise over the course of the past year rather than stabilize or fall. My expectation is that short term, there continue to be some headwinds when it comes to ALDA returns. But my confidence in medium and long term has not changed.

Great. I'd love to ask you about capital and M&A potential. Obviously, a LICAT of 136, very strong number currently. Leverage could move up potentially. We've seen it higher in the past. When you think about capital deployment, you've been very clear on your priorities, but like is it a really high bar on M&A? I know your preference is for organic growth, but if it doesn't present itself and you could potentially do something inorganically, how are you thinking about tuck-ins versus that bar for something a bit more transformational?

Great challenge. And when I reflect on our capital position, we are in a really strong position. And to put a number behind it, the capital that we have above the upper end of our operating range is around CAD 10 billion. And then on top of that, we have the leverage flexibility. Our leverage ratio at the moment is around 22%. Long term -- or sorry, medium-term target for leverage 25%.

And of course, we could go above that. So there is substantial flexibility. Organic capital deployment is always our highest priority, supporting a progressive dividend is also up there as a high priority. We currently have an active share buyback program, 2.5% share buyback program in place. We're on track to deliver on that. But inorganic deployment, yes, that's possible. And I think we've demonstrated through the largest acquisition in a decade with Comvest Credit Partners.

We're prepared to do that. What I would call out when we've done that, it's a transaction that's financially accretive and strategically relevant. And that's the bar that we would be looking at for any further deployments of inorganic capital. We do like Global Wealth and Asset Management as a place to deploy capital.

We like the fee income and the diversification that, that provides. But we do look for financial accretion and strategic accretion. And it's not really about bolt-ons or larger transactions. It's much more about whether there is the right transaction that delivers against those criteria, but we have the capability to move, and we've got the financial strength to move if there is the right opportunity.

Great. Thanks for that synopsis. Maybe I'll turn it back over to you, Phil. Any sort of key messages you want to leave with investors?

It's a great question. And I -- look, what I'll leave with you is that we have refreshed our strategy. It's right up to date, and we are moving at pace in the execution. We've demonstrated some key milestones, the entry into India Life Insurance, the Comvest acquisition, the long-term care transaction, and there's much more that this management team wants to deliver.

And the final point that I will make is our portfolio is diversified. And I do believe it's an envious portfolio. We have the growth in Asia and Global WAM, but we also have the stability as well as growth opportunity here in North America. And I speak on behalf of Manulife and the leadership team when we are incredibly excited about what we can achieve in the years ahead, watch the space.

Great. Thank you, Phil, for joining us, and thank you for all the insights. Super happy to have you, and I appreciate your time.

Thank you, Mike. It's great to be here. Thank you.

Thanks a lot.

Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation Second Quarter 2026 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead.

Thank you. Welcome to Manulife's earnings conference call to discuss our second quarter 2026 financial and operating results. Our earnings materials, including the webcast slide for today's call are available in the Investor Relations section of our website at manulife.com.

Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 32 for a note on the non-GAAP and other financial measures used in this presentation. Please note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated.

Turning to Slide 4. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide a highlight of our second quarter 2023 results, a strategic update and an overview of our latest long-term care reinsurance transaction. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail. After their prepared remarks, we'll move to the live Q&A portion of the call.

With that, I'd like to turn the call over to Phil.

Thanks, Hung, and thank you, everyone, for joining us today. Before we begin, I'd like to take a moment to recognize and welcome the newest members of our executive leadership team that we announced in May. Patrick Graham has assumed the role of President and CEO of Manulife Canada. Patrick previously led our Hong Kong and Macau business and brings deep expertise across both distribution and health that will help accelerate our Canada growth strategy.

I'd also like to congratulate Jodie Wallis on her expanded mandate as Chief AI Officer, which now spans both AI and enterprise data. Jodie remains instrumental in driving responsible AI adoption at scale to support growth, improve efficiency and enhance customer experience and her appointment to the executive leadership team further reflects the importance of this work across our enterprise.

In addition, Stephanie Fadous and Shamus Weiland have taken on broader responsibilities. These important leadership changes further strengthen our team, both at the enterprise level and in our key markets, and I'm confident they position us to deliver on our strategic priorities and drive sustainable growth. I'll now provide an overview of our second quarter financial performance before turning to the stand-alone long-term care reinsurance transaction we just announced.

Let's start on Slide 6. We delivered strong results this quarter, demonstrating disciplined execution and the benefits of our diversified portfolio. Our insurance businesses generated strong top line results with APE sales growth of 21% year-over-year, supported by double-digit growth across all segments. APE sales momentum remained strong in Asia, which was driven by broad-based contributions from key markets such as Hong Kong, Singapore and Japan and was supported by our high-quality agency force, which I will discuss further momentarily.

Growth in overall sales drove a double-digit increase in value metrics, including year-over-year new business CSM growth of 16%. This contributed to CSM balance growth of 20%, positioning us well for future earnings generation. In Global WAM, record gross flows supported net inflows of $0.4 billion this quarter. Net inflows were driven by strength in our institutional business, including continued contributions from CQS and Comvest.

In terms of profitability, core EPS grew 16%, reflecting 12% growth in core earnings and the benefits of continued share buybacks. This strong result was led by Asia, where core earnings grew 21% from the prior year to a record level as well as Global WAM, where core earnings increased 9% despite the impact of the transition to eMPF. While we saw some insurance experience headwinds in Canada and the U.S., the overall results reflect the strength and resilience of our diversified business. And we delivered a solid core ROE of 16.3%, up 130 basis points from the prior year quarter.

Turning to our balance sheet. We maintained a strong capital position with a LICAT ratio of 136% and a leverage ratio well below our medium-term target, providing us with substantial financial flexibility and supporting continued return on capital to shareholders through dividends and share buybacks.

Turning to Slide 7. We continue to make strong progress in the execution of our strategy, which is underpinned by our ambition to be the #1 choice for customers. Our distribution capabilities and product innovation remain important differentiators positioning us to meet evolving customer needs. In Asia, we achieved a 9% year-over-year increase in million dollar roundtable members, the highest increase among the top 10 multinational insurers, reflecting continued progress in scaling our high-quality agency force. In fact, APE sales per active agent increased over 30% year-over-year in the second quarter.

This speaks to the effective execution of our agency strategy, including efforts to enhance the quality of our agency force through Manulife Business Academy training programs, AI-enabled capability building and broader adviser excellence initiatives. In addition, we expanded our global high net worth offerings with 2 innovative insurance solutions that address the evolving wealth protection and legacy planning landscape. This includes the introduction of an insurance savings solution that uniquely combines the benefits of our participating life products with investment diversification through a Manulife CQS strategy, further differentiating our value proposition to high net worth individuals.

In Global WAM, we expanded our ETF-based offerings for North American retail customers. And in the U.S., we enhanced our variable universal life offering, broadening the reach of our life insurance solutions while delivering greater protection, flexibility and long-term value. Being an AI-powered organization is a key priority within our refreshed strategy and our continued innovation and industry recognition reflect the meaningful progress that we're making across the enterprise. We are proud to be recognized by Evident as the #1 life insurer for AI maturity for the second consecutive year, ranking first in North America and top 3 overall among 30 major insurers across North America and Europe. We were also recognized for our AI-enabled underwriting capabilities in Canada and named the Model Insurer for Data, Analytics and AI by Celent.

And in Global WAM, we launched new scalable Agentic AI solutions. The portfolio of solutions includes document intelligence readers and knowledge assistants, which are enhancing customer experience while driving greater operational efficiency. Finally, the rollout of our enterprise AI platform continues, providing our AI developers and data scientists with a scalable and secure foundation to design, build and govern AI responsibly. It allows us to reuse capabilities across businesses and markets, accelerating delivery and reducing duplication. This platform lays the foundation for accelerated development and AI value generation. Overall, these achievements and the recognition we've received underscore the meaningful progress that Jodie and the team have made embedding AI across our organization.

Similarly, we're proud of our longevity leadership, where we're helping customers achieve better health and wealth outcomes across their lifespan while driving sustainable growth for our business. In collaboration with the MIT AgeLab, our U.S. insurance and retirement businesses launched a first-of-its-kind longevity preparedness tool, helping customers assess and improve their readiness for living longer, healthier and better lives. We also enhanced our health and wellness offerings for eligible Canada Group retirement and private wealth customers through preferred rate access to select health and wellness solutions. And in Hong Kong, we're providing customers with greater health care options, quadrupling our medical specialist network to more than 900 providers through our strategic partnership with Bupa. Collectively, these achievements highlight the meaningful impact that we're making to empower customer health, wealth and longevity.

Before I turn it over to Colin, I'd like to discuss the long-term care reinsurance agreement with Munich Re that we just announced, which is our third long-term care transaction within the past 3 years. A couple of elements of this transaction differentiate it from our prior deals. First, it is a full risk transfer of biometric risk on $3.2 billion of reserves at 80% quota share. And second, it is a stand-alone long-term care block. The pricing is similar to our previous transactions with a modest negative seed, further reinforcing the robustness of our reserves and assumptions. The transacted block is an older vintage but has richer benefits, including greater lifetime benefits and policyholder inflation protection compared with our retained book. Inclusive of prior transactions, we will have reduced LTC morbidity risk by 24%, significantly improving our overall risk profile. The impact to capital is expected to be largely neutral as the benefit from reducing morbidity risk required capital is offset by the release of the associated risk adjustment and the ceding commission. Unlike our previous deals, there is no capital benefit from the disposal of investments as no assets are being transferred.

Foregone core earnings is relatively immaterial at CAD 30 million per annum in the first year, and that will reduce over time as the block runs off. More broadly, this transaction demonstrates how we're continuing to derisk our in-force portfolio through innovative actions. Looking ahead, we continue to focus on improving our long-term care portfolio through organic initiatives that will enhance risk-adjusted returns and drive shareholder value. For example, our long-term care transformation program is focused on helping customers remain healthier and more independent for longer and reducing fraud through enhanced claims management. The program is already generating strong results with current run rate LTC claim savings of over 6%, which also helped contribute to the attractiveness of the transacted block.

In closing, I am pleased with our performance this quarter and delighted to have delivered a third long-term care in-force reinsurance transaction. We continue to execute on our strategy, innovate across our diversified business, drive sustainable growth and deliver insights and solutions to help our customers across their life spans and for generations to come.

With that, I'll hand it over to Colin to discuss our quarterly results in more detail. Colin?

Thanks, Phil, and good morning, everyone. This quarter, we delivered strong results, underscoring our continued focus on high-quality growth and value creation. Before opening the line to questions, I'll walk you through our results. Let's begin on Slide 10 to discuss our top line. We delivered strong APE sales growth underpinned by double-digit increases across all insurance segments, including over 20% in both Canada and Asia. This momentum translated into double-digit growth in value metrics with new business CSM increasing 16% year-over-year. In Global WAM, net inflows of $0.4 billion reflected strength in our institutional business, partially offset by outflows in retirement and to a lesser extent, retail, which I will expand on shortly.

Turning to Slide 11. I'll walk you through the key drivers of our earnings this quarter compared with the second quarter of 2025. Our higher net insurance service result was driven by continued growth in Asia as well as the net positive impact of last year's actuarial assumption review. This was partially offset by insurance experience, including unfavorable experience in Canada compared to net favorable experience in the prior year, partially mitigated by much improved but still negative claims experience in U.S. Life. I will provide more detail on the insurance experience in Canada and the U.S. momentarily. Moving down the DOE table, our core net investment result increased 10%, primarily driven by a lower charge in the expected credit loss provision, or ECL, partially offset by lower investment spreads in the U.S. Lastly, Global WAM generated 10% growth in pretax earnings.

On to Slide 12. And as Phil mentioned at the top of the call, core EPS increased 16% year-over-year, driven by strong core earnings growth and ongoing share buybacks. This quarter, we generated net income of $2.1 billion, exceeding core earnings as higher-than-expected returns on public equities more than offset lower-than-expected returns on ALDA. As we've seen across the industry, market conditions continue to weigh on valuations and returns in certain alternative asset classes.

Moving on to the results by segment. We'll start with Asia on Slide 13. APE sales increased 21% from the prior year, driven by double-digit growth in Hong Kong, Singapore and Japan, partially offset by lower sales in Mainland China and other markets. The strong sales reflects double-digit growth across agency, banker and other third-party sales, demonstrating the strength of our diversified multichannel distribution network. It also drove strength in our value metrics, though this was partially offset by changes in business mix.

In Hong Kong, APE sales growth of 37% year-on-year reflected higher sales of savings products across all channels. This performance reflects the breadth of our franchise with our domestic customer base driving the majority of sales this quarter and remaining a core strength of our business. With regards to core earnings, Asia delivered another quarter of strong results. Year-over-year, core earnings increased 21%, driven by continued business growth and the net favorable impact of last year's basis change, partially offset by less favorable insurance experience.

Now moving on to Global WAM on Slide 14. We were encouraged to see a return to net inflows this quarter, driven by strength in our institutional business, including continued contributions from CQS and Comvest and supported by another quarter of record gross flows. This positive result was partially offset by outflows in North American Retirement and retail, though we did see continued momentum across Canada Wealth and Asia more broadly. In the retirement channel, outflows reflected higher planned sponsor redemptions and increased net member withdrawals due to higher account balances from market appreciation.

Retail outflows were primarily driven by active mutual fund redemptions through third-party intermediaries in Canada, although trends improved on a sequential basis. Even as we continue to navigate pressures in certain areas of the business, this quarter's positive net flow result reflects the strength and resilience of our diversified platform. We generated solid core earnings growth of 9% from the prior year, driven by higher average AUMA and contributions from the Comvest acquisition, partially offset by the impact of the EMPF transition in Hong Kong and higher expenses due to business growth. These factors also supported our core EBITDA margin reaching 31.2%, expanding 110 basis points from the prior year.

Next, turning to Canada on Slide 15. This quarter, APE sales increased 23% year-over-year, reflecting growth across all lines of business, led by higher large case sales within group insurance and continued strong participating life sales within our individual business. This, along with increased margins in individual insurance and annuities drove strong growth of 29% in new business CSM, while new business value was largely flat due to lower margins and product mix changes in Group Benefits. Core earnings declined 10% year-over-year, mainly due to unfavorable claims and expense experience within group insurance as well as normal claims variability in individual insurance. Relative to the first quarter of 2026, overall insurance experience improved modestly, reflecting the impact of the actions we are taking in Group Benefits, though this was partially offset by the unfavorable claims experience in individual insurance. We now expect overall Canada insurance experience to trend neutral by the end of the year as our group benefit case managers help members return to work, although elevated expenses from our transformational investments should persist to the end of the year.

Lastly, let's discuss our U.S. segment's results on Slide 16. APE sales grew 12% year-over-year, supported by product enhancements and distribution expansion initiatives, while growth in our value metrics was impacted by product mix. Core earnings rebounded year-over-year, reflecting improved claims experience in both life and LTC as well as a lower ECL provision charge, partially offset by lower investment spreads. While life claims experience was unfavorable this quarter, it improved meaningfully from the prior year. We view the result as being within the normal range of variability and when considered alongside the gain in the first quarter of 2026 is close to neutral on a year-to-date basis. LTC experience was once again favorable across both the P&L and CSM.

Turning to Slide 17. Our adjusted book value per share continued to grow, increasing 15% year-over-year to $41.12. We achieved this growth while returning $5.3 billion of capital to shareholders over the past 12 months. For the stand-alone quarter, we returned $1.4 billion to shareholders through a combination of dividends and share buybacks underpinned by our continued strong cash generation.

Let's now turn to our balance sheet on Slide 18. Our capital position remains strong with a LICAT ratio of 136%, representing $26 billion in excess of our supervisory target ratio. Our financial leverage ratio of 22.2% remains well below our medium-term target of 25%. Together, these metrics highlight the robustness of our balance sheet and the strength of our capital position, providing significant financial flexibility and positioning us well for the future.

To close, Slide 19 highlights our progress against our 2027 and medium-term targets. We're pleased with the progress we have made towards our financial targets, underpinned by strong results from 2 of our high-growth businesses, Asia and Global WAM. While there is more to do to achieve our core ROE target, this quarter saw a 130 basis point increase compared to the prior year quarter. We remain committed to delivering against our targets, while at the same time, further improving our risk profile as evidenced by the stand-alone LTC reinsurance transaction, another milestone for Manulife. This concludes our prepared remarks.

Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of 2 questions, including follow-ups and to requeue if they have additional questions. Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from John Aiken with Jefferies.

I know it's early days, but I was wondering if you could give us your thoughts on the Chinese government's tax on offshore insurance policies, how that may affect your business in the region?

Thanks, John. It's Steve Finch here. I'll take that question. I'll start with taking a step back and to sort of frame the size of the business and with respect to MCV business. Manulife has a diversified business in Hong Kong. And our core strength is our domestic franchise, which represents about 75% of sales year-to-date. So MCV is an important part of the business at 25%. It can vary from period to period. As you note, it's early to comment on the implications of some of the recent news. There was the point that you raised about tax treatment of offshore trusts.

There's been press even more recently on enforcement of existing rules, which I think is really important. There haven't been updated tax laws, but there is focus on potential enforcement of existing rules, which that's pretty common to see as markets develop. my expectation is that as guidance gets more clear, it could actually provide more clarity, remove ambiguity and actually help support the development of this business over time.

And I want to make a key point. We expect that the structural trend of Mainland Chinese customers accessing Hong Kong for products and services to continue. There's a lot of reasons why that's being done, currency diversification, access to different underlying investments that they can get onshore, the benefits and services that they can access in Hong Kong. And in my time in the role, I haven't heard tax benefits as the primary reason that's driving this business.

Yes. Thanks, Steve. Just to paraphrase to make sure I got this straight. So basically, you're expecting some changes, but this is not destroying the outlook for the business.

Yes, absolutely not destroying the outlook. I have confidence as we look to the future, this part of the business is going to continue to be a strength of Hong Kong. Could there be short-term implications? Really too early to say. We'll have to track it closely and see how this evolves over time.

Our next question comes from Tom Gallagher with Evercore ISI.

So Steve, just one quick follow-up on that. The -- so you said 25% or MCV sales within Hong Kong, and I think Hong Kong is 40% of Asia. So if sales went to 0, on that part of the business, it would be a 10% hit to total Asia, but it sounds like you think -- obviously, that doesn't sound like you think it's going to go to 0. There might be a hit, but it would be -- you'd probably be able to restructure transition it somehow. Is that a fair way to frame it?

Yes. And I'll expand a bit. I do not expect these sales to go to 0, not even -- not in the short term at all. And as we look out into the future, continue to -- as I said, I continue to have confidence that this is going to be an important part of the Hong Kong insurance business and for Manulife. Any short-term impacts will be manageable, won't impact core earnings over the immediate future. So continue to have confidence in this business going forward.

Okay. And for my follow-up, just on the long-term care deal, I heard the 5% negative seed on IFRS. What was it on U.S. statutory, the negative seed? And can you also just give a little color for the retaining the asset risk? Like what was behind that? Would it have been too punitive? Had you transferred the asset risk? Or were the other reasons you maintain the asset risk?

Thanks, Thomas. It's Stephanie here. So on an NAIC basis, the ceding commission would have been around 6% to 7% or IFRS reserve in this block are higher than the statutory reserve. In terms of color on the transaction, so we're quite pleased to have transacted in this new innovative structure. where we basically see the biometric risk or exchange variable cash flows for fixed cash flows, but we retain the asset management. And what that does is that we retain the earnings potential and the assets supporting the portfolio as well as the capital generation on the assets as the block matures over time.

Our next question comes from Gabriel Dechaine with National Bank.

Just another question on the Asia sales outlook, the Hong Kong sales outlook more specifically because the Chinese regulators don't look to be just going after or forcing existing rules on MCV sales. It looks like they're the tax authorities are broadening their search for unpaid taxes essentially on gains on offshore investments. I'm wondering if there's any implications at all? Maybe there's not because the structure of the products are entirely different and unaffected. But your offshore high net worth business, which is also managed out of Hong Kong, I believe, I appreciate it's not entirely sold to wealthy Chinese individuals, but there may be some implications there, if you care to comment?

And Gabe, it's Steve. Can I clarify the -- when you say the offshore high net worth, are you referring to our Bermuda international high net worth? Or I mean the comments that I made in terms of Hong Kong encompass all the Hong Kong business, so whether it's high net worth, whatever channel it's coming through.

The sales that are -- sales and earnings, if you look in your Asia segment, I think it's only on an annual basis. There's an other category that includes the smaller other Asia businesses plus the offshore high net worth business?

Yes. The international high net worth that we disclosed is our Bermuda business. Bermuda business, high net worth, yes, there are -- we do have some China national sales that go through that business. Last year, our APE was a little bit over $150 million. And the China portion of that is a little bit under 10%.

Okay. Right. So nothing. Okay. Great. I'm wondering -- okay, so this LTC deal, which I think is a positive news. So just so I understand, there's no planned reduction to the assets, like notably the ALDA portfolio that was partially backing these LTC blocks. And I'd like to pivot more to the future outlook. You talked about putting more emphasis on the organic management strategies for that block of business. And just wondering if that's a deliberate risk management strategy because you do benefit from higher mortality rates in that business, whereas your U.S. life block is still generating some mortality losses here so they offset each other.

Gabe, it's Trevor. Thanks for the question. I'll start and then turn it over to Phil. So in terms of the asset strategy, so for the assets backing the reserves involved in this block, we do manage them within our broader ALM framework, and we don't have any current plans to change the investment strategy.

Great. Thank you, Trevor, and thanks, Gabe, for the question. This is Phil. So when we look to the future on long-term care, we -- our primary basis for management of the portfolio going forward, it will be the organic management actions that we're taking. And there are various things that we're doing, and I talked earlier in my remarks about the LTC customer care program. That has delivered a 6% reduction in claims through various initiatives, including reduction in fraud waste and abuse. And you'll have heard over the years the progress that we've made on premium rerates that has proved to be a highly effective mechanism to mitigate variability in claims experience over time.

So when I reflect on what the best thing to do for Manulife shareholders is, I think it's important to -- now that we've demonstrated our ability to transact across various structures, an older block, a younger block and over the past 24 hours, a biometric risk transfer, I think the logical thing to do is to make that pivot to organic management while retaining the strategic flexibility to transact if that makes most sense in a particular point in time. One supplement, and that is -- and Stephanie touched on this earlier in response to an earlier question, that's relating to how we preserve the benefits for Manulife and Manulife shareholders. By pursuing that -- the third transaction on a biometric risk-only basis, we do preserve the benefits of managing the asset portfolio for Manulife shareholders. And that's actually important when you reflect on our strategy. One thing we said in our strategy that we released in November last year is that sustaining the scale of our U.S. business is important. And this structure where we retain management of the asset portfolio, along with yield opportunity and ongoing capital generation as the block matures, it helps fulfill that objective of sustaining earnings and balance sheet scale of our U.S. segment.

Our next question comes from Paul Holden with CIBC.

So continuing with the long-term care reinsurance deal. So I think you hit on an important point, the capital generation associated with that business. And I think it's been maybe a little bit of time since you kind of gave an update on the capital generation. Maybe some thoughts there to help us think through it as it pertains to this block, but I think more importantly, as it pertains to the retained block as well. When do IFRS reserves start coming down? When does stat reserves start coming down? And when does the capital start flowing back to shareholders?

Thanks, Paul. I think Stephanie is best placed to answer that one.

Thank you, Paul, for the question. So on the remaining block, which is slightly younger, but still quite a number of euro experience and was issued a number of years ago, we expect the block to be relatively stable and start declining in the next 5 to 10 years. And I would expect the capital, both IFRS and statutory to start releasing generating capital at the same time.

Okay. And given the insured or the reinsured block, you just is a few years younger than a few years earlier. Is that an easy assumption to make?

The reinsured block for this transaction was a more mature block of business with richer benefits. And as the block matures, we'll have the capital generation on the assets that we've retained, and that will be a little quicker than the remaining block.

Yes. Okay. Okay. Next question kind of changed the topic is on the Canadian insurance business, very strong individual insurance sales for the second consecutive quarter. So 20% this quarter, I think somewhere around the same ballpark last quarter, a little bit higher. Maybe talk about -- I know you have renewed and reinvigorated growth strategy there. So talk about the success you're having in those sales, what kind of products are coming from distribution channel and sustainability and that type of growth rate?

Paul, it's Patrick here. Thanks for the question. So first, let me say how excited I am to be here and working with the Canadian team to drive our shared ambition of being the undisputed leader in insurance in the market. And I think your question speaks nicely to that shared vision and ambition. So as you referenced, we've done very well in individual insurance sales, achieving #1 market share in Q1, largely driven off the back of our successful par product and being #1 in the high net worth space. We view this as something that's sustainable. We've got a lot of competitive differentiators in the business. And going forward, we see opportunities in underserved segments in the market, so we can continue that track record of growth and success. Thank you.

Our next question comes from Tom MacKinnon with BMO Capital.

Steve, maybe you can talk a little bit about just the trend in terms of what you've been seeing in Hong Kong sales, certainly did better than anticipated in the second quarter. There was news around MCV stuff in late May, early June or at least in terms of offshore accounts. Maybe you can comment as to what you've been seeing with respect to trends in the MCV sales just in the last couple of months, if possible? And I have a follow-up.

Thanks, Tom, for the question. In terms of the sales performance in Hong Kong, yes, we were pleased with the results this quarter. As was commented on earlier, we saw growth in APE of 37% and growth in NBV of 12%. So continued solid results. And it was quite broad-based. We've got a diversified distribution platform in Hong Kong. So success in agency, bancassurance that actually more than offset lower sales year-over-year in the MCV space.

And it kind of ties into your point about -- there have been some regulatory, I guess, announcements coming out of China. But those have been primarily focused on offshore investments or outbound investments. There's no direct impact on the MCV business. It's possible there could be some second order impacts, which we're watching closely. But there were changes in regulations last year and early this year, and that's having some impact in terms of the MCV business. But as you noted, it was a strong result. And we have -- as we look out into the future, we have confidence in that business. One interesting fact was that Hong Kong recently took over as the #1 source of offshore wealth flows overtaking Switzerland. So it is a global and regional finance hub that continues to be really important.

Yes. And then the follow-up is with respect to Canadian LTD. I think you've mentioned you had poor experience in the first quarter continued into the second quarter. You talk about the overall trend to be neutral by the end of the year. What gives you confidence -- predicting claims is always tough. What gives you confidence that this is going to be trending to neutral by the end of the year? Maybe you can elaborate on some of the actions you're taking and maybe some repricing initiatives you're doing with respect to some of these cases where the experience hasn't been as good.

Thanks, Tom. Patrick here again. So yes, as you referenced, like the industry, we are seeing unfavorable morbidity experience, largely driven by disability claims. And within that, you can think that roughly 1/3 of new claims are coming from mental health, which is they can materially extend claims duration, they're stickier. And as a business, we're making targeted investments in a number of areas to improve health outcomes for our customers. That includes earlier intervention, enhanced treatment access and specialized case management teams designed to improve health outcomes for customers, manage duration and ultimately mitigate the growing impact of that on our experience over time. We have seen improvements in Q2, modest improvements in claims from Q1. And whilst we see emerging industry trends with recoveries, we are confident that the overall insurance experience for the segment will trend towards neutral by year-end.

And Tom, this is Phil. You also touched there on our ability to reprice. And just to confirm, this is annually repriceable business. And if we do see sustained adverse experience, we have the ability and intent to reprice.

Our next question comes from Mario Mendonca with TD Securities.

I have just a quick follow-up on those Hong Kong sales. Was there any level of, let's say, front ending of sales this quarter in Hong Kong, not necessarily because of the tax change because I don't think there's any way to escape the taxes. But in terms of front-ending sales in anticipation of regulatory change. Did you see any of that in the quarter, Steve?

Yes. Thanks, Mario. What -- the driver of the sales in Hong Kong this quarter, and Colin referenced mix, the real driver was that we routinely have customer offerings, campaigns. And in the quarter, we had campaigns that really hit the mark with customers, and that was driving the sales results. It was very attractive for customers. That's why you see the APE growth higher than the NBV growth. So it was somewhat lower margin, but it really resonated. I didn't see any sort of impact of accelerated sales from regulatory changes?

Okay. If we could go to the reinsurance transaction. So Phil, I understand your comments about retaining the scale of the U.S. business to absorb the expense load. That's a concept that I've become familiar with any insurance business. But like everything else, there's a trade-off to this. And the trade-off is that you're not getting the release of capital that you did on the previous transactions. So where I'm going with this is, when I look at the pace of share repurchases over the past few years, during that period when Manulife benefited from a material improvement in the ROE, it coincided with those large reinsurance transactions that allowed for the buybacks. So I'm going with this is, if this is the new state of affairs where reinsurance transactions do not result in a release of capital, is it appropriate to suggest that the pace of buybacks can't return to where it was in the past? And as a consequence, achieving the 18% ROE becomes more and more difficult. Is that appropriate?

So Mario, this is Phil. Let me take that, and Colin, feel free to supplement. The way we've structured this transaction, I mean, it really is partly a reflection of our intent to transact in different structures, the older structure, the younger block of business and now biometric risk only with the ability to preserve and retain benefits for Manulife and Manulife shareholders. There is a cost to transacting. And you can see that with the 5% negative seed, similar economics to the first 2 transactions. But through the biometric-only approach, it's not only that we retain the assets and therefore, an earnings -- continued earnings and capital generation from that portfolio as it runs off. But beyond that, it's -- of course, it allows us to sustain our scale, as you pointed out, but it's preserving profitability for Manulife.

And it's coming with a limited impact, an immaterial impact to earnings. So while there isn't a big capital release, there isn't the large earnings impact. And you recall from our first 2 transactions, there was notable forfeited earnings that on an EPS basis, we made up for through share purchases, but there was also substantial net income noise through the realization of gains from OCI to net income as changes were made to the asset portfolio. So when I think about the go-forward approach, it's actually preserving the earnings rather than having to make up the earnings by way of share buybacks.

Now in terms of share buybacks, -- they do have an important role to play in achieving our 18% plus ROE target. We have a 2.5% share buyback program in place. And our capital generation remains strong. We also have a 2027 remittances target. That -- we're well on track to achieve that target, and that supports the share buyback program. And if I look at the second quarter, a pace of share buybacks in the second quarter, it was consistent with full delivery of the 2.5% share buyback. So I feel confident that we're doing the right thing on LTC. I feel confident that we're generating capital to support share buybacks. And the overall position of the company remains strong, both from a capital perspective and a leverage perspective. Colin, is there anything you'd like to supplement?

No, I think you covered it all, Phil. I would just say, Mario, buybacks are an important lever to get us to 18%, but we're not anticipating an outsized buyback to get across the finish line. What you see this year, 2.5%, that's without any boosting from reinsurance transactions, and we wouldn't want to guide you to anything materially higher or lower than that to get to the 18% core ROE.

The bottom line, Colin and Phil, this pace of buybacks is consistent with achieving that 18% ROE. You don't need to make any -- you need to do anything special there to get to the 18%. Is that your outlook?

That's a fair summary, Mario, confirmed.

Our next question comes from Doug Young with Desjardins Capital Markets.

I apologize, just something more on the long-term care insurance deal. But just looking at the ceding commission, and I know it's the same as past deals, but what's driving the ceding commission this time? Because I think last time it was the difference in return assumptions. I think that was part of the GA deal. And just in terms of structure with the ceding, how it's going to flow through, I think it's [ $160 million ], correct me if I'm wrong. Is that accounted for as a negative in the CSM that just unwinds over time? I'm just trying to get a little bit of understanding of the mechanics of that.

Thank you, Doug. It's Stephanie here. I think you have a good question, and you have all of the answers. In terms of the ceding commission, it's really due to a difference in expectation of returns as opposed to a different view of reserve or assumption, so similar to what we mentioned on prior deal. And the ceded commission, the 5% ceded commission, you're right, this will flow through CSM over time, CSM amortization.

Yes. This is Phil. I think that what Stephanie just ran through, it demonstrates that it's a really clean transaction in terms of the accounting and mechanics. There's a modest impact on CSM, which flows through to earnings over time, but there is no noise in either core earnings or net income from the biometric risk transfer. So it's something that reduces our risk without those unfortunate cosmetic accounting implications that we've seen on a couple of other transactions.

Yes. And then just Phil or Colin, I think what would be really, really helpful is if you can kind of maybe put in context how much of Manulife's core earnings are now from legacy businesses? And how much common equity backs these legacy businesses? Because we know the starting point, you gave it to us and you've given us kind of iterations over the years because I think it does tell an interesting story. I don't know if you have the numbers with you, that would be great if you did. Just thought I'd throw that out there to see if you could provide some context to that.

