Manulife Financial Corporation 2024 Annual Report.
Manulife Financial Corporation
Raising the bar
2024 was a banner year for Manulife. We continued making decisions easier and
lives beter for the more than 36 million customers we serve around the world.
Along the way, we raised the bar by delivering top-quartile shareholder returns, announcing ambitious new financial targets
that reflect our solid foundation and momentum, committing to advance the longevity economy alongside global leaders in
research and innovation, and continuing to leverage our award-winning AI and GenAI capabilities. This work was made
possible by our winning team and culture, and we are proud to have earned top-quartile engagement in our annual
colleague survey relative to Gallup’s financial and insurance company benchmark.
Manulife by the numbers
Net Income Attributed to Shareholders
$5.4 billion
Net income attributed to shareholders up $0.3 billion from
2023, and up $1.9 billion from 2022 transitional net income.
3.5
2022
5.1
2023
5.4
2024
Core Earnings
$7.2 billion
Core earnings up 8% on a constant exchange rate basis
from 2023.
5.8
2022
6.7
2023
7.2
2024
New Business Value
$3.1 billion
New business value increased 32% compared with 2023.
2.1
2022
2.3
2023
3.1
2024
Common Share Dividend
$1.60/share
Common share dividend increased 10% from 2023.
$1.32/sh
2022
$1.46/sh
2023
$1.60/sh
2024
Assets Under Management and Administration
$1.6 trillion
Total invested assets: $442 billion
Segregated funds net assets: $436 billion
Mutual funds: $334 billion
Assets under administration: $223 billion
Institutional asset management: $154 billion
Other funds: $19 billion
Note: Specified financial measures in this report include 2022 transitional net income attributed to shareholders (2022 transitional net income),
core earnings, assets under management and administration (“AUMA”), new business value (“NBV”), core ROE, core EBITDA margin, expense
efficiency ratio, core earnings contribution from LTC and VA businesses, remittances, net flows, APE sales, and percentage changes in core
earnings, core EPS and new business CSM which are on a constant exchange rate basis. Percentage changes in NBV and APE sales are also on a
constant exchange rate basis.
For more information on the specified financial measures used in this report, see the section “Non-GAAP and Other Financial Measures”
in our 2024 Management’s Discussion and Analysis (“MD&A”) below. For more information on 2022 transitional net income, see “Implementation
of IFRS 17 and IFRS 9” and “Non-GAAP and Other Financial Measures” in our 2023 MD&A, which is available on our profile on SEDAR+ at
www.sedarplus.ca.
| 1
Don
Lindsay
Board Chair
Fellow Shareholders
It is my privilege to address you as Chair following a significant
year for Manulife. In 2024, we delivered record insurance new
business results for the full year, generated continued top-line
growth in Asia and impressive net inflows in Global WAM, and
announced landmark transactions that have set a strong
foundation for continued execution against our strategy.
Our results have contributed to
top-quartile total shareholder return,
record NPS, continued top-quartile
employee engagement, and progress
against the financial targets announced
at Investor Day.
Underpinning our financial results
and the value we deliver for you,
our shareholders, is a steadfast
commitment to making decisions
easier and lives better for our
customers around the world.
Board Refreshment
One of our priorities this year was
Board succession, with a focus on
welcoming new directors who bring
perspectives and expertise that align
with the future of our business. We
were delighted to welcome several
exceptional leaders who joined the
Board in 2024:
Michael Durland is a former senior
executive at the Bank of Nova Scotia,
holding a number of senior roles in
their capital markets division, including
Group Head and CEO, Global Banking
and Markets. He brings a sophisticated
risk taking and risk structuring
capability set to the board, along with
international business experience.
Don Kanak is a former senior
executive who held several senior roles
at Prudential and previously served in
senior executive positions at American
International Group (AIG). He brings
deep insurance experience, including
extensive experience in Asia.
Anna Manning has extensive
insurance industry experience, most
recently as President and CEO of
Reinsurance Group of America, a
role she held until January 2024.
Anna brings deep global reinsurance
expertise to the Board.
John Wong is the former Senior
Partner and former Chairman of
Greater China at Boston Consulting
Group. His experience serving global
clients in the Asian healthcare market
provides valuable insight to our
business in Asia and globally.
We have a robust Board orientation
and onboarding program that is tailored
to individual director needs to provide
new directors with the resources
needed to provide effective oversight.
CEO Succession
In 2024, after leading Manulife through
significant transformation during which
we realigned our organization around a
clear mission, values, and strategy,
2 | 2024 Annual Report
reshaped our portfolio, grew our
business, and delivered significant
value to shareholders and more than
36 million customers around the world,
Roy Gori shared his intention to retire as
President and CEO in May of 2025.
I want to highlight the thoughtful,
deliberate work our entire Board
undertook, leveraging our established
succession planning process to identify
and appoint Phil Witherington as our
new leader as of May 9, 2025.
Effective succession planning is a
continuous effort, and we benefited
from having an established succession
framework in place that we refresh
annually. This includes regular
discussions about leadership develop-
ment and talent reviews for internal can-
didates, evaluating potential external
candidates, and aligning those reviews
with our strategic priorities and values.
As part of our selection process, we
reflected on our current strategic
positioning and the leadership qualities
that helped us get to where we are
today to determine which leadership
qualities would ensure our success
moving forward.
Thanks to Roy and his team’s
leadership, Manulife is a fundamentally
different company today than it was in
2017. Atop the strong foundation that
has been built, we knew Roy’s successor
would have a different starting point,
leading a Manulife that is now better
positioned for success than ever before,
despite a rapidly evolving market.
I’m pleased to share the Board was
unanimous in our selection of Phil,
who embodies the leadership qualities
critical to the next chapter of our
journey. His values-based approach,
deep knowledge and understanding of
our business and industry, experience in
both developed and emerging markets,
and his key role in Manulife’s
transformation make him the perfect
person to serve as the next leader
of Manulife.
Shareholder Engagement
When I began engaging with
shareholders as Chair in 2022, we
looked back on what we had achieved,
including increasing core earnings
run rate, improving capital ratios,
NPS scores, and colleague
engagement scores.
As we approached 2024, the Board
and I wanted to underscore not only
our significant transformation as a
company, but also the strength of our
execution – and our vast potential as
an organization.
We began the year by closing our
historic LTC transaction with Global
Atlantic and finished 2024 by
announcing a $5.4 billion agreement
with RGA, including $2.4 billion of LTC
reserves. As a result of our continued
efforts to optimize our portfolio and
free up capital, we returned $3.2 billion
to shareholders via buybacks in 2024.
Additionally, our total shareholder
return on NYSE-listed shares of
45.1% is more than double peer
average in 2024.
But we know the best is still ahead of
us. In June we hosted our Investor Day
in Hong Kong and Jakarta, and during
it, we raised the bar on how we will
deliver on our strategic priorities with
updated financial targets, including
recommitting to our medium-term
targets, increasing our core ROE target
to 18%+ by 2027, introducing a new
target of $22 billion+ cumulative
remittances between 2024 and 2027,
and further improving our expense
efficiency goal to <45% in the medium
term. As Phil steps into his new role,
he will be focused on executing our
strategy and delivering against these
targets in the years ahead.
Thank You
The Board and I extend our deep
gratitude to Roy for his extraordinary
leadership over the past eight years.
His ability to make the complex clear,
set ambitious targets and deliver upon
them, and foster a winning team and
culture has defined Manulife’s
transformation and set it on a strong
course for continued success.
Thank you for your remarkable
stewardship, Roy.
To our recently retired Board members
– Susan Dabarno, Vanessa Kanu, and
James Prieur, and to Pam Kimmet – a
former Board member who will retire
this year from Manulife’s Executive
Leadership Team, we greatly appreciate
your partnership and sound counsel.
We have built a strong foundation and
are excited about the road ahead,
where we will continue to put our
customers, shareholders, colleagues,
and communities at the heart of what
we do. The Board remains steadfast
in our commitment to strong
governance, transparency, and the
long-term success of our company.
We thank you, our shareholders, for
your trust and support, as well as our
teams who continue to raise the bar
and deliver on our promises.
Sincerely,
Don Lindsay
Board Chair
| 3
Roy
Gori
President and
CEO
Fellow Shareholders
2024 was another outstanding year for Manulife.
We delivered superior results, demonstrated continued
progress against our strategic priorities, unlocked even
greater value for shareholders, raised the bar with
ambitious new financial targets, and continued to
make lives beter for our more than 36 million
customers around the world.
This year was also an important one
for me personally, as I announced my
decision to retire. When I took the role
as President and CEO seven years ago,
I knew Manulife had incredible
potential and I’m incredibly proud to
say we are a fundamentally different
company than we were in 2017.
Since then, we have defined our
mission, articulated our values,
launched our Impact Agenda, become
a more digital, customer-centric
leader in our industry, optimized our
portfolio, accelerated growth in our
highest potential businesses, delivered
superior operating results, created a
winning team and culture, and so much
more. Today, we are one of the few truly
global insurance and wealth and asset
managers that is both a leader and
at scale.
As a result, the ingredients are now
in place to begin the next chapter
for Manulife. We have incredible
momentum, a strong foundation,
and in Phil Witherington, we have a
tremendous leader who will bring the
business to new heights. While I’m
incredibly proud to have led such a
storied institution, this is the perfect
time for me to pass the baton to Phil.
We’ve accomplished
much of what we set out
to achieve.
In 2017, we sat down to define our bold
ambitions. We asked ourselves what
industry leadership looked like and
what we wanted our legacy to be as
we strove to deliver exceptional value
for shareholders and customers. I still
have notes from those early meetings,
and I’m proud to say we’ve delivered
against the ambitions we set.
Can we significantly increase
core return on equity (ROE)?
In 2024, core ROE was 16.4%,
up from 11.3% in 2017.
4 | 2024 Annual Report
Members of Manulife’s leadership team ring the opening bell at the Toronto Stock Exchange to celebrate 25 years since our initial IPO.
Can we reduce long-term
care (LTC) and Variable
Annuity (VA) core earnings
contributions from 24%
to 15%?
LTC and VA now make up 10%.
Can we show consistent core
earnings per share (EPS)
growth of 10-12% per year?
In 2024, we increased core
EPS by 11% from last year,
despite the impact of Global
Minimum Tax.
Can we drastically improve
our relationship Net Promoter
Score (NPS)?
We’ve achieved record NPS
of 27 at year-end, up from
1 in 2017.
And can we do all of this while
building a high-performing,
highly engaged employee
culture?
We’ve achieved top-quartile
employee engagement scores
for five consecutive years.
“With our robust strategy, focus on execution,
sustained performance, and world-class
leadership, we’ve achieved almost all of what
we set out to do.”
These were goals many called
unattainable. But with our robust
strategy, focus on execution,
sustained performance, and world-
class leadership, we’ve achieved
almost all of what we set out to do.
At the end of 2024, we reported record
insurance new business results for the
full year, including 30%+ increases
year-over-year across APE sales, new
business CSM, and new business value.
We have strong
momentum and will
continue raising the bar.
We’re delivering superior
shareholder value. In 2024, we
announced a remarkable $5.4 billion
reinsurance agreement with RGA,
including $2.4 billion of LTC reserves,
on the heels of two other historic
transactions in less than twelve
months. We have cumulatively reduced
our LTC reserves by 18% and have
proven our ability to transact on LTC
blocks of different vintages. The latest
transaction further validates our LTC
assumptions and gives the market even
| 5
greater confidence in our commitment
to reshaping our portfolio to higher
returns and lower risk.
Since 2018, we have freed up an
expected $12 billion of capital through
our portfolio optimization efforts,
including an expected $2.8 billion from
our reinsurance transactions closed or
announced in 2024.
We’re accelerating growth in our
highest potential businesses. In
Asia, we are now a top-three pan-Asian
life insurer with substantial top-line
growth in 2024 and a 27% increase in
core earnings. Global Wealth and Asset
Management (Global WAM) capped
off the year with over $13 billion of net
inflows, a 220-basis point increase in
core EBITDA margin, and a 30% core
earnings growth. And we delivered
positive net flows over 14 of the past 15
years, increasing Global WAM AUMA to
more than $1 trillion.
We are embracing the power of
digital and improving customer
experience. We have 27 GenAI use
cases in production, strengthening our
position as industry leaders in using
this transformative technology and
creating efficiencies for our team
and driving better outcomes for our
customers. We have made significant
progress toward our digital, customer
leadership ambition, achieving record
high Net Promoter Score and
generating over $600 million of
benefits from our digital initiatives
globally, representing more than
three times the benefits from 2023.
In the U.S., we continue to lead the
industry and innovate with behavioural
insurance by collaborating with MIT
AgeLab, expanding our GRAIL Galleri®
offering, and hosting our second
Longer. Healthier. Beter. Symposium.
And in Canada, we enhanced the
Manulife Vitality program mobile app
with more personalized health and
wellness recommendations.
Continuous improvements have
resulted in a nine-percentage-point
increase in the app’s utilization year
over year.
We are driving expense efficiency.
Our global scale and expense
discipline have enabled us to achieve
an expense efficiency ratio of 44.8%,
already meeting our medium-term
target announced at Investor Day.
“ Phil is an amazing leader with a deep
understanding of our business and industry,
and together with our winning team around
the world, he will help take Manulife to even
greater heights.”
Our winning team and culture
continue to be our long-term
competitive advantage. Since
2019, we have maintained top-quartile
employee engagement results against
Gallup’s financial and insurance
company benchmark. In 2024, our
colleagues completed 1.1 million
learning hours, volunteered 48,000
hours, and – through our employee
giving and corporate match benefit –
donated $7.6 million. These are true
investments in the future of our
company and communities.
This year, our colleagues and agents
from around the world shared more
than 300 stories of Beter, exploring
how they connect personally to our
mission. You’ll see a few of these
stories featured alongside this report,
and I’m so proud of what they say
about our collective commitment to
embracing purpose to fuel
performance for our customers.
And we’re raising the bar with
ambitious targets. At our Investor
Day in June, we recommitted to our
medium-term targets and set some
new ones: we increased our core ROE
target to 18%+ by 2027, introduced a
new target of $22 billion+ cumulative
remittances between 2024 and 2027,
and further improved our expense
efficiency goal to <45% in the medium
term. We are on track to achieve these
ambitious targets while continuing to
deliver on our strategic priorities.
6 | 2024 Annual Report
| 7
Roy Gori joins colleagues who shared their Better stories at the fifth annual Global Colleague Forum.
I truly believe the best
is still ahead of us.
I have known Phil for more than a
decade. He is one of the first people
I met at Manulife, and we quickly
became partners in transforming our
Asia business. When I became CEO, he
was the clear choice for CFO and was
one of the key partners in developing
our transformation plans.
He is an amazing leader with a deep
understanding of our business and
industry, and together with our winning
team around the world, he will help
take Manulife to even greater heights.
Thank you for the honour
of a lifetime.
It has been my honour to serve as
Manulife’s President and CEO, and I am
humbled to have had the opportunity
to lead such a historic company and a
tremendous team of colleagues.
I would like to thank our Board
Chair Don Lindsay and our Board of
Directors for their continued trust
and support of our team. And to you,
our shareholders and customers,
thank you for the trust you place in us
to deliver for your future and
your families.
Thank you to the entire ELT for being
one of the most amazing groups of
people I’ve had the opportunity to
work with in my career.
While I’m thrilled with the results
we’ve achieved, what I will always be
most proud of is the culture we’ve
built together. Thank you to our
more than 37,000 colleagues and
109,000 agents for their passion and
commitment to our customers,
mission, and values.
As I look to 2025, I have every
confidence that Manulife will sustain
the momentum we’ve worked so hard
to achieve together.
Sincerely,
Roy Gori
President and CEO
Caution regarding forward-looking statements
From time to time, Manulife Financial
Corporation (“MFC”) makes written
and/or oral forward-looking statements,
including in this document. In addition, our
representatives may make forward-looking
statements orally to analysts, investors,
the media and others. All such statements
are made pursuant to the “safe harbour”
provisions of Canadian provincial
securities laws and the U.S. Private
Securities Litigation Reform Act of 1995.
The forward-looking statements in this
document include, but are not limited
to, statements with respect to possible
share buybacks, the Company’s strategic
priorities and targets, its medium-term
financial and operating targets and ability
to achieve them, potential future premium
increases for long-term care, the impact
of changes in tax laws, the capital release
associated with reinsurance transactions,
exposure limit estimates for our property
and casualty reinsurance business, and the
probability and impact of LICAT scenario
switches and also relate to, among other
things, our objectives, goals, strategies,
intentions, plans, beliefs, expectations and
estimates, and can generally be identified
by the use of words such as “may”, “will”,
“could”, “should”, “would”, “likely”, “suspect”,
“outlook”, “expect”, “intend”, “estimate”,
“anticipate”, “believe”, “plan”, “forecast”,
“objective”, “seek”, “aim”, “continue”, “goal”,
“restore”, “embark” and “endeavour”
(or the negative thereof) and words and
expressions of similar import, and include
statements concerning possible or
assumed future results. Although we
believe that the expectations reflected
in such forward-looking statements are
reasonable, such statements involve risks
and uncertainties, and undue reliance
should not be placed on such statements
and they should not be interpreted as
confirming market or analysts’ expectations
in any way.
Certain material factors or assumptions
are applied in making forward-looking
statements and actual results may differ
materially from those expressed or implied
in such statements. Important factors
that could cause actual results to differ
materially from expectations include, but
are not limited to: general business and
economic conditions (including but not
limited to the performance, volatility and
correlation of equity markets, interest rates,
credit and swap spreads, inflation rates,
currency rates, investment losses and
defaults, market liquidity and
creditworthiness of guarantors,
reinsurers and counterparties); changes
in laws and regulations; changes in
accounting standards applicable in any of
the territories in which we operate; changes
in regulatory capital requirements; our
ability to obtain premium rate increases
on in-force policies; our ability to execute
strategic plans and changes to strategic
plans; downgrades in our financial strength
or credit ratings; our ability to maintain
our reputation; impairments of goodwill or
intangible assets or the establishment of
provisions against future tax assets; the
accuracy of estimates relating to
morbidity, mortality and policyholder
behaviour; the accuracy of other estimates
used in applying accounting policies and
actuarial methods; our ability to implement
effective hedging strategies and unforeseen
consequences arising from such strategies;
our ability to source appropriate assets
to back our long-dated liabilities; level of
competition and consolidation; our ability
to market and distribute products through
current and future distribution channels;
unforeseen liabilities or asset impairments
arising from acquisitions and dispositions
of businesses; the realization of losses
arising from the sale of investments
classified as fair value through other
comprehensive income; our liquidity,
including the availability of financing to
satisfy existing financial liabilities on
expected maturity dates when required;
obligations to pledge additional collateral;
the availability of letters of credit to provide
capital management flexibility; accuracy of
information received from counterparties
and the ability of counterparties to
meet their obligations; the availability,
affordability and adequacy of reinsurance;
legal and regulatory proceedings,
including tax audits, tax litigation or
similar proceedings; our ability to adapt
products and services to the changing
market; our ability to attract and retain
key executives, employees and agents;
the appropriate use and interpretation of
complex models or deficiencies in models
used; political, legal, operational and other
risks associated with our non-North
American operations; geopolitical
uncertainty, including international
conflicts; acquisitions and our ability to
complete acquisitions including the
availability of equity and debt financing for
this purpose; the disruption of or changes
to key elements of the Company’s or public
infrastructure systems; environmental
concerns including climate change; our
ability to protect our intellectual property
and exposure to claims of infringement; our
inability to withdraw cash from subsidiaries
and the fact that the amount and timing of
any future common share repurchases will
depend on the earnings, cash requirements
and financial condition of Manulife, market
conditions, capital requirements (including
under LICAT capital standards), common
share issuance requirements, applicable
law and regulations (including Canadian
and U.S. securities laws and Canadian
insurance company regulations), and other
factors deemed relevant by Manulife, and
may be subject to regulatory approval
or conditions.
Additional information about material risk
factors that could cause actual results to
differ materially from expectations and
about material factors or assumptions
applied in making forward-looking
statements may be found in this document
under “Risk Management and Risk Factors”,
“Critical Actuarial and Accounting Policies”
and in the “Risk Management” note to the
Annual Consolidated Financial Statements
as well as elsewhere in our filings with
Canadian and U.S. securities regulators.
The forward-looking statements in this
document are, unless otherwise
indicated, stated as of the date hereof
and are presented for the purpose of
assisting investors and others in
understanding our financial position and
results of operations, our future operations,
as well as our objectives and strategic
priorities, and may not be appropriate for
other purposes. We do not undertake to
update any forward-looking statements,
except as required by law.
8 | 2024 Annual Report
Table of
Contents
10
Management’s Discussion and Analysis
10
Manulife Financial Corporation
24
Asia
28
Canada
30
U.S.
33
Global Wealth and Asset Management
36
Corporate and Other
37
Investments
42
Fourth Quarter Financial Highlights
45
Risk Management and Risk Factors
84
Capital Management Framework
87
Critical Actuarial and Accounting Policies
98
Controls and Procedures
99
Non-GAAP and Other Financial Measures
139
Additional Disclosures
143
Consolidated Financial Statements
157
Notes to Consolidated Financial Statements
270
Board of Directors
270
Executive Leadership Team
271
Office Listing
272
Glossary of Terms
273
Shareholder Information
273
Dividend Information
| 9
Management’s Discussion
and Analysis
This Management’s Discussion and Analysis (“MD&A”) is current as of February 19, 2025.
1. Manulife Financial Corporation
Manulife Financial Corporation is a leading international financial services provider, helping our customers make their
decisions easier and lives better. With our global headquarters in Toronto, Canada, we operate as Manulife across
Canada, Asia, and Europe, and primarily as John Hancock in the United States, providing financial advice and
insurance for individuals, groups and businesses. Through Manulife Wealth & Asset Management, the global brand for
our Global Wealth and Asset Management segment, we serve individuals, institutions and retirement plan members
worldwide. At the end of 2024, we had more than 37,000 employees, over 109,000 agents, and thousands of distribution
partners, serving over 36 million customers. At the end of 2024, we had $1.6 trillion (US$1.1 trillion) in assets under
management and administration1, including total invested assets of $0.4 trillion (US$0.3 trillion), and segregated funds
net assets of $0.4 trillion (US$0.3 trillion). We trade as ‘MFC’ on the Toronto, New York, and Philippine stock exchanges,
and under ‘945’ on the Hong Kong stock exchange.
Our reporting segments are:
• Asia – providing insurance products and insurance-based wealth accumulation products in Asia.
• Canada – providing insurance products, insurance-based wealth accumulation products, and banking services in Canada.
• U.S. – providing life insurance products and insurance-based wealth accumulation products and has an in-force long-term
care insurance business and an in-force annuity business.
• Global Wealth and Asset Management (“Global WAM”) – providing innovative investment solutions to our retail, retirement,
and institutional clients around the world under the Manulife Wealth & Asset Management brand.
• Corporate and Other – comprised of investment performance on assets backing capital, net of amounts allocated to operating
segments; financing costs; costs incurred by the corporate office related to shareholder activities (not allocated to operating
segments); our Property and Casualty (“P&C”) Reinsurance business; and run-off reinsurance operation.
In this document, the terms “Company”, “Manulife”, “we” and “our” mean Manulife Financial Corporation (“MFC”) and its
subsidiaries. The term “MLI” means The Manufacturers Life Insurance Company and its subsidiaries.
Footnote number 1 This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more information.
10 | 2024 Annual Report | Management’s Discussion and Analysis
Enterprise Strategy
Our ambition is to be the most digital, customer-centric global company in our industry. The goals for our stakeholders are:
Customers
Improve Net Promoter Score (“NPS”) by +36 points and delight customersRefer to footnote number 1
Team
Engage our team – achieve top quartile engagementRefer to footnote number 2
Shareholders
Deliver top quartile returnsRefer to footnote number 3
Community
Deliver on our Impact AgendaRefer to footnote number 4
Our mission, strategic priorities and values are summarized below:
Decisions made easier.
Lives made better.
Mission
Strategic
Priorities
Values
Portfolio
Optimization
Expense
Efficiency
Accelerate
Growth
Digital,
Customer
Leader
High
Performing
Team
• Obsess about customers
• Do the right thing
• Think big
• Get it done together
• Own it
• Share your humanity
Our values enable the achievement of our mission and strategic priorities, reflect our culture, inform our behaviours, and help
define how we work together:
• Obsess about customers – Predict their needs and do everything in our power to satisfy them.
• Do the right thing – Act with integrity and do what we say.
• Think big – Anything is possible. We can always find a better way.
• Get it done together – We’re surrounded by an amazing team. Do it better by working together.
• Own it – Feel empowered to make decisions and take action to deliver our mission.
• Share your humanity – Build a supportive, diverse and thriving workplace.
Footnote Number 1 As compared to a baseline of 1 in 2017, achieve NPS of 37 by 2027. 2024 results are discussed in the “Strategic Priorities and Progress Update” section below.
Footnote Number 2 As compared to global financial services companies and insurance peers. In 2024, our employee engagement ranked in the top quartile. For more information, see
the “Strategic Priorities and Progress Update” section below.
Footnote Number 3 As compared to our performance peer group. Refer to Manulife’s most recent Management Information Circular for information on our performance peer group. For
the five-year period ended December 31, 2024, our Total Shareholder Return ranked in the top quartile.
Footnote Number 4 Achieve top quartile for Standard & Poor’s Corporate Sustainability Assessment rating. As of December 2024, Manulife ranked in the top quartile.
11
Financial Targets
At our Investor Day in June 2024, we announced that we are raising the bar on our financial targets1, including:
• Core return on common shareholders’ equity (“Core ROE”)2 of 18%+ by 2027;
• A new target on cumulative remittances3 of $22 billion+ between 2024 and 2027; and
• Expense efficiency ratio2 of less than 45% over the medium-term.
Our other medium-term financial targets1 include:
• Diluted core earnings per common share (“Core EPS”)2 growth of 10% to 12% per year;
• New business contractual service margin (“new business CSM”) growth4 of 15% per year;
• Contractual service margin (“CSM”) balance growth4 of 8% to 10% per year;
• Financial leverage ratio2 of 25%; and
• Common share core dividend payout ratio2 range of 35% to 45%.
Details of our performance on the above metrics are provided below.
Detailed updates on our strategic priorities and actions taken to deliver on the related targets are outlined in the “Strategic
Priorities and Progress Update” section below.
1 See “Caution regarding forward-looking statements above”.
Footnote Number 2 Core ROE, expense efficiency ratio, core EPS, financial leverage ratio, and common share core dividend payout ratio are non-GAAP ratios. See “Non-GAAP and
Other Financial Measures” below for more information.
Footnote Number 3 For more information on this metric, see “Non-GAAP and other financial measures” below.
Footnote Number 4 CSM and new business CSM are net of non-controlling interest (“NCI”). Percentage growth / declines in CSM and new business CSM are stated on a constant
exchange rate basis, a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.
12 | 2024 Annual Report | Management’s Discussion and Analysis
Profitability
Profitability
As at and for the years ended December 31,
($ millions, unless otherwise stated)
2024
2023
Net income (loss) attributed to shareholders
$ 5,385
$ 5,103
Core earningsRefer to footnote number (1)
$ 7,226
$ 6,684
Diluted earnings (loss) per common share ($)
$ 2.84
$ 2.61
Diluted core earnings per common share ($)
$ 3.87
$ 3.47
Return on common shareholders’ equity (“ROE”)
12.0%
11.9%
Core ROE
16.4%
15.9%
Expense efficiency ratio
44.8%
45.5%
General expenses
$ 4,859
$ 4,330
Core expensesRefer to footnote number (1)
$ 6,899
$ 6,550
Footnote Number (1)This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more information.
Our net income attributed to shareholders was $5.4 billion in 2024 compared with $5.1 billion in 2023. Net income
attributed to shareholders is comprised of core earnings (consisting of items we believe reflect the underlying earnings capacity
of the business), which amounted to $7.2 billion in 2024 compared with $6.7 billion in 2023, and items excluded from core
earnings of $1.8 billion of net charges in 2024 compared with net charges of $1.6 billion in 2023.
Net income attributed to shareholders in 2024 increased $0.3 billion compared with 2023, due to improved market experience in
alternative long-duration assets (“ALDA”), derivatives and hedge accounting ineffectiveness and public equities, and growth in
core earnings. This was partially offset by the impact of the $941 million net loss attributed to the reinsurance transactions with
Global Atlantic1 (“GA Reinsurance Transaction”) and the reinsurance transaction with RGA Canada1 (“RGA Canadian
Reinsurance Transaction”) recorded in items excluded from core earnings, primarily related to market experience from the sale
of fair value through other comprehensive income (“FVOCI”) debt instruments (there is an offsetting change in other
comprehensive income (“OCI”) attributed to shareholders resulting in a neutral impact to book value), a higher net charge from
the annual review of actuarial methods and assumptions, lower tax-related benefits, and a charge to items excluded from core
earnings related to Global Minimum Taxes (“GMT”). The net charge from market experience of $1.5 billion in 2024 was primarily
related to lower-than-expected returns on ALDA, largely related to real estate and private equity investments, net realized losses
due to the sale of debt instruments primarily related to the GA and RGA Canadian Reinsurance Transactions, partially offset by
higher-than-expected returns on public equities and a gain from derivatives and hedge accounting ineffectiveness.
Core earnings increased $0.5 billion, or 8%2, on a constant exchange rate basis compared with 2023. The increase was driven
by higher core earnings in Global WAM, largely reflecting an increase in net fee income from higher average assets under
management and administration3 (“average AUMA”) and positive net flows3, along with disciplined expense management and
certain non-recurring tax true-ups and tax benefits in 2024, partially offset by lower fee spreads. In addition, strong growth in our
insurance business, a lower charge in the expected credit loss (“ECL”) provision in 2024 and the impact of updates to actuarial
methods and assumptions in 2023 also contributed to higher core earnings. These increases were partially offset by a charge
related to GMT, lower expected investment earnings, and unfavourable net claims experience. Net claims experience reflects
unfavourable experience in the U.S. and less favourable experience in our P&C business, partially offset by improved experience
in Asia and Canada. The GA Reinsurance Transaction reduced core earnings by $81 million in 2024, compared with 2023
reflecting the impact on expected earnings on insurance contracts, expected investment earnings, insurance experience and the
change in ECL. The RGA Canadian Reinsurance Transaction reduced core earnings by $8 million in 2024 compared with 2023.
Core earnings by segment are presented in the following table. See Asia, Canada, U.S., Global WAM, and Corporate and Other
sections below.
For the years ended December 31,
($ millions)
2024
2023
% changeRefer to footnote number (1)
2024 vs 2023
Core earnings by segment
Asia
$ 2,589
$ 2,048
27%
Canada
1,568
1,487
5%
U.S.
1,690
1,759
(5)%
Global Wealth and Asset Management
1,736
1,321
30%
Corporate and Other
(357)
69
Zero
Total core earnings
$ 7,226
$ 6,684
8%
Footnote Number (1)Percentage change is on a constant exchange rate basis is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.
Footnote Number 1 The GA Reinsurance Transaction closed February 22, 2024 with an effective date of January 1, 2024. The RGA Canadian Reinsurance Transaction closed April 2,
2024.
Footnote Number 2 Percentage growth / declines in core earnings, pre-tax core earnings, core expenses, general expenses, assets under management and administration (“AUMA”),
assets under management (“AUM”), core earnings before interest, taxes, depreciation and amortization (“core EBITDA”), and Manulife Bank average net lending
assets are stated on a constant exchange rate basis, a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.
Footnote Number 3 For more information on this metric, see “Non-GAAP and other financial measures” below.
13
The table below presents 2024 and 2023 net income attributed to shareholders consisting of core earnings and items excluded
from core earnings.
For the years ended December 31,
($ millions)
2024
2023
Core earnings
$ 7,226
$ 6,684
Items excluded from core earnings:
Market experience gains (losses)(1)
$ (1,450)
$ (1,790)
Realized gains (losses) on debt instruments
(962)
(130)
Derivatives and hedge accounting ineffectiveness
132
(152)
Actual less expected long-term returns on public equity
312
103
Actual less expected long-term returns on ALDA
(969)
(1,623)
Other investment results
37
12
Changes in actuarial methods and assumptions that flow directly through income(2)
(199)
105
Restructuring chargeRefer to footnote number (3)
(72)
(36)
Reinsurance transactions, tax-related items and otherRefer to footnote number (4)
(120)
140
Total items excluded from core earnings
(1,841)
(1,581)
Net income (loss) attributed to shareholders
$ 5,385
$ 5,103
Footnote Number (1)Market experience was a net charge of $1,450 million in 2024 primarily due to lower-than-expected returns on ALDA driven by real estate and private equity
investments and net realized losses from the sale of debt instruments, of which $841 million was related to the transfer of assets with respect to the GA
Reinsurance Transaction and the RGA Canadian Reinsurance Transaction, which are classified as FVOCI. These were partially offset by gains from higher-than-
expected returns from public equity, a net gain from derivatives and hedge accounting ineffectiveness and a gain from other investment results. Market experience
was a net charge of $1,790 million in 2023 primarily driven by lower-than-expected returns on ALDA mainly related to real estate, private equity and energy
investments, a net charge from derivatives and hedge accounting ineffectiveness, as well as net realized losses from the sale of debt instruments which are
classified as FVOCI, partially offset by gains from higher-than-expected returns on public equity.
Footnote Number (2)See “Critical Actuarial and Accounting Policies – Review of Actuarial Methods and Assumptions” section below for further information on the 2024 charge and the
2023 net gain.
Footnote Number (3)In 2024, we reported a restructuring charge of $72 million post-tax ($92 million pre-tax) in Global WAM and Canada. In 2023, we reported a restructuring charge of
$36 million post-tax ($46 million pre-tax) in Global WAM.
Footnote Number (4)In 2024, the net loss of $120 million included a charge of $70 million resulting from the GA Reinsurance Transaction in the U.S. and Japan, a charge of $67 million
related to GMT (an additional $164 million charge was recorded in core earnings), a charge of $60 million related to U.S. withholding taxes on remittances
associated with the GA Reinsurance Transaction, a net charge of $43 million related to the acquisition of CQS, a charge of $25 million related to a reinsurance
recapture in Asia and an investment impairment charge of $22 million in Global WAM. This was partially offset by tax-related benefits and true-ups of $125 million
and a gain of $34 million related to the RGA Canadian Reinsurance Transaction in Canada. In 2023, the net gain of $140 million included a one-time tax benefit of
$290 million. This was partially offset by $46 million related to a provision for the cancellation of certain policies in our Vietnam operations, other tax-related net
true-ups of $39 million, a $38 million charge for an investment impairment in Asia and a charge of $33 million related to legal settlements in the U.S.
Net income attributed to shareholders by segment is presented in the following table. See Asia, Canada, U.S., Global WAM, and
Corporate and Other sections below.
For the years ended December 31,
($ millions)
2024
2023
% changeRefer to footnote number (1)
2024 vs 2023
Net income (loss) attributed to shareholders by segment
Asia
$ 2,355
$ 1,348
75%
Canada
1,221
1,191
3%
U.S.
135
639
(79)%
Global Wealth and Asset Management
1,597
1,297
23%
Corporate and Other
77
628
(88)%
Total net income (loss) attributed to shareholders
$ 5,385
$ 5,103
6%
Footnote Number (1)Percentage change is on an actual exchange rate basis.
Diluted earnings (loss) per common share (“EPS”) was $2.84 in 2024, compared with $2.61 in 2023 primarily related to the
increase in net income attributed to common shareholders and the impact of common share buybacks. Diluted core earnings per
common share was $3.87 in 2024, compared with $3.47 in 2023 primarily related to the increase in core earnings and the impact
of common share buybacks. The diluted weighted average common shares outstanding was 1,785 million in 2024 and
1,838 million in 2023.
ROE for 2024 was 12.0%, compared with 11.9% for 2023. The increase in ROE reflects higher net income attributed to common
shareholders in 2024. Core ROE was 16.4% in 2024 compared with 15.9% in 2023. The increase in 2024 core ROE was
primarily driven by an increase in common shareholders’ core earnings.
Expense efficiency ratio
The expense efficiency ratio is a financial measure which we use to measure progress on our strategic priority of expense
efficiency and reflects expenses that flow directly through core earnings (“core expenses”). Core expenses include core general
14 | 2024 Annual Report | Management’s Discussion and Analysis
expenses, directly attributable maintenance expenses and directly attributable acquisition expenses for products measured using
the premium allocation approach (“PAA”) and for other products without a CSM. Core expenses exclude certain expenses
directly attributable to acquiring new business that are capitalized into the CSM instead of flowing directly through core earnings.
Our focus on expense efficiency has enabled us to drive the benefits of scale across our businesses. We believe there are
further opportunities to leverage our global scale and operating environment, streamline processes and further digitize our
business. As a result, in 2024 we updated our medium-term target for the expense efficiency ratio from less than 50% to less
than 45%.
The expense efficiency ratio was 44.8% in 2024, compared with 45.5% in 2023. The 0.7 percentage point decrease in the ratio
compared with 2023 reflects an 8% increase in pre-tax core earnings1, and a 5% increase in core expenses. The increase in
core expenses was driven by higher workforce-related costs, including higher performance-related costs, and the inclusion of
ongoing operating expenses related to our acquisition of CQS.
Total 2024 general expenses increased 12% on an actual exchange rate basis and 11% on a constant exchange rate basis
compared with 2023 driven by the items noted above related to the increase in core expenses, as well as a reallocation of
expenses from directly attributable maintenance to general expenses, higher restructuring charges in Global WAM and Canada
and the acquisition of CQS. General expenses excluded from core earnings consisted primarily of the acquisition of CQS and
restructuring charges in Global WAM and Canada in 2024, and consisted of a true-up of an existing legal provision and a
restructuring charge in Global WAM in 2023.
Business Performance
Business performance
As at and for the years ended December 31,
($ millions, unless otherwise stated)
2024
2023
Asia APE sales
$ 6,073
$ 4,469
Canada APE sales
1,689
1,409
U.S. APE sales
623
562
Total APE salesRefer to footnote number (1)
8,385
6,440
Asia new business value
2,209
1,627
Canada new business value
627
490
U.S. new business value
241
207
Total new business value
(1)
3,077
2,324
Asia new business CSMRefer to footnote number (2)
2,148
1,549
Canada new business CSM
357
224
U.S. new business CSM
382
394
Total new business CSM(2)
2,887
2,167
Asia CSM net of NCI
15,540
12,617
Canada CSM
4,109
4,060
U.S. CSM
2,468
3,738
Corporate and Other CSM
10
25
Total CSM net of NCI
22,127
20,440
Post-tax CSM net of NCI(3)
19,682
17,748
Global WAM gross flows ($ billions)(1)
171.7
143.4
Global WAM net flows ($ billions)Refer to footnote number (1)
13.3
4.5
Global WAM assets under management and administration ($ billions)(3),(4)
1,031.1
849.2
Global WAM total invested assets ($ billions)
9.7
7.1
Global WAM segregated funds net assets ($ billions)(4)
291.9
248.1
Total assets under management and administration ($ billions)(3)
1,608.0
1,388.8
Total invested assets ($ billions)
442.5
417.2
Total net segregated funds net assets ($ billions)
436.0
377.5
Footnote Number (1)For more information on this metric, see “Non-GAAP and Other Financial Measures” below.
Footnote Number (2)New business CSM is net of NCI.
Footnote Number (3)This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more information.
Footnote Number (4)The Global WAM portion of AUMA as at December 31, 2024 was $1,031.1 billion, an increase of 14% compared with December 31, 2023, driven by the favourable
impact of interest rates and equity markets, the $19 billion of assets added from the acquisition of CQS in the second quarter of 2024 (“2Q24”), as well as net
inflows. The Global WAM segregated funds net assets were $291.9 billion as at December 31, 2024, an increase of 18% compared with December 31, 2023 on an
actual exchange rate basis driven by the favourable impact of equity markets and foreign currency exchange rates.
Footnote Number 1 This is a non-GAAP financial measure. See “Non-GAAP and other financial measures” below for more information.
15
Annualized premium equivalent (“APE”) sales were $8.4 billion in 2024, an increase of 30%1 compared with 2023, new
business value (“NBV”) was $3.1 billion in 2024, an increase of 32% compared with 2023, and new business contractual
service margin (“New business CSM”) was $2.9 billion in 2024, an increase of 32% compared with 2023. New business
results by segments were as follows:
• In Asia, APE sales increased 36% compared with 2023, driven by broad-based growth across most geographies in Asia,
partially offset by a decrease in Vietnam. NBV and new business CSM increased 35% and 38%, respectively, compared with
2023, driven by higher sales volumes, partially offset by business mix. New business CSM additionally benefited from the
impact of updates to actuarial methods and assumptions in the second half of 2023. New business value margin (“NBV
margin”)2 remained resilient at 40.7%.
• In Canada, APE sales and NBV increased 20% and 28%, respectively, in 2024 compared with 2023, driven by higher sales
volumes in Group Insurance across all group benefits markets, along with higher participating life insurance and segregated
fund products sales, partially offset by the non-recurrence of a large affinity markets sale in 2023. Higher margins in Individual
Insurance also contributed to the growth in NBV. New business CSM increased 59% driven by higher sales volumes and
higher margins in Individual Insurance and Annuities.
• In the U.S., APE sales and NBV increased 9% and 14%, respectively, in 2024 compared with 2023, reflecting increased
demand from affluent customers for accumulation insurance products, partially offset by lower sales of protection insurance
products. New business CSM decreased 5% driven by product mix and the impact of interest rates, partially offset by higher
sales volumes.
Contractual service margin (“CSM”) net of NCI was $22,127 million as at December 31, 2024, an increase of $1,687 million or 3%
compared with December 31, 2023. Organic CSM movement was $1,231 million in 2024, driven by the impact of new business and
interest accretion, partially offset by amortization recognized in core earnings and unfavourable insurance experience. Inorganic CSM
movement was $456 million in 2024, primarily driven by the favourable impacts of changes in foreign currency exchange rates,
partially offset by the impacts of reinsurance transactions and the annual review of actuarial methods and assumptions.
Global WAM net inflows were $13.3 billion in 2024, compared with net inflows of $4.5 billion in 2023.
• Net inflows in Retirement were $0.7 billion in 2024, compared with net outflows of $4.0 billion in 2023, primarily driven by the
non-recurrence of large-case retirement plan redemptions by a single sponsor in the U.S. in 2023 and higher new retirement
plan sales, partially offset by higher member withdrawals.
• Net inflows in Retail were $6.8 billion in 2024, compared with net outflows of $0.5 billion in 2023, driven by increased demand
for investment products amid a constructive equity market and improved investor sentiment.
• Net inflows in Institutional Asset Management were $5.7 billion in 2024, compared with net inflows of $9.0 billion in 2023,
reflecting lower net flows from fixed income and equity mandates.
Assets under Management and Administration (“AUMA”)
AUMA as at December 31, 2024 was $1.6 trillion, an increase of 9% compared with December 31, 2023, primarily due to the
favourable impact of interest rates and equity markets, and net inflows. Total invested assets increased 6% on actual exchange
rate basis, primarily due to the impact of foreign currency exchange rates and interest rates on debt instruments, partially offset
by the transfer of invested assets related to the GA and RGA Canadian Reinsurance Transactions. Segregated funds net assets
increased 15% on an actual exchange rate basis, primarily due to the impact of equity markets and foreign currency exchange
rates.
Assets under Management and Administration
As at December 31,
($ millions)
2024
2023
Total invested assets
$
442,497
$
417,210
Segregated funds net assetsRefer to footnote number (1)
435,988
377,544
Mutual funds, institutional asset management and otherRefer to footnote number (1),(2)
506,868
411,961
Total assets under management
1,385,353
1,206,715
Other assets under administration
222,614
182,046
Total assets under management and administration
$ 1,607,967
$ 1,388,761
Footnote Number (1)These assets are not available to satisfy the liabilities of the Company’s general fund.
Footnote Number (2)Other funds represent pension funds, pooled funds, endowment funds and other institutional funds managed by the Company on behalf of others.
Footnote Number 1 Percentage growth / declines in APE sales and NBV are stated on a constant exchange rate basis.
2 For more information on this metric, see “Non-GAAP and Other Financial Measures” below.
16 | 2024 Annual Report | Management’s Discussion and Analysis
Financial Strength
Financial strength metrics
As at and for the years ended December 31,
($ millions, unless otherwise stated)
2024
2023
MLI’s LICAT ratioRefer to footnote number (1)
137%
137%
Financial leverage ratio
23.7%
24.3%
Consolidated capital ($ billions)Refer to footnote number (2)
$
81.2
$
73.9
Book value per common share ($)
$
25.63
$
22.36
Adjusted book value per common share ($)(3)
$
37.02
$
32.19
Footnote Number (1)This item is disclosed under the Office of the Superintendent of Financial Institutions (“OSFI”) Life Insurance Capital Adequacy Test Public Disclosure
Requirements guideline.
Footnote Number (2)This item is a capital management measure. For more information on this metric, see “Non-GAAP and Other Financial Measures” below.
Footnote Number (3)This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.
