Manulife Financial Reports Earnings Growth of 58 Per Cent

November 16, 1999 PSE CIRCULAR FOR BROKERS NO. 2923-99 November 15, 1999 Manulife Financial reports earnings growth of 58 per cent Toronto Manulife Financial reported record third quarter earnings of $224 million, an increase of $82 million or 58 per cent over the prior year. For the nine months ended September 30, 1999, net income totaled $623 million, also a record and up 22 per cent over 1998. The strong results reflect continued growth in both protection and wealth management operations as well as favourable claims experience across all lines of business. All performance measures reflect the ongoing successful execution of the Company's business plan. Premiums and deposits totaled $4.9 billion in the quarter compared to $3.9 billion in the third quarter last year, while return on equity rose to 14.1 per cent from 10.1 per cent last year. Based on total company results and using the number of shares outstanding as at September 30, 1999, earnings per share in the quarter were $0.45 per share, up from $0.28 per share last year. At September 30, 1999, funds under management were $105.1 billion, an increase of 17 per cent from the same period last year. Largest IPO in Canadian history On September 23, 1999, Manulife Financial completed its demutualization process with the listing of its stock on the Toronto, New York, Montreal, Hong Kong and Philippine stock exchanges. All proceeds raised in the initial public offering-which at $2.5 billion was the largest in Canadian history were used to cash out policyholders who had requested that shares due to them on demutualization be sold. "We are delighted that we have completed our demutualization and that we have been able to deliver outstanding value to our participating policyholders," said Dominic D' Alessandro, President and Chief Executive Officer of Manulife Financial Corporation. "The premium that was received by our policyholders is amongst the highest realized in any demutualization, whether in Canada or abroad." llcd "We are very proud that the financial markets recognized the tremendous value that has been created for our owners over the past number of years," he added. "Our objective going forward is to continue to build superior value: the results we are reporting today confirm that we have the people and strategies in place to achieve this objective." "We are pleased to report excellent operating results," said Peter Rubenovitch, Executive Vice President and Chief Financial Officer. "Our continued focus on product innovation and on the expansion of our distribution networks are producing excellent financial results." Highlights : Total premiums and deposits increased by 27 per cent to $4.9 billion when compared to the same period in 1998. Strong demand for pensions and annuities and solid growth in insurance sales including new sales from the Japanese operation were key drivers of this growth. LibLex Funds under management ended the quarter at $105.1 billion, an increase of 17 per cent from their September 30, 1998 levels. This increase was the result of the 32 per cent growth in segregated funds assets, ending the quarter at $42.4 billion. Excellent sales of variable annuities and 401 (k) pension products and market appreciation were the key contributors to the growth in segregated funds. General fund assets at September 30, 1999 rose by $4.2 billion to $56.8 billion compared to $52.6 billion as at September 30, 1998. Other revenue, comprised primarily of fee revenue, increased by 39 per cent over the corresponding period in 1998 reflecting growth in segregated funds assets. Sales of individual insurance products in the U.S. grew by 29 per cent over the third quarter of 1998 and were driven by a refreshed product portfolio, successful marketing campaigns and increased productivity in the Company's distribution network. In Canada, individual insurance sales grew by 17 per cent compared to the third quarter of 1998 due to the continued success of the Company's Inno Vision and Security Universal Life products, combined with demand for the Healthstyles term program. Healthstyles is a preferred risk underwriting program introduced in early 1998. Sales of insurance products in Asia rose significantly following the launch of operations in Japan, augmented by growth in other Asian operations. Improving consumer and investor confidence and aggressive marketing initiatives have driven sales growth in Hong Kong, Singapore and Indonesia. LibLex This quarter, sales of wealth management products in the U.S. grew, by 43 per cent over the corresponding period in 1998. Sales of 401(k) pension products in the small to medium market were very strong, driven by an expanding presence, in the broker/dealer channels. A second consecutive quarter of record annuity sales was led by demand for the Vantage Bonus Annuity, aggressive marketing programs and an attractive sales compensation program. Demand for annuities in Canada remains soft. prcd On October 6, 1999, the Company's Canadian