Yes, Doug, this is drawing my memory from a few years ago, we had the 15% of earnings target. We wanted to reduce legacy earnings below 15% of earnings. And we had the stretch ambition for that to be less than 10%. I can now say, and we achieved this a couple of years back, it's comfortably less than 10% of our earnings coming from LTC and VA, and this transaction further reduces that. So it's not something we track on a periodic basis, but it's well below what we had set out to achieve.

And how about common equity backing? And I know you said LTC, VA, I know there's more than that in legacy, but -- and how about common equity backing the legacy businesses? Because I think it started at about 50%, but I don't that number.

That's not something I have to hand, but it's not something we track month in, month out. Our priority metric we were managing to was the percentage of earnings, and that's been exceeded a couple of years back. So not something that I'm overly concerned about.

Our next question comes from Darko Mihelic with RBC Capital.

Steve, maybe you can speak to the other area of Asia where sales don't look so great and neither do earnings. How should we think about that? What's going on? And should we think about this trending the same way for the foreseeable future?

Thanks, Darko. Yes, in the other category, the primary driver of what's going on, on the sales results, it's our international high net worth business, the Bermuda business is reported in that part. And there have been headwinds this year from the Middle East conflicts. Middle East business was a significant component of that. But I would point out that we have high net worth business that we book across the region in Hong Kong and Singapore are the primary hubs. So we've seen high net worth business overall go up materially this year. So the business isn't flowing right now to Bermuda. It's flowing to Hong Kong and Singapore. So that's in the results. Unclear exactly how long it will take for that situation to unwind, but we are -- Phil mentioned some new products that we've launched there as well as focus on where the flows have gone and make sure that Bermuda continues to be an attractive offering and source for business going forward.

And then just a question on the Mandatory Provident Fund. We've heard from a few sources that they are reviewing fees by end of the year. Is there any visibility on -- I'm talking about fees from the funds that are managed. Is there any visibility on this and where it's sort of headed?

Yes. Thanks, Darko. It's Paul here. Yes, in terms of fees, this isn't a onetime exercise. It's something that we submit regularly throughout the years, and it's part of our regular fee compression budget that we build into all our businesses, frankly, as we do expect fees to come down over time. So part of that process is we build that into our planning, we make proposals to the regulator. We try and balance that with competitiveness and make sure we're competitive where we need to be. But I would look at this as BAU for us. That's how we look at it across all our business lines.

Okay. So it's not overly material in any respect. Is that the way I should think about that.

That's how you should think about it.

Our next question comes from Mike Rizvanovic with Scotiabank.

Just a high-level question for Colin or maybe for Phil. Just wanted to touch on the efficiency, the expense efficiency ratio. I know you've got your target of being below 45% medium term. It's sort of oscillated there the last couple of years. I know you're spending a lot on new capabilities on the digital side. So I'm just wondering if you have any updated thoughts on how you'd like to see this number move. I'm wondering if it's reasonable to think that there are some levers that this number could improve, say, by 2 to 3 percentage points to a sustainably lower level over the next 2 to 3 years?

Mike, it's Colin here. Thanks for pointing out the expense efficiency ratio. Actually, we're really pleased. 44.5% is our medium-term target. But what's important is that we continue to invest in the business. And if I look at each of the business lines, you'll see some reasonable increases. Take, for instance, GWAM, you've got Comvest that's added $25 million to expenses. Asia, we're growing. So expenses went up 10%. Within Canada, we're modernizing our customer experience. So we saw a 10% increase there. And then at the center, we spent more on AI. And so you'll see a little bit of a bump up. We've always said that the #1 use for our capital is organic investments, and this is a testament to it.

In terms of can we see expense efficiency going forward, maybe 1 or 2 percentage points, absolutely. And I think AI and our AI initiatives are really key to achieving that and that's both through growing earnings and being more efficient. So lots more to see on this and lots to work on. But as I've experienced in the 4 years I've been here, expense management is so core to Manulife's DNA. This should continue being a good story for years to come.

Okay. And I'm just curious, across the segments, is it fair to say that the higher expense segments like a GWAM is maybe where you've got a bit more torque there potentially?

Yes, yes, you're absolutely right. GWAM has about a 60% efficiency ratio. And so as the business mix changes, that could impact the overall number. I would point you to Asia actually. What's really interesting about Asia is that we're growing really fast and it has the lowest expense ratio.

Our next question is a follow-up from Gabriel Dechaine with National Bank.

Just a follow-up on the group insurance LTD issues in Canada. Can you talk about some of the drivers there? Last week, we had one of your peers reporting and they mentioned that there's some economic factors that are influencing the volume of LTD claims and the duration of the claims as well. I wonder if that's something you're seeing as well.

Gabriel, Patrick here again. So yes, I think you're spot on. I mean it's a globally recognized phenomenon that in down cycles in the economy, particularly where there's increased unemployment that there are rises in certain types of disability claims. And like you, what we're seeing and what we're hearing from the market is the unfavorable morbidity experience is driven by disability claims. 1/3 of those new claims are coming, as I said earlier, from mental health claims, which again, there's a correlation. And those claims tend to be longer duration and stickier. So the programs I referenced earlier in terms of investments to get those customers back to work, get them healthy again, improve their health outcomes is the important factor. And from a recoveries perspective, again, like the industry, we're seeing some pressure, but we think we're taking the right targeted actions to get to the right outcome.

So your outlook for improved claims performance is leaning more on the claims management and recoveries process as opposed to some anticipation of a stronger economy or anything like that, that reverses those trends. And then if I look forward to 2027, and I expect most of the companies are going to be repricing group in Canada, like what about the companies themselves are maybe less able to accept price hikes and there's loss of inflation. Is there any concern there that you might not be able to get your pricing or maybe some customers dial back their coverage?

Yes. Look, on the first part, 100%, we control our own destiny. We're making the right investments, and we will execute on those, and that will help the trend and help our customers. And as Phil mentioned on repricing earlier, our schemes are able to be repriced annually. We will take balanced adjustments and approach to that, looking to manage both margin but also to protect growth.

Is this a large case, mid-case phenomenon that you're seeing?

It's not specific to any particular segment or demographic cohort. So it's kind of across the board.

Even regionally?

Yes.

Our next question is a follow-up from Mario Mendonca.

I'll be quick. One thing I noticed like post IFRS 17 is that the corporate segments for the insurers got cleaned up. There was a lot of expenses that were being allocated to the segments in those like in that line called nondirectly attributable expenses. And then more recently, and this is not unique to Manulife. I've seen these corporate segments start to -- the losses start to really increase again. Can you talk about like what's changing here? Why are the losses in your corporate segment starting to increase? I mean one of the obvious areas I can see is that the core investment result has really started to decline in the investment income is now being allocated out to segments like Asia, for example. So what are we seeing here? Why would corporate become -- why would we start to see losses really start to increase again in corporate?

Mario, it's Colin. So you're right, the corporate results has gone backward from last year. It's $45 million lower or more adverse than last year. but it's clearly explainable. And one of the reasons in Manulife's case is the presence of our retro P&C business. And as you know, the cycle is softening. So when you look at that $45 million year-on-year change, 1/3 of that is coming from our P&C retro business. When you look at the other 2/3, we're spending a lot more in central projects and mostly AI. So we're holding on to expenses at the center. And so that's pushing up the costs there.

But there's also other factors like we make an accrual for withholding tax. And so we're expecting higher dividends from some of our entities that incur higher withholding tax. So that's factoring into it. We've said now that we expect the corporate result to be between $300 million and $400 million. We think we'll be towards the top end of that $400 million range, but definitely within the range. It is important to keep a lid on expenses in the corporate center, but the nature of how we're spending that money in a very central fashion means that there is a bit of upward pressure on that and not to forget the P&C business.

Yes. So $300 million to $400 million loss annually is the outlook, with the high end being more appropriate.

Yes. We were lower than that. We were towards the bottom end of that range. Last year, we'll be towards the top end of that range. We'll have to go through the full financial plan before we absolutely reconfirm 2027 in light of some of the expenses that we are making centrally, but that's a good place to start modeling from.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hung Ko for any closing remarks.

Thank you operator. We'll be available after the call if there are any follow-up questions. Have a good day, everyone.

This brings today's call to a close. You may disconnect your lines. Thank you for participating, and have a pleasant day.

[Presentation]

Well, good morning. Welcome, and thank you all for joining us today. On behalf of our Board, we welcome you to the Annual Meeting of Manulife Financial Corporation and the Manufacturers Life Insurance Company. My name is Don Lindsay, and I'm Chair of the Board. The Board of Directors, on behalf of shareholders, policyholders and employees of Manulife acknowledge that Toronto is covered by Treaty 13 and that for thousands of years, it has been the traditional land of the Huron-Wendat, the Seneca, and the Mississaugas of the Credit River. We recognize and honor these nations as the traditional stewards of the land and water on which Manulife's Toronto offices are now present.

With that important acknowledgment, I, along with the Board of Directors, and privilege to address you today to share some highlights from a remarkable year for Manulife. In 2025, Manulife delivered record core earnings, continued expanding its global customer base and saw strong growth in new business value across the franchise.

We continue to maintain significant financial flexibility, and we announced a 10.2% increase to our dividend per common share. And we bolstered our competitive position through investments that grew our global presence, strengthened our portfolio and advanced our strategic objectives.

Manulife achieved all of this and more against the backdrop of geopolitical and economic uncertainty and rapidly evolving technology. 2025 was also a year of leadership transition for Manulife with Phil Witherington, becoming President and CEO. Now Phil is a well-known and well-regarded leader within Manulife. Having served as CEO of our Asia business and as Group CFO prior to his current role, he has a track record as a strategic forward-thinking leader who delivers results.

Under Phil's leadership, Manulife announced a refreshed enterprise strategy in November of 2025, supported by 5 new strategic priorities that build on our strengths and position us to be the #1 choice for customers. These priorities strike a balance between strategic continuity and bold investment in future growth to help ensure Manulife is positioned to capitalize on global megatrends over the long term. The Board is fully aligned with Manulife's new ambition and has confidence in the leadership team's, ability to execute this strategy with speed, clarity and discipline.

We're deeply committed to providing steady oversight through this pivotal period as Manulife accelerates digital transformation to become an AI-powered organization, deepens customer experiences and unlocks value across our global portfolio. In closing, I would like to extend my sincere thanks to Phil and to the executive leadership team for their leadership and to my fellow Board members for their unwavering focus on strong governance. We reflect on 2025 with pride and look forward to supporting Phil and the rest of Manulife's leadership team as they lead Manulife into its next phase of growth, scaling innovation and delivering sustainable value for our customers and shareholders.

And to our customers and shareholders, thank you for your continued support. And to our teams around the world, thank you for your hard work. You are vital to achieving our ambition and ensuring a strong future for Manulife. Phil and I are joined on stage today by Chief Financial Officer, Colin Simpson; and Corporate Secretary, Antonella Deo.

And before handing over to Phil for his remarks, we'd like to review a few housekeeping items.

First, this meeting is being broadcast in both English and French. For attendees online to switch languages, please click on your desired language from the buttons above the presentation screen. Closed captioning is also being provided in both English and French. For attendees in person, there are translation headsets available. Channel #1 is for English, channel #2 for French.

If you did not receive a headset when you registered and would like one now, please raise your hand and a volunteer will provide you with one.

Closed captioning will also be shown on the monitors to the left and the right of the stage in English and in French, as indicated. If you need assistance during the meeting, there are volunteers at the back of the room. To be able to vote or ask questions during the meeting, online participants had to join the meeting by entering their control number at the registration screen.

Information on where to find your control number was provided in the meeting materials sent to shareholders and policyholders and posted on our website.

For attendees online, to ask a question during the formal business of the meeting, you can click on the messaging button on the screen and enter your question in the text box and click the send button. We will receive the questions and read them for all to hear or you can enter your phone number and topic in the text box.

The operator will then dial you into the meeting. Once you pick up, you will hear the meeting on your phone. Please mute your computer and listen to the live feed on your phone only. And this will prevent any delay or feedback from occurring.

When called upon to ask your questions, the operator will then unmute your line. Please be sure to clearly indicate the topic your question relates to when submitting it online, so we can address it at the appropriate time. For attendees here in person to ask a question during the formal business of the meeting, please come to one of the stationary microphones and identify yourself and confirm whether you are a shareholder of MFC, a policyholder of MLI or a duly appointed proxy holder.

If you're unable to come to one of the stationary microphones please raise your hand and a volunteer will bring a microphone to you. Now in the interest of giving sufficient time to respond to the questions of others, please only ask one question at a time and ensure your question does not exceed 3 minutes in length. Questions during the formal business of the meeting should relate to the matter being discussed.

Questions of a general nature that are of interest to all shareholders and policyholders will be dealt with during the Q&A session following the conclusion of the formal business of the meeting. In fairness to other shareholders and policyholders, we ask that you not submit personal or offensive questions. If your question relates to a personal matter, and you are in the room, please hold your question and approach one of our volunteers at the back who will direct you to an on-site management representative.

If you have joined us via the webcast please indicate in the text box that you would like someone to contact you and provide your contact information. We will not be addressing questions of a personal nature or that are offensive during the meeting. A reminder that only shareholders, policyholders and proxy holders may ask questions.

We draw your attention to the caution regarding forward-looking statements in the presentation slide. Comments made during this meeting may include forward-looking statements as defined in securities legislation. Actual results may differ materially from those expressed or implied in these statements. And please also refer to the note regarding the non-GAAP and other financial measures used in today's presentations. And with that, I will now hand it over to Phil.

Well, thank you, Don, and good morning, everyone. It is an honor to speak with you today, just over a year into my tenure as Manulife's President and CEO and what a year it has been from record core earnings and impressive new business growth across each of our insurance segments to announcing our refreshed strategy and making targeted strategic investments, it was a year of growth that positions us well to achieve our new ambition to be the #1 choice for customers.

I'm excited for what lies ahead and confident in our team's continued performance. So let's dive in. We are proud of our strong 2025 financial results, including robust cash generation that enables us to deploy capital strategically and in 2025, we returned $5.4 billion to you, our shareholders, all while investing in our business to deliver continued growth. We also strengthened our diversified portfolio this year.

First, we acquired Comvest Credit Partners, accelerating the growth of our private markets platform and enhancing our asset management capabilities. Then we acquired Schroder's Indonesia, reinforcing our position as the leading asset manager in Indonesia and expanding the range of world-class investment solutions we can offer our clients. We established a joint venture with Mahindra & Mahindra to enter the insurance market in India, one of the world's fastest-growing insurance markets. This strategic move expands our global footprint and positions us for growth in all 3 mega economies of the future, the U.S., China and India.

And finally, we are investing to further strengthen our leadership position in our home market of Canada and deliver new business growth and sustain a scaled presence in the United States. These strategic investments will help to drive our long-term growth, and I'm grateful to our partners and our teams around the world who have made each of these milestones possible. And on a personal note, I know that I will look back fondly on this year as we successfully entered a new chapter for Manulife with my appointment as CEO.

As I've settled into this new position, I am incredibly proud and grateful of the support of my predecessor, Roy Gori, and the entire Board of Directors, executive leadership team and our teams around the world who have embraced our new ambition and enterprise strategy. In my first 100 days, I visited our offices across Canada including Waterloo, Montreal and Halifax. I also visited the U.S. and Europe and many of our markets in Asia, where I met thousands of colleagues, partners and investors.

The insights from those early days helped shape our leadership team's thinking as we set our near- and long-term goals in this new chapter for Manulife. And in the months that followed, I've continued to take a proactive stance externally, meeting with world leaders, government officials and policymakers to ensure that Manulife is at the table informing policy decisions that can help improve the lives of our more than 37 million customers. These engagements renewed my confidence in what I already knew to be true. Our people and culture are our greatest strengths.

Our transformation over recent years is a testament to that but we know we must continue to be nimble because the world around us is ever changing. Market volatility and global economic uncertainty are heightened. Consumer digital expectations are climbing and competition for top talent and distribution are intensifying, reshaping our industry for good.

At the same time, we anticipate record levels of intergenerational wealth transfer, growing opportunities in the mega economies of the future and sustained scale arising from low insurance penetration rates and retirement savings gaps in many markets around the world.

We are well positioned for this reality, thanks to our diversification by business, geography and distribution mix and due to our industry-leading AI position and top quartile employee engagement. Combined with our top-tier innovative insurance capabilities, global wealth and retirement businesses and strong presence across high-growth markets in Asia and in North America's more mature markets, we are taking decisive action to stay ahead.

As I referenced earlier, in November 2025, we announced our refreshed enterprise strategy and introduced our new ambition to be the #1 choice for customers. Our strategy includes 5 new strategic priorities, enabled by digital first integrated platforms, capital strength, financial discipline and long-term vision and strong risk management and governance. Our strategy gives us a clear path to capture opportunities and deliver shareholder value for the next decade and beyond.

And the strategy is contemporary, recognizing the transformational power of AI and providing competitive differentiations in the solutions we provide to customers by recognizing the importance and interconnectivity between customer health, wealth and longevity. We've been recognized by Evident AI as the leading life insurer for AI maturity and responsible innovation. And last year, we deployed AI sales enablement and underwriting solutions across all 4 operating segments. This work is delivering measurable results and meaningful impact for our customers, colleagues and distribution partners.

Under our new strategy, we will continue this work to become a truly AI-powered organization. This year, we also redefined our commitment to advancing health, wealth and financial well-being for our customers. With product innovation continuing across our segments, we are differentiating Manulife from our peers. This includes embedding incentives to encourage healthier lifestyles, preventing or slowing the onset of disease and providing access to early detection tests for diseases such as cancer.

And in recognition of the responsibility we have to the communities in which we operate, concurrent with the introduction of our refreshed strategy, we launched the Manulife Longevity Institute, a global community investment and research platform backed by a $350 million commitment through 2030. This enables us to advance our community impact while helping our customers live longer and healthier lives for generations to come.

With the Board's support, our leadership team continues to move quickly to execute and deliver milestones that set us up for enduring success. I'm truly energized by the opportunities ahead for our team, our shareholders and the communities we operate in.

In closing, it is an honor to serve as Manulife's President and CEO. As a proud Canadian leading such an iconic Canadian company with a long history, I feel a real sense of duty to each of you, our shareholders and all our customers and our communities around the world. Thank you to our Board Chair and our entire Board of Directors for their continued support for our team and strategy.

Thank you to our executive leadership team for your partnership and dedication to making lives better. And thank you to our 106,000 distribution partners and 37,000 colleagues whose hard work makes our success possible.

And thank you to you, our shareholders and customers, for the trust you place in us to help secure your future. For more than 130 years, our company has navigated periods of geopolitical and economic uncertainty. And our expertise remains rooted in disciplined risk management and long-term decision-making. As a result, I am confident in our ability to not only achieve our targets but also drive high-quality sustainable growth for years to come and to be the clear #1 choice for customers. Thank you. Don, back to you.

And thank you to you, Phil, for both your remarks and your leadership. I will now call to order the Annual Meeting of Shareholders of MFC and the Annual Meeting of Policyholders and the Shareholder of MLI. Antonella Deo will act as Secretary of the meeting and Jennifer Andersen and Sarah Hunter of TSX Trust Company will act as scrutineers for both MFC and MLI.

The notice of this meeting was sent to all shareholders and policyholders required to be sent such notice and the quorum requirements for the meeting have been met. Accordingly, this meeting is now properly convened. We will now table the following items: 2025 consolidated financial statements of MFC and of MLI as well as the reports of the auditor and the actuary thereon. The 2025 consolidated financial statements of MFC were sent to shareholders in accordance with the Insurance Companies Act, Canada and the applicable securities legislation.

The 2025 consolidated financial statements of MLI were sent to policyholders in accordance with the Insurance Companies Act, Canada. And the information for participating policyholders of MLI, which includes summaries of the participating policyholder dividend policy and the participating account management policy. This information can be found in the 2025 report to policyholders, which was sent to all participating policyholders who requested notice of meetings.

Now do we have any questions on the financial statements or the information for participating policyholders of MLI. Seeing none in the room, Antonella, do we have any questions online?

We do not have any online questions.

Thank you. We will now proceed to the voting section of the meeting. Before commencing, we would like to provide instructions for how shareholders, policyholders and proxy holders may vote. For shareholders, policyholders and proxy holders in person to be able to vote during the meeting, ballots were handed out at the registration desk prior to the meeting.

If you did not receive a ballot when you registered, and are entitled to vote but you have not already voted by proxy, please raise your hand and the scrutineers will provide you with the required ballots.

To the extent that you have voted in advance of the meeting and do not wish to change your vote, you do not need to do anything. As we proceed through each item of business, shareholders, policyholders and proxy holders that joined the meeting online using their control number, will see the resolutions to be voted on displayed on the screen as the item of business is being discussed. Shareholders, policyholders and proxy holders that join the meeting here in person will see the resolutions to be voted on displayed on the screen in the room.

To vote, click one of the voting options available online or mark your vote on the green ballot for MFC or the yellow ballot for MLI. Votes submitted online will be automatically included in the vote tabulation. Scrutineers will collect ballots for those who are here voting in person.

If you have not voted in advance of the meeting and you do not press one of either for withhold or against when voting is open, your vote will not be recorded, and you will be regarded as having abstained from voting. We will be voting on items of business for both MFC shareholders and MLI policyholders.

If you are both an MFC shareholder and an MLI policyholder or a proxy holder for both, you may vote on all matters. If you are an MFC shareholder but not an MLI policyholder or vice versa, you will see the items being voted upon for each company, but votes cast will only be counted towards the company of which you are a holder. A simple majority is required to approve matters voted on at this meeting.

To facilitate efficiently proceeding through the business of the meeting, Manulife employees who are MFC and MLI proxy holders will move all resolutions. Preliminary results will be announced after voting closes for all matters, and then final results will be posted on our website following the meeting.

First item of business is the election of the directors of MFC and MLI. You may either vote for or withhold your vote from each director nominee. We will now vote on the election of directors of MFC. The number of directors to be elected today, as determined by the Board, is 13. If you have already voted and do not wish to change your vote, there is nothing for you to do at this time. Information on each nominee is set out in the management information circular for this meeting. Michelle Joy Rafat, an employee and a proxy holder has agreed to move this resolution.

Mr. Chair, I am pleased to nominate the 13 directors as set out in the management information circular and as shown on the screen as directors of MFC to hold office until the close of the next Annual Meeting of the Shareholders of MFC or until their successors are elected or appointed.

Thank you. Do we have any questions on the election of the directors of MFC. Seeing none in the room, Antonella. Do we have any questions online? .

No questions at this time.

Thank you. For shareholders and proxies online, please vote online for the election of directors of MFC. For shareholders and proxy holders here in person, please mark your ballot for the election of directors of MFC. Voting is now closed for the election of the directors of MFC.

We will now vote on the election of directors of MLI. The number of directors to be elected today, as determined by the Board, is 13, made up of 5 policyholder directors and 8 shareholder directors. Information regarding the nominees is set out in the report to policyholders for this meeting. The participating policyholders of MLI vote for the policyholder directors.

And if you've already voted and do not wish to change your vote, there is nothing for you to do at this time. Camille Ricketts, an employee and a proxy holder has agreed to move this resolution.

Mr. Chair, I'm pleased to nominate the 5 directors as set out in the report to policyholders and as shown on the screen as policyholder directors of MLI to hold office until the close of the next annual meeting or until their successors are elected or appointed.

Thank you. Do we have any questions on the election of policyholder directors of MLI? Seeing none in the room. Antonella, have we received any questions online?

We have not.

Thank you. For policyholders and proxy holders online, please vote online for the election of the policyholder directors of MLI. And for policyholders and proxy holders here in person, please mark your ballot for the election of the policyholder directors of MLI.

[Voting]

Voting is now closed as it relates to the election of the policyholder directors of MLI.

We will now move to the election of the shareholder directors of MLI. As the sole shareholder of MLI, MFC has elected the shareholder directors by written resolution in accordance with the Insurance Companies Act of Canada. The 8 directors shown on the screen and as set out in the report to policyholders have been elected as the shareholder directors of MLI to hold office until the close of the next annual meeting or until their successors are elected or appointed.

We will now vote on the appointment of auditors for MFC and MLI. If you have already voted and do not wish to change your vote, there is nothing for you to do at this time. Michelle Joy Rafat, an employee and proxy holder has agreed to move this resolution.

Mr. Chair, I move that Ernst & Young LLP chartered accountants be appointed auditors of MFC and MLI until the close of the next annual meeting at a remuneration to be fixed by the directors.

Thank you. Camille Ricketts, an employee and proxy holder has agreed to second this motion.

Mr. Chair, I second the motion.

Thank you. Do we have any questions on the appointment of the auditors for MFC and MLI, seeing none in the room. Antonella, have we received any questions online?

We do not have any online questions.

Thank you. For shareholders, policyholders and proxy holders online, please vote online now for the appointment of the auditors of MFC and MLI. For shareholders, policyholders and proxy holders, who are here in person, please mark your ballot for the appointment of the auditors of MFC and MLI.

[Voting]

Voting is now closed as it relates to the appointment of the auditors for MFC and MLI. We will now hold the nonbinding shareholder advisory vote on MFC's approach to executive compensation.

MFC's executive compensation program is designed to contribute to our long-term sustainable growth by rewarding executives for strong performance in executing our business strategy. Your Board believes that shareholders should have an opportunity to understand how and why the Board makes its executive compensation decisions and should be able to provide input to the Board on executive compensation.

We take our shareholders' feedback seriously and we will continue to do so. If you have already voted and do not wish to change your vote, there is nothing for you to do at this time. Michelle Joy Rafat, an employee and a proxy holder has agreed to move this resolution.

Mr. Chair, I move that the advisory resolution to accept MFC's approach to executive compensation as set out on Page 14 of the management information circular be approved.

Thank you. Camille Ricketts, an employee and a proxy holder has agreed to second this motion.

Mr. Chair, I second the motion.

Thank you. Do we have any questions on the advisory resolution on MFC's approach to executive compensation? Seeing none in the room. Antonella, have we received any questions online?

No online questions.

Thank you. For shareholders and proxy holders online, please vote now online for the approval of the advisory resolution on MFC's approach to executive compensation. And for shareholders and proxy holders here in person, please mark your ballot for the approval of the advisory resolution on MFC's approach to executive compensation.

[Voting]

Voting is now closed as it relates to the approval of the advisory resolution on MFC's approach to executive compensation. For shareholders, policyholders and proxy holders here in person, the scrutineers will now collect the ballots, and we will wait a few moments for all ballots to be collected.

Okay. Thank you. The scrutineers have prepared their preliminary report, and Antonella Deo will now present the preliminary results of the votes.

On the election of directors of MFC, each director nominee received at least 95% of the votes in favor.

I declare that all 13 director nominees have been elected as directors of MFC.

On the election of policyholder directors of MLI, each policyholder director nominee received at least 90% of the votes in favor.

I declare that all 5 nominees have been elected as policyholders directors of MLI.

On the appointment of auditors, for both MFC and MLI at least 89% of the votes were cast in favor of the appointment of Ernst & Young as auditor.

I declare that Ernst & Young LLP has been appointed as auditors of MFC and of MLI.

On the advisory resolution to accept MFC's approach to executive compensation, more than 94% voted for and less than 6% voted against.

I declare that the shareholders have accepted Manulife's approach to executive compensation. And I want to thank the shareholders for your vote.

The scrutineers' report in final form will be recorded in the minutes of this meeting and will be posted on our website following the meeting.

This concludes the formal business of the meeting. Your Board would like to acknowledge Phil and the executive leadership team for their leadership through this next chapter for Manulife and for their commitment to disciplined execution of our refreshed enterprise strategy. And on behalf of the Board of Directors, I also want to thank Manulife colleagues for their unwavering focus on bringing to life Manulife's purpose, which is to make decisions easier and lives better for our more than 37 million customers around the world.

And finally, thank you to our fellow shareholders and policyholders for your continued trust, support and feedback. We will now turn to the question-and-answer period. As a reminder, only shareholders, policyholders and proxy holders may ask questions. To be able to vote or ask questions during the meeting, online participants had to join the meeting by entering their control number at the registration screen. To ask a question, you can click on the messaging button on the screen and either enter your question in the text box and click the send button.

We will receive the questions and read them for all to hear or you can enter your phone number and the topic in the text box and the operator will then dial you into the meeting. Once you pick up, you will hear the meeting on your phone, and so then please mute your computer and listen to the live feed on your phone only. This will prevent any delay or feedback from occurring.

When called upon to ask your question, the operator will unmute your line. For shareholders, policyholders or proxy holders in person, please come to one of the stationary microphones and identify yourself and confirm whether you are a shareholder of MFC, a policyholder of MLI or a duly appointed proxy holder. If you are unable to come to one of the stationary microphones, please raise your hand and a volunteer will bring a microphone to you.

In the interest of giving sufficient time to respond to the questions of others, please only ask 1 question at a time and ensure your question does not exceed 3 minutes in length. Questions of a similar nature will be grouped together to avoid repetition. Questions should be of interest to all shareholders and policyholders and should not be offensive or of a personal nature. As stated previously, in fairness to other shareholders and policyholders, we ask that you not submit personal or offensive questions.

If your question relates to a personal matter, and you are here in the room, please hold your question and approach one of our volunteers at the back who will direct you to an on-site management representative. If you have joined us via the webcast, please indicate in the text box that you would like someone to contact you and provide your contact information. We will not be addressing questions of a personal nature or that are offensive during the meeting. So, we're open for questions.

I see we have one at this microphone over here. So please.

Hello. My name is Kyra Bell-Pasht, and I work with Investors for Paris Compliance. Nice to see some of you again. I am here as a proxy holder on behalf of the Salal Foundation. So -- as I mentioned, Investors for Paris Compliance is a climate shareholder advocacy group, and we have been following Manulife's progress towards its net-zero commitment and its general account since about 2022.

And the commitment having been made in 2021. Over these 4 years, we have valued the open dialogue with the Chief of Sustainability, her team with the previous CEO and the current CEO and we have been encouraged by steady progress, incremental progress towards this general account commitment.

From the outset of our engagement, one of our goals has been to secure acknowledgment that ongoing fossil fuel investment presents a unique and growing risk to Manulife's core business of ensuring policyholder health and well-being, adverse health impacts from air pollution and extreme weather will intensify as long as capital continues to flow towards the problem rather than the solutions.

Heading into this AGM, we're pleased to see that Manulife has begun analyzing climate and health data from policyholder claims, including air quality impacts, we're also pleased to see a decline in its legacy fossil fuel assets and its general count from $1.9 billion in 2024 to $1.7 billion in 2025.

I hope I'm getting that right. and a commitment to decline these holdings going forward. And to increase generally its investments in transition.

However, our analysis shows that Manulife does not appear yet to be on track to reach a ratio of 4.8:1 low carbon to fossil fuel energy investments in its general account by 2030, which Bloomberg NEF states is required to achieve its net-zero commitments.

So my question, sorry for the long preamble -- in light of the -- in light of the strong links between climate and health and Manulife's commitment to achieve its net-zero -- to achieve net-zero in its general account, I'm curious to know whether in the coming year, Manulife will commit to a quantitative target to increase its investments in the opportunity side of the climate ledger, the energy transition and renewables, really a commitment to invest in the health of its policyholders. So thank you. I look forward to your answer.

Thank you very much for your question and your comments. And I do want to say upfront that we very much appreciate your acknowledgment of the quality of dialogue with our team at Manulife. I'll make a couple of comments and then Phil may want to add things more specific.

But as you said towards the end of your comments, there's no doubt for a life and a health insurer that climate change and human health are directly connected and we are very, very much committed to going forward, taking action on climate change. We have a climate action plan have had for a number of years with targets all across our listed assets, the power generation project finance and our own operations. And we've seen some pretty strong progress so far, though, obviously much work to do.

In addition, our sustainable investments, including renewables, represent about 11% of the portfolio alongside roughly $13 billion in labeled bonds underscoring that sustainability is already embedded in our approach. As the initial target time lines conclude as we get close to that, we are reviewing next steps to keep future targets ambitious, which is towards the specific question that you're asking and make sure they're credible and aligned with today's policy and market conditions and we are going to continue to engage with you and hopefully maintain a high quality of dialogue on the issue. So that's sort of from the Board's perspective. But Phil, I don't know if you want to add anything more specific.

I've got a microphone that works. Firstly, and I think Don has covered it nicely. But firstly, I wanted to -- thank you for the question. And -- as Don said, for the constructive engagement from Investors for Paris Compliance, you have our commitment that we will continue to gauge equally as constructively. And as Don laid out, as we look to the future, we are now getting into a period where we have, as you referenced, made a lot of progress.