The Life Insurance Capital Adequacy Test (“LICAT”) ratio for MLI was 137% as at December 31, 2024, compared with 137%
as at December 31, 2023. The ratio is in line with 2023 as the positive impacts from earnings and the CSM, the net issuance of
capital instruments1 and the GA and RGA Canadian Reinsurance Transactions were offset by common share buybacks and
market movements.
MFC’s financial leverage ratio as at December 31, 2024 was 23.7%, a decrease of 0.6 percentage points from 24.3% as at
December 31, 2023. The decrease in the ratio was driven by growth in total equity and higher post-tax CSM, partially offset by
the net issuance of capital instruments1. The growth in total equity was from total comprehensive income, which was partially
offset by dividends and common share buybacks.
MFC’s consolidated capital was $81.2 billion as at December 31, 2024, an increase of $7.3 billion compared with $73.9 billion
as at December 31, 2023. The increase was driven by growth in total equity, a higher post-tax CSM and the net issuance of
capital instruments1. The growth in total equity was mainly from total comprehensive income, which was partially offset by
dividends and common share buybacks.
Remittances were $7.0 billion in 2024 of which Asia and U.S. operations delivered $1.9 billion and $2.0 billion, respectively.
Remittances in 2024 increased by $1.5 billion compared with 2023 due to the favourable impact of market movements in 2024
and the GA Reinsurance Transaction. Refer to “Remittance of Capital” below for more information.
Cash and cash equivalents and marketable securities2 were $263.3 billion as at December 31, 2024 compared with
$250.7 billion as at December 31, 2023. The increase of $12.6 billion was primarily driven by favourable changes in foreign
exchange rates and higher equity markets, partially offset by the impact of GA and RGA Canadian Reinsurance Transactions,
and the lower market value of debt instruments due to higher interest rates. Refer to “Liquidity Risk Management Strategy” below
for more information.
Book value per common share as at December 31, 2024 was $25.63, a 15% increase compared with $22.36 as at December
31, 2023. The number of common shares outstanding was 1,729 million as at December 31, 2024, a net decrease of 77 million
common shares from 1,806 million as at December 31, 2023, primarily due to common share buybacks.
Adjusted book value per common share as at December 31, 2024 was $37.02, a 15% increase compared with $32.19 as at
December 31, 2023, driven by an increase in the adjusted book value3 and a lower number of common shares outstanding.
Adjusted book value increased $5.9 billion due to growth in total common shareholders’ equity and an increase in post-tax CSM,
net of NCI. The increase in common shareholders’ equity reflects the impact of growth in total comprehensive income, partially
offset by dividends and common share buybacks.
Impact of Foreign Currency Exchange Rates
We have worldwide operations, including in Canada, the United States and various markets in Asia, and generate revenues and
incur expenses in local currencies in these jurisdictions, all of which are translated into Canadian dollars. The bulk of our
exposure to foreign currency exchange rates is to movements in the U.S. dollar.
Footnote Number 1 The net issuance of capital instruments consists of the issuance of $1.1 billion of subordinated debt in the first quarter of 2024 (“1Q24”), $0.5 billion of subordinated
debt in 2Q24, and $1.0 billion of subordinated debt in the fourth quarter of 2024 (“4Q24”), partially offset by the redemption of $0.6 billion of JHUSA Surplus Notes
in 1Q24, $0.75 billion of subordinated debt in the third quarter of 2024 (“3Q24”) and $0.5 billion of subordinated debt in 4Q24.
Footnote Number 2 Includes cash & cash equivalents, comprised of cash on deposit, Canadian and U.S. Treasury Bills and high quality short-term investments, and marketable
assets, comprised of investment grade government and agency bonds, investment grade corporate bonds, investment grade securitized instruments, publicly
traded common stocks and preferred shares.
Footnote Number 3 This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more information.
17
Items impacting our Consolidated Statements of Income are translated to Canadian dollars using average exchange rates for the
respective quarterly period. For items impacting our Consolidated Statements of Financial Position, period end rates are used for
currency translation purposes. The following table provides the most relevant foreign currency exchange rates for 2024 and 2023.
Exchange rate
Quarterly
Full Year
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
AverageRefer to footnote number (1)
U.S. dollar
1.3987
1.3639
1.3682
1.3485
1.3612
1.3698
1.3494
Japanese yen
0.0092
0.0091
0.0088
0.0090
0.0092
0.0090
0.0096
Hong Kong dollar
0.1799
0.1749
0.1750
0.1724
0.1742
0.1755
0.1724
Period end
U.S. dollar
1.4382
1.3510
1.3684
1.3533
1.3186
1.4382
1.3186
Japanese yen
0.0092
0.0094
0.0085
0.0089
0.0094
0.0092
0.0094
Hong Kong dollar
0.1851
0.1739
0.1753
0.1729
0.1689
0.1851
0.1689
Footnote Number (1)Average rates for the quarter are from Bank of Canada which are applied against Consolidated Statements of Income items for each period. Average rate for the
full year is a 4-point average of the quarterly average rates.
Net income attributed to shareholders and core earnings from the Company’s foreign operations are translated to Canadian
dollars, and in general, our net income attributed to shareholders and core earnings benefit from a weakening Canadian dollar
and are adversely affected by a strengthening Canadian dollar. However, in a period of net losses in foreign operations, the
weakening of the Canadian dollar has the effect of increasing the losses. The relative impact of foreign currency exchange in any
given period is driven by the movement of currency rates as well as the proportion of earnings generated in our foreign
operations.
Changes in foreign currency exchange rates increased core earnings by $32 million in 2024 compared with the same period of
2023, primarily due to a weaker Canadian dollar compared with the U.S. dollar. The impact of foreign currency exchange rates
on items excluded from core earnings does not provide relevant information given the nature of these items.
Strategic Priorities and Progress Update
Our strategy is underpinned by five strategic priorities which we introduced in 2018. Since then, we have made significant
progress on these priorities; the progress made in 2024 is outlined below.
Accelerate Growth
We strive to increase the core earnings contribution from our highest potential businesses1 and the Asia region (our Asia
segment and Asia wealth and asset management (“Asia WAM”)).
Focus areas:
• Leverage global footprint and business diversity to allocate capital and resources to higher growth opportunities
• In Asia, increase penetration and scale in high-quality, sustainable growth businesses
• In Global WAM, scale investment capabilities, enhance our intermediated distribution strength, and increase our focus
where we have direct relationships with clients
• In North America, expand behavioural insurance offerings to provide innovative solutions and support positive health and
well-being outcomes for customers
• In Canada, drive new business growth and persistency in group benefits
• Execute on organic and inorganic growth opportunities
2024
2023
Baseline
TargetsRefer to footnote number 2
2017 (IFRS 4)Refer to footnote number 3
2025
2027
Core earnings contribution from highest potential businesses4
70%
60%
54%
75%
n/a
Core earnings contribution from Asia region4
44%
37%
36%
n/a
50%
Our ambition to accelerate growth through our highest potential businesses remains a core element of our strategic agenda, and
we continued to see strong momentum this year. Global megatrends of a growing middle class in Asia, a widening retirement
gap globally, and dramatic digitization of the consumer, continue to fuel significant opportunities for Asia and Global WAM, and
we are uniquely positioned to grow these businesses. Our diverse franchise also provides significant opportunities to deploy
capital in high ROE and growth areas in North America where we see strong demand for our behavioural insurance and group
benefits products.
Footnote Number 1 Highest potential businesses include Asia segment, Global WAM, Canada group benefits and North American behavioural insurance products.
Footnote Number 2 See “Caution regarding forward-looking statements” above.
Footnote Number 3 2017 core earnings is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below.
Footnote Number 4 This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.
18 | 2024 Annual Report | Management’s Discussion and Analysis
In 2024, 70% of core earnings were generated from our highest potential businesses compared with 60% in 2023, as the
increase in core earnings from highest potential businesses outpaced the growth in total company core earnings.
Asia segment core earnings in 2024 increased 27% compared with 2023 after adjusting for the impact of changes in foreign
currency exchange rates, primarily reflecting strong business growth, benefits from updates to actuarial methods and
assumptions in 2023 and 2024, as well as improved insurance experience. The segment contributed to 70% of the total company
CSM balance1 as at December 31, 2024 and 74% of the total company new business CSM1 in 2024, demonstrating that
accelerating profitable growth is at the heart of our ambition and supporting our commitment to deliver 50% of total company
core earnings from the Asia region.
Global WAM core earnings in 2024 increased 30% compared with 2023 on a constant exchange rate basis, driven by growth
across all business lines and geographies, including 37% growth in Asia. The segment generated positive net flows in 14 of the
past 15 calendar years, including $13.3 billion of net inflows in 2024, demonstrating our consistent track record of generating and
retaining flows.
Canada Group Insurance core earnings in 2024 benefited from strong business growth as evidenced by a 43% increase in APE
sales compared with 2023.
In the U.S. segment, APE sales of products with the John Hancock Vitality PLUS feature continued to increase and represented
81% of overall U.S. sales in 2024.
In addition, inorganic optimization actions continued to transform our portfolio, shifting our business mix further towards highest
potential businesses. In 2024, we completed the acquisition of CQS, a U.K.-based multi-sector alternative credit manager, which
positively contributed to Global WAM net flows and core earnings in its first year. We closed the largest long-term care (“LTC”)
reinsurance transaction in 1Q24 and closed the largest Canadian universal life reinsurance transaction in 2Q24. We also entered
into an agreement in 4Q24 for a second LTC reinsurance transaction in less than 12 months to further transform our business to
higher return and lower risk.
The strength of our diverse global franchise, strong balance sheet and disciplined capital allocation position us well to capitalize
on attractive opportunities for our highest potential businesses.
2024 Highlights
• In Asia, we continued to invest in our diversified distribution platform to accelerate growth and deliver holistic solutions for
customers:
O
Expanded Manulife Pro, our proprietary proposition for top-tier agents, to Indonesia, Japan and Hong Kong. The
proposition provides select agents with differentiated resources and tools, including dedicated underwriting support and
enhanced customer engagement services with access to customer leads. This initiative contributed to improved agent
productivity, demonstrated by our 23% year-over-year growth in agency APE sales in 2024. With this expansion, Manulife
Pro is now available in five of our markets2; and
O
Further addressed the complex and evolving financial needs of high-net-worth individuals through a focus on innovative
customer solutions. This includes the launch of two new products that cater to the protection, legacy planning and wealth
management needs of high-net-worth customers. The Manulife Global Indexed UL PRO product incorporates our next
generation index account design, providing higher long-term return potential. The Signature Indexed Income product
provides lifetime monthly income payout, benchmarked to the S&P 500 Index, and protection against market volatility.
• In Global WAM, we executed on several initiatives to deliver comprehensive investment solutions and drive growth
opportunities:
O
Completed the acquisition of CQS, a U.K.-based multi-sector alternative credit manager, which positively contributed to
Global WAM net flows and core earnings in 2024. We have leveraged these expanded investment capabilities to launch
the John Hancock Multi Asset Credit Fund in U.S. Retail. This fund is a strong addition to our growing lineup of liquid and
semi-liquid alternative offerings which are part of our larger credit franchise; and
O
Continued to meet investor needs for alternative solutions through the expansion of our product offerings with the launch of
the Manulife Capital Partners VII and Manulife Private Equity Partners II for institutional investors which combined have
garnered over $2 billion in AUMA.
• In Canada, we implemented activity recommendations in the Manulife Vitality program app to provide customers with a more
personalized app experience to help them achieve their health and wellness goals, contributing to a 9 percentage point
increase in the app’s utilization in 2024 compared with 2023.
• In the U.S., we delivered new business growth through innovative enhancements to our current behavioural insurance
solutions and new market offerings for distributors and customers:
O
Entered into a strategic distribution collaboration with Annexus – one of the nation’s leading independent retirement
planning product design and distribution companies – to expand our portfolio of indexed account offerings and reach a
wider market with our Protection Indexed Universal Life solution; and
1 CSM balance and new business CSM are net of non-controlling interests (pre-tax).
2 Manulife Pro is available in Singapore, Vietnam, Indonesia, Japan and Hong Kong.
19
O
Expanded a differentiated enhancement to our entire suite of survivorship solutions that allows customers to proactively
address their estate planning needs now in anticipation of an expiring estate tax legislation.
Digital, Customer Leader
We strive to continue improving our digital, customer leadership through the NPS and straight-through-processing (“STP”)Refer to footnote number 1
lens.
Focus areas:
•
Leverage advanced analytics and artificial intelligence (“AI”) capabilities, globally at scale
•
Build differentiated, market-leading customer experiences
•
Extend customer relationships through new services in health and wellness
•
Harness customer insights from millions of customer interactions to enhance the experience delivered
•
Drive NPS through a robust NPS system that spans across the customer journey
2024
2023
Baseline
Targets2
2018
2017
2025
2027
Net promoter score
27
23
n/a
1
n/a
37
Straight-through-processing (STP)
89%
85%
68%
n/a
88%
n/a
Digital has become our strategic channel for customer servicing interactions, allowing us to deepen customer engagement while
transforming our cost base. As part of our planned $1 billion investment over the three-year period from 2023 to 2025, we
continued to invest in digital capabilities through the delivery of multiple technology transformation initiatives across our operating
segments in 2024; notably, multiple generative AI use cases spanning sales effectiveness, call centre optimization, improved
underwriting speed and accuracy, enhancement of mobile apps and websites enabling customer self-service capabilities, and
launch of targeted campaigns to drive digital adoption. These capabilities are allowing us to rapidly scale and capitalize on
innovation opportunities as well as deploy proprietary digital tools. We expect these capabilities to generate a threefold return on
our investment over five years through 20272 with over $600 million of benefits3 realized in 2024 from our initiatives globally.
We have made significant progress against our NPS ambition, achieving a record high score of 27, a 4-point improvement
compared with 2023, and we are leading or on par with peers4 across the majority of our business lines. We are focused on
driving customer experience improvements across our business portfolio and progressing our mission to make decisions easier,
lives better.
Our progress on STP is a critical lever to transform our global cost base through automation and digitization of manual
processes. We have made consistent progress on our global STP objective across segments in a variety of areas, with a 4-
percentage point improvement compared with 2023 and have exceeded our target of 88%, one year ahead of schedule.
Customer centricity is at the heart of our ambition and we remain focused on achieving our NPS target of 37 by 2027, and
maintaining our STP progress going forward.
2024 Highlights
• Successful generative AI applications:
O
We are driving value from generative AI by rapidly scaling use cases across our organization. We had 27 use cases in
production, with another 32 in development at the end of 2024. Our continued investment in foundational capabilities has
put us in a strong position, and enabled faster and easier execution in deploying AI-based solutions. We are able to quickly
scale use cases, enhancing value for our customers and our business;
O
In Asia, we strengthened agent-customer interactions through the launch of an innovative generative AI sales tool in both
Singapore and Japan. It enables our agents to automatically create personalized engagement strategies to offer customers
the right solutions at the right time based on their needs, preferences, demographic data and transaction histories;
O
In Asia, we enhanced underwriting efficiency in Singapore through the implementation of generative AI, which improves the
accuracy of underwriting decisions by automating document digitization and summarization. This also elevates customer
experience by reducing processing time for policy applications; and
O
In the U.S., we streamlined our underwriting process to improve our customers’ experience and capture more sales by
expanding our use of electronic health records, and leveraging generative AI to automate preliminary underwriting
assessments.
Footnote Number 1 Straight-through-processing represents customer interactions that are completely digital, and includes money movement.
Footnote Number 2 See “Caution regarding forward-looking statements” above.
Footnote Number 3 The benefits from our global digital, customer leadership initiatives include expense saves, growth absorption, revenue benefits (margin businesses) and new
business CSM growth (insurance).
Footnote Number 4 Based on studies conducted in 2024 by IPSOS, a global market research company.
20 | 2024 Annual Report | Management’s Discussion and Analysis
• Self-service capability improvements across mobile applications:
O
In Global WAM, we continued to add new self service capabilities to our Canada Retirement mobile app, which contributed
to a 29% growth in user counts in 2024 compared with the prior year; and
O
In Canada, we entered into a multi-year loyalty rewards partnership agreement with Aeroplan. We launched the Aeroplan
Rewards and Challenges program in the Manulife mobile app that enables eligible group benefits plan members to earn
reward points by completing programs and benefits-related activities to encourage health and well-being.
• Progress in digital adoption and expanded digital solutions:
O
In Global WAM, we advanced and broadened our wealth planning and advice business with the implementation of a new
advisor retail wealth platform and an AI-powered planning tool in Canada and a new AI-powered sales enablement app in
Asia. These tools improve productivity for advisors and agents and deliver an enhanced digital experience for investors;
O
In Canada, we added mental health features and live support to our Manulife mobile app for group benefits members in
partnership with TELUS Health1 that provide eligible members and their families immediate, personal assistance with
navigating the healthcare system to help them understand the types of support available;
O
In the U.S., we continued to modernize the end-to-end purchase and delivery process by introducing a term solution with
digital policy delivery, payment capabilities, and easy registration process to the Life Customer Storefront as well as
Vitality’s website; and
O
In the U.S., we accelerated our distribution team’s ability to act on sales opportunities and improved their efficiency to
assist producers by implementing and subsequently enhancing JHINI, our AI-powered, sales enablement tool.
• Operational efficiency:
O
We have completed phase 1 of our global contact centre transformation, with all our operations re-platformed to a modern,
cloud-based infrastructure. We are now rolling out new features to capitalize on embedded AI capabilities as well as
in-house solutions. For example, we improved the customer experience and operational efficiency of our Japan contact
centre where further enhancement of voice bot capabilities and the application of AI-enabled speech-to-text and call
summarization contributed to a record high transactional NPS in 2024 and reduced average contact centre handling time
by 28% in the second half of 2024, compared with the same period of 2023; and
O
In the U.S., we deployed automated call summarization for our customer service representatives within all contact centres,
contributing to an immediate improvement in average handle time since the launch in May 2024, and subsequently
introduced a generative AI knowledge management chatbot within annuity and long-term care contact centres to further
enhance the customer experience.
Expense Efficiency
We remain focused on driving efficient growth by effectively managing expense growth at a rate below the pace of our top-
line growth, while ensuring outstanding customer experience and digital ways of working.
Focus areas:
•
Leverage global scale, operating efficiencies and digital capabilities
•
Deploy emerging technologies and advanced analytics to achieve the next wave of cost synergies
•
Streamline business processes and eliminate activities not valued by end customers
•
Continue to sustain a culture of expense efficiency and driving efficient growth
2024
2023
Baseline
Medium-term TargetRefer to footnote number 2
2017 (IFRS 4)Refer to footnote number 3
Expense efficiency ratio
44.8%
45.5%
55.4%
<45%
Expense optimization remains a priority in our current operating environment; therefore we continue to explore opportunities
across our businesses to manage expense growth at a rate below the pace of our top-line growth.
We achieved our expense efficiency ratio medium-term target in 2024, attributed to our continued expense discipline. The
expense efficiency ratio was 44.8% for 2024, compared with 45.5% in 2023. The 0.7 percentage point decrease in the ratio
compared with 2023 was driven by an 8% increase in pre-tax core earnings, offset by a 5% increase in core expenses.
Our focus on expense efficiency has enabled us to drive benefits of scale. Our restructuring efforts in Global WAM and Canada
during the second half of 2024 were aimed at optimizing our global operating model and continuing to focus on high growth
priorities. Such strategic actions are expected to generate future savings, improve efficiency, and position us to further capitalize
on emerging opportunities and deliver greater value to our clients.
We remain committed to consistently achieving an expense efficiency ratio of less than 45%.
1 Telus Health (Canada) Ltd.
Footnote Number 2 See “Caution regarding forward-looking statements” above.
3 2017 expense efficiency ratio is a non-GAAP ratio.
21
2024 Highlights
• Continued to improve expense efficiency by lowering unit costs and improving scalability of our operations through:
O
Digitizing to improve automation and straight-through-processing;
O
Reshaping and streamlining processes through Generative AI;
O
Optimizing global footprint and organizational structure;
O
Actively managing third-party spend and procurement; and
O
Rationalizing real estate expenditures
Portfolio Optimization
We will continue to optimize our legacy and low ROE businesses and reduce the combined contributions from long-term
care insurance (“LTC”) and variable annuities (“VA”) businesses.
Focus areas:
• Deliver capital release from legacy or low ROE businesses, including variable annuity, long-term care insurance and
select long-duration, guaranteed insurance products
• Optimize portfolio to enhance our risk profile and ROE
• Create value for customers and shareholders through organic optimization initiatives
2024
2023
Baseline
TargetsRefer to footnote number 1
2017 (IFRS 4)
2025
Core earnings contribution from LTC and VA businesses2
10%
12%
24%
<15%
We aim to create strategic and financial flexibility to deliver on our Total Shareholder Return objective by continuing to assess
inorganic options, taking into account policyholder considerations and the impacts to our risk profile and ROE. In 1Q24, we
completed the reinsurance transaction with Global Atlantic on four in-force blocks of legacy or low ROE businesses, including the
largest LTC reinsurance deal in history. In 2Q24, we completed the largest universal life reinsurance transaction in the Canadian
insurance industry with RGA Canada3, further reducing our risk profile and unlocking significant value for shareholders. In
November 2024, we entered into an agreement with RGA4 to reinsure a younger LTC block and a legacy block of U.S. structured
settlements, and closed the transaction in January 2025. This latest transaction is expected to release $0.8 billion1 of capital,
bringing the total capital release to $12 billion5 from all portfolio optimization efforts since 2018. On a combined basis, these
three inorganic transactions are expected to cumulatively release $2.8 billion of capital and reduce reserves6 by $24 billion. The
two LTC transactions are expected to cumulatively reduce our LTC reserves by 18% and LTC morbidity sensitivity7 by 17%.
We are also confident in our ability to effectively manage the legacy blocks of business to maturity with organic solutions and
optimization, including seeking LTC premium rate increases for which we have a strong track record of success1. We have
received approval for over 90% of the premium rate increases8 that were embedded in our reserves as of the last LTC actuarial
assumption review in 2022. We are also investing in and leveraging digital experiences, analytics capabilities, and healthy aging
solutions to transform the LTC customer experience, providing significant value to our customers and shareholders.
In 2023, two years ahead of schedule, we achieved our target of less than 15% of core earnings contribution from our LTC and
VA businesses. Contribution to core earnings from these businesses was 10% in 2024, a decrease of 2 percentage points as
compared with 2023, reflecting the impact of the GA Reinsurance Transaction, and strong core earnings growth in Asia and
Global WAM. A dedicated team working exclusively on portfolio optimization, and our proactive, disciplined approach in
optimizing the in-force business, are key success factors to these achievements.
2024 Highlights
• Reinsured four in-force blocks of legacy or low ROE businesses with Global Atlantic, including the largest LTC reinsurance
deal in history;
• Reinsured a Canadian universal life insurance block with RGA Canada;
• Entered into an agreement with RGA4 to reinsure a second LTC block and a legacy block of U.S. structured settlements. This
transaction was closed in January 2025; and
Refer to footnote number 1 See “Caution regarding forward-looking statements” above.
Refer to footnote number 2 This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below.
3 RGA Life Reinsurance Company of Canada.
4 Reinsurance Group of America, Incorporated.
Refer to footnote number 5 Pro forma. Includes $9 billion of capital release from 2018 to 2022 under IFRS 4, $2.2 billion from 2023 to 2024 initiatives under IFRS 17, and an estimated
$0.8 billion capital to be released from this transaction in 2025.
Refer to footnote number 6 IFRS 17 current estimate of present value of future cash flows + risk adjustment + contractual service margin.
7 Morbidity sensitivity is based on 2Q24, grossed up for 3Q24 reserves.
Refer to footnote number 8 Represents present value of future premium rate increases or other equivalent options to be offered to LTC policyholders.
22 | 2024 Annual Report | Management’s Discussion and Analysis
• In the LTC business, we,
O
Engaged partners and explored new tools, resources and networks to support customers, their families and caregivers at
various moments in the aging-at-home journey, evolving our relationship from that of policy manager to a partner in
ongoing health and care;
O
Delivered significant value by taking actions to reduce fraud and simplifying complex claims activities which will ultimately
drive a best-in-class claims experience. In 2024, our efforts achieved significant value for our customers and businesses
through claim savings of more than 2%; and
O
Continued with our efforts in gaining approval on premium rate increases.
High Performing Team
We are committed to enabling a high performing team and maintaining top quartile employee engagement compared to
global financial services and insurance peers.
Focus areas:
• Organizational effectiveness and speed of decision-making
• Diversity, equity, and inclusion
• Developing our talent with differentiated capabilities
• Continuing to strengthen our value proposition to attract and retain top talent
2024
2023
Baseline
TargetRefer to footnote number 1
2017Refer to footnote number 2
2023 and onwards
Employee Engagement
1st quartile
1st quartile
2nd quartile
1st quartile
We are now in the fifth year of being in the top quartile employee engagement rank3, maintaining our position in 2024.
Our high performing team has been a key enabler of accomplishments to date, and we remain committed to maintaining top
quartile employee engagement going forward.
2024 Highlights
• Awarded the Gallup Exceptional Workplace Award for the second consecutive year, recognizing our focus on engagement
and prioritization of employee experience that creates an authentic, unique culture to empower our colleague population to do
and achieve more;
• Recognized globally across various markets by a number of leading organizations:
O
By Forbes as one of the World’s Best Employers for the fifth consecutive year, one of Canada’s Best Employers for the
eighth consecutive year, Canada’s Best Employers for Diversity, and America’s Best Employers for Diversity;
O
By Mediacorp Canada Inc. as one of Canada’s Top 100 Employers, Greater Toronto’s Top Employers, Canada’s Top
Employers for Young People, and Canada’s Best Diversity Employers;
O
By HR Asia as one of the Best Companies to Work for in Asia in six of our markets, as well as for Diversity, Equity and
Inclusion Awards in three of our markets; and by Hong Kong Business Management Excellence for DEI Initiative of the
Year.
Footnote Number 1 See “Caution regarding forward-looking statements” above.
Footnote Number 2 Starting in 2019, engagement surveys were transitioned to the Gallup methodology.
Footnote Number 3 Based on the annual global employee engagement survey conducted by Gallup. Ranking is measured by the engagement grand mean as compared to Gallup’s
Finance and Insurance Company level database.
23
2. Asia
Our Asia segment offers insurance and insurance-based wealth accumulation products, driven by a customer-centric
strategy, and leverages the asset management expertise of, and products managed by our Global Wealth and Asset
Management segment. We are a top three pan-Asian life insurer1, with a history of over 125 years and 13 million
insurance customers in the region, focused on addressing the significant health and mortality protection gaps and low
insurance penetration rates across Asia.
With a broad geographic presence across 12 markets – Hong Kong, Macau, Japan, Bermuda2, mainland China,
Singapore, Vietnam, Indonesia, the Philippines, Malaysia, Cambodia, and Myanmar – and a robust multi-channel
distribution platform, we are well-positioned to create value for our customers, employees, and shareholders. We have
close to 110,000 contracted agents and over 100 bank partnerships, of which our exclusive bancassurance
partnerships provide us access to over 35 million bank customers. This includes our regional exclusive bancassurance
partnership with DBS Bank across Singapore, Hong Kong, mainland China, and Indonesia. We also work with many
independent agents, financial advisors, and brokers.
Asia continues to be a core driver of growth for Manulife, as we execute our strategy to accelerate growth through our
diversified distribution platform, deliver sustainable margin expansion with our holistic solutions, drive expense
efficiency, and further enhance customer experience through digital capabilities and analytics. Our growth is
underpinned by Asia megatrends including fast growing economies, rising middle class populations, and growing
unmet health and protection needs driving continued demand for financial solutions.
In 2024, our Asia segment contributed 34%3 of the Company’s core earnings from operating segments and, as at December 31,
2024, accounted for 12%3 of the Company’s assets under management and administration. See section 1 “Strategic Priorities
and Progress Update” above, for information on the core earnings contributions from Asia segment and Asia operations in Global
WAM segment combined.
Profitability
Asia reported net income attributed to shareholders of $2,355 million in 2024 compared with $1,348 million in 2023. Net income
attributed to shareholders is comprised of core earnings, which were $2,589 million in 2024 compared with $2,048 million in
2023, and items excluded from core earnings, which amounted to a net charge of $234 million for 2024 compared with a net
charge of $700 million in 2023. See section 13 “Non-GAAP and Other Financial Measures” below, for a reconciliation of core
earnings to net income (loss) attributed to shareholders. The changes in net income attributed to shareholders and core earnings
expressed in Canadian dollars were due to the factors described below and, in addition, the change in core earnings reflected a
net $16 million unfavourable impact due to changes in various foreign currency exchange rates versus the Canadian dollar.
Expressed in U.S. dollars, the presentation currency of the segment, net income attributed to shareholders was US$1,717 million
in 2024 compared with US$995 million in 2023. Core earnings were US$1,890 million in 2024 compared with US$1,518 million in
2023 and items excluded from core earnings amounted to a net charge of US$173 million in 2024 compared with a net charge of
US$523 million in 2023. Items excluded from core earnings are outlined in the table below.
Core earnings in 2024 increased 27% compared with 2023, after adjusting for the impact of changes in foreign currency
exchange rates. The changes in core earnings by geography are primarily due to the items noted below and also include the
impact of higher investment income on allocated capital. Investment income on allocated capital increased Asia’s core earnings
by $76 million in 2024 compared with 2023:
• Hong Kong increased 36% driven by an increase in expected earnings on insurance contracts, higher expected investment
earnings, and improved insurance experience. The increase in expected earnings on insurance contracts was driven primarily
by business growth and the net impact of updates to actuarial methods and assumptions on our CSM and risk adjustment in
2023 and 2024;
• Japan increased 26% reflecting improved insurance experience and an increase in expected earnings on insurance contracts.
The increase in expected earnings on insurance contracts was driven primarily by business growth and the net impact of
updates to actuarial methods and assumptions on our CSM and risk adjustment in 2023 and 2024. In addition, the GA
Reinsurance Transaction increased core earnings by US$9 million in 2024 compared with 2023, attributable to the impact on
expected investment earnings, expected earnings on insurance contracts, and the change in ECL;
• International High Net Worth business increased 58% due to improved insurance experience, an increase in expected
earnings on insurance contracts due to business growth, higher expected investment earnings, and the change in ECL;
• Mainland China decreased 14% reflecting lower expected earnings on insurance contracts, partially offset by higher expected
investment earnings;
1 Based on APE sales.
Footnote Number 2 This represents our International High Net Worth business.
Footnote Number 3 This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.
24 | 2024 Annual Report | Management’s Discussion and Analysis
• Singapore increased 33% driven by an increase in expected earnings on insurance contracts and higher expected investment
earnings. The increase in expected earnings on insurance contracts was driven primarily by business growth and the net
impact of updates to actuarial methods and assumptions on our CSM and risk adjustment in 2023 and 2024;
• Vietnam was in line with 2023 as lower expected earnings on insurance contracts were offset by higher expected investment
earnings and improved insurance experience; and
• Other Emerging Markets decreased 3% reflecting unfavourable insurance experience.
The table below presents net income attributed to shareholders for Asia for 2024 and 2023 consisting of core earnings and items
excluded from core earnings.
For the years ended December 31,
($ millions)
Canadian $
US $
2024
2023
2024
2023
Core earnings
$ 2,589
$ 2,048
$ 1,890
$ 1,518
Items excluded from core earnings:(1)
Market experience gains (losses)
(178)
(553)
(131)
(413)
Realized gains (losses) on debt instruments
(374)
(113)
(276)
(83)
Derivatives and hedge accounting ineffectiveness
(92)
(264)
(67)
(197)
Actual less expected long-term returns on public equity
204
12
151
8
Actual less expected long-term returns on ALDA
21
(72)
15
(54)
Other investment results
63
(116)
46
(87)
Changes in actuarial methods and assumptions that flow directly through income
(5)
(68)
(4)
(51)
Reinsurance transactions, tax-related items and other
(51)
(79)
(38)
(59)
Total items excluded from core earnings
(234)
(700)
(173)
(523)
Net income (loss) attributed to shareholders
$ 2,355
$ 1,348
$ 1,717
$
995
Footnote Number (1)For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the total Company “Profitability” section above.
Business Performance
(All percentages quoted are on a constant exchange rate basis)
APE sales were US$4,429 million in 2024, representing an increase of 36% compared with 2023, driven by broad-based growth
across most geographies in Asia, partially offset by a decrease in Vietnam. NBV was US$1,612 million in 2024, an increase of
35% compared with 2023, driven by higher sales volumes, partially offset by business mix. NBV margin was 40.7% in 2024, a
decrease of 0.5 percentage points compared with 2023. New business CSM was US$1,567 million in 2024, a 38% increase
compared with 2023, due to higher sales volumes and the impact of updates to actuarial methods and assumptions in the
second half of 2023, partially offset by business mix.
• In Hong Kong, APE sales were US$1,626 million in 2024, an 80% increase compared with 2023, reflecting higher sales
across all channels driven by strong growth in sales of savings, health and protection products to both domestic and mainland
Chinese visitor customers. NBV of US$772 million in 2024 increased 43% compared with 2023 due to higher sales volumes,
partially offset by product mix. NBV margin of 47.5% in 2024 decreased 12.0 percentage points compared with 2023. New
business CSM of US$670 million in 2024 increased 34% compared with 2023 due to higher sales volumes and the impact of
updates to actuarial methods and assumptions in the second half of 2023, partially offset by product mix.
• In Japan, APE sales were US$391 million in 2024, an increase of 61% compared with 2023, reflecting higher sales in the
broker channel, driven by strong growth in non-participating savings products primarily to customers with maturing products.
NBV of US$194 million in 2024 increased 78% compared with 2023 due to higher sales volumes and product mix. NBV
margin of 49.5% in 2024 increased 4.9 percentage points compared with 2023. New business CSM of US$212 million in 2024
increased 146% compared with 2023 due to higher sales volumes, product mix and the impact of updates to actuarial
methods and assumptions in the second half of 2023.
• International High Net Worth business APE sales were US$170 million in 2024, in line with 2023. NBV was US$126 million, a
19% decrease compared with 2023 due to product mix. NBV margin was 74.2%, a decrease of 16.6 percentage points
compared with 2023. New business CSM was US$137 million, a 20% decrease compared with 2023 due to product mix.
• In mainland China, APE sales were US$896 million in 2024, a 24% increase compared with 2023, reflecting growth in the
bancassurance channel, partially offset by a decline in the agency channel. NBV of US$183 million in 2024 increased 68%
compared with 2023 due to higher sales volumes and product mix. NBV margin of 40.0% in 2024 increased 10.4 percentage
points compared with 2023. New business CSM of US$198 million in 2024 increased 94% compared with 2023 due to higher
sales volumes, product mix and the impact of updates to actuarial methods and assumptions in the second half of 2023.
• In Singapore, APE sales were US$955 million in 2024, a 16% increase compared with 2023, reflecting higher sales in the
bancassurance and agency channels. NBV of US$278 million in 2024 increased 34% compared with 2023 due to higher sales
volumes and product mix. NBV margin of 29.2% in 2024 increased 3.9 percentage points compared with 2023. New business
CSM of US$285 million in 2024 increased 56% compared with 2023 due to higher sales volumes, product mix and the impact
of updates to actuarial methods and assumptions in the second half of 2023.
25
• In Vietnam, APE sales were US$95 million in 2024, a 32% decrease compared with 2023, reflecting a decline in the agency
and bancassurance channels due to the impact of industry headwinds and the cessation of the partnership agreement with
Vietnam Technological and Commercial Joint-Stock Bank. NBV of negative US$5 million in 2024 decreased by US$30 million
compared with 2023 due to lower sales volumes impacting expense coverage and the impact of updates to actuarial methods
and assumptions. Consequentially, NBV margin of negative 5.3% in 2024 decreased 22.4 percentage points compared with
2023. New business CSM of US$12 million in 2024 decreased 80% compared with 2023 due to lower sales volumes
impacting expense coverage and the impact of updates to actuarial methods and assumptions.
• In Other Emerging Markets, APE sales were US$296 million in 2024, a 12% increase compared with 2023, reflecting higher
sales in the bancassurance and agency channels. NBV was US$64 million, a 25% increase compared with 2023 due to
higher sales volumes and product mix. NBV margin was 23.7%, an increase of 2.3 percentage points compared with 2023.
New business CSM was US$53 million, a 59% increase compared with 2023 due to higher sales volumes, product mix and
the impact of updates to actuarial methods and assumptions in the second half of 2023.
CSM net of NCI was US$10,807 million as at December 31, 2024, an increase of US$1,237 million compared with
December 31, 2023. Organic CSM movement was US$784 million in 2024 driven by the impact of new business and interest
accretion, partially offset by amortization recognized in core earnings and a net reduction from insurance experience. Inorganic
CSM movement was US$453 million in 2024 largely due to changes in actuarial methods and assumptions that adjust the CSM,
the impact of equity market performance and the impact of the GA Reinsurance Transaction, partially offset by the strengthening
of the U.S. dollar against most Asian currencies.
Business Performance
For the years ended December 31,
($ millions)
Canadian $
US $
2024
2023
2024
2023
Annualized premium equivalent sales
$
6,073
$
4,469
$
4,429
$
3,313
New business value
$
2,209
$
1,627
$
1,612
$
1,206
New business CSM(1)
$
2,148
$
1,549
$
1,567
$
1,148
CSM net of NCI
$ 15,540
$ 12,617
$ 10,807
$
9,570
(1) New business CSM is net of NCI.
Assets under Management1 (“AUM”)
Asia’s assets under management were US$135.7 billion as at December 31, 2024, an increase of US$7.4 billion or 9%
compared with December 31, 2023. The increase was driven by the impact of positive equity market performance on invested
assets and segregated funds net assets, partially offset by the transfer of invested assets related to the GA Reinsurance
Transaction.
Assets under Management
As at December 31,
($ millions)
Canadian $
US $
2024
2023
2024
2023
Total invested assets
$ 166,590
$ 144,433
$ 115,843
$ 109,533
Segregated funds net assets
28,622
24,854
19,904
18,846
Total assets under management
$ 195,212
$ 169,287
$ 135,747
$ 128,379
Strategic Highlights
Asia continues to be a core driver of growth for Manulife, as we execute our strategy to accelerate growth through our diversified
distribution platform, deliver sustainable margin expansion with our holistic solutions, drive expense efficiency, and further
enhance customer experience through digital capabilities and analytics.
We continued to invest in our diversified distribution platform to accelerate growth and deliver holistic solutions for customers. In
2024, we:
• Expanded Manulife Pro, our proprietary proposition for top-tier agents, to Indonesia, Japan and Hong Kong. The proposition
provides select agents with differentiated resources and tools, including dedicated underwriting support and enhanced
customer engagement services with access to customer leads. This initiative contributed to improved agent productivity,
demonstrated by our 23% year-over-year growth in agency APE sales in 2024. With this expansion, Manulife Pro is now
available in five of our markets2;
• Further addressed the complex and evolving financial needs of high-net-worth individuals through a focus on innovative
customer solutions. This includes the launch of two new products that cater to the protection, legacy planning and wealth
management needs of high-net-worth customers. The Manulife Global Indexed UL PRO product incorporates our next
Footnote Number 1 This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more information.
Footnote Number 2 Manulife Pro is available in Singapore, Vietnam, Indonesia, Japan and Hong Kong.
26 | 2024 Annual Report | Management’s Discussion and Analysis
generation index account design, providing higher long-term return potential. The Signature Indexed Income product provides
lifetime monthly income payout, benchmarked to the S&P 500 Index, and protection against market volatility; and
• Enhanced our health proposition through new partnerships with innovative healthcare services providers in Hong Kong and
Singapore to help our customers proactively manage their health. In Hong Kong, we have strengthened our integrated cross-
border healthcare offerings with holistic health management, cancer screening and treatment, and other medical services. In
Singapore, eligible customers will be able to access personalized advanced cancer care and gut microbiome health solutions.
We also continued to invest in our AI and digital capabilities to enhance the customer and distributor experience. In 2024, we:
• Strengthened agent-customer interactions through the launch of an innovative generative AI sales tool in both Singapore and
Japan. It enables our agents to automatically create personalized engagement strategies to offer customers the right solutions
at the right time based on their needs, preferences, demographic data and transaction histories;
• Enhanced underwriting efficiency in Singapore through the implementation of generative AI, which improves the accuracy of
underwriting decisions by automating document digitization and summarization. This also elevates customer experience by
reducing processing time for policy applications;
• Improved the customer experience and operational efficiency of our Japan contact centre as part of global contact centre
transformation initiatives. Our further enhancement of voice bot capabilities and the application of AI-enabled speech-to-text
and call summarization contributed to a record high transactional NPS in 2024 and reduced average contact centre handling
time by 28% in the second half of 2024, compared with the same period of 2023; and
• Completed the roll-out of M-Pro, a first-in-market digital pre-issuance verification sales tool, to all distribution channels in
Vietnam. M-Pro has further improved customer experience and we have received outstanding feedback on the ease of
navigating policy issuance details, ability to review crucial policy information and transparency of the consultation process.
We continued to maintain a diverse and engaged culture and make Manulife a great place to work. Manulife has been
recognized by HR Asia as one of the “Best Companies to Work for in Asia 2024” in six of our markets.
27
3. Canada
Our Canada segment has been committed to customers in our home market for over 135 years. We serve the needs of
one in six adults overall across the country, including members of approximately 27,000 businesses and organizations
in our group benefits business, through a diverse and competitive suite of financial and health-protection offerings
tailored to individuals, families, and business owners. We leverage the asset management expertise and products
managed by our Global Wealth and Asset Management segment.
Our Canadian business lines are: group life, health, and disability insurance solutions for employers; insurance and
guaranteed investment products including life, critical illness, segregated funds, and annuities sold via retail advisors;
and Affinity group insurance offerings including life, health, travel, disability, and creditor insurance solutions sold
through the Manulife CoverMe® brand, mortgage brokers, travel advisors, and sponsor groups and associations. We
also offer flexible banking products through Manulife Bank.
We aim to be the leading life and health insurer in Canada, by focusing on four key areas: continuing to strengthen our
core operations; digital customer leadership; distribution expansion; and differentiation through health.
In 2024, our Canada segment contributed 21% of the Company’s core earnings from operating segments and, as at
December 31, 2024, accounted for 9% of the Company’s assets under management and administration.
Profitability
Canada’s reported net income attributed to shareholders of $1,221 million in 2024 compared with $1,191 million in 2023. Net
income attributed to shareholders is comprised of core earnings, which were $1,568 million in 2024 compared with $1,487 million
in 2023, and items excluded from core earnings, which amounted to a net charge of $347 million in 2024 compared with a net
charge of $296 million in 2023. Items excluded from core earnings are outlined in the table below. See section 13 “Non-GAAP
and Other Financial Measures” below, for a reconciliation of core earnings to net income attributed to shareholders.
The $81 million, or 5%, increase in core earnings was driven by business growth in Group Insurance, improved insurance
experience in Individual Insurance, and a release in the provision for ECL in 2024 compared with a charge in 2023, partially
offset by lower expected investment earnings. In addition, the RGA Canadian Reinsurance Transaction reduced core earnings
by $8 million in 2024 compared with 2023.
The table below presents net income attributed to shareholders for Canada for 2024 and 2023 consisting of core earnings and
items excluded from core earnings.
For the years ended December 31,
($ millions)
2024
2023
Core earnings
$ 1,568
$ 1,487
Items excluded from core earnings:(1)
Market experience gains (losses)
(384)
(341)
Realized gains (losses) on debt instruments
(328)
(10)
Derivatives and hedge accounting ineffectiveness
109
65
Actual less expected long-term returns on public equity
65
(13)
Actual less expected long-term returns on ALDA
(235)
(327)
Other investment results
5
(56)
Changes in actuarial methods and assumptions that flow directly through income
2
41
Restructuring charge
(6)
Zero
Reinsurance transactions, tax-related items and other
41
4
Total items excluded from core earnings
(347)
(296)
Net income (loss) attributed to shareholders
$ 1,221
$ 1,191
Footnote Number (1)For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the total Company “Profitability” section above.
Business Performance
APE sales were $1,689 million in 2024, an increase of 20% compared with 2023.
• Individual Insurance APE sales of $523 million in 2024 decreased 7% compared with 2023, driven by the non-recurrence of a
large affinity markets sale in 2023, partially offset by higher participating life insurance sales.
• Group Insurance APE sales of $923 million in 2024 increased 43% compared with 2023, reflecting higher sales across all
group benefits markets, primarily due to large case sales.
• Annuities APE sales of $243 million in 2024 increased 21% compared with 2023, primarily due to higher sales of segregated
fund products.
28 | 2024 Annual Report | Management’s Discussion and Analysis
CSM was $4,109 million as at December 31, 2024, an increase of $49 million compared with December 31, 2023. Organic CSM
movement was $104 million in 2024 driven by the impact of new business and interest accretion, partially offset by amortization
recognized in core earnings. Inorganic CSM movement was $(55) million in 2024, reflecting the impacts of the RGA Canadian
Reinsurance Transaction and the net unfavourable impact of interest rates partially offset by equity markets. This reduction was
partially offset by changes in actuarial methods and assumptions that adjust the CSM.
Manulife Bank average net lending assets1 were $26.0 billion in 2024, an increase of $1.0 billion, or 4%, compared with 2023,
driven by business growth and improved mortgage retention.