Division announced the launch of "Manulife one," the Company's new wealth management product. This unique product allows customers to manage their money and debt more efficiently by combining personal finances into a single bank account that credits payroll deposits against a revolving balance mortgage account. Sales of group insurance products in Canada were strong this quarter with excellent demand for the Company's Signature product, targeted at mid-sized markets. LibLex In October, Manulife sold its interest in its Korean joint venture to its joint venture partner and will record a small gain on the sale, in the fourth quarter. Results of Operations by Division Canadian Division Canadian Division net income increased by five per cent to $63 million, compared to the third quarter of 1998, driven by favourable claims experience and reduced unit expenses. Premiums and deposits remained at third quarter 1998 levels of $1.0 billion with an increase in fixed-rate annuity premiums of offsetting a decline in segregated fund deposits. This latter decline is reflective of investment industry sales trends as well as increased competition due to the introduction of variable annuity products, similar to the Company's Guaranteed Investment Fund, by other Canadian life insurance companies. Canadian funds under management increased by eight per cent from $26.0 billion as at September 30, 1998 to $28.2 billion as at September 30, 1999, largely due to segregated fund asset appreciation, net new deposits, and an increase in general fund assets associated with an assumption reinsurance arrangement in the second quarter of 1999 with the liquidators of Confederation Life. prcd U . S . Division U.S. Division net income increased by 19 per cent to $83 million, compared to the third quarter of 1998, as a result of increased fees from the administration of variable annuity and 401(k) pension product assets, improved life insurance claims experience and continued growth in core insurance operations. Third quarter premiums and deposits increased by 36 per cent to $3.1 billion driven mainly by increased sales of 401(k) pension products and variable annuities. Premiums increased significantly due to increased annuity sales, together with the amendment of a third party reinsurance program, which has resulted in the retention of new annuity premiums. Funds under management increased by 18 per cent from $48.9 billion as at September 30, 1998 to $57.6 billion as at September 30, 1999, largely due to growth in segregated fund assets from both new deposits and stronger U.S. equity markets. Asia Division Asia Division continued to benefit from recovering economies as net income increased by $25 million to $42 million, compared to the third quarter of 1998, due to business growth primarily in Hong Kong, and improved credit and claims experience. Premiums and deposits increased by 71 per cent to $512 million for the quarter ended September 30, 1999 primarily due to sales of single premium endowment products in Japan and growth in individual insurance business in Hong Kong. Funds under management increased by 52 per cent from $4.4 billion as at September 30, 1998 to $6.6 billion as at September 30, 1999. This increase was largely due to the investment in Japan in the first quarter of 1999, and segregated fund growth as a result of asset appreciation and net new variable pension deposits in Hong Kong. Reinsurance Division Reinsurance Division reported significantly improved earnings with net income increasing by $38 million from a loss of $9 million in the third quarter of 1998 to a profit of $29 million in 1999. This increase was attributable to improved claims experience in both the Life and Accident and Health business lines. Premiums increased by 20 per cent to $258 million in the third quarter of 1999, primarily due to a new inforce retrocession transaction in the life business. Accident and health premiums continued to decline due to the execution of the Company's strategy to reduce participation in the U.S. medical reinsurance market. General fund assets increased by nine per cent from $2.6 billion as at September 30, 1998 to $2.8 billion as at September 30, 1999, reflecting business growth. Manulife Financial (Manulife Financial Corporation, The Manufacturers Life Insurance Company and its subsidiaries) is a leading provider of financial protection products and investment management services to individuals, families, businesses and groups in selected international markets. Canadian-based Manulife Financial operates in 15 countries and territories worldwide, with more than 28,000 employees and agents. Funds under management by the Company and its subsidiaries were Cdn$105.1 billion as of September 30, 1999. All figures in Canadian dollars unless otherwise stated . Attachments : Financial Highlights Consolidated Statement of Operations Consolidated Balance Sheet Divisional Information Media inquiries: Investor Relations: Donna Morrison Edwina Stoate Corporate Communications Investor Relations (416) 