And we are actually coming up on the periods of time when some of our targets, the relevant completion dates will fall, and that causes us to actually review what is the next wave of targets that will remain relevant and credible and ambitious. And so we will take this feedback on board, and we look forward to that continued engagement.

One final point that I will make. You referenced the link between air quality and human health, that is something that is of great interest to us. It's very important to our business, but it's also important to the health of the communities in which we operate.

We take that very seriously, and we are investing in research into that topic, and we have partnered with a Canadian university to explore. And this is early stage, but explore one element of that, which is the connection between severe climate events and mental health. And I think it's not just always about physical health, but mental health is also an important consideration. Thank you for your question today.

Antonella, just check, do we have any questions online?

Not yet.

Okay. Thank you. Back to the room here.

Hi, my name is Sharon. I'm a policyholder and the shareholder. I'm sorry, but this concerns policyholders, including my husband, who have suffered significant losses and cuts in their life insurance, death benefits as a result of Manulife's dividend scale decreases over the years.

Manulife has cut a total of 55,000 from my husband's death benefit insurance coverage. Not only has he lost 55,000 in death benefit, he also had to pay more to Manulife, 137% more in premium payment. For the past 13 years, Manulife simply used the excuse that the dividend scale has decreased to unfairly cut my husband's death benefit by 55,000.

My question is how did your company's dividend scale decreases led to my husband's 55,000 loss.

For the past 13 years, Manulife never explained how the dividend scale decreases caused the 55,000 death benefit cut and the 137% increase in premium payment. I'm sorry, but your company's AVP, Mr. Blair Anderson and his team simply covered up and said they consider the matter closed. Even though they have repeatedly refused to correct, among other things, their premium calculation errors, their overcharge errors, and their completely wrong guaranteed maximum premium rates errors.

Manulife's 55,000 cut ended up 137% premium increase are in violation of my husband's policy contract. Section 211 of the Ontario Regulation 700 unfair or deceptive acts or practices of the Insurance Act and 1998 class action settlement agreement. Manulife has cut the death benefit to the point that my husband's death benefit is now less than the death benefit he had when he purchased his policy 41 years ago.

So he has more -- less money, a lot less money in his death benefit for the past 13 years. Mr. Anderson and his executive team have never shown any interest in correcting their among other things, their premium calculation error.

their overcharge errors and their completely and totally wrong guarantee maximum premium rates errors. Can you please help. I've been to the on-site management team 3 times over the past 3 years, but they never wanted to help.

Thank you very much for your question. We do appreciate your concern, but I'm going to consider your question to be of a personal nature. And if you could please review the issue with one of the volunteers at the back, and they will direct you to someone who can give you detailed answers to your question. We'll move on to the next question. Is there another one in the room? Okay. Any online?

We do have a question from Mr. Jeff Carlson. Mr. Carlson, please go ahead.

Hello, can you hear me?

Yes, we can.

We've heard today from some shareholders about the evils of hydrocarbon production. And nothing could be further from the truth. The support by Manulife for the Canadian oil and gas sector in oil and gas production is critical to the well-being of Canadians and in fact, the entire world. Those who promote the policies aimed at limiting hydrocarbon production and refining would have you believe that fossil fuels are the root of all evil. And as I've said, that's absolutely false.

It's easy to see how civilization has benefited and continues to benefit from hydrocarbon production refinery for medicines, transportation, production of food for the people of the planet. Canada is a leader in these technologies and best practices, and it behooves Manulife to continue to support Canadian-made, Canadian-produced hydrocarbon resources and I look forward to that continued to support in the future. Thank you.

Thank you very much for your comment. Manulife gives very careful consideration to our investments in energy, whether they be renewable energy or hydrocarbon based. We understand that there's a range of issues -- a range of views on these issues, and we'll be carefully monitoring that as we go forward.

Do you have any further questions online?

No more questions.

Are there any further questions in the room? I want to make sure we have given everybody enough time. Well I see no more questions in the room and there are none online. So with that, I want to thank you all for attending and for your continued interest in Manulife. The meeting is now closed. Please have a wonderful day.

Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation First Quarter 2026 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead.

Thank you. Welcome to Manulife's earnings conference call to discuss our first quarter 2026 financial and operating results. Our earnings materials, including a webcast slide for today's call, are available in the Investor Relations section of our website at manulife.com.

Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 33 for a note on the non-GAAP and other financial measures used in this presentation. Please note that certain material factors, assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated.

Turning to Slide 4. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide a highlight of our first quarter 2026 results and a strategic update. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail. After their prepared remarks, we'll move to the live Q&A portion of the call.

With that, I'd like to turn the call over to Phil.

Thanks, Hung, and thank you, everyone, for joining us today. As I reflect on my first year as CEO, I'm proud of what we've accomplished as an organization. We've moved at pace to make significant progress against our refreshed enterprise strategy. And as we look to the future, we're well positioned to achieve our ambition to be the #1 choice for customers.

I'll begin with an overview of our first quarter financial performance, starting on Slide 6. We delivered solid results in the first quarter, building on our strong 2025 momentum despite heightened macro uncertainty. Our insurance businesses generated strong top line results with each segment achieving double-digit growth in new business CSM. This contributed to 18% growth in our CSM balance and further strengthened our future earnings potential. Asia had strong sales this quarter with meaningful growth from key markets, including Hong Kong, Japan and Singapore. While Global WAM posted net outflows in the first quarter, we saw sequential improvement, including continued institutional inflows, supported by the recently acquired Comvest business as well as CQS. Colin will take you through those details shortly.

From a profitability standpoint, we delivered core EPS growth of 11%, in line with our medium-term target. This reflects strong growth in Asia, where core earnings increased 22% year-over-year as well as the positive impact of share buybacks. We delivered this result despite the impact of the transition to eMPF, which moderated core earnings growth in Global WAM. It was also a challenging quarter for insurance experience in Canada. Nevertheless, we continue to make progress towards our 18% plus core ROE target by 2027 and delivered a solid core ROE of 16.5%, up 90 basis points from the prior year.

On to our balance sheet. Our LICAT ratio remains strong, and our leverage ratio is well below our target, providing us with ample financial flexibility. In addition, our adjusted book value per share increased 6% even as we continue to return significant capital to shareholders through dividends and share buybacks.

Moving on to Slide 7, which shows the refreshed enterprise strategy introduced late last year. The organization remains highly energized about the strategy with a focus on execution to deliver high-quality sustainable growth. Continuing our strong momentum from last year, we made meaningful progress executing the strategy again this quarter, which you can see on Slide 8.

A balanced and well-diversified portfolio underpins our ability to deliver earnings resilience and long-term value creation. This is why we continue to expand our global reach and capabilities, which have proven to be especially important during periods of uncertainty. We were recently named Asia's Best Insurance Provider for Wealth Management, reflecting our innovative product suite, value-added service and trusted relationships with our distribution partners across our high net worth channels.

In Global WAM, we completed the acquisition of Schroders Indonesia, strengthening our position as the largest asset manager in Indonesia. And we entered into a strategic partnership with L&G, enabling us to leverage complementary strengths in global asset management and distribution and expand access to differentiated investment solutions across institutional, retirement and retail channels. In the U.S., we further differentiated our indexed and hybrid indexed universal life offerings, positioning us well to meet evolving income protection and wealth accumulation needs.

We also continued to expand our U.S. distribution footprint. And over the past year, our wholesaling team has grown by more than 50%. This expansion enables us to deepen adviser relationships, improve execution and coverage in key markets and better support the launch of new products and initiatives. Becoming an AI-powered organization is a key area of focus, and we're accelerating progress through targeted strategic actions. This includes recent strategic partnerships such as our collaborations with AKKA and Adaptive ML, which improve our ability to deploy AI at scale with speed and consistency.

In parallel, we're focused on increasing our capacity and accelerating the pace of our technology initiatives. By further leveraging AI tools, our developers drove a 30% increase in productivity this quarter, enhancing their ability to support business growth and develop new capabilities. In Global WAM, we deployed an AI-powered sales platform in U.S. retail that has driven a 40% increase in meaningful adviser interactions and is supporting higher flows. We also continued to roll out AI tools across Asia to enhance agent and adviser productivity, including the launch of a new distributor AI tool in Vietnam and enhancements to our adviser AI tool in Japan. These initiatives support faster access to information, enhanced customer service and enable further improvements to distributor productivity and wider customer reach.

In the U.S., we expanded our Quick Quote support tool, automating nearly half of preliminary assessments and reducing average turnaround time from days to minutes. These examples illustrate how we're scaling digital and AI capabilities across the enterprise to deliver measurable improvements in efficiencies, customer experience and value. And finally, we're committed to empowering health, wealth and longevity for our customers across all stages of their lives, and we continue to deepen our leadership in this space. During the quarter, we announced a new partnership with Guardant Health, offering eligible customers in Asia access to the Shield Multi-Cancer Detection blood test. We're proud to be the first insurer in Asia to offer this test, expanding access to early cancer detection.

And in Canada, we've partnered with Osara Health to offer evidence-based cancer support programs to eligible group benefits customers, helping them navigate the daily challenges of living with cancer, obtaining treatment and recovery. Overall, I'm pleased with the progress we're making. We're taking decisive action to strengthen our competitive differentiation, which is positioning us for long-term success and contributed to our solid operating results this quarter. Our financial and operating performance underscores the strength of our strategy, the discipline of our execution and the quality of our global franchise. We remain steadfast in our commitment to delivering on our targets and driving sustainable growth, and we're confident in our ability to do so.

With that, I'll hand it over to Colin to discuss our quarterly results in more detail. Colin?

Thanks, Phil, and good morning, everyone. This quarter marked another period of solid execution for Manulife through a volatile macro environment. Before opening the line to questions, I'll walk you through this quarter's results.

Let's begin on Slide 10 to discuss our top line. We delivered solid new business results in the first quarter with 16% growth in new business CSM, underpinned by double-digit growth from each insurance segment. This was supported by strong APE sales growth in Asia and the U.S. Canada's APE sales declined as growth in individual insurance sales were more than offset by lower large case group insurance sales, which tend to be lumpy. In Global WAM, headwinds in active mutual funds in North America retail and to a lesser extent, U.S. retirement led to net outflows of $4.4 billion.

Turning to Slide 11. You'll note a few of the key drivers behind our earnings this quarter compared to the first quarter of 2025. Strong business growth in Asia and Canada, along with the net impact of last year's actuarial assumptions review drove a higher net insurance service result. Overall insurance experience improved compared to the prior year, reflecting claims gains in U.S. Life and LTC as well as the nonrecurrence of a P&C provision in the first quarter of 2025, partially offset by unfavorable experience in Canada Group insurance. I will provide more color on our insurance experience in a few moments.

Moving down the DOE table and on to our net investment result, where we saw a decrease of 5% versus the prior year, primarily driven by lower investment spreads in the U.S. Our expected credit loss, or ECL, was a $39 million pretax charge, largely in line with the prior year and our medium-term guidance. Lastly, Global WAM generated modest pretax earnings growth.

Turning to Slide 12. Core EPS was up 11% year-over-year, reflecting strong growth in core earnings alongside the impact of continued share buybacks. Net income for the quarter came in at $1.1 billion, reflecting a charge from market experience driven primarily by public equity performance. It's worth highlighting that while we're only halfway through the second quarter, most equity markets have largely reversed their first quarter underperformance. We also saw a $242 million charge in our ALDA portfolio, primarily related to lower-than-expected returns across real estate, timber and private equity investments.

Moving on to results by segment. We'll start with Asia on Slide 13. You'll notice that we've expanded our regional disclosures for certain sales and other metrics to now include Mainland China and Singapore on a quarterly basis. This additional granularity gives you a sense of the diversity and scale of our Asia footprint. APE sales increased 11% from the prior year, supported by double-digit growth in Hong Kong, Japan and Singapore.

After a softer fourth quarter in Hong Kong, focused execution from the team drove 18% year-on-year growth in APE sales, reflecting higher agency and bancassurance sales and resulting in record quarterly sales. Overall, new business margins modestly expanded, supported by a more favorable business mix. From a core earnings perspective, Asia delivered another quarter of impressive results. Core earnings increased 22% year-on-year, reflecting continued business growth and the net favorable impact of last year's basis change, partially offset by less favorable insurance experience.

Now moving on to Global WAM on Slide 14. Despite generating record gross flows this quarter, net flows were challenged. In retail, we experienced higher active mutual fund outflows, primarily driven by higher redemptions through third-party intermediaries in North America, including a few large model redemptions in the U.S., while U.S. retirement outflows were primarily driven by higher plan redemptions. These were partially offset by strong institutional inflows, including contributions from Comvest and CQS. We also saw strength across Canada and Asia retirement, North American ETFs and Canadian wealth as well as Asia retail, highlighting the strength of our diversified platform.

Our core EBITDA margin expanded 60 basis points from the prior year, supported by AUMA growth, the Comvest acquisition and continued expense discipline, partially offset by the impact of the eMPF transition in Hong Kong and lower performance fees, which can be lumpy. These factors also contributed to modest core earnings growth of 2%. With the reduction in one-time eMPF-related expenses incurred in the first quarter, along with more trading days, we expect the Q2 core earnings run rate to increase by approximately $25 million. And if equity markets were to hold at current levels, they would provide a tailwind to the normalized demand.

Next, turning to Canada on Slide 15. This quarter, APE sales declined 15% year-over-year, reflecting lower group insurance sales. This was partially offset by higher sales in individual insurance as we saw continued strong demand for our participating life products. Overall, we also saw a decline in new business value. New business CSM, however, increased 13%, reflecting the strong growth in individual insurance. Core earnings declined 6% year-over-year, primarily reflecting unfavorable insurance experience in group insurance compared with favorable experience in the prior year.

This was driven by a combination of higher incidence and lower recoveries in our long-term disability business, along with higher expenses to support business growth and transformational investments. We expect recoveries and experience to normalize throughout the year, and we continue to invest in our Canadian business to improve customer experience and help our customers return to work. The impact of this experience was partially offset by business growth, the net impact of last year's basis change and a lower ECL provision charge.

Lastly, let's discuss our U.S. segment's results on Slide 16. APE sales grew 29% year-over-year, driven by continued strong demand for our insurance accumulation products and translating into robust growth in new business CSM. Core earnings decreased modestly, primarily reflecting lower investment spreads, though this was partially offset by favorable insurance experience. It's worth noting that this included claims gains in our U.S. Life business, reinforcing our view that the unfavorable experience last year was a result of normal course variability rather than a sign of an underlying trend. Also of note, LTC insurance experience was positive across the P&L and CSM this quarter.

Moving on to our book value on Slide 17. You'll note we continue to grow our adjusted book value per share, which was up 6% from the prior year at $39.01 even as we returned $5.3 billion of capital to shareholders over the past year. As previously announced, our new buyback program began in late February, allowing us to repurchase up to 2.5% of common shares outstanding. Between dividends and share buybacks, we returned $1.2 billion of capital to shareholders during the quarter.

Let's now turn to our balance sheet on Slide 18. Our LICAT ratio remained strong at 136%, $25 billion above our supervisory target ratio, and our financial leverage ratio of 22.5% remained well below our medium-term target of 25%. In what remains a dynamic and volatile macroeconomic environment, our balance sheet has held up extremely well. These results highlight the strength and resilience of our capital position and provide us with confidence in our ability to navigate uncertainty while maintaining financial flexibility.

And finally, turning to Slide 19, you'll find an overview of our continued progress against our 2027 and medium-term targets. While we faced some headwinds this quarter, overall, we are very pleased with our financial performance underpinned by the strength and resilience of our diversified business. Strong underlying business growth and disciplined execution keep us on track to deliver against our targets.

This concludes our prepared remarks. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of 2 questions, including follow-ups and to requeue if they have additional questions. Operator, we will now open the call to questions.

[Operator Instructions] The first question today comes from John Aiken with Jefferies.

I wanted to drill down the performance in Asia, if I may. Actually, I want to look at Japan in particular. We've seen several quarters of improving core earnings growth. I wanted to discuss what the outlook is for the region, what you're doing in terms of product development and how sustainable are these earnings levels or even growth trajectory?

Thanks, John, for the question. It's Steve here. And as Phil and Colin noted, we were really pleased with the overall Asia results with strong growth in our new business metrics. And Japan was a key part of that. We're pleased with the new business performance, the APE sales growth and the value metrics all grew very strongly. What we're seeing there, this is really a combination of a couple of things. First is a continuation of the momentum that we had in 2025. We've been really focused on broadening our product propositions, our portfolio to cover a wider range of customer needs across distribution channels.

And then we also note that in Japan, there can be some quarter-to-quarter variability somewhat due to market conditions. We saw a bit of that this quarter, but the fundamentals, the sustainable part, the business performance, that part is sustainable. And the -- we've introduced some new whole life products. We've introduced ILP products, all of which have hit the mark in terms of customer needs. So our outlook there is quite positive. What we're seeing is that the environment is supportive of insurance, building on customers' needs to build retirement savings. The interest rate environment has helped the attractiveness of insurance products. So we're quite optimistic as we look out there, particularly with the products having hit the mark.

The next question comes from Gabriel Dechaine with National Bank.

Yes. First question is on the experience in group. Can you break that down between expense and the disability and why this quarter might be just a bit of a blip as opposed to something we've got to worry about for a few more quarters? Because I mean, I looked last year, it's not like group had a big sales surge and 2024 was pretty high. I don't know if there's any connection there. Sometimes you have big sales and the pricing needs to be adjusted.

Gabriel, it's Naveed here. Thanks for the question. So you highlighted that we did have unfavorable insurance experience in Canada, specifically in our long-term disability business. What we saw there was modestly higher incidence and lower recoveries. It's worth noting, though, that we're seeing overall less favorable experience in this business across the industry in the first quarter. We did also see experience losses on our travel insurance business due to recent global disruptions, which we do not expect to persist going forward. And finally, group insurance had higher expenses in the quarter to support recent growth and transformational investment to elevate the customer experience.

Now we are -- on the long-term disability, we are taking targeted actions on the business to address the lower recoveries that I previously mentioned. Specifically, in 2025, we started to hire extra case managers as our disability case loads had exceeded our target levels due to business growth. Again, if you sell the business, you saw -- you mentioned the really strong sales year in 2024. It does take some time for those disability cases to come in. And so we did need to really ramp up our case managers to deal with the growth. And it does take some time to onboard and train the new case managers. So we did see higher expenses and lower recoveries contributing to deterioration in experience. Now going forward, we do expect Canada segment total insurance experience to improve and trend to get to more normal levels by the end of the year.

And Gabriel, this is Phil. Just to add, you did ask about sales momentum. And I think the word that Colin used, the adjective he used in his remarks was that group business can be lumpy. I think that's absolutely right. If you look at the next level of detail below sales, in Canada, the individual insurance sales are actually very strong, and that's the driver of the 13% growth in new business CSM in Canada. And I would expect that group sales continue to be lumpy. A better metric actually for group business is to look at persistency and our persistency remains strong.

Okay. Great. Now turning to the investments, I think everybody is focused on private credit exposure and your disclosures help. I want to ask about the impact of the oil price shock in your Asia footprint. There are different -- different countries are positioned differently with regards to how it's impacting them, level of reserves they have, for instance. I'm just wondering if you could talk about if there's any impact on consumption or sales that is noteworthy. But more importantly, the credit exposure, whether it's in the public or government portfolio or maybe the corporate portfolio, if you're starting to see any signs of stress there tied to this issue?

Okay. Great, Gabriel. This is Phil. Let me take the start. There's quite a lot in there. Then I'll hand over to Steve on Asia and Trevor on private credit. Just in relation to where you started on the impact of the oil price shock and the potential impacts on our business. If I maybe start actually in the Middle East and highlight that we actually don't have much by way of direct exposure to the Middle East. To the extent that we do have direct exposure, it's very modest. And has -- we have seen in the quarter some disruption to our international high net worth business from Middle East customers.

However, that's not particularly visible because it's been more than offset by actually very favorable momentum in some key hubs in Asia, Hong Kong and Singapore, for example, in the high net worth segment have done very well. In terms of the broader impact on Asia, there's nothing that is currently visible in terms of declines in consumer sentiment. But I will hand over to Steve at this point to elaborate further.

Thanks, Gabe. Phil covered it quite well. At this point, you can see from the strength of the Q1 results, we don't see a material impact. We're watching closely for how this plays out over time. And as you noted, I think some of the markets are in Southeast Asia, more exposed to oil supply. But we haven't seen it yet, and our capital positions are resilient and strong. So we feel quite good overall.

And I'll pass it to Trevor on the investment specific.

Thanks, Steve. And thanks, Gabe, for the question. So sort of 2 elements there. Firstly, I think on the private credit side, most of that exposure is really in the U.S. There's very limited exposure to either the Middle East or Asia or, in fact, oil. So I think very low concern there at all...

The plain vanilla portfolio, I'm thinking about more...

Yes. So just to the plain vanilla investment portfolio in Asia, it's probably mid-90s investment grade. It's largely government and sort of quasi-government exposures. And even the below investment-grade exposure in Asia tends to be sovereigns and quasi-sovereigns in places like Vietnam to match local liabilities. So we're not really seeing anything at this point. And I think, as I said, I think the quality of the portfolio is quite strong. So no particular concerns.

The next question comes from Thomas Gallagher with Evercore ISI.

First question, just a follow-up on Asia. Would you say Q1 earnings are a good baseline to build off of or anything unusual there because investment spreads look pretty good and expense is low. So I just want to see if you would adjust that at all when you think about the roll forward into 2Q.

Thanks, Tom. It's Steve here. And the short answer is Q1 is a good baseline to look at for future growth, subject to normal variability, but Q1 is a good base.

Okay. The follow-up is there's been some recent M&A activity in the U.S. And just curious how you're thinking about your position and footprint in that market and whether you think M&A in that region may make sense for Manulife?

Tom, this is Phil, and I think it's probably best for me to take that one. We actually quite recently released our refreshed strategy at the end of last year. And our focus right now is on the execution of that strategy, and it's very much an organic focus plus execution of the transactions that we have already done, and we have done a sequence of M&A transactions in recent months, quarters in the last couple of years, CQS, Comvest as well as Schroders in Indonesia.

And I do acknowledge we are in a strong capital position. We have, through our refreshed strategy, expressed appetite to invest not only in Asia and GWAM, but also in our insurance markets in the U.S. and Canada, and we have a strong capital position. But the bar is high when it comes to inorganic deployment. I don't rule inorganic deployment out, but the bar is high, and our primary focus is organic execution.

The next question comes from Tom MacKinnon with BMO.

A question about the U.S. where sales continue to be strong here. Maybe you can provide a little bit as to what's happening here? Is it just expanded distribution? Is the product working? How is it working? Is it piggybacking on Vitality brand strength? And maybe a little bit about the type of products that are driving that growth. They appear to be a bit more CSM type products. To me, that indicates better earnings visibility going forward. But maybe you can dig a little bit deeper into those exceptional sales growth you're getting in the U.S.

Thanks, Tom. It's Brooks. I appreciate the question. And yes, Q1 represented the seventh quarter in a row of really strong new business growth, including the underlying value metrics. So we're quite pleased with that. And it's a combination of many of the factors you mentioned and some others. Phil mentioned in his introductory remarks that we substantially increased the size of our wholesaling force over 50% up from a year ago, but really more than double from, say, 18 months ago. So substantial investments there that are paying off nicely. We have a highly differentiated story.

I would say, in your own lives, if you think about the hot topics these days, longevity, wellness, things like that, they're some of the fastest-growing segments of the economy. And we continue to be the only U.S. Life insurer offering life insurance with those embedded features and benefits. So very, very strong appeal there. We've introduced a number of new solutions, recently something called Vitality Pro, which is a companion app to our customer-facing Vitality app, but the Vitality Pro is for advisers, and it's intended to drive engagement just as we have engagement with our customers around health and wellness, it drives engagement with our advisers and ultimately loyalty. So a whole series of initiatives underway there, frankly, with many more planned. So not only do we feel good about the recent growth, the value it's creating, the ability to restore the CSM balance that you commented on, we're quite optimistic about the future as well.

And as a follow-up, are these largely more adjustable type products, i.e., the level of guarantees on these things would be certainly not as high as what's in your legacy book?

Great point, Tom. We were really the first U.S. insurer to move away from long-duration guarantees in a meaningful way all the way back in 2010, we had substantially migrated away from them. In the past 15 years, our block is virtually entirely adjustable.

And Tom, this is Phil. Just to make a connection between what Brooks just said and how we expect earnings in the U.S. to emerge in the future, given the shift from sort of the past of guaranteed products to the future and current state of adjustable products, you would expect the net investments income in our core earnings to actually decline over time and the core insurance component of earnings driven by CSM generation amortizing and then amortizing through earnings, you'd expect that to increase. So we should expect that change in dynamics in U.S. earnings. But overall U.S. earnings, I think a good baseline or benchmark for us to look at in terms of run rate is in that sort of Q4, Q1 range that you've seen USD 230 million to USD 240 million.

Yes. So a bit of a shift in geography, but probably to higher quality items [indiscernible] in your DOE.

Absolutely right.

The next question comes from Paul Holden with CIBC.

I want to ask you first on the GWAM earnings. So down slightly year-over-year and obviously, a few moving parts there. So hoping maybe you can parse it out for us really, I guess, to get a better sense of sort of how we should be modeling growth going forward. So maybe if you can provide any further breakdown on sort of the eMPF impact, impact from the recent Comvest acquisition, et cetera. Again, anything you can help us sort of with to model what kind of growth rate we should be using going forward?

Yes. Great. Thanks, Paul. It's Paul here. I'll take the question. Yes, in terms of the run rate earnings this quarter, as Colin mentioned, they were lower than our expected run rate for the quarter. We did have some one-time items. Just to clarify, the impact of the MPF is reflected in the quarter, and it's consistent with our guidance of USD 25 million. That was about CAD 33 million in the quarter. But there was also some one-time costs as we transitioned and moved at the -- in Q4 to the new platform. We do need to just decommission systems, FTE, et cetera, and there are some other one-time items. So when you adjust for those and if you're looking, I guess, for outlook for Q2, as Colin mentioned, there's 2 fewer calendar days in Q1 as well. So in terms of run rate for Q2, if you adjust for those items, recognizing the calendar days and if you look at where markets would be as of now, you should expect a run rate to be approaching the $500 million mark.

Okay. That is helpful. And then sort of similar question on the net investment earnings or expected investment earnings because those declined, I think it was 10% year-over-year. But obviously, you're actually growing the underlying assets. And again, I guess, a number of moving pieces there. So if there's any way you can kind of parse that out and help us understand what that should look like for the remainder of the year would be super helpful.

Paul, it's Trevor. Thanks for the question. So yes, in terms of expected investment spread, as you noted, it was down. That was really largely driven by all the sales for the reinsurance that we executed, I think, at the beginning of last year as well as some either normal course ALDA portfolio management trades in the U.S. I would also expect to see some variability from quarter-to-quarter in this line, given sort of differences in the timing of asset maturities and other changes between assets and liabilities on the balance sheet. And we did actually see some spread compression in the quarter as well. As Phil mentioned, I think we would also expect to see a slow shift in earnings from this line towards insurance service result over time. So you should expect to see that in coming quarters as well. But I think in terms of modeling as a base, I think Q1 is probably a reasonable base to use. Thanks for the question.

The next question comes from Alex Scott with Barclays.

First thing I wanted to ask about is just if you could provide a high-level update on how you're viewing remittances for this year. I know you have a longer-term plan that you've set, but would be interested in any commentary you're offering up and just broader thoughts on the balance between growth and remittance.

Alex, it's Colin here. So remittances, as you remember, we introduced a $22 billion cumulative remittance target at our Investor Day. So that would imply a $5.5 billion run rate going forward for those years. But we've actually exceeded that each year and continue to look favorably on remittances. And there's a couple of reasons behind that. One is the shift in our product mix to quite capital-generative products, low new business strain, that helps a lot. Two is the underlying capital strength of each of our subsidiaries.

And so we've been able to really produce good capital generation in each of our markets on the back of a strong capital foundation. We've had a couple of capital regime changes. You've got Hong Kong and right now, we're working through Japan. Both of those have actually worked in our favor because they bring the capital regime on a local basis closer to our consolidated capital basis. So everything works towards quite a good outlook for capital generation. We said before that you should expect 60% to 70% of our earnings to convert into remittances, and we stand by that. And that gives us a nice little buffer every year compared to the 35% to 45% dividend that we pay out. So everything is looking very good for remittances actually.

Great. Second question is on the GWAM net flows. I'd be interested in any commentary you provide on the outlook, thinking through the different moving pieces there. And I think in your commentary, you also mentioned some AI implementation that was benefiting your retail wealth management interactions. And so is there any evidence that, that is going to convert to flows as well?

Yes, Alex, it's Paul here. I'll take the question. Yes, in terms of the flows, we're actually quite pleased with the momentum of the business this quarter. If you look at gross flows, it was $56 billion. That was a new record for us. It was up 13% versus prior quarter and 15% from the prior year. We also had a record quarter for ETFs across our retail business in North America. So the momentum from a top line perspective is actually quite strong. The softness came through on the redemption side in a couple of specific areas. The first is just general industry pressure in active management in North America. Colin mentioned that in his remarks.

Within that, we had 2 model redemptions late in the quarter where partners were reallocating asset mix. It wasn't performance-related changes, but it was asset mix and it did impact us. That was worth $3.4 billion of the $4.4 billion of outflows in the quarter. The other area was U.S. retirement, and as Colin mentioned, primarily from higher withdrawals, but not from a rate perspective as markets continue to do well, that increases the dollar amount of withdrawals at the participant level and creates a little bit of a headwind on flows, but obviously a tailwind as it relates to fee revenue on the asset base.

And then if you look at the businesses within there, it's pretty broad-based on the others. We had positive net flows in our institutional business again, that was positive contributions from CQS and Comvest. Asia Retail and Retirement were positive, and our North America Wealth and Canadian Retirement business were also positive net flows. So it's pretty broad-based. We have a couple of areas, obviously, we're focused on. In terms of outlook, we're cautiously optimistic of our flows, particularly considering the strong top line. However, I would say we do expect some of these pressures in active with market uncertainty to persist. But I would -- we're still confident that we can get back to positive net flows over the long term. And to the extent market uncertainty starts to get some clarity there, we would expect our net flows to slowly improve over time.

As it relates to your AI question, it's a great question. We've been investing significantly across the business, across all of our distribution platforms, and we are seeing the benefit of that. And so one of our strategic levers is making our wholesaling team more productive, but also extending the size of the team. And that will take some time to do, but we're seeing the benefits of the productivity with AI. But as we also expand the teams globally, we should expect that to come through our top line results as well.

The next question comes from Darko Mihelic with RBC Capital Markets.

I just wanted to revisit the U.S. business for a moment. Phil, in your answer to a previous question, you mentioned that the investment earnings should be lower as a result of the sort of the change product mix. Presumably, there's some -- maybe there's some ALM matching going on and you're changing the investment portfolio. But in Colin's remarks, it was spreads, like investment spreads were lower. So my question is, is it really like spreads? And then as you continue to alter the investment portfolio that the investment -- the expected investment returns will be even lower than the current run rate going forward. Maybe you can just provide a little more color on the 2 sort of forces there that are impacting that and give us a sense of the run rate going forward would be helpful for the model.

Darko, it's Phil. Thank you for asking the question. It's quite a technical question. I will hand over to Trevor in a moment. But I think the reality, there are various factors going on here, various factors at play. One is a very commercial factor that our new business mix in the U.S. is exclusively focused on or very much focused on the adjustable products, so universal life type products. And that gives rise to future earnings that don't come through the net investment result line, it emerges through the core insurance result line. So that's one dynamic that will happen over time.

Another dynamic is the fact that in recent years, including just over a year ago, we have transacted on some quite significant reinsurance transactions. And that relates to components of our business that as those transactions have been executed have resulted in a lower net investment result in our drivers of earnings analysis. And I think another sort of related factor is the fact that as we have reduced our legacy portfolio as a result of reinsurance as well as organic runoff, we are reducing our holdings of older within the guaranteed segment. So all of those factors are at play.

But Trevor, is there anything that you'd like to add to that?

Not really. I think you've basically covered it. I think we have been selling down ALDA, and that's obviously a driver of lower expected investment spreads going forward. I think Colin's point, obviously, lower spreads are a little bit of a headwind, but I think it's a slow emerging headwind, though right, the ALDA impacts, I think, are much, much quicker to manifest themselves. And then I think as Phil had said earlier, there is a sort of a geographic shift going on as well, moving -- effectively moving overall earnings from expected investment spread into CSM amortization over time.