Business Performance
For the years ended December 31,
($ millions)
2024
2023
APE sales
$
1,689
$
1,409
Contractual service margin
$
4,109
$
4,060
Manulife Bank average net lending assets
$
26,020
$
25,050
Assets under Management
Canada’s assets under management of $145.2 billion as at December 31, 2024 decreased $2.3 billion, or 2%, from $147.5 billion
as at December 31, 2023, driven by the transfer of invested assets related to the RGA Canadian Reinsurance Transaction,
partially offset by the net impact from interest rates and equity markets.
Assets under Management
As at December 31,
($ millions)
2024
2023
Total invested assets
$ 107,141
$ 111,456
Segregated funds net assets
38,099
36,085
Total assets under management
$ 145,240
$ 147,541
Strategic Highlights
We continued to accelerate the growth of our business by enhancing our digital offerings through key partnerships and
innovative upgrades for our clients so that they can continue to focus on improving their health and wellness, and introducing
new products to meet the expanding needs of Canadians. During 2024, we:
• Established strategic partnerships and enhanced our digital apps, enabling clients to leverage personalized features on their
journey to improve their health and well-being:
O
Entered into a multi-year loyalty rewards partnership agreement with Aeroplan. We launched the Aeroplan Rewards and
Challenges program in the Manulife mobile app that enables eligible group benefits plan members to earn reward points by
completing programs and benefits-related activities to encourage health and well-being;
O
Added mental health features and live support to our Manulife mobile app for group benefits members in partnership with
TELUS Health2, that provide eligible members and their families immediate, personal assistance with navigating the
healthcare system to help them understand the types of support available;
O
Implemented activity recommendations in the Manulife Vitality program app to provide customers with a more personalized
app experience to help them achieve their health and wellness goals, contributing to a 9 percentage point increase in the
app’s utilization in 2024 compared with 2023; and
O
Published a special report for employers titled “Promoting women’s health for a vibrant workforce”. Prepared in
collaboration with Cleveland Clinic Canada and the Centre for Addiction and Mental Health, the report uncovered key
insights about women’s health and provided recommendations that employers can take to better support women in the
workforce.
• Offered additional solutions for Canadians and their families to meet their protection and accumulation needs by expanding
our product shelf:
O
Introduced a guaranteed issue life product, designed to provide accessible life insurance coverage with guaranteed fixed
premiums for a wide range of individuals seeking straightforward and reliable life insurance coverage; and
O
Refreshed our suite of segregated fund options with a new product that features a simplified, all-inclusive fee structure and
offers Canadians an investment solution to help with their estate planning needs.
Footnote Number 1 This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more information.
2 Telus Health (Canada) Ltd.
29
4. U.S.
Our U.S. segment is committed to helping our customers live longer, healthier, better lives by providing an array of life
insurance and insurance-based wealth accumulation solutions to meet a variety of their needs, and making behavioural
insurance a standard component on all our life insurance solutions through the John Hancock Vitality Program.
We operate under the brand of John Hancock with more than 160 years of history in the U.S. We have built lifelong
customer relationships and created a vast distribution network of licensed financial advisors, who help us bring the
benefits of life insurance, wellness, and wealth planning to more individuals and their families. Our life insurance
solutions are designed to meet customers’ estate, business, income-protection, and wealth accumulation needs; they
also leverage the expertise and solutions provided by our Global Wealth and Asset Management segment.
Over the past decade, we have transitioned from being a passive claims payer to actively rewarding our customers for
taking small, everyday steps toward better long-term health. To that end, we have integrated behavioural insurance
across our suite of solutions, offering our customers tools, technology, education, and rewards through the John
Hancock Vitality Program – in collaboration with partners including GRAIL, Verily, Apple, Prenuvo, and Massachusetts
Institute of Technology (“MIT”) AgeLab – to help them make more informed decisions about their overall health.
We also have in-force LTC and annuity businesses. Our proven record of organically managing our LTC blocks as well
as our LTC, variable and fixed annuity reinsurance transactions over the last few years have been significant
contributors to the Company’s efforts to transform the business portfolio to one of higher returns and lower risk.
In 2024, our U.S. segment contributed 22% of the Company’s core earnings from operating segments and, as at December 31,
2024, accounted for 13% of the Company’s assets under management and administration.
Profitability
U.S. reported net income attributed to shareholders of $135 million in 2024 compared with $639 million in 2023. Net income
attributed to shareholders is comprised of core earnings, which was $1,690 million in 2024 compared with $1,759 million in 2023,
and items excluded from core earnings, which amounted to a net charge of $1,555 million in 2024 compared with a net charge of
$1,120 million in 2023. See section 13 “Non-GAAP and Other Financial Measures” below, for a reconciliation of core earnings to
net income (loss) attributed to shareholders. The changes in core earnings expressed in Canadian dollars were due to the
factors described below and additionally, reflected a $24 million favourable impact from the strengthening of the U.S. dollar
compared with the Canadian dollar.
Expressed in U.S. dollars, the functional currency of the segment, net income attributed to shareholders was US$96 million in
2024 compared with US$473 million in 2023. Core earnings were US$1,234 million in 2024 compared with US$1,304 million in
2023 and items excluded from core earnings amounted to a net charge of US$1,138 million in 2024 compared with a net charge
of US$831 million in 2023. Items excluded from core earnings are outlined in the table below.
The US$70 million, or 5%, decrease in core earnings was mainly due to the impact of the GA Reinsurance Transaction, lower
expected investment earnings, unfavourable net claims experience, and the impact of the annual review of actuarial methods
and assumptions. These impacts were partially offset by a lower charge in the ECL provision in 2024. Net claims experience
primarily reflected more unfavourable experience in long-term care and less favourable experience in life. Investment income on
allocated capital also increased core earnings by US$22 million in 2024 compared with 2023. The GA Reinsurance Transaction
reduced core earnings by US$69 million in 2024 compared with 2023, attributable to the impact on expected earnings on
insurance contracts, expected investment earnings, insurance experience, and the change in ECL.
The table below presents net income attributed to shareholders for the U.S. for 2024 and 2023 consisting of core earnings and
items excluded from core earnings.
For the years ended December 31,
($ millions)
Canadian $
US $
2024
2023
2024
2023
Core earnings
$ 1,690
$ 1,759
$ 1,234
$ 1,304
Items excluded from core earnings:Refer to footnote number (1)
Market experience gains (losses)
(1,327)
(1,196)
(971)
(887)
Realized gains (losses) on debt instruments
(525)
(6)
(385)
(5)
Derivatives and hedge accounting ineffectiveness
(33)
(14)
(23)
(10)
Actual less expected long-term returns on public equity
(47)
6
(34)
5
Actual less expected long-term returns on ALDA
(751)
(1,212)
(550)
(899)
Other investment results
29
30
21
22
Changes in actuarial methods and assumptions that flow directly through income
(202)
132
(148)
98
Reinsurance transactions, tax-related items and other
(26)
(56)
(19)
(42)
Total items excluded from core earnings
(1,555)
(1,120)
(1,138)
(831)
Net income (loss) attributed to shareholders
$
135
$
639
$
96
$
473
Footnote Number (1)For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the total Company “Profitability” section above.
30 | 2024 Annual Report | Management’s Discussion and Analysis
Business Performance
U.S. APE sales of US$454 million in 2024 increased 9% compared with 2023, reflecting increased demand from affluent
customers for accumulation insurance products, partially offset by lower sales of protection insurance products. APE sales of
products with the John Hancock Vitality PLUS feature increased 17%, and represented 81% of overall U.S. sales compared with
75% in 2023.
CSM was US$1,715 million as at December 31, 2024, a decrease of US$1,113 million compared with December 31, 2023.
Organic CSM movement was US$44 million in 2024 driven by the impact of new business and interest accretion, partially offset
by amortization recognized in core earnings and net unfavourable insurance experience. The net unfavourable insurance
experience was mainly due to life claims and lapse experience. Inorganic CSM movement was US$(1,157) million in 2024 due to
changes in actuarial methods and assumptions that adjust the CSM, the impact of the GA Reinsurance Transaction as well as an
in-force reinsurance transaction covering certain life mortality, partially offset by the favourable impacts from equity market
experience and higher interest rates.
Business Performance
For the years ended December 31,
($ millions)
Canadian $
US $
2024
2023
2024
2023
APE sales
$
623
$
562
$
454
$
416
Contractual service margin
$
2,468
$
3,738
$
1,715
$
2,828
Assets under Management
U.S. assets under management of US$149 billion as at December 31, 2024 decreased 3% compared with December 31, 2023.
The decrease was primarily due to the transfer of invested assets related to the GA Reinsurance Transaction, partially offset by
the net impact from interest rate and equity markets on both segregated funds net assets and total invested assets.
Assets under Management
As at December 31,
($ millions)
Canadian $
US $
2024
2023
2024
2023
Total invested assets
$
136,833
$
133,959
$
95,142
$
101,592
Segregated funds net assets
77,440
68,585
53,845
52,014
Total assets under management
$
214,273
$
202,544
$
148,987
$
153,606
Strategic Highlights
At John Hancock, we are focused on profitably growing our life insurance business by expanding our product offerings,
continuing to modernize the end-to-end purchase and delivery processes, as well as enhancing the customer experience. We
are also focused on optimizing our legacy and in-force portfolios through both organic initiatives and strategic reinsurance
transactions to create shareholder value. In 2024, we:
Delivered new business growth through innovative enhancements to our current solutions and new market offerings for
distributors and customers:
• Entered into a strategic distribution collaboration with Annexus – one of the nation’s leading independent retirement planning
product design and distribution companies – to expand our portfolio of indexed account offerings and reach a wider market
with our Protection Indexed Universal Life solution;
• Streamlined our underwriting process to improve our customers’ experience and capture more sales by expanding our use of
electronic health records, and leveraging generative AI to automate preliminary underwriting assessments; and
• Expanded a differentiated enhancement to our entire suite of survivorship solutions that allows customers to proactively
address their estate planning needs now in anticipation of an expiring estate tax legislation.
Focused our attention on improving our digital offerings to create compelling customer experiences and improve expense
efficiency:
• Continued to modernize the end-to-end purchase and delivery process by introducing a term solution with digital policy
delivery, payment capabilities, and easy registration process to the Life Customer Storefront as well as Vitality’s website;
31
• Accelerated our distribution team’s ability to act on sales opportunities and improved their efficiency to assist producers by
implementing and subsequently enhancing JHINI, our AI-powered, sales enablement tool; and
• Deployed automated call summarization for our customer service representatives within all contact centres, contributing to an
immediate improvement in average handle time since the launch in May, and subsequently introduced a generative AI
knowledge management chatbot within annuity and long-term care contact centres to further enhance the customer
experience.
Built upon our commitment to help customers live longer, healthier, better lives:
• Expanded our annual ‘Longer.Healthier.Better.’ symposium to double the audience of life insurance brokers, reinsurers,
industry and global longevity leaders, and local government officials, when compared to last year’s symposium, to share the
latest research and innovations driving longevity. With an NPS score of 92, the symposium continues to be significantly well-
received;
• Entered a five-year, multimillion-dollar research collaboration with MIT AgeLab to shape the future of longevity innovation and
drive actionable insights for the business community, policymakers, as well as individuals and their families;
• Became the first U.S. life insurer to offer discounted and prioritized access to Prenuvo – a whole body MRI scan for the early
detection of cancer and other diseases – to eligible John Hancock Vitality members; and
• Provided access to GRAIL’s Galleri® multi-cancer early detection test to certain eligible John Hancock Vitality members ages
40 to 49 (previously ages 50 and up). This change aligns our offering with recent medical research indicating a significant
increase in early-onset cancer diagnoses1, reinforcing our commitment to early detection and better health outcomes for our
members.
Accelerated optimizing the financial results of our legacy and in-force blocks:
• Strengthened the value of our LTC insurance by leveraging advanced analytic models to eliminate fraud, waste, and abuse,
developing preferred provider networks, as well as ensuring not only our customers’ financial protection but also fostering their
overall well-being and helping them achieve better health outcomes (ultimately delaying, shortening, or preventing care
requirements). In 2024, our efforts achieved significant value for our customers and businesses through claim savings of more
than 2%.
1 Jianhui Zhao, Liying Xu, et al – Global trends in incidence, death, burden and risk factors of early-onset cancer from 1990 to 2019; BMJ Oncology 2023.
32 | 2024 Annual Report | Management’s Discussion and Analysis
5. Global Wealth and Asset Management
Our Global Wealth and Asset Management segment, branded Manulife Wealth & Asset Management, is defined by our
purpose: to make decisions easier and lives better by empowering investors for a better tomorrow. We operate across
19 geographies, including 10 in Asia1, distributing innovative investment solutions to both individual and institutional
investors through three integrated and complementary business lines. We seek to offer leading capabilities across a
wide spectrum of public and private asset classes, leveraging the expertise of our team of over 600 investment
professionals worldwide.
At our core, we believe in good stewardship and incorporating sustainable asset management into our business
practices. We prioritize engagement with companies and investors with a view to addressing systemic risks, which we
believe allows us to develop and provide resilient alpha generating investment solutions to our customers.
Our Retirement business serves more than 9 million investors in North America and Asia through retirement plan
solutions, with investments managed by our internal teams and third-party managers. We offer financial guidance and
advice to investors to help improve financial preparedness and also provide solutions for investors when they retire or
leave their employer plan.
Our Retail business serves individual investors primarily through third-party intermediaries, and, in select markets,
through a direct-to-customer network including our Manulife Wealth business in Canada. Our fund platform consists
predominantly of internally managed solutions. We also supplement our solutions by partnering with third-party
managers through sub-advisory agreements.
Our Institutional Asset Management business serves pension plans, foundations, endowments, financial institutions,
and other institutional investors worldwide including our own insurance business. Our solutions span all major asset
classes including equities, fixed income, and alternative assets (real estate, timberland, farmland, private equity/debt
and infrastructure).
We believe that together, our global footprint, investment expertise, and channel breadth position us strongly to
capitalize on high-growth opportunities in the most attractive markets globally.
In 2024, our Global WAM segment contributed 23% of the Company’s core earnings from operating segments and, as at
December 31, 2024, represented 64% of the Company’s total assets under management and administration.
Profitability
Global WAM’s net income attributed to shareholders was $1,597 million in 2024 compared with $1,297 million in 2023, and core
earnings were $1,736 million in 2024 compared with $1,321 million in 2023. Items excluded from core earnings are outlined in
the table below and amounted to a net charge of $139 million in 2024 compared with a net charge of $24 million in 2023. See
section 13 “Non-GAAP and Other Financial Measures” below, for a reconciliation of core earnings to net income (loss) attributed
to shareholders.
Core earnings increased $415 million, or 30% compared with 2023 on a constant exchange rate basis, primarily driven by an
increase in net fee income from higher average AUMA reflecting the favourable impact of markets and net inflows, certain
non-recurring tax true-ups and tax benefits totaling $110 million in 2024, and disciplined expense management. This increase
was partially offset by the impact of lower fee spreads. In addition, investment income on allocated capital increased core
earnings by $37 million compared with 2023.
The table below presents net income attributed to shareholders for the Global WAM segment for 2024 and 2023 consisting of
core earnings and items excluded from core earnings.
For the years ended December 31,
($ millions)
2024
2023
Core earnings
Retirement
$ 1,013
$
745
Retail
581
502
Institutional
142
74
Core earnings
1,736
1,321
Items excluded from core earnings:(1)
Market experience gains (losses)
4
10
Realized gains (losses) on debt instruments
Zero
Zero
Derivatives and hedge accounting ineffectiveness
Zero
Zero
Actual less expected long-term returns on public equity
4
10
Actual less expected long-term returns on ALDA
Zero
Zero
Other investment results
Zero
Zero
Restructuring charge
(66)
(36)
Reinsurance transactions, tax-related items and other
(77)
2
Total items excluded from core earnings
(139)
(24)
Net income (loss) attributed to shareholders
$ 1,597
$ 1,297
Footnote Number (1)For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the total Company “Profitability” section above.
Footnote Number 1 United States, Canada, Japan, Hong Kong, Singapore, Taiwan, Indonesia, Vietnam, Malaysia, India, the Philippines, England, Ireland, Switzerland, Germany, and
mainland China. In addition, we have timberland/farmland operations in Australia, New Zealand, and Chile.
33
In 2024, core EBITDA1 was $2,173 million, $437 million higher than core earnings. In 2023, core EBITDA was $1,771 million,
$450 million higher than core earnings. Core EBITDA increased $402 million, or 22%, compared with 2023, driven by growth in
net fee income and disciplined expense management, partially offset by the impact of lower fee spreads.
Core EBITDA margin2 was 27.1% in 2024 compared with 24.9% in 2023. The 220 basis point increase was primarily driven by
similar factors as mentioned above for core EBITDA.
Core EBITDA
For the years ended December 31,
($ millions)
2024
2023
Core earnings
$ 1,736
$ 1,321
Amortization of deferred acquisition costs and other depreciation
188
166
Amortization of deferred sales commissions
78
80
Core income tax expenses (recoveries)
171
204
Core EBITDA
$ 2,173
$ 1,771
Core EBITDA margin (%)
27.1%
24.9%
Business Performance
Net inflows were $13.3 billion in 2024, compared with net inflows of $4.5 billion in 2023.
• Retirement net inflows were $0.7 billion in 2024 compared with net outflows of $4.0 billion in 2023, primarily driven by the
non-recurrence of large-case retirement plan redemptions by a single sponsor in the U.S. in 2023 and higher new retirement
plan sales, partially offset by higher member withdrawals.
• Retail net inflows were $6.8 billion in 2024 compared with net outflows of $0.5 billion in 2023, driven by increased demand for
investment products amid a constructive equity market and improved investor sentiment.
• Institutional Asset Management net inflows were $5.7 billion in 2024 compared with net inflows of $9.0 billion in 2023,
reflecting lower net flows from fixed income and equity mandates.
Net Flows
For the years ended December 31,
($ millions)
2024
2023
Net flows
$ 13,270
$ 4,548
Assets under Management and Administration
As of December 31, 2024, AUMA for our wealth and asset management businesses were $1,031.1 billion, an increase of 14%
compared with December 31, 2023, driven by the favourable impact of interest rates and equity markets, the $19 billion of assets
added from the acquisition of CQS in 2Q24, as well as net inflows. As of December 31, 2024, Global WAM also managed
$226.7 billion in assets for the Company’s other reporting segments. Including those assets, AUMA managed by Global WAMRefer to footnote number 1
were $1,257.8 billion compared with $1,055.0 billion as at December 31, 2023.
Segregated funds net assets were $291.9 billion for December 31, 2024, an increase of 18% compared with December 31, 2023
on an actual exchange rate basis, driven by the favourable impact of equity markets and foreign currency exchange rates.
Changes in Assets under Management and Administration
For the years ended December 31,
($ millions)
2024
2023
Balance January 1,
$
849,163
$ 782,340
Acquisitions / Dispositions
18,670
(410)
Net flows
13,270
4,548
Investment income (loss) and other
149,982
62,685
Balance December 31,
$ 1,031,085
$ 849,163
Average assets under management and administration
$
946,087
$ 812,662
Footnote Number 1 This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below.
Footnote Number 2 This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.
34 | 2024 Annual Report | Management’s Discussion and Analysis
Assets under Management and Administration
As at December 31,
($ millions)
2024
2023
Total invested assets
$
9,743
$
7,090
Segregated funds net assetsRefer to footnote number (1)
291,860
248,066
Mutual funds, institutional asset management and otherRefer to footnote number (2)
506,868
411,961
Total assets under management
808,471
667,117
Other assets under administration
222,614
182,046
Total assets under management and administration
$ 1,031,085
$
849,163
Footnote Number (1)Segregated funds net assets are primarily comprised of AUM in our Retirement business, which mainly consists of fee-based products with little or no guarantees.
Footnote Number (2)Other funds represent pension funds, pooled funds, endowment funds and other institutional funds managed by the Company on behalf of others.
Managed Assets under Management and Administration
As at December 31,
($ millions)
2024
2023
Assets under management and administration
$ 1,031,085
$
849,163
AUM managed by Global WAM on behalf of Manulife’s other segments
226,752
205,814
Total managed assets under management and administration
$ 1,257,837
$ 1,054,977
Strategic Highlights
As one of Manulife’s highest potential businesses, we remain focused on accelerating growth, achieving operational excellence,
and increasing shareholder value. Our strategy is to deliver comprehensive investment solutions while providing exceptional
digital-first experiences; enhancing our intermediate distribution channels; increasing focus on direct relationships with investors;
and elevating our brand to be recognized as a leading global wealth and asset management organization all while being a
premier destination for top talent in our industry.
We executed on several initiatives to deliver comprehensive investment solutions and drive growth opportunities. In 2024, we:
• Completed the acquisition of CQS, a U.K.-based multi-sector alternative credit manager, which positively contributed to Global
WAM net flows and core earnings in 2024. We have leveraged these expanded investment capabilities to launch the John
Hancock Multi Asset Credit Fund in U.S. Retail. This fund is a strong addition to our growing lineup of liquid and semi-liquid
alternative offerings which are part of our larger credit franchise; and
• Continued to meet investor needs for alternative solutions through the expansion of our product offerings with the launch of
the Manulife Capital Partners VII and Manulife Private Equity Partners II for institutional investors which combined have
garnered over $2 billion in AUMA.
We enhanced our digital capabilities to improve our customer experience. In 2024, we:
• Advanced and broadened our wealth planning and advice business with the implementation of a new advisor retail wealth
platform and an AI-powered planning tool in Canada and a new AI-powered sales enablement app in Asia. These tools
improve productivity for advisors and agents and deliver an enhanced digital experience for investors; and
• Continued to add new self service capabilities to our Canada Retirement mobile app, which contributed to a 29% growth in
user counts in 2024 compared with the prior year.
35
6. Corporate and Other
Corporate and Other is comprised of investment performance on assets backing capital, net of amounts allocated to
the operating segments; financing costs; costs incurred by the corporate office related to shareholder activities (not
allocated to the operating segments); our P&C Reinsurance business; as well as our run-off reinsurance operation
including variable annuities and accident and health. In addition, for segment reporting purposes, consolidations and
eliminations of transactions between operating segments are also included in Corporate and Other earnings.
Profitability
Corporate and Other reported net income attributed to shareholders of $77 million in 2024 compared with $628 million in 2023.
Net income (loss) attributed to shareholders is comprised of core earnings and items excluded from core earnings. Core loss
was $357 million in 2024 compared with core earnings of $69 million in 2023. Items excluded from core earnings (loss)
amounted to a net gain of $434 million in 2024 compared with a net gain of $559 million in 2023. Items excluded from core
earnings are outlined in the table below. See section 13 “Non-GAAP and Other Financial Measures” below, for a reconciliation of
core earnings to net income (loss) attributed to shareholders.
The unfavourable variance in core loss of $426 million was primarily attributable to the charge for GMT, higher interest on capital
allocated to Asia, Global WAM and the U.S., and lower gains from updates to provisions for estimated losses in our P&C
Reinsurance business compared to prior year.
The table below presents net income attributed to shareholders for 2024 and 2023 consisting of core earnings (loss) and items
excluded from core earnings (loss).
For the years ended December 31,
($ millions)
2024
2023
Core earnings (loss)
$ (357)
$ 69
Items excluded from core earnings (loss):Refer to footnote number (1)
Market experience gains (losses)
435
290
Realized gains (losses) on debt instruments
265
(1)
Derivatives and hedge accounting ineffectiveness
148
61
Actual less expected long-term returns on public equity
86
88
Actual less expected long-term returns on ALDA
(4)
(12)
Other investment results
(60)
154
Changes in actuarial methods and assumptions that flow directly through income
6
Zero
Reinsurance transactions, tax-related items and other
(7)
269
Total items excluded from core earnings (loss)
434
559
Net income (loss) attributed to shareholders
$
77
$ 628
Footnote Number (1)For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the total Company “Profitability” section above.
In 2024, a GMT expense of $231 million has been recorded in Corporate and Other, consisting of an expense of $164 million in
core earnings and $67 million outside core earnings. Starting in 2025, GMT is expected to be recorded in the segment that
incurred this tax.
Strategic Highlights
Our P&C Reinsurance business provides substantial retrocessional capacity for a select clientele in the property and casualty
reinsurance market. The business is largely non-correlated to Manulife’s other businesses and helps diversify our overall
business mix. We manage the risk exposure of this business in relation to the total Company balance sheet risk and volatility as
well as the prevailing market pricing conditions. The business is renewable annually, and we currently estimate our exposure
limit in 2025 for a single event to be approximately US$250 million (net of reinstatement premiums) and for multiple events to be
approximately US$500 million (net of all premiums).Refer to footnote number 1
Footnote Number 1 See “Caution regarding forward-looking statements” above.
36 | 2024 Annual Report | Management’s Discussion and Analysis
7. Investments
Our investment philosophy for the general fund is to invest in an asset mix that optimizes our risk adjusted returns and matches
the characteristics of our underlying liabilities. We follow a bottom-up approach which combines our strong asset management
skills with an in-depth understanding of the characteristics of each investment. We invest in a diversified mix of assets and our
diversification strategy has historically produced superior risk adjusted returns while reducing overall risk. We use a disciplined
approach across all asset classes. Our risk management strategy is outlined in the “Risk Management and Risk Factors” section
below.
General Fund Assets
As at December 31, 2024, our general fund invested assets totaled $442.5 billion compared with $417.2 billion at the end of
2023. The following table shows the asset class composition as at December 31, 2024 and December 31, 2023.
As at December 31,
($ billions)
2024
2023
Carrying value
% of total
Fair value
Carrying value
% of total
Fair value
Cash and short-term securities
$ 25.8
6
$ 25.8
$ 20.3
5
$ 20.3
Debt securities and private placement debt
Government bonds
83.9
19
83.6
80.1
19
79.9
Corporate bonds
125.0
28
124.8
130.1
31
129.9
Mortgage / asset-backed securities
1.8
Zero
1.8
2.0
1
2.0
Private placement debt
49.7
11
49.7
45.6
10
45.6
Mortgages
54.4
12
54.8
52.4
13
52.3
Loans to Bank clients
2.3
1
2.3
2.4
1
2.4
Public equities
33.7
8
33.7
25.5
6
25.5
Alternative long-duration assets (“ALDA”)
Real estate
13.3
3
13.4
13.0
3
13.2
Infrastructure
17.8
4
18.3
15.0
3
15.3
Timber and agriculture
5.9
1
6.5
5.7
1
6.3
Private equity
18.3
4
18.3
15.4
4
15.4
Energy
1.9
1
1.9
1.9
1
1.9
Various other ALDA
3.9
1
3.8
3.5
1
3.4
Leveraged leases and other
4.8
1
4.8
4.3
1
4.3
Total general fund invested assets
$ 442.5
100
$ 443.5
$ 417.2
100
$ 417.7
The carrying values for invested assets are generally equal to their fair values, however, residential mortgages and some
commercial mortgages are carried at amortized cost; company own use properties, with the exception of one property which is
held at depreciated cost, are held at fair value; loans to Bank clients are carried at unpaid principal balances less allowance for
credit losses; and private equity investments, including power and infrastructure, energy, and timber, are accounted for as
associates using the equity method, or at fair value. Certain public bonds are classified as held to maturity and held at amortized
cost, with the remaining public and private bonds being classified as either “fair value through other comprehensive income” or
as “fair value through profit or loss”.
Shareholders’ accumulated other comprehensive pre-tax income (loss) at December 31, 2024 consisted of a $17.5 billion loss
for bonds (2023 – loss of $15.4 billion), a $3.2 billion loss for private placements (2023 – loss of $2.8 billion), and a $1.7 billion
loss for mortgages (2023 – loss of $1.7 billion). Included in the losses for bonds, private placements and mortgages were gains
related to the fair value hedge basis adjustments attributable to the hedged risk of certain FVOCI bonds, FVOCI private
placements and FVOCI mortgages of $414 million, $235 million and $124 million, respectively (2023 – loss of $388 million,
$21 million, $2 million respectively).
Debt Securities and Private Placement Debt
We manage our high-quality fixed income portfolio to optimize yield and quality while ensuring that asset portfolios remain
diversified by sector, industry, issuer, and geography. As at December 31, 2024, our fixed income portfolio of $260.3 billion
(2023 – $257.8 billion) was 96% investment grade (rated BBB or better) and 70% was rated A or higher (2023 – 96% and 71%,
respectively). Our private placement debt holdings provide diversification benefits (issuer, industry, and geography) and,
because they often have stronger protective covenants and collateral than debt securities, they typically provide better credit
protection and potentially higher recoveries in the event of default. Geographically, our fixed income portfolio is well-diversified.
20% is invested in Canada (2023 – 22%), 48% is invested in the U.S. (2023 – 48%), 6% is invested in Europe (2023 – 6%) and
the remaining 26% is invested in Asia and other geographic areas (2023 – 24%).
37
Debt Securities and Private Placement Debt – by Credit QualityRefer to footnote number (1)
As at December 31,
($ billions)
2024
2023
Debt
securities
Private
placement
debt
Total
% of
Total
Debt
securities
Private
placement
debt
Total
% of
Total
AAA
$ 39.3
$ 0.6
$ 39.9
15
$ 38.2
$ 0.7
$ 38.9
15
AA
36.2
7.5
43.7
17
35.8
7.8
43.6
17
A
80.9
17.5
98.4
38
84.6
15.2
99.8
39
BBB
48.6
17.8
66.4
26
47.6
16.3
63.9
25
BB
4.7
0.9
5.6
2
4.8
0.8
5.6
2
B & lower, and unrated
0.9
5.4
6.3
2
1.2
4.8
6.0
2
Total carrying value
$ 210.6
$ 49.7
$ 260.3
100
$ 212.2
$ 45.6
$ 257.8
100
Footnote Number (1)Reflects credit quality ratings as assigned by Nationally Recognized Statistical Rating Organizations (“NRSRO”) using the following priority sequence order: S&P
Global Ratings (“S&P”), Moody’s Investors Services (“Moody’s”), DBRS Limited and its affiliated entities (“Morningstar DBRS”), Fitch Ratings Inc. (“Fitch”), Rating
and Investment information, and Japan Credit Rating. For those assets where ratings by NRSRO are not available, disclosures are based upon internal ratings as
described in the “Risk Management and Risk Factors” section below.
Debt Securities and Private Placement Debt – by Sector
As at December 31,
(Per cent of carrying value, unless otherwise stated)
2024
2023
Debt
securities
Private
placement
debt
Total
Debt
securities
Private
placement
debt
Total
Government and agency
40
9
34
38
10
33
Utilities
14
34
18
14
35
18
Financial
15
12
15
16
12
15
Industrial
8
15
9
8
15
9
Consumer (non-cyclical)
7
14
9
8
14
9
Energy
6
5
6
6
4
6
Consumer (cyclical)
3
5
3
3
6
3
Securitized (MBS/ABS)
1
1
1
1
1
1
Telecommunications
2
1
1
2
Zero
2
Basic materials
2
3
2
2
3
2
Technology
1
Zero
1
1
Zero
1
Media and internet and other
1
1
1
1
Zero
1
Total per cent
100
100
100
100
100
100
Total carrying value ($ billions)
$ 210.6
$ 49.7
$ 260.3
$ 212.2
$ 45.6
$ 257.8
As at December 31, 2024, gross unrealized losses on our fixed income holdings were $26.9 billion, or 10%, of the amortized cost
of these holdings (2023 – gross unrealized loss of $23.6 billion or 9%). Of this amount, $12.2 billion (2023 – $10.7 billion) related
to debt securities trading below 80% of amortized cost for more than 6 months. Securitized assets represented $111.0 million of
the gross unrealized losses and $0.2 million of the amounts traded below amortized cost for more than 6 months (2023 – gross
unrealized loss of $141.0 million and $6.3 million, respectively). After adjusting for debt securities supporting participating
policyholder and pass-through products and the provisions for credit included in the insurance and investment contract liabilities,
the potential impact to shareholders’ pre-tax earnings for debt securities trading at less than 80% of amortized cost for greater
than 6 months was approximately $10.2 billion as at December 31, 2024 (2023 – $8.3 billion).
38 | 2024 Annual Report | Management’s Discussion and Analysis
Mortgages
As at December 31, 2024, our mortgage portfolio of $54.4 billion represented 12% of invested assets (2023 – $52.4 billion and
13%, respectively). Geographically, 68% of the portfolio is invested in Canada (2023 – 69%) and 32% is invested in the U.S.
(2023 – 31%). The overall portfolio is also diversified by geographic region, property type, and borrower. Of the total mortgage
portfolio, 14% is insured (2023 – 14%), primarily by the Canada Mortgage and Housing Corporation (“CMHC”) – Canada’s AAA
rated government-backed national housing agency, with 31% of residential mortgages insured (2023 – 32%) and 1% of
commercial mortgages insured (2023 – 1%).
As at December 31,
($ billions)
2024
2023
Carrying value
% of total
Carrying value
% of total
Commercial
Retail
$
8.0
15
$
7.9
15
Office
7.5
14
7.7
15
Multi-family residential
6.7
12
6.5
12
Industrial
5.5
10
4.9
9
Other commercial
2.4
4
2.6
5
30.1
55
29.6
56
Other mortgages
Manulife Bank single-family residential
24.0
44
22.5
43
Agricultural
0.3
1
0.3
1
Total mortgages
$
54.4
100
$
52.4
100
Our commercial mortgage loans are originated with a hold-for-investment philosophy. They have low loan-to-value ratios, high
debt-service coverage ratios, and as at December 31, 2024 there were zero loans in arrears. Geographically, of the total
commercial mortgage loans, 43% are in Canada and 57% are in the U.S. (2023 – 45% and 55%, respectively). We are
diversified by property type and largely avoid risky market segments such as hotels, construction loans, and second liens.
Non-CMHC Insured Commercial MortgagesRefer to footnote number (1)
As at December 31,
2024
2023
Canada
U.S.
Canada
U.S.
Loan-to-Value ratioRefer to footnote number (2)
61%
59%
63%
60%
Debt-Service Coverage ratioRefer to footnote number (2)
1.67x
1.94x
1.60x
1.89x
Average duration (years)
4.15
5.47
4.08
5.90
Average loan size ($ millions)
$
21.7
$
21.9
$
21.6
$
20.1
Loans in arrearsRefer to footnote number (3)
0.00%
0.00%
0.70%
0.99%
Footnote Number (1)Excludes Manulife Bank commercial mortgage loans of $350 million (2023 – $338 million).
Footnote Number (2)Loan-to-Value and Debt-Service Coverage ratios are based on re-underwritten cash flows.
Footnote Number (3)Arrears defined as three or more missed monthly payments or in the process of foreclosure in Canada and two or more missed monthly payments or in the process
of foreclosure in the U.S.
Public Equities
As at December 31, 2024, public equity holdings of $33.7 billion represented 8% (2023 – $25.5 billion and 6%) of invested
assets and, when excluding assets supporting participating policyholder and pass-through products, represented 1% (2023 –
1%) of invested assets. The portfolio is diversified by industry sector and issuer. Geographically, 20% (2023 – 26%) is held in
Canada; 12% (2023 – 29%) is held in the U.S.; and the remaining 68% (2023 – 45%) is held in Asia, Europe, and other
geographic areas.
Public Equities – classified by type of product-line supported
As at December 31,
($ billions)
2024
2023
Carrying value
% of total
Carrying value
% of total
Participating policyholders
$
20.8
62
$
14.6
57
Non-participating products and pass-through products
9.3
28
8.3
33
Global Wealth and Asset ManagementRefer to footnote number (1)
1.5
4
1.5
6
Corporate and Other segment
2.1
6
1.1
4
Total public equities
$
33.7
100
$
25.5
100
Footnote Number (1)Includes $1.1 billion of seed money investments in new segregated and mutual funds.
39
Alternative Long-Duration Assets (“ALDA”)
Our ALDA portfolio is comprised of a diverse range of asset classes with varying degrees of correlations. The portfolio typically
consists of private assets representing investments in varied sectors of the economy which act as a natural hedge against future
inflation and serve as an alternative source of asset supply to long-term corporate bonds. In addition to being a suitable match
for our long-duration liabilities, these assets provide enhanced long-term yields and diversification relative to traditional fixed
income markets. The majority of our ALDA are managed in-house.
As at December 31, 2024, carrying value of ALDA of $61.1 billion represented 14% (2023 – $54.5 billion and 13%) of invested
assets. The fair value of total ALDA was $62.3 billion at December 31, 2024 (2023 – $55.5 billion). The carrying value and
corresponding fair value by sector and/or asset type are outlined above (see table in the section “General Fund Assets”).
Real Estate
Our real estate portfolio is diversified by geographic region; of the total fair value of this portfolio, 45% is located in the U.S., 37%
in Canada, and 18% in Asia and Other as at December 31, 2024 (2023 – 43%, 39%, and 18%, respectively). This high-quality
portfolio has very low leverage and is well-diversified by property type, including industrial, multi-family, urban office, suburban
office, and company own use buildings. The portfolio is well-positioned with an average occupancy rate of 84% (2023 – 87%)
and an average lease term of 5.4 years (2023 – 4.9 years). During 2024, no acquisitions were executed (2023 – 2 acquisitions,
representing $0.17 billion market value of commercial real estate assets). As part of ongoing portfolio management initiatives, 3
commercial real estate assets totaling $0.07 billion were sold during 2024.
The composition of our real estate portfolio based on fair value is as follows:
As at December 31,
($ billions)
2024
2023
Fair value
% of total
Fair value
% of total
Company Own Use
$ 2.8
21
$ 2.7
20
Office – Downtown
3.8
28
3.9
30
Office – Suburban
0.8
6
0.9
7
Industrial
2.6
19
2.3
17
Residential
2.5
19
2.1
16
Retail
0.3
2
0.3
2
Other
0.6
5
1.0
8
Total real estateRefer to footnote number (1)
$ 13.4
100
$ 13.2
100
Footnote Number (1)These figures represent the fair value of the real estate portfolio excluding real estate interests. The carrying value of the portfolio was $13.3 billion and
$13.0 billion as at December 31, 2024 and December 31, 2023, respectively.
Infrastructure
We invest both directly and through funds in a variety of industry specific asset classes, listed below. The portfolio is well-
diversified with over 600 portfolio companies. The portfolio is predominantly invested in the U.S. and Canada, but also in
Western Europe, the United Kingdom, Australia, Asia and Latin America. Our power and infrastructure holdings are as follows:
As at December 31,
($ billions)
2024
2023
Carrying value
% of total
Carrying value
% of total
Renewable power generation
$ 3.8
21
$ 3.2
22
Thermal power generation
1.7
9
1.4
9
Transportation (including roads, ports)
4.5
25
3.9
26
Electric and gas regulated utilities
0.7
4
0.8
5
Electricity transmission
0.1
1
Zero
Zero
Water distribution
0.3
2
0.4
3
Midstream gas infrastructure
0.7
4
0.8
5
Maintenance service, efficiency and social infrastructure
1.3
7
1.0
6
Digital infrastructure
4.4
25
3.4
23
Other infrastructure
0.3
2
0.1
1
Total infrastructure
$ 17.8
100
$ 15.0
100
Timber and Agriculture
Our timber and agriculture assets are managed by a proprietary entity, Manulife Investment Management Timberland and
Agriculture (“MIM Timberland and Agriculture”). In addition to being the world’s largest timberland investment manager for
institutional investors1, with timberland properties in the U.S., New Zealand, Australia, Chile, Brazil, and Canada, MIM
Timberland and Agriculture also manages farmland properties in the U.S., Australia, Chile, and Canada. The general fund’s
timber holdings comprised 21% of MIM’s total timberland AUM (2023 – 21%). The farmland portfolio includes annual (row) crops,
fruit crops, wine grapes, and nut crops. The general fund’s farmland holdings comprised 41% of MIM’s total farmland
AUM (2023 – 41%).
1 Based on the global timber investment management organization ranking in the RISI International Timberland Ownership and Investment Database.
40 | 2024 Annual Report | Management’s Discussion and Analysis
Private Equities
Our private equity portfolio of $18.3 billion (2023 – $15.4 billion) includes both directly held private equity and private equity
funds. Both are diversified across vintage years and industry sectors.
Energy
This category is comprised of $1.9 billion (2023 – $1.9 billion), which includes legacy oil and gas equity interests related to
upstream and midstream assets that are in runoff, and energy transition private equity interests in areas supportive of the
transition to lower carbon forms of energy, such as wind, solar, and carbon sequestration.
Investment Income
For the years ended December 31,
($ millions, unless otherwise stated)
2024
2023
Interest income
$ 13,761
$12,802
Dividend, rental income and other incomeRefer to footnote number (1)
3,719
3,318
Impairments, provisions and recoveries, net
109
(304)
Other
660
364
18,249
16,180
Realized and unrealized gains (losses) on assets supporting insurance and
investment contract liabilities
Debt securities
(1,857)
430
Public equities
4,178
2,157
Mortgages
(151)
99
Private placements
235
375
Real estate
(592)
(1,289)
Other invested assets
1,256
491
Derivatives
(859)
875
2,210
3,138
Investment expenses
(1,348)
(1,297)
Total investment income (loss)
$ 19,111
$18,021
Footnote Number (1)Rental income from investment properties is net of direct operating expenses.
In 2024, the $19.1 billion of investment income (2023 – income of $18.0 billion) consisted of:
• $18.2 billion of investment income before net realized and unrealized gains on assets supporting insurance and investment
contract liabilities (2023 – gains of $16.2 billion);
• $2.2 billion of net realized and unrealized gains on assets supporting insurance and investment contract liabilities (2023 –
gains of $3.1 billion); and
• $1.3 billion of investment expenses (2023 – $1.3 billion).
The $2.1 billion increase in net investment income before unrealized and realized gains was primarily due to higher interest
income from fixed income assets driven by higher interest rates in U.S. and Canada.
In 2024, net realized and unrealized gains on assets supporting insurance and investment contract liabilities were $2.2 billion
compared with gains of $3.1 billion in 2023. The 2024 gains were primarily driven by gains on equities resulting from higher
equity markets in U.S., Canada and Asia, partially offset by losses on fixed income assets resulting from higher interest rates in
U.S. and Canada. The 2023 gains were primarily driven by higher equity markets, partially offset by losses on real estate driven
by declining office property values.
41
8. Fourth Quarter Financial Highlights
Profitability
($ millions, unless otherwise stated)
Quarterly Results
4Q24
4Q23
Net income (loss) attributed to shareholders
$ 1,638
$ 1,659
Core earningsRefer to footnote number (1)
$ 1,907
$ 1,773
Diluted earnings (loss) per common share ($)
$ 0.88
$ 0.86
Diluted core earnings per common share ($)
$ 1.03
$ 0.92
ROE
14.0%
15.3%
Core return on shareholders’ equity
16.5%
16.4%
Expense efficiency ratio
44.4%
45.5%
General expenses
$ 1,328
$ 1,180
Core expenses
$ 1,797
$ 1,725
(1) Impact of currency movement on the fourth quarter of 2024 (“4Q24”) core earnings compared with the fourth quarter of 2023 (“4Q23”) was a $36 million favourable variance.
Manulife’s 4Q24 net income attributed to shareholders was $1,638 million compared with $1,659 million in 4Q23. Net
income attributed to shareholders is comprised of core earnings (consisting of items we believe reflect the underlying earnings
capacity of the business), which amounted to $1,907 million in 4Q24 compared with $1,773 million in 4Q23, and items excluded
from core earnings, which amounted to a net charge of $269 million in 4Q24 compared with a net charge of $114 million in 4Q23.
Net income attributed to shareholders in 4Q24 decreased $21 million compared with 4Q23 primarily reflecting the non-
recurrence of a net gain from updates to actuarial methods and assumptions in 4Q23 and a higher charge from market
experience, partially offset by core earnings growth. The net charge from market experience of $192 million in 4Q24 was mainly
related to lower-than-expected returns from public equity and lower-than-expected returns on ALDA driven by real estate
investments.
The 6% increase in core earnings on a constant exchange rate basis compared with 4Q23 was driven by higher core earnings in
Global WAM, largely reflecting an increase in net fee income from higher average AUMA and positive net flows, along with
disciplined expense management, certain non-recurring tax benefits and tax true-ups in 4Q24 and performance fees from CQS,
partially offset by lower fee spreads. In addition, growth in our insurance business and improved insurance experience in North
America and Asia also contributed to higher core earnings. These increases were partially offset by lower expected investment
earnings and a charge related to GMT. The impact of updates to actuarial methods and assumptions was neutral in the quarter.
The GA Reinsurance Transaction reduced core earnings by $17 million in 4Q24 compared with 4Q23 reflecting the impact on
expected earnings on insurance contracts, insurance experience and expected investment earnings. The RGA Canadian
Reinsurance Transaction reduced core earnings by $7 million in 4Q24 compared with 4Q23.
Core earnings by segment are presented in the table below for the periods presented.
For the quarters ended December 31,
($ millions)
2024
2023
Core earnings by segment
Asia
$
666
$ 564
Canada
390
352
U.S.