926-5226 (416) 926-3490 [emailprotected] [emailprotected] Visit our Web site www.manulife.com for complete financial statements and related notes. Financial Highlights (Canadian $ in millions, unaudited) Three Months Ended September 30 Nine Months Ended September 30 1999 1998 % Change 1999 1998 % Change Premiums and deposits Life and health insurance 1,506 1,209 25 4,841 3,438 41 Annuities and pensions 604 236 156 1,616 679 138 Segregated funds 2,653 2,252 18 7,681 6,690 15 Mutual funds 31 53 (42) 93 190 (51) ASO premium equivalents 135 128 5 402 387 4 Total premiums and deposits 4,929 3,878 27 14,633 11,384 29 Funds under management General fund 56,809 52,551 8 Segregated funds 42,408 32,144 32 Mutual and other managed funds 5,906 5,043 17 Total funds under management 105,123 89,738 17 Net income attributed to : Mutual operations 208 142 46 607 511 19 Participating policyholders - - - - - - Shareholders 16 - n/a 16 - n/a Net income for the period 224 142 58 623 511 22 Capitalization : Subordinated debt 597 630 (5) Trust preferred securities issued by subsidiaries 733 763 (4) Equity Participating policyholders' equity 69 - n/a Shareholders' equity: Common shares - n/a Shareholders' retained earnings - n/a Surplus - 5,760 n/a Total capital 7,153 7,153 8 Selected key performance measures (annualized) Earnings per share (*) $0.45 $0.28 $1.24 $ 1.02 Return on total equity 14.1% 10.1% 13.4% 12.7% Return on assets 1.6% 1.1% 1.5% 1.3% Book value per share $12.69 Shares outstanding 500,903,225 * In these financial highlights, earnings per share has been computed using total net income for the period and the number of shares outstanding as at September 30, 1999. Summary Financial Statements Consolidated Statements of Operations (Canadian $ in millions, unaudited) Three Months Ended September 30 Nine Months Ended September 30 1999 1998 1999 1998 Revenue Total premium income 2,110 1,445 6,457 4,117 Investment income 1,023 955 3,065 3,006 Other revenue 261 188 739 580 Total revenue 3,394 2,588 10,261 7,703 Policy benefits and expenses To policyholders and beneficiaries Death and disability benefits 510 608 1,556 1,628 Maturity and surrender benefits 547 428 1,561 1,598 Annuity payments 314 318 942 930 Net transfers to segregated funds 279 208 782 594 Increase in actuarial liabilities 541 64 2,033 85 Policyholder dividends 200 157 529 435 General expenses 481 331 1,303 951 Commissions 241 197 656 562 Interest expense 34 39 121 120 Premium taxes 23 20 64 59 Non-controlling interest in subsidiaries (67) (3) (132) - Trust preferred securities issued by subsidiaries 14 16 47 45 Total policy benefits and expenses 3,117 2,383 9,462 7,007 Income before income taxes 277 205 799 696 Income taxes (53) (63) (176) (185) Net income 224 142 623 511 Net income attributed to Mutual operations (prior to demutualization) 208 142 607 511 Participating policyholders (after demutualization) - - - - Shareholders (after demutualization) 16 - 16 - Net income 224 142 623 511 Consolidated Balance Sheets (Canadian $ in millions, unaudited) As at September 30 1999 1998 Assets Invested assets Bonds 30,337 30,417 Mortgages 7,099 7,621 Stocks 4,331 3,752 Real estate 3,156 2,911 Policy loans 3,195 3,048 Cash and short term investments 4,107 1,555 Other investments 1,050 466 Total invested assets 53,275 49,770 Other assets Accrued investment income 731 742 Outstanding premiums 338 355 Deferred income taxes 632 849 Miscellaneous 1,833 835 Total other assets 3,534 2,781 Total assets 56,809 52,551 Segregated fund net assets 42,408 32,144 Liabilities and equity Actuarial liabilities 39,624 38,452 Benefits payable and provision for unreported claims 1,412 1,283 Policyholder amounts on deposit 1,153 1,,014 Deferred realized net gains 2,413 2,846 Trust and banking deposits 298 283 Borrowed funds 54 3 Other liabilities 3,396 1,473 48,350 45,354 Subordinated debt 597 630 Non-controlling interest in subsidiaries 706 44 Trust preferred securities issued by subsidiaries 733 763 Equity Participating policyholders' equity 69 - Shareholders' equity (note 2) Common shares 636 - Shareholders' retained earnings 5,718 - Surplus - 5,760 Total equity 6,423 5,760 Total liabilities and equity 56,809 52,551 Segregated fund net liabilities 42,408 32,144 Divisional Information (1) (Canadian $ in millions, unaudited) For the three months ended September 30, 1999 Canadian U.S. Asia Reinsurance Premiums and deposits Division Division Division Division Other Total General fund 592 833 427 258 - 2.110 Segregated funds 277 2,301 75 - - 2,653 Mutual funds- - - 10 - 21 31 Group premium equivalent 135 - - - - 135 Total 1,004 3,134 512 258 21 4,929 Net income 63 83 42 29 7 224 As at September 30, 1998 Funds under management General fund 19,946 23,694 3,414 2,560 2,937 52,551 Segregated funds 6,090 25,192 862 - - 32,144 Mutual funds- - - 99 - 1,512 1,611 Other managed funds - - - - 3,432 3,432 Total 26,036 48,886 4,375 2,560 7,881 89,738 Notes 1. Certain of the prior year balances have been reclassified to conform with the current year's presentation.