So this is a good run rate? Is this the way I should factor it into the model from here?

Yes. Yes. Yes, this is a good run rate.

The next question comes from Mike Rizvanovic with Scotiabank.

Just a quick one, maybe for Colin. Just wanted to get some more color on the ALDA, maybe an update on what drove the negative experience in the quarter. And then I guess, more broadly, more high level, should investors be concerned about maybe a change in that run rate assumption, which I think would impact your core EPS as presented today. So the 9% or 9% to 9.5% assumption, is that something that's being thought about as maybe for potential change?

Mike, I'll quickly pass over to Trevor on that because there's actually quite a lot going on in the ALDA portfolio.

Thanks, Colin. Thanks, Mike, for the question. So firstly, just in terms of performance on the ALDA portfolio for the quarter, it was actually similar to Q4. We were, however, adversely impacted by a fire on one of our large Australia timber assets, and that generated a one-off charge of about CAD 50 million for the quarter. And so if you adjust for that, the quarter was actually better with most of the portfolio showing continued improvement with infrastructure being quite strong, while real estate was again largely flat. In terms of the assumptions, I mean, these are very long-term assumptions. They're not set for any specific year.

And so -- and they're also basically a forward-looking assumption rather than retrospective. So while we do look at our own and benchmark experience, we also look at market expectations and current transactions that we're underwriting generally with return expectations well above our long-term assumptions. So throughout the rest of the year, we will go through that process again. But I think given the factors that I just mentioned, I think changes in the asset mix over the last few years, including sales of underperforming office real estate, I think we do still feel the assumptions are appropriate for long-term forward-looking older assumptions.

And just a quick follow-up. So I guess it sounds like you do have the ability to shift that portfolio into something a bit more conducive to higher returns over time. You still have a lot more potential work to do there? Or is it sort of later innings?

I think it's just normal course portfolio management. We are generally making ongoing changes to the portfolio, selling things that we think are -- that are at a good time to sell and buying things that we think are sort of relatively cheap, and that's how we basically manage the portfolio for the last 20 years. But I think that is our expectation that we will be transitioning into assets and asset classes that will meet those long-term assumptions.

The next question comes from Tom MacKinnon with BMO.

Just with respect to the reported, the impact from public equity markets seem to be a little bit more severe than your -- you guys do a pretty good job of outlying sensitivities and providing how to try to model that. We do have equity markets, particularly in the U.S. that are heavily weighted to MAG-7. So is that probably why the impact was more pronounced in the first quarter in terms of a negative impact? And then -- or just some color with respect to that.

Tom, it's Trevor again. Thanks for the question. So yes, in terms of the market impact that you're seeing relative to the sensitivity. So there was a larger-than-expected noncore charge given weak performance in some equity markets. It was really focused on the U.S. And to your point, it was worse than the sensitivities, but it was largely driven by more active fund underperformance relative to local indices in what was a pretty noisy quarter. It wasn't really specific to the MAG-7.

Yes. And do you think maybe more of a question, the reported number, that really impacts really the book value. And I think the book value per share was probably better than people were looking for. So how do you think those who look really at the reported number, do you believe they should be looking more at the book value that comes out at the end of the day, if that's better than anticipated, doesn't that indicate reasonably good quality?

Yes, Tom, it's Colin. I'll take that because it's such a great question and a great debate. Do you stop at core earnings? Do you go to net income? Do you look at book value? Do you go to adjusted book value, which was up even more, actually 6% and 8% excluding FX. So I personally believe that book value and book value growth encompasses everything that we -- you are exposed to as a shareholder or an analyst. And so book value growth is really important to us. Obviously, during the -- as on a per share basis, it's adjusted for the buyback. So that's helpful. But yes, we saw book value -- modest book value growth this quarter in part because of equity and ALDA underperformance. But bear in mind that equities, if markets stay where they are, should reverse and some. So continued book value growth and a reasonable outlook for that.

The next question comes from Mario Mendonca with TD Securities.

Can we go back to the GWAM business for a moment? It's a business where I've become very accustomed to seeing solid positive operating leverage and margin expansion. Now I appreciate you're going through a transition here with the eMPF. My question is this, as you look forward a year from now, would you expect the revenue -- the EBITDA margin, revenue margin to be higher? Would you expect to be delivering positive operating leverage? Like once you are through this period, is it about -- is it a few more quarters? Is it a few more years of transition? How would you characterize that?

Yes. Thanks, Mario. It's Paul here. The short answer to the question is you should expect margin expansion going forward, subject to regular markets and growth. And as we've discussed in the past or provided guidance, we try and manage our expense growth to 50% of revenue, and we still think we can do that with the investments in Gen AI and efficiency. As we mentioned, the transition to eMPF, it is behind us. It has happened. We had some one-time costs in Q1 that will not recur in Q2. So from this point forward, we provided kind of that new run rate go forward. From that, you should expect us subject to markets, obviously, to see margin improvement over time.

And do you have an outlook for the EBITDA margin over the next 12 or 24 months?

Well, the outlook is we do have the Investor Day target that we set for next year of 30%. We feel good that we're on track to achieve that target. Again, if you look at just where we were at Q1 of '29 looking forward with market growth and our ability to manage expenses, again, we feel optimistic in terms of our outlook to achieving that next year.

And that brings me to the Investor Day, it still was pretty important. So I think it's a reasonable time to ask you, does the 18% in 2027 still feel achievable? And if so, how do you bridge that gap from the 16.5% today to 18% in 2027?

Let me start, Mario, it's Colin. I think the 16.5% is impacted by some seasonal factors in the first quarter. And I'll highlight a few. Paul talked about calendar days for GWAM. Actually, our Group Benefits business always exhibits an element of seasonality in the first quarter as people submit claims at a different period during Q1 versus other quarters. The P&C earnings have historically emerged much more in the second half. Even if you look at last year's ROE numbers, the second half ROE numbers were 18.1%, 17.1%, much closer to our target. So while the 16.5% does seem like quite a leap to the 18%, it is 90 bps higher than Q1 last year. So we are making progress. We've got plans in place to get us to 18%. It does need very strong execution, and that's exactly what Phil is driving through the organization with his comments around all about execution of the refresh strategy. So it's absolutely a big focus for us, and we have plans in place to get there.

And Mario, this is Phil. Just to be clear, we stand by the 18% plus Investor Day target by the end of 2027. And I expect to see improvements from where we are at the moment, 16.5%. It's an improvement year-on-year, and I expect to see improvements as we go through 2026.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hung Ko for any closing remarks.

Thank you, operator. We'll be available after the call if there are any follow-up questions. Have a good day, everyone.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Thanks for coming to Montreal again.

Thanks a lot, Gabe. It's time for you to relax and I'll let you finished interviewing your CEO.

Yes. I can loosen up a bit. I was up tight at that time.

Let's start with a fun one, ROE. Every company I cover basically is hiking their ROE targets. You were early in that phase, by the way, I'm sure you noted. Just to put a finer point on that target, is it a full year 2027 or an exit rate?

Yes. The short answer to the question is it's a full year 18% target in 2027. I think you're asking the question because we're at 16.5% in 2025. So it still seems like quite a jump to get to 18%. But if you look at the second half of the year, we had an 18.1% core ROE in Q3 and 17.1% in Q4. So second half of the year went quite a bit better than the first half of the year and shows that we're pretty close to it.

If we look at the longer way to answer the question, I mean, the real reason why I was so keen and we were so keen on an ROE is it is a measure of quality for a company. And in my opinion, people underestimate the quality of Manulife as a franchise. I've only been here 3 years. And to be honest, I think we're a better quality company than people realize. And you see that when we trade down days, we trade worse and on up days, we trade a little bit better. And so it still feels like people underappreciate the quality of the stock. Now that's for us to prove. We don't expect you to give us the credit for it. But the whole reason behind the core ROE target was to try and prove that we're a high-quality franchise that can deliver 18% year in, year out.

Okay. Well, -- the 16.5% last year does make it look like a stretch. But if you take the glass 3 quarters full perspective, if you look at every region, Asia was up, [indiscernible] was up, Canada was up. The U.S. took a pretty big dip in terms of ROE because there was mainly some mortality issues. So that looks like to be the main hindrance to the target at this point. However, for some reasons, that may be idiosyncratic, I guess. Is there any updated perspective on the U.S. performance and that mortality issue specifically? Because if that turns around, I think the 18% seems a lot more credible very quickly.

Yes, you bang on. Last year, we had mortality losses of about $251 million pretax. If you exclude those, 16.5% goes to 17%. Now what happened? Well, we focus on the high end of the market, and we had some big deaths, unfortunately. That's the business we're in. Obviously, we spend a lot of time going, well, what happened, what could we have done differently. These were people that were underwritten 10, 15, 20 years ago. And it's just the nature of the business.

And so it will happen from time to time. Now, it's all slow. London, whichever one you want to say, it happened Q2, Q3 and Q4, which was painful. So to my earlier point about trying to prove that we're a high-quality franchise, it doesn't help if we have disappointments like that. So we're paying a lot of attention to it. We're obviously very focused on it. Q2 was the blip. Q3 and Q4 were much more normal variability. Now, are we just sitting around waiting to see if more deaths happen? No, not at all.

We have this scheme, Vitality scheme or behavioral insurance scheme where we offer cancer detection test to our customers. And actually, we're proactively reaching out to some of our larger customers and saying, you know what, do you fancy a free cancer check on our dime or a free health check. Anything we can do to help our customers live longer, healthier and better lives. And obviously, that will benefit shareholders as well. But you should expect the mortality experience that we saw in 2025 to be within normal variability, not something that we should expect to see persist. And yes, as I said, if you can eradicate that, then that's already 50 bps on our core ROE.

Okay. Well, the Asia business, though, was top -- yes 21% ROE last year. I mean what's the -- what's the limit on that business? And I guess -- well, yes, I'll just leave it at that.

Yes. You mentioned core ROE at 20%. I mean that's just one metric. Earnings grew by 18%. APE, that's our sales metric, grew by 18%. And the new business value, which is the value of our sales, that grew by 20%. So all metrics in Asia were going in the right direction. And really, that drove us upward.

I think the 20%, 21% core ROE, that's a reflection of being part of a larger group. We don't have to capitalize our Asia business as though it was a standalone entity. And that's the benefit of being part of a large well capitalized organization headquartered in Canada. So we are able to operate with high margins with decent returns within the Asia business. Even if you look at a business like our Japan business, which is going really well, the ROE on that would surprise many of you in the room. We don't disclose it separately, but it's certainly not a drag on our Asia core ROE. And that just is evidence of our ability to run our individual countries at a very efficient way because we're part of a large organization.

And again, the value of being a conglomerate has been lost over time because complexity has eroded the value to the external markets. And obviously, we all like simplicity. But I do think we deserve some credit for being a well-managed large organization that's able to allocate capital very effectively between our businesses and manage it very efficiently.

The last quarter, one of the sticking points, I guess, for the Asia business despite the earnings growth was sales were down. And I think -- and I look at it, sales being down, not ideal, but the prior year, they were up 60%. So that whole tough comp thing. But if you look at the numbers a little bit more in detail, you see that the sales were down but the value of new business was down, but by a lot less. And I'm wondering if that is a reflection of some of the change in mix that's more profitable for the future because I know that the -- some of that sales surge we saw in 2024 -- yes 2024 was like a savings type product, maybe not as conducive to profit. So there's a silver lining, I guess, is in there.

Yes. I think that's right. We have a diversified distribution mix in Hong Kong. We sell through our own agents, we sell through the bank and we sell through independent agents. And what happened is there was a change in regulation and that affected the independent broker channel more.

Now the independent broker channel came in, in full force in 2024, and it really boosted sales to the 60% levels that you're saying. We lapped a tough comparator. And then we saw that part of the distribution channel slowed down a little bit with the change in regulations. I don't want to overemphasize that. That's for us to sort out and to manage, and that's the business that we're in. So no excuses there.

But we wrote less broker business in Q4 last year and that saw a decline in APE, our sales metric, but certainly an improvement in margin. So our margin improved by 13 percentage points during that quarter, which is a reflection that we got more business from our agents and our bancassurance channel. I think the reaction was mostly because Hong Kong has been such a powerhouse for us, driving our sales and our earnings.

Hong Kong as a core earnings were up 26%. So we're still driving a lot of profit growth, a lot of strong ROE, but definitely to see the top line come off a little bit, that took a bit of shine off of the numbers. And so we're really focused on printing good numbers going forward in Hong Kong. They can't -- it can't keep growing at 60% per year. But it's a good thing that we've got a diversified Asian business. We're in 12 countries. When one country falters, another country will pick up the slack. 5 years ago, I'm pretty sure we weren't saying Japan and Hong Kong are going really strong. It will be much more like Vietnam and Singapore.

And so it just so happens that the countries at certain times, different countries have different places in the stack, and it's great to have a diversified business. It is a unique selling point for us for North American investors and companies. It's only really us, Pru and AIA who have proper diversified businesses, and we're really proud of that.

Well, sticking with the Hong Kong thing, the business, the mandatory provident fund, which is the retirement pensions plan over there, and you're one of the biggest providers. There was a regulatory change and it's going to hit your earnings and you've quantified that. So that's out there. I'm just wondering what's missing from the outlook, I suppose, is what you're doing to offset it? And then maybe go into that.

Yes. Just for a bit of color for anyone who's not completely familiar with the story, you save in Hong Kong for your pension through a mandatory provident fund. So you get a job, you have to save. It turns out we're #1 in the market, and that's a fantastic place to be because people come to Hong Kong, they get a job and they need an MPF account. And so who do they come to? They come to Manulife. And that's the

Well, sticking with the Hong Kong thing, the business, the mandatory profit fund, which is the retirement pension plan over there, and you're 1 of the biggest providers there was a regulatory change and it's going to hit your earnings and you've quantified that. So that's out there. I'm just wondering what's missing from the outlook, I suppose, is what you're doing to offset it and then maybe go into that?

Yes. Just for a bit of color for anyone who's not completely familiar with the story, you save in Hong Kong for your pension through a mandatory provident fund. So you get a job, you have to save turns up we're #1 in the market, and that's a fantastic place to be because people come to Hong Kong, they get a job and they need an MPF account. And so who do they come to? They come to Manulife. And that's the establishment of a relationship and we sell that product to them. And then we build a relationship and hopefully sell longer-term, higher-margin products to our customers. We've got 30% of the market.

So that's, again, a phenomenal place to be high ROE business and it's been very profitable to us. I think if you had to look at the situation, the government probably looks at it as, okay, well, companies have been able to charge a little bit more than global averages because the fund is needed to scale. Now that funds like us or businesses like us are at scale, it makes sense to restrict the charging. And the way that the government has done this is that they've taken over the administration for the whole industry. So they take over the administration. We don't do that administration and we pay the government basis points for that administration.

The impact of that because we used to make profits on that. The impact of that was USD 25 million a quarter. So we're giving that up. And that's net of the reduction in expenses because obviously, we don't have to do the administration, we save on those expenses. So the question that you're asking is, well, what mitigating factors are...

Can you recoup it...

We're certainly going to reduce the people doing admin, but the net impact of that is still $25 million a quarter. So unfortunately, there's no more to come on that, but we've still got work to do to rightsize that business. I think when you think of $25 million a quarter, that's 2 years' worth of growth that we're giving up, disappointing, but something that we're taking on the chin. And as well, like when you look at the long term, it's an amazing business for us to be in. And it gives us a calling card in different Asian countries.

We go in and say, "Look, this is what Hong Kong does for your pension provision. You should think about this. We're good at this. We can do this." And we have great conversations across the region around how to increase pension savings throughout the region because demographics are quickly changing in Asia, and that in itself provides both a risk and opportunity to the region.

Was that regulatory change disruptive enough that some of the smaller players might be wanting to sell and a 30% market share, are you able to do anything?

Yes, we're in the market for sure, looking at books of business to try and take it out. Now that was my reaction is, okay, there's going to be even more consolidation, but actually, this doesn't help too much because the government now does the administration. So you can come as a small player and not need scale and be supported by the government. So it doesn't actually drive more consolidation, but I think some companies are just too small that they will look to punch at and we'll be there for sure we're in the business to grow that.

Okay. Well, speaking of acquisitions, you acquired Comvest -- well, announced it last year anyway, a private credit manager and then the market changed subsequently. Could you -- 2 kind of questions. What makes Comvest different such that those maybe high flyers that they're getting into [indiscernible], that doesn't apply to Columbus, they're established whatever. And then two, even if their business model is more established, more discipline, et cetera., the demand for what they're selling might be lower or maybe not. Can you talk about the growth outlook for them? .

Yes. We bought Comvest, which had about $14 billion on its platform, U.S. dollars, and we paid just under $1 billion for 75% of that business. It was a fantastic acquisition for us because in the past, we've been able to offer just about everything from timber and ag, all the way up to public credit and public equities and everything in between, even semiprivate through our acquisition of CQS a few years ago.

So really the missing piece was private credit, which, as we all know, had been growing a lot, and we've been watching somewhat from the sidelines, always looking to acquire. Now Comvest was a very sweet spot for us because it wasn't so big that it would completely destabilize the organization if something went wrong, but it was big enough to -- that we can now have scale in private credit. So all the funds are third parties. So there's no real risk on our own balance sheet for this. We haven't been a big participant in private credit, which is also why we needed to buy in the skill set because it's not that we've been able to grow it ourselves.

And so what we're talking about is really things like sub-investment grade, floating rate notes, 5 rate, 5-year duration private credit, and this is where Comvest is awesome at. And so that, along with the culture, made them a really great fit for us. Now it turns out that the headlines don't work in our favor. And so we did the acquisition and the world seemed to fall out of some of the private credit market from a headline perspective. You do have to take everything with a grain of salt. I mean private credit is a $40 trillion market in the U.S., of which only $2 trillion is sub-investment grade.

So the headlines you read are not necessarily reflective of the private credit market, of which we've been a big participant in the above investment grade business and will continue to be so. But anyway, I'm trying -- getting back to the question at hand, what makes them different. They're very much mid-market-focused. They go for the complex stuff, so they put a lot of effort into it. We don't have exposure to retail perpetual BDCs. So where you're seeing a lot of the headlines is really around liquidity. People want their money out. They're thinking, well, there's going to be a rush to the door I want to be first. And so I guess what happens is a rush for the door.

But the reality is that we haven't sold through any of these retail BDCs where people have the ability to come in and go out as they please. And so our capital is much more permanent. Teaming up with a company like Manulife helps that situation. And right now, what we're seeing is more attractive lending conditions as a lender. So spreads are a bit wider I think conditions are great for Comvest. And for a business like them who are incentivized to grow for the long term, they're probably looking at the situation. We're not probably, they are looking at the situation as an opportunity and not necessarily as a risk.

Because if you rewind 6 months, maybe 9 months ago, everyone was throwing money at private credit, it was difficult to get loans. There was money on the sidelines, and it was a real bunfight. So we think it's a good opportunity. And we'll keep everyone updated. But so far, no exposure to the tricolor or some of the big names that have been in the press around defaulting. So we feel very good about the acquisition.

All right. Well, sticking to the investment theme, interest rates and there years and years ago, as low interest rates are bad for instance companies, we want higher interest rates. And we've had higher interest rates, not like they were in the old days, of course, but still high enough that the marks on real estate, private equity positions and your general fund are constantly a drag on reported earnings anyway. Is it preferable for you to have lower interest rates as an insurance company?

No. I think executives do have a tendency to like any situation has been good for the business. But no, we don't try and take interest rate risk. We hedge our interest rate risk once we take the business on our books. It's very difficult to make money out of interest rates on a consistent basis, especially when you're in large corporate.

So generally, the best way to think about interest rates is when the yield curve is higher and steeper, people like our products more because we can offer longer-term guarantees more attractively than you can do saving money at a bank account. And the best way to look at that through our numbers is our value of new business, new business value, it goes up by $140 million for every 50 basis points increase. But once it's on our books, it's locked in.

Now when interest rates come down, some parts of our portfolio get better. We have commercial real estate on our books. We have private equity on our books. So the valuations of those should improve if the short end of the curve goes down. However, you've got to also look through why is the short end of the curve going down? Well, kind of like the economy is not going through a great time. So it's not like private equity and commercial real estate are going to do particularly well in that circumstance.

So I don't want to overplay the role of interest rates coming down as a positive for our company. I think for the insurance industry as a whole, higher and steeper brings capital into the industry and it's good. So far, the long end of the curve seems pretty stubborn and will probably stay that way and that's good for us.

Okay. Switching to Manulife Bank. That's like I could proudly say when I'm modeling the company, that's one where a line item, I'm reliably accurate, but that's because it has been growing for a number of years. Does it still make sense for Manulife to have that bank? Like what's the business case? And also like if I look -- if I use the OSFI financial data, it looks like it's actually a drag in your ROE. So what's the counterargument to running that thing.

Yes. We're #8 in the market. It is an attractive market to be in. I mean we heard that for the last -- from the last presenter. I think your synopsis is right, but what's going on beneath the surface is a lot more than what you say. Lending assets are up 12%. So we're growing quite a lot. Why? Because advisers who we deal with, that's our distribution channel, there's independent advisers, they kind of like having their client to themselves. And so they like dealing with a bank that's maybe a little bit more independent or maybe offers a little bit of a different offering to some of the bigger banks.

So we're a popular choice amongst advisers. We're #8 in the market, as I said, so plenty of room to grow on the upside. Now the reason why earnings have been flat is while we've been doing all these great things on growing lending assets, the short end of the curve has been coming down. And because we're not a deposit finance business that has hurt our net interest margin. And so that is the reason why earnings have been soggy, if not slightly down.

Does owning a bank makes sense for us? Absolutely. Should we be doing better with the bank Absolutely. Obviously, if we can't and we don't, then that's a completely different conversation for us to have. But in the meantime, we're working really hard to make sure that we maximize the value for Manulife as a real opportunity for us to grow as opposed to other parts of the market where we have 20%, 30% market shares, and that's hard to grow from.

All right. So without -- if you look at in isolation numbers, look, maybe not as good, but your wealth business or you're in even distribution business wouldn't be doing as well? Is that basically it? .

I think that will be the case in the future once we really get that bank operating as part of -- as an avenue to offer a more holistic product offering to our customers. Right now, we haven't maximized the value of that. But that's the potential.

I want to wrap up on capital allocation. One, I mean, buybacks are the first thing to come to mind, because it's next on my question list. You have outlined your buyback plan for -- or you updated your program for the upcoming year. It's a little bit smaller, I guess, than it was. Is that because the stock's valuation is a lot higher? Is it because you've got other deployment opportunities in mind? Or it's just nothing in worry about it?

No, we did 5% 2 years ago, and part of that was because we did a reinsurance transaction that released about 3% of our market cap and capital. Then we did 3%. We did another reinsurance transaction that released 1%. And then now we've announced 2.5%. So it's pretty much line, and it does utilize the capital that we haven't spent on dividends and acquisitions.

And I guess the -- well, the bigger buybacks were tied to dispositions, reinsurance transaction. And the tone around that has changed a little bit. And I guess, let's the LTC specifically. Is it because the posturing. I guess, you don't want to signal that you're desperate to sell, of course, right, just to make it hyperbolic, but also you've done a lot of things to improve the risk profile of the business over the years. So it's -- and it also hedges some mortality risk and stuff like that. So what's the appetite for legacy dispositions.

Portfolio optimization is always going to be a key thing for us. And reinsurers want to deal with us. We're a great counterparty. But you have to appreciate that reinsurers also need to make their profit. And so we needed to do those deals that we did because 3 years ago, actually, Phil Witherington, the former CFO, was sitting here, and you were grilling him on LTC and rightfully so because it's like, tell me how I can believe your numbers. We'll tell you how you can believe our numbers. We'll do a reinsurance transaction with someone who everyone trusts. And now you can believe our numbers.

I don't think we have that same level of doubt. But if we did, we can still pull the trigger on more transactions because we have people that we're talking to that are interested in doing transactions. Right now, it doesn't feel like our #1 priority. Arguably, I'm not so sure, but if you feel differently, let us know, and we can and we will. I don't think it's something never, and I don't think it's a #1 priority. It's somewhere in between, and it's something we we've got to decide to do going forward.

Okay. What about -- I asked about acquisitions, the MPF market. What about something bigger, more ambitious in the U.S., for instance, there are some insurers that could be potentially sold with some business lines that would fit well with Manulife, some that don't, of course. But another way of asking, would you be willing to sacrifice your -- the timing of your 18% ROE for a deal?

I mean I spent a bit of time in capital markets, and I think the market doesn't quite like missing targets and it doesn't quite like surprises. So it would have to be a blockbuster acquisition for us to pursue to do those 2 things. As a CFO, you would never say never, but it's very hard to see what is Manulife missing. And then also what are other people offering that would plug that gap. So it would be unusual, Gabe, to be honest.

And so we've got great opportunities within our own stable to maximize the value for Manulife. We're on a fantastic trajectory. But as I said, we've got lots to prove to you. And we're dead set on improving this company and driving it higher and being a champion -- a global champion, to be honest. So M&A is not something that we are spending huge amounts of time on, but I'm also conscious that growing in mature markets is hard. And so M&A can well prove to be a trigger for that. And we've shown that with various acquisitions, particularly in our [ GUM ] business. So it's all to play for, to be honest.

Okay. And I agree pushing back?

[Technical Difficulty]

Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead.

Thank you. Welcome to Manulife's earnings conference call to discuss our fourth quarter and full year 2025 financial and operating results. Our earnings materials, including the webcast slide for today's call are available in the Investor Relations section of our website at manulife.com. Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 41 for a note on non-GAAP and other financial measures used in this presentation.

Please note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated.

Turning to Slide 4. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide highlights of our full year 2025 results and the progress made towards our new and elevated strategic priorities. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial reporting results in more detail.

After the prepared remarks, we move to the live Q&A portion of the call. With that, I'd like to turn the call over to Phil.

Thanks, Hung, and thank you, everyone, for joining us today. 2025 was a defining year for Manulife. We delivered strong financial results, announced our refreshed enterprise strategy to shape Manulife's next chapter of growth and are laser-focused on executing against our vision through targeted strategic investments.

While macroeconomic and geopolitical uncertainty remains, we're confident that the diversified nature of our business positions us well to navigate the current environment and capitalize on the opportunities ahead.

So let's start with our 2025 financial results, which we announced yesterday. We delivered strong top line results with new business CSM growth exceeding 20% in each insurance segment, contributing to a double-digit growth in our CSM balance and supporting our future earnings potential. Despite experiencing net outflows in the second half of 2025, Global WAM continues to deliver strong margins and core earnings growth.

The strong results in Global WAM, combined with the double-digit earnings growth in Asia contributed to our record core earnings this year. Together with the benefit of continued share buybacks, we delivered 8% core EPS growth. We also continue to generate attractive returns with core ROE expanding 30 basis points from the prior year, and we're tracking well towards our 2027 target of 18% plus.

Moving to our balance sheet. We generated $6.4 billion of remittances this year and returned nearly $5.5 billion of capital to shareholders. Our LICAT ratio of 136% and leverage ratio of 23.9% provides significant financial flexibility. And I'm pleased to share that we announced a 10% increase in our quarterly common share dividend.

In addition, we have received OSFI approval for a new NCIB program, which will allow us to repurchase up to 42 million shares or approximately 2.5% of issued and outstanding common shares, highlighting our continued commitment to returning capital to shareholders. We plan to commence buybacks under this new program in late February, subject to approval by Toronto Stock Exchange.

Moving on to Slide 7. In November, we introduced our refreshed enterprise strategy, which builds on our strength is growth focused and is anchored in our ambition to be the #1 choice for customers. There is tremendous enthusiasm across the company as we execute on our new and elevated strategic priorities, which provide logical continuity as we progress in our new chapter with refreshed ambition. As a result, we've already made meaningful progress in 2025.

Starting with our winning team and culture. Our world-class talent is one of our greatest strengths, and this year marked our sixth consecutive year of top quartile employee engagement.

I'm encouraged by the energy and commitment of our colleagues around the world who've embraced our ambition to be the #1 choice for customers. Together, we will continue to bring focused execution and innovation to the work ahead. And as we drive high-quality sustainable growth, we will maintain a balanced, diversified business model. This year, we've made strategic investments both organically and inorganically to further strengthen our portfolio.

We acquired Comvest Credit Partners, announced a joint venture to enter the India life insurance market and entered into an agreement to acquire Schroders Indonesia, with the latter two subject to regulatory approval. We also became the first international life insurer to establish an office in the Dubai International Financial Center dedicated to advising on and arranging life insurance solutions for high net worth customers. And we've expanded our customer solutions, including a new indexed universal life offering in the U.S., while in Canada, we launched a simplified specialized lending suite of products in Manulife Bank.

As Colin will highlight, the benefit of a diversified portfolio was evident in our fourth quarter results, and I expect our diversification to serve as well amidst rising global uncertainty.

On to Slide 8 and our focus on being the most trusted partner in health, wealth and financial well-being. We took meaningful steps to further empower our customers this year, including a significant milestone in our ambition to be the health partner of choice in Asia. Through a strategic collaboration in Hong Kong with Bupa International, we will offer greater choice and sustainable healthcare solutions that empower individuals and communities to this healthier and more fulfilling lives.

In Canada, we became the first insurer to offer access to GRAIL's Galleri multi-cancer early detection test, supporting earlier detection and longevity for our customers.

And in the U.S., we're providing additional resources and offerings to eligible U.S. customers to proactively manage their health and wellness.

These actions deliver measurable benefits for customers while generating value for Manulife, and we're proud to be a leader in this space. We also continued to invest to make it easier for customers to buy and advisers to sell our solutions.

We renewed our bancassurance partnership with Chinabank in the Philippines, extending the exclusive partnership to 2039. In Singapore, we leveraged our digital capabilities to enhance our Manulife iFUNDS platform through using a single platform and leveraging AI-powered analytics, advisers can deliver more personalized and insightful financial guidance.

And in the U.S., we expanded our wholesaling team to accelerate our penetration into the high net worth and mass affluent markets. By expanding our reach and scaling our digital and AI capabilities, we can more effectively reach our customers and enhance their experience.

Finally, over to Slide 9. Becoming an AI-powered organization is core to delivering on our ambitions and while we've been an early adopter of AI and built the underlying infrastructure necessary to support our vision, it's very important that we sustain our leadership position. We're investing with discipline and a clear focus on areas where AI can be deployed at scale and further improve our efficiency, enhance our customer and colleague experiences and support sustainable growth.

In 2025, we ranked 1st among global life insurers for AI maturity by evident, and achieved 30% of the $1 billion plus of AI enterprise value generation by 2027. To drive measurable outcomes, we're concentrating on core focus areas where AI can make the greatest difference for Manulife, and we're already deploying initiatives across businesses and geographies to continue to drive value.

Across the organization, we're deploying virtual assistance that create efficiencies while equipping employees and advisers with deeper insights, more personalized outreach and instant product guidance, strengthening the quality and consistency of customer interactions.

In underwriting, AI is accelerating decision-making by automating data analysis, enabling faster and more accurate assessments while maintaining strong risk discipline. And we're prioritizing AI solutions that remove manual transactions, driving measurable improvements in efficiency and operational outcomes.

Within distribution, AI is enhancing client engagement through tailored sales support, leading to improved sales close ratios and outcomes. We're strengthening our internal productivity by equipping our global technology teams with modern engineering tools, helping us build better solutions and faster. And we're also exploring how AI can help close the advice-access gap and support more meaningful ongoing investor engagement at scale.

Moving forward, we're progressing towards a proprietary Agentic AI platform that will make it easier to manage and coordinate AI tools across the company, allowing us to scale AI even faster and more consistently, while ensuring a robust governance process.

Overall, these are high-impact areas that reduce friction, support long-term growth and will enable us to deliver on our 2027 and medium-term targets.

In closing, I am thrilled with the progress we've made in 2025. We've delivered strong financial results and are already making meaningful strides against our refreshed strategy. As we begin 2026, we're executing from a position of strength with clear momentum and confidence in our ability to achieve our 2027 targets while generating high-quality, sustainable growth for all our stakeholders for the long term.

With that, I'll hand it over to Colin to discuss our results in more detail. Colin?

Thanks, Phil, and good morning, everyone. 2025 was a fantastic year for Manulife as we delivered another year of strong financial and operational performance.