412
474
Global Wealth and Asset Management
481
353
Corporate and Other
(42)
30
Total core earnings
$ 1,907
$1,773
In Asia, core earnings were $666 million in 4Q24 compared with $564 million in 4Q23. The 16% increase on a constant
exchange rate basis was driven by an increase in expected earnings on insurance contracts and higher expected investment
earnings. The increase in expected earnings on insurance contracts primarily reflected business growth and the net impact of
updates to actuarial methods and assumptions on our CSM and risk adjustment. Investment income on allocated capital also
increased core earnings by $27 million in 4Q24 compared with 4Q23. In addition, the GA Reinsurance Transaction increased
core earnings by $1 million in 4Q24 compared with 4Q23, attributable to the impact on expected investment earnings and
expected earnings on insurance contracts.
In Canada, core earnings were $390 million in 4Q24 compared with $352 million in 4Q23. The 11% increase primarily reflected
more favourable insurance experience overall, and business growth in Group Insurance. In addition, the RGA Canadian
Reinsurance Transaction reduced core earnings by $7 million in 4Q24 compared with 4Q23.
In the U.S., core earnings were $412 million in 4Q24 compared with $474 million in 4Q23. The 16% decrease on a constant
exchange rate basis reflected lower expected investment earnings, as well as the impact of the GA Reinsurance Transaction and
42 | 2024 Annual Report | Management’s Discussion and Analysis
the annual review of actuarial methods and assumptions, both of which impacted expected investment earnings and insurance
service result. Net insurance experience was modestly favourable mainly due to improved life lapse experience, partially offset
by less favourable life claims experience. Investment income on allocated capital also increased core earnings by $8 million in
4Q24 compared with 4Q23. The GA Reinsurance Transaction reduced core earnings by $18 million in 4Q24 compared with
4Q23, attributable to the impact on expected earnings on insurance contracts, insurance experience, and expected investment
earnings.
Global WAM core earnings were $481 million in 4Q24 compared with $353 million in 4Q23. The 34% increase was driven by an
increase in net fee income from higher average AUMA reflecting the favourable impact of markets and net inflows, certain
non-recurring tax benefits and tax true-ups in 4Q24 totaling $23 million, performance fees from CQS, as well as disciplined
expense management. This was partially offset by the impact of lower fee spreads. In addition, investment income on allocated
capital increased core earnings by $9 million compared with 4Q23.
Corporate and Other core loss was $42 million in 4Q24 compared with core earnings of $30 million in 4Q23. The $72 million
decrease in core earnings was primarily driven by the charge for GMT and higher interest on capital allocated to operating
segments, Asia, Global WAM and the U.S.
The table below presents net income attributed to shareholders consisting of core earnings and the items excluded from core
earnings.
(For the quarters ended December 31,
($ millions)
2024
2023
Core earnings
$ 1,907
$ 1,773
Items excluded from core earnings:
Market experience gains (losses)Refer to footnote number (1)
(192)
(133)
Realized gains (losses) on debt instruments
(43)
(51)
Derivatives and hedge accounting ineffectiveness
40
34
Actual less expected long-term returns on public equity
(113)
182
Actual less expected long-term returns on ALDA
(97)
(381)
Other investment results
21
83
Changes in actuarial methods and assumptions that flow directly through income
Zero
119
Restructuring chargeRefer to footnote number (2)
(52)
(36)
Reinsurance transactions, tax-related items and otherRefer to footnote number (3)
(25)
(64)
Total items excluded from core earnings
(269)
(114)
Net income (loss) attributed to shareholders
$ 1,638
$ 1,659
Footnote Number (1)Market experience was a net charge of $192 million in 4Q24 primarily reflecting lower-than-expected returns from public equity, lower-than-expected returns on
ALDA driven by real estate investments, and net realized losses from the sale of debt instruments which are classified as FVOCI. These were partially offset by a
gain from derivatives and hedge accounting ineffectiveness and other investment results. Market experience was a net charge of $133 million in 4Q23 primarily
driven by lower-than-expected returns on ALDA related to real estate and private equity investments, partially offset by higher-than-expected returns on public
equity.
Footnote Number (2)In 4Q24, we reported a restructuring charge of $52 million post-tax ($67 million pre-tax) in Global WAM and Canada. In 4Q23, we reported a restructuring charge
of $36 million post-tax ($46 million pre-tax) in Global WAM.
Footnote Number (3)The 4Q24 net charge of $25 million mainly included a $22 million for an investment impairment in Global WAM. The 4Q23 net charge of $64 million included a
$38 million for an investment impairment in Asia and a charge for tax-related true-ups of $23 million.
Net income attributed to shareholders by segment are presented in the following tables.
Net income (loss) attributed to shareholders by segment
Quarterly Results
($ millions)
4Q24
4Q23
Asia
$
583
$
615
Canada
439
365
U.S.
103
198
Global Wealth and Asset Management
384
365
Corporate and Other
129
116
Total net income (loss) attributed to shareholders
$ 1,638
$ 1,659
Expense efficiency ratio
The expense efficiency ratio was 44.4% in 4Q24, compared with 45.5% in 4Q23. The 1.1 percentage point decrease in the
ratio compared with 4Q23 reflects a 7% increase in pre-tax core earnings, and a 3% increase in core expenses. The increase in
core expenses was driven by higher workforce-related costs, including higher performance-related costs, and the inclusion of
ongoing operating expenses related to our acquisition of the CQS business.
Total general expenses in 4Q24 increased 13% on an actual exchange rate basis and 11% on a constant exchange rate basis
compared with 4Q23 driven by the items noted above related to the increase in core expenses, as well as a reallocation of
43
expenses from directly attributable maintenance to general expense, higher restructuring charges in Global WAM and Canada.
General expenses excluded from core earnings consisted primarily of restructuring charges in Global WAM and Canada in
4Q24, and a restructuring charge in Global WAM in 4Q23.
Business Performance
As at and for the quarters ended December 31,
($ millions, unless otherwise stated)
2024
2023
Asia APE sales
$
1,661
$
995
Canada APE sales
376
363
U.S. APE sales
211
192
Total APE sales
2,248
1,550
Asia new business value
585
417
Canada new business value
168
139
U.S. new business value
89
74
Total new business value
842
630
Asia new business CSM
586
414
Canada new business CSM
116
70
U.S. new business CSM
140
142
Total new business CSM
842
626
Asia CSM net of NCI
15,540
12,617
Canada CSM
4,109
4,060
U.S. CSM
2,468
3,738
Corporate and Other CSM
10
25
Total CSM net of NCI
22,127
20,440
Post-tax CSM net of NCI
19,682
17,748
Global WAM gross flows ($ billions)
43.5
35.1
Global WAM net flows ($ billions)
1.2
(1.3)
Global WAM assets under management and administration ($ billions)
1,031.1
849.2
Global WAM total invested assets ($ billions)
9.7
7.1
Global WAM segregated funds net assets ($ billions)
291.9
248.1
Total assets under management and administration ($ billions)
1,608.0
1,388.8
Total invested assets ($ billions)
442.5
417.2
Total net segregated funds net assets ($ billions)
436.0
377.5
APE sales were $2.2 billion in 4Q24, an increase of 42% compared with 4Q23, NBV was $842 million in 4Q24, an increase of 31%
compared with 4Q23, and New business CSM was $842 million in 4Q24, an increase of 32% compared with 4Q23.
• In Asia, APE sales increased 63% compared with 4Q23, driven by growth in Hong Kong, Japan and Asia Other1. Combined
with business mix, this led to 38% and 37% increases in new business CSM and NBV, respectively, compared with 4Q23.
• In Canada, APE sales increased 4% reflecting strong sales growth in participating life insurance and segregated fund
products partially offset by lower Group Insurance sales. NBV increased 21% from sales growth in Individual Insurance and
higher margins in across all insurance products. New business CSM increased 66% driven by higher sales volumes in
Individual Insurance and segregated fund products.
• U.S. APE sales and NBV increased 7% and 17%, respectively, driven by increased demand from affluent customers for
accumulation insurance products. New business CSM decreased 5% driven by product mix and the impact of interest rates,
partially offset by higher sales volumes.
Global WAM net inflows were $1.2 billion in 4Q24 compared with net outflows of $1.3 billion in 4Q23.
• Net outflows in Retirement were $1.9 billion in 4Q24 compared with net outflows of $2.5 billion in 4Q23, primarily driven by the
non-recurrence of a large-case retirement plan redemption in the U.S. and higher member contributions, partially offset by
higher withdrawals.
• Net inflows in Retail were $1.3 billion in 4Q24 compared with net outflows of $1.0 billion in 4Q23, driven by increased demand
for investment products amid a constructive equity market and improved investor sentiment.
• Net inflows in Institutional Asset Management were $1.8 billion compared with net inflows of $2.1 billion in 4Q23, as higher net
flows from fixed income mandates were more than offset by lower net flows in equity mandates.
1 Asia Other excludes Hong Kong and Japan.
44 | 2024 Annual Report | Management’s Discussion and Analysis
9. Risk Management and Risk Factors
This section provides an overview of our overall risk management approach along with detailed description of specific risks.
Enterprise Risk Management Framework
Our approach to risk management is governed by our Enterprise Risk Management (“ERM”) Framework. The ERM Framework is
a foundational, holistic, compliant, integrated, and adaptive approach to understanding and managing risk while balancing the
need to remain competitive. This structure is designed to provide guardrails on our risk profile while optimizing risk adjusted
returns without compromising our ability to meet our commitments.
The ERM Framework is comprised of five interrelated components: Risk Taxonomy, Risk Appetite, Risk Governance, Risk
Process, and Risk Culture.
Risk Taxonomy
Our businesses and operations expose Manulife to a broad range of risks. The Risk Taxonomy categorizes and defines these
potentially material risks. It creates a common risk language and provides reasonable assurance that risks are consistently
understood and managed.
The risks in the Risk Taxonomy are categorized in a mutually exclusive and collectively exhaustive manner, starting with five
overarching categories (known collectively as “Principal Risks”): Strategic Risk, Market & Liquidity Risk, Credit & Investment
Risk, Product & Insurance Risk, and Operational Risk. The Principal Risks are further subdivided into subcategories, with
increasing levels of granularity as appropriate. The following sections of the MD&A describe the risk management strategies and
risk factors for each Principal Risk category. Additional risks not presently known to us or that are currently immaterial could
impair our businesses, operations and financial condition in the future. If any such risks should occur, the trading price of our
securities, including common shares, preferred shares and debt securities, could decline, and investors may lose all or part of
their investment.
The Risk Taxonomy is a core element of the ERM Framework, supporting all other components. It provides the basis for policy
and committee coverage (Risk Governance), enables risk identification (Risk Process), reasonably assures that Risk Appetite
Statements and Limits are established for material risks (Risk Appetite), and clarifies who is accountable for managing each risk
(Risk Culture).
Risk Appetite
The Risk Appetite Framework (“RAF”) guides risk taking by establishing our Risk Appetite, which is the aggregate level of each
type of risk we are prepared to accept in pursuit of our strategic priorities, as well as how much additional risk we can tolerate
before reaching Risk Limits established by the risk committee of MFC’s board of directors (the “Board”).
The RAF creates a balanced view of risk and return that promotes sustainable growth and resilience, supports informed
decision-making, and fosters prudent Risk Culture. The RAF is integral to the Board and management discussions and decision-
making. They receive regular reports on the RAF’s effectiveness and compliance, including comparisons of actual results versus
stated RAF measures, and notification of any limit breaches and corresponding action plans. Risk Appetite Statements are
designed to provide guardrails on our appetite for identified risks. Risk Appetite Statements regarding our Principal Risks are
summarized as follows:
• Strategic – Manulife accepts a total level of risk that provides a very high level of confidence to meeting stakeholder
obligations while targeting an appropriate overall return to shareholders over time.
• Market & Liquidity – Market risks are acceptable when they are managed within specific risk limits and tolerances.
• Credit & Investment – Manulife believes a diversified portfolio reduces overall risk and enhances returns; therefore, it
accepts credit and investment-related risks within appropriate limits.
• Product & Insurance – Manulife pursues product risks that add customer and shareholder value where there is competence
to assess and monitor them, and for which appropriate compensation is received.
• Operational – Manulife accepts that operational risks are an inherent part of the business and are managed by implementing
appropriate controls that provide reasonable assurance that we are within our risk thresholds and tolerances. Management
will protect its business and customers’ assets through cost-effective operational risk mitigation.
Risk Governance
Risk Governance is intended to provide an organized, hierarchical approach to risk management oversight. It is articulated in
policies and executed through a Three Lines Operating Model that is supported by a risk committee structure. Requirements,
limits, and decisions are cascaded top-down; issues, escalations, and reporting are raised bottom-up.
45
Risk Committee Structure
The Board governs oversight of risk management and is supported by a dedicated Board Risk Committee (“BRC”).
Management is responsible for directing the Company’s operations within the authority delegated to them by the Board and
BRC, and for implementing their decisions in compliance with applicable laws and regulations.
Management has established an Executive Risk Committee (“ERC”), which strategically manages our global risk profile, and
shapes our Risk Appetite and Risk Culture.
The ERC is supported by Risk Oversight Committees including Credit Committee, Product Oversight Committee, Global Asset
Liability Committee, Operational Risk Committee, Reinsurance Risk Oversight Committee, and Capital Outlook Committee.
Segment Risk Committees have also been established, each with mandates similar to the ERC with a focus on the applicable
segment (Asia, Canada, U.S., and Global WAM). All functional and segment risk oversight committees oversee our risks with
independent chairs. These committees may further delegate oversight activities to various subcommittees.
Three Lines Operating Model
Management has established an operating model that separates duties between risk taking, risk oversight, and independent
assurance as follows:
The First Line consists of the CEO, General Managers for the Segments and Business Units (“Business Management”), Group
Function Heads (“Group Functions”), and their respective teams. Business Management and Group Functions are accountable
for maintaining an effective control environment, managing risks arising from everyday operations, and overseeing the execution
of the business strategy. They have a responsibility to identify, assess, manage, monitor, and report on their risk exposures, and
to sufficiently document these activities.
The Second Line consists of oversight functions, which provide objective assessments to the Board and BRC. These include the
Chief Risk Officer (“CRO”) who leads the Global Risk Management (“GRM”) function, the Global Compliance Chief who leads the
Global Compliance function, and the Chief Actuary who leads the Actuarial function. Collectively, these oversight functions
design and implement policies and procedures to independently identify, assess, monitor, and report on risks. They have a
responsibility to oversee and objectively challenge the effectiveness of First Line risk management and internal controls; to
determine whether operations, results and risk exposures are consistent with Risk Appetite; and to sufficiently document their
Second Line oversight and objectives assessments.
The Third Line consists of the Chief Auditor and the Audit & Advisory Services team, which provides independent assurance to
the Board and management on the effectiveness of internal controls, risk management, and governance processes.
Risk Process
The Risk Process involves the First Line managing risk in alignment with the RAF and within Risk Limits, and the Second Line
overseeing risk management and providing objective challenge. It entails the First Line and the Second Line independently
identifying, assessing, monitoring, and reporting on our current risk profile and our risk profile under stressed conditions at both
the segment and Company levels, with appropriate controls and documentation.
Risk Identification
Risk identification is the first step in the Risk Process. Given the constantly evolving operating environment, risk identification is
an ongoing process conducted using a risk based approach that considers risk exposure size, likelihood of the risk occurring,
and its impact.
Risks within the Company’s strategic and business plans are identified and assessed for alignment with Risk Appetite at least
annually.
Risk identification distinguishes between the identification of risk events, their drivers, and their impacts. Multiple different drivers
can contribute to or result in the same risk event. One risk event can result in multiple different impacts.
Understanding the difference between drivers, risk events, and impacts results in a more effective control environment.
Risk Assessment
Risk assessment involves granular understanding of the probability of a risk event occurring as well as the potential impacts it
may have. Risk assessment must be current, timely, and of sufficient granularity and quality to support decision-making. It can
leverage both quantitative approaches and qualitative perspectives. On a Company-wide basis, multiple approaches are used to
assess risk in aggregate.
46 | 2024 Annual Report | Management’s Discussion and Analysis
Risk Management
Risks are effectively managed to an acceptable level. The First Line establishes processes and controls for managing risks
arising from their activities within stated Risk Appetite, which can include risk avoidance, risk acceptance, risk mitigation, and risk
transfer techniques. The Second Line is intended to provide an independent oversight and objective challenge.
Risk Monitoring
Risk exposures fluctuate over time. We monitor risk exposures on an ongoing basis and take appropriate action to keep
exposures within the range of Risk Appetite. At times, risk exposures may move beyond Risk Appetite into the tolerance range
and in those circumstances, we act to further mitigate or transfer the risk to avoid a breach of our Risk Limits.
Risk Reporting
The Company produces Risk Reporting that is accurate, timely, comprehensive and of sufficient quality, clarity, and granularity
so that it can be relied upon for decision-making.
Risk Culture
The Company is committed to a set of shared values, which reflect our culture, inform our behaviours, actions, and decisions,
and help define how we work together. Refer to “Enterprise Strategy” above for more information on our values.
Risk Culture is a subset of the Company’s culture; it reflects norms of behaviours, actions, and decisions in relation to risk
awareness, risk taking, and risk oversight. A sound Risk Culture balances risk-return to remain within Risk Appetite and in
alignment with the ERM Framework. It emphasizes the importance of maintaining an effective control environment. It promptly
detects and remediates policy/limit breaches and operational incidents, and then follows up to understand root causes, enhances
preventative and detective controls, and takes appropriate disciplinary action if warranted.
In alignment with regulatory expectations and international standards, we believe that the combination of Risk Governance, Risk
Appetite, and aligned compensation programs sets the foundation for sound Risk Culture including the core elements of Tone
from the Top, Accountability, Communication and Challenge, and Compensation and Incentives.
• Tone from the Top is set by the Board and management through effective communication and the example of their own
behaviours, actions, and decisions.
• Clear Accountability is defined for the First Line to understand and manage risk in alignment with the RAF, which is
reinforced by Risk Governance throughout the Risk Process.
• An environment of open Communication and effective Challenge exists in which decision-making processes encourage a
range of views, stimulate a positive critical attitude, and encourage constructive engagement, allowing for the identification,
escalation, and resolution of issues.
• Compensation and Incentives encourage appropriate risk taking, and are designed to reward behaviours, actions, and
decisions that are aligned with the ERM Framework.
We foster a sound Risk Culture that promotes integrity and risk awareness. We balance the level of risk with obligations to our
stakeholders. We incentivize behaviours, actions and decisions that achieve consistent and sustainable performance over the
long-term. Our values support our Risk Culture by creating an environment where we communicate openly, raise issues
proactively, take accountability, and make decisions that align to the ERM Framework.
Risk Profile and Stress Testing
Regular and timely stress testing, including sensitivity testing and scenario testing, is designed to facilitate risk identification and
assessment, which contributes to the establishment of risk mitigation plans and control. Stress testing supports strategic
decision-making and assesses the impact of severe but plausible events on our risk profile. Subject to the specific stress test, it
can inform:
• Evaluation of implications on earnings and capital;
• Evaluation of the Company’s liquidity profile;
• Identification of potential portfolio vulnerabilities;
• The establishment of the Company’s internal capital target ratios; and
• Validation of contingency plans.
A range of stress tests are regularly considered. On a regular basis, the Second Line establishes the parameters of stress testing
with the involvement of the First Line to determine appropriate scenario definitions and assumptions. Ad hoc stress testing is
often developed in response to changes in the environment or to aid management, BRC and the Board in decision-making. For
key exposures, stress testing is performed at least annually.
47
Strategic Risk
Strategic risk is the risk of loss resulting from the inability to adequately plan or implement an appropriate business strategy that
allows us to effectively compete in the markets in which we operate, or to adapt to change in the external business, political or
regulatory environment.
We compete for customers with both insurance and non-insurance companies. Customer loyalty and retention, and access to
distributors, are important to the Company’s success and are influenced by many factors, including our distribution practices and
regulations, service levels including digital capabilities, investment performance, and our financial strength ratings and
reputation. Our ability to effectively compete is highly dependent upon being quick to react and adapt to changes from the
external environment while continuing to proactively drive innovation.
Strategic Risk Management Strategy
While the Board approves the overall strategy of the Company, the CEO and Executive Leadership Team establish and oversee
execution of business strategies and have accountability to understand and manage the risks embedded in these strategies.
They are supported by several processes:
• Strategic business, risk, and capital planning that is reviewed with the Board, Executive Leadership Team, and the ERC;
• Performance and risk reviews of all key businesses with the CEO and reviews with the Board;
• Risk based capital allocation designed to encourage a consistent decision-making framework across the organization; and
• Review and approval of significant acquisitions and divestitures by the CEO and Deal Committee and, where appropriate, the
Board.
Reputation Risk
Our reputation is among our most valuable assets. Our Risk Management Principles compel us to protect our reputation and
brand. Our RAF reinforces this expectation, making reputational impact a central consideration in defining Risk Appetite.
Reputation risk is the risk that the Company’s corporate reputation may be eroded by adverse publicity, real or perceived, as a
result of business practices of the Company or its representatives, potentially resulting in damage to the Company’s franchise
value.
Reputation risk may arise from both internal and external drivers. This transverse nature of reputation risk, which can be a casual
risk driver, a risk event, or an impact arising from other risks, means that understanding and managing it cannot be done in
isolation. Reputation risk identification, assessment and monitoring processes and practices are embedded in:
• Business operations and management decisions;
• Governance and mitigation/control processes, including within the Crisis Management Framework, and stress, scenario, and
evolving risk monitoring process;
• Impact analysis of changes in society, social media, and political and regulatory factors;
• Regular amendments to the Code of Business Conduct and Ethics for review and sign off, as well as disclosure of conflicts of
interest by employees and directors; and
• Inclusion of the Code of Business Conduct and Ethics and explicit discussion of corporate reputation as a valued asset within
training materials.
Environmental, Social and Governance Framework
Environmental, social and governance (“ESG”) issues may impact our investments, underwriting, and operations, which could
lead to adverse financial, operational, legal, reputational, or brand value risks for Manulife due to our actual or perceived actions,
or inaction in relation to ESG issues.
The Board’s Corporate Governance and Nominating Committee (“CGNC”) oversees Manulife’s ESG framework, including
matters related to climate change strategy and disclosures. On a regular basis, the CGNC is updated on relevant ESG topics,
including our progress against the commitments set out in Manulife’s Climate Action Plan. Each member of the CGNC also
participates in at least one externally facilitated ESG-related education session every two years. The CGNC’s oversight
complements Manulife’s Executive Sustainability Council (“ESC”), which consists of the CEO, the Chief Sustainability Officer, the
CRO and other members of the Executive Leadership Team. As part of its mandate, the ESC is responsible for guiding the
development and execution of our climate strategy, including climate-related risk management activities. The ESC meets
monthly and is supported by the Sustainability Centre of Expertise (“CoE”), which consists of corporate function and business
unit leads tasked with integrating sustainability into our business practices. Manulife’s Climate Change working groups,
consisting of cross-functional teams, are responsible for the execution of the Climate Action Plan and manage climate-related
performance and disclosures. Additionally, our global executive Diversity, Equity and Inclusion (“DEI”) Council, which includes
members of the Executive Leadership Team and is chaired by the CEO, meets quarterly and guides, supports, and facilitates the
implementation of our DEI strategy, encourages innovative thinking about DEI challenges and opportunities, and drives and
builds accountability for DEI throughout the organization.
48 | 2024 Annual Report | Management’s Discussion and Analysis
49
Climate Risk Management Strategy
Consistent with the International Sustainability Standards Board’s IFRS S2 “Climate-related Disclosures” standard which
leverages the Taskforce on Climate-Related Financial Disclosures framework, Manulife defines climate-related risks as the
potential negative impacts from climate change, which may be experienced directly (e.g., through financial loss) or indirectly
(e.g., through reputational harm), resulting from the physical impacts of climate change or the transition to a low-carbon
economy.
Climate change impacts can manifest across a diverse set of pathways, with the potential to impact any of our principal risks,
including strategic, market & liquidity, credit & investment, product, and operational risk, as well as legal and reputational risk.
We view climate as a transverse driver of our existing principal risks. Failure to adequately prepare for the potential impacts of
climate change can have material adverse impacts on our balance sheet or our ability to operate.
In response, we have enhanced the integration of climate-related risk drivers into our ERM Framework with an aim of ensuring
that they are managed in a manner consistent with our approach to risk management. Our Environmental Risk Policy and other
relevant policies and standards are used to guide business operations on climate risk identification and assessment. GRM
continues to enhance risk management practices to consider the potential impacts from climate-related risk, including in our
investment decision-making processes, life insurance underwriting due diligence, and assessment of operational risks and
controls.
For additional information regarding strategic risks associated with Manulife’s sustainability commitments, see “Strategic Risk
Factors – We may not be able to achieve our sustainability commitments, or our commitments may not meet the expectations of
stakeholders or regulators”. For an overview of our approach to transitioning to a lower-carbon economy and associated risk
management strategies, please see our “Climate Action Implementation Plan Report”. Please also see our annual “Sustainability
Report”, published in the second quarter of each year, for details on our alignment with requirements in OSFI Guideline B-15 –
Climate Risk Management, including our climate risk management and governance practices, as well as our ESG performance.
Strategic Risk Factors
We may not be successful in executing our business strategies or these strategies may not achieve our objectives.
• The global environment has a significant impact on our financial plans and ability to implement our business strategy.
• Our business strategy and associated financial plans are developed by considering forecasts of economic growth. Actual
economic growth can be significantly impacted by the macroeconomic environment and can deviate significantly from
forecasts, thus impacting our financial results and the ability to implement our business strategy.
• Operations in new markets may achieve low margins or may be unprofitable, and expansion in existing markets may be
affected by local economic and market conditions.
• Changes in the global environment can also have a significant impact on financial markets, including movements in interest
rates, spreads on fixed income assets, and returns on public equity and ALDA investments. Our financial plan, including
income, balance sheet, and capital projections are based on certain assumptions with respect to future interest rates and
spreads on fixed income assets, and future returns from our public equity and ALDA investments. Actual experience is highly
variable and can deviate significantly from our assumptions, thus impacting our financial results. For example, for changes to
interest rates, please refer to the risk factor “Prolonged changes in market interest rates may impact our net income attributed
to shareholders and capital ratios”.
• The spending and savings patterns of our customers can evolve, impacting the products and services we offer to our
customers.
• Customer behaviour and emergence of claims on our liabilities can change. For example, a prolonged period of economic
weakness in certain markets may adversely impact policyholders’ behaviour (such as higher withdrawals, lapses, lower
premium deposits, and lower policy persistency than anticipated), increase expenses and cost of funding, along with other
adverse impacts from continued uncertainty in our operating environment as noted in the Market & Liquidity Risk Factors
section.
• A rise in geopolitical tensions and political risk either within or outside of jurisdictions in which we operate can trigger changes
in the global environment, overall regulatory landscape, and consumer behaviour, which can have various impacts across our
business. For example, economic sanctions imposed on a country could adversely impact our ability to achieve specific
business objectives. Military conflicts could drive financial and economic dislocations across global capital markets, supply
chains or commodity markets. See also “Operational Risk Factors – Our operations face political, legal, operational and other
risks that could negatively affect those operations or our results of operations and financial condition.”
Adverse publicity, litigation or regulatory action resulting from our business practices or actions by our employees,
representatives and/or business partners, could erode our corporate image and damage our franchise value and/or
create losses.
• Manulife’s reputation is one of its most valuable assets. Harm to a company’s reputation is often a consequence of risk control
failure. Manulife’s reputation could also be harmed by the actions of third parties with whom we do business. Our
representatives include affiliated broker-dealers, agents, wholesalers and independent distributors, such as broker-dealers
and banks, on whose services and representations our customers rely. Business partners include, among others, joint venture
partners and third parties to whom we outsource certain functions and that we rely on to fulfill various obligations.
• If any of these representatives or business partners fail to adequately perform their responsibilities, or monitor their own risks,
these failures could affect our business reputation and operations. While we seek to maintain adequate internal risk
management policies and procedures and protect against performance failures, events may occur involving our
representatives or our business partners that could cause us to lose customers or cause us or our representatives or business
partners to become subject to legal, regulatory, economic or trade sanctions, which could have a material adverse effect on
our reputation, our business, and our results of operations. For further discussion of government regulation and legal
proceedings refer to “Government Regulation” in MFC’s Annual Information Form dated February 19, 2025 and note 18 of the
2024 Annual Consolidated Financial Statements.
Our businesses are heavily regulated, and changes in regulation or laws, or in the interpretation or enforcement of
regulation and laws, may reduce our profitability and limit our growth.
• Our operations are subject to a wide variety of insurance and other laws and regulations including with respect to financial
crimes (which include, but are not limited to, money laundering, bribery and economic or trade sanctions), privacy, market
conduct, consumer protection, business conduct, prudential and other generally applicable non-financial requirements.
Legislators, regulators and self-regulatory or government authorities in Canada, the United States, Asia and other jurisdictions
regularly re-examine existing laws, regulations, rules and standards applicable to insurance companies, investment advisors,
broker-dealers and their products. Compliance with applicable laws and regulations is time consuming and personnel-
intensive, and changes in these laws and regulations or in the interpretation or enforcement thereof, may materially increase
our direct and indirect compliance costs and other expenses of doing business, thus having a material adverse effect on our
results of operations and financial condition.
• Future regulatory capital, actuarial and accounting changes, including changes with a retroactive impact, could have a
material adverse effect on the Company’s consolidated financial condition, results of operations and regulatory capital both on
transition and going forward. In addition, such changes could have a material adverse effect on the Company’s position
relative to that of other Canadian and international financial institutions with which Manulife competes for business and capital.
• In Canada, MFC and its principal operating subsidiary, MLI, are governed by the Insurance Companies Act (Canada) (“ICA”).
The ICA is administered, and the activities of the Company are supervised, by the Office of the Superintendent of Financial
Institutions (“OSFI”). MLI is also subject to regulation and supervision under the insurance laws of each of the provinces and
territories of Canada. Regulatory oversight is vested in various governmental agencies having broad administrative power with
respect to, among other things, dividend payments, capital adequacy and risk based capital requirements, asset and reserve
valuation requirements, permitted investments and the sale and marketing of insurance contracts. OSFI has an expanded
mandate to supervise institutions to determine whether they have adequate policies and procedures to protect against threats
to integrity and security, including foreign interference. In general, OSFI has increased their supervisory focus on other
non-financial risks, which has led to new or enhanced regulations, including conduct risk, third party risk, cybersecurity, and
operational resilience. These regulations focus on protecting policyholders, beneficiaries, and the stability of the Canadian
financial system, rather than investors and may adversely impact shareholder value.
• Some recent examples of regulatory and professional standard developments, which could impact our net income attributed
to shareholders and/or capital position are provided below.
O
A new Segregated Fund Guarantees LICAT capital framework became effective on January 1, 2025. The new framework
includes adjustments to the available capital calculation, adjustments to the Base Solvency Buffer and the inclusion of
transition measures. We continue to meet OSFI’s requirements and maintain capital in excess of regulatory expectations.
O
The International Association of Insurance Supervisors (“IAIS”) announced the adoption of a new global Insurance Capital
Standard (“ICS”) at their annual conference in December 2024. LICAT continues to provide an appropriate risk based
measure of group capital in Canada and we do not expect any impact from the adoption of ICS by IAIS.
O
The National Association of Insurance Commissioners (“NAIC”) continues to review and revise reserving and capital
methodologies as well as the overall risk management framework as required to keep pace with an evolving landscape.
These reviews will affect U.S. life insurers, including John Hancock, and could lead to increased reserving and/or capital
requirements for our business in the U.S. In addition, in December 2020 the NAIC adopted a group capital calculation
(“GCC”) and amendments to the NAIC Insurance Holding Company System Regulatory Act which exempt certain
insurance holding groups, including John Hancock and Manulife, from the requirements relating to the GCC. In Michigan,
which is the lead state for NAIC regulation of John Hancock, the Michigan Insurance Code was recently amended to adopt
the NAIC GCC model language and the Michigan Department of Insurance and Financial Services (“DIFS”) has
promulgated the implementation rules. As the Canadian group-wide supervisor, OSFI has been working with the NAIC to
achieve mutual recognition and treatment of the Canadian group supervision and regulatory framework. Mutual recognition
will avoid redundant group oversight at the John Hancock level by U.S. regulators, and Manulife and John Hancock have
taken a leadership role to ensure the NAIC process could accommodate a process that OSFI could and would undertake.
In the fall of 2024, the NAIC’s Mutual Recognition of Jurisdictions (E) Working Group and the Financial Condition
(E) Committee reviewed and recommended Canada / OSFI as a Recognized and Accepted Jurisdiction. The NAIC
50 | 2024 Annual Report | Management’s Discussion and Analysis
Commissioners then adopted the E Committee recommendation on December 18, 2024. Accordingly, we should have no
future obligations for annual GCC filing waiver requests with Michigan DIFS.
O
The use of asset-intensive reinsurance, where investment risk is transferred to the reinsurer along with insurance risk, has
been the subject of increased focus by insurance authorities in several jurisdictions. NAIC is considering additional
guidelines regarding the use of asset-intensive reinsurance and it, or other insurance regulatory authorities, may in the
future impose additional rules or standards. New guidelines or regulatory requirements may impact the reinsurance market
and limit the availability of asset-intensive reinsurance, increase its cost, or reduce the capital or risk management benefits
of such reinsurance in a manner that could have a material impact on Manulife.
O
Regulators in various jurisdictions in which we operate continue to reform their respective capital regulations. We continue
to closely monitor the developments.
• Increasingly, global financial regulators are promulgating guidance and rules related to climate change and its potential
impacts on financial services firms. OSFI, the SEC and several regulators across Asia have been engaging industry to assess
the impacts of climate change and to set expectations on establishing climate transition plans, including ensuring effective risk
management and governance structures to manage climate change-related risks, and have begun releasing guidance and
disclosure requirements. There are also increasing expectations from investors, regulators, and other stakeholders to provide
comparable, decision-useful data and reporting on climate change-related risks and opportunities, including performance
metrics such as an organization’s Scope 1, 2 and 3 carbon emissions. Regulatory disclosure requirements are guided by
private sector bodies, where there is a convergence in the industry around sustainability reporting frameworks. The IFRS
Foundation’s International Sustainability Standards Board (“ISSB”) is one such body and has published draft standards for a
comprehensive global baseline of sustainability disclosures for capital markets.
• In the United States, state insurance laws regulate most aspects of our business, and our U.S. insurance subsidiaries are
regulated by the insurance departments of the states in which they are domiciled and the states in which they are licensed.
State laws grant insurance regulatory authorities broad administrative powers with respect to, among other things: licensing
companies and agents to transact business; calculating the value of assets to determine compliance with statutory
requirements; mandating certain insurance benefits; regulating certain premium rates; reviewing and approving policy forms;
regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices,
distribution arrangements and payment of inducements; regulating advertising; protecting privacy; establishing statutory
capital and reserve requirements and solvency standards; fixing maximum interest rates on insurance policy loans and
minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts; approving changes in control of
insurance companies; restricting the payment of dividends and other transactions between affiliates; and regulating the types,
amounts and valuation of investments. Changes in any such laws and regulations, or in the interpretation or enforcement
thereof by regulators, could significantly affect our business, results of operations and financial condition.
• Currently, the U.S. federal government does not directly regulate the business of insurance. However, federal legislation and
administrative policies in several areas can significantly and adversely affect state regulated insurance companies. These
areas include financial services regulation, securities regulation, pension regulation, privacy, tort reform legislation, and
taxation. In addition, under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), the U.S. Board
of Governors of the Federal Reserve has supervisory powers over non-bank financial companies that are determined to be
systemically important.
• Insurance guaranty associations in Canada and the United States have the right to assess insurance companies doing
business in their jurisdiction for funds to help pay the obligations of insolvent insurance companies to policyholders and
claimants. Typically, an insurer is assessed an amount related to its proportionate share of the line of business written by all
insurers in the relevant jurisdiction. Because the amount and timing of an assessment is beyond our control, the liabilities that
we have currently established for these potential liabilities may not be adequate, particularly if there is an increase in the
number of insolvent insurers or if the insolvent insurers operated in the same lines of business and in the same jurisdictions in
which we operate.
• Manulife operates in numerous jurisdictions in Asia. These operations are subject to the regulations and laws in each local
jurisdiction, with the structure or model for oversight of insurance differing by jurisdiction. We are encouraged to see further
regional economic and trade integration in Asia, with most jurisdictions supportive of foreign investment and many regulators’
increasing willingness to benchmark domestic law and regulation against international standards and best practices. However,
the increasing geopolitical complexity, rising political and regulatory uncertainty, and regulatory tightening in some jurisdictions
have created heightened complexity and risk for Manulife to mitigate and navigate, which may adversely impact shareholder
value.
• While many of the laws and regulations to which we are subject are intended to protect policyholders, beneficiaries,
depositors and investors in our products and services, others also set standards and requirements for the governance of our
operations. Failure to comply with applicable laws or regulations could result in financial penalties or sanctions, and damage
our reputation.
• All aspects of Manulife’s Global WAM businesses are subject to various laws and regulations around the world. These laws
and regulations are primarily intended to protect investment advisory clients, investors in registered and unregistered funds,
and clients of Manulife’s global retirement businesses. Agencies that regulate investment advisors, investment funds and
51
retirement plan products and services have broad administrative powers, including the power to limit, restrict or prohibit the
regulated entity or person from carrying on business if it fails to comply with such laws and regulations. Possible sanctions for
significant compliance failures include the suspension of individual employees, limitations on engaging in certain lines of
business for specified periods of time, revocation of investment advisor and other registrations and censures and fines both
for individuals and Manulife, along with the resulting damage to our reputation.
• From time to time, regulators raise issues during examinations or audits of Manulife that could have a material adverse impact
on us. We cannot predict whether or when regulatory actions may be taken that could adversely affect our operations. Our
failure to comply with existing and evolving regulatory requirements could also result in regulatory sanctions and could affect
our relationships with regulatory authorities and our ability to execute our business strategies and plans. For further discussion
of government regulation and legal proceedings refer to “Government Regulation” in MFC’s Annual Information Form dated
February 19, 2025 and note 18 of the 2024 Annual Consolidated Financial Statements. See also “Operational Risk Factors –
Our operations face political, legal, operational and other risks that could negatively affect those operations or our results of
operations and financial condition” for further discussion on the impact to our operations.
Changes to International Financial Reporting Standards could have a material impact on our financial results.
• New standards or modifications to existing standards could have a material adverse impact on our financial results and
regulatory capital position (the regulatory capital framework in Canada uses IFRS as a base). Additionally, any mismatch
between the underlying economics of our business and new accounting standards could have significant unintended negative
consequences on our business model and potentially affect our customers, shareholders and our access to capital markets.
Changes in tax laws, tax regulations, or interpretations of such laws or regulations could make some of our products
less attractive to consumers, could increase our corporate taxes or cause us to change the value of our deferred tax
assets and liabilities as well as our tax assumptions included in the valuation of our insurance and investment contract
liabilities. This could have a material adverse effect on our business, results of operations and financial condition1.
• Many of the products that the Company sells benefit from one or more forms of preferred tax treatment under current income
tax regimes. For example, the Company sells life insurance policies that benefit from the deferral or elimination of taxation on
earnings accrued under the policy, as well as permanent exclusion of certain death benefits that may be paid to policyholders’
beneficiaries. We also sell annuity contracts that allow the policyholders to defer the recognition of taxable income earned
within the contract. Other products that the Company sells, such as certain employer-paid health and dental plans, also enjoy
similar, as well as other, types of tax advantages. The Company also benefits from certain tax benefits, including tax-exempt
interest, dividends-received deductions, tax credits (such as foreign tax credits), and favourable tax rates and/or income
measurement rules for tax purposes.
• There is risk that tax legislation could be enacted that would lessen or eliminate some or all of the tax advantages currently
benefiting the Company or its policyholders or its other clients. This could occur in the context of deficit reduction or other tax
reforms. The effects of any such changes could result in materially lower product sales, lapses of policies currently held, and/
or our incurrence of materially higher corporate taxes, any of which could have a material adverse effect on our business,
results of operations and financial condition.
• Additionally, the Company may be required to change its provision for income taxes or carrying amount of deferred tax assets
or liabilities if the characterization of certain items is successfully challenged by taxing authorities or if future transactions or
events, which could include changes in tax laws, tax regulations or interpretations of such laws or regulations, occur. Any
such changes could significantly affect the amounts reported in the consolidated financial statements in the year these
changes occur.
• In 2021, 136 of the 140 members of the Organization for Economic Co-Operation and Development / G20 Inclusive
Framework agreed on a two-pillar solution to address tax challenges from the digital economy, and to close the gaps in
international tax systems. These include a new approach to allocating certain profits of multinational entities amongst
countries and a global minimum income tax rate of 15%. On June 20, 2024, the Canadian government further affirmed its
commitment to these tax reforms by passing the Global Minimum Tax (“GMT”) Act into law. Canada’s GMT applies
retroactively to fiscal periods commencing on or after December 31, 2023, resulting in a GMT expense of $231 million
recorded for the year. While numerous variables contribute to the determination of our GMT liability, we generally expect that
it will increase the effective tax rate by approximately 2 to 3 percentage points. Furthermore, the subsequent adoption of GMT
by other countries in which we operate is likely to impact the tax jurisdictions in which our GMT liabilities will arise, but it
should not have an effect on our overall GMT liability, as any higher local country taxes should reduce our GMT payable to
Canada.
• On January 31, 2025, the Canadian government announced its intention to increase the capital gains inclusion rate from 50%
to 66.67%, effective January 1, 2026. Most of Manulife’s investments are not treated as capital property, however, and
therefore we do not expect to be materially affected by this tax change. For investments treated as capital properties, the
increased effective tax rate on capital gains would result in a modest increase in the deferred tax liabilities on such
investments with accrued gains.
• The U.S. Inflation Reduction Act of 2022 includes a 15% minimum tax based on financial statement income, starting in 2023.
Many related regulations remain to be finalized to clarify how the tax will operate, but at this time we do not expect our IFRS
Footnote Number 1 See “Caution regarding forward-looking statements” above.
52 | 2024 Annual Report | Management’s Discussion and Analysis
effective tax rate to be materially affected by this new tax, though the timing of cash tax payments could be accelerated.
• On December 27, 2023, Bermuda enacted a 15% domestic corporate income tax regime applicable to large multinational
entities that will come into force in 2025. Bermuda has also introduced a transition process intended to phase in the tax impact
to affected taxpayers over a number of years. There are no immediate consequences to Manulife from the passage of this tax
reform and the longer-term impact on the Company’s income tax expense is not expected to be material.
Access to capital may be negatively impacted by market conditions.
• Disruptions, uncertainty or volatility in the financial markets may limit or delay our access to the capital markets to raise capital
required to operate our business, satisfy regulatory capital requirements or meet our refinancing needs. Under extreme
conditions, we may be forced, among other things, to delay raising capital, issue different types of capital than we would
otherwise under normal conditions, issue shorter-term securities than we prefer, or issue securities that bear an unattractive
cost of capital which could decrease our financial flexibility, profitability, and/or dilute our existing shareholders.
As a holding company, MFC depends on the ability of its subsidiaries to transfer funds to MFC to meet its obligations
and pay dividends. Subsidiaries’ remittance of capital depends on subsidiaries’ earnings, regulatory requirements and
restrictions, and macroeconomic and market conditions.
• MFC is a holding company and relies on dividends and interest payments from our insurance and other subsidiaries as the
principal source of cash flow to meet MFC’s obligations and pay dividends. As a result, MFC’s cash flows and ability to service
its obligations are dependent upon the earnings of its subsidiaries and the distribution of those earnings and other funds by its
subsidiaries to MFC. Substantially all of MFC’s business is currently conducted through its subsidiaries.
• The ability of MFC’s insurance subsidiaries to pay dividends to MFC in the future will depend on their earnings,
macroeconomic and market conditions, and their respective local regulatory requirements and restrictions, including capital
adequacy and requirements, exchange controls and economic or trade sanctions.
• MFC’s insurance subsidiaries are subject to a variety of insurance and other laws and regulations that vary by jurisdiction and
are intended to protect policyholders and beneficiaries in that jurisdiction first and foremost, rather than investors. These
subsidiaries are generally required to maintain solvency and capital standards as set by their local regulators and may also be
subject to other regulatory restrictions, all of which may limit the ability of subsidiary companies to pay dividends or make
distributions to MFC.
• Potential changes to regulatory capital and actuarial and accounting standards could also limit the ability of the insurance
subsidiaries to pay dividends or make distributions and could have a material adverse effect on internal capital mobility. We
may be required to raise additional capital, which could be dilutive to existing shareholders, or to limit the new business we
write, or to pursue actions that would support capital needs but adversely impact our subsequent earnings potential. In
addition, the timing and outcome of these initiatives could have a significantly adverse impact on our competitive position
relative to that of other Canadian and international financial institutions with which we compete for business and capital.
• The Company seeks to maintain capital in its regulated subsidiaries in excess of the minimum required in all jurisdictions in
which the Company does business. The minimum requirements in each jurisdiction may increase due to regulatory changes
and we may decide to maintain additional capital in our operating subsidiaries for competitive reasons, to fund expected
growth of the business or to deal with changes in the risk profile of such subsidiaries. Any such increases in the level of capital
may reduce the ability of the operating companies to pay dividends.