Let me take a moment to walk you through the quarter's results before we open the line for Q&A. Let's begin with our top line results on Slide 11. We generated strong growth in new business CSM, reflecting more favorable business mix and margin improvements. This marked our sixth consecutive quarter in which new business CSM growth exceeded 20%, a testament to the strength of our balanced and globally diverse business profile.

APE sales for the quarter were largely in line with the prior year. Global WAM saw net outflows of $9.5 billion, reflecting several large retirement plan redemptions in the U.S. and to a lesser extent, in Canada as well as net outflows in our North American retail business. This was partially offset by strong institutional flows, including contributions from CQS and Comvest.

The redemptions in our U.S. retirement business reflects seasonally higher planned redemptions and higher participant withdrawals as market strength has given rise to higher customer balances.

Our retail business saw continued pressure in North American intermediary and Canada Wealth. Though I'd highlight our U.S. retail business performed well relative to peers in what was a challenging quarter for active fund managers in the industry.

Moving on to Slide 12. I'd like to highlight some of the key earnings drivers comparing them to the same period last year. We continued to see strong growth in our insurance businesses in Asia and Canada, driving a higher insurance service results. We generated positive overall insurance experience this quarter, including a release of P&C provisions from prior year events as well as strong gains in Canada. Though positive, total insurance experience was less favorable than the prior year, largely reflecting unfavorable U.S. life claims experience.

Our investment results decreased a modest 5%, mainly driven by lower investment spreads. In the bottom half of the table, you will see that Global WAM reported solid pretax core earnings growth of 8% this quarter, supported by strong AUMA growth and margin expansion but this was partially offset by the transition to eMPF in Hong Kong.

Turning to Slide 13. Core EPS increased 9% from the prior year quarter as we continue to grow core earnings and actively buy back shares. We reported $1.5 billion of net income this quarter, which reflects unfavorable market experience, largely driven by a charge of $232 million in our ALDA portfolio, primarily due to lower-than-expected returns from infrastructure, private equity and real estate. We also reported a $162 million loss from hedge accounting and effectiveness, primarily due to swap spread widening in Canada and, to a lesser extent, derivatives without hedge accounting.

Moving to the segment results. We'll start with Asia on Slide 14. APE sales decreased by a modest 3% from the prior year as double-digit growth in Japan and Asia Other was more than offset by lower sales in Hong Kong. While we expected some moderation in Hong Kong given a strong prior year comparative, we also saw anticipated pressure in the broker channel in the fourth quarter as distributors transitioned to new regulations. Even so, we remain confident in the outlook, supported by the strength of our proprietary distribution channels.

Despite softer volume, Asia's new business CSM and new business value delivered strong double-digit growth on the back of a more favorable business mix. As such, NBV margin expanded by 5.5 percentage points from the prior year to 41.2%. These top line results demonstrate both the strength and diversity of our business in Asia.

In fact, when you look at our full year new business CSM growth, we saw greater than 20% growth in multiple markets, including Hong Kong, Japan, Mainland China and Singapore.

Asia core earnings in the quarter were even stronger, increasing 24% year-over-year as we benefited from continued business growth and the net favorable impact of the basis change last quarter.

Over to Global WAM on Slide 15. We maintained our growth momentum in Global WAM, delivering a solid 7% year-over-year increase in core earnings. This was supported by higher average AUMA, the addition of Comvest Credit Partners and sustained expense discipline. This was partially offset by lower earnings as a result of our transition to the new eMPF platform in Hong Kong in November.

Net outflows were elevated this quarter, reaching $9.5 billion, as I noted earlier. Our gross flows this quarter, up 15% from the prior year to $50 billion continued to be strong, supported by growth across each business line. And our core EBITDA margin expanded 60 basis points from the prior year to 29.2%, strong results given the eMPF transition.

Next, let's head over to Canada on Slide 16, where we delivered solid growth in new business metrics and core earnings. APE sales and new business value increased by 2% and 4%, respectively, from the prior year, reflecting strong growth in individual insurance and annuity sales, partially offset by lower large case sales in group insurance.

New business CSM maintained strong momentum and continued to deliver double-digit year-over-year growth, supported by higher sales volumes in individual insurance. Core earnings increased by 6% year-over-year, driven in part by favorable insurance experience in individual insurance, higher investment spreads and business growth in group insurance. These tailwinds were partially offset by less favorable insurance experience in group insurance.

Lastly, our U.S. segment results on Slide 17. In the U.S., we saw continued broad-based demand for our suite of products, resulting in a 9% increase in APE sales versus the prior year quarter. Together with product mix changes, we saw very strong growth in new business CSM of 34%.

Core earnings decreased 22% year-on-year, primarily due to lower investment spreads and unfavorable life insurance claims experience, compared with favorable experience in the prior year.

Moving on to cash generation and capital allocation on Slide 18. In 2025, we generated remittances of $6.4 billion, exceeding our $6 billion expectation, positioning us firmly to meet our cumulative 2027 target of $22 billion plus. Over the past 3 years, remittances have averaged over 85% of our core earnings. And while this has been positively impacted by in-force reinsurance activities and favorable market movements, we continue to expect 60% to 70% of core earnings to materialize as cash remittances on a go-forward basis, a testament to our capital-efficient and cash-generative businesses.

As Phil mentioned earlier, we will initiate a new share buyback program in late February 2026 to repurchase up to 2.5% of our outstanding common shares. In addition, our Board has approved a 10% increase in our quarterly common share dividend. Together, these actions reflect our continued commitment to shareholder value creation.

Let's now move to our balance sheet on Slide 19. We grew our adjusted book value per share by 6% from the prior year to $38.27 even after returning significant capital to shareholders as well as the impact of a strengthening Canadian dollar that reduced the growth rate by 3%. We ended the year with a strong LICAT ratio of 136%, which was $24 billion above the supervisory target ratio.

Our financial leverage ratio of 23.9% remained well below our medium-term target of 25%. These robust metrics underpin the strength and resilience of our capital position and balance sheet.

Moving to Slide 20, which summarizes how we are progressing toward our targets. Our 2025 results reflect disciplined execution and momentum across the business, with meaningful progress towards achieving our Investor Day core ROE remittances and efficiency targets. You can see the 3-year progress of our core ROE expansion in the appendix of the presentation.

While our core EPS growth was slightly below our target due in part to headwinds in our U.S. segment this year, we achieved or are tracking well towards the remainder of our targets. And by executing our refreshed strategy, I'm confident in our ability to achieve our 2027 and medium-term targets going forward.

This concludes our prepared remarks.

Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups and to requeue if they have additional questions.

Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from John Aiken from Jefferies.

Thank you. Sorry about that. Colin, one clarification in terms of your commentary on the Hong Kong sales, down because of the broker pressure and regulatory changes. Is this a step function? Or can we see the sales levels maybe back further -- sorry, back up to a run rate level in 2026?

John, it's Steven Finch here. So for Hong Kong sales, maybe I'll take a step back first. For the full year, we're very happy with the Hong Kong performance. We saw strong sales for the full year up 21%, NBV up 31%, NBCSM up 21% and strong core earnings up 26%. So really good results.

What we're seeing in the quarter is, as Colin mentioned in his opening, both a tough year-over-year comparative. We had very strong results in Q4 prior year. But isolated to softness that we're seeing in the broker channel and in particular, the MCV broker channel. The distributors there, they're adjusting to some regulatory changes. And this is not unusual from what we see in different markets in Asia with regulatory changes coming in, some adjustment period and then a resumption of growth.

We benefit from a diversified distribution strategy in Asia, and we saw a continued growth in Q4 in both our agency and banca channel. So as we look to the future, we're confident the underlying customer demand is still there. The fundamentals are strong. So we expect that the brokers will adjust, and we'll see sales increase over time.

And John, this is Phil. Just if I could add one thing. Consistently on this call in recent years, I've said that we have appetite for the broker channel, but we can see quarters where there will be variability in volume, particularly if there are changes in the regulatory environment, which we have seen over the past 6 months and because of competitive factors in the competitive environment. The environment is competitive in the broker channel. I think the really important point is that our core channels of agency as well as bank delivered strong growth in the fourth quarter, as Steve said.

Our next question comes from Tom MacKinnon from BMO.

Yes. Just a follow-up with respect to that and then one other question. If I look at the NBV margin, it's in Hong Kong, it's 52.4% in fourth quarter '25 and 39.7% in the fourth quarter of '24. So substantially increased. Is this due to mix, is the agency and the banca channel certainly more profitable than the broker channel? And if so, why focus more on the -- on that MCV broker channel if the others are -- provide better like new business value and better CSM -- new business CSM growth and better NBV margin?

Yes. Thanks, Tom. It's Steve. You noted an important point there. We saw the margin in Hong Kong NBV margin year-over-year increased over 12%. And it is a mix. We saw the -- with the MCV broker sales dropping, that is a lower margin channel certainly. We see it as attractive. We regularly adjust our overall focus on volume versus margin and optimize there. But the core of our business continues to be domestic agency where we've got strong margins and continue to have strong growth. So we're happy with that mix overall. We did see also a product mix shift. We've been emphasizing and meeting the customer needs around health and protection, and we saw an increase in our health and protection sales, which also contributed to the margin expansion.

All right. And a question perhaps for Paul. I mean, we're just into the Comvest close here, but I think you've noted an impact from eMPF in terms of what it would be post tax to GWAM earnings. What about Comvest? I know you've talked about overall accretion, but I mean you used a lot of cash to make this acquisition. How should we be looking at the GWAM segment going forward in light of the incremental earnings from Comvest?

Yes. Thanks, Tom. It's Paul here. So just in terms of outlook, as you mentioned, we're quite pleased with -- maybe I'll start with the eMPF, just in terms of the rationale or change there, we're about halfway -- even though we've converted, I would say about half of the impact that we provided guidance is reflected in the current quarter, and that's still an accurate guidance going forward.

As it relates to Comvest, we don't disclose the metrics separately at this point. But what I would say is, it was a positive contributor to marginally because it closed late in the year to gross flows, net flows and core earnings. And it is tracking in line with what we had expected early. We're quite excited about it in terms of what we're seeing in terms of customer demand. The category itself is expected to double.

And just to give you a little bit of a proof point of why we're so optimistic. We look at CQS, which closed a number of years -- 1.5 years ago, which is alternative credit. Our AUM was up 40% since deal close and it's driving a lot of positive top line, and we expect to see similar excitement around the Comvest product suite just because of the demand. So it's early, but we're quite optimistic and quite happy with how it's proceeding so far.

And if I could just squeeze one quick one in here. The 2.5% NCIB, you got a pretty good track record, I think it's over 3% you purchased in 2025. Colin, is there anything you can say about what your intentions would be with respect to this NCIB, given that you've generally historically purchased the bulk of these NCIBs?

Well, thanks for the question, Tom. Let me jump in on that one. It's Phil. You're right. Our last NCIB program was 3%, and we completed that in full. This year, we've announced 2.5%. And it's hard to predict the future. But where we stand now, our intention is to complete the program in full. And if anything changes there, I'm happy to update on future calls.

From our perspective, our capital deployment strategy is balanced and NCIB remains an appropriate use of capital. But at this level, 2.5%, it's not something that constrains our ability to invest organically in our businesses, which is really important in the context of the refreshed strategy that we laid out 3 months ago.

Our next question comes from Doug Young from Desjardins Capital Markets.

Maybe just going to the U.S. division. It feels like -- and correct me if I'm wrong, that we've had unfavorable mortality experience for three to four quarters or for sure, unfavorable claims experience or experience in general for about three to four quarters in a row. I'm just hoping you can unpack what you're seeing this quarter. I think it's mortality. Is there a particular product line? We had heard a little bit more about competition on the mortality side in the U.S. market. So just trying to kind of gauge kind of what you're seeing and what to expect going forward.

Doug, it's Brooks Tingle. Thanks for the question. And I guess I'd start with a quick reminder that we operate at the very high end of the market in the U.S., quite large policies. Now that's a very attractive segment of the market, and you see that reflected in our new business value metrics.

It does result in some variability quarter-to-quarter and even year-to-year from a mortality perspective. And you'll recall that Q2 of '25 represented a particularly unusual level of variability. But we're pleased that Q3 showed significant normalization improvement from there. In Q4, still further improvement from there. And I'd actually characterize where we finished Q4 is within sort of a normal range of variability. And I'll probably leave it at that.

So you're not seeing a particular trend here that would in the end result in some form of actuarial reserve increase that's required for these businesses? I guess that's where I'm trying to go.

It's Stephanie here. I think Brooks covered it well. What we saw this quarter is sequentially improved claims experience, and I really view this as normal variability due to slightly elevated severity. And we'll see variability from time to time given where we are in the large case business. I don't view this as a trend. In fact, same quarter last year, we had -- and for the full year of 2024, we saw claims gains through P&L in this business.

Okay. And then second question, maybe for Colin or for Phil. I guess my question is, can you achieve an 18% plus core ROE target by 2027 with the level of excess capital that you have and you're under levered as well? Or do those things need to kind of normalize? And I assume you're going to say yes. But maybe if you can map out how you get 16.5% to 18% plus in the next 2 years? Just to give a sense of what those drivers could be? And then maybe if you can kind of tie in, like why not be more aggressive on the NCIB given the amount of capital or cash that you're generating and the amount of excess capital you currently sit on?

So Doug, this is Phil. I will hand over to Colin, but I do want to say, yes, we do remain confident that we can get to the 18% plus core ROE target, and there are various reasons underpinning that, but I'll let Colin walk through it.

Yes. Doug, I think the important point to note is we've mapped out a number of scenarios to get us to the 18%. We're confident that we're going to get there. We were at 18.1% last quarter, 17.1% this quarter. So the trajectory is good. We live in a fluid environment, and we will use share buybacks not as the primary driver to get to the 18% ROE, but as a lever to pull in order for us to get there. You mentioned excess capital being a drag on our ability to grow ROE. That's certainly the case. We have got around about $10 billion above our upper operating limit, but that becomes a competitive strength in either difficult times or in a whole range of scenarios. So we're in no hurry to deplete what is a very favorable capital position.

Our next question comes from Gabriel Dechaine from National Bank Financial.

Actually, just a follow-up on that mortality issue in the U.S. So you're confident this isn't some trend. I guess one way to confirm your view more or less is, is there any impact from what's happening in this business mortality wise on your appetite for LTC dispositions? Because that business would be as a hedge to higher mortality.

We're here, Gabriel. We just -- I think it's probably best for Brooks to take a start on that, and maybe Naveed will comment from an LTC perspective.

Yes. I would just say that certainly, we don't view this as a long-term trend. We look at it very carefully. There's variability for sure. If you look at our Q4 results from a core earnings impact, you see a little bit more -- it looks a little bit like an outsized impact, because we actually had a gain in the prior Q4, which again reflects that variability.

But if you look at, sort of, post-COVID, the range of tailwind and headwind from mortality in the Life segment in U.S. it's been within a reasonably tight range, and the Q4 result was in that range. So we're pleased to see it normalizing, though there'll always be some amount of variability. Again, I would point to that, while there is that variability associated with operating at the high end of the market, the value metrics are very strong. You saw that last year, and we're very confident about our ability to continue to grow that business.

It's Naveed here. I would just add that given that we don't feel the mortality is a sort of long-term trend. It's not really affecting how we're thinking about LTC transactions. As you know, we've done two significant transactions with different counterparties at or near book value, which provides sort of external validation of our assumptions in LTC. And we're continuing to focus on evaluating opportunistic transactions that drive shareholder value, that won't go away.

Okay. And I guess just to continue down that path with regards to legacy book dispositions, a, quickly, is the mortality issue tied to a legacy block. But the real question is, when I look at the transactions that you've announced in the past and how you've neutralized the earnings per share impact from the disposition is buying back stock. Is that dynamic much more challenging now, i.e., makes dispositions a lot more difficult to do and make them EPS neutral? Because it's a different discussion when you stock at 2x book versus just over 1x when the first deal was announced a couple of years back. Or I guess, are you committed to making dispositions earnings per share neutral?

So Gabriel, thanks. It's Brooks. I'll turn to Naveed on the broader question of legacy dispositions or not. But I will say on the claims, we've seen really Q2 of '25 and a little bit beyond it's not anything notable as it relates to a particular block.

Incidents, the number of claims is actually favorable. It's really, again, because we write these large policies, a confluence in a quarter of a small number of large cases that drove that result. So there -- it's not early duration business. This is generally business written 20-plus years ago. So nothing really abnormal there, just works out to a variability quarter-to-quarter, year-to-year.

Yes. I would just add that -- on our legacy businesses, I feel really good about how we're managing them organically. You've seen our success in obtaining premium rate increases on LTC, that's contractually allowed. We've continually beat our assumptions on that. We're investing significant amounts on fraud waste and abuse. That said, we have -- we connect regularly with the market in terms of opportunistic transactions. There is interest in the market, and we continue to follow up with them. And I don't think we're constrained with respect to what we can do there.

Yes. I think, Gabe, just to pile on there. You talked about the book value multiple in the shares. I mean, that is not a constraint for us to grow our earnings per share. We'll look at each deal on an individual basis and then make any according capital allocation decision based on that deal on its own merit. So I don't -- I wouldn't read anything into how the current share price is affecting our ability to do future deals.

Our next question comes from Mike Ward from UBS.

I was curious about the Japan business actually. One of your global kind of peers has run into a little bit of a hiccup in terms of just distribution in Japan. So I'm just wondering what you see in this kind of high net worth market for insurance and wealth products in Japan? And if you see any disruption or anything changing there in terms of the market structure?

Yes. Thanks, Mike. It's Steve here. Yes, I'm well aware of what's been reported by one of our peers in Japan, and it's not directly applicable to Manulife. One thing I'd point out is, we're very experienced in running a multichannel distribution model in many countries in Asia, including Japan. And over time, we've built and continue to build strong controls and compliance programs. Whenever there are isolated issues, we address them very swiftly.

And then to your point around the Japan market, what we're seeing is some strong success in the Japan market. You see from our numbers double-digit growth this year. We've been executing on a strategy to capitalize on customer needs. And so those needs are driven by interest rates that are structurally higher than they have been in the past, an aging society with a long longevity, so a big need for retirement planning.

We've expanded the product portfolio to meet more of these customer needs, in terms of unit-linked product, whole life product. And that's been driving our success, and we're optimistic as we look forward in Japan.

Right. My other questions were answered.

The next question comes from Paul Holden from CIBC.

I want to ask a couple of follow-up questions related to topics that have already been discussed. So first one is around Asia sales and I guess, Hong Kong, particularly, you gave us a number of different measures or metrics to follow. And I think we've all been conditioned to follow APE sales because of IFRS 4 accounting. But now maybe there's an argument that, that shouldn't be the number one metric to follow, maybe it should be new CSM growth because that's what's really going to drive future earnings. So point is like, to agree with that if you were to focus on one metric, that should be the most important one. And then second part of the question, like does that influence or to what degree does that influence? How you think about sales mix?

Yes. Thanks, Paul. It's Steve here. And you hit on an important point. I mean, the way we think about this, under IFRS 17, when we see sales variability, it does not translate into core earnings variability as the CSM amortizes into income. So we are focused on generating the most value for shareholders. NBV and NBCSM, we report both. They're both a good indicator of the value that we're generating for different reasons. So we focus on both of those. And we drive maximum dollar magnitude with an important guiding light of the company's medium-term ROE target of 18% plus. So we optimize for dollar of value while meeting that -- meeting or exceeding that hurdle rate, and that's what we're looking to optimize.

Okay. So if I measure this quarter on that basis, then it was a really good result for Asia sales. Yes.

As Colin noted, NBV up for the segment of 10% and NBCSM up 19%, helping drive year-over-year CSM was up organically 11% total 19% and a little over USD 2 billion.

Yes. Okay. Okay. Good. And then my second question, again, a follow-up to prior discussions is on the U.S. core insurance experience. So the questions were a little bit more focused on the short term. But when I think about the U.S. segment over the long term, negative experience or unfavorable experience as kind of being the issue or concern for investors for a long period of time for different reasons. So given the refreshed strategy and the renewed focus on wanting to grow the U.S., I think it would be helpful to give people more comfort around the experience there and how you're growing.

So I don't know if there's any actions you can take to kind of get that experience to more neutral or positive? Or again, how you're thinking about that? Because I think addressing that issue, again, would give people a lot more comfort around this renewed growth emphasis on U.S. So just thoughts, comments there.

Paul, this is Phil. It's an excellent question, and thank you for asking it. In our strategy refresh, one of the things that we emphasized was the importance of having a diversified portfolio. And when I think about that, of course, diversification is a risk mitigant. But in particular, for the U.S., there are many things that the U.S. business, John Hancock, contributes to Manulife that we value a great deal, including the earnings generation, including the capital generation and the stability of our capital generation.

And one of the things that we changed as part of the strategy refresh is actually having a clearer appetite to invest in that business so that we can sustain for the long term earnings and capital generation.

Now when we're talking about investing in the business, it's not about going back to where we've been before. It's actually growing in product lines that we have demonstrated tremendous value and success in recent years. And the drivers of adverse experience that you've referenced are quite different lines of business.

The short-term matter that we've discussed on this call of some mortality variability, we do believe that short-term variability. But I think it will be helpful to hear from Brooks some of the specific initiatives that we're taking in the U.S. and build that confidence that they're profitable, they're sustainable and from a risk perspective within appetite.

Brooks, over to you.

Yes, sure. Thanks, Phil, and thanks, Paul. Just quickly on policyholder experience. We -- you look at it and certainly over a very long period of time, yes, whether it's mortality, persistency or LTC experience lots of attention there. But we've taken a whole range of options with respect to the U.S. segment to optimize shareholder value. And that's really resulted in, I think, a winnowing of a lot of that policyholder experience variability. LTC experience in Q4 was benign. The life claims experience, as I've said, was really represented a particularly unusual level of variability in Q2, now normalizing.

So we actually feel quite a bit better about policyholder experience in the U.S. But to pick up on Phil's point, feel really great about our ability to contribute to strong and profitable growth for Manulife via our new business franchise in the U.S. And I won't go on too long about this, but I think everyone knows we've got a strong brand. We have an innovative and broad product suite. We have top relationships with independent distribution.

And I'd point out, a couple of the fastest-growing segments in the U.S. economy are the so-called wellness economy and longevity economy. And we remain the only carrier in the U.S. that offers such services to their policyholders, early cancer screening, things like that. Very strong consumer appeal. And you see that reflected in our new business value metrics for last year, similar to the discussion you had with Steve. Our APE was up nicely last year, 24% for the full year, but new business CSM up 42%. So a lots of other initiatives, in the interest of time, I won't get into backing a quite ambitious growth plan for the U.S. and we feel very good about the risk and expected policyholder experience profile of that business we're putting on the books.

Our next question comes from Darko Mihelic from RBC Capital Markets.

I just had a modeling question, maybe looking for a range here. I'm actually want to switching gears here and look to Canada for a moment. When I look at 2024 in Canada, you had a 43% increase in group sales. This year, it's down 24%. So when I think about 2025, you had 12% growth in your expected earnings on the short-term business. And now that we've had a very big decline in sales, I wonder if you can give me an idea of what we could expect with respect to that important line item. I don't think we should think about a decline, but maybe you can give me a sort of a range or some sort of an outlook on expected earnings and short-term business for 2026.

Darko, it's Naveed here. So what you saw in 2024 was a very large case that we sold, a jumbo case. So as you know, in this business, there's normal large-case variability. So you have small- and medium-sized cases that generally have a consistent trend year-over-year, then you get these large cases that jump around year-over-year. What we look at, in addition to sales, is our persistency and our sort of overall in-force premium, and that continues a good trajectory. And so I think you can -- our recent sort of trends on P/E profits is something that should continue going forward.

Okay. But at a similar pace? Or should we at least expect a slowdown in the pace?

Yes, at a similar pace because again, our persistency remains very strong.

Our next question comes from Mario Mendonca from TD Securities.

There have been a lot of healthy discussions there on the liability side of the balance sheet. Could we flip over to the asset side. There's growing concern among investors around private equity, private debt, and that obviously draws my attention to Manulife's large private placement debt, the $52 -- almost $52 billion. You talk about how credit experience has evolved in that asset category and what proportion of that would you sort of you would label as higher risk or sort of topical areas in that specific line, that $51.8 billion of private placement?

Mario, it's Trevor. Thanks for the question. So as you noted, there's -- there are a wide range of definitions as to what you include in private credit, in private debt and private placements. We have, for example, successfully participated in the investment-grade private placement market for many years. We like the diversification, the spreads, the covenants that you get relative to public markets.

Just breaking down the $52 million that you mentioned, our investment-grade portfolio is around $45 billion and our below investment-grade private credit portfolio, which, to your point, I would consider to be higher risk. That's around $4 billion, $4.5 billion. It's about 1% of our general account assets. It is focused on middle market loans to private equity-sponsored companies, but it's also quite diverse by issuer sector and sponsors. So there's no real concentrations there.

And we do manage underwriting rate most of those assets in-house. And as I suggested, I would see this as being at the lower end of the risk spectrum and about 90% of those assets are actually priced by an external vendor each quarter, and we've also executed multiple third-party sales from that portfolio, which I think also validates the asset valuations.

To your point about performance, I think our investment grade private placement portfolio has actually done the same or better than our public portfolio. So we have no concerns with that part of the portfolio.

And on the private credit portfolio, performance has also been strong even with COVID and relatively recent rate increases, and our credit experience is still comfortably within our underwriting loss assumption. So really quite happy with both parts of the strategy.

Okay. And then looking down a little bit on that portfolio composition, the private equity, the $18 billion there. Can you talk about the ALDA related charges this quarter and the extent to which private equity played a role or any other segment played a role?

Sure. Thanks for the follow-up. So yes, in terms of ALDA performance this quarter, as I think we disclosed, the ALDA returns did improve. Both real estate and private equity were actually better than Q3. The area that was actually worse was infrastructure, which over the long term has actually been very strong for us.

Private equity, it did underperform, but to your point, it is a large portfolio. And so we would expect to see some variability from quarter-to-quarter. Obviously, given some of the broader economic and geopolitical uncertainty, there's going to be a little bit of noise there. But at the same time, I think strong public markets, the likelihood of short-term rate declines as well as, I think, improving M&A and IPO activity on the middle market private equity section of the market, I think as -- I think all of those make us cautiously optimistic of an improvement in 2026.

So I'll be quick here. So if you buy the notion that sponsors are going to be active as in returning capital to investors IPOing, all the things you referred to. Is that supportive of ALDA performance like the private equity performance? Or how would you describe that?

I think it would be positive. I'd be looking forward to more of the IPO and M&A activity. I think it will improve liquidity. It will improve price discovery. And I think it will improve go-forward returns.

Our next question is a follow-up from Darko Mihelic from RBC Capital Markets.

I just wanted to follow up on the ALDA question there. Slightly different angle, though. I am curious on how you're capable of growing the ALDA portfolio but not having the sensitivity to ALDA go up. And in fact, the insensitivity is going down. So if I just look at it, it's up $7.5 billion over the last 2 years. But your sensitivity is actually down a little bit. So what is it that you're doing there? What am I missing in the sort of market calculation?

Darko, it's Trevor. Thanks for the question. So it's actually not that complicated. So we do have on the balance sheet, I think, $62 billion, $63 billion of ALDA in total. But it backs a different group of liabilities, some of which are guaranteed, which is shareholder risk and some of which is participating or adjustable, which is policyholder risk.

So basically, we expect the ALDA backing the guaranteed liabilities to be flat and slowly decline as those liabilities age. And if we do more reinsurance transactions. At the same time, the ALDA backing the adjustable and participating liabilities where investment experience is passed back to the policyholders will grow as those businesses grow. So basically, what you're seeing is that the overall ALDA portfolio that you see on the balance sheet may continue to grow, but not the income exposure for shareholders. And that's why you're seeing it slowly decline.

Okay. I figured it was something like that, but that's great.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hung Ko for any closing remarks.

Thank you, operator. We will be available after the call if there are any follow-up questions. Have a good day, everyone.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

I want the full 25 minutes here. So yes, we're going to get the going here. So we have Colin Simpson, CFO of Manulife Financial. You've been CFO now for how many years?

2.5 years, I think.

2.5 years.

Yes. Exciting times, but I met you before I was CFO.

When you were at Aviva.

That's right.

And that was -- well, that was when you were in Canada, Aviva...

That's right.

It's been a while. So -- but thank you very much for participating in the conference, our inaugural conference in Toronto. We do appreciate that. And I think it's your -- I've been starting with big picture kind of strategic kind of priorities, but you're a bit different because you come out with a refreshed strategy and a video with it, which is interesting.

But so maybe you can talk a bit about the new refreshed strategy, more importantly, like what's different? Maybe I'll start there and then we can kind of dig into it a bit.

Yes, Doug, I think when you look at a company like Manulife, we've got so much forward momentum, and we issued new targets last year to go -- to generate an 18% plus ROE. I'm sure we'll get on to that, that -- it wasn't -- the time and the place was not here to go, we're going to throw everything out and start all over again because we've just got such good momentum, and we've got a new CEO who's been in the business for a decade. And so -- but at the same time, we wanted to send a message that this is a different company.

And I'll give you a classic example. I think if you listened to this conversation, maybe when I joined Manulife, you would have heard a lot about Asia and GWAM. And it's like Asia, GWAM, Asia, GWAM. That's what we want to be. We want to be a wealth and asset management, bigger in wealth and asset management, and we want to have 50% of our earnings come from Asia.

Today, it's a bit more balanced than that. You know what, we still want to be much bigger in Asia and asset management, but we've got these great businesses in Canada and the U.S. And so we want to grow those as well because we want to be that stable global champion that people gravitate towards because when I look around, and this is what drew me to Manulife is, I genuinely don't feel that there are other life insurance companies that offer the same level of geographic diversification that we do and quality of earnings. And so if we can grow them together, then that protects us in a very uncertain world. So that's different. And then we use the opportunity to really underscore how important AI is, distribution, people and culture and then also health, wealth and longevity.

AI came up, and you gave a specific dollar target. Can you define what goes into that, cost versus other items that would go in? I think it was $1 billion...

That's right. $1 billion of value created from AI, and that will come through 3 areas, just straightforward earnings increase. And so that will often come from operational efficiency. The other is CSM growth. And for those of you who are not familiar with life insurance, CSM is really our store of future earnings. So we're able to grow more through AI, then that's going to increase our CSM.

And the third area, which is going to frustrate you probably the more out of the 3 years, cost avoidance. Because I'd love to say to you, we made -- I think you told us all the time as the CFO, like, oh, you should be really happy. We avoided $500 million of cost. And I was like, well, actually, I didn't even know we were at risk of losing that $500 million. So cost avoidance is something that is important to us, and we need to work on it, but it's not something that you track as a separate item nor should you and it doesn't feed into earnings. So this is a long way of me saying the $1 billion is real, we're going to track it, but it's not necessarily going to drive $1 billion of incremental earnings.

So when you talk about CSM growth, how does AI grow CSM?

Yes, sure. So the -- when you think about what AI can do for us and a lot of our business, particularly in Asia, comes from agents and distributors. And so when you think about how an agent goes out to hunt for new business, they wake up in the morning and they go, who am I going to call today? And we have an AI tool that says, today, you've got one of your clients, Peter, he has just had a kid. Why don't you congratulate them for having a kid and then offer to sell them 3 different products. And then the agent goes, I'm just working up, good idea. And up pops an e-mail that describes to Peter and then go hang on a minute. I actually know Peter a lot better than how you've written, you've written it quite formally. Let's try again. You press another button and it's like, hey, Peter, like great news on the kid and I can't wait to see you next week.

So that drives extra sales. And so that will increase our CSM. Our ability to reprice products and be faster to market will drive CSM. We have this quick quotes process in the U.S. where distributors send us quotes in and they say, I've got a customer, I think that they're looking for life insurance. These are the biometrics. This is the information. And we send back a quote straight away. It's quick. And that in itself allows the customer to say, "Hey, would you be interested in life insurance, I think it's going to cost you $200 a month." Those are the sorts of things that drive CSM growth.

So when you look at those 3 buckets, is it equal?

I don't know. I honestly don't know. I think -- and we're at that stage of GenAI and AI that we are exploring a lot and we just don't have all the answers.

Yes. So then the other big part of the strategy has been the legacy business. Mark, who recent -- who ran the legacy business, he did corporate development as well, recently departed, [ Naveed, ] who's excellent, is now in charge of legacy, but he's also got a day job running Canada. And so like is this to infer that maybe there's less to do on that side in terms of the legacy businesses in terms of reinsuring? Thoughts on that.