• The payment of dividends to MFC by MLI is subject to restrictions set out in the ICA. The ICA prohibits the declaration or
payment of any dividend on shares of an insurance company if there are reasonable grounds for believing: (i) the company
does not have adequate capital and adequate and appropriate forms of liquidity; or (ii) the declaration or the payment of the
dividend would cause the company to be in contravention of any regulation made under the ICA respecting the maintenance
of adequate capital and adequate and appropriate forms of liquidity, or of any order made to the company by the
Superintendent. All of our U.S. and Asian operating life insurance companies are subsidiaries of MLI. Accordingly, a restriction
on dividends from MLI would restrict MFC’s ability to obtain dividends from its U.S. and Asian businesses.
• Certain of MFC’s U.S. insurance subsidiaries also are subject to insurance laws in Michigan, New York and Massachusetts,
the jurisdictions in which these subsidiaries are domiciled, which impose general limitations on the payment of dividends and
other upstream distributions by these subsidiaries to MLI.
• Our Asian insurance subsidiaries are also subject to restrictions in the jurisdictions in which these subsidiaries are domiciled
which could affect their ability to pay dividends to MLI in certain circumstances.
The declaration and payment of dividends and the amount thereof is subject to change.
• The holders of common shares are entitled to receive dividends as and when declared by the Board, subject to the preference
of the holders of Class A Shares, Class 1 Shares, Class B Shares (collectively, the “Preferred Shares”) and any other shares
ranking senior to the common shares with respect to priority in payment of dividends. The declaration and payment of
dividends and the amount thereof is subject to the discretion of the Board of MFC and is dependent upon the results of
operations, financial condition, cash requirements and future prospects of, and regulatory and contractual restrictions on the
payment of dividends by MFC and other factors deemed relevant by the Board of MFC. Although MFC has historically
declared quarterly cash dividends on the common shares, MFC is not required to do so and the Board of MFC may reduce,
defer, or eliminate MFC’s common share dividend in the future.
53
• The foregoing risk disclosure in respect of the declaration and payment of dividends on the common shares applies equally in
respect of the declaration and payment of dividends on the Preferred Shares, notwithstanding that the Preferred Shares have
a fixed rate of dividend.
• See “Government Regulation” and “Dividends” in MFC’s Annual Information Form dated February 19, 2025 for a summary of
additional statutory and contractual restrictions concerning the declaration of dividends by MFC.
We may experience future downgrades in our financial strength or credit ratings, which may materially adversely
impact our financial condition and results of operations.
• Credit rating agencies publish financial strength ratings on life insurance companies that are indicators of an insurance
company’s ability to meet contract holder and policyholder obligations. Credit rating agencies also assign credit ratings, which
are indicators of an issuer’s ability to meet the terms of its obligations in a timely manner and are important factors in a
company’s overall funding profile and ability to access external capital. Ratings reflect the views held by each credit agency,
which are subject to change based on various factors that may be within or beyond a company’s control.
• Ratings are important factors in establishing the competitive position of insurance companies, maintaining public confidence in
products being offered, and determining the cost of capital. A ratings downgrade, or the potential for such a downgrade, could
adversely affect our operations and financial condition. A downgrade could, among other things, increase our cost of capital
and limit our access to the capital and loan markets; cause some of our existing liabilities to be subject to acceleration,
additional collateral support, changes in terms, or additional financial obligations; result in the termination of our relationships
with broker-dealers, banks, agents, wholesalers and other distributors of our products and services; increase our cost of
hedging; unfavourably impact our ability to execute on our hedging strategies; materially increase the number of surrenders,
for all or a portion of the net cash values, by the owners of policies and contracts we have issued; impact our ability to obtain
reinsurance at reasonable prices or at all; and materially increase the number of withdrawals by policyholders of cash values
from their policies and reduce new sales.
Competitive factors may adversely affect our market share and profitability.
• The insurance, wealth and asset management, and banking industries are highly competitive. Our competitors include other
insurers, securities firms, investment advisors, asset managers, banks and other financial institutions. The rapid advancement
of new technologies, such as blockchain, artificial intelligence (“AI”) (e.g., generative AI) and advanced analytics, may enable
other non-traditional firms (e.g., big technology competitors providing financial products and services) to compete directly in
the industry space, or offer services to our traditional competitors to enhance their value propositions. The rapid growth and
availability of AI and generative AI technologies presents significant opportunities to enhance customer experience, improve
business decisions, manage risk and drive operational efficiencies, however, there can be no assurances that the use of AI
and generative AI technologies will have their intended effects, appropriately or sufficiently replicate certain outcomes, or
accurately predict future events or exposures. The use of AI and generative AI technologies presents complex challenges,
including balancing and mitigating potential risks posed by the development or deployment of AI technologies. Additionally,
future legislation may restrict certain usage of AI models or technologies or data that feed into AI models or technologies,
which could impact our ability to effectively use such models or technology.
• The impact from technological disruption may result in our competitors improving their customer experience, product offerings
and business costs. Our competitors compete with us for customers, access to distribution channels such as brokers and
independent agents, and for employees. In some cases, competitors may be subject to less onerous regulatory requirements,
have lower operating costs or have the ability to absorb greater risk while maintaining their financial strength ratings, thereby
allowing them to price their products more competitively or offer features that make their products more attractive. These
competitive pressures could result in lower new business volumes and increased pricing pressures on a number of our
products and services that may harm our ability to maintain or increase our profitability. Due to the highly competitive nature of
the financial services industry, there can be no assurance that we will continue to effectively compete with our traditional and
non-traditional industry rivals, and competitive pressure may have a material adverse effect on our business, results of
operations and financial condition.
We may experience difficulty in marketing and distributing products through our current and future distribution
channels.
• We distribute our insurance and wealth management products through a variety of distribution channels, including brokers,
independent agents, broker-dealers, banks, wholesalers, affinity partners, other third-party organizations and our own sales
force in Asia. We generate a significant portion of our business through individual third-party arrangements. We periodically
negotiate provisions and renewals of these relationships, and there can be no assurance that such terms will remain
acceptable to us or relevant third parties. An interruption in our continuing relationship with certain of these third parties could
significantly affect our ability to market our products and could have a material adverse effect on our business, results of
operations and financial condition.
Industry trends could adversely affect the profitability of our businesses.
• Our business segments continue to be influenced by a variety of trends that affect our business and the financial services
industry in general. The impact of the volatility and instability of the financial markets on our business is difficult to predict and
the results of operations and our financial condition may be significantly impacted by general business and economic trends in
54 | 2024 Annual Report | Management’s Discussion and Analysis
the geographies in which we operate. These conditions include, but are not limited to, market factors, such as public equity,
foreign currency, interest rate and other market risks, demographic shifts, consumer behaviours, and governmental policies
(e.g., fiscal, monetary, and global trade). In addition, the future of global trade remains uncertain, as companies and countries
look to decrease reliance on global supply chains and countries implement increased protectionist measures, including
through protectionist trade policies and tariffs. Such policies and measures, and increasing economic nationalism could
reshape global alliances and impact the economies in which we operate. The Company’s business plans, results of
operations, and financial condition have been negatively impacted in the past and may be negatively affected in the future.
We may face unforeseen liabilities or asset impairments arising from possible mergers with, or acquisitions and
dispositions of, or strategic investments in, businesses or difficulties integrating acquired businesses.
• We have engaged in mergers with, acquisitions and dispositions of, or strategic investments in, businesses in the past and
expect to continue to do so in the future as we may deem appropriate. There could be unforeseen liabilities or asset
impairments, including goodwill impairments that arise in connection with the businesses that we may sell, have acquired, or
may acquire in the future. In addition, there may be liabilities or asset impairments that we fail, or are unable, to discover in
the course of performing due diligence investigations on acquisition targets. Furthermore, the use of our own funds as
consideration in any acquisition would consume capital resources that would no longer be available for other corporate
purposes.
• Our ability to achieve some or all of the benefits we anticipate from any mergers with, acquisitions and dispositions of, or
strategic investments in, businesses will depend in large part upon our ability to successfully integrate the businesses in an
efficient and effective manner. We may not be able to integrate the businesses smoothly or successfully, and the process may
take longer than expected. The integration of operations may require the dedication of significant management resources,
which may distract management’s attention from our day-to-day business. Mergers with, acquisitions and dispositions of, or
strategic investments in, operations outside of North America, especially any acquisition in a jurisdiction in which we do not
currently operate, may be particularly challenging or costly to integrate. If we are unable to successfully integrate the
operations of any acquired businesses, we may be unable to realize the benefits we expect to achieve as a result of the
acquisitions and the results of operations may be less than expected.
If our businesses do not perform well, or if the outlook for our businesses is significantly lower than historical trends,
we may be required to recognize an impairment of goodwill or intangible assets or to establish a valuation allowance
against our deferred tax assets, which could have a material adverse effect on our results of operations and financial
condition.
• Goodwill represents the excess of the amounts we paid to acquire subsidiaries and other businesses over the fair value of
their net identifiable assets at the date of acquisition. Intangible assets represent assets that are separately identifiable at the
time of an acquisition and provide future benefits such as the John Hancock brand.
• As outlined below under “Critical Actuarial and Accounting Policies – Goodwill and Intangible Assets”, goodwill and intangible
assets with indefinite lives are tested at least annually for impairment at the cash generating unit (“CGU”) or group of CGUs
level, representing the smallest group of assets that is capable of generating largely independent cash flows. As a result of the
impact of economic conditions and changes in product mix and the granular level of goodwill testing under IFRS, additional
impairment charges could occur in the future. Any impairment in goodwill would not affect LICAT capital.
• If market conditions deteriorate in the future and, in particular, if MFC’s common share price is low relative to book value per
share, if the Company’s actions to limit risk associated with its products or investments cause a significant change in any one
CGU’s recoverable amount, or if the outlook for a CGU’s results deteriorate, the Company may need to reassess the value of
goodwill and/or intangible assets which could have a material adverse effect on our results of operations and financial
condition.
• Deferred income tax balances represent the expected future tax effects of the differences between the book and tax basis of
assets and liabilities, loss carry forwards and tax credits. Deferred tax assets are recorded when the Company expects to
claim deductions on tax returns in the future for expenses that have already been recorded in the financial statements.
• The availability of those deductions is dependent on future taxable income against which the deductions can be made.
Deferred tax assets are assessed periodically by management to determine if they are realizable.
• Factors in management’s determination include the performance of the business including the ability to generate gains from a
variety of sources and tax planning strategies. If based on information available at the time of the assessment, it is determined
that the deferred tax asset will not be realized, then the deferred tax asset is reduced to the extent that it is no longer probable
that the tax benefit will be realized.
We may not be able to protect our intellectual property and may be subject to infringement claims.
• We rely on a combination of registrations, contractual rights and copyright, trademark, patent and trade secret laws to
establish and protect our intellectual property. In particular, we have invested considerable resources in promoting and
protecting the brand names “Manulife” and “John Hancock” and expect to continue to do so. Although we use a broad range
of measures to protect our intellectual property rights, third parties may infringe or misappropriate our intellectual property. As
the occurrence of potential infringements or misappropriations against our intellectual property increases, we may have to
litigate more often to enforce and protect our copyrights, trademarks, patents, trade secrets and know-how or to determine
their scope, validity or enforceability, which represents a diversion of resources that may be significant in amount and may not
55
prove successful. The loss of intellectual property protection or the inability to secure or enforce the protection of our
intellectual property assets could have a material adverse effect on our business and our ability to compete.
• We also may be subject to costly litigation in the event that another party alleges our operations or activities infringe upon its
intellectual property rights. Third parties may have, or may eventually be issued, patents that could be infringed by our
products, methods, processes or services. Any party that holds such a patent could make a claim of infringement against us.
We may also be subject to claims by third parties for breach of copyright, trademark, trade secret or license usage rights. Any
such claims and any resulting litigation could result in significant liability for damages. If we were found to have infringed a
third-party patent or other intellectual property rights, we could incur substantial liability, and in some circumstances could be
enjoined from providing certain products or services to our customers or utilizing and benefiting from certain methods,
processes, copyrights, trademarks, trade secrets or licenses, or alternatively could be required to enter into costly licensing
arrangements with third parties, all of which could have a material adverse effect on our business, results of operations and
financial condition.
Applicable laws may discourage takeovers and business combinations that common shareholders of MFC might
consider in their best interests.
• The ICA contains restrictions on the purchase or other acquisition, issue, transfer and voting of the shares of an insurance
company. In addition, under applicable U.S. insurance laws and regulations in states where certain of our insurance company
subsidiaries are domiciled, no person may acquire control of MFC without obtaining prior approval of those states’ insurance
regulatory authorities. These restrictions may delay, defer, prevent, or render more difficult a takeover attempt that common
shareholders of MFC might consider in their best interests. For instance, they may prevent shareholders of MFC from
receiving the benefit from any premium to the market price of MFC’s common shares offered by a bidder in a takeover
context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing
market price of MFC’s common shares if they are viewed as discouraging takeover attempts in the future.
Entities within the MFC group are interconnected which may make separation difficult.
• MFC operates in local markets through subsidiaries and branches of subsidiaries. These local operations are financially and
operationally interconnected to lessen expenses, share and reduce risk, and efficiently utilize financial resources. In general,
external capital required for companies in the Manulife group has been raised at the MFC level in recent years and then
transferred to other entities primarily as equity or debt capital as appropriate. Other linkages include policyholder and other
creditor guarantees and other forms of internal support between various entities, loans, capital maintenance agreements,
derivatives, shared services and affiliate reinsurance treaties. Accordingly, the risks undertaken by a subsidiary may be
transferred to or shared by affiliates through financial and operational linkages. Some of the consequences of this are:
O
Financial difficulties at a subsidiary may not be isolated and could cause material adverse effects on affiliates and the
group as a whole.
O
Linkages may make it difficult to dispose of or separate a subsidiary or business within the group by way of a spin-off or
similar transaction and the disposition or separation of a subsidiary or business may not fully eliminate the liability of the
Company and its remaining subsidiaries for shared risks. Issues raised by such a transaction could include: (i) the
Company cannot terminate, without policyholder consent, and in certain jurisdictions regulator consent, parental
guarantees on in-force policies and therefore would continue to have residual risk under any such non-terminated
guarantees; (ii) internal capital mobility and efficiency could be limited; (iii) significant potential tax consequences; (iv)
uncertainty about the accounting and regulatory outcomes of such a transaction; (v) obtaining any other required
approvals; (vi) there may be a requirement for significant capital injections; and (vii) the transaction may result in increased
sensitivity of net income attributed to shareholders and capital of MFC and its remaining subsidiaries to market declines.
We may not be able to achieve our sustainability commitments, or our commitments may not meet the expectations of
stakeholders or regulators.
• We continue to build on our sustainability commitments, including our climate-related commitments, as set out in our
sustainability strategy, and continue to adopt policies and processes to manage these commitments, in alignment with our
business priorities. Internal or external circumstances could affect our ability to successfully meet some or all of our
sustainability commitments. Our commitments could also materially change in the future and this could affect stakeholders’
evaluation of us and lead to adverse impacts on our business operations and reputation.
• Our progress towards the commitments is disclosed periodically, which allows our stakeholders, including shareholders,
customers and employees, to evaluate our business based on our advancement towards these commitments. Our reporting
on our progress relies on various external frameworks, methodologies, taxonomies and other standards, which may change
over time, resulting in changes to or restatements of our reporting processes and results. Stakeholders may also evaluate our
business by their own sustainability criteria which may not be consistent with our own criteria or performance indicators, which
could result in varying levels of expectations for which we may not be able to entirely satisfy.
• The availability of quality and reliable data, including issuer data, is a notable factor in our ability to set targets, make effective
decisions against, and report on our progress towards our targets and strategic areas of focus, for our general fund. However,
as a consequence of incomplete, inadequate, or unavailable data, our targets, and our progress toward achieving them, may
need to be revisited.
56 | 2024 Annual Report | Management’s Discussion and Analysis
• Interim targets support us in understanding how our investments can contribute to decarbonization of the real economy and
provide guideposts against which to measure our progress towards our long-term commitments. However, our targets, and
our progress toward achieving them, may need to be revisited if the assumptions underlying net zero scenarios and pathways
prove incorrect, or if regulatory, economic, technological and other external factors needed to enable such scenarios and
pathways fail to evolve.
• As regulators adopt mandatory sustainability-related disclosure requirements and investment criteria and taxonomies, there is
an increasing possibility of regulatory sanctions, including fines, and litigation resulting from inaccurate or misleading
statements, often referred to as “greenwashing”. As a result, we may face adverse investor, media, or public scrutiny which
may negatively impact our financial results and reputation.
• With respect to our asset management business, we may be subject to competing demands from investors who have
divergent views on ESG matters and may choose to invest or not invest in our products based on their assessment of how we
address ESG in our investment process. This divergence increases the risk that action, or inaction, on ESG matters will be
perceived negatively by at least some stakeholders thereby potentially adversely impacting our business.
Market & Liquidity Risk
Market risk is the risk of loss resulting from market price volatility, interest rate change, credit and swap spread changes, and
adverse foreign currency exchange rate movements. Market price volatility primarily relates to changes in prices of publicly
traded equities and alternative long-duration assets. The profitability of our insurance and annuity products, as well as the fees
we earn in our investment management business, are subject to market risk.
Liquidity risk is the risk of loss resulting from the inability to access sufficient funds or liquid assets to meet expected and
unexpected cash and collateral demands.
IFRS 7 Disclosures
Text and tables in this and the following section (“Market Risk Sensitivities and Market Risk Exposure Measures”) include
disclosures on market and liquidity risk in accordance with IFRS 7, “Financial Instruments – Disclosures”, and discussions on
how we measure risk and our objectives, policies and methodologies for managing them. Disclosures in accordance with IFRS 7
are identified by a vertical line in the left margin of each page. The identified text and tables represent an integral part of our
audited 2024 Annual Consolidated Financial Statements. The fact that certain text and tables are considered an integral part of
the 2024 Annual Consolidated Financial Statements does not imply that the disclosures are of any greater importance than the
sections not part of the disclosures. Accordingly, the “Risk Management and Risk Factors” disclosure should be read in its
entirety.
Market & Liquidity Risk Management Strategy
Market & liquidity risk management strategy is governed by the Global Asset Liability Committee which oversees the
market and liquidity risk program. Our overall strategy to manage our market & liquidity risks incorporates several
component strategies, each targeted to manage one or more of the market & liquidity risks arising from our businesses. At
an enterprise level, these strategies are designed to manage our aggregate exposures to market & liquidity risks against
limits associated with earnings and capital volatility.
The following table outlines our key market & liquidity risks and identifies the risk management strategies which contribute
to managing these risks.
Risk Management Strategy
Key Market & Liquidity Risk
Public
Interest Rate
ALDA
Foreign Currency
Equity Risk
and Spread Risk
Risk
Exchange Risk
Liquidity Risk
Product design and pricing
✓
✓
✓
✓
✓
Variable annuity guarantee dynamic hedging
✓
✓
✓
✓
Macro equity risk hedging
✓
✓
✓
Asset liability management
✓
✓
✓
✓
✓
Foreign currency exchange management
✓
✓
Liquidity risk management
✓
Public Equity Risk – To manage public equity risk from our insurance and annuity businesses, we primarily use a variable
annuity and segregated fund guarantee dynamic hedging strategy which is complemented by a general macro equity risk
hedging strategy, in addition to asset liability management strategies. Our strategies employed for dynamic hedging of variable
annuity and segregated fund guarantees and macro equity risk hedging expose the Company to additional risks. See “Market &
Liquidity Risk Factors” below.
Interest Rate and Spread Risk – To manage interest rate and spread risk, we primarily employ asset liability management
strategies to manage the duration of our fixed income investments and execute interest rate hedges.
57
ALDA Risk – We seek to limit concentration risk associated with ALDA performance by investing in a diversified basket of
assets including commercial real estate, timber, farmland, private equities, infrastructure, and energy assets. We further diversify
risk by managing investments against established investment and risk limits.
Foreign Currency Exchange Risk – Our policy is to generally match the currency of our assets with the currency of the
liabilities they support. Where assets and liabilities are not currency matched, we seek to hedge this exposure where appropriate
to stabilize our consolidated capital positions and remain within our enterprise foreign exchange risk limits.
Liquidity Risk – In the operating companies, cash and collateral demands arise day-to-day to fund policyholder benefits,
customer withdrawals, reinsurance settlements, derivative instrument settlements/collateral pledging, expenses, and investment
activities. Under stressed conditions, additional cash and collateral demands could arise from changes to policyholder
termination or policy renewal rates, withdrawals of customer deposit balances, loan extensions, derivative settlements or
collateral demands, and reinsurance settlements.
Our liquidity risk management framework is designed to provide adequate liquidity to cover cash and collateral obligations as
they come due, and to sustain and grow operations in both normal and stressed conditions. Refer to “Liquidity Risk Management
Strategy” below for more information.
Product Design and Pricing Strategy
Our policies, standards, and guidelines, with respect to product design and pricing, are designed with the objective of aligning
our product offerings with our risk taking philosophy and risk appetite, and in particular, ensuring that incremental risk generated
from new sales aligns with our strategic risk objectives and risk limits. The specific design features of our product offerings,
including level of benefit guarantees, policyholder options, fund offerings and availability restrictions as well as our associated
investment strategies, help to mitigate the level of underlying risk. We regularly review and modify key features within our product
offerings, including premiums and fee charges with a goal of meeting profit targets and staying within risk limits. Certain of our
general fund adjustable benefit products have minimum rate guarantees. The rate guarantees for any particular policy are set at
the time the policy is issued and governed by insurance regulation in each jurisdiction where the products are sold. The
contractual provisions allow crediting rates to be reset at pre-established intervals subject to the established minimum crediting
rate guarantees. The Company may partially mitigate the interest rate exposure by setting new rates on new business and by
adjusting rates on in-force business where permitted. In addition, the Company partially mitigates this interest rate risk through its
asset liability management process, product design elements, and crediting rate strategies. All material new product, reinsurance
and underwriting initiatives must be reviewed and approved by the CRO or key individuals within risk management functions.
Hedging Strategies for Variable Annuity and Other Equity Risks
The Company’s exposure to movement in public equity market values primarily arises from insurance contract liabilities related
to variable annuity guarantees and general fund public equity investments.
Dynamic hedging is the primary hedging strategy for variable annuity market risks. Dynamic hedging is employed for new
variable annuity guarantees business when written or as soon as practical thereafter.
We seek to manage public equity risk arising from unhedged exposures in our insurance contract liabilities through our macro
equity risk hedging strategy. We seek to manage interest rate risk arising from variable annuity business not dynamically hedged
through our asset liability management strategy.
58 | 2024 Annual Report | Management’s Discussion and Analysis
Variable Annuity Dynamic Hedging Strategy
The variable annuity dynamic hedging strategy is designed to hedge the sensitivity of variable annuity guarantee insurance
contract liabilities to fund performance (both public equity and bond funds) and interest rate movements. The objective of the
variable annuity dynamic hedging strategy is to offset, as closely as possible, the change in the economic value of guarantees
with the profit and loss from our hedge asset portfolio.
Our variable annuity hedging program uses a variety of exchange-traded and over-the-counter (“OTC”) derivative contracts to
offset the change in value of variable annuity guarantees. The main derivative instruments used are equity index futures,
government bond futures, currency futures, interest rate swaps, total return swaps, equity options, and interest rate swaptions.
The hedge instruments’ positions against insurance contract liabilities are continuously monitored as market conditions change.
As necessary, the hedge asset positions will be dynamically rebalanced to stay within established limits. We may also utilize
other derivatives with the objective to improve hedge effectiveness opportunistically.
Our variable annuity guarantee dynamic hedging strategy is not designed to completely offset the sensitivity of insurance
contract liabilities to all risks associated with the guarantees embedded in these products. The profit (loss) on the hedge
instruments will not completely offset the underlying losses (gains) related to the guarantee liabilities hedged because:
• Policyholder behaviour and mortality experience are not hedged;
• Risk adjustment related to cost of guarantees in the insurance contract liabilities is largely hedged;
• A portion of interest rate risk is not hedged;
• Credit spreads may widen and actions might not be taken to adjust accordingly;
• Fund performance on a small portion of the underlying funds is not hedged due to lack of availability of effective exchange-
traded hedge instruments;
• Performance of the underlying funds hedged may differ from the performance of the corresponding hedge instruments;
• Correlations between interest rates and equity markets could lead to unfavourable material impacts;
• Unfavourable hedge rebalancing costs can be incurred during periods of high volatility from equity markets, bond markets,
and / or interest rates, which is magnified when these impacts occur concurrently; and
• Not all other risks are hedged.
Differences in the profit (loss) on the hedge instruments versus the underlying losses (gains) related to the guarantee liabilities
hedged are reported in CSM.
Macro Equity Risk Hedging Strategy
The objective of the macro equity risk hedging program is to maintain our overall earnings sensitivity to public equity market
movements within our Board approved risk appetite limits. The macro equity risk hedging program is designed to hedge earnings
sensitivity due to movements in public equity markets arising from all sources (outside of dynamically hedged exposures).
Sources of equity market sensitivity addressed by the macro equity risk hedging program include general fund equity holdings
backing guaranteed, and adjustable liabilities.
Asset Liability Management Strategy
Our asset liability management strategy is designed to help ensure that the market risks embedded in our assets and liabilities
held in the Company’s general fund are effectively managed and that risk exposures arising from these assets and liabilities are
maintained within risk limits. The embedded market risks include risks related to the level and movement of interest rates and
credit and swap spreads, public equity market performance, ALDA performance, and foreign currency exchange rate
movements.
General fund product liabilities are categorized into groups with similar characteristics in order to support them with a specific
asset strategy. We seek to align the asset strategy for each group to the premium and benefit patterns, policyholder options and
guarantees, and crediting rate strategies of the products they support. The strategies are set using portfolio analysis techniques
intended to optimize returns, subject to considerations related to regulatory and economic capital requirements, and risk
tolerances. They are designed to achieve broad diversification across asset classes and individual investment risks while being
suitably aligned with the liabilities they support. The strategies encompass asset mix, quality rating, term profile, liquidity,
currency, and industry concentration targets.
Products which feature guaranteed liability cash flows (i.e., where the projected net flows are not materially dependent upon
economic scenarios) are managed to a target return investment strategy. The products backed by this asset group include:
• Accumulation annuities (other than annuities with pass-through features), which are primarily short-to-medium-term
obligations and offer interest rate guarantees for specified terms on single premiums. Withdrawals may or may not have
market value adjustments;
• Payout annuities, which have no surrender options and include predictable and very long-dated obligations; and
• Insurance products, with recurring premiums extending many years in the future, and which also include a significant
component of very long-dated obligations.
59
We seek to manage the assets backing these long-dated benefits to achieve a target return sufficient to support the obligations
over their lifetime, subject to established risk tolerances and the impact of regulatory and economic capital requirements. Fixed
income assets are managed to a benchmark developed to minimize interest rate risk against the liability cash flows. Utilizing
ALDA and public equity investments provides a suitable match for long-duration liabilities that also enhances long-term
investment returns and reduces aggregate risk through diversification.
For insurance and annuity products where significant pass-through features exist, a total return strategy approach is used,
generally combining fixed income with ALDA plus public equity investments. ALDA and public equity may be included to enhance
long-term investment returns and reduce aggregate risk through diversification. Target investment strategies are established
using portfolio analysis techniques that seek to optimize long-term investment returns while considering the risks related to
embedded product guarantees and policyholder withdrawal options, the impact of regulatory and economic capital requirements
and considering management tolerances with respect to short-term income volatility and long-term tail risk exposure. For these
pass-through products such as participating insurance and universal life insurance, the investment performance of assets
supporting the liabilities will be largely passed through to policyholders as changes in the amounts of dividends declared or rates
of interest credited, subject to embedded minimum guarantees. Shorter duration liabilities such as fixed deferred annuities do not
incorporate ALDA plus public equity investments into their target asset mixes. Authority to manage our investment portfolios is
delegated to investment professionals who manage to benchmarks derived from the target investment strategies established for
each group, including interest rate risk tolerances.
Our asset liability management strategy incorporates a wide variety of risk measurement, risk mitigation and risk management,
and hedging processes. The liabilities and risks to which the Company is exposed, however, cannot be completely matched or
hedged due to both limitations on instruments available in investment markets and uncertainty of impact on liability cash flows
from policyholder experience / behaviour.
Foreign Currency Exchange Risk Management Strategy
Our policy is to generally match the currency of our assets with the currency of the liabilities they support. Where assets and
liabilities are not currency matched, we seek to hedge this exposure where appropriate to stabilize our earnings and consolidated
capital positions and remain within our enterprise foreign exchange risk limits.
Risk from small balance sheet mismatches is accepted if managed within set risk limits. Risk exposures are measured in terms
of potential changes in earnings and capital ratios, due to foreign currency exchange rate movements, determined to represent a
specified likelihood of occurrence based on internal models.
Liquidity Risk Management Strategy
Global liquidity management policies and procedures are designed to provide adequate liquidity to cover cash and collateral
obligations as they come due, and to sustain and grow operations in both normal and stressed conditions. They consider legal,
regulatory, tax, operational or economic impediments to inter-entity funding. The asset mix of our balance sheet takes into
account the need to hold adequate unencumbered and appropriate liquid assets to satisfy the requirements arising under
stressed scenarios and to allow our liquidity ratios to remain strong. We manage liquidity centrally and closely monitor the
liquidity positions of our principal subsidiaries.
We seek to mitigate liquidity risk by diversifying our business across different products, markets, geographical regions, and
policyholders. We design insurance products to encourage policyholders to maintain their policies in-force, to help generate a
diversified and stable flow of recurring premiums. We design the policyholder termination features with the goal of mitigating the
financial exposure and liquidity risk related to unexpected policyholder terminations. We establish and implement investment
strategies intended to match the term profile of the assets to the liabilities they support, taking into account the potential for
unexpected policyholder terminations and resulting liquidity needs. Liquid assets represent a large portion of our total assets. We
aim to reduce liquidity risk in our businesses by diversifying our funding sources and appropriately managing the term structure
of our funding. We forecast and monitor daily operating liquidity and cash movements in various individual entities and
operations as well as centrally, aiming to ensure liquidity is available and cash is employed optimally.
We also maintain centralized cash pools and access to other sources of liquidity and contingent liquidity such as repurchase
funding agreements. Our centralized cash pools consist of cash or near-cash, high quality short-term investments that are
continually monitored for their credit quality and market liquidity.
60 | 2024 Annual Report | Management’s Discussion and Analysis
As at December 31, 2024, the Company held $263.3 billion in cash and cash equivalents, comprised of cash on deposit,
Canadian and U.S. Treasury Bills and high quality short-term investments, and marketable securities comprised of investment
grade government and agency bonds, investment grade corporate bonds, investment grade securitized instruments, publicly
traded common stocks and preferred shares, compared with $250.7 billion as at December 31, 2023 as noted in the table below.
As at December 31,
($ millions, unless otherwise stated)
2024
2023
Cash and cash equivalents
$
25,789
$
20,338
Marketable securities
Government bonds (investment grade)
80,891
77,191
Corporate bonds (investment grade)
122,324
126,992
Securitized – ABS, CMBS, RMBS (investment grade)
1,758
1,971
Public equities
32,576
24,211
Total marketable assets
237,549
230,365
Total cash and cash equivalents and marketable securitiesRefer to footnote number (1)
$ 263,338
$ 250,703
Footnote Number (1)Including $15.6 billion encumbered cash and cash equivalents and marketable securities as at December 31, 2024 (2023 – $11.0 billion).
We have established a variety of contingent liquidity sources. These include, among others, a $500 million committed unsecured
revolving credit facility with certain Canadian chartered banks available for MFC, and a US$500 million committed unsecured
revolving credit facility with certain U.S. banks available for MFC and certain of its U.S. subsidiaries. There were no outstanding
borrowings under these facilities as at December 31, 2024 (2023 – $nil). In addition, John Hancock Life Insurance Company
(U.S.A.) (“JHUSA”) is a member of the Federal Home Loan Bank of Indianapolis (“FHLBI”), which enables the Company to
obtain loans from FHLBI as an alternative source of liquidity that is collateralizable by qualifying mortgage loans, mortgage-
backed securities, municipal bonds, and U.S. Treasury and Agency securities. As at December 31, 2024, JHUSA had an
estimated maximum borrowing capacity of US$3.8 billion (2023 – US$4.3 billion) based on regulatory limitations with an
outstanding balance of US$500 million (2023 – US$500 million) under the FHLBI facility.
The following table outlines the maturity of the Company’s significant financial liabilities.
Maturity of financial liabilitiesRefer to footnote number (1)
As at December 31, 2024
($ millions)
Less than
1 year
1 to 3
years
3 to 5
years
Over 5
years
Total
Long-term debt
Do
llar Zero
$ 2,829
Do
llar Zero
$ 3,800
$ 6,629
Capital instruments
Zero
Zero
Zero
7,532
7,532
Derivatives
2,320
2,304
1,244
8,379
14,247
Deposits from Bank clientsRefer to footnote number (2)
15,690
3,774
2,599
Zero
22,063
Lease liabilities
105
151
52
47
355
Footnote Number (1)The amounts shown above are net of the related unamortized deferred issue costs.
Footnote Number (2)Carrying value and fair value of deposits from Bank clients as at December 31, 2024 were $22,063 million and $22,270 million, respectively (2023 – $21,616 million
and $21,518 million, respectively). Fair value is determined by discounting contractual cash flows, using market interest rates currently offered for deposits with
similar terms and conditions. All deposits from Bank clients were categorized in Level 2 of the fair value hierarchy (2023 – Level 2).
Through the normal course of business, pledging of assets is required to comply with jurisdictional regulatory and other
requirements including collateral pledged to partially mitigate derivative counterparty credit risk, assets pledged to
exchanges as initial margin, and assets held as collateral for repurchase funding agreements. Total unencumbered assets
were $516.6 billion as at December 31, 2024 (2023 – $470.2 billion).
61
Market Risk Sensitivities and Market Risk Exposure Measures
Variable Annuity and Segregated Fund Guarantees Sensitivities and Risk Exposure Measures
Guarantees on variable annuity products and segregated funds may include one or more of death, maturity, income and
withdrawal guarantees. Variable annuity and segregated fund guarantees are contingent and only payable upon the occurrence
of the relevant event, if fund values at that time are below guarantee values. Depending on future equity market levels, liabilities
on current in-force business would be due primarily in the period from 2025 to 2044.
We seek to mitigate a portion of the risks embedded in our retained (i.e., net of reinsurance) variable annuity and segregated
fund guarantee business through the combination of our dynamic and macro hedging strategies (see “Publicly Traded Equity
Performance Risk” below).
The table below shows selected information regarding the Company’s variable annuity and segregated fund investment-related
guarantees, gross and net of reinsurance.
Variable annuity and segregated fund guarantees, net of reinsurance
As at December 31,
($ millions)
2024
2023
Guarantee
valueRefer to footnote number (1)
Fund
value
Net
amount at
riskRefer to footnote number (1),(2),(3)
Guarantee
valueRefer to footnote number (1)
Fund
value
Net
amount at
riskRefer to footnote number (1),(2),(3)
Guaranteed minimum income benefit
$
3,628
$
2,780
$
918
$
3,864
$
2,735
$ 1,156
Guaranteed minimum withdrawal benefit
33,473
33,539
3,339
34,833
33,198
4,093
Guaranteed minimum accumulation benefit
18,987
19,097
70
18,996
19,025
116
Gross living benefitsRefer to footnote number (4)
56,088
55,416
4,327
57,693
54,958
5,365
Gross death benefitsRefer to footnote number (5)
8,612
19,851
644
9,133
17,279
975
Total gross of reinsurance
64,700
75,267
4,971
66,826
72,237
6,340
Living benefits reinsured
23,768
23,965
3,016
24,208
23,146
3,395
Death benefits reinsured
3,430
2,776
289
3,400
2,576
482
Total reinsured
27,198
26,741
3,305
27,608
25,722
3,877
Total, net of reinsurance
$ 37,502
$ 48,526
$ 1,666
$ 39,218
$ 46,515
$ 2,463
Footnote Number (1)Guarantee Value and Net Amount at Risk in respect of guaranteed minimum withdrawal business in Canada and the U.S. reflect the time value of money of these
claims.
Footnote Number (2)Amount at risk (in-the-money amount) is the excess of guarantee values over fund values on all policies where the guarantee value exceeds the fund value. For
guaranteed minimum death benefit, the amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account balance and
assumes that all claims are immediately payable. In practice, guaranteed death benefits are contingent and only payable upon the eventual death of
policyholders if fund values remain below guarantee values. For guaranteed minimum withdrawal benefit, the amount at risk assumes that the benefit is paid as a
lifetime annuity commencing at the earliest contractual income start age. These benefits are also contingent and only payable at scheduled maturity/income start
dates in the future, if the policyholders are still living and have not terminated their policies and fund values remain below guarantee values. For all guarantees,
the amount at risk is floored at zero at the single contract level.
(3) The amount at risk net of reinsurance at December 31, 2024 was $1,666 million (December 31, 2023 – $2,463 million) of which: US$293 million (December 31, 2023
– US$391 million) was on our U.S. business, $1,021 million (December 31, 2023 – $1,559 million) was on our Canadian business, US$100 million (December 31,
2023 – US$140 million) was on our Japan business, and US$56 million (December 31, 2023 – US$155 million) was related to Asia (other than Japan) and our run-off
reinsurance business.
Footnote Number (4)Where a policy includes both living and death benefits, the guarantee in excess of the living benefit is included in the death benefit category as outlined in footnote 5.
Footnote Number (5)Death benefits include stand-alone guarantees and guarantees in excess of living benefit guarantees where both death and living benefits are provided on a policy.
Investment categories for variable contracts with guarantees
Variable contracts with guarantees, including variable annuities and variable life, are invested at the policyholder’s discretion
subject to contract limitations, in various fund types within the segregated fund accounts and other investments. The account
balances by investment category are set out below.
As at December 31,
($ millions)
2024
2023
Investment category
Equity funds
$ 51,457
$ 45,593
Balanced funds
37,381
35,801
Bond funds
9,017
8,906
Money market funds
1,712
1,559
Other debt investments
2,082
1,907
Total
$ 101,649
$ 93,766
62 | 2024 Annual Report | Management’s Discussion and Analysis
Caution Related to Sensitivities
In the sections that follow, we provide sensitivities and risk exposure measures for certain risks. These include sensitivities due
to specific changes in market prices and interest rate levels projected using internal models as at a specific date, and are
measured relative to a starting level reflecting the Company’s assets and liabilities at that date. The risk exposures measure the
impact of changing one factor at a time and assume that all other factors remain unchanged. Actual results can differ significantly
from these estimates for a variety of reasons including the interaction among these factors when more than one changes;
changes in liabilities from updates to non-economic assumptions, changes in business mix, effective tax rates and other market
factors; and the general limitations of our internal models. For these reasons, the sensitivities should only be viewed as
directional estimates of the underlying sensitivities for the respective factors based on the assumptions outlined below. Given the
nature of these calculations, we cannot provide assurance that the actual impact on contractual service margin, net income
attributed to shareholders, other comprehensive income attributed to shareholders, and total comprehensive income attributed to
shareholders or on MLI’s LICAT ratio will be as indicated.
Market movements affect LICAT capital sensitivities through the available capital, surplus allowance and required capital
components of the regulatory capital framework. The LICAT available capital component is primarily affected by total
comprehensive income and the CSM.
Publicly Traded Equity Performance Risk Sensitivities and Exposure Measures
As outlined above, we have net exposure to equity risk through asset and liability mismatches; our variable annuity and
segregated fund guarantee dynamic hedging strategy is not designed to completely offset the sensitivity of insurance contract
liabilities to all risks associated with the guarantees embedded in these products. The macro hedging strategy is designed to
mitigate public equity risk arising from variable annuity and segregated fund guarantees not dynamically hedged, and from other
unhedged exposures in our insurance contracts.
Changes in public equity prices may impact other items including, but not limited to, asset-based fees earned on assets under
management and administration or policyholder account value, and estimated profits and amortization of deferred policy
acquisition and other costs. These items are not hedged.
The tables below include the potential impacts from an immediate 10%, 20% and 30% change in market values of publicly traded
equities on net income attributed to shareholders, CSM, other comprehensive income attributed to shareholders, and total
comprehensive income attributed to shareholders. The potential impact is shown after taking into account the impact of the
change in markets on the hedge assets. While we cannot reliably estimate the amount of the change in dynamically hedged
variable annuity and segregated fund guarantee liabilities that will not be offset by the change in the dynamic hedge assets, we
make certain assumptions for the purposes of estimating the impact on net income attributed to shareholders.
This estimate assumes that the performance of the dynamic hedging program would not completely offset the gain/loss from the
dynamically hedged variable annuity and segregated fund guarantee liabilities. It assumes that the hedge assets are based on
the actual position at the period end, and that equity hedges in the dynamic program offset 95% of the hedged variable annuity
liability movement that occurs as a result of market changes.
It is also important to note that these estimates are illustrative, and that the dynamic and macro hedging programs may
underperform these estimates, particularly during periods of high realized volatility and/or periods where both interest rates and
equity market movements are unfavourable. The method used for deriving sensitivity information and significant assumptions did
not change from the previous period.
Changes in equity markets impact our available and required components of the LICAT ratio. The second set of tables shows the
potential impact to MLI’s LICAT ratio resulting from changes in public equity market values.
63
Potential immediate impact on net income attributed to shareholders arising from changes to public equity returns(1)
As at December 31, 2024
($ millions)
Net income attributed to shareholders
-30%
-20%
-10%
+10%
+20%
+30%
Underlying sensitivity
Variable annuity and segregated fund guaranteesRefer to footnote number (2)
$ (2,050)
$ (1,240)
$
(560)
$ 470
$
860
$ 1,190
General fund equity investmentsRefer to footnote number (3)
(1,240)
(820)
(400)
390
780
1,180
Total underlying sensitivity before hedging
(3,290)
(2,060)
(960)
860
1,640
2,370
Impact of macro and dynamic hedge assets
Refer to footnote number (4)
720
430
190
(150)
(260)
(360)
Net potential impact on net income attributed to shareholders after
impact of hedging and before impact of reinsurance
(2,570)
(1,630)
(770)
710
1,380
2,010
Impact of reinsurance
1,320
810
370
(320)
(590)
(830)
Net potential impact on net income attributed to shareholders
after impact of hedging and reinsurance
$ (1,250)
$
(820)
$
(400)
$ 390
$
790
$ 1,180
As at December 31, 2023
($ millions)
Net income attributed to shareholders
-30%
-20%
-10%
+10%
+20%
+30%
Underlying sensitivity
Variable annuity and segregated fund guaranteesRefer to footnote number (2)
$ (2,370)
$ (1,460)
$
(670)
$ 550
$ 1,010
$ 1,390
General fund equity investments(3)
(1,170)
(770)
(390)
380
760
1,140
Total underlying sensitivity before hedging
(3,540)
(2,230)
(1,060)
930
1,770
2,530
Impact of macro and dynamic hedge assetsRefer to footnote number (4)
880
530
240
(190)
(340)
(460)
Net potential impact on net income attributed to shareholders after
impact of hedging and before impact of reinsurance
(2,660)
(1,700)
(820)
740
1,430
2,070
Impact of reinsurance
1,470
900
420
(350)
(650)
(910)
Net potential impact on net income attributed to shareholders
after impact of hedging and reinsurance
$ (1,190)
$
(800)
$
(400)
$ 390
$
780
$ 1,160
(1) See “Caution related to sensitivities” above.
Footnote Number (2)For variable annuity contracts measured under the variable fee approach (“VFA”), the impact of financial risk and changes in interest rates adjusts CSM, unless
the risk mitigation option applies. The Company has elected to apply risk mitigation and therefore, a portion of the impact is reported in net income attributed to
shareholders instead of adjusting the CSM. If the CSM for a group of variable annuity contracts is exhausted, the full impact is reported in net income attributed
to shareholders.
Footnote Number (3)This impact for general fund equity investments includes general fund investments supporting our insurance contract liabilities, investment in seed money
investments (in segregated and mutual funds made by Global WAM segment), and the impact on insurance contract liabilities related to the projected future fee
income on variable universal life and other unit-linked products. The impact does not include any potential impact on public equity weightings. The participating
policy funds are largely self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in equity markets.
Footnote Number (4)Includes the impact of assumed rebalancing of equity hedges in the macro and dynamic hedging program. The impact of dynamic hedging represents the impact
of equity hedges offsetting 95% of the dynamically hedged variable annuity liability movement that occurs as a result of market changes, but does not include any
impact in respect of other sources of hedge accounting ineffectiveness (e.g., fund tracking, realized volatility, and equity and interest rate correlations different
from expected among other factors).
64 | 2024 Annual Report | Management’s Discussion and Analysis
Potential immediate impact on contractual service margin, other comprehensive income to shareholders, total
comprehensive income to shareholders and MLI’s LICAT ratio from changes to public equity market valuesRefer to footnote number (1),(2),(3)
As at December 31, 2024
($ millions)
-30%
-20%
-10%
+10%
+20%
+30%
Variable annuity and segregated fund guarantees reported in CSM
$ (3,420)
$ (2,110)
$
(970)
$ 840
$ 1,580
$ 2,250
Impact of risk mitigation – hedgingRefer to footnote number (4)
940
560
250
(190)
(350)
(470)
Impact of risk mitigation – reinsuranceRefer to footnote number (4)
1,670
1,020
470
(400)
(740)
(1,050)
VA net of risk mitigation
(810)
(530)
(250)
250
490
730
General fund equity
(1,140)
(740)
(370)
370
750
1,110
Contractual service margin ($ millions, pre-tax)
$ (1,950)
$ (1,270)
$
(620)
$ 620
$ 1,240
$ 1,840
Other comprehensive income attributed to shareholders
($ millions, post-tax)(5)
$
(840)
$
(560)
$
(280)
$ 270
$
530
$
790
Total comprehensive income attributed to shareholders
($ millions, post-tax)
$ (2,090)
$ (1,380)
$
(680)
$ 660
$ 1,320
$ 1,970
MLI’s LICAT ratio (change in percentage points)
(1)
(1)
Zero
1
1
1
As at December 31, 2023
($millions)
-30%
-20%
-10%
+10%
+20%
+30%
Variable annuity and segregated fund guarantees reported in CSM
$ (3,810)
$ (2,370)
$ (1,100)
$ 940
$ 1,760
$ 2,470
Impact of risk mitigation – hedging(4)
1,150
700
310
(250)
(450)
(600)
Impact of risk mitigation – reinsurance(4)
1,850
1,140
530
(450)
(830)
(1,150)
VA net of risk mitigation
(810)
(530)
(260)
240
480
720
General fund equity
(940)
(610)
(300)
290
590
870
Contractual service margin ($ millions, pre-tax)
$ (1,750)
$ (1,140)
$
(560)
$ 530
$ 1,070
$ 1,590
Other comprehensive income attributed to shareholders
($ millions, post-tax)(5)
$
(730)
$
(490)
$
(240)
$ 230
$
460
$
680
Total comprehensive income attributed to shareholders
($ millions, post-tax)
$ (1,920)
$ (1,290)
$
(640)
$ 620
$ 1,240
$ 1,840
MLI’s LICAT ratio (change in percentage points)
(3)
(2)
(1)
1
2
2
(1) See “Caution related to sensitivities” above.
Footnote Number (2) This estimate assumes that the performance of the dynamic hedging program would not completely offset the gain/loss from the dynamically hedged variable
annuity and segregated fund guarantee liabilities. It assumes that the hedge assets are based on the actual position at the period end, and that equity hedges in
the dynamic program offset 95% of the hedged variable annuity liability movement that occur as a result of market changes.
Footnote Number (3) OSFI rules for segregated fund guarantees reflect full capital impacts of shocks over 20 quarters within a prescribed range. As such, the deterioration in equity
markets could lead to further increases in capital requirements after the initial shock.
Footnote Number (4) For variable annuity contracts measured under VFA the impact of financial risk and changes in interest rates adjusts CSM, unless the risk mitigation option
applies. The Company has elected to apply risk mitigation and therefore a portion of the impact is reported in net income attributed to shareholders instead of
adjusting the CSM. If the CSM for a group of variable annuity contracts is exhausted the full impact is reported in net income attributed to shareholders.
Footnote Number (5) The impact of financial risk and changes to interest rates for variable annuity contracts is not expected to generate sensitivity in Other Comprehensive Income.
Interest Rate and Spread Risk Sensitivities and Exposure Measures
As at December 31, 2024, we estimated the sensitivity of our net income attributed to shareholders to a 50 basis point parallel
decline in interest rates to be a benefit of $100 million, and to a 50 basis point parallel increase in interest rates to be a charge of
$100 million.
The table below shows the potential impacts from a 50 basis point parallel move in interest rates on CSM, net income attributed
to shareholders, other comprehensive income attributed to shareholders, and total comprehensive income attributed to
shareholders. This includes a change in current government, swap and corporate rates for all maturities across all markets with
no change in credit spreads between government, swap and corporate rates. Also shown separately are the potential impacts
from a 50 basis point parallel move in corporate spreads and a 20 basis point parallel move in swap spreads. The impacts reflect
the net impact of movements in asset values in liability and surplus segments and movements in the present value of cash flows
for insurance contracts including those with cash flows that vary with the returns of underlying items where the present value is
measured by stochastic modelling. The method used for deriving sensitivity information and significant assumptions did not
change from the previous period.
The disclosed interest rate sensitivities reflect the accounting designations of our financial assets and corresponding insurance
contract liabilities. In most cases these assets and liabilities are designated as fair value through other comprehensive income and
as a result, impacts from changes to interest rates are largely in other comprehensive income. There are also changes in interest
rates that impact the CSM for VFA contracts that relate to amounts that are not passed through to policyholders. In addition,
changes in interest rates impact net income as it relates to derivatives not in hedge accounting relationships and on VFA contracts
where the CSM has been exhausted.
65
The disclosed interest rate sensitivities assume no hedge accounting ineffectiveness, as our hedge accounting programs are
optimized for parallel movements in interest rates, leading to immaterial net income impacts under these shocks. However, the
actual hedge accounting ineffectiveness is sensitive to non-parallel interest rate movements and will depend on the shape and
magnitude of the interest rate movements which could lead to variations in the impact to net income attributed to shareholders.
Our sensitivities vary across all regions in which we operate, and the impacts of yield curve changes will vary depending upon
the geography where the change occurs. Furthermore, the impacts from non-parallel movements may be materially different
from the estimated impacts of parallel movements.
The interest rate and spread risk sensitivities are determined in isolation of each other and therefore do not reflect the combined
impact of changes in government rates and credit spreads between government, swap and corporate rates occurring
simultaneously. As a result, the impact of the summation of each individual sensitivity may be materially different from the impact
of sensitivities to simultaneous changes in interest rate and spread risk.
The potential impacts also do not take into account other potential effects of changes in interest rate levels, for example, CSM at
recognition on the sale of new business or lower interest earned on future fixed income asset purchases.
The impacts do not reflect any potential effect of changing interest rates on the value of our ALDA. Rising interest rates could
negatively impact the value of our ALDA (see “Critical Actuarial and Accounting Policies – Fair Value of Invested Assets”, below).
More information on ALDA can be found below in the “Alternative Long-Duration Asset Performance Risk Sensitivities and
Exposure Measures” section.
The impact to the LICAT ratio from a change in interest rates reflects the impacts on total comprehensive income, the LICAT
adjustments to earnings for the CSM, the surplus allowance and required capital components of the regulatory capital
framework.
Potential impacts on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders of an immediate parallel change
in interest rates, corporate spreads or swap spreads relative to current ratesRefer to footnote number (1),(2),(3)
As at December 31, 2024
($ millions, post-tax except CSM)
Interest rates
Corporate spreads
Swap spreads
-50bp
+50bp
-50bp
+50bp
-20bp
+20bp
CSM
$ 100
$ (200)
Do
llar Zero
$ (100)
Do
llar Zero
Do
llar Zero
Net income attributed to shareholders
100
(100)
100
(100)
100
(100)
Other comprehensive income attributed to shareholders
(100)
200
(200)
300
(100)
100
Total comprehensive income attributed to shareholders
Zero
100
(100)
200
Zero
Zero
As at December 31, 2023
($ millions, post-tax except CSM)
Interest rates
Corporate spreads
Swap spreads
-50bp
+50bp
-50bp
+50bp
-20bp
+20bp
CSM
Do
llar Zero
$ (100)
Do
llar Zero
$ (100)
Do
llar Zero
Do
llar Zero
Net income attributed to shareholders
100
(100)
Zero
Zero
100
(100)
Other comprehensive income attributed to shareholders
(300)
300
(200)
300
(100)
100
Total comprehensive income attributed to shareholders
(200)
200
(200)
300
Zero
Zero
(1) See “Caution related to sensitivities” above.
Footnote Number (2) Estimates include changes to the net actuarial gains/losses with respect to the Company’s pension obligations as a result of changes in interest rates.
Footnote Number (3) Includes guaranteed insurance and annuity products, including variable annuity contracts as well as adjustable benefit products where benefits are generally
adjusted as interest rates and investment returns change, a portion of which have minimum credited rate guarantees. For adjustable benefit products subject to
minimum rate guarantees, the sensitivities are based on the assumption that credited rates will be floored at the minimum.
Swap spreads remain at low levels, and if they were to rise, this could generate material changes to net income attributed to
shareholders.
66 | 2024 Annual Report | Management’s Discussion and Analysis
Potential impact on MLI’s LICAT ratio of an immediate parallel change in interest rates, corporate spreads or swap
spreads relative to current ratesRefer to footnote number (1),(2),(3),(4),(5)
As at December 31, 2024
(change in percentage points)
Interest rates
Corporate spreads
Swap spreads
-50bp
+50bp
-50bp
+50bp
-20bp
+20bp
MLI’s LICAT ratio
Zero
Zero
(3)
3
Zero
Zero
As at December 31, 2023
(change in percentage points)
Interest rates
Corporate spreads
Swap spreads
-50bp
+50bp
-50bp
+50bp
-20bp
+20bp
MLI’s LICAT ratio
Zero
Zero
(4)
4
Zero
Zero
(1) See “Caution related to sensitivities” above.
Footnote Number (2) Estimates include changes to the net actuarial gains/losses with respect to the Company’s pension obligations as a result of changes in interest rates.
Footnote Number (3) Includes guaranteed insurance and annuity products, including variable annuity contracts as well as adjustable benefit products where benefits are generally
adjusted as interest rates and investment returns change, a portion of which have minimum credited rate guarantees. For adjustable benefit products subject to
minimum rate guarantees, the sensitivities are based on the assumption that credited rates will be floored at the minimum.
Footnote Number (4) LICAT impacts reflect the impact of anticipated scenario switches.
Footnote Number (5) Under LICAT, spread movements are determined from a selection of investment grade bond indices with BBB and better bonds for each jurisdiction. For LICAT,
we use the following indices: FTSE TMX Canada All Corporate Bond Index, Barclays USD Liquid Investment Grade Corporate Index, and Nomura-BPI (Japan).
LICAT impacts presented for corporate spreads reflect the impact of anticipated scenario switches.
LICAT Scenario Switch
When interest rates change past a certain threshold, reflecting the combined movement in risk-free rates and corporate spreads,
a different prescribed interest rate stress scenario needs to be taken into account in the LICAT ratio calculation in accordance
with OSFI’s LICAT guideline.
The LICAT guideline specifies four stress scenarios for interest rates and prescribes the methodology to determine the most
adverse scenario to apply for each LICAT geographic region1 based on current market inputs and the Company’s Consolidated
Statements of Financial Position.
With the current level of interest rates in 2024, the probability of a scenario switch that could materially impact our LICAT ratio is low2.
Should the future interest rate movements differ from those presented above, a scenario switch, if applicable, may cause the impact
to the LICAT ratio to be different from the disclosed values. Should a scenario switch be triggered in a LICAT geographic region, the
full impact would be reflected immediately for non-participating products while the impact for participating products would be reflected
over six quarters using a rolling average of interest rate risk capital, in line with the smoothing approach prescribed in the LICAT
guideline. The LICAT interest rate, corporate spread and swap spread sensitivities presented above reflect the impact of scenario
switches, if any, for each disclosed sensitivity.
The level of interest rates and corporate spreads that would trigger a switch in the scenarios is dependent on market conditions
and movements in the Company’s asset and liability position. The scenario switch, if triggered, could reverse in response to
subsequent changes in interest rates and/or corporate spreads.
Alternative Long-Duration Asset Performance Risk Sensitivities and Exposure Measures
The following table shows the potential impact on CSM, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders resulting from an immediate 10% change
in market values of ALDA. The method used for deriving sensitivity information and significant assumptions made did not change
from the previous period.
ALDA used in this sensitivity analysis includes commercial real estate, private equity, infrastructure, timber and agriculture,
energy3 and other investments.
The impacts do not reflect any future potential changes to non-fixed income return volatility. Refer to “Publicly traded equity
performance risk sensitivities and exposure measures” above for more details.
Footnote Number 1 LICAT geographic locations to determine the most adverse scenario include North America, the United Kingdom, Europe, Japan and Other Region.
Footnote Number 2 See “Caution regarding forward-looking statements” above.
Footnote Number 3 Energy includes legacy oil and gas equity interests related to upstream and midstream assets that are in runoff, and energy transition private equity interests in
areas supportive of the transition to lower carbon forms of energy, such as wind, solar, and carbon sequestration.
67
Potential immediate impacts on contractual service margin, net income attributed to shareholders, other
comprehensive income attributed to shareholders, and total comprehensive income attributed to shareholders from
changes in ALDA market valuesRefer to footnote number (1)
As at
($ millions, post-tax except CSM)
December 31, 2024
December 31, 2023
-10%
+10%
-10%
+10%
CSM excluding NCI
$ (200)
$ 200
$ (100)
$ 100
Net income attributed to shareholders(2)
(2,500)
2,500
(2,400)
2,400
Other comprehensive income attributed to shareholders
(200)
200
(200)
200
Total comprehensive income attributed to shareholders
(2,700)
2,700
(2,600)
2,600
(1) See “Caution related to sensitivities” above.
(2) Net income attributed to shareholders includes core earnings and the amounts excluded from core earnings.
Potential immediate impact on MLI LICAT ratio arising from changes in ALDA market valuesRefer to footnote number (1)
(change in percentage points)
December 31, 2024
December 31, 2023
-10%
+10%
-10%
+10%
MLI’s LICAT ratio
(1)
1
(2)
2
(1) See “Caution Related to Sensitivities” above.
Foreign Exchange Risk Sensitivities and Exposure Measures
We generally match the currency of our assets with the currency of the insurance and investment contract liabilities they support.
As at December 31, 2024, we did not have a material unmatched currency exposure.
The following table shows the potential impact on core earnings of a 10% change in the value of the Canadian dollar relative to
our other key operating currencies. Note that the impact of foreign currency exchange rates on items excluded from core
earnings does not provide relevant information given the nature of these items.
Potential impact on core earnings of changes in foreign exchange ratesRefer to footnote number (1)
As at December 31,
($ millions)
2024
2023
+10%
strengthening
-10%
weakening
+10%
strengthening
-10%
weakening
10% change in the Canadian dollar relative to the U.S. dollar and the Hong Kong
dollar
$ (450)
$ 450
$ (390)
$ 390
10% change in the Canadian dollar relative to the Japanese yen
(50)
50
(40)
40
(1) See “Caution Related to Sensitivities” above.
LICAT regulatory ratios are also sensitive to the fluctuations in the Canadian dollar relative to our other key operating currencies.
The direction and materiality of this sensitivity varies across various capital metrics.
Liquidity Risk Exposure Strategy
We manage liquidity levels of the consolidated group and key subsidiaries against established thresholds, which are based on
extreme but plausible liquidity stress scenarios over varying time horizons.
Our use of derivatives for hedging purposes is a significant source of liquidity risk through collateral and cash settlement
requirements for OTC bilateral and centrally cleared derivatives under adverse market conditions. To assess these potential
liquidity needs, we regularly stress test the market value of our derivative portfolio under various stress scenarios and measure
and monitor the contingent requirements against our liquid asset holdings. Additionally, we maintain a liquidity contingency plan
with diverse sources of contingent liquidity that can be utilized under severe stress conditions.
Manulife Bank (the “Bank”) has a stand-alone liquidity risk management framework. The framework includes daily monitoring of
liquidity levels, liquidity forecasting and stress testing, and a liquidity contingency plan. The Bank maintains an unencumbered,
high-quality liquidity buffer and has established a diversified funding program to meet its funding and liquidity requirements. The
Bank’s funding program includes retail demand deposits and GICs, wholesale term funding, and a well-established program to
securitize residential mortgage assets. The Bank models extreme but plausible stress scenarios that demonstrate the Bank has
sufficient liquid marketable securities and sufficient contingent liquidity to manage its requirements during periods of elevated
market stress.
Similarly, Global WAM has a stand-alone liquidity risk management framework for the businesses managing assets or
manufacturing investment products for third-party clients. We maintain fiduciary standards designed to ensure that client and
regulatory expectations are met in relation to the liquidity risks taken within each investment. Additionally, we regularly monitor
and review the liquidity of our investment products as part of our ongoing risk management practices.
68 | 2024 Annual Report | Management’s Discussion and Analysis
Market & Liquidity Risk Factors
Our most significant source of publicly traded equity risk arises from equity-linked products with guarantees, where the
guarantees are linked to the performance of the underlying funds.
• Publicly traded equity performance risk arises from a variety of sources, including guarantees associated with equity-linked
investments such as variable annuity and segregated fund products, general fund investments in publicly traded equities and
mutual funds backing general fund product liabilities.
• Market conditions resulting in reductions in the asset value we manage have an adverse effect on the revenues and
profitability of our investment management business, which depends on fees related primarily to the values of assets under
management and administration.
• Guaranteed benefits of variable annuity and segregated funds are contingent and payable upon death, maturity, permitted
withdrawal or annuitization. If equity markets decline or even if they increase by an amount lower than the risk-free rate plus
an adjustment for product illiquidity assumed in our actuarial valuation, additional liabilities may need to be established to
cover the contingent liabilities, resulting in reductions that could impact net income attributed to shareholders, the contractual
service margin, and regulatory capital ratios. Further, if equity markets do not recover to the amount of the guarantees, by the
dates the liabilities are due, the accrued liabilities will need to be paid out in cash. In addition, sustained flat or declining public
equity markets would likely reduce asset-based fee revenues related to variable annuities and segregated funds with
guarantees, unit linked products, and other wealth and insurance products.
• Where publicly traded equity investments are used to support general fund product liabilities, adverse public equity returns
and associated impacts to insurance contract liabilities from certain product features such as universal life minimum crediting
rate guarantees, or participating product zero dividend floor implicit guarantees, could result in a reduction to the contractual
services margin or total comprehensive income.
We experience interest rate and spread risk within the general fund primarily due to differences in how our assets and
liabilities respond to changes in these variables.
• Interest rate and spread risk arises from differences in the movements of our assets and liabilities due to changes in these
variables. For our assets, changes in value from movements in interest rates and spreads would vary by asset and would be
impacted by factors such as duration and credit rating. For insurance contract liabilities, which are discounted using risk-free
yields adjusted by an illiquidity premium, changes in the value would be impacted by factors such as the duration of the
liability, and the spread exposure through the illiquidity premium. To the extent that there are mismatches between the assets
and liabilities such as through differences in duration, or differences in spread exposure, interest rate or spread movements
could result in a reduction in the contractual service margin or total comprehensive income.
• The Company’s disclosed estimated impact from interest rate movements reflects a parallel increase and decrease in interest
rates of specific amounts. The impact from non-parallel movements may be different from the estimated impact of parallel
movements. For further information on interest rate scenarios refer to “Interest Rate and Spread Risk Sensitivities and
Exposure Measures”.
We experience ALDA performance risk from the risk of low returns, including lower valuations.
• ALDA performance risk arises from general fund investments in directly-owned real estate, timber properties, farmland
properties, infrastructure, private equities, and energy assets.
• Difficult economic conditions could result in higher vacancy, lower rental rates, and lower demand for real estate investments,
all of which would adversely impact the value of our diversified real estate investments. Continual advances in the digitization
of work and the transformation of physical retail may have further negative impact to our commercial real estate investments.
Difficult economic conditions could also prevent companies in which we have made private equity investments from achieving
their business plans and could cause the value of these investments to fall, or even cause the companies to fail. Sustained
declines in valuation multiples in the public equity market would also likely cause values to decline in our private equity
portfolio. The timing and amount of investment income from private equity investments is difficult to predict, and investment
income from these investments can vary from quarter to quarter.
• Our timberland and farmland holdings are exposed to natural risks, such as prolonged drought, wildfires, insects, windstorms,
flooding, and climate change. We are generally not insured for these types of risks but seek to proactively mitigate their
impact through portfolio diversification and prudent operating practices.
• The value of energy assets, including oil and gas, could be adversely affected by declines in energy prices as well as by a
number of other factors including production declines, difficult economic conditions, changes in consumer preferences to
transition to a low-carbon economy, and geopolitical events. Changes in government regulation, including environmental
regulation, such as carbon taxes, could also adversely affect the value of our investments in energy assets.
• Higher interest rates, in combination with uncertain economic environments, could precipitate higher ALDA discount rates as
buyers demand higher current returns to invest in ALDA. Since ALDA cash flows may, to some degree, be fixed in the near to
medium term, some ALDA values may initially decline in order for the asset returns to meet the desired higher discount rates
in future periods, resulting in lowered current portfolio returns.
69
• The negative impact of changes in market or economic factors can take time to be fully reflected in the valuations of private
investments, including ALDA, especially if the change is large and rapid, as market participants endeavor to adjust their
forecasts and better understand the potential medium to long-term impact of such changes. As a result, valuation changes in
any given period may reflect the delayed impact of events that occurred in prior periods. Our real estate valuations are based
on external appraisals and these appraisals may lag behind current market transactions.
• We rely on a diversified portfolio of ALDA to generate relatively stable investment returns. Diversification benefits may be
reduced at times, especially during a period of economic stress, which would adversely affect portfolio returns.
We experience foreign exchange risk as a substantial portion of our business is transacted in currencies other than
Canadian dollars.
• Our financial results are reported in Canadian dollars. A substantial portion of our business is transacted in currencies other
than Canadian dollars, mainly U.S. dollars, Hong Kong dollars and Japanese yen. If the Canadian dollar strengthens relative
to these currencies, net income attributed to shareholders would decline and our reported shareholders’ equity would decline.
A weakening of the Canadian dollar against the foreign currencies in which we do business would have the opposite effect
and would increase net income attributed to shareholders and shareholders’ equity.
The Company’s hedging strategies will not fully reduce the market risks related to the product guarantees and fees
being hedged, hedging costs may increase and the hedging strategies expose the Company to additional risks.
• Our hedging strategies rely on the execution of derivative transactions in a timely manner. Market conditions can limit
availability of hedging instruments, requiring us to post additional collateral, and can further increase the costs of executing
derivative transactions. Therefore, hedging costs and the effectiveness of the strategy may be negatively impacted if markets
for these instruments become illiquid. The Company is subject to the risk of increased funding and collateral demands which
may become significant as equity markets and interest rates increase.
• The Company is also subject to counterparty risks arising from the derivative instruments and to the risk of increased funding
and collateral demands which may become significant as equity markets and interest rates increase. The strategies are highly
dependent on complex systems and mathematical models that are subject to error and rely on forward-looking long-term
assumptions that may prove inaccurate, and which rely on sophisticated infrastructure and personnel which may fail or be
unavailable at critical times. Due to the complexity of the strategies, there may be additional unidentified risks that may
negatively impact our business and future financial results. In addition, rising equity markets and interest rates that would
otherwise result in profits on variable annuities and segregated funds will be offset by losses from our hedging positions. For
further information pertaining to counterparty risks, refer to the risk factor “If a counterparty fails to fulfill its obligations, we may
be exposed to risks we had sought to mitigate”.
• Under certain market conditions, which include a sustained increase in realized equity and interest rate volatilities, a decline in
interest rates, or an increase in the correlation between equity returns and interest rate declines, the costs of hedging the
benefit guarantees provided in variable annuities and segregated funds may increase or become uneconomic. In addition,
there can be no assurance that our dynamic hedging strategy will fully offset the risks arising from the variable annuities and
segregated funds being hedged.
• The level of guarantee claims returns or other benefits ultimately paid will be impacted by policyholder longevity and
policyholder behaviour including the timing and amount of withdrawals, lapses, fund transfers, and contributions. The
sensitivity of liability values to equity market and interest rate movements that we hedge are based on long-term expectations
for longevity and policyholder behaviour since the impact of actual policyholder longevity and policyholder behaviour
variances cannot be hedged using capital markets instruments. The efficiency of our market risk hedging is directly affected
by accuracy of the assumptions related to policyholder longevity and policyholder behaviour.
• Policy liabilities for variable annuity guarantees are determined using long-term forward-looking estimates of volatilities. These
long-term forward-looking volatilities assumed for policy liabilities meet the Canadian Institute of Actuaries calibration
standards. To the extent that realized equity or interest rate volatilities in any quarter exceed the assumed long-term
volatilities, or correlations between interest rate changes and equity returns are higher, there is a risk that rebalancing will be
greater and more frequent, resulting in higher hedging costs.
Prolonged changes in market interest rates may impact our net income attributed to shareholders and capital ratios.
• A prolonged low or negative (nominal or real) interest rate environment may result in lower net investment results and a decrease
in new business CSM until products are repositioned for the lower rate environment. Other potential consequences of low interest
rates include:
O
Negative impact on sales and reduced new business profitability;
O
Increased cost of hedging and as a result, the offering of guarantees could become uneconomic;
O
Reinvestment of cash flows into low yielding bonds could result in lower future earnings due to lower returns on surplus
and general fund assets supporting in-force liabilities, and due to guarantees embedded in products including minimum
guaranteed rates in participating and adjustable products;
O
Negative impacts to other macroeconomic factors including unfavourable economic growth and lower returns on other
asset classes;
70 | 2024 Annual Report | Management’s Discussion and Analysis
O
Potential impairments of goodwill;
O
Lower expected earnings on in-force policies;
O
Potential risk of lowering the ultimate spot rate within our discount rates that would increase our liabilities;
O
A switch in the prescribed interest stress scenario that impacts LICAT capital. See “LICAT Scenario Switch” above; and
O
Reduced ability of MFC’s insurance subsidiaries to pay dividends to MFC.
• While higher interest rates are generally good for our business, there are some associated risks. A rapid rise in interest rate or
a prolonged high-rate environment may result in material changes in policyholder behaviour such as higher surrenders,
withdrawals, changes in fund contributions or fund transfers. Other potential consequences of a rapid rise in or prolonged high
interest rates include:
O
Decrease in value of existing fixed income assets supporting general account surplus and liabilities, including the
employee benefit plans;
O
Losses attributable to early liquidation of fixed income instruments supporting contractual surrender benefits;
O
Decline in value of some of our ALDA investments, particularly those with fixed contractual cash flows such as long-
leased real estate and certain infrastructure investments;
O
Increase in collateral demands, especially for our interest rate hedging book which incurs market-to-market losses in a
rising rate environment;
O
Adverse effect on the local solvency ratio for some countries in which we operate;
O
A switch in the prescribed interest stress scenario that impacts LICAT capital. See “LICAT Scenario Switch” above;
O
Shift in new sales mix from competitive pressure on wealth products that are less attractive on a yield basis;
O
Increase in funding costs on repurchase agreements (i.e., repo transactions); and
O
Increase in borrowing costs as we refinance our debt.
While we have successfully transitioned our exposure to decommissioned IBORs according to our transition plan, the
ongoing global interest rate benchmark reform may pose risks.
• Various interest rate benchmarks, including Interbank Offered Rates (IBORs) such as London Interbank Offered Rate (LIBOR)
and Canadian Dollar Offered Rate (CDOR) have been the subject of international regulatory guidance and proposals for reform.
Regulators in various jurisdictions have pushed for the transition of IBORs to alternative reference rates based on risk-free
rates. Manulife holds different types of instruments, including derivatives, bonds, loans, and other floating rate instruments that
referenced IBORs. Changes from IBORs to alternative reference rates that have different characteristics compared to IBORs
may affect the valuation of our existing interest rate linked and derivatives securities we hold, the effectiveness of those
derivatives in mitigating our risks, securities we have issued, or other assets, liabilities and other contractual rights, and
obligations whose value is tied to IBORs or to IBOR alternatives. To ensure a timely transition to alternative reference rates,
Manulife established an enterprise-wide program and governance structure across functions to identify, measure, monitor, and
manage financial and non-financial risks of transition. Manulife’s enterprise-wide program focused on quantifying our exposures
to various IBORs, evaluating contract fallback language, contract remediation, risk management, assessing accounting and tax
implications, and ensuring operational readiness for IT systems, models, processes, and controls. The interest rate benchmark
reform has not resulted in material changes in the Company’s risk management strategy.
• Further to previous announcements by various regulators, the publication of GBP, EUR, CHF and JPY LIBOR settings, as
well as one-week and two-month USD LIBOR settings was discontinued on December 31, 2021. The publication of the
remaining USD LIBOR tenors (overnight and one, three, six and twelve-month USD LIBOR) was discontinued on June 30,
2023. We have successfully transitioned our exposures to the LIBOR rates that were decommissioned on December 31, 2021
and June 30, 2023.
• In December 2021, the Canadian Alternative Reference Rate (CARR) working group recommended that the administrator of
CDOR, Refinitiv Benchmark Services (UK) Limited (RBSL), cease publication of CDOR after the end of June 2024. On
May 16, 2022, RBSL announced that the calculation and publication of all tenors of CDOR will permanently cease
immediately following a final publication on June 28, 2024. Further to the confirmation of CDOR’s cessation date, OSFI
expected all new derivative contracts and securities to transition to alternative reference rates by June 30, 2023, with no new
CDOR exposure being booked after that date, with limited exceptions. OSFI also expected Federally Regulated Financial
Institutions (FRFIs) to transition all loan agreements referencing CDOR by June 28, 2024, including prioritizing system and
model updates to accommodate the use of Canadian Overnight Repo Rate Average (CORRA), the alternative reference rate
to which CDOR is expected to transition, or any alternative reference rates, as necessary. In July 2023, CARR announced
that there should be no new CDOR or Banker’s Acceptance (BA) loans after November 1, 2023 to facilitate a tapered
transition for the loan market. In October 2023, Bank of Canada announced that Bankers’ Acceptances will no longer be
issued by major Canadian banks after June 28, 2024. In April 2024, RBSL reaffirmed that all three tenors of CDOR will cease
to be published after June 28, 2024 and CARR further announced that no synthetic CDOR rate will be made available after
CDOR’s cessation. Manulife incorporated these developments in its project plan to align with updated timelines and ensure an
orderly transition. As of December 31, 2024, we have successfully addressed our exposures to CDOR, in accordance with our
transition plan.
71
Liquidity risk is impacted by various factors, including but not limited to, capital and credit market conditions, repricing
risk on letters of credit, collateral pledging obligations, and reliance on deposits sensitive to confidence or broad
macroeconomic factors.
• Adverse market conditions may significantly affect our liquidity risk.
O
Reduced asset liquidity may restrict our ability to sell certain types of assets for cash without taking significant losses. If
providers of credit preserve their capital, our access to borrowing from banks and others or access to other types of
credit, such as letters of credit, may be reduced. If investors have a negative perception of our creditworthiness, this
may reduce access to the debt capital markets or increase borrowing costs.
O
Liquid assets are required to pledge as collateral and to cover cash settlements for variation margin to support activities
such as the use of derivatives for hedging purposes.
O
The principal sources of our liquidity are cash, insurance and annuity premiums, fee income earned on AUM, cash flow
from our investment portfolios, and our assets that are readily convertible into cash, including money market securities.
The issuance of long-term debt, common and preferred shares, and other capital securities may also increase our
available liquid assets or be required to replace certain maturing or callable liabilities. In the event we seek additional
financing, the availability and terms of such financing will depend on a variety of factors including market conditions, the
availability of credit to the financial services industry, our credit ratings and credit capacity, as well as the possibility that
customers, lenders, or investors could develop a negative perception of our long-term or short-term financial prospects if
we incur large financial losses or if the level of our business activity decreases due to a significant market downturn.
• Increased cleared derivative transactions, combined with margin rules on non-cleared derivatives, could adversely impact our
liquidity risk.
O
Over time our existing over-the-counter derivatives will migrate to clearing houses, or the Company and its
counterparties may have the right to cancel derivative contracts after specific dates or in certain situations such as a
ratings downgrade, which could accelerate the transition to clearing houses. Cleared derivatives are subject to both
initial and variation margin requirements, and a more restrictive set of eligible collateral than non-cleared derivatives.
O
In addition, initial margin rules for new non-cleared derivatives further increase our liquidity needs.
• We are exposed to repricing risk on letters of credit.
O
In the normal course of business, third-party banks issue letters of credit on our behalf. In lieu of posting collateral, our
businesses utilize letters of credit for which third parties are the beneficiaries, as well as for affiliate reinsurance
transactions between subsidiaries of MFC. Letters of credit and letters of credit facilities must be renewed periodically.
At time of renewal, the Company is exposed to repricing risk and under adverse conditions, increases in costs may be
realized. In the most extreme scenarios, letters of credit capacity could become constrained due to non-renewals which
would restrict our flexibility to manage capital. This could negatively impact our ability to meet local capital requirements
or our sales of products in jurisdictions in which our operating companies have been affected. As at December 31, 2024,
letters of credit for which third parties are beneficiaries, in the amount of $271 million, were outstanding (2023 – $466
million). There were no assets pledged against these outstanding letters of credit as at December 31, 2024.
• Our obligations to pledge collateral or make payments related to declines in value of specified assets may adversely affect our
liquidity.
O
In the normal course of business, we are obligated to pledge assets to comply with jurisdictional regulatory and other
requirements including collateral pledged in relation to derivative contracts and assets held as collateral for repurchase
funding agreements. The amount of collateral we may be required to post under these agreements, and the payments
we are required to make to our counterparties, may increase under certain circumstances, including a sustained or
continued decline in the value of our derivative contracts. Such additional collateral requirements and payments could
have an adverse effect on our liquidity. As at December 31, 2024, total pledged assets were $26,272 million, compared
with $21,108 million as at December 31, 2023.
• Our bank subsidiary relies on deposits sensitive to confidence as well as macroeconomic conditions.
O
The Bank is a wholly owned subsidiary of our Canadian life insurance operating company, MLI. Retail deposits are a
significant part of the funding base of the Bank. A real or perceived problem with the Bank or its parent company could
result in a loss of confidence in the Bank’s ability to meet its obligations, which in turn may trigger a significant
withdrawal of deposit funds. Depositors are protected through the Bank’s membership in the Canada Deposit Insurance
Corporation (CDIC) which insures demand deposits up to $100,000 per eligible depositor. Insured demand deposits are
less susceptible to runoff and a significant proportion of the Bank’s deposits are CDIC insured. The Bank also protects
depositors through mitigation strategies outlined in the Bank’s liquidity contingency plan and the Bank may elect to sell
or securitize assets with third parties to increase liquidity. The Bank may consider the use of Bank of Canada facilities to
generate short term liquidity to pay depositors; however, access to these facilities is at the sole discretion of the Bank of
Canada.
72 | 2024 Annual Report | Management’s Discussion and Analysis
Credit & Investment Risk
Credit risk is the risk of loss due to the inability or unwillingness of a borrower or counterparty to fulfill its payment obligations.
Investment risk, such as those pertaining to market fluctuations (e.g., interest rates, foreign exchange) or operating performance,
that can affect both fixed income and ALDA valuations, are covered under the Market & Liquidity section above.
Credit Risk Management Strategy
Credit risk is governed by the Credit Committee which oversees the overall credit risk management program. The Company has
established objectives for overall quality and diversification of our general fund investment portfolio and criteria for the selection
of counterparties, including derivative counterparties, reinsurers, and insurance providers. Our policies establish exposure limits
by borrower, corporate connection, quality rating, industry, and geographic region, and govern the usage of credit derivatives.
Corporate connection limits vary according to risk rating. Our general fund fixed income investments are primarily public and
private investment grade bonds and commercial mortgages. We have a program for selling Credit Default Swaps (“CDS”) that
employs a highly selective, diversified, and conservative approach. CDS decisions follow the same underwriting standards as our
cash bond portfolio. Our credit granting units follow a defined evaluation process that provides an objective assessment of credit
proposals. We assign a risk rating, based on a standardized 22-point scale consistent with those of external rating agencies,
following a detailed examination of the borrower that includes a review of business strategy, market competitiveness, industry
trends, financial strength, access to funds, and other risks facing the counterparty. We assess and update risk ratings regularly.
For additional input to the process, we also assess credit risks using a variety of industry standard market-based tools and
metrics. We map our risk ratings to pre-established probabilities of default and loss given defaults, based on historical industry
and Company experience, and to resulting default costs.
We establish delegated credit approval authorities and make credit decisions on a case-by-case basis at a management level
appropriate to the size and risk level of the transaction, based on the delegated authorities that vary according to risk rating.
Major credit decisions are approved by the Credit Committee and the largest decisions are approved by the CEO and, in certain
cases, by the Board.
We limit the types of authorized derivatives and applications and require pre-approval of all derivative application strategies and
regular monitoring of the effectiveness of derivative strategies. Derivative counterparty exposure limits are established based on
a minimum acceptable counterparty credit rating (generally A- from internationally recognized rating agencies). We measure both
bilateral and exchange-traded derivative counterparty exposure as net potential credit exposure. The measurement takes into
consideration the replacement cost, which reflects mark-to-market values of the exposure adjusted for the effects of net
collateral, and the potential future exposure, which reflects the potential increase in exposure until the closure or replacement of
the transactions. Reinsurance counterparty exposure is measured reflecting the level of ceded liabilities on a best estimate basis
net of collateral held. The creditworthiness of all reinsurance counterparties is reviewed internally on a regular basis.
Regular reviews of credits within the various portfolios are undertaken with the goal of prompt identification of changes to credit
quality and, where appropriate, taking corrective action.
We establish Expected Credit Loss (“ECL”) allowances for investments in debt instruments which are measured at FVOCI or
amortized cost. On an ongoing basis, these ECL allowances are monitored and adjusted for changes in credit quality and
conditions. Credit risk arising from reinsurance counterparties is included in the valuation models of reinsurance contract assets.
There is no assurance that the ECL allowances or valuation results will be adequate to cover future potential losses.
Our credit policies, procedures and investment strategies are established under a strong governance framework and are
designed to ensure that risks are identified, measured, and monitored consistent with our risk appetite. We seek to actively
manage credit exposure in our investment portfolio to reduce risk and minimize losses, and derivative counterparty exposure is
managed proactively. However, we could experience volatility on a quarterly basis and losses could potentially rise as a result.
Credit Risk Exposure Measures
We use the ECL impairment allowance model in accordance with IFRS to establish and maintain allowances on our invested
assets which are debt instruments measured at FVOCI or amortized cost. ECL allowances are measured on a probability-
weighted basis, based on four macroeconomic scenarios, and incorporate consideration of past events, current market
conditions, and reasonable supportable information about future economic conditions.
We measure ECL allowances using a three-stage approach. We recognize ECL on performing financial instruments that have
not experienced significant increases in credit risk since acquisition to the extent of losses expected to result from defaults
occurring within 12 months of the reporting date (Stage 1). Full lifetime ECLs are recognized for financial instruments
experiencing significant increase in credit risk since acquisition or having become 30 days in arrears in principal or interest
payments (Stage 2). Full lifetime ECLs are also recognized for financial instruments which have become credit-impaired (Stage
3), with a probability of default set at 100%. Interest income on Stage 3 financial instruments is determined based on the carrying
amount of the asset, net of any credit loss allowance.
For more information on our ECL allowances, refer to notes 1 and 8 of the 2024 Annual Consolidated Financial Statements.
73
Credit & Investment Risk Factors
Borrower or counterparty defaults or downgrades could adversely impact our earnings.
• Worsening regional and global economic conditions could result in borrower or counterparty defaults or downgrades and
could lead to increased allowances or impairments related to our general fund invested assets and derivative financial
instruments, and an increase in the credit risk factored into modeling of our reinsurance contract assets and insurance
contract liabilities.
• Our invested assets subject to credit risk primarily include investment grade bonds, private placements, commercial
mortgages, asset-backed securities, and consumer loans. These assets are generally carried at FVOCI, and as a result,
changes in the required ECL allowance would be recorded in the provision for credit losses in the Consolidated Statements of
Income. The return cash inflow assumptions incorporated in actuarial liabilities include an expected level of future asset
impairments. There is a risk that actual impairments will exceed the assumed level of impairments in the future and earnings
could be adversely impacted.
• Volatility may arise from defaults and downgrade charges on our invested assets, and as a result, losses could potentially rise
above long-term expected levels. The ECL impairment allowance was $828 million, representing 0.19% of total general fund
invested assets as at December 31, 2024, compared with $929 million, representing 0.22% of total general fund invested
assets as at December 31, 2023.
If a counterparty fails to fulfill its obligations, we may be exposed to risks we had sought to mitigate.
• The Company uses derivative financial instruments to mitigate exposures to public equity, foreign currency, interest rate and
other market risks arising from on-balance sheet financial instruments, guarantees related to variable annuity products,
selected anticipated transactions and certain other guarantees. The Company may be exposed to counterparty risk if a
counterparty fails to pay amounts owed to us or otherwise perform its obligations to us. Counterparty risk increases during
economic downturns because the probability of default increases for most counterparties. If any of these counterparties
default, we may not be able to recover the amounts due from that counterparty. As at December 31, 2024, the largest single
counterparty exposure, without taking into account the impact of master netting agreements or the benefit of collateral held,
was $1,319 million (2023 – $1,357 million). The net exposure to this counterparty, after taking into account master netting
agreements and the fair value of collateral held, was $nil (2023 – $nil). As at December 31, 2024, the total maximum credit
exposure related to derivatives across all counterparties, without taking into account the impact of master netting agreements
and the benefit of collateral held, was $9,048 million (2023 – $9,044 million) compared with $429 million after taking into
account master netting agreements and the benefit of fair value of collateral held (2023 – $154 million). The exposure to any
counterparty would grow if, upon the counterparty’s default, markets moved such that our derivatives with that counterparty
gain in value. Until we are able to replace those derivatives with another counterparty, the gain on the derivatives subsequent
to the counterparty’s default would not be backed by collateral.
• The Company reinsures a portion of the insurance policies it sells, which also includes the use of reinsurance to sell blocks of
business to third party purchasers. Unless the policies are novated to the reinsurer, the Company remains directly liable to
policyholders to fulfill obligations under these policies. The Company is reimbursed by the reinsurer for payments made to
policyholders on the reinsured policies. To mitigate credit risk to the reinsurer, the Company may require reinsurers to provide
collateral for their reinsurance obligations. In the event that a reinsurer fails to fulfill its contractual obligations to the Company
under the reinsurance contract, a proportional decrease to the value of the reinsurance asset would be acknowledged with a
consequent negative impact to any net income attributed to shareholders and capital position. Such negative impact would be
offset to the extent the amount of collateral provided by the reinsurer is sufficient to cover the reinsurer’s obligations.
• We participate in a securities lending program whereby blocks of securities are loaned to third parties, primarily major
brokerage firms and commercial banks. Collateral, which exceeds the market value of the loaned securities, is retained by the
Company until the underlying security has been returned. If any of our securities lending counterparties default and the value
of the collateral is insufficient, we would incur losses. As at December 31, 2024, the Company had loaned securities (which
are included in invested assets) valued at approximately $1,021 million, compared with $626 million as at December 31, 2023.
The determination of loss allowances and impairments on our investments is subjective and changes could materially
impact our results of operations or financial position.
• The determination of impairment losses on debt investments measured at FVOCI or amortized cost is based upon the ECL
model which is applied quarterly. ECL allowances are measured under four probability-weighted macroeconomic scenarios
and are estimated as the differences between all contractual cash flows due in accordance with the contract and all the cash
flows that we expect to receive, discounted at the original effective interest rates of the contracts. This process includes
consideration of past events, current market conditions, and reasonable and supportable information about future economic
conditions. Forward-looking macroeconomic variables used within the estimation models represent variables that are the most
closely related with credit loss expectations for the relevant issuance.
• The estimation and measurement of ECL impairment losses requires significant judgment. These estimates are driven by
many elements, changes in which can result in different levels of allowances. Elements include the estimation of the amount
and timing of future cash flows, our criteria for assessing if there has been a significant increase in credit risk (“SICR”), the
selection of forward-looking macroeconomic scenarios and their probability weights, the application of expert credit judgment
74 | 2024 Annual Report | Management’s Discussion and Analysis
in the development of the models, inputs and, when applicable, overlay adjustments. It is our process to regularly review our
models in the context of actual loss experience and adjust when necessary. We have implemented formal policies,
procedures, and controls over all significant impairment processes.
• Such evaluations and assessments are revised as conditions change and new information becomes available. We update our
evaluations regularly and reflect changes in allowances and impairments as such evaluations warrant. The evaluations are
inherently subjective and incorporate only those risk factors known to us at the time the evaluation is made. There can be no
assurance that management has accurately assessed the level of impairments that have occurred. Additional impairments will
likely need to be taken or allowances provided for in the future as conditions evolve. Historical trends may not be indicative of
future impairments or allowances.
Product & Insurance Risk
We make a variety of assumptions related to the expected future level of claims, policyholder behaviour, expenses, reinsurance
costs and sales levels when we design and price products, and when we establish insurance and investment contract liabilities.
Product & Insurance risk is the risk of failure to design, implement and maintain a product or service to achieve these expected
outcomes, and the risk of loss due to actual experience emerging differently than assumed when a product was designed and
priced. Assumptions for future claims are generally based on both Company and industry experience, and assumptions for future
policyholder behaviour and expenses are generally based on Company experience. Assumptions for future policyholder
behaviour include assumptions related to the retention rates for insurance and wealth products. Assumptions for expenses
include assumptions related to future maintenance expense levels and volume of the business.
Product & Insurance Risk Management Strategy
Product & Insurance risk is governed by the Product Oversight Committee for the insurance business. Global WAM product risk
is managed by First Line Local/Regional Product Committees and the Global Investment Product Committee. Notable products
which could introduce new and material risks are reviewed and approved by the Global WAM Risk Committee prior to launch.