Yes. I think by definition, because we've already done 3 deals, those are 3 deals that we don't have to do going forward. So sure, the pipeline of deals is now smaller because we've successfully done 3 deals. I think when I'm talking about the 3-year journey that we've been on, which is easier for me to talk about because that's my tenure, we had a lot of concern over the validity of our assumptions related to long-term care. And so it took external transactions, highly respected external parties validating our reserves through a transaction to get people to say, you know what, maybe these reserves are current.

Maybe management is -- maybe management has more than just they were to put behind the reserve. So I don't feel we need to do them quite as much. Do I want to do more LTC deals? Absolutely. I think we've got just over USD 30 billion of long-term care exposure on our balance sheet. It's going really well. The experience is quite positive. We've just had an assumption review, which turned out to be neutral. But the reality is it's not a business we write going forward. And so should the opportunity come for us to reduce it, we will take it. But just like the last transaction we did with RGA, it's not like the market turned around and gave us a huge re-rating on the back of the last LTC deal we did. Actually, we didn't necessarily outperform. I'm not expecting this to be a watershed moment in the investment thesis for Manulife, but that doesn't mean we shouldn't pursue it.

Yes. Am I -- in the ballpark if I thought 25% to 30% of your equity was back in the legacy business? To be fair, it used to be 50% -- and we always say it's down quite a bit. We...

We stay clear of like putting a ring fence around legacy because the second reinsurance transaction that we did was not technically in the legacy bucket. So we stay clear around labels, but I'm not offended by that guess.

Well, I would say legacy too, it's not just long-term care insurance. I would say there's opportunities probably to reinsure secondary guarantee UL stuff and annuities and just [indiscernible] aside. So -- but maybe we can move on to the division side of things. Asia is obviously continues to be a big part of the strategy. That hasn't changed.

You've got some headwinds from the EMPS. You've got some tailwinds from the accounting change that came through this quarter related to health products in Hong Kong. Like there's some puts and takes, maybe you can talk about some of the puts and takes, but are you still comfortable with that 27% target of mid-teen core earnings growth and 21% ROE. And you don't give ROE by division, but where would you stand relative -- or maybe I'm wrong, but maybe where would you stand relative to that 21%...

Yes. Once a year, we give ROE. So we'll give it at the end of the year for the full year. We -- I think our last printed number was 19%. I'm seeing I'm not in the audience, that's very helpful. So we're very close to 21% core ROE for the Asia segment. So feeling really good about that. Yes. puts and takes, you called them out quite well. I mean the reality is that in Asia, we're selling to people who haven't bought policies before. So the natural demographic growth that we are offering our customers is incredible. And that's a huge benefit for being with Manulife. We see CSM growth that other companies don't see to the same extent. And so that in itself is great. And then when you look at the wealth hubs that come from Singapore and Hong Kong, and we recently opened an office in Dubai, that's an attractive opportunity.

So when you consider, is it all about, hopefully, Asian markets grow and demographics take us through? Well, yes. But at the same time, we're seeing centers, wealth centers pop up in the world that weren't there before. And we want to be there, and we want to be a key part in people's savings decision, and that's serving all parts of demographics from people who've never bought an insurance product before to people who have quite a lot of money and who are looking to diversify their wealth. So lots of tailwinds in Asia on the headwinds. It's -- we're in 14 different markets when you include asset management. And these markets all operate independently to a large extent. So some things can happen that you don't expect. And -- but our diversification allows us not to be derailed by any particular market that has an issue.

So no change to the targets. And then you've talked about entering or you are entering the Indian insurance market. And so it wasn't long ago in India that there were some issues around the selling and unit-linked product -- and that was a while back. And it seems like it's worked through the system and the mix has changed and the economics have changed. Is that your sense? Are you getting in at a period of time of inflection? Or is it already reflected in India or...

I mean let's also be clear. It's going to take 12 to 18 months before we sell a single policy. So this is not Manulife trying to time the market. This is us taking a very long-term view on a mega economy, 3 mega economies, China, U.S. and India and fantastic that we're now in all 3 of them. I feel that the regulatory environment in India has improved quite a lot, whether it be foreign ownership limits, whether it will be banks opening up their shelves to more providers, some of the product structures. I think that's benefited a lot. But Also, the Indian consumer is incredibly digital native. And so the opportunity for us to sell through maybe channels that weren't quite as developed as they were 20 years ago is extreme.

And so we've also -- and being a fast follower, not necessarily fast, but being a follower, it also gives us the opportunity to see where others have made mistakes and avoid those. So it's a combination of a lot of factors. But as I said, it's going to be a long time before we get the business up and running, a long time, 12 to 18 months before we sell a policy. And then we've got to scale the business in a way that is responsible as well. So it's going to be exciting for us, and it's going to be exciting for the future generations of management.

So 3 to 4 years before you break even, is that typical? Depends on sales?

I think that's not unreasonable.

Yes. The other region that you were in way back in the day, you're not in South Korea? Any interest in other regions in Asia and not just ones that pops up?

No. And I won't go into South Korea in a lot of detail because the local players there, Samsung like they're dominant there would be -- it would be very difficult for us to come in there and make inroads. We are -- geographic expansion is not key to us beyond the India debate, which we've been having for a number of years. We feel that we've got wonderful opportunities on an organic basis and plenty to keep us busy with that we don't need to go to new countries or regions.

And then lastly, just on Asia, like I think it was many investor days ago that it was conveyed that maybe China would one day contribute more Manulife than Canada. And so it always stuck with me. And clearly, that hasn't been the case. And there's been a bunch of headwinds, and we don't need to kind of do a full history lesson. But what is the outlook for China? A big country, a lot of population, underpenetrated, hard maybe to drive the profitability that you expected.

Yes. And we own a 51% JV in China. So not all of the earnings go to us. We've got a fantastic JV partner in Sinochem. I think what you just described and maybe the hope for China's contribution to Manulife's earnings not materializing in the same magnitude is exactly why we're pursuing a balanced strategy. It is very difficult in today's day and age to figure out where -- what economy is going to be the #1 winner, what geopolitical environment is going to happen. And so we need an element of diversification. Did China not grow quite as much? Did we -- did we expect the Chinese long end of the yield curve to be where it is now? Absolutely not. But we take a prudent approach when we write insurance products. We're not overly exposed.

I like our position in China because I think some of the regulatory change that's happening in the market is something that we've seen elsewhere in the world. And so we're able to adapt to it quite well. Our product suite is not overly exposed to the long end of the curve going down. And so when you look at the foreign insurers share of profitability for the industry, it's only 8%. So in my -- and that's grown a couple of percentage points. In my opinion, that 8% is going to grow, and we're going to be a key beneficiary to it. But the bigger contribution for the foreseeable future will be from Hong Kong.

Yes. Okay. And then maybe going out of Asia, the U.S., renewed kind of focused strategy. At some point, if you're running off a business, you have to either sell or grow. I guess that's kind of we're at a period of time where you're looking to grow. And like maybe I'll ask it this way, what will the U.S. division look like in 4 to 5 years? -- very simplistically, size or ROE or return, like however you want to describe it?

So the U.S. right now makes about USD 250 million. That's what it made in Q1. We had 2 quarters of adverse mortality experience. That shouldn't happen. And so we need to have stable mortality experience and overall policyholder experience. I think in some time, our long-term care reserves will peak. And so there will be a natural decline in earnings from long-term care business. That is good in the sense that some of that risk is running off, but it's also a challenge because it means our earnings are not going to grow at double digit unless we do something about it.

So I would say that $250 million grows steady single-digit earnings. And what's important is that we don't see declines. And if you look back over the last 2 to 3 years, you've seen the U.S. earnings come down because we have done transactions that have reduced earnings, and we have had basis changes that have rightsized the earnings of that business. So we need to make sure that we harvest what is a fantastic brand in John Hancock. We've got the ownership rights to the licensing rights to Vitality on behavioral insurance. We're going to really empower our customers to live longer, healthier lives, and they're going to reward us by being loyal and great risk. So I feel really good about the U.S., but I don't think we're talking step change here. I just think it's a strong commitment to growing the earnings in a stable, responsible fashion.

So when does that pivot point happen in long-term care?

We're a few years out. We -- again, it changes with basis changes, but it's certainly not in the next 2 to 3 years.

Canada -- renewed focus on Canada. Again, mass market. What's driving that? What areas? Can you give some examples of where you think you can take some market share?

I think the obvious place to look is where we don't have the same level of market share that we have in some of our individual business or group benefits. So that's the example is the bank. We have the #8 bank in the market. It's core to us. We now believe that there's opportunity for us to take market share. We're not talking about huge market shares against much bigger competitors, but it's just an opportunity for us to do more with what we have. I think the health space in Canada is really interesting. And so when you look at the current balance of provision of health care between public and private, is that going to be the same forever? I don't think so.

So can we take more market share, not necessarily from our competitors, but maybe from what's done by other providers in a way that is responsible and a win-win. So that will be a gradual win. At the same time, can we improve our customer experience? Can we improve our systems? Can we use AI to become more efficient? All of those are absolutely yes. But Canada is a fantastic country to operate in. Margins are good, margins are stable. There should be -- once we get to more normalized population growth, that provides some decent GDP growth. And again, a great economy to be a leader in.

Okay. Capital, excess capital, buybacks, you've been active. You bought back $1.74 billion year-to-date '25, I think, is you've got $6 billion of excess capital and debt capacity by our math. You expect 60% to 70% of core earnings to be cash remittance, $6 billion this year. Why not be more aggressive on buybacks? And I know you've got the Comvest deal that you're spending money on, but it seems like you've got a lot of flexibility. Or is there a renewed focus potentially more on M&A? You've done the Comvest deal. Is there other areas where you see opportunities to deploy capital acquisitions?

I can see why buying back stock makes a lot of sense for us. And that's why we bought back 5% last year and we're buying back 3% this year. And it definitely acts as a -- to gear up our core EPS growth. The question mark that I think every good management team should ask themselves is can we get synergies from buying something else? Is there a gap in what we offer that we need to plug. And clearly, Comvest was one of those gaps. We didn't have a private equity -- private credit manager that we used or built in-house. And so that was a fantastic opportunity for us to plug a gap, but it wasn't at the expense of a share buyback.

I'm very focused on making sure Manulife is not just all about being a share buyback because that is -- that lacks the ability to create value through real growth. And so I think it's a great tool. And I will say to you, if we don't buy back stock, if we stopped our share buyback program, it will be incredibly difficult to hit our 18% ROE target. So it is a tool that we use and we see good use in. But I want Manulife to be more than just a company that earns money and then gives it back to shareholders through share buyback despite it being the reasonable tailwind on share price, I suspect.

Yes, I get the tone changed on M&A in the last 6 months to a year?

Yes, it definitely has, but not because we're like -- we've got money that's burning a hole in a pocket and let's go out and buy it. I think it's more under Roy, our former CEO's leadership. We had so many fires to fight. It was like we've got to go out and do reinsurance transaction to do. We've got to rightsize expenses. We had so many different fires to fight along the way since 2017.

Now we've got Phil and he's come at a time when it's like, okay, we've done a lot. And actually, when you have a share price that has better reflected valuation itself, it allows us to think longer term as opposed to, well, the real job of the day is to try and get our share price to adequately reflect the quality of the business. And we're getting closer to that point. But when we traded at 21 forever, it was much more -- it was very difficult to take a 10-year view and take the view that I'm sure investors will be fine if we don't show demonstrable progress in the near term.

What would be the areas of interest in M&A? Is it Asia? Is it wealth? Is it...

I would look at any opportunity in Canadian Wealth. I think that's a wonderful -- it's a great market for us, great brand. Margins are attractive. And so anything we would do there, I think, would look good. I think within the U.S., anything that adds to our scale. And if a small book of retirement business came up for acquisition, I think to add to our $260 billion of retirement assets, that would make sense. I don't think looking -- chasing wealth in the U.S. makes sense from where we're coming from. And then in Asia, you've got distribution agreements that come up from time to time that we absolutely would look at. But nothing transformational. We've got a lot of exciting opportunities organically actually.

And then you brought up ROE, you're probably 16%, give or take, core ROE by our math in '25 target 18% plus. Buybacks could be a big contributor. You've got a lot -- like I calculate 1% of LICAT about 25 basis points ROE. So you more than easily can add 1 to 2 percentage points by bringing your LICAT. But like what's that path from 16% to 18%?

I think a better place to start is the Q3 number because the basis change did change the earnings trajectory a little bit. $30 million a quarter. So I would take the -- we had an 18.1% ROE in the third quarter of this year. If you normalize for credit and some of the tax benefit we've got, you get down to 17%. So 17% versus 18% plus by the end of 2027, we're not far off. On top of that, you've got adverse mortality. So if mortality normalizes, that's going to be a tailwind. We still got a buyback program to complete this year. I made some other comments on buyback program.

So that's a lever to pull to get there. And then on top of that, we've got -- we're growing well. Our CSM growth is double digit this last quarter. And so that should feed future earnings. But one of the great things about IFRS 17, and this is another thing that's been underappreciated is it produces quite stable earnings. So we should be a lot more boring than sometimes we trade. And part of that is because our earnings stability is underappreciated. So I don't have too many rabbits that I plan to pull out of a hat to get to the 18%. It's just block and tackle, get the earnings up. If this buyback makes sense, do the buyback and get to the 18%.

Yes. Well, with that, I know we're coming down towards the very end here. But maybe I'll pass it over to you for any closing remarks or anything you want to touch on that maybe we didn't touch on.

No, I think the investment thesis, in my opinion, is very clear. We are on a journey to be a quality world-renowned franchise. And I think we've got all the ingredients. And we want to think long term, we want to continue delivering. We've got a lot on our plates. And we really thank our shareholders for being with us, and we look forward to welcoming many more. The journey is exciting ahead. So thanks again for having us.

Well, I appreciate you again contributing to and participating in our inaugural conference, and I look forward to next year, too.

Good morning, everyone, and thank you for joining us in the room and on the line this morning. We're with Phil Witherington, Manulife's new CEO. Phil, thank you for doing this. Appreciate the opportunity.

Anytime, Mario, and thank you for inviting me and finding time to do this. Very exciting.

I invited you into your own home.

You've come in and we can talk about the history of this building in a few moments. But yes. It's great.

So I've been around Manulife for a long time. I did not expect this much change so early in your tenure. I did not expect the strategic refresh 5 priorities, 6 values, 3 enablers -- 2 enablers of [indiscernible] is it 3 enablers?

3 enablers.

3 enablers, wow. That's a lot. So help me understand why such a change. And this seems like a meaningful change to me so early on.

Right. And it's a great topic to cover upfront. This is a new chapter for Manulife without doubt. And it's not about the CEO. It's not a CEO's chapter. It's about a chapter for the organization. And our leadership team and our organization wanted to make something of this chapter. And I think the easy answer would have been to say, okay, we've got a strategy that's working. Performance is good. Let's stick with it. Continuity let's coast.

And I and other members of the leadership team were a little bit concerned with our high ambitions that the organization may have a bit of fatigue. But interestingly, over the course of the early days of this next chapter and getting out to the organization, I was very deliberately visited our colleagues across our offices. So Waterloo, I was the first CEO to visit Halifax in more than 20 years, Montreal, Boston, New York, went back to Hong Kong, passed through London and met with so many of our colleagues and business partners from around the world.

And what I found is that there was a huge amount of excitement about the future and what we can do with this next chapter. And that's one of the things that informed us that, yes, we should be really deliberate in being clear about what our strategy is, what stays the same, what will change and then positioning the company, the organization to be able to deliver on that next chapter.

And we made a decision as a leadership team that actually, there's no point in dragging this out. Let's provide clarity rather than live through a period of what some may interpret as strategic ambiguity. And we evaluated various options. Should we wait for 2027 and then have another Investor Day? Should we wait until the middle of 2026 and have another Investor Day? And we decided that, well, actually, no, let's get this done from end to end in 6 months, provide that clarity on strategy and then quickly get into execution. And part of our rationale for that was we know what our ambitions are. We know as an organization what it is that we want to do.

If we're slow, then we're effectively waiting for the competition to either catch up or get ahead of us. And we don't want that to happen. So we've been very deliberate in being clear about what stays the same, what will change and then moving quickly into execution. And I think with the refreshed strategy, and I hope we get to talk about that a little more. But with this strategy, I think it sets us up well not only to build confidence in 2027 to deliver on our targets there, but actually sets the company up for an entire chapter of success, and that's what's driven us.

So either time is moving very slowly or the clock hasn't been started. So just a reminder to get the clock going. Still said 60 minutes. It's okay. So the -- I want to go and review a little bit of Manulife's history. So I was in the business the day Manulife demutualized in 1999.

Yes.

Forget what month that was? Was it the fall? When did Manulife demutualize?

I think if I recall from the books, I think it was March.

March of 1999.

But I may be wrong. I may be wrong.

I think it was like $15 or $16, and there was a lot of debate around that.

Yes. A couple of billion dollars market cap.

Yes. I remember that well. So D'Alessandro, CEO, very aggressive guy. Remember, he had that 15 by 15. It was 15% EPS growth by 15% ROE. That was a lofty target back then. I mean it would even be now. Made the company big. It was growing quickly, but it was messy. And then the global financial crisis sort of exposed some shortcomings in risk, I think, in the risk culture of the institution.

And then Donald Guloien comes along. And the way I characterize his time as CEO was he inherited a company that was on life support, and he had to essentially bring it back from the brink. That's the way I interpret it. Some folks remember that -- there was a time in 2008 when the banks lent Manulife $5 billion. I mean it was like -- I remember getting a call over the weekend being told this was coming down. It was a big deal. That's how scary things were.

And I think he brought it back from the brink. And then, of course, you had Roy Gori, that took this institution and made it into the thriving institution that it is today. So 10 years from now, 12, 3 years from now, there will likely be a younger analyst than me writing your buy line or maybe you should write your buy line. So what I'm asking you now is when we look back 10 years from now, what will we be saying about Phil's time as CEO?

So I love the fact that your question is reflecting on a bit of the history here because one of the things that I think about is that we're an organization with a tremendously long and rich history. It goes back to 1887. Where you are sitting now, I mean, those physically in the room, this became our headquarters in 1925. We built this building, the foundations that we're sitting on.

And I reflect on our history a lot. And I -- as I often walk into our treasury function and look at some of the photos on the wall, there is a photo of the gold bullion being carried through the front door, which is still the original front door into the building to be deposited in the -- not to say, I forgot what word we would call it, but the vault, yes, in the vault. Then vault is still there. It doesn't have gold bars in it anymore, but it's still there.

And the relevance of that is that the long history that we have really demonstrates how much we have learned through various chapters in this history, including the IPO, the demutualization, the financial crisis. And that's very much in our culture, in our memory. And it's something that we learn from that. We're not going to make the same mistakes of the past. And I think that's strategically relevant.

But when I think about the future and this next chapter, what I see us achieving is really very clear.

And I would want this next chapter to be something like Manulife becomes the leading global life insurer and asset management company in the world, as simple as that. So it's not just about being the leading in Canada, it's about being the leading in the world. And then you think about sort of the strategic relevance of that statement, having a presence in the mega economies of this next generation, the U.S., China, India, both insurance and asset management.

It's that thought, that ambition to be the leading, which drives some of the strategic clarity that we've provided. And I think that explains why it's important that we're successful and we thrive in the U.S., the largest economy in the world, the largest insurance market in the world, but do it in a way that is balanced across the portfolio and doesn't go against our disciplined appetite to take risk. So I think when I reflect on this next chapter, we want to be hugely successful. We want to deliver on our targets and outdeliver on our targets and set Manulife up to be hugely successful in the long term. It's not a short-term strategy.

When I hear that outlook, the one where Manulife wants to be the leading insurer globally, the leading asset manager globally, it immediately makes me think about consolidation. It's very hard to be that big, that important without consolidation. So what do -- should investors interpret some of those phrases as Manulife will be more acquisitive in your 10 years or 12 years, depending how long you stay in this role than in the previous, say, Roy's 8 years. Should we expect a lot more M&A?

I think we have already demonstrated very early in this next chapter that we have the appetite to move inorganically where it makes sense to do so. So that was the Comvest acquisition. Should you expect to see a whole series of acquisitions? No. What I see from the history, and I'm very disciplined about this, is that the best returns we get come from organic investments that we make.

And those organic investments sometimes take a number of years to come to fruition and to pay off, but can be transformational over a longer period of time. And an example I often reflect on of this is when I speak to former executives, and I was speaking to Vikas, who was our CEO in Asia many years ago, so before me, before Roy, before Bob Cook, it was Vikas.

And Vick was the pioneer of an organic investment to build a retirement business in Hong Kong, the MPF business. And we had an ambition that, hey, this is a market that we should be a leader in. And I recall the story that Vick tells that nobody wanted him to deploy expenses. I mean, capital would be an exaggeration because it was a relatively small amount of money, but deploy expenses in order to invest for the future.

But now having a leadership position in that business, generating hundreds of millions of dollars of profitability per year with a huge scale retirement platform, that clearly was the right decision. And that was 20 years ago. And so 20 years is a long time, but that's been a hugely successful business for a long time.

So the priority deployment of capital is around building those organic growth engines. leveraging the strong brands that we have with Manulife around the world, with John Hancock in the U.S. to build a competitive advantage and creating a differentiated proposition. And then when you look at some of the strategic priorities that we're laying out, for example, empowering customer health, wealth and longevity, that's about how do we differentiate Manulife relative to the rest of the pack and in doing so, bring value to customers. So that's really how we're thinking about our strategy and the future, Mario.

I want to be clear, folks in the room, let me know if you want to ask a question and on the line, use the system we have in place, and we'll get to your questions. I do want to talk about 2 countries. weren't neglected, but they certainly didn't feel like a priority for Manulife. One, of course, was India. I don't recall Roy -- you certainly have the asset management relationship with Mahindra, but I don't recall Roy or the company as a whole ever talking seriously about getting into Indian insurance market. So did something change? Or was it always sort of in the after the -- was it always a thought for Manulife and the environment just presented the opportunity? How does that?

It has always been there. And in fact, and this is true, something I keep in my top draw, and it's actually in the shipment on its way over from Hong Kong is a piece of paper, and it's a piece of paper that I had taken a copy of from our archives, and it was the first insurance policy we had sold in India, and it was 100 years ago.

And a lot happened in the India insurance market over time. And we had exited India with nationalization, I think, something like the 1940s. And it's been a long-term ambition for us to get back into the market, to have a life insurance presence in India. The challenge has been that there was a 26% ownership cap for foreigners for a long time. That was increased to 51%, but it wasn't possible for a foreigner to control. And so we've been monitoring the market.

But then in recent years, things have really started to change. So the ownership limit was increased to 74%, an acknowledgment that a foreign party can control an India business. And there is what appears to be a regulatory path to 100%. And at the same time, the regulatory environment for insurance, the IRDA, the Indian regulator has set out an insurance for all strategy, which really underpins insurance being a financial services product and tool that should be widely held across the India market.

And combine that with the rapid growth in prosperity for various reasons, the India economy has done incredibly well. The middle-income households are starting to emerge and grow rapidly. This is the right time. But we have been -- we've done quite a lot of research over the course of the past couple of years and be cautious.

We independently concluded that the best strategy for Manulife to enter India would be through a partnership with a local successful business and preferably a conglomerate. The question then was, we have a suitable partner? We had a conversation with Mahindra and Mahindra being our existing partner on the asset management side, we didn't think that Mahindra would say, "Hey, yes, we're up for an insurance JV." But when we had that conversation, and that conversation was relatively recently, and it was this year, the response was, well, we're already looking at the possibility of entering the insurance market.

Why don't we look at doing this together, 50-50, because we know the local market. Mahindra knows the local market. Manulife knows insurance, and we have a whole breadth of product experience, actuarial experience, risk management experience, compliance experience, bring that together in a true 50-50 partnership. That, I think, is an incredible strategic feat.

And what it does is position Manulife in all 3 of the mega economies of the future, both insurance and asset management in a way that we can truly thrive. And so when I reflect back on the long-term potential and the potential for Manulife to be successful in the long term as the leading global life insurance company and asset manager, then having that presence in the mega economies is hugely important.

I don't think there are many that can say that they've got that. And to supplement that presence in the mega economy is a really strong business that's sustainable and growing here in Canada, our home market. And I think that's really important as a Canadian company to be successful in Canada. And then the presence across multiple other growth markets in Asia, I think it makes for a tremendous footprint.

Which makes me think of another really important country that Manulife entered -- I forget the year Daihyaku, obviously, the Japanese first...

Daihyaku Life in Japan, yes...

That was important when the deal was done. It got a lot of attention. I remember spending a lot of time thinking about it. And then kind of I wouldn't say a die on the vine. It's still a thriving business, but we don't hear much about it anymore. Japan's economy is having a resurgence right now. How does Japan fit into this -- the global aspirations? You're already there, but could you expand further in Japan?

I've been asked the question for many years, why haven't you exited Japan? And our response to that has been -- and we actually see opportunity in Japan. You look at the demographics, you look at the customer needs, the aging population and recently, more of an open mind when it comes to immigration.

So there's more immigration into Japan from various markets, including China, and that is creating a stimulus for economic growth. And Japan, I do see as an attractive market, both from an asset management perspective and an insurance perspective. And we feel actually confident about the role that Japan plays in the future of our portfolio. It is a scale business. It's a profitable business. It generates capital. It brings some, I suppose, some diversity and balance to our overall Asia business, which is very much growth-focused. Japan is a little bit more mature, but it's still growing, still very profitable.

And so I think it's part of the portfolio that will remain and contribute to our overall growth as an organization. And my perspective as CEO is that if we are invested in a business and we're confident about the future of that market, we should stay in the business, stay in the market and do what we need to do in order to maximize the opportunity and deliver growth. And I think that comes back to the importance of organic investment.

If there's an opportunity for us, let's go after it rather than constraining our ability to succeed through what could be expense management in the wrong way. And I'm sure you'll touch on expense management, but that's essentially the philosophy, high returns from organic investment.

So the ROE in Japan, I don't think you disclosed it in that sort of granularity, but it's reasonable. It's a contributor to the overall ROE goals of the company.

It hits our thresholds. But we don't play in every space in Japan. We've been more focused on our core capabilities of foreign currency-denominated solutions. But with the yield curve improvements in Japan, I was looking -- I think the 10-year yield curve hit a new high yesterday or a new high for 30 years in Japan is something like 1.7% at the 10-year point. And what that does is open the opportunity for yen-denominated solutions within risk appetite as well.

And that's what I was getting at. Japan looks legitimate again, like a real economy with potential. But it sounds from your answer that it will be more of an organic initiative in Japan. There's probably not room for acquisitions in Japan.

Correct.

And just before we leave India, is the strategy now just to add thousands and thousands of agents and train them and get them into the Manulife way of thinking? Is that the goal over the next year or so?

Actually, we are still working through exactly how we will operationalize the business in India. So we need to go through the process of forming the legal entity and getting the regulatory approvals over the line. But our view on distribution and business opportunity is one where we would have access to a whole spectrum of customer segments by leveraging what Mahindra brings and Mahindra brings distribution already.

So I did see one of the news reports that they described Mahindra as a car manufacturing conglomerate or a car manufacturing company. Actually, they are a conglomerate that has a whole range of businesses, including financial services. Mahindra Financial Services they have an insurance brokerage, it's separately listed. So everything is arm's length. But as part of our joint venture agreement, there is a strategic cooperation agreement with Mahindra Finance that brings distribution for various customer segments, semi-urban, rural.

And our intent is that we bring our agency expertise to supplement that so that we can capture the full spectrum of customer segments. And I think there'll be a bit of experimentation, what works, what doesn't work and then what works, scale it.

So a new -- like the very first policy, this new first policy in India may be a year away at least from being written.

Yes, I would say 12 to 18 months is a reasonable timeline.

Let's go to -- there are I think it's 5 strategic priorities, as you said, 6 values, several enablers. It seemed to me when I was -- I listened to your presentation...

Thank you. All 18 minutes or...

I did. It was healthy. And I felt like I was drinking through a water hose. There was a lot there. And this is coming from someone that's really comfortable with Manulife. I really -- I've understood Manulife over many years. It felt like almost too much for me to absorb in one go. How does that -- how is it being received internally? Does it feel -- do you risk almost putting too much on folks' plates too early on? Is that a risk for the company?

Well, the -- to that last point, has it been received internally? The strategy refresh has created a real buzz across the organization and lots of excitement alongside that refresh with the announcement that we will enter India through a joint venture with Mahindra, the launch of the Longevity Institute, which is hugely strategically relevant to our priority of empowering customer health, wealth and longevity.

So this huge buzz, and it reflects the feedback that I have received and the leadership team have received that -- we want to make something about this next chapter. We want to hear what the strategy is. We don't just want to continue what's been done in the past. And in particular, many of our teams around the world, and we're a big organization, they want to do more. They have ideas. They want to be the AI leader in our industry. We've achieved an early lead.

Sustaining that is important to the organization, embracing some of these new technologies, things that we couldn't have anticipated 7 years ago, 8 years ago when we had set the last strategy. So there's lots of excitement about what we can do. And what we've done with the strategy, some elements of it, we've essentially made it more relevant to our businesses. And so for example, we previously had a priority of accelerating growth. Okay, great. Yes, we want to accelerate growth. How do we do that? And we do that through having superior distribution and creating differentiation through customer health, wealth and longevity.

And so it's actually making our strategy more commercial and more real to our businesses and our customers. Now are we doing too much? I don't think so. Expense efficiency will absolutely continue as a functional capability within the organization. In-force management will absolutely continue as a capability within the organization. Each of those items, we had identified as 1 of our 5 priorities in our last strategy, what that was about was building the discipline, building the capability. We've done that. We'll sustain that. and will be compensated based on the success of some of those capabilities.

In-force management provides us with the opportunity to manage capital more efficiently. If we're able to release capital from our in-force portfolios, that gives us the ability to deploy organically or return to shareholders or a combination of both. And so there's a huge incentive for us to continue to do that.

And with in-force management in particular, appointing Naveed, who has done this in the past to take on some additional responsibility with a dedicated Global Head of In-force Management reporting into him with dedicated in-force management teams in each of our insurance segments, I think, sets the company up for not just success, but a whole next wave of success through our ability to deliver on potentially inorganic in-force management transactions.

But I think more importantly, the organic discipline, which has the benefits of improving policyholder experience, reducing fraud, informing how we design new products, the whole feedback loop that has been embedded in how we do things. So I don't think we're doing too much. I think what we're doing is satisfying the desire of the organization to be hugely successful and to capture the opportunities that present themselves to us.

When we look at the external environment and the circumstances that we face, there is a huge amount of challenge and opportunity. But our perspective is that the challenge provides us through our creativity, through our execution, to find solutions that then allow us to get there before the competition and service not just our customers, but new potential customers as well.

This brings me to the portfolio optimization. Let's just focus on that for a moment. There's no doubt that the move in Manulife stock over the last 2, 3 years, Manulife's reasserted itself as a premium name in the financial services space. I think it has. I think a lot of investors would agree with me on that.

In getting there, a lot of things went well. But one in particular that investors absolutely paid for was the reinsurance transactions, the portfolio optimization. but not just doing the reinsurance transaction, but actually using the capital to return it to shareholders. I think for a lot of investors, that was exactly what they wanted to see.

Now that portfolio optimization and efficiency are not in the priorities, how do you make sure that they remain a priority for your employees? Do those specifically get embedded in compensation? Or is it a broader picture, like ROE is what drives comp for your top 120 executives? How do you make sure that those 2 do not fall off the table?

Yes. So in our strategy in the one-page strategic house, if we call it that, you referenced 3 enablers. One of those enablers is around capital strength and disciplined risk management. And actually, when we look at portfolio optimization, a big part of that -- it's not everything, but part of that is around efficient management of capital.

And I think that's the right place for it in the strategy that we are incentivized as an organization to manage capital as efficiently as possible. That means taking certain organic actions, and it means as well potentially transacting on portfolios of in-force business.

Raising that capital, releasing that capital then gives us the ability to improve returns by returning it to shareholders and/or investing organically in our business or potentially even doing something inorganically. We're incentivized to do that through our compensation structures, which include ROE targets, book value, adjusted book value per share targets and a whole range of other financial and strategic targets.

So I think the incentives are there. The organizational resources and desire are both there. When I think about the future, some of the things that you've referenced from the past, landmark reinsurance transactions, yes, we have the ambition to do more of that into the future. And of course, we're evaluating opportunities. Nothing to update at the moment, but we'll stay across that.

And one of the things I've learned over the years is if you shrink a business, let's say you do shrink a business through reinsurance, you shrink the install of in-force, which makes it then increasingly difficult to cover the unit cost of that business, not to get too far into the weeds, but that matters. And that, of course, makes me think about the U.S. business now.

And I have -- for every company I cover, I have a story in my mind. And I just -- I create a story, sits in a little bubble. And if someone asked me a question, I know exact, I just extract that from my line and I go through that. The thing that's changed is Manulife now that bubble has changed for me. I have to rethink how I talk about Manulife and how I think about Manulife.

And one of the biggest changes is the notion that Manulife is going to focus on growing in the U.S. again. I don't think the U.S. became an afterthought, but it certainly wasn't top of mind for me. And it wasn't in my conversations with Roy and other executives. Let's talk about why this makes sense now. And I think it's like -- I think we need to understand what you're talking about. What are you actually thinking about doing in the U.S. now?

Yes. And I'm in no way saying or implying that the previous strategy was wrong. And I think a bit of history here is helpful that if we go back to 2017, and we look at what our U.S. business was delivering, we've been through a whole period of withdrawing products, long-term care, variable annuity, fixed annuity, we've withdrawn those from new business distribution. They had created an element of financial and nonfinancial risk that really was outside what our appetite was at that time for those businesses.

And so we essentially went through a period of rebuilding a new business footprint. And so that back in 2017, and I remember it well, our new business value margin for the U.S. If you look at actually the new business value was negative. So this was a drag on new business. And we looked at that and said, we don't want to invest in a business to grow new business that's generating negative new business value.

So what we did was embark on a strategy that was more of a niche strategy that rebuilt our new business footprint through a relatively niche product footprint and a niche high-net-worth-focused customer segment. Over the course of the past 8 years, we have rebuilt that new business footprint in such a way that our return on equity in the U.S. is now 15%.

Our new business value margins are about the same as what we achieve on average in Asia, around 40%. And so we're now in a very different position. And also, if you put that alongside something that I think is also very important, and I remember it really well because my first quarter end as CFO of this organization was the fourth quarter of 2017, which happened to coincide with the transition from MCCSR to LICAT. And our LICAT ratio at transition was 131%. That was a strong ratio.

But I think it was reflective of the fact that we really did need to be thoughtful about where we deploy capital. And it didn't make a lot of sense to deploy capital to businesses that didn't generate attractive new business margins. So that was the right strategy at the time. But having been through this period of transformation, we've built a new business capability that is differentiated through our focus on health, wellness and longevity in the U.S.

Now we have an opportunity to scale that not just from the high-net-worth customer segment, but in adjacent customer segments, emerging high net worth families, the upper end of the affluent customer segment and even explore adjacent product opportunities. Now I don't want to talk too much or be too specific about what they are for reasons of competitive sensitivity.

But on a global leadership team call last night, and we had the top 120 leaders from across Manulife on a Teams call to talk about the strategy and next steps, our U.S. CEO summed it up really well when he said, to Brooks Tingle said, this is not a back to the future strategy. So it's different. So we're not going to go back to variable annuities, traditional fixed annuities, long-term care, this will be an adjacent strategy, adjacent to our core capabilities that focuses on customer health, wealth and longevity, creates differentiation and therefore, enables us to sustain attractive margins, but to scale those beyond the niche that we're in.

And the bigger strategic picture here is something that you touched upon. As in-force portfolios are either reinsured or mature, businesses shrink. And the U.S. is actually a really important part of our global footprint. It generates profitability, it generates capital, contributes to organizational scale. And through these actions, what we'll actually be able to do, growing new business enables us to sustain our scale and therefore, to sustain capital generation for the long term.

And we're not on the cusp of capital generation in the U.S. taking a no life, not at all, but I feel my role as CEO and our role as a leadership team is to set up the company for the future so that whoever are our successes, whether it be 5, 10 years' time, whatever it might be, they don't look back and say, that management team should have taken action earlier. So this is about setting the company up for long-term sustainable success.

In the process of doing that, though, and this came across on the questions on your call, does it require a capital injection into the U.S.? Does it require a lot of new expenses in the U.S. that could sort of hurt short-term profitability before delivering 2 or 3 years from now? Is this going to be a little bit uncomfortable for us to watch in the near term?

I don't believe it will be uncomfortable to watch. It certainly does not require capital injections. The U.S. is highly capital accretive to the group. It generates capital and remittances to our parent company. When we consider investments to grow the U.S., this is not really a capital conversation. It's an expense conversation.

And do I feel comfortable about incurring some expenses in the U.S. in order to grow strategic value? Yes. When we model this out, the benefits that arise from strategic expansion are very closely matched with the costs that we incur. So while there may be some costs, we'll also see growth in contractual service margin through CSM. And I think this is really important to rebuild the contractual service margin in our U.S. business that then supports future and stable profitability.

And the ways in which we will grow, the expenses associated with that, a good chunk of them will go to the CSM as well and so will be matched with the revenues that we receive. But I think it's a really important lens. We should not be an expense-constrained organization given the overall strength of our capital position. Because we have so many opportunities to deliver quality growth. This is why we're keen to invest organically, but extract the benefits alongside those investments.

But I don't think you should be worried about a little bit of expense growth, particularly given the bigger picture, which is our ambition to be an AI-powered organization. And that's something that is already having a benefit to our expense efficiency line and our expense efficiency ratio. To your question on the call, we stand by the 45% or less expense efficiency target. And we're comfortably within that. We will remain comfortably within that.

And I know you don't want to get too specific on the products that might be sold, but would it be correct to suggest that there'll be products that are generally not long-term guaranteed products, products generally repriceable relatively quickly?

Correct. We don't have an appetite for long-term guaranteed products.

Because you recall, that was Manulife's thing many years ago. That brings me to Canada. I was a little surprised to hear that Canada was also a focus because we could go back, I think, go back and check the last time Manulife got a call -- a question on a conference call on Canada. It's probably been a few years.

Naveed reminds me of that from time to time.

Like he should -- he could take that day off if he wanted to. Why Canada? We think of Canada as being sleepy and not a lot of growth potential. It's a saturated market. Manulife, Great-West Life and Sun Life dominate the group insurance market. You guys just sort of battle among each other. Why Canada again?

And could I -- if I could be a little specific on this one, do you think Manulife could start to reassert itself in the wealth management space in Canada, like things like a new product suite of segregated funds. We haven't really seen you compete there aggressively in a while. What's interesting about Canada for you?

The opportunity in Canada is both insurance and wealth management. And we also have Manulife Bank as well, which through our strategy, we have clarified that it's an important part of our overall proposition in this market and creates differentiation. And there have been some questions from various stakeholders, is Manulife Bank core? Is it not core? We've clarified that strategic ambiguity as part of our strategy refresh.

And just for clarity here for this group, and we talked about this as a leadership team last night, as we have gone through this process of strategic refresh, it's not just an enterprise strategic refresh. Every single one of our operating segments has refreshed their strategy over the course of the past 6 months. There's been a huge amount of work in the organization without some of the churn that sometimes happens when organizations go through these processes. It's been very focused, very effective.

But coming back to your question, why invest in Canada? Our belief is that as a global financial institution that is diversified, but with a Canadian headquarters, we actually have a really compelling reason to invest in Canada, and we should be the market leader -- and that's something that we have a leadership position in many lines of business here.

Let's invest to make sure that we not only sustain that, let's grow that and make it consistent over time because the statistics do vary between the large 3 lifecos here in Canada. But another lens is important. As an international organization, when we look at what we're able to achieve in other markets, and then we look at the Canadian market, we see an opportunity to bring some of the capabilities and solutions from other markets and embed them here. And an example of that is digital experience.

I think there is an opportunity to improve the digital experience, especially for customers that have multiple touch points. with the organization. They may be a customer of the bank. They may have a wealth management portfolio. They may have a seg fund insurance product. They may have another life insurance product that they may have a group benefits policy. How do we make that experience seamless, frictionless and use that as a point of differentiation in order to grow.

And I think given our footprint here in Canada across insurance, and we have the Vitality partnership in insurance, Manulife just 3 weeks ago was the first insurer in Canada to provide access with discounts to costs for the GRAIL Galleri multi-cancer early signal detection test.

So it's that early cancer signal detection test. We're the first -- just came to Canada about a month ago. We've had that partnership in the U.S. for some time. We brought it to Canada. I think that shows how we can really create differentiation in insurance as well as that connection with health and wellness group benefits and thrive in this home market.

Right. Let's talk about everybody's favorite topic these days, AI. When I -- I'll be honest, when I speak to the banks about AI, it's becoming convincing. The way they talk about it, the way they talk about the benefits of AI, I almost believe them now. I'm not that cynical anymore. When I hear the P&C companies talk about AI, I'm almost there, too. I can see the use cases. I'm not there yet on the life insurance companies.

But it's something that you focused on in your 18-minute presentation. It's something that you talk about. In fact, among the life insurance companies, Manulife probably talks about AI more than anybody. Help convince me the way the banks have that AI is the real deal for Manulife.

You set me that objective. Let me convince you and everyone watching and listening.

And the banks have. The banks have got me there.

Okay. So I actually think the opportunity in our sector is even bigger. And Manulife has -- we've built the infrastructure over a long period of time. 90% of our applications are in the cloud. We structured -- spent a lot of time and investment structuring data in such a way that it can be used. And that's what's positioned us to really capture an early lead when it comes to the deployment of AI. And Manulife is ranked #1 by the evident AI Maturity Index for AI maturity.

So we have an early lead. It's really important that we sustain that early lead. There are more than 50 use cases currently in operation across Manulife. A smaller number of those are already being scaled at scale deployment. And the type of opportunities that are already in testing or full-scale deployment, the AI agents, the sales distribution assistant that we started in Singapore, we showcased at our Investor Day in 2024. We rolled that out to Hong Kong. We rolled that out to Japan. It's moving to other markets.

That really enables distribution productivity and has been a source -- a factor that has contributed to our growth in those Asian markets over the course of the past 18 months. So that's already tangible. Underwriting. So in the U.S., if -- actually, if a distributor in the U.S. wants an indicative quote for an insurance policy. We now do that close to instantly through an AI solution, which is called Quick Quotes.

Underwriting in multiple locations around the world, we are now able to assimilate huge volumes of data, medical reports, almost instantly with AI-generated underwriting recommendations, insights for humans to evaluate and then make informed underwriting decisions. So we're finding ways to augment human capability in such a way that speeds things up, provides competitive differentiation and actually gets to better outcomes.

There are so many examples that we could run through. I suppose in your space, investment research. Through our global wealth and asset management team, our investment professionals are using AI solutions to make -- gain real-time insights as to how the portfolios that they manage may be impacted by macro developments. And so an example of this was when we had -- I forgot what Liberation Day, Trump announced taxes -- on tariffs on various jurisdictions around the world. We already had this tool built.

We could run that model to determine which stocks in the portfolio would be most exposed to some of the changes from Liberation Day, and that enabled early action. And of course, in this industry, time is everything. So it's something that -- AI is something that has been widely embraced by the organization. Every single employee has access to what we call ChatMFC. And that is an AI tool. We also -- we've rolled out Copilot with our Microsoft applications.

And we're now rolling out an agentic AI solution that will be available to our teams. And the Agentic AI solution enables us to build agents that can then actually do things, manage processes within the organization to create improved customer experience, improve productivity and efficiency and help to grow revenue. So I think there is a huge amount that we're doing, a huge amount that we will continue to build on. And what I'm really excited about is the organization is pushing us to do this. Our people are not saying we don't want to be an AI-powered organization. They are saying, we want more tools. We want to embrace AI. We see the potential.

Now you concluded that with revenue. You said it will augment revenue. So 2 things. Let's try to put some numbers around this. You've given us some goalposts on the value creation from this. So help me understand what you said about the value creation, but also the expense side, because there was a JPMorgan Investor Day, I think it was, where the person that head up their retail business said that they could reduce headcount by 10%. I mean that caught a lot of attention. AI presumably lessens, reduces the requirement for people at some point as well. Does that part of the equation?

Without doubt, AI enables cost efficiency and productivity improvements. And how we have already seen that play out is that through a period of quite rapid growth over the past couple of years, our headcount has remained fairly stable. And so I think as a growing organization, we are able to scale the organization without materially increased cost.

And so if you look at our cost growth over the past couple of years, it's really -- it's low. It's low single digits. AI has been really -- it's been an important driver of that, and I expect that to continue. But when I look at the overall breakdown of the benefits that we expect to get from AI, we said, look, we expect between '25 and 2027, about $1 billion of benefits.

Sorry, what does benefits mean, reduction in expenses or higher revenue or...

Growth of the CSM, so sort of revenue generation of new business value, it can be benefits to policyholder experience, for example, through fraud detection and reduction, hugely powerful tools that we have on deploying AI capability to learn patterns of patterns that may indicate fraud that we can then investigate and eliminate or take away adverse policyholder experience as a result of fraud, waste and abuse. That's very relevant to health claims, for example, where patents can emerge.

And then there's the sort of direct expense benefit. And I expect the direct expense benefit to be a relatively smaller component of the overall AI benefits. We've said about 20% of the $1 billion of benefits we expect over a 2-year period, about 20% to come from expense efficiency.

So is the right way to frame it then AI becomes an operating leverage story. It doesn't mean that you're firing 10% of your staff. You just -- you might be growing revenue a lot faster than you're growing the expense base. That's the right way to think about AI for Manulife?

The operating leverage story, I would say, is this first wave. And so that's something that comes through augmentation of what we currently do, improvements in productivity, improvements in customer experience. I think there is another horizon. And that is through the deployment of AI, how do we do things that previously we couldn't do. It may not have been efficient for us to do. And that opportunity for disruptive new business models is something that we're actually quite excited about.

We don't necessarily know what AI will bring, but we want Manulife to be at the forefront of being a pioneer when it comes to that next frontier, what can we do now that we couldn't do before. It may not have been efficient to do before. And in doing so, provide more solutions to our customers.

So we've spent a good chunk of our time talking about all the big sort of important growth strategies. And I've left out share buybacks, I think as dollar share buybacks. But there's no doubt that, that's played a role in Manulife's ROE progression and in the way we view Manulife.

The way investors have described Manulife to me as being super responsive to what shareholders thought was important. And in Manulife's case, that was an important part of the story. Your share counts this quarter relative to last year was 4% lower. given everything we've talked about, do share buybacks have to just cool off now? Or could you keep up this pace, this 3%, 4% reduction in your share count annually?

Well, the 4% that you're referencing includes the deployment of capital that has been released from some of the reinsurance transactions, as we released that capital, continue to execute the buyback. So I would say the 4% is a little bit elevated.

However, what you should see, as we have gone through the period of transition from Roy to Phil, you will have seen continuity in the pace of buybacks. That is deliberate. And it shows that there is no step change or CEO transition disruption to capital deployment. Yes, we prioritize stable and progressive dividends.

We prioritize organic investments, but we're in the fortunate position that given the footprint that we have and the maturity of our portfolio, including the consistent capital generation from the U.S., we expect 60% to 70% of our core earnings to translate to remittances, which is more than sufficient to cover the progressive dividend policy, interest on debt and organic investment.

And so there's some left over. And that may be deployed in some cases to highly strategic M&A, but the bar is high. There's nothing bubbling away behind the scenes. We've completed Comvest. A smaller acquisition in Indonesia with Schroders Asset Management. But our focus now is on execution of those inorganic deployments of capital. And what's left where it makes sense, at least for now to deploy to share buybacks. So you should expect to see continuity in the near term, but reflect on that 4% is elevated because of the capital redeployment from the reinsurance transaction.

There was extra capital was special then. I want to conclude with something that is always the top of mind when insurance companies, banks, whomever, when they report. The growth story is there. It's very believable. It's very plausible. The way you talk about the way Manulife has discussed Asia's opportunity, the wealth opportunity, now Canada and the U.S., super believable to me.

But you can't do that. You can't just talk about growth if every once in a while, investors are really disappointed by some kind of blow up. It feels to me Manulife doesn't have that inherent risk that it used to. There was always these sort of built-in land mines for Manulife over the years, and I just haven't seen them recently.

I appreciate that there's the occasional all the charge and some of are immediate, but that's not what I'm talking about. I'm talking about the real blowups like when Manulife had to put aside $2 billion, $3 billion on long-term care. Help me understand -- and my theory and the way I've described it to investors is we just don't have those land mines anymore. How do you think about it? Are there land mines built in here that could still blow us up if the markets are down 15% next quarter, could that blow us up?

So a couple of things, Mario. The first is that the progress we have made on reducing the sensitivity, the impact on earnings, the impact on capital, the impact on book value, reducing the sensitivity to changes in macro factors, interest rates, equity markets, that continues, and it's an important priority for us to sustain those much lower levels of sensitivity. So we have no intention to sort of rewind some of the progress or any of the progress that we've made there. So that's the first thing.

The second thing is that in developing our strategy, we have very explicitly included one of the enablers being robust risk management and governance. That is deliberate. And when I speak to our employees and our colleagues across the organization, I talk a lot about risk management, governance and learning from the past. And I describe it as a competitive differentiator for Manulife that we should embrace. And this comes to the point that you've just made.

If we are able to anticipate challenges and address those challenges before they become problems or crises, then we've created a huge amount of value. And so having a mature active risk management function that challenges line 1, that challenges management helps us intervene when interventions are necessary. helps set the framework for risk appetite.

I think we set ourselves up for not only stable results for the long term, but also convergence of net income with core earnings, which is something that I'm very sensitive to as well you've been actually very clear about calling the importance out of medium-term core earnings and net income. And that's something that I think is important, and we'll continue to focus on.

So we've gone through a lot of material here. With the last 1.5 minutes, what's the big message you want to leave for investors or your employees as well?

This is an exciting next chapter for Manulife. We're all in. We're not holding back. We're in a strong position, capital to deploy opportunities to maximize. And we've got the leadership team in place to do that with a refreshed strategy that I believe puts us ahead of the competition. And one simple example of that is defining, making clear we'll be an AI-powered organization. That reflects the current technology environment that we're in. So I'm really excited about the future, Mario.

The big things to watch then, we're growing in the U.S. again, growing in Canada, Asia and wealth still matter. AI will drive the story. We're not going to blow up. We've got risk in place. That's the big takeaway for me going forward.

Perfectly summed up. Watch this space. We are not a caretaker team, for sure.

Thank you, Phil. And thanks, everyone, for joining us. Appreciate it.

Thank you, all.

Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation Third Quarter 2025 Results Conference Call. [Operator Instructions]. And the conference call is being recorded. [Operator Instructions]. I'd now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead.

Thank you. Welcome to Manulife's earnings conference call to discuss our third quarter 2025 financial and operating results as well as our refreshed strategy that was announced yesterday afternoon. Our earnings materials, including webcast slides for today's call are available in the Investor Relations section of our website at manulife.com. In addition, I would like to note that a video recording of our refresh strategy presentation and the related materials are also available in the same section of our website. Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 33 for a note on the non-GAAP and other financial measures used in this presentation.

Please note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated.

Turning to Slide 4. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide a highlight of our third quarter 2025 results and a strategic update, including an overview of our refresh strategy. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail. After their prepared remarks, we will move to the live Q&A portion of the call.

With that, I'd like to turn the call over to Phil.

Thanks, Hung, and thank you, everyone, for joining us today. Before I start, I'd like to thank Marc Costantini, who's with us on the call today for his outstanding contributions to Manulife throughout his career at the company and wish him well in the next chapter of his career. Marc's 2 stints with Manulife total more than 25 years. And in his most recent role as Global Head of Inforce Management, he had an immense impact in a short period of time, including the completion of several monumental reinsurance transactions, which unlocked significant value for shareholders. While we're sad to see him go, we know he will flourish as a CEO, and we wish him nothing but the best.

Inforce Management has been embedded as a capability in our organization and it will remain an important enabler of our commercial success. Naveed Irshad President and CEO of Manulife Canada has taken on an expanded role and assumed responsibility for Inforce Management and reinsurance globally while continuing to lead the Canada segment.

Shifting back to the purpose of today's call. Yesterday, we announced our third quarter 2025 financial results. At the same time, we unveiled our refreshed enterprise strategy, which builds on our strengths, is growth focused and is anchored in our ambition to be the #1 choice for customers.

Materials related to our refreshed strategy, including a video, are available in the Investor Relations section of our website, but I want to highlight a few key takeaways: to deliver on our ambition, drive sustainable growth for the long term and build on our total shareholder return momentum, we're pleased to introduce new and elevated strategic priorities. Maintaining a diversified and balanced portfolio is important to us as it provides resilience and access to multiple sources of growth without overreliance on any single market.

We continue to be well positioned to capture the exceptional growth opportunities across Asia and global WAM, and I'm pleased to share that we have reached an agreement with Mahindra. A leading conglomerate and consumer brand in India to form a joint venture to enter the India insurance market subject to regulatory approvals. Mahindra is an incredibly strong and trusted partner with whom we have an existing asset management relationship, and I'm excited about expanding our partnership further. Our continued focus on Asia and global WAM will be accompanied by deliberate investments to enhance and strengthen our leadership position in our home market and maintain a scaled presence in the U.S., which remains the largest insurance market and the largest economy in the world.

We will also leverage our early leadership in AI to become a truly AI-powered organization, and we will utilize our strengths in product, digital innovation and partnerships to become the most trusted partner for our customers' health, wealth and financial well-being. These efforts will be further enabled through superior distribution, making it easier for customers, agents and partners to engage with us and of course, through our winning team and culture, which is critical to every aspect of the execution of our strategy.

At our Investor Day in 2024, we announced various key performance indicators and targets including total shareholder return, employee engagement and Net Promoter Score, which we remain focused on delivering. I am incredibly excited about this next chapter for Manulife, and I'm confident that executing on our strategy will further strengthen our ability to deliver on both our 2027 financial targets and sustain our growth for the next decade and beyond.

Moving on to our quarterly results on Slide 7, which reflects our continued focus on execution and demonstrate the strength and diversity of our businesses. We generated strong insurance new business performance this quarter, with each insurance segment delivering growth of 15% or greater in new business CSM, providing clear evidence of our future earnings potential. While Global WAM experienced net outflows of $6.2 billion, which Colin will discuss in more detail shortly, it continued to generate positive operating leverage with margin expansion year-over-year.

From a profitability standpoint, core EPS grew 16% from the prior year supported by a record level of core earnings, reflecting strong underlying business growth in Asia, Global WAM and Canada segments, along with other factors, which Colin will talk about further. Our strong core earnings generation contributed to third quarter core ROE of 18.1%, demonstrating that our core ROE target of 18% plus by 2027 is within reach, and we remain confident that we'll deliver on it.

Our balance sheet remains strong with a LICAT ratio of 138% and a leverage ratio of 22.7% and we generated another quarter of book value per share growth with an increase of 7% from the prior year while continuing to return a significant amount of capital to shareholders.

On to Slide 8, I'd like to dive a little deeper into the recent performance of our high-potential businesses, particularly Asia and Global WAM as they remain critical elements of our refreshed enterprise strategy. Over the past several years, both segments demonstrated strong track records of generating consistent growth and resilience through a volatile operating environment.

The performance from both Asia and Global WAM has meant that on a year-to-date basis, our highest potential businesses are contributing 76% of core earnings exceeding our 2025 target of 75%. Asia had another outstanding quarter of growth, delivering a 29% year-on-year increase in core earnings to a record level. Our NBV margin also remained resilient, improving year-on-year to 39% backed by the solid growth in new business during the quarter. In Global WAM, we also delivered a record level of core earnings, maintaining another quarter of strong growth and this was our eighth consecutive quarter of double-digit pre-tax growth from the prior year and our focus on disciplined growth with proactive expense management enabled us to continue to generate positive operating leverage and steadily increase our core EBITDA margin, which expanded by 310 basis points year-on-year to 30.9% this quarter.

These are great results. And as I reflect on the future and what comes next, I'm confident that our refreshed strategy supported by clear priorities will position us to deliver sustainable growth and achieve our new ambition to be the #1 choice for customers.

With that, I'll hand it over to Colin to discuss our quarterly results in more detail. Colin?

Thanks, Phil. The third quarter was indeed a strong quarter for Manulife, where we continue to demonstrate the ongoing strength, quality and resilience of our business.

Let's begin on Slide 10, where we talk about our growth in the quarter. The momentum in our insurance new business performance continued in the third quarter. Our APE sales increased 8% from the prior year, with strong contributions from our North American businesses. This resulted in continued growth in our value metrics with 25% and 11% growth in new business CSM and new business value, respectively.

Growth in new business CSM was strong, with each insurance segment delivering growth of 15% or greater compared to the prior year quarter. In fact, our total new business CSM increased over 20% year-over-year for the fifth consecutive quarter, further highlighting the strength of our diversified franchise and providing an encouraging read-through to the future earnings potential of each business. Headwinds in North American Retail and our U.S. retirement channel led to net outflows of $6.2 billion for Global WAM following 6 consecutive quarters of positive net flows. In our retail business, this was primarily due to continued pressure in the intermediary and wealth channels, while the headwinds in our U.S. retirement business were anticipated as elevated markets resulted in higher absolute level of participant withdrawals.

Moving on to Slide 11, which summarizes the main earnings drivers when compared to the same period last year.

We continue to see growth in our insurance businesses in Asia and Canada, which contributed to a higher insurance service results. We also saw a net favorable impact from the annual actuarial review of methods and assumptions or basis change during the quarter. Although this was partially offset by unfavorable claims experience in the U.S. I would note that U.S. insurance experience improved from the previous quarter, even though claims severity remains somewhat elevated on a small number of policies in contrast with last year's favorable experience. Moving down on the DOE table, you'll note a year-over-year improvement in our net investment results, mainly due to a release in the expected credit loss or ECL provision driven by updates to our parameters and models compared with an increase in the provision in the prior year.

Note that we continue to expect an ECL charge of $30 million to $50 million per quarter on average, and year-to-date, the increase in ECL is $86 million post tax. Excluding the impact of the ECL, our core earnings growth would have been 6% compared with the prior year. Global WAM continues to be a significant contributor to our core earnings and reported a 19% growth in pre-tax core earnings this quarter. You'll notice the lower income tax amount despite the growth in our core earnings. This is mainly driven by an adjustment to our year-to-date withholding tax accrual, reflecting the use of our internal funding for the Comvest acquisition. Finally, I would also add that the most recent U.S. reinsurance transaction with RGA reduced our core earnings by $12 million across multiple lines of the DOE.

Turning to Slide 12. Core EPS increased 16% from the prior year, reflecting the strong double-digit growth in core earnings as well as the impact of share buybacks. In fact, even after adjusting for ECL, we saw strong growth of 11%. We reported $1.8 billion of net income this quarter, which reflects neutral market experience where a $291 million gain from higher-than-expected public equity returns was offset by a charge of $289 million in our ALDA portfolio from lower-than-expected returns. Our ALDA performance was primarily impacted by lower-than-expected returns on private equity and commercial real estate investments as well as our timber assets, reflecting a recent decline in commodity prices.

During the quarter, we also completed our annual basis change, which included our comprehensive triennial review of our U.S. long-term care business, or LTC. The basis change resulted in a net favorable impact of a $605 million decrease in overall pre-tax fulfill and cash flows, which comprised a $1.1 billion increase in CSM partially offset by a modest decrease in net income of $216 million post tax as well as a small impact to OCI. I would also note that the overall impact of the LTC study was slightly favorable, largely driven by favorable re-rate experience and assumed future premium rate increases as well as updates to reflect higher terminations, partially offset by higher utilization of benefits given the higher cost of care. The premium increases included amounts tied to future asks as well as approvals in excess of our prior assumptions, illustrating our conservatism in embedding these into our reserves.

It is important to note the favorable net impact from the basis change further validates the prudence of our reserves. We reported a modest favorable impact on core earnings this quarter, and we also expect a similarly modest positive impact on core earnings going forward. More information on the basis change is available in the appendix of this presentation.

Moving to the segment results. We'll start with Asia on Slide 13, where we generated solid growth across all new business metrics despite a very strong prior year comparable. APE sales increased 5% from the prior year, led by strong growth in Asia Other.

While Hong Kong sales declined year-on-year compared to a very strong prior year quarter, we generated sequential growth of 4%. The overall increase in sales contributed to solid growth and value metrics, with new business CSM and new business value increasing 18% and 7%, respectively. All of this together with improved product mix drove NBV margin expansion from the prior year of 2.5 percentage points to 39%. Asia core earnings also delivered another strong quarter of strong year-on-year growth, increasing 29% as we benefited from continued business growth momentum. The net favorable impact of basis change and improved insurance experience as well as a release in the ECL provision compared with an increase in the prior year quarter.

Over to Global WAM on Slide 14. Global WAM continued to build on its growth momentum, delivering record-level core earnings with a solid 9% increase year-on-year. This was again supported by higher average AUMA and higher performance fees, as well as continued expense discipline, partially offset by lower favorable tax true-ups and tax benefits.

On a pre-tax basis, we achieved our eighth consecutive quarter of double-digit year-over-year growth, delivering a 19% increase in the third quarter. Net flows were challenged this quarter, resulting in net outflows of $6.2 billion. Our retail business saw net outflows of $3.9 billion related to our North American intermediary and wealth channels, followed by net outflows of $1.6 billion in our retirement business. Here, we saw higher outflows due to market appreciation as people generally had higher account balances, which resulted in ordinary course withdrawals also being higher. Our institutional business also saw modest net outflows of $0.7 billion and with the close of our third infrastructure fund in the quarter, we expect this to be a positive contributor to flows as money is deployed over the course of next year.

Despite the challenges in our net flows, we delivered another quarter of positive operating leverage with core EBITDA margin of 30.9%, which expanded 310 basis points from the prior year, or 80 basis points sequentially, backed by our continued proactive expense management. With regards to eMPF, I can confirm we officially commenced our onboarding to the new platform in Hong Kong on November 6 and thus expect to reflect an impact to core earnings in our Retirement business starting in the fourth quarter.

Next, let's hand over to Canada on Slide 15, where we delivered another quarter of solid results. APE sales increased 9% from the prior year, reflecting continued double-digit growth in our individual insurance business, primarily due to higher par sales. Our individual insurance business was the key contributor to a strong new business CSM growth of 15% year-on-year as our group insurance business does not generate CSM.

We also delivered a solid 4% year-over-year growth in core earnings, driven by higher investment spreads as well as continued growth in our group insurance business and favorable insurance experience and individual insurance. The basis change provided additional uplift, but these drivers were partially offset by less favorable insurance experience in group insurance.

Lastly, our U.S. segment's results on Slide 16. In the U.S., we delivered another quarter of strong APE sales growth of 51%, fueled by higher broad-based demand for our suite of products. This momentum led to more than doubling of our new business CSM and a 53% increase in new business value. Core earnings decreased 20% year-on-year, primarily due to unfavorable life insurance claims experience this quarter compared with favorable experience a year ago, along with lower expected investment earnings.

These impacts were partially offset by a release in the ECL provision compared with an increase in the prior year as well as favorable lapse experience in our life business. While large claims variability presented challenges, the fundamentals of our U.S. business remains strong and position us well for steady earnings in the long term. Our confidence is reinforced by the sequential improvement in core earnings and the continued strong growth in our new business metrics this quarter, which bodes well for our future earnings in the segment.

Looking beyond our earnings, it's worth noting our overall LTC insurance experience was once again modestly positive, including favorable incidents reported in the CSM.

Bringing you to our book value on Slide 17. Even after returning nearly $4 billion of capital to shareholders year-to-date through dividends and share buybacks, we continue to grow our adjusted book value per share which was up 12% from the prior year quarter to $38.22. On a stand-alone quarter basis, we continue to demonstrate our strong cash generation capability and returned over $1.3 billion of capital to shareholders, including both dividends and share buybacks during the period. And as Phil mentioned in our refreshed strategy update, we expect our remittances for 2025 to be approximately $6 billion, putting us well on our way to achieving our cumulative 2027 target of at least $22 billion.

Let's now move to our balance sheet on Slide 18. Our LICAT ratio remained strong at 138%, providing a $26 billion buffer above the supervisory target ratio. Our financial leverage ratio improved sequentially as well as year-on-year, standing at 22.7% and remaining well below our medium-term target of 25%.

Together, these metrics highlight the strength and stability of our robust capital position and balance sheet, which provide ample financial flexibility to drive future growth.

And finally, moving to Slide 19, which summarizes the progress against our 2027 and medium-term targets. I'm pleased with our overall financial performance this quarter. In particular, with record core earnings supported by our continued top line momentum despite some headwinds that impacted our net flows and ALDA performance. This quarter, we also generated core ROE of 18.1%, with a meaningful expansion of 1.5 percentage points year-on-year. As Phil highlighted in our refreshed strategy update, we have a clear path to achieving our 2027 core ROE target of 18% plus, and I'm confident in our ability to do so.