Product Oversight Committee
The Product Oversight Committee oversees the overall insurance risk management program. The Product Oversight Committee
has established a broad framework for managing insurance risk under a set of policies, standards, and guidelines, designed to
ensure that our product offerings align with our risk taking philosophy and risk limits, and achieve acceptable profit margins.
These cover:
• product design features
• use of reinsurance
• pricing models and software
• internal risk based capital allocations
• target profit objectives
• pricing methods and assumption setting
• stochastic and stress scenario testing
• required documentation
• review and approval processes
• experience monitoring programs
In each business unit that sells insurance, we designate individual pricing officers who are accountable for pricing activities, chief
underwriters who are accountable for underwriting activities, and chief claims risk managers who are accountable for claims
activities. Both the pricing officer and the general manager of each business unit approve the design and pricing of each product,
including key claims, policyholder behaviour, investment return and expense assumptions, in accordance with global policies and
standards. Risk management functions provide additional oversight, review and approval of material product and pricing
initiatives, as well as material underwriting initiatives. Actuarial functions provide oversight review and approval of insurance and
investment contract liability valuation methods and assumptions. In addition, both risk and actuarial functions review and approve
new reinsurance arrangements. We perform annual risk and compliance self-assessments of the product development, pricing,
underwriting and claims activities of all insurance businesses. To leverage best practices, we facilitate knowledge transfer
between staff working with similar businesses in different geographies.
We utilize an internally developed global underwriting manual, supplemented with reinsurers’ manuals in certain jurisdictions and
for certain coverages. This is intended to ensure insurance underwriting practices for direct written life business are consistent
across the organization while reflecting local conditions. Each business unit establishes underwriting policies and procedures,
including criteria for approval of risks and claims adjudication policies and procedures.
We apply retention limits per insured life that are intended to reduce our exposure to individual large claims which are monitored
in each business unit. These retention limits vary by market and jurisdiction. We reinsure exposure in excess of these limits with
other companies (see “Risk Management and Risk Factors – Product & Insurance Risk Factors – External market conditions
determine the availability, terms and cost of reinsurance protection” below). Our current global life retention limit is US$40 million
for individual policies (US$45 million for survivorship life policies) and is shared across businesses. We apply lower limits in
some markets and jurisdictions. We aim to further reduce exposure to claims concentrations by applying geographical aggregate
retention limits for certain covers. Enterprise-wide, we aim to reduce the likelihood of high aggregate claims by operating
75
globally, insuring a wide range of unrelated risk events, and reinsuring some risks. We seek to actively manage the Company’s
aggregate exposure to each of policyholder behaviour risk and claims risk against enterprise-wide economic capital limits.
Policyholder behaviour risk limits cover the combined risk arising from policy lapses and surrenders, withdrawals, and other
policyholder driven activity. The claims risk limits cover the combined risk arising from mortality, longevity, and morbidity.
Internal experience studies, as well as trends in our experience and that of the industry, are monitored to update current and
projected claims and policyholder behaviour assumptions, resulting in updates to insurance contract liabilities as appropriate.
Global WAM Risk Management Committee
Global WAM product risk is managed by First Line Local/Regional Product Committees and the Global Investment Product
Committee. The Global WAM Risk Management Committee reviews and approves notable new products prior to launch. The
Global WAM Risk Management Committee has established a framework for managing risk intended to ensure that notable
product offerings align with Global WAM risk taking philosophy and risk appetite.
Product & Insurance Risk Factors
Losses may result should actual experience be materially different than that assumed in the valuation of insurance
contract liabilities.
• Such losses could have a significant adverse effect on our results of operations and financial condition. In addition, we
periodically review the assumptions we make in determining our insurance contract liabilities and the review may result in an
increase in insurance contract liabilities and a decrease in net income attributed to shareholders. Such assumptions require
significant professional judgment, and actual experience may be materially different than the assumptions we make. (See
“Critical Actuarial and Accounting Policies” below).
• Policyholder behaviour including premium payment patterns, policy renewals, lapse rates and withdrawal, and surrender
activity are influenced by many factors including market and general economic conditions, and the availability and relative
attractiveness of other products in the marketplace. For example, a weak or declining economic environment could increase
the value of guarantees associated with variable annuities or other embedded guarantees and contribute to adverse
policyholder behaviour experience, or a rapid rise in interest rates could increase the attractiveness of alternatives for
customers holding products that offer contractual surrender benefits that are not market value adjusted, which could also
contribute to adverse policyholder behaviour experience. If premium persistency or lapse rates are significantly different from
our expectations, it could have a material adverse effect on our business, financial condition, results of operations, and cash
flows.
We may be unable to implement necessary price increases on our in-force businesses or may face delays in
implementation.
• We continue to seek state regulatory approvals for price increases on existing long-term care business in the United States.
We cannot be certain whether or when each approval will be granted. For some in-force business, regulatory approval for
price increases may not be required. However, regulators or policyholders may nonetheless seek to challenge our authority to
implement such increases. Our insurance contract liabilities reflect our estimates of the impact of these price increases, but
should we be less successful than anticipated in obtaining them, then insurance contract liabilities could increase accordingly
and reduce net income attributed to shareholders.
Evolving legislation related to genetic testing could adversely impact our underwriting abilities.
• Current or future legislation in jurisdictions where Manulife operates may restrict its right to underwrite based on access to
genetic test results. Without the obligation of disclosure, the asymmetry of information shared between applicant and insurer
could increase anti-selection in both new business and in-force policyholder behaviour. The impact of restricting insurers’
access to this information and the associated problems of anti-selection becomes more acute where genetic technology leads
to advancements in diagnosis of life-threatening conditions that are not matched by improvements in treatment. We cannot
predict the potential financial impact that this would have on the Company or the industry as a whole. In addition, there may
be further unforeseen implications as genetic testing continues to evolve and becomes more established in mainstream
medical practice.
Evolving AI models could adversely impact our underwriting and claims abilities.
• The rapid growth and availability of AI and generative AI technologies presents significant opportunities to enhance
underwriting and claims activities, together with certain risks and challenges. AI models have been implemented in some
geographies to enhance underwriting and claims processes that could have unknown risks that materially impact experience.
• Future legislation may restrict certain usage of AI models or data that feed into the AI models, which could adversely impact
our underwriting and claims abilities.
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Life and health insurance claims may be impacted unexpectedly by changes in the prevalence of diseases or illnesses,
medical and technology advances, widespread lifestyle changes, natural disasters, large-scale human-made disasters
and acts of terrorism.
• Claims resulting from catastrophic events could cause substantial volatility in our financial results in any period and could
materially reduce our profitability or harm our financial condition. Large-scale catastrophic events may also reduce the overall
level of economic activity, which could hurt our business and our ability to write new business. It is possible that geographic
concentration of insured individuals could increase the severity of claims we receive from future catastrophic events. The
effectiveness of external parties, including governmental and non-governmental organizations, in combating the severity of
such an event is outside of our control and could have a material impact on the losses we experience. Additionally,
catastrophic events could harm our reinsurers’ financial condition, resulting in reinsurance defaults.
• The cost of health insurance benefits may be impacted by unforeseen trends in the incidence, termination and severity rates
of claims. The ultimate level of lifetime benefits paid to policyholders may be increased by an unexpected increase in life
expectancy. For example, advances in technology could lead to longer lives through better medical treatment or better
disease prevention. As well, adverse claims experience could result from systematic anti-selection, which could arise from
anti-selective lapse behaviour, underwriting process failures, anti-selective policyholder behaviour due to greater consumer
accessibility to home-based medical screening, or other factors.
External market conditions determine the availability, terms and cost of reinsurance protection which could impact our
financial position and our ability to write new policies.
• As part of our overall risk and capital management strategy, we purchase reinsurance protection on certain risks underwritten
or assumed by our various insurance businesses. As the global reinsurance industry continues to review their business
models, certain of our reinsurers have attempted to increase rates on our existing reinsurance contracts. The ability of our
reinsurers to increase rates depends upon the terms of each reinsurance contract. Typically, a reinsurer’s ability to raise rates
is restricted by terms in our reinsurance contracts, which we seek to enforce. Over the past several years, we have received
rate increase requests from some of our reinsurers. Thus far, dealing with those requests has not had a material adverse
effect on our results of operation or financial condition. Consistent with past practice, we dispute requested increases and, if
necessary, we can pursue legal action in order to protect our contractual rights. While possible outcomes remain unknown
and there can be no assurance that the outcome of any one or more of these disputes would not have a material adverse
effect on our results of operation or financial condition for a particular reporting period, we believe that our reserves, inclusive
of reinsurance provisions, are appropriate overall.
• In addition, an increase in the cost of reinsurance could also adversely affect our ability to write future new business or result
in the assumption of more risk with respect to policies we issue. Premium rates charged on new policies we write are based,
in part, on the assumption that reinsurance will be available at a certain cost. Certain reinsurers may attempt to increase rates
they charge us for new policies we write, and for competitive reasons, we may not be able to raise the premium rates we
charge for newly written policies to offset the increase in reinsurance rates. If the cost of reinsurance were to increase, or if
reinsurance were to become unavailable and if alternatives to reinsurance were not available, our ability to write new policies
at competitive premium rates could be adversely affected.
Operational Risk
Operational risk is naturally present in all of our business activities and encompasses a broad range of risks, including business
disruptions, technology failures, information security and privacy breaches, damage to physical assets, human resource
management failures, processing errors, modelling errors, business integration, theft and fraud, as well as regulatory compliance
failures or legal disputes.
Operational risk is also embedded in all the practices we use to manage other risks; therefore, if not managed effectively,
operational risk can impact our ability to manage other key risks such as credit & investment risk, market & liquidity risk, and
product & insurance risk.
Like many firms, operational risk is inherently on the rise as we expand our ecosystem to include more third parties and adopt
newer technologies to drive better customer outcomes and efficiencies. In such cases, an operational risk can arise from outside
of Manulife’s immediate span of direct control and have material consequences for Manulife, our customers, and other key
stakeholders. If left unmitigated, these risks can be amplified across multiple business units and processes resulting in significant
exposures.
Exposures can take the form of financial losses, regulatory sanctions, loss of competitive positioning, or damage to our brand
and reputation. As such, there are higher expectations from Manulife’s management, our customers and other key stakeholders,
including regulators, on our ability to ensure continued operations of our most critical operations and services in a face of
disruption.
Furthermore, Manulife has strengthened its operational risk management program by identifying its critical operations, defining
impact tolerances and establishing effective mitigations against severe but plausible disruptions, and have been embedded into
our Operational Risk Frameworks and risk management practices.
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Operational Risk and Resilience Management Strategy
Our corporate governance practices, corporate values, and integrated enterprise-wide approach to managing risk set the
foundation for mitigating operational risks. This base is further strengthened by internal controls and systems, compensation
programs, and talent management throughout the organization. We align compensation programs with business strategy, long-
term shareholder value and good governance practices, and we benchmark these compensation practices against peer
companies.
We have our enterprise operational risk management framework that sets out the processes we use to identify, assess, manage,
mitigate, and report on significant operational risk exposures. Complementary to this, we have our operational resilience
framework which outlines Manulife’s approach to resilience including our ability to adapt to, recover from and withstand
disruption of our most critical operations. Operational resilience entails a sound understanding of critical operations and services
end to end and their delivery through severe but plausible circumstances within tolerance for disruption. Overall, the execution of
our operational risk management strategy supports the drive towards a focus on the effective management of our key global
operational risks. Our Operational Risk and Segment Risk Committees oversee all operational risk matters, including operational
risk strategy, management, and governance. We have enterprise-wide risk management programs for specific operational risks
that could materially impact our ability to do business or impact our reputation.
Business Continuity Risk Management Strategy
Effective business continuity management is an important capability to help ensure the resilience of a firm’s most critical
operations and services. However it has traditionally focused on the ‘recovery after’ rather than the ‘continued operation through’
disruption. At Manulife, we connect our business continuity with other key disciplines such as third-party risk management,
technology risk and disaster recovery, and change risk and data risk management through the lens of critical operations and
seek to ensure that resilience is embedded into the design of processes and technologies to reduce the likelihood of failure in the
first instance.
We manage business continuity risk through its lifecycle in accordance with regulatory requirements, our business continuity risk
management standard, and industry best practices. Management develops and owns the business continuity plans (BCPs) and
processes that seeks to minimize the impact of, and continue to operate through disruptions resulting from internal or external
factors. BCPs are developed with a level of detail and comprehensiveness commensurate with the criticality of the business
process and address business strategy and requirements, incorporate inputs from key stakeholders, and details upstream and
downstream dependencies. The BCPs are updated through regular monitoring and testing, recalibrating them to meet the
evolving environment conditions and business requirements. Oversight and challenge are provided by the risk teams at all
stages of the business continuity management lifecycle, helping to ensure the requirements set out in the standard are being met
and that our plans are up to date and actionable.
Third-Party Risk Management Strategy
We manage third-party risk through its lifecycle in accordance with regulatory requirements, our third-party risk management
framework, and associated standards (covering procurement, business-managed and distribution-managed third parties). Our
governance framework and standard for addressing third-party risk includes the sourcing of third parties, ensuring appropriate
contracts are in place, the regular monitoring of risk including concentration risk and ongoing performance of the third party, and
its eventual termination or renewal. It also includes enhanced requirements to be applied to critical third parties, aiming to ensure
the continuity of their service in the event of an exit or a disruption. Oversight and challenge are provided by the Independent
Oversight function, helping to ensure the requirements set out in the framework and standards are being met.
Change Risk Management Strategy
We seek to ensure that significant changes are practical and meet company objectives, and are successfully implemented and
monitored by management. Our practices are enforced through our framework, policies and standards which are benchmarked
against leading practices and regulatory requirements.
Legal and Regulatory Risk Management Strategy
Compliance oversees our Regulatory Compliance Management program and function. For our centralized programs, support is
provided by our designated Segment Chief Compliance Officers and Compliance Functional leads. Programs supported include
Financial Crimes Compliance, Privacy Compliance, the Global Ethics Office, and Distribution Compliance.
The program is designed to promote compliance with regulatory obligations worldwide and to assist in making the Company’s
employees aware of the laws and regulations that affect it, along with the risks associated with failing to comply. Compliance
monitors emerging legal and regulatory developments and prepares the Company to address any new requirements or
obligations.
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Compliance seeks to ensure significant issues are escalated and proactively mitigated. Compliance also independently assesses
and monitors the effectiveness of a broad range of regulatory compliance processes and business practices against potential
legal, regulatory, fraud, and reputation risks. These processes and business practices include Privacy (such as the handling of
personal and other confidential information), Sales and Marketing practices, Sales conduct (including compensation practices,
product design, suitability and fiduciary responsibilities), Asset Management practices, the Ethics Hotline, and Regulatory filings.
In addition, the Company has standards, policies, processes and controls in place to help protect the Company, our customers
and relevant third parties from acts of fraud, and from risks associated with money laundering and terrorist financing. Audit
Services and Compliance personnel periodically assess the effectiveness of the system of internal controls. For further
discussion of government regulation and legal proceedings, refer to “Government Regulation” in MFC’s Annual Information Form
dated February 19, 2025 and note 18 of the 2024 Annual Consolidated Financial Statements.
Technology & Information Security Risk Management Strategy
We have a global framework for managing the Company’s technology and information security risks, including disruptive
technologies like generative AI. Programs supporting this framework are overseen by the Chief Information Risk Officer. These
programs establish the governance, policies and standards, and appropriate controls to protect information and computer
systems.
Our Technology Risk Management program provides strategy, direction and oversight, and facilitates governance for all
technology risk domain activities across the Company. The scope of this program includes: proactively identifying, managing,
monitoring, and reporting on critical information risk exposures; promoting transparency and informed decision-making by
building and maintaining information risk profiles and risk dashboards for global and segment teams aligned with enterprise and
operational risk reporting; providing advisory services to global and segment teams around current and evolving technology risks
and their impact to the Company’s information risk profile; and reducing vendor information risk exposures by incorporating
sound information risk management practices into sourcing, outsourcing, and offshoring initiatives and programs.
Our Information Security Management program, which is overseen by the Vice President of Information Security, provides
strategy, direction and oversight, and facilitates governance for all cybersecurity risk domain activities across the Company. The
scope of this program includes: managing confidentiality, integrity, and availability risks through asset and access management,
systems security and vulnerability management, and other operational security practices; providing advisory services to global
and segment teams around current and evolving cybersecurity risk exposures and their impact to the Company’s information risk
profile; and providing challenge and oversight for the Company’s cybersecurity program and practices globally and locally within
segments.
We also have ongoing security awareness training sessions for all employees. The Board’s Risk Committee regularly reviews the
Company’s technology and information security programs and engages in discussions regarding the effectiveness of the
programs for identifying and addressing relevant risks.
Many jurisdictions in which we operate are implementing more stringent privacy legislation. We also have a global framework for
managing the Company’s privacy risk. It is overseen by our Global Chief Privacy Officer and includes policies and standards,
ongoing monitoring of emerging privacy legislation and risks, and a network of privacy officers. Processes have been established
to provide guidance on handling personal information and for reporting privacy incidents and issues to appropriate management
for response and resolution. As a global company, Manulife is subject to a wide variety of laws and regulations throughout its
operations, including those related to privacy and information security. In many jurisdictions, privacy and information security
requirements are becoming more onerous, including stringent incident reporting requirements, and may increase our compliance
costs as well as the risks associated with any compliance failure.
The Chief Information Risk Officer, the Global Chief Privacy Officer, and their teams work closely on information security and
privacy matters.
Human Resource Risk Management Strategy
We have multiple human resource policies, practices and programs in place that seek to manage the risks associated with
attracting and retaining top talent. These include recruiting programs at every level of the organization, training and development
programs for our individual contributors and people leaders, initiatives to help increase diversity, equity and inclusion, employee
engagement surveys, and competitive compensation programs that are designed to attract, motivate and retain high performing
and high potential employees.
Communications Risk Management Strategy
Our Communications team is responsible for both protecting and managing our reputation and the risk associated with
distributing communications – internally and externally. Our Media and Social Media policies help ensure that proper reviews of
content are taking place ahead of distribution. We also use tools to listen for what others are saying about Manulife as a way to
proactively understand and respond to inherent risk. We regularly facilitate Reputation Outlook meetings to plan for future risk,
and we have teams that are able to distribute communications in response to a crisis should we need to.
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Marketing Risk Management Strategy
We have policies, processes and controls in place across all media channels and forums globally which seek to ensure
Manulife’s brands, trademarks, advertising, other marketing-related materials and all communications are presented accurately.
Model Risk Management Strategy
We have designated Model Risk Management teams working closely with model owners and users that seek to manage model
risk. Our model risk oversight program includes processes intended to ensure that our critical business models are conceptually
sound and used as intended, and to assess the appropriateness of the calculations and outputs.
Operational Risk Factors
Competition for the best people is intense and an inability to recruit qualified individuals may negatively impact our
ability to execute on business strategies, conduct our operations or to meet the rapid changes in external environments
such as demographics and regulatory landscape.
• Market fluctuations aside, the competition for top talent and key capabilities continues to be fierce. Our ability to attract
external talent while developing our own internal capabilities is core to our high performing team ambitions. Our industry
continues to require specific core capabilities and in meeting those talent needs we compete against other insurance
companies, financial institutions, and wealth management organizations to attract talent. We compete against organizations
across many industries for digital talent, functional experts, leaders, and sales talent. We also monitor and react to rapid
changes in regulations across the globe. These regulations are often complex and may have a significant impact to our
operations. To find the talent we need to deliver on our strategic objectives and maintain our competitive advantage, our core
approach is focused on building enhanced talent networks to entice top candidates in the market. The risk of other
organizations both inside and outside of our geographic footprint targeting our employees is heightened as companies
maintain flexible remote working arrangements. Additionally, we are in an environment where pay levels have been increasing
more quickly than in recent years due to the competitive talent market, inflation, and other factors. We help ensure that our
value proposition remains competitive and current through offerings such as flexible work arrangements, learning
investments, wellbeing, recognition & incentive programs, and a culture that strives to be recognized as a top employer within
the markets we operate.
If we are not able to attract, motivate and retain agency leaders and individual agents, our competitive position, growth
and profitability will suffer.
• The attraction and motivation of productive and engaged sales representatives (agents) is critical to achieving our financial
targets and a positive customer experience and brand. We compete with other financial services companies for sales
representatives primarily based on the opportunity available, our brand and culture, support services, compensation and
product features. Negative changes to any of these factors, or falling below market competitive levels, could impact our ability
to attract, retain and engage sufficient sales representatives which could pose a risk to our business objectives and ambitions
and could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to manage the risk of significant changes to our business in accordance with our standards, our
business strategies and plans, and operations may be impaired.
• We must successfully deliver several significant changes to our business to implement our business strategies and
successfully achieve our plans. If we are unable to manage risk imposed by significant changes in accordance with our risk
appetite and in order to capture the projected benefits and outcomes of such changes, there could be a material adverse
effect on our business and financial condition.
Key business processes may fail, causing material loss events and impacting our customers and reputation.
• Our institution processes a substantial volume of complex transactions both internally and through third-party relationships.
This complexity introduces a risk that errors could have material impact on our customers or result in financial loss for the
organization. To mitigate these risks, we have instituted controls that seek to ensure timely and accurate processing for our
most significant business processes. Furthermore, we have established necessary monitoring, escalation and reporting
processes to promptly address errors that may arise.
The interconnectedness of our operations and risk management strategies could expose us to risk if all factors are not
appropriately considered and communicated.
• Our business operations, including strategies and operations related to risk management, asset liability management and
liquidity management, are interconnected and complex. Changes in one area may have a secondary impact in another area of
our operations. For example, risk management actions, such as the increased use of interest rate swaps, could have
implications for liquidity risk management, as this strategy could result in the need to post additional amounts of collateral.
Failure to appropriately consider these inter-relationships, or effectively communicate changes in strategies or activities
across our operations, could have a negative impact on the strategic objectives or operations of another group.
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Our risk management policies, procedures and strategies may leave us exposed to unidentified or unanticipated risks,
which could negatively affect our business, results of operations and financial condition.
• We devote significant resources to develop our risk management policies, procedures, and strategies. Nonetheless, there is a
risk that our policies, procedures, and strategies may not be comprehensive. Many of our methods for measuring and
managing risk exposures are based upon the use of observed historical market behaviour or statistics based on historical
models. Future behaviour may differ from past behaviour. Furthermore, data or models we use may not always be accurate,
complete, up-to-date, or properly evaluated or reported.
We are subject to tax audits, tax litigation or similar proceedings, and as a result we may owe additional taxes, interest
and penalties in amounts that may be material.
• We are subject to income and other taxes in the jurisdictions in which we do business. In determining our provisions for
income taxes and our accounting for tax-related matters in general, we are required to exercise judgment. We regularly make
estimates where the ultimate tax determination is uncertain. There can be no assurance that the final determination of any tax
audit, appeal of the decision of a taxing authority, tax litigation or similar proceedings will not be materially different from that
reflected in our historical financial statements. The assessment of additional taxes, interest and penalties could be materially
adverse to our current and future results of operations and financial condition.
Our operations face political, legal, operational and other risks that could negatively affect those operations or our
results of operations and financial condition.
• Our operations face the risk of discriminatory regulation, political and economic instability, the imposition of economic or trade
sanctions, isolationist foreign policies, armed conflicts, civil unrest or disobedience, government policies or regulations
adopted in response to political or social pressures and rising populism and/or nationalism, limited protection for, or increased
costs to protect intellectual property rights, inability to protect and/or enforce contractual or legal rights, nationalization or
expropriation of assets, price controls and exchange controls or other restrictions that prevent us from transferring funds out of
the countries in which we operate and disruptions in global supply chains. In addition, as political tensions and populism and/
or nationalism rise in a number of locations, compliance with laws and regulations by global financial institutions may become
challenging as complying with the requirements in one jurisdiction may be contrary to the requirements of another.
• A substantial portion of our revenue and net income attributed to shareholders is derived from our operations outside of North
America, primarily in Asian markets. Some of these markets are developing and are rapidly growing countries where these
risks may be heightened.
• There is tension between mainland China and Canada, the U.S. and their allies over a number of issues, including trade,
technology and human rights resulting in the imposition of sanctions and trade restrictions on companies and individuals.
Mainland China and the Hong Kong SAR are important markets for Manulife and tensions may create a more challenging
operating environment for Manulife. In addition, the military conflicts in the Middle East and in Ukraine may negatively impact
regional and global financial markets and economies.
• These risks could result in disruptions to our operations, unanticipated costs, increased market volatility and inflation, a
contraction of business activity and recession, diminished investor and consumer confidence, lower investment growth,
insurance sales and fees earned on managed assets, the loss of assets or a reduction in their value and reduced remittances.
Failure to manage these risks could have a significant negative impact on our operations and profitability globally.
We are regularly involved in litigation.
• We are regularly involved in litigation, either as a plaintiff or defendant. These cases could result in an unfavourable resolution
and could have a material adverse effect on our results of operations and financial condition. For further discussion of legal
proceedings refer to note 18 of the 2024 Annual Consolidated Financial Statements.
We are exposed to investors trying to profit from short positions in our stock.
• Short sellers seek to profit from a decline in the price of our common shares. Through their actions and public statements,
they may encourage the decline in price from which they profit and may encourage others to take short positions in our
shares. The existence of such short positions and the related publicity may lead to continued volatility in our common share
price.
System failures or events that impact our facilities may disrupt business operations.
• Technology is used in virtually all aspects of our business and operations; in addition, part of our strategy involves the
expansion of technology to directly serve our customers. An interruption in the service of our technology resulting from system
failure, cyber-attack, human error, natural disaster, human-made disaster, pandemic, or other unpredictable events beyond
reasonable control could prevent us from effectively operating our business. We rely on the internet in order to conduct
business and may be adversely impacted by outages in critical infrastructure such as electric grids, undersea cables, satellites
or other communications used by us or our third parties.
• While our facilities and operations are distributed across the globe, we can experience extreme weather, natural disasters,
civil unrest, human-made disasters, power outages, pandemic, and other events which can prevent access to, and operations
within, the facilities for our employees, partners, and other parties that support our business operations.
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• We take measures to plan, structure and protect against routine events that may impact our operations, and maintain plans to
operate through, and recover from, unpredictable events. An interruption to our operations may subject us to regulatory
sanctions and legal claims, lead to a loss of customers, assets and revenues, or otherwise adversely affect us from a
financial, operational and reputational perspective.
An information security or privacy breach of our operations or of a related third party could adversely impact our
business, results of operations, financial condition, and reputation.
• It is possible that the Company may not be able to anticipate or to implement effective preventive measures against all
disruptions or privacy and security breaches, especially because the techniques used by threat actors change frequently,
generally increase in sophistication, and often are not recognized until launched, and because cyber-attacks can originate
from a wide variety of sources, including organized crime, hackers, terrorists, activists, and other parties, including parties
sponsored by hostile foreign governments. Those parties may also attempt to fraudulently induce employees, customers, and
other users of the Company’s systems or third-party service providers to hire them as legitimate employees or otherwise
disclose sensitive information in order to gain access to the Company’s data or that of its customers or clients. We, our
customers, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyber-attacks,
including computer viruses, malicious or destructive code, phishing attacks, denial of service, and other security incidents that
could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of personal, confidential,
proprietary and other information of the Company, our employees, our customers, or of third parties, or otherwise materially
disrupt our or our customers’ or other third parties’ network access or business operations. These attacks could adversely
impact us from a financial, operational and reputational perspective. The rapid evolution and increased adoption of AI
technologies may intensify our cybersecurity risks, including the deployment of AI technologies by threat actors.
• The Company maintains an Information Risk Management Program, overseen by the Chief Information Risk Officer, which
includes information and cybersecurity defenses, to protect our networks and systems from attacks. However, there can be no
assurance that these countermeasures will be successful in every instance in protecting our networks against advanced
attacks. Therefore, in addition to protection, detection and response mechanisms, the Company maintains cyber risk
insurance, though this insurance may not cover all costs associated with the financial, operational, and reputational
consequences of personal, confidential or proprietary information being compromised.
Model risk may arise from the inappropriate use or interpretation of models or their output, or the use of deficient
models, data or assumptions.
• We rely on highly complex models to support the various operations such as underwriting, pricing, valuation, risk
measurement, and for input on decision-making. Consequently, the risk of inappropriate use or interpretation of our models or
their output, or the use of deficient or outdated models, could have a material adverse effect on our business.
Fraud risks may arise from incidents caused by many internal and external threats.
• As a major financial institution, Manulife is subject to fraud risk stemming from internal and external threats. It is impossible to
eliminate all fraud risk; however, having an effective Anti-Fraud Program to guide the organization on minimum required
controls, as outlined by the Global Anti-Fraud Standard, will maximize the likelihood that fraud will be prevented or detected in
a timely manner and will create a strong deterrent to fraudulent activities such as account takeover, bank, claims, distribution,
underwriting, and others. The Anti-Fraud Office within Compliance is responsible for Second Line governance and oversight
of fraud risks. Despite these efforts, Manulife may not be successful in preventing or detecting fraud, which could result in
business disruption or financial losses, either due to the fraud itself, or from measures Manulife adopts to remediate historic
fraudulent activity. In addition to the risk of loss, Manulife could face legal actions and the loss of customer and market
confidence from fraud events.
Contracted third parties may fail to deliver against contracted activities.
• We rely on third parties to perform a variety of activities on our behalf, and failure of our most significant third parties to meet
their contracted obligations may impact our ability to meet our strategic objectives or may directly impact our customers.
Third-party governance processes are in place that seek to ensure that appropriate due diligence is conducted at time of
contracting, and ongoing third-party monitoring activities are in place that seek to ensure that the contracted services are
being fulfilled to satisfaction but we may nevertheless be unable to mitigate all possible failures.
Damage to the natural environment may arise related to our business operations, owned property or commercial
mortgage loan portfolio.
• Environmental risk may originate from investment properties that are subject to natural or human-made environmental risk.
Real estate assets may be owned, leased and/or managed, as well as mortgaged by Manulife and we might enter into the
chain of liability due to foreclosure ownership when in default.
• Liability under environmental protection laws resulting from our commercial mortgage loan portfolio and owned property
(including commercial real estate, timberland and farmland properties) may adversely impact our reputation, results of
operations and financial condition. Under applicable laws, contamination of a property with hazardous materials or substances
may give rise to a lien on the property to secure recovery of the costs of cleanup. In some instances, this lien has priority over
82 | 2024 Annual Report | Management’s Discussion and Analysis
the lien of an existing mortgage encumbering the property. The environmental risk may result from on-site or off-site
(adjacent) due to migration of regulated pollutants or contaminants with financial or reputational environmental risk and liability
consequences by virtue of strict liability. Environmental risk could also arise from natural disasters (e.g., climate change,
weather, fire, earthquake, floods, and pests) or human activities (use of chemicals or pesticides) conducted within the site or
when impacted from adjacent sites.
• Additionally, as lender, we may incur environmental liability (including without limitation liability for cleanup, remediation and
damages incurred by third parties) similar to that of an owner or operator of the property, if we or our agents exercise
sufficient control over the operations at the property. We may also have liability as the owner and/or operator of real estate for
environmental conditions or contamination that exist or occur on the property or affecting other property.
• Across our portfolio of investment properties, we seek to ensure appropriate levels of insurance are maintained in line with
industry standards. These policies often include protections against physical and/or operational damage related to various
environmental risks. Should the availability of such insurance policies become more limited or not reasonably commercially
available, there may be an increased risk of loss for environmental related damages on our portfolio.
Pandemics, epidemics or infectious disease outbreaks, and the economic, legal, regulatory, tax and other responses to
such pandemics, epidemics, or infectious disease outbreaks, could have a material adverse effect on our business,
results of operations and financial condition.
• We purchase reinsurance protection on certain risks underwritten or assumed by our various insurance businesses. As either
a direct or indirect result of a pandemic, epidemic or infectious disease outbreaks, we may find reinsurance more difficult or
costly to obtain.
• In pricing or repricing of new business, the impact of any pandemic, epidemic or infectious disease outbreaks related changes
may be compounded with or offset by other pricing inputs. These inputs include assumption changes (e.g., reinsurance,
interest rates, morbidity, mortality, expense, lapse, and surrender changes), business considerations related to retaining
specific market share or client business and regulatory restrictions impacting the approval process for price changes.
• Market volatility and stressed conditions resulting from pandemic, epidemic or infectious disease outbreaks could result in
additional cash and collateral demands primarily from changes to policyholder termination or renewal rates, withdrawals of
customer deposit balances, borrowers renewing or extending their loans when they mature, derivative settlements or
collateral demands, reinsurance settlements or collateral demands, and our willingness to support the local solvency position
of our subsidiaries. Such an environment could also limit our access to capital markets. Sustained global economic
uncertainty could also result in adverse credit rating changes which in turn could result in more costly or limited access to
funding sources. While we currently have a variety of sources of liquidity including cash balances, short-term investments,
government and highly rated corporate bonds, and access to contingent liquidity facilities, there can be no assurance that
these sources will provide us with sufficient liquidity on commercially reasonable terms in the future.
• Pandemics, epidemics, or infectious disease outbreaks may result in further increases in the risks outlined in the “Risk
Management and Risk Factors” section of this document, including strategic, market, liquidity, product, model, business
continuity, legal, regulatory, reputational, and operational risks.
Evolving Risks
The identification and assessment of our external environment for evolving risks is an important aspect of our ERM Framework,
as these risks could have the potential to have a material adverse impact on our operations and/or business strategies.
Our Evolving Risk Framework facilitates the ongoing identification, assessment and monitoring of evolving risks, and includes:
maintaining a process for the ongoing discussion and evaluation of such risks with senior leaders; reviewing and validating
evolving risks with the ERC; developing and executing on responses to each evolving risk based on materiality and prioritization;
and monitoring and reporting on evolving risks on a regular basis to the Board’s Risk Committee.
Additional Risk Factors That May Affect Future Results
Other factors that may affect future results include changes in government trade policy; monetary policy or fiscal policy, including
interest rates policy from central banks; political conditions and developments in or affecting the countries in which we operate;
technological changes; public infrastructure disruptions; changes in consumer spending and saving habits; the possible impact
on local, national or global economies from public health or natural disaster emergencies; and international conflicts and other
developments including those relating to terrorist activities. Although we take steps to anticipate and minimize risks in general,
unforeseen future events may have a negative impact on our business, financial condition and results of operations.
We caution that the preceding discussion of risks that may affect future results is not exhaustive. When relying on our forward-
looking statements to make decisions with respect to our Company, investors and others should carefully consider the foregoing
risks, as well as other uncertainties and potential events, and other external and company-specific risks that may adversely affect
the future business, financial condition or results of operations of our Company.
83
10. Capital Management Framework
Manulife seeks to manage its capital with the objectives of:
• Operating with sufficient capital to be able to honour all commitments to its policyholders and creditors with a high degree of
confidence;
• Retaining the ongoing confidence of regulators, policyholders, rating agencies, investors and other creditors in order to ensure
access to capital markets; and
• Optimizing return on capital to meet shareholders’ expectations subject to constraints and considerations of adequate levels
of capital established to meet the first two objectives.
Capital is managed and monitored in accordance with the Capital Management Policy. The Policy is reviewed and approved by
the Board annually and is integrated with the Company’s risk and financial management frameworks. It establishes guidelines
regarding the quantity and quality of capital, internal capital mobility, and proactive management of ongoing and future capital
requirements.
Our capital management framework takes into account the requirements of the Company as a whole, as well as the needs of
each of our subsidiaries. Internal capital targets are set above regulatory requirements, and consider a number of factors,
including results of sensitivity and stress testing and our own risk assessments, as well as business needs. We monitor against
these internal targets and initiate actions appropriate to achieving our business objectives.
We periodically assess the strength of our capital position under various stress scenarios. The annual Financial Condition
Testing (“FCT”) typically quantifies the financial impact of economic events arising from shocks in public equity and other
markets, interest rates and credit, amongst others. Our 2024 FCT results demonstrate that we would have sufficient assets,
under the various adverse scenarios tested, to discharge our insurance and investment contract liabilities. This conclusion was
also supported by a variety of other stress tests conducted by the Company.
We use an Economic Capital (“EC”) framework to inform our internal view of the level of required capital and available capital.
The EC framework is a key component of the Own Risk and Solvency Assessment process, which is an internal assessment of
an insurer’s risks, capital needs and solvency position, and is used for setting Internal Capital Targets.
Capital management is also integrated into our product planning and performance management practices.
The composition of capital between equity and other capital instruments impacts the financial leverage ratio which is an
important consideration in determining the Company’s financial strength and credit ratings. The Company monitors and
rebalances its capital mix through capital issuances and redemptions.
Financing Activities
Securities Transactions
During 2024, we raised a total of $2.6 billion of subordinated debt, and $1.9 billion of debt securities was redeemed at par.
($ millions)
Par value
IssuedRefer to footnote number (1)
Redeemed/
MaturedRefer to footnote number (1)
4.064% MFC Subordinated debenture, issued on Dec 6, 2024
$
1,000
$
995
Do
llar Zero
4.275% MFC Subordinated debenture, issued on June 19, 2024
S$
500
524
Zero
5.054% MFC Subordinated debenture, issued on Feb 23, 2024
1,100
1,095
Zero
7.375% JHUSA Surplus notes, redeemed on Feb 15, 2024
US$
450
Zero
594
3.049% MFC Subordinated debenture, redeemed on Aug 20, 2024
750
Zero
750
3.000% MFC Subordinated debenture, redeemed on Nov 21, 2024
S$
500
Zero
527
Total
$ 2,614
$ 1,871
(1) Represents carrying value, net of issuance costs.
Normal Course Issuer Bid
On February 20, 2024, we announced that the Toronto Stock Exchange (“TSX”) approved a normal course issuer bid (the “2024
NCIB”) permitting the purchase for cancellation of up to 50 million common shares, representing approximately 2.8% of common
shares outstanding as at February 12, 2024. On May 7, 2024, we announced that the TSX approved an amendment to the 2024
NCIB to increase the number of common shares that we may repurchase for cancellation to 90 million common shares,
representing approximately 5% of common shares outstanding as at February 12, 2024.
Purchases under the 2024 NCIB, as subsequently amended, commenced on February 23, 2024, and will continue until
February 22, 2025, when the NCIB expires, or such earlier date as we complete our purchases. During the year ended
December 31, 2024, we purchased for cancellation under the 2024 NCIB 82.8 million common shares for a total cost of
$3.2 billion.
84 | 2024 Annual Report | Management’s Discussion and Analysis
Our 2023 NCIB which was announced on February 21, 2023, expired on February 22, 2024, with no purchases during the year
ended December 31, 2024. Our 2022 NCIB, which was announced on February 1, 2022, expired on February 2, 2023.
During the year ended December 31, 2023, we purchased for cancellation 62.6 million common shares for a total cost of
$1.6 billion, including 6.9 million common shares for a total cost of $0.2 billion under the 2022 NCIB.
On February 19, 2025, we announced that we are launching a normal course issuer bid (the “2025 NCIB”) permitting the purchase
for cancellation of up to 51.5 million common shares, representing approximately 3.0% of common shares outstanding. We have
received approval from both the TSX and OSFI for the 2025 NCIB. Purchases under the 2025 NCIB may commence on February 24,
2025 and continue until February 23, 2026, when the 2025 NCIB expires, or such earlier date as we complete our purchases.
Consolidated Capital
As at December 31,
($ millions)
2024
2023
Non-controlling interests
$
1,421
$
1,431
Participating policyholders’ equity
567
257
Preferred shares and other equity
6,660
6,660
Common shareholders’ equityRefer to footnote number (1)
44,312
40,379
Total equity
52,960
48,727
Exclude the accumulated other comprehensive gain/(loss) on cash flow hedges
119
26
Total equity excluding accumulated other comprehensive gain/(loss) on cash flow hedges
52,841
48,701
Post-tax CSM
20,826
18,503
Qualifying capital instruments
7,532
6,667
Consolidated capitalRefer to footnote number (2)
$ 81,199
$ 73,871
Footnote Number (1)Common shareholders’ equity is equal to total shareholders’ equity less preferred shares and other equity.
Footnote Number (2)Consolidated capital does not include $6.6 billion (2023 – $6.1 billion) of MFC senior debt as this form of financing does not meet OSFI’s definition of regulatory
capital at the MFC level. The Company has down-streamed the proceeds from this financing into operating entities in a form that qualifies as regulatory capital at
the subsidiary level.
MFC’s consolidated capital was $81.2 billion as at December 31, 2024, an increase of $7.3 billion compared with $73.9 billion as
at December 31, 2023. The increase was driven by growth in total equity, a higher post-tax CSM and the net issuance of capital
instruments1. The growth in total equity was mainly from total comprehensive income, which was partially offset by dividends and
common share buybacks.
Remittance of Capital
As part of its capital management, Manulife promotes internal capital mobility so that MFC has access to funds to meet its
obligations and to optimize capital deployment. Remittances is defined as the cash remitted or made available for distribution to
MFC from its subsidiaries. It is a key metric used by management to evaluate our financial flexibility. In 2024, MFC subsidiaries
delivered $7.0 billion in remittances of which Asia and U.S. operations delivered $1.9 billion and $2.0 billion, respectively.
Remittances were $1.5 billion higher than 2023 due to the favourable impact of market movements in 2024 and the GA
Reinsurance Transaction.
Financial Leverage Ratio
MFC’s financial leverage ratio as at December 31, 2024 was 23.7%, a decrease of 0.6 percentage points from 24.3% as at
December 31, 2023. The decrease in the ratio was driven by growth in total equity and higher post-tax CSM, partially offset by
the net issuance of capital instruments1.
Common Shareholder Dividends
The declaration and payment of shareholder dividends and the amount thereof are at the discretion of the Board and depend
upon various factors, including the results of operations, financial conditions, future prospects of the Company, dividend payout
ratio, and taking into account regulatory restrictions on the payment of shareholder dividends.
Common Shareholder Dividends Paid
For the years ended December 31,
$ per share
2024
2023
Dividends paid
$ 1.60
$ 1.46
Footnote Number 1 The net issuance of capital instruments consists of the issuance of $1.1 billion of subordinated debt in 1Q24, $0.5 billion of subordinated debt in 2Q24, and
$1.0 billion of subordinated debt in 4Q24, partially offset by the redemption of $0.6 billion of JHUSA Surplus Notes in 1Q24, $0.75 billion of subordinated debt in
3Q24 and $0.5 billion of subordinated debt in 4Q24.
85
The Company offers a Dividend Reinvestment Program (“DRIP”) whereby shareholders may elect to automatically reinvest
dividends in the form of MFC common shares instead of receiving cash. The offering of the program and its terms of execution
are subject to the Board’s discretion.
During 2024, the required common shares in connection with the DRIP were purchased on the open market with no applicable
discount.
Regulatory Capital Position
MFC and MLI are regulated by OSFI and are subject to consolidated risk based capital requirements. Manulife monitors and
manages its consolidated capital in compliance with the OSFI LICAT guideline. Under this regime, our available capital and other
eligible capital resources are measured against a required amount of risk capital determined in accordance with the guideline.
For regulatory reporting purposes under the LICAT framework, consolidated capital is adjusted for various additions or
deductions to capital as mandated by the guidelines defined by OSFI.
Manulife’s operating activities are conducted within MLI and its subsidiaries. MLI’s LICAT ratio was 137% as at December 31,
2024, compared with 137% as at December 31, 2023. The ratio is in line with 2023 as the positive impact from earnings and
CSM, the net issuance of capital instruments1 and the GA and RGA Canadian Reinsurance Transactions was offset by common
share buybacks and market movements.
MFC’s LICAT ratio was 124% as at December 31, 2024, compared with 124% as at December 31, 2023, with the change driven
by similar factors that impacted the movement in MLI’s LICAT ratio. The difference between the MLI and MFC ratios is largely
due to the $6.6 billion (2023 – $6.1 billion) of MFC senior debt outstanding that does not qualify as available capital at the MFC
level, but based on the form it was down-streamed to MLI, it qualifies as regulatory capital at the MLI level.
The LICAT ratios as at December 31, 2024, resulted in excess capital of $24.0 billion over OSFI’s supervisory target ratio of
100% for MLI, and $22.7 billion over OSFI’s regulatory minimum target ratio of 90% for MFC (no supervisory target is applicable
to MFC). In addition, all MLI’s subsidiaries maintain capital levels in excess of local requirements.
Credit Ratings
Manulife’s operating companies have strong financial strength ratings from credit rating agencies. These ratings are important
factors in establishing the competitive position of insurance companies and maintaining public confidence in products being
offered. Maintaining strong ratings on debt and capital instruments issued by MFC and its subsidiaries allows us to access
capital markets at competitive pricing levels. Should these credit ratings decrease materially, our cost of financing may increase
and our access to funding and capital through capital markets could be reduced.
During 2024, S&P, Moody’s, Morningstar DBRS, and AM Best Company (“AM Best”) maintained their assigned ratings of MFC
and its primary insurance operating companies. On July 30, 2024, Fitch upgraded the financial strength ratings for Manulife’s
primary insurance operating companies to AA from AA-.
The following table summarizes the financial strength ratings of MLI and certain of its subsidiaries as at January 31, 2025.