Overall, our third quarter results reflect the ongoing strength of our underlying business performance and the quality of our portfolio. And when combined with our focused execution against refreshed strategic priorities I'm excited for the future and the opportunities that lie ahead. This concludes our prepared remarks.

Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups and to requeue if they have additional questions.

Operator, we will now open the call to questions.

[Operator Instructions]. The first question comes from John Aiken with Jefferies.

Phil, I'm very intrigued about the venture that you announced in India. I was hoping you might be able to give us a couple of more details in terms of what type of products you think you're going to be offering? What you bring to the table in what I believe is a very competitive marketplace. And then finally, the regulatory approval process, how long do you think that will take before you can actually open shop the business?

John, this is Phil. Thanks for the question and the first question today. Certainly, the announcement we made yesterday of our intention to enter the India market through a JV with Mahindra is very exciting. We've been looking at an India market entry from an insurance perspective for many years and have been really observing the environment to wait for the right moment. And what we've seen in recent years is that the regulatory environment has moved favorably, the digital infrastructure within India has moved very favorably. There's been consistent economic growth and market maturity within the insurance sector, as well as that, there has been a notable increase in wealth across the India population and that creates insurance needs and provides an ability to purchase insurance products.

And I think a really important component of our entry strategy here is really moving with the right partner and Mahindra, who's been our partner on the asset management side since 2020 is a fantastic partner and has not only substantial local knowledge, but a strong brand as well as a distribution infrastructure. So in terms of some of the specific questions that you ask on what we bring to the table, we bring our global expertise in the insurance sector to this partnership. And it's not only about product development, but it's also an aspect such as risk management, which is so important to managing insurance businesses. It's too early to get into a topic such as which product will -- what the products will look like. I expect it would take in the order of 12 to 18 months to get this operation off the ground and up and running, including the regulatory approval process that you referenced, and I look forward to providing updates along the way.

And the next question comes from Alex Scott with Barclays.

Wanted to see if you could talk a little bit more about what you're seeing in some of your Asian markets and the growth has been pretty good. What's your outlook for contingent strength of sales over the next couple of years?

Yes. Thanks, Alex. It's Steve Finch here. I can take that. Yes, as you noted, we've had some strong momentum in results in Asia as Colin covered, we saw continued solid momentum in sales growth in the quarter with our new business value metrics up 7% on NBV, 18% up on CSM, new business CSM, which bodes well for our future earnings. And we've seen broad-based success across multiple markets, continued strength in the value metrics in Hong Kong. And then in Asia Other, we had a strong result in our China business as well as continued momentum in Singapore, our Indonesia agency and as well as our bank partner in the Philippines. So we've continued to see broad-based success. And what we see is the market fundamentals and customer demand remain strong and aligned with the strategy that Phil updated on, we're continuing to make the investments for growth, and we're well positioned to capitalize in markets across the region.

That's helpful. So the next question I wanted to ask about your private credit exposure. See if you could put numbers around some of the different forms of private credit you have. And also just ask if you have any comments, just on some of the comments that have been made by industry participants out there that have been a little more critical of private credit recently.

Alex, it's Trevor. Thanks for the question. So yes, in terms of private credits, just for context, our below investment-grade private credit portfolio is around CAD 4 billion. It's a little bit less than about 1% of our general account assets. It is -- the strategy is largely focused on middle market lending to private equity-sponsored companies. It's pretty diverse by issuer, sector and sponsor. And we do manage and underwrite these assets in-house. I would say we see our participation as kind of being on the low end of the risk spectrum. Our performance has actually been quite strong even with COVID, even with the rate increases. And the credit expense has actually been I think well within our loss assumptions.

So we are actually quite happy with the strategy. In terms of use of private credit, I would say we're always looking at new asset classes to diversify the balance sheet. I think given the nature of private credit, the ratings, the term and the fact that it's floating rate. The most natural home for us on the balance sheet is probably our par and adjustable liabilities where investment experience is passed back to the policyholders. So I think we might look to add a little bit more there where we thought it was sort of appropriate for the balance sheet.

And next question comes from Gabriel Dechaine with National Bank Financial.

First question is for the -- yes, the GWAM business, the Mandatory Provident Fund fee changes that are -- they're going to start having an effect in Q4. So we all are aware of this, but you alluded to some actions you would take and you contemplated this regulatory change when you laid out your 2027 vision. Maybe you can shed a bit more light on what some of these offsets are, how impactful it could be when they could become effective, I guess?

Yes. Thank. It's Paul Lorentz here. Yes. Just on that, the guidance we provided around about USD 25 million a quarter remains intact once we get through the entire transition. So we did transition earlier this month. It will take us some time to decommission systems, obviously, reduce our FTE footprint there because we're no longer servicing the business. So you'd expect to see some of that come through those costs continue into Q1, and then we would expect most of those to disappear into Q2. In terms of outlook for Q4, we did end the quarter with higher AUMA versus the average. So there is a little bit of upside there in terms of revenue, but that would be offset by the eMPF coming in for 2 months of the quarter. And then in Q1, we would obviously get the full run rate coming through.

So just to put a finer point, are you expecting to fully offset at some point in the future or not?

Yes. So most of the expense actions we took were upfront to try and get ahead of it. That's why we've seen such an improvement in our margin, frankly, leading up to the transition. So we are very proactive in terms of not waiting for the transition to happen. So we feel we've taken most of the costs out, except for those that are remaining, which will disappear in Q1.

Okay. Then a question on the actuarial review, which I always am hesitant to ask about because it could get a little bit technical. But in the LTC components, specifically, there's a familiar pattern you increase your morbidity reserves, essentially and then offset that with future premium increases expected. But on the medical cost inflation that you're observing, you talked about higher utilization because of rising health care costs. Is that just another way of saying the utilization is -- well, is it actually higher or it's the same utilization and it's just costing you more because it's kind of a nuanced message there. And what kind of I guess, inflation, are you factoring into this updated assumption up to 10% a year or something like that, I don't know.

Gabe, it's Stephanie. Thank you for the question. So for the for the LTC triennial review, what we saw is a modest favorable impact that's in line that with the experience that we would have seen since the last review. But as you point out, there were different parts. And if we dive in a little deeper, we have been seeing utilization losses for a number of quarters. And to your question, that is a result of higher medical inflation. So this is something we were focused on. And we fully address what we've observed, and we are also reflecting elevated inflation for a little longer period of time. There were also, as you point out, other parts that led to positives, we had absorbed consistent termination gains, which led to a favorable impact to reserve, and we have also reviewed our premium rate increase assumption, which we remain very conservative and embedded less than 30% of the total outstanding ask.

Got it. And any sense of what medical cost inflation you're assuming?

So as I mentioned, we did reflect that it would -- like the medical cost inflation has come down since its peak, but it's still slightly elevated we would -- we reflected that, that would persist a little longer before returning to our longer-term view. And I think I would leave it with our longer-term view is higher than general inflation expectations.

And the next question comes from Tom MacKinnon with BMO Capital.

Yes. A question maybe for Phil here. Just the thinking behind this refreshed strategy. I mean you came out with these 2027 targets about 16 months ago, you're standing by them. Is it really a new team, you wanted to kind of refresh it because you've got a new kind of leadership team. And I noticed that now you're talking about kind of more balanced growth across the portfolio. I'm just interpreting it, I leave it up to you to here to paraphrase. But investing to grow in Canada and the U.S. How should we be thinking about that in terms of outlook for share buybacks, they still look like that's going to be fairly robust. But yes, maybe you can address some of those points I've raised.

Thanks, Tom. This is Phil. And there's quite a lot in there to unpack. So if I miss something out, please do call me out on it, and I'll provide a supplement. But the logic for the refreshed strategy update, I do acknowledge that the strategy we've had for the past 8 years has served the company tremendously well we've been through a period of hugely successful transformation. And we felt having achieved what we wanted to achieve with the last strategy as a leadership team, we felt that this was the right time to take a fresh look. And something that I've said before is that given that the external environment continues to evolve, it's really important that the strategy is never static that we always look at what's changing externally and how do we position the company? Yes, of course, to deliver on our 2027 targets but have a much longer time horizon beyond that when we think about setting the company up for long-term success.

So Tom, you picked up on something that's really important and that is balanced growth. And having a diversified organization is something that we truly value. It's something that provides resilience. One of the things that is not changing as part of this strategy is that Asia and global wealth and asset management remain compelling growth opportunities, and we will do everything within our means to fulfill that opportunity. But at the same time, given the transformation that has been delivered over the course of the past 8 years, our new business footprint in both Canada and the U.S. is attractive. We're generating attractive margins, and we see an opportunity to invest to grow our new business in the U.S. and Canada and in particular, in the U.S., to grow new business so that it sustains our scale.

And that, therefore, is the relevance, I think, to our overall portfolio diversification, we sustain a level of diversification within the overall organization. On this topic as well, our strategy clarifies that we do believe that it's important to be in the mega economies of the future, and we have a hugely successful business in the U.S., both on the GWAM side and on the insurance side with John Hancock. We have a successful scale business in China and where we saw a strategic gap was the scale of our presence in India. And that was really the logic for us taking decisive action to enter the India insurance market. There are other elements of our strategy that I won't go into, but I'd just call out that being a leader in AI and an AI-powered organization is important to us. And I think that's very important to our overall competitive position and future success.

But Tom, you referenced the importance of capital generation. And I do want to emphasize that, we expect to continue the strong capital generation that the company has seen in recent years. Colin referenced our expectations for remittances for 2025. I think that's a good example, $6 billion. And when it comes to capital deployment and share buybacks, our highest priority is unchanged, and that's to organically invest in our business as well as sustaining and growing our shareholder dividend. And then for what's left over, buybacks and strategic M&A are possibilities. But I will emphasize, when it comes to strategic M&A, the bar is high, and that means that buybacks, we expect to continue to be an important form of capital deployment for us. I hope that covers all the points you raised, Tom.

No, that's fulsome. And congratulations to Marc Constantini as he kind of moves on to his next role here. So all the best.

The next question comes from Doug Young with Desjardins Capital Markets.

I'm going to go back to the actuarial review. And there was, I think, a change in methodology in Asia. Correct me if I'm wrong, from the PPA to the GMM and I think this had a decent positive impact on the CSM. And so I'm just trying to understand why the shift and what impact did that shift have on core earnings in the quarter and with all the moving parts and the core earnings going forward, Colin, I think you talked a bit about it will have a positive impact. Can you put a point on what that positive impact might be.

Doug. It's Stephanie. I'll start and see if Colin wants to add. But you're right. So the -- in terms of the impact of the annual review, which was favorable and led to a reserve reduction of $605 million. A large part of this was driven by a change in how we account for some health insurance contract in Hong Kong. We're moving from the PAA approach or what you would call short-term insurance contract to reserving for the lifetime. I'd add that since we implemented our IFRS 17, we've been studying industry practice, and we found that most payers accounted for these products over the lifetime, so we're now aligning with this practice. What this does is we've capitalized our cash flows in the reserve, and we've set up a CSM to offset it.

No impact to total insurance contract liability in terms of the impact to core earnings for this item and there are small timing differences. So there will be a modest favorable impact, and then you asked about the impact of the annual review overall on core earnings. Due to the favorable impact we saw an increase in CSM which will lead to an increase in CSM amortization of approximately $30 million per quarter.

Per quarter, okay. And is there any other changes being contemplated?

At this time, with no other changes of the type being contemplated.

Okay. And then just second, on the credit side, thanks for the detail on private credit. But what got my eye is, it seems like the parameter movements caused a reversal of credit provisions this quarter, and it was kind of tied into the positive moves in equity markets, and I kind of -- everyone can see the positive move in equity markets. But I was a bit surprised that positive move in equity market has an impact on the ECL or as significant impact on ECL. So I just wanted to kind of understand the mechanics there a little bit.

Doug, it's Trevor. Thanks for the question. So yes, in terms of the ECL, as you noted, there was a $44 million release, which was better than the charge than we saw in Q2. And just to remind people, the ECL charge is broadly two main components. The first one is basically the impact of defaults and rating changes, which you would expect. And then there is, secondly, this modeled impact reflecting changes in the broader economic environment. And we include both of those components in our definition of core earnings. As you said, for Q3 specifically, the majority of the benefit was driven by this positive impact from the market movement impact or the market environment impact driven by strong equity markets. So just to your -- I guess to your question, so we use a third-party model, and that third-party model basically generates this market environment impact. And it includes a variety of metrics.

So equity markets is one, volatility, interest rates et cetera, and how those have actually been correlated to credit experience in the past. So that's what the model is basically doing. It's not a linear impact, but given the strength of equity markets and our consistency of that strength. The model obviously picked it up and felt that the environment was obviously much less risky than it had been in prior quarters, and that leads to the release.

And I guess the point is, I mean, this obviously was favorable this quarter, but this is another area where if equity markets were to decline, you could see the reverse happen, I guess that's kind of obvious, but...

Yes, exactly.

And the next question comes from Paul Holden with CIBC.

First question, I want to ask about the Hong Kong APE sales. Obviously, they were quite strong over the prior 4 quarters and now a little bit of a decline year-over-year. So really, I guess what I want to understand is what should we expect over the next few quarters as you continue to lap some pretty good comps. Do you think you can produce positive growth in sales. Or is it going to be similar to this quarter or maybe there's a bit of a, I don't know if you call it, a normalization in growth?

Yes. Thanks, Paul. It's Steve here. And as you noted, the Hong Kong, the APE was down modestly year-over-year. And that was off, as Colin noted earlier, a very strong base, the prior year. And your point about growth, we've seen year-to-date, the APE has increased 46% year-over-year. So that demonstrates the growth that we've had. In addition, while the APE declined in the quarter, our value metrics performed strongly. So in Hong Kong, we are happy with these results and NBV and NB CSM were up 10% and 12% year-over-year, respectively. And that was due to some favorable mix, some additional health and protection that we saw in the quarter. In terms of outlook in Hong Kong, Q4 was another strong year last year. We typically see seasonal variability, so we'd expect some drop off in Q4 and picking up again in Q1.

But if I back up to look at the underlying fundamentals and look a bit further out than that, the market fundamentals do remain very strong, and demand is high from our customers. We also see that in Hong Kong and in Singapore as well, an international financial center, and there's a strong flow of funds. So the underlying drivers are favorable, and we're making significant investments in our capabilities to support customers and distributors. So as we look out over the medium term, we remain very optimistic about the Hong Kong market.

Okay. Second question is going back to the strategy refresh. So I want to get a better sense of how we should think about the earnings trajectory for Canada and U.S. When I hear investments in those markets, I think about maybe in the short term, higher expenses as a result of those investments, but longer-term growth rates. Is that the right interpretation?

Paul, this is Phil. Thanks for the drill-down question there on the strategy. The way I see this, I mean, we only have one target when it comes to medium-term earnings growth and that's the 10% to 12% core EPS. But my expectation, and this is the leadership team's expectation is that each of our segments contribute to that growth. And the lens that we've applied in resetting the strategy is really to make it clear that growth will not only come from Asia and Global WAM, the U.S. and Canada will be important contributors to that. And so this is about investing to sustain scale, investing to sustain capital generation, investing to sustain growth rates. And I don't want to get too precise or issue any formal guidance.

But I think what's reasonable are the sort of -- we're not looking double digits for Canada and the U.S., but it's sort of low to mid-single digits for the U.S. and a little higher for Canada. But I think we have great businesses in North America, and this strategy really clarifies that we see those businesses being an ongoing and important part of the overall portfolio.

The next question comes from Mario Mendonca with TD Securities.

Phil, a related question. So when I reflect back on what the U.S. business was in the past and what it's become. I remember, as I suspect many people on the call do, that the U.S. business was a much broader business, long-term care, universal life, variable annuities, variable universal life. There was a lot going on, but it was a really messy business as well. So as you think about this refresh in the U.S., is the point that -- is the goal to drive higher sales levels in your existing product mix? Or will you return Manulife to its former self with just a much broader product suite in the U.S.

Thank you, Mario, for the question. And let me be really clear up front. There is no intention in the U.S. or John Hancock to go back to the days of variable annuities and that higher market risk types of products. What we have -- there are really two elements to our strategy and I'll come on to this. What we're really thinking about is when we reflect on the transformation that we've delivered in the U.S. over the course of the past 7 to 8 years, is we've created differentiation through our focus on behavioral insurance that promotes health and wellness. And that creates differentiation in the market that has enabled us to be successful in what I would say is quite a niche footprint in the high net worth, focusing on the high net worth customer segment.

It's profitable. The business we write is profitable, the margins are now at a similar level to the margins that we generate on average in Asia. So the question for us is twofold. One is how do we potentially broaden the scope of solutions that we provide to customers, but within our risk appetite. So not going back to where we were 10, 15, 20 years ago. And secondly, how do we take the solutions that we have and enable those solutions to be accessed not only by high net worth individuals, but affluent individuals and families and emerging high net worth individuals. So that's really an expansion of the relevant customer segments that we focus on. And I feel with some of the strategic changes that we're making in the U.S. and the team that we have we're very well positioned to be able to deliver on that opportunity and sustain our scale, earnings and capital generation from what is the largest economy and the largest insurance market in the world.

So Phil, does that mean that you stick with your existing product suite? I couldn't quite figure that out.

In the near term, we're sticking with our existing product suite and scaling that or moving that into additional customer segments. We are also looking to be fully transparent, Mario, also looking at opportunities in adjacent products that help fulfill a wider range of customer needs, but within our risk appetite, and we have robust risk disciplines that apply not only in the U.S. but around the world.

Okay. A quick follow-up question. Look none of this is free. I see that the efficiency target is no longer formally part of your strategic refresh, but I appreciate that it's still a priority. Would it be fair to say that the sub-45% efficiency ratio that's something you could sacrifice in the near term in pursuit of this refreshed strategy in Canada and the U.S.

Actually, Mario, we're not withdrawing our sub-45% targets when it comes to efficiency ratio. I expect that to be maintained. And going in the other direction on this, yes, we'll be investing in our businesses, but part of our investments at an enterprise level include becoming an AI-powered organization. And we're already seeing the benefits of our investments and leadership position in AI pay off when it comes to mitigating expense growth and providing an ability for the organization to do more with less. And so I think there are forces moving in both directions that will enable us to continue to be efficient.

And Marc, congratulations on a great career there and hope to see you in your new role.

He's smiling. Thanks Mario.

The next question is from Darko Mihelic with RBC Capital Markets.

Just a real quick question on corporate. There's a bit of noise in there. You actually have a negative CSM. Colin, how should I think about this business unit on a go-forward basis from a modeling perspective?

Good to hear from you. Corporate was a little bit more -- was different to the trend, actually, and a large part of that was the withholding tax accrual release that we made in respect of the Comvest acquisition. But I think going forward, you would expect us to have a result of $300 million to $400 million in this line, and that reflects further investments in central products. You mentioned the CSM, the negative CSM, that is related to our COLI product that we've owned for many years. It's really just an intercompany settlement and nothing to really focus on. It will be steady for the next few quarters.

Okay. And a question for Steve Finch. Steve, the question is really twofold. One is your agent count still declining. Maybe you can talk a little bit about what it is you're doing there? And when does it -- if does it affect sales power? And then on top of that, just quickly, is there -- how should we think about the build-out of India in terms of the earnings drag for the next couple of years?

Thanks, Darko. And on the agency side, our focus there, our strategy is building out a high-quality and professional agency. And which it's not really driven by that metric in terms of number of agents. So we -- if we look at other metrics in terms of top-tier agency, our APE per active agent is growing significantly. Our NBV per agent is also growing materially. And we've seen growth in our agency sales this year as a result of this. One of the other objective measures there is a measure of top-tier agents is $1 million roundtable. Manulife was third globally in terms of number of MDRT qualifiers in '24, and the run rate is in the 20s, 20% for growth tracking through 2025 as well. And what we're continuing to do to drive this is we're making investments. And broadly speaking, those investments are training and development, really investing in our people to be able to recruit high-quality agents, train them very well, develop them into leaders, and create highly professional agents, along with investments in technology and tools, AI tools that are making the agents more efficient providing better service to our customers, identifying from all the data that we've got on customer interactions, what the next best need for the agent would be.

And we're seeing benefits from these investments. So we are pleased with the -- what we're seeing come out of these investments in the agency strategy. It's one of the core -- it is the core distribution engine of the franchisee representing a little over 1/3 of the sales.

And Steve, did you want to cover the India -- the India earnings question? Okay. You go ahead, Steve.

Yes. Thanks. As Phil said earlier, we're -- we still have a ways to go to get the entity set up. We're not giving those forward projections at this time in terms of financial metrics, but we look forward to updating on that in the future.

Yes, that makes sense. And just to supplement, in terms of one financial metric we can provide is we expect the capital cost of India over the course of the next decade to be around USD 400 million capital injection. In the first 5 years, that's around USD 140 million to USD 150 million. And I think that helps really to put some parameters around what the overall financial dynamics are, but a hugely exciting move for Manulife.

Thank you. And this concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hung Ko for any closing remarks.

Thank you, operator. We'll be available after the call if there are any follow-up questions. Have a good day, everyone.

Thank you. This brings to a close of today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Hello, and thank you for joining me. I'm pleased to share Manulife's refreshed enterprise strategy that builds on our strengths and is anchored in our ambition to be the #1 choice for customers.

Our refreshed strategy reflects the valuable input I've gathered from engaging with our stakeholders across Canada, the U.S., Asia and Europe since stepping into my role as CEO 6 months ago and demonstrates strong collaboration and alignment across our Executive Leadership Team.

While our previous strategy served us well, the rapidly evolving geopolitical and macroeconomic environment requires that we adapt and remain nimble, positioning our organization to seize the tremendous opportunities ahead of us for the next decade and beyond.

I believe Manulife is set up to be the leading global life insurance and asset management company. So, let's dive in.

To deliver on our ambition and drive high quality sustainable growth, we're pleased to introduce new and elevated strategic priorities that I'll explain shortly. While we remain well-positioned to capitalize on the exceptional growth opportunities across Asia and Global WAM, this will be accompanied by further investment in our leadership position in our home market of Canada and investment to sustain a scaled presence in the U.S.

And across our diversified and balanced portfolio, we will deliver enhanced health, wealth and longevity solutions and services to improve customer outcomes while leveraging our early industry leadership in AI to power our organization and support our growth goals. These efforts will be enabled by strong cash generation, allowing us to invest in our businesses, while also returning capital to shareholders.

I have incredible confidence in our path forward as we deliver this strategy, both in the long-term and through focused execution to achieve our 2027 targets.

Before getting into the details of our refresh, I'll share some observations on the current operating environment. Heightened market volatility, global economic uncertainty, increasing consumer digital expectations and intensifying competition for top talent and distribution are rapidly reshaping the economy and our industry.

Manulife is well-positioned for this reality. We are diversified by business and geography and have industry-leading AI capabilities, top quartile employee engagement and diverse distribution channels. Combined with our market-leading and innovative insurance capabilities, global wealth and retirement businesses and a strong presence across high-growth markets in Asia, as well as more mature but important markets in North America, we are well-positioned to benefit from mega-trends, such as anticipated record levels of intergenerational wealth transfer and low insurance penetration rates across the globe.

In such a dynamic environment, simply staying the course carries risk. We must adapt our strategy to capture opportunities and generate value over the long-term. And we will do so through 5 new and elevated strategic priorities, 3 enablers, and our 6 values, which define our culture. The evolution of our priorities strikes a balance between strategic continuity and necessary change by building on our strong foundation.

As we execute, we expect to deliver growth to build on our total shareholder return momentum. Let's walk through it in more detail.

First, our winning team and culture remains a top priority. Our colleagues are our greatest strength, and we will continue to invest in equipping our team with the right skills, tools and global opportunities to power growth and demonstrate why we are a magnet for attracting top talent.

Second, we will continue driving a diversified business model that strives to deliver high quality sustainable growth across all our segments. Asia and Global WAM will remain high-growth businesses, but we also have the appetite to invest in the U.S. and Canada, having demonstrated our ability to deliver attractive new business performance in recent years.

While Canada and the U.S. are more mature markets, there continues to be opportunities for profitable growth, which supports our goal of sustaining and growing scale in these markets as a globally diversified organization.

Third, by leveraging our strengths in product, digital innovation and partnerships, we will deliver a differentiated value proposition by becoming the most trusted partner for our customers' health, wealth and financial well-being.

Fourth, we will build on our leadership position and strive to become a truly AI-powered organization. We will leverage our digital-first mindset and integrate AI powered solutions at scale, constantly challenging ourselves to reimagine how we create value, drive growth and even greater efficiency and provide world leading experiences for our customers.

Finally, we will seek to deliver superior distribution by making it easier for our customers, agents and partners to engage with us across our entire portfolio and in all geographies where we operate. This means expanding existing channels, identifying new ones and utilizing AI to enhance distribution and provide frictionless customer interactions. Across everything we do, expense efficiency and portfolio optimization will remain embedded in our culture and part of our DNA.

In terms of measuring success, at our Investor Day in 2024, we announced various key performance indicators and targets, including total shareholder return, employee engagement and net promoter score, which we remain focused on delivering.

I am confident that our new and elevated priorities will generate sustained value for all our stakeholders because they are grounded in the mega trends that will define our industry's future.

For instance, as global populations live longer, retirement and health protection gaps are widening. There is significant opportunity to create shared value solutions and drive positive outcomes across customer lifespans.

In Asia, where social safety nets are generally limited, we aim to provide innovative health solutions across the region. We recently rolled out our enhanced ManulifeMOVE program in Singapore and the Philippines, teaming up with leading longevity and wellness partners to empower individuals to take charge of their health and well-being.

In Canada, we will scale a digital health ecosystem across our businesses, creating a unified platform for access to care, as we become a trusted health partner to our customers. Many of you will know that we have market-leading behavioral insurance capabilities in our U.S. business.

Globally, we are looking to expand that expertise to enhance customer outcomes, as well as providing advice, guidance and investment solutions to our wealth and asset management customers. And we're taking further action with the launch of the Manulife Longevity Institute, a global research, advocacy and community investment platform backed by a $350 million signature commitment through 2030 to help people live longer, healthier and more financially secure lives.

Together, with partners who share our purpose, we will unlock new insights to inform our work, stay up to date on the latest longevity trends to drive innovation and help create a future across communities where it is easier for people to thrive at every stage of life.

Today, the global landscape is increasingly influenced by 3 mega-economies: the U.S, China and India. Across our portfolio, we already operate in markets that generate approximately 60% of the world's life insurance premiums. We have a long history of success in both China and the U.S., and it's important we invest to maintain a scaled presence in these influential markets.

Where we see further opportunity to develop is India, one of the world's fastest growing economies, which offers remarkable growth potential. That is why I am pleased to share that we have entered a joint venture agreement with Mahindra to enter the India insurance market, subject to regulatory approvals.

Mahindra is an incredibly strong and trusted partner with whom we have an existing asset management relationship. And through this arrangement, we will leverage Mahindra's extensive distribution infrastructure and apply our insurance expertise and agency capabilities to reach a wide spectrum of customer segments. This expands our global footprint and positions Manulife well in all 3 of the world's mega-economies of the future.

To sustain a balanced portfolio and fuel growth, we will organically invest in each of our segments.

In Asia, structural trends continue to support long-term growth, driven by an aging population, gaps in health, protection and retirement savings and the rise of middle-income households. We are focused on investing to further grow and enhance our agency and bank distribution channels, expanding health offerings and accelerating our high-net-worth leadership.

In Canada, we see attractive growth opportunities, driven by underinsured segments of the population and rising health care spending. Our aspiration remains clear, to be the undisputed insurance leader in our home market. We will achieve this by accelerating digital transformation that deepens our penetration in the mass market and further strengthens our Group Benefits business.

In the U.S., we generate attractive margins with our behavioral insurance offerings to high-net-worth customers, but we currently operate in select segments of the market. By leveraging our strong brand and trusted relationships with distributors, we see opportunity to deliver sustained scale by broadening our offerings and expanding our customer base, including within the affluent and emerging high-net-worth customer segments.

Finally, Global WAM continues to generate attractive returns and capital-light earnings. We have great momentum, a diversified investor base, a robust distribution network and strong capabilities, and we are investing to continue delivering strong returns and positive experiences for our customers.

Following our recently closed acquisition of Comvest Credit Partners, we are able to offer the full continuum of investment solutions from public markets, semi-liquid credit through Manulife CQS, private credit through Manulife Comvest and a full suite of alternative investment solutions, such as infrastructure and natural capital.

Key differentiators for Manulife include our ability to leverage our insurance business and provide a full suite of product capabilities.

Critical to our strategy is the disciplined deployment of AI, which will deliver value across the enterprise. Our track record of investing in AI talent and capabilities is paying off. We were recently ranked first in the life insurance sector for AI maturity by Evident. Continued success will require deliberate actions, and we are focused on 3 areas of innovation across our portfolio.

First, we're reviewing and adjusting our processes to embed AI to improve efficiency and enhance customer experience. Examples include our AI research assistant that can filter and consolidate data across a spectrum of sources, turning hours of work into minutes. We are also using AI to classify and extract data from physician statements, accelerating the underwriting process.

Second, we are delivering transformative new capabilities to drive productivity, accelerate decision making through rapid analysis of new and existing data and thereby grow new business.

In distribution, AI is equipping sales coaches with valuable performance insights and providing sales teams with personalized information about their customers' needs and opportunities. We're using AI to provide quick quotes to advisors in the U.S., based on its ability to read and interpret our underwriting manuals.

And third, we are exploring opportunities to innovate with AI-based products and business models and new sources of data. AI is already having a real impact across our company, and we see many opportunities for it to transform how we operate. We are moving quickly and expect AI to generate $1 billion of value by 2027, with roughly 1/5 expected to come from improved efficiency.

Our AI capabilities are supported by our proprietary agentic AI platform, a secure, integrated foundation designed to accelerate the development and deployment of AI agents across the company.

The platform adds significant business value by streamlining development, reducing operational costs and supporting high-volume, business-critical use cases. And it allows us to embed automated assurance and security controls from the ground up, encouraging innovation while ensuring robust governance, security and responsible AI practices.

Ultimately, the wide-ranging use of AI powered agents and assistants running on this platform will enable Manulife to maintain a competitive edge in what is a rapidly changing AI landscape. And with roughly 80% of our applications already in the cloud, we have a powerful infrastructure that positions us to deploy and scale the latest AI capabilities across our organization.

So far, I have talked a lot about what we are changing. But equally important is what is not changing, and this includes our commitment to strong cash generation and disciplined capital deployment, which will continue to underpin our strategy. After significant organic investment in the business to fund growth, we expect to remit 60% to 70% of core earnings to be available for deployment.

We have a strong history of cash generation and expect to deliver $6 billion of remittances this year, which would put us 60% of the way towards our 2027 target.

These remittances exceed our dividend and financing costs, leaving capacity and flexibility for share buybacks and strategic M&A. And as a reminder, the bar for M&A remains high, which is why we refer to it as strategic M&A.

Examples of where we've directed capital to strategic M&A include the CQS and Comvest acquisitions, the extension of the Chinabank bancassurance partnership in the Philippines and just a few weeks ago, the agreement to acquire Schroders' Indonesian investment management business.

Executing our strategy will further strengthen our ability to deliver on our 2027 financial targets, which we set out at our 2024 Investor Day.

We continue to make strong progress on both remittances and Asia region core earnings contributions. We also have a clear path to achieving 18% plus core ROE, enabled by 2 key levers, profit growth and share buybacks.

Our earnings have seen strong momentum from Asia and Global WAM this year, which have grown 16% and 17%, respectively. And our strong capital position and cash generation gives us capacity to utilize share buybacks, as needed.

Our team remains focused on achieving these goals and I look forward to keeping you updated on our progress.

While I am pleased with our momentum towards achieving our 2027 targets, we're also looking beyond that horizon to ensure we are positioned to capture the opportunities ahead of us for the next decade and beyond. We see tremendous growth potential across our segments. And through the execution of this strategy, we will sustain a balanced and globally diverse business profile, as illustrated here.

It is important to me and our entire executive leadership team that we generate consistent value for all our stakeholders and drive high-quality growth across our franchise that sustains attractive total shareholder returns.

I am incredibly excited about this next chapter for Manulife. And as we execute our refreshed strategy, our purpose, to make decisions easier and lives better for more than 36 million customers around the world, remains unchanged. The impact we have on individuals and their families for generations to come motivates our team as we work together to make Manulife the most trusted partner in health, wealth and financial well-being and the #1 choice for customers.