Financial Strength Ratings
Subsidiary
Jurisdiction
S&P
Moody’s
Morningstar DBRS
Fitch
AM Best
The Manufacturers Life Insurance Company
Canada
AA-
A1
AA
AA
A+
(Superior)
John Hancock Life Insurance Company (U.S.A.) United States AA-
A1
Not Rated
AA
A+
(Superior)
Manulife (International) Limited
Hong Kong
AA-
Not Rated
Not Rated
Not Rated
Not Rated
Manulife Life Insurance Company
Japan
A+
Not Rated
Not Rated
Not Rated
Not Rated
Manulife (Singapore) Pte. Ltd.
Singapore
AA-
Not Rated
Not Rated
Not Rated
Not Rated
As of January 31, 2025, S&P, Morningstar DBRS, Fitch, and AM Best had a stable outlook on these ratings, while Moody’s had a
positive outlook. The S&P rating and outlook for Manulife Life Insurance Company are constrained by the sovereign rating on
Japan (A+/Stable).
Footnote Number 1 The net issuance of capital instruments consists of the issuance of $1.1 billion of subordinated debt in 1Q24, $0.5 billion of subordinated debt in 2Q24, and
$1.0 billion of subordinated debt in 4Q24, partially offset by the redemption of $0.6 billion of JHUSA Surplus Notes in 1Q24, $0.75 billion of subordinated debt in
3Q24 and $0.5 billion of subordinated debt in 4Q24.
86 | 2024 Annual Report | Management’s Discussion and Analysis
11. Critical Actuarial and Accounting Policies
The preparation of Consolidated Financial Statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
and the disclosure of contingent assets and liabilities as at the date of the Consolidated Financial Statements, and the reported
amounts of insurance service, investment result, and other revenues and expenses during the reporting periods. Actual results
may differ from these estimates. The most significant estimation processes relate to evaluating assumptions used in measuring
insurance and investment contract liabilities and reinsurance contract held liabilities, assessing assets for impairment,
determining of pension and other post-employment benefit obligation and expense assumptions, determining income taxes and
uncertain tax positions, and estimating fair values of certain invested assets. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised
and in any future years affected. Although some variability is inherent in these estimates, management believes that the amounts
recorded are appropriate. The material accounting policies used and the most significant judgments made by management in
applying these accounting policies in the preparation of the 2024 Annual Consolidated Financial Statements are described in
note 1 to the Consolidated Financial Statements.
Critical Actuarial Policies – Insurance and Investment Contract Liabilities
Insurance contract liabilities are determined in Canada under IFRS 17 “Insurance Contracts”, which establishes principles for the
recognition, measurement, presentation and disclosure of insurance contracts within the scope of the Standard. The objective of
IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information
provides a basis for users of financial statements to assess the effect that insurance contracts have on the entity’s financial
position, financial performance, and cash flows.
Insurance contract liabilities include the fulfilment cash flows and the contractual service margin. The fulfilment cash flows
comprise:
• An estimate of future cash flows
• An adjustment to reflect the time value of money and the financial risk related to the future cash flows if not included in the
estimate of future cash flows
• A risk adjustment for non-financial risk
Estimates of future cash flows including any adjustments to reflect the time value of money and financial risk represent the
estimated value of future policyholder benefits and settlement obligations to be paid over the term remaining on in-force policies,
including costs of servicing the policies, reduced by any future amounts paid by policyholders to the Company for their policies.
The determination of estimates of future cash flows involves the use of estimates and assumptions. To determine the best
estimate amount, assumptions must be made for several key factors, including future mortality and morbidity rates, rates of
policy termination and premium persistency, operating expenses, and certain taxes (other than income taxes). Further
information on best estimate assumptions is provided in the “Best Estimate Assumptions” section below.
To reflect the time value of money and financial risk, estimates of future cash flows are generally discounted using risk-free yield
curves adjusted by an illiquidity premium to reflect the liquidity characteristics of the liabilities. The Company primarily uses a
deterministic projection using best estimate assumptions to determine the present value of future cash flows. However, where
there are financial guarantees such as universal life minimum crediting rates guarantees, participating life zero dividend floor
implicit guarantees and variable annuities guarantees, a stochastic approach to capture the asymmetry of the risk is used. For
the stochastic approach the cash flows are both projected and discounted at scenario specific rates calibrated on average to be
the risk-free yield curves adjusted for illiquidity. The Company disaggregates insurance finance income or expenses on
insurance contracts issued for most of its group of insurance contracts between profit or loss and other comprehensive income
(“OCI”). The impact of changes in market interest rates on the value of the life insurance and related reinsurance assets and
liabilities are reflected in OCI to minimize accounting mismatches between the accounting for insurance assets and liabilities and
supporting financial assets.
Risk adjustments for non-financial risk represent the compensation an entity requires for bearing the uncertainty about the
amount and timing of the cash flows that arises from non-financial risk as the entity fulfills insurance contracts. The risk
adjustment considers insurance, lapse and expense risks, includes both favourable and unfavourable outcomes, and reflects
diversification benefits from the insurance contracts issued. The Company has estimated the risk adjustment using a margin
approach. This approach applies a margin for adverse deviation, typically in terms of a percentage of best estimate assumptions,
where future cash flows are uncertain. The resulting cash flows are discounted at rates consistent with the best estimate cash
flows to arrive at the total risk adjustment. The ranges of these margins are set by the Company and reviewed periodically. The
risk adjustment for non-financial risk for insurance contracts correspond to a 90% – 95% confidence level for all segments. The
risk adjustment for non-financial risk leads to higher insurance contract liabilities, but increases the income recognized in later
periods as the risk adjustment releases as the non-financial risk on policies decreases.
The contractual service margin represents the present value of unearned profits the entity will recognize as services are provided
in the future.
87
Total net insurance contract liabilities were $522.8 billion as at December 31, 2024 (December 31, 2023 – $482.0 billion),
reflecting business growth and foreign exchange impacts.
Best Estimate Assumptions
We follow established processes to determine the assumptions used in the determination of insurance contract liabilities. The
nature of each risk factor and the process for setting the assumptions used in the determination are discussed below.
Mortality
Mortality relates to the occurrence of death. Mortality assumptions are based on our internal as well as industry past and
emerging experience and are differentiated by sex, underwriting class, policy type and geographic market. We make
assumptions about future mortality improvements using historical experience derived from population data. Reinsurance is used
to offset some of our direct mortality exposure on in-force life insurance policies with the impact of the reinsurance separately
accounted for in our reinsurance contract assets or liabilities. Actual mortality experience is monitored against these assumptions
separately for each business. The results are favourable where mortality rates are lower than assumed for life insurance and
where mortality rates are higher than assumed for payout annuities and long-term care. Overall 2024 experience was favourable
(2023 – favourable) when compared with our assumptions.
Morbidity
Morbidity relates to the occurrence of accidents and sickness for the insured risks. Morbidity assumptions are based on our
internal as well as industry past and emerging experience and are established for each type of morbidity risk and geographic
market. For our JH Long Term Care business we make assumptions about future morbidity changes. Actual morbidity
experience is monitored against these assumptions separately for each business. Our morbidity risk exposure relates to future
expected claims costs for long-term care insurance, as well as for group benefits and certain individual health insurance products
we offer. Overall 2024 experience was favourable (2023 – favourable) when compared with our assumptions.
Policy Termination and Premium Persistency
Policy termination includes lapses and surrenders, where lapses represent the termination of policies due to non-payment of
premiums and surrenders represent the voluntary termination of policies by policyholders. Premium persistency represents the
level of ongoing deposits on contracts where there is policyholder discretion as to the amount and timing of deposits. Policy
termination and premium persistency assumptions are primarily based on our recent experience adjusted for expected future
conditions. Assumptions reflect differences by type of contract within each geographic market and actual experience is monitored
against these assumptions separately for each business. Overall 2024 experience was unfavourable (2023 – unfavourable)
when compared with our assumptions.
Directly Attributable Expenses and Taxes
Directly attributable operating expense assumptions reflect the projected costs of maintaining and servicing in-force policies,
including associated directly attributable overhead expenses. The expenses are derived from internal cost studies and are
projected into the future with an allowance for inflation. For some developing businesses, there is an expectation that unit costs
will decline as these businesses mature. Actual expenses are monitored against assumptions separately for each business.
Overall maintenance expenses for 2024 were unfavourable (2023 – unfavourable) when compared with our assumptions. Taxes
reflect assumptions for future premium taxes and other non-income related taxes.
Experience Adjusted Products
Where policies have features that allow the impact of changes in experience to be passed on to policyholders through policy
dividends, experience rating refunds, credited rates or other adjustable features, the projected policyholder benefits are adjusted
to reflect the projected experience. Minimum contractual guarantees and other market considerations are considered in
determining the policy adjustments.
Sensitivity of Earnings to Changes in Assumptions
The following tables present information on how reasonably possible changes in assumptions made by the Company on
insurance contracts’ non-economic risk variables and certain economic risk variables impact contractual service margin, net
income attributed to shareholders, other comprehensive income attributed to shareholders, and total comprehensive income
attributed to shareholders. For non-economic risk variables, the impacts are shown separately gross and net of the impacts of
reinsurance contracts held. The method used for deriving sensitivity information and significant assumptions made did not
change from the previous period.
The analysis is based on a simultaneous change in assumptions across all businesses and holds all other assumptions constant.
In practice, experience for each assumption will frequently vary by geographic market and business, and assumption updates
88 | 2024 Annual Report | Management’s Discussion and Analysis
are specifically made on a business and geographic basis. Actual results can differ materially from these estimates for a variety
of reasons including the interaction among these factors when more than one changes, actual experience differing from the
assumptions, changes in business mix, effective tax rates, and the general limitations of our internal models.
Potential impact on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders
economic assumptionsRefer to footnote number (1)
As at December 31, 2024
($ millions, post-tax except CSM)
, and total comprehensive income attributed to shareholders arising from changes to non-
CSM net of NCI
Net income
attributed to shareholders
Other comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality rates(2),(3),(5)
Portfolios where an increase in rates increases
insurance contract liabilities
$ (700)
$ (200)
$ (700)
$ (300)
$ 200
$ 100
$ (500)
$ (200)
Portfolios where a decrease in rates increases
insurance contract liabilities
(100)
(600)
Zero
Zero
100
200
100
200
5% adverse change in future morbidity rates(4),(5),(6)
(incidence and termination)
(2,200)
(1,800)
(3,000)
(2,700)
700
600
(2,300)
(2,100)
10% change in future policy termination rates(3),(5)
Portfolios where an increase in rates increases
insurance contract liabilities
(700)
(600)
(100)
(100)
(200)
(200)
(300)
(300)
Portfolios where a decrease in rates increases
insurance contract liabilities
(900)
(700)
(700)
(400)
400
300
(300)
(100)
5% increase in future expense levels
(600)
(600)
(100)
(100)
100
100
Zero
Zero
As at December 31, 2023
($ millions, post-tax except CSM)
CSM net of NCI
Net income
attributed to shareholders
Other comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality rates(2),(3),(5)
Portfolios where an increase in rates increases
insurance contract liabilities
$ (800)
$ (200)
$ (400)
$ (200)
$
-
$
-
$ (400)
$ (200)
Portfolios where a decrease in rates increases
insurance contract liabilities
Zero
(500)
Zero
Zero
Zero
100
Zero
100
5% adverse change in future morbidity ratesRefer to footnote number (4),(5),(6)
(incidence and termination)
(1,500)
(1,300)
(3,300)
(3,300)
500
400
(2,800)
(2,900)
10% change in future policy termination rates(3),(5)
Portfolios where an increase in rates increases
insurance contract liabilities
(600)
(500)
(100)
(100)
(100)
(100)
(200)
(200)
Portfolios where a decrease in rates increases
insurance contract liabilities
(1,200)
(800)
(400)
(300)
300
200
(100)
(100)
5% increase in future expense levels
(600)
(600)
Zero
Zero
Zero
Zero
Zero
Zero
Footnote Number (1)The participating policy funds are largely self-supporting and experience gains or losses would generally result in changes to future dividends reducing the direct
impact on the CSM and shareholder income.
Footnote Number (2)An increase in mortality rates will generally increase insurance contract liabilities for life insurance contracts, whereas a decrease in mortality rates will generally
increase insurance contract liabilities for policies with longevity risk such as payout annuities.
Footnote Number (3)The sensitivity is measured for each direct insurance portfolio net of the impacts of any reinsurance held on the policies within that portfolio to determine if the
overall insurance contract liabilities increased.
Footnote Number (4)No amounts related to morbidity risk are included for policies where the insurance contract liability provides only for claims costs expected over a short period,
generally less than one year, such as Group Life and Health.
Footnote Number (5)The impacts of the sensitivities on LTC for morbidity, mortality and lapse do not assume any offsets from the Company’s ability to contractually raise premium
rates in such events, subject to state regulatory approval. In practice, we would plan to file for rate increases equal to the amount of deterioration resulting from
the sensitivity.
Footnote Number (6)This includes a 5% deterioration in incidence rates and a 5% deterioration in claim termination rates.
89
Potential impact on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders arising from changes to non-
economic assumptions on Long Term CareRefer to footnote number (1)
As at December 31, 2024
($ millions, post-tax except CSM)
CSM net of NCI
Net income attributed to
shareholders
Other
comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality ratesRefer to footnote number (2),(3)
$ (300)
$ (300)
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
5% adverse change in future morbidity incidence
ratesRefer to footnote number (2),(3)
(1,400)
(1,300)
(500)
(400)
200
200
(300)
(200)
5% adverse change in future morbidity claims
termination ratesRefer to footnote number (2),(3)
(1,400)
(1,300)
(1,300)
(1,100)
500
400
(800)
(700)
10% adverse change in future policy termination
ratesRefer to footnote number (2),(3)
(400)
(400)
Zero
Zero
100
100
100
100
5% increase in future expense levelsRefer to footnote number (3)
(100)
(100)
Zero
Zero
Zero
Zero
Zero
Zero
As at December 31, 2023
($ millions, post-tax except CSM)
CSM net of NCI
Net income attributed to
shareholders
Other
comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality ratesRefer to footnote number (2),(3)
$ (300)
$ (300)
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
5% adverse change in future morbidity incidence
ratesRefer to footnote number (2),(3)
(900)
(900)
(800)
(800)
100
100
(700)
(700)
5% adverse change in future morbidity claims
termination rates(2),(3)
(900)
(900)
(1,600)
(1,600)
200
200
(1,400)
(1,400)
10% adverse change in future policy termination
rates(2),(3)
(400)
(400)
Zero
Zero
Zero
Zero
Zero
Zero
5% increase in future expense levels(3)
(100)
(100)
Zero
Zero
Zero
Zero
Zero
Zero
Footnote Number (1)The potential impacts on CSM were translated from US$ at 1.4382 (2023 – 1.3186) and the potential impacts on net income attributed to shareholders, OCI
attributed to shareholders and total comprehensive income attributed to shareholders were translated from US$ at 1.3987 (2023 – 1.3612).
Footnote Number (2)The impacts of the sensitivities on LTC for morbidity, mortality and lapse do not assume any offsets from the Company’s ability to contractually raise premium
rates in such events, subject to state regulatory approval. In practice, we would plan to file for rate increases equal to the amount of deterioration resulting from
the sensitivities.
Footnote Number (3)The impact of favourable changes to all the sensitivities is relatively symmetrical.
Potential impact on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders arising from changes to certain
economic financial assumptions used in the determination of insurance contract liabilitiesRefer to footnote number (1)
As at December 31, 2024
($ millions, post-tax except CSM)
CSM net of NCI
Net income
attributed to
shareholders
Other comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Financial assumptions
10 basis point reduction in ultimate spot rate
$ (300)
Do
llar Zero
$ (200)
$ (200)
50 basis point increase in interest rate volatility(2)
(100)
Zero
Zero
Zero
50 basis point increase in non-fixed income return volatility(2)
(100)
Zero
Zero
Zero
As at December 31, 2023
($ millions, post-tax except CSM)
CSM net of NCI
Net income
attributed to
shareholders
Other comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Financial assumptions
10 basis point reduction in ultimate spot rate
$ (200)
Do
llar Zero
$ (300)
$ (300)
50 basis point increase in interest rate volatility(2)
Zero
Zero
Zero
Zero
50 basis point increase in non-fixed income return volatility(2)
(100)
Zero
Zero
Zero
Footnote Number (1)Note that the impact of these assumptions is not linear.
Footnote Number (2)Used in the determination of insurance contract liabilities with financial guarantees. This includes universal life minimum crediting rate guarantees, participating
life zero dividend floor implicit guarantees, and variable annuities guarantees, where a stochastic approach is used to capture the asymmetry of the risk.
90 | 2024 Annual Report | Management’s Discussion and Analysis
Review of Actuarial Methods and Assumptions
The Company performs a comprehensive review of actuarial methods and assumptions annually. The review is designed to
reduce the Company’s exposure to uncertainty by ensuring assumptions for insurance contract liability risks remain appropriate.
This is accomplished by monitoring experience and updating assumptions that represent a best estimate of expected future
experience, and maintaining a risk adjustment that is appropriate for the risks assumed. While the assumptions selected
represent the Company’s best estimates and assessment of risk, the ongoing monitoring of experience and changes in the
economic environment are likely to result in future changes to the actuarial assumptions, which could materially impact the
insurance contract net liabilities. The changes implemented from the review are generally implemented in the third quarter of
each year, though updates may be made outside the third quarter in certain circumstances.
2024 Review of Actuarial Methods and Assumptions
The completion of the 2024 annual review of actuarial methods and assumptions resulted in a decrease in pre-tax fulfilment cash
flows1 of $174 million, excluding the portion related to non-controlling interests. These changes resulted in a decrease in pre-tax
net income attributed to shareholders of $250 million ($199 million post-tax), an increase in pre-tax net income attributed to
participating policyholders of $29 million ($21 million post-tax), a decrease in CSM of $421 million, an increase in pre-tax other
comprehensive income attributed to shareholders of $771 million ($632 million post-tax), and an increase in pre-tax other
comprehensive income attributed to participating policyholders of $45 million ($32 million post-tax).
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flowsRefer to footnote number (1)
For the year ended December 31, 2024
($ millions)
Total
Lapse and policyholder behaviour updates
$ 620
Reinsurance contract and other risk adjustment review
427
Expense updates
(406)
Financial related updates
(386)
Mortality and morbidity updates
(273)
Methodology and other updates
(156)
Impact of changes in actuarial methods and assumptions, pre-tax
$ (174)
Footnote Number (1)Excludes the portion related to non-controlling interests of $(215) million. The impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash
flows, including the portion related to non-controlling interests, would be $(389) million.
Impact of changes in actuarial methods and assumptions on pre-tax net income attributed to shareholders, pre-tax net
income attributed to participating policyholders, OCI and CSMRefer to footnote number (1)
For the year ended December 31, 2024
($ millions)
Total
Portion recognized in net income (loss) attributed to:
Participating policyholders
$
29
Shareholders
(250)
(221)
Portion recognized in OCI attributed to:
Participating policyholders
45
Shareholders
771
816
Portion recognized in CSM
(421)
Impact of changes in actuarial methods and assumptions, pre-tax
$ 174
Footnote Number (1)Excludes the portion related to non-controlling interests of $215 million. The impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash
flows, including the portion related to non-controlling interests, would be $389 million.
Lapse and policyholder behaviour updates
Updates to lapses and policyholder behaviour assumptions resulted in an increase in pre-tax fulfilment cash flows of
$620 million.
The increase was primarily driven by a detailed review of the lapse assumptions for our non-participating products in our U.S. life
insurance business and our International High Net Worth business in Asia segment. For U.S. protection products, lapse rates
declined during the COVID-19 pandemic and continue to remain low, while for U.S. indexed universal life, U.S. bank-owned life
insurance, and Asia’s International High Net Worth business, lapse rates increased due to the impact of higher short-term
interest rates. We updated our lapse assumptions to reflect these experience trends. The ultimate lapse rates for products with
no-lapse guarantees were not changed.
Footnote Number 1 Fulfilment cash flows include an estimate of future cash flows; an adjustment to reflect the time value of money and the financial risk related to future cash flows if
not included in the estimate of future cash flows; and a risk adjustment for non-financial risk. Additional information on fulfilment cash flows can be found in note 6
of our 2024 Annual Consolidated Financial Statements.
91
Reinsurance contract and other risk adjustment review
The review of our reinsurance contracts and risk adjustment, excluding changes that were a direct result of other assumption
updates, resulted in an increase in pre-tax fulfilment cash flows of $427 million.
The increase was driven by updates to our reinsurance contract fulfilment cash flows to reflect current reinsurance market
conditions and the resulting expected cost on older U.S. mortality reinsurance, partially offset by updates to our risk adjustment
methodology in North America related to non-financial risk.
Our overall risk adjustment continues to be within the 90 – 95% confidence level.
Expense updates
Expense updates resulted in a decrease in pre-tax fulfilment cash flows of $406 million.
The decrease was driven by a detailed review of our global expenses, including investment expenses. We aligned them with our
current cost structure and included the impact of changes in classification of certain expenses from directly attributable to
non-directly attributable.
Financial related updates
Financial related updates resulted in a decrease in pre-tax fulfilment cash flows of $386 million.
The decrease was driven by a review of the discount rates used in the valuation of our non-participating business, which
included increases to ultimate risk-free rates in the U.S. to align with historical averages, as well as updates to parameters used
to determine illiquidity premiums. This was partially offset by refinements to crediting rate projections on certain U.S. universal
life products.
Mortality and morbidity updates
Mortality and morbidity updates resulted in a decrease in pre-tax fulfilment cash flows of $273 million.
The decrease was driven by morbidity updates to health insurance products in Hong Kong to reflect lower hospital claims on
certain business that we account for under the general measurement model, partially offset by updates to mortality and morbidity
assumptions on critical illness products in Hong Kong to reflect emerging experience.
Methodology and other updates
Methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $156 million.
The decrease was driven by the impact of annual updates to our valuation models for participating products in Asia and Canada
reflecting higher interest rates during the year, partially offset by various other smaller items that netted to an increase in
fulfilment cash flows.
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flows, net income attributed to
shareholders, CSM and OCI by segmentRefer to footnote number 1
The impact of changes in actuarial methods and assumptions in Canada resulted in a decrease in pre-tax fulfilment cash flows of
$266 million. The decrease was primarily driven by updates to the risk adjustment methodology related to non-financial risks and
the review of the discount rates used in the valuation of non-participating business. These changes resulted in an increase in
pre-tax net income attributed to shareholders of $3 million ($2 million post-tax), an increase in CSM of $222 million, and a
decrease in pre-tax other comprehensive income attributed to shareholders of $15 million ($10 million post-tax).
The impact of changes in actuarial methods and assumptions in the U.S. resulted in an increase in pre-tax fulfilment cash flows
of $895 million. The increase was primarily driven by the net impact of updates to our reinsurance contract fulfilment cash flows
and risk adjustment methodology related to non-financial risks, a detailed review of the lapse assumptions in our life insurance
business, and refinements to our crediting rate projections on certain universal life products, partially offset by a review of the
discount rates used in the valuation of non-participating business. These changes resulted in a decrease in pre-tax net income
attributed to shareholders of $256 million ($202 million post-tax), a decrease in CSM of $1,228 million, and an increase in pre-tax
other comprehensive income attributed to shareholders of $589 million ($466 million post-tax).
The impact of changes in actuarial methods and assumptions in Asia resulted in a decrease in pre-tax fulfilment cash flows of
$818 million. The decrease was primarily driven by the impact of morbidity updates to certain health insurance products in Hong
Kong to reflect emerging experience, updates from our detailed review of global expenses, including investment expenses, as
well as the impact of annual updates to our valuation models for participating products, partially offset by a review of lapse
assumptions for the International High Net Worth business. These changes resulted in a decrease in pre-tax net income
attributed to shareholders of $4 million ($5 million post-tax), an increase in CSM of $591 million, and an increase in pre-tax other
comprehensive income attributed to shareholders of $213 million ($190 million post-tax).
Footnote Number 1 Our annual update of actuarial methods and assumptions also impacts net income and other comprehensive income attributed to participating policyholders. The
total company impact of these metrics can be found in the above table.
92 | 2024 Annual Report | Management’s Discussion and Analysis
The impact of changes in actuarial methods and assumptions in Corporate and Other (which includes our property and casualty
reinsurance businesses, run-off insurance operations including variable annuities and health, and consolidation adjustments
including intercompany eliminations) resulted in an increase in pre-tax fulfilment cash flows of $15 million. These changes
resulted in an increase in pre-tax net income attributed to shareholders of $7 million ($6 million post-tax), a decrease in CSM of
$6 million, and a decrease in pre-tax other comprehensive income attributed to shareholders of $16 million ($14 million post-tax).
2023 Review of Actuarial Methods and Assumptions
On a full year basis, the 2023 review of actuarial methods and assumptions resulted in a decrease in pre-tax fulfilment cash
flows of $3,197 million. These changes resulted in an increase in pre-tax net income attributed to shareholders of $171 million
($105 million post-tax), an increase in pre-tax net income attributed to participating policyholders of $173 million ($165 million
post-tax), an increase in CSM of $2,754 million, and an increase in pre-tax other comprehensive income of $99 million
($73 million post-tax).
In 3Q23, the completion of the 2023 annual review of actuarial methods and assumptions resulted in a decrease in pre-tax
fulfilment cash flows of $347 million, excluding the portion related to non-controlling interests. These changes resulted in an
increase in pre-tax net income attributed to shareholders of $27 million (a decrease of $14 million post-tax), an increase in
pre-tax net income attributed to participating policyholders of $58 million ($74 million post-tax), an increase in CSM of
$116 million, and an increase in pre-tax other comprehensive income of $146 million ($110 million post-tax).
In 4Q23, we also updated our actuarial methods and assumptions which decreased the overall level of the risk adjustment for
non-financial risk. This change moves the risk adjustment to approximately the middle of our existing 90 – 95% confidence level
range. The risk adjustment would have exceeded the 95% confidence level in 4Q23 without making the change. This change led
to a decrease in pre-tax fulfilment cash flows of $2,850 million, excluding the portion related to non-controlling interests, an
increase in pre-tax net income attributed to shareholders of $144 million ($119 million post-tax), an increase in pre-tax net
income attributed to participating policyholders of $115 million ($91 million post-tax), an increase in CSM of $2,638 million, and a
decrease in pre-tax other comprehensive income of $47 million ($37 million post-tax).
Since the beginning of 2020, some lines of business have seen impacts to mortality and policyholder behaviour driven by the
COVID-19 pandemic. Given the long-term nature of our assumptions, our 2023 experience studies have excluded experience
that was materially impacted by COVID-19 as this is not seen to be indicative of the levels of actual future claims or lapses.
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flowsRefer to footnote number (1)
($ millions)
For the three and nine
months ended
September 30, 2023
For the three months
ended December 31,
2023
For the year ended
December 31, 2023
Canada variable annuity product review
$ (133)
Do
llar Zero
$
(133)
Mortality and morbidity updates
265
Zero
265
Lapse and policyholder behaviour updates
98
Zero
98
Methodology and other updates
(577)
Zero
(577)
Risk adjustment review
Zero
(2,850)
(2,850)
Impact of changes in actuarial methods and assumptions, pre-tax
$ (347)
$ (2,850)
$ (3,197)
Footnote Number (1)Excludes the portion related to non-controlling interests of $103 million for the three and nine months ended September 30, 2023, and $97 million for the three
months ended December 31, 2023, respectively.
Impact of changes in actuarial methods and assumptions on pre-tax net income attributed to shareholders, pre-tax net
income attributed to participating policyholders, OCI and CSMRefer to footnote number (1)
($ millions)
For the three and nine
months ended
September 30, 2023
For the three months
ended December 31,
2023
For the year ended
December 31, 2023
Portion recognized in net income (loss) attributed to:
Participating policyholders
$
58
$
115
$
173
Shareholders
27
144
171
85
259
344
Portion recognized in OCI attributed to:
Participating policyholders
Zero
(21)
(21)
Shareholders
146
(26)
120
146
(47)
99
Portion recognized in CSM
116
2,638
2,754
Impact of changes in actuarial methods and assumptions, pre-tax
$
347
$
2,850
$
3,197
Footnote Number (1)Excludes the portion related to non-controlling interests, of which $72 million is related to CSM for the three and nine months ended September 30, 2023, and
$87 million is related to CSM for the three months ended December 31, 2023.
93
Canada variable annuity product review
The review of our variable annuity products in Canada resulted in a decrease in pre-tax fulfilment cash flows of $133 million.
The decrease was driven by a reduction in investment management fees, partially offset by updates to product assumptions,
including surrenders, incidence, and utilization, to reflect emerging experience.
Mortality and morbidity updates
Mortality and morbidity updates resulted in an increase in pre-tax fulfilment cash flows of $265 million.
The increase was driven by a strengthening of incidence rates for certain products in Vietnam to align with emerging experience
and updates to mortality assumptions in our U.S. life insurance business to reflect industry trends, as well as emerging
experience. This was partially offset by updates to morbidity assumptions for certain products in Japan to reflect actual
experience.
Lapse and policyholder behaviour updates
Updates to lapses and policyholder behaviour assumptions resulted in an increase in pre-tax fulfilment cash flows of $98 million.
The increase was primarily driven by a detailed review of lapse assumptions for our universal life level cost of insurance products
in Canada, which resulted in a reduction to the lapse rates to align with emerging trends.
Methodology and other updates
Methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $3,427 million.
In 3Q23, methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $577 million. The decrease
was driven by the impact of cost-of-guarantees for participating policyholders across all segments from annual updates related to
parameters, dividend recalibration, and market movements during the year, as well as modelling refinements for certain products
in Asia. This was partially offset by a modelling methodology update to project future premiums on our U.S. life insurance
business.
In 4Q23, methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $2,850 million. The decrease
was driven by a decrease in the overall level of the risk adjustment for non-financial risk. This change moves the risk adjustment
to approximately the middle of our existing 90 – 95% confidence level range.
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flows, net income attributed to
shareholders, CSM and OCI by segment
For the three and nine months ended September 30, 2023
The impact of changes in actuarial methods and assumptions in Canada resulted in a decrease in pre-tax fulfilment cash flows of
$159 million. The decrease was driven by updates to our variable annuity product assumptions, as well as by updates to our
valuation models for participating products, driven by the annual dividend recalibration, partially offset by a reduction in lapse
rates on our universal life level cost of insurance products to reflect emerging trends. These changes resulted in an increase in
pre-tax net income attributed to shareholders of $52 million ($37 million post-tax), an increase in CSM of $142 million, and an
increase in pre-tax other comprehensive income attributed to shareholders of $2 million ($1 million post-tax).
The impact of changes in actuarial methods and assumptions in the U.S. resulted in an increase in pre-tax fulfilment cash flows
of $270 million. The increase was related to our life insurance business and primarily driven by a modelling methodology update
to project future premiums, as well as updates to mortality assumptions. These changes resulted in an increase in pre-tax net
income attributed to shareholders of $134 million ($106 million post-tax), a decrease in CSM of $600 million, and an increase in
pre-tax other comprehensive income attributed to shareholders of $196 million ($155 million post-tax).
The impact of changes in actuarial methods and assumptions in Asia resulted in a decrease in pre-tax fulfilment cash flows of
$457 million. The decrease largely relates to participating products, primarily driven by model refinements, dividend recalibration
updates, as well as annual updates to reflect market movements during the year. This, and the updates to morbidity assumptions
on certain products in Japan, were partially offset by updates to incidence rates on certain products in Vietnam. These changes
resulted in a decrease in pre-tax net income attributed to shareholders of $159 million ($157 million post-tax), an increase in
CSM of $574 million, and a decrease in pre-tax other comprehensive income attributed to shareholders of $53 million
($47 million post-tax).
The impact of changes in actuarial methods and assumptions in Corporate and Other (which includes our property and casualty
reinsurance businesses, run-off insurance operations including variable annuities and health, and consolidation adjustments
including intercompany eliminations) resulted in a decrease in pre-tax fulfilment cash flows of $1 million. These changes resulted
in no impacts to pre-tax net income attributed to shareholders or CSM, and an increase in pre-tax other comprehensive income
attributed to shareholders of $1 million ($1 million post-tax).
94 | 2024 Annual Report | Management’s Discussion and Analysis
For the three months ended December 31, 2023
The reduction in the risk adjustment level resulted in the following impacts by segment:
The impact of changes in actuarial methods and assumptions in Canada resulted in a decrease in pre-tax fulfilment cash flows of
$246 million. These changes resulted in an increase in pre-tax net income attributed to shareholders of $4 million ($3 million
post-tax), an increase in pre-tax net income attributed to policyholder of $40 million ($29 million post-tax), an increase in CSM of
$213 million, and a decrease in pre-tax other comprehensive income of $11 million ($8 million post-tax).
The impact of changes in actuarial methods and assumptions in the U.S. resulted in a decrease in pre-tax fulfilment cash flows of
$91 million. These changes resulted in an increase in pre-tax net income attributed to shareholders of $33 million ($26 million
post-tax), an increase in CSM of $78 million, and a decrease in pre-tax other comprehensive income of $20 million ($15 million
post-tax).
The impact of changes in actuarial methods and assumptions in Asia resulted in a decrease in pre-tax fulfilment cash flows of
$2,513 million. These changes resulted in an increase in pre-tax net income attributed to shareholders of $107 million
($90 million post-tax), an increase in pre-tax net income attributed to policyholders of $75 million ($62 million post-tax), an
increase in CSM of $2,348 million, and a decrease in pre-tax other comprehensive income of $17 million ($14 million post-tax).
Critical Accounting Policies
Consolidation
The Company is required to consolidate the financial position and results of entities it controls. Control exists when the
Company:
• Has the power to govern the financial and operating policies of the entity;
• Is exposed to a significant portion of the entity’s variable returns; and
• Is able to use its power to influence variable returns from the entity.
The Company uses the same principles to assess control over any entity it is involved with. In evaluating control, potential factors
assessed include the effects of:
• Substantive voting rights that are potentially or currently exercisable;
• Contractual management relationships with the entity;
• Rights and obligations resulting from policyholders to manage investments on their behalf;
• The extent of other parties’ involvement in the entity, if any, the possibility for de facto control being present; and
• The effect of any legal or contractual restraints on the Company from using its power to affect its variable returns from the
entity.
An assessment of control is based on arrangements in place and the assessed risk exposures at inception of the relationship.
Initial evaluations are reconsidered at a later date if:
• The contractual arrangements of the entity are amended such that the Company’s involvement with the entity changes;
• The Company acquires or loses power over the financial and operating policies of the entity;
• The Company acquires additional interests in the entity or its interests in an entity are diluted; or
• The Company’s ability to use its power to affect its variable returns from the entity changes.
Subsidiaries are consolidated from the date on which control is obtained by the Company and cease to be consolidated from the
date that control ceases. A change in control may lead to gains or losses on derecognition of a subsidiary when losing control, or
on derecognition of previous interests in a subsidiary when gaining control.
Fair Value of Invested Assets
A large portion of the Company’s invested assets are recorded at fair value. Refer to note 1 of the 2024 Annual Consolidated
Financial Statements for a description of the methods used in determining fair values. When quoted prices in active markets are
not available for a particular investment, significant judgment is required to determine an estimated fair value based on market
standard valuation methodologies including discounted cash flow methodologies, matrix pricing, consensus pricing services, or
other similar techniques. The inputs to these standard valuation methodologies include: current interest rates or yields for similar
instruments, credit rating of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund
requirements, tenor (or expected tenor) of the instrument, management’s assumptions regarding liquidity, volatilities and
estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management’s
judgments about the key market factors impacting these financial instruments. Financial markets are susceptible to severe
events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company’s ability to
sell assets, or the price ultimately realized for these assets, depends upon the demand and liquidity in the market which affect
the use of judgment in determining the estimated fair value of certain assets.
95
Evaluation of Invested Asset Impairment
FVOCI debt investments are carried at fair market value, with changes in fair value recorded in OCI with the exception of
unrealized gains and losses on foreign currency translation of foreign currency denominated FVOCI debt investments which are
included in net income.
Debt investments classified as FVOCI or amortized cost are reviewed on a regular basis for expected credit loss (“ECL”)
impairment allowances. ECL allowances are measured as the difference between amounts due according to the contractual
terms of the debt security and the discounted value of cash flows that the Company expects to receive. Changes in ECL
impairment allowances are recorded in the provision for credit losses included in net income.
Significant judgment is required in assessing ECL impairment allowances and fair values and recoverable values. Key matters
considered include macroeconomic factors, industry specific developments, and specific issues with respect to single issuers
and borrowers.
Changes in circumstances may cause future assessments of invested asset ECL impairment allowances to be materially
different from current assessments, which could require additional provisions for impairment. Additional information on the
process and methodology for determining the allowance for expected credit losses is included in the discussion of credit risk in
notes 1 and 8 to the 2024 Annual Consolidated Financial Statements.
Derivative Financial Instruments
The Company uses derivative financial instruments (“derivatives”) including swaps, forwards and futures agreements, and
options to help manage current and anticipated exposures to changes in interest rates, foreign exchange rates, commodity
prices and equity market prices, and to replicate different types of investments. Refer to note 4 to the 2024 Annual Consolidated
Financial Statements for a description of the methods used to determine the fair value of derivatives.
The accounting for derivatives is complex and interpretations of the primary accounting guidance continue to evolve in practice.
Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate
accounting treatment under such accounting guidance. Differences in judgment as to the availability and application of hedge
accounting designations and the appropriate accounting treatment may result in a differing impact on the Consolidated Financial
Statements of the Company from previous periods. Assessments of hedge effectiveness and measurements of ineffectiveness of
hedging relationships are also subject to interpretations and estimations.
Hedge Accounting
The Company applies hedge accounting principles under IFRS 9 to certain economic hedge transactions that qualify for hedge
accounting. The Company evaluates the economic relationship between the hedged item and the hedging instrument, assesses
the effect of credit risk on the economic relationship, and determines the hedge ratio between the hedged item and hedging
instrument to identify qualifying hedge accounting relationships.
The Company designates fair value hedges to hedge interest rate exposure on fixed rate assets and liabilities. In certain
instances, the Company hedges fair value exposure due to both foreign exchange and interest rate risk using cross currency
swaps.
The Company designates interest rate derivatives under cash flow hedges to hedge interest rate exposure in variable rate
financial instruments. In addition, the Company may use non-functional currency denominated long-term debt, forward currency
contracts, and cross currency swaps to mitigate the foreign exchange translation risk of net investments in foreign operations.
The Company applies the cost of hedging option for certain hedge accounting relationships, as such changes in forward points
and foreign currency basis spreads are excluded from the hedge accounting relationships and are accounted for as a separate
component in equity.
Employee Future Benefits
The Company maintains defined contribution and defined benefit pension plans, and other post-employment plans for employees
and agents, including registered (tax qualified) pension plans that are typically funded, as well as supplemental non-registered
(non-qualified) pension plans for executives, retiree welfare plans and disability welfare plans that are typically not funded. The
largest defined benefit pension and retiree welfare plans in the U.S. and Canada are the material plans that are discussed herein
and in note 15 to the 2024 Annual Consolidated Financial Statements.
Due to the long-term nature of defined benefit pension and retiree welfare plans, the calculation of the defined benefit obligation
and net benefit cost depends on various assumptions such as discount rates, salary increase rates, cash balance interest
crediting rates, health care cost trend rates and rates of mortality. These assumptions are determined by management and are
reviewed annually. The key assumptions, as well as the sensitivity of the defined benefit obligation to changes in these
assumptions, are presented in note 15 to the 2024 Annual Consolidated Financial Statements.
96 | 2024 Annual Report | Management’s Discussion and Analysis
Changes in assumptions and differences between actual and expected experience give rise to actuarial gains and losses that
affect the amount of the defined benefit obligation and OCI. For 2024, the amount recorded in OCI was a gain of $67 million
(2023 – loss of $5 million) for the defined benefit pension plans and a gain of $16 million (2023 – gain of $10 million) for the
retiree welfare plans.
Contributions to the registered (tax qualified) defined benefit pension plans are made in accordance with the applicable U.S. and
Canadian regulations. During 2024, the Company contributed $2 million (2023 – $3 million) to these plans. As at December 31,
2024, the difference between the fair value of assets and the defined benefit obligation for these plans was a surplus of
$483 million (2023 – surplus of $422 million). For 2025, the contributions to the plans are expected to be approximately
$2 million.
The Company’s supplemental pension plans for executives are not funded; benefits under these plans are paid as they become
due. During 2024, the Company paid benefits of $55 million (2023 – $56 million) under these plans. As at December 31, 2024,
the defined benefit obligation for these plans, which is reflected as a liability in the balance sheet, amounted to $533 million
(2023 – $546 million).
The Company’s retiree welfare plans are partially funded, although there are no regulations or laws governing or requiring the
funding of these plans. As at December 31, 2024, the difference between the fair value of plan assets and the defined benefit
obligation for these plans was a surplus of $125 million (2023 – surplus of $76 million).
Income Taxes
The Company is subject to income tax laws in various jurisdictions. Tax laws are complex and potentially subject to different
interpretations by the taxpayer and the relevant tax authority. The provision for income taxes represents management’s
interpretation of the relevant tax laws and its estimate of current and future income tax implications of the transactions and
events during the period. A deferred tax asset or liability results from temporary differences between carrying values of assets
and liabilities and their respective tax basis. Deferred tax assets and liabilities are recorded based on expected future tax rates
and management’s assumptions regarding the expected timing of the reversal of such temporary differences. The realization of
deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under
the tax law in the applicable tax jurisdiction. A deferred tax asset is recognized to the extent that future realization of the tax
benefit is probable. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the tax benefit will be realized. At December 31, 2024, we had $5,884 million of deferred tax assets (December 31,
2023 – $6,739 million). Factors in management’s determination include, among others, the following:
• Future taxable income exclusive of reversing temporary differences and carryforwards;
• Future reversals of existing taxable temporary differences;
• Taxable income in prior carryback years; and
• Tax planning strategies.
The Company may be required to change its provision for income taxes if the ultimate deductibility of certain items is
successfully challenged by taxing authorities or if estimates used in determining the amount of deferred tax assets to recognize
change significantly, or when receipt of new information indicates the need for adjustment in the recognition of deferred tax
assets. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations,
could have an impact on the provision for income tax, deferred tax balances, actuarial liabilities (see Critical Actuarial and
Accounting Policies – Expenses and Taxes above) and the effective tax rate. Any such changes could significantly affect the
amounts reported in the Consolidated Financial Statements in the year these changes occur.
Goodwill and Intangible Assets
At December 31, 2024, under IFRS we had $6,275 million of goodwill (December 31, 2023 – $5,919 million) and $4,777 million
of intangible assets ($2,124 million of which are intangible assets with indefinite lives) (December 31, 2023 – $4,391 million and
$1,825 million, respectively). Goodwill and intangible assets with indefinite lives are tested for impairment at the cash generating
unit level (“CGU”) or group of CGUs level. A CGU comprises the smallest group of assets that are capable of generating largely
independent cash flows and is either a business segment or a level below. The tests performed in 2024 demonstrated that there
was $nil impairment of goodwill or intangible assets with indefinite lives (2023 – $nil). Changes in discount rates and cash flow
projections used in the determination of recoverable values or reductions in market-based earnings multiples may result in
impairment charges in the future, which could be material.
Impairment charges could occur in the future as a result of changes in economic conditions. The goodwill testing for 2025 will be
updated based on the conditions that exist in 2025 and may result in impairment charges, which could be material.
97
12. Controls and Procedures
Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by us is recorded, processed, summarized, and reported accurately and completely and within the time periods specified under
Canadian and U.S. securities laws. Our process includes controls and procedures that are designed to ensure that information is
accumulated and communicated to management, including the CEO and CFO, to allow timely decisions regarding required
disclosure.
As of December 31, 2024, management evaluated the effectiveness of its disclosure controls and procedures as defined under
the rules adopted by the U.S. Securities and Exchange Commission and the Canadian securities regulatory authorities. This
evaluation was performed under the supervision of the Audit Committee, the CEO and CFO. Based on that evaluation, the CEO
and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2024.
MFC’s Audit Committee has reviewed this MD&A and the 2024 Consolidated Financial Statements and MFC’s Board approved
these reports prior to their release.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s
internal control system was designed to provide reasonable assurance to management and the Board regarding the preparation
and fair presentation of published financial statements in accordance with generally accepted accounting principles. All internal
control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management maintains a comprehensive system of controls intended to ensure that transactions are executed in accordance
with management’s authorization, assets are safeguarded, and financial records are reliable. Management also takes steps to
ensure that information and communication flows are effective and to monitor performance, including performance of internal
control procedures.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024
based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework in
Internal Control – Integrated Framework. Based on this assessment, management believes that, as of December 31, 2024, the
Company’s internal control over financial reporting is effective.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 has been audited by
Ernst & Young LLP, the Company’s independent registered public accounting firm that also audited the Consolidated Financial
Statements of the Company for the year ended December 31, 2024. Their report expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2024.
Changes in Internal Control over Financial Reporting
No changes were made in our internal control over financial reporting during the year ended December 31, 2024 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
98 | 2024 Annual Report | Management’s Discussion and Analysis
13. Non-GAAP and Other Financial Measures
The Company prepares its Consolidated Financial Statements in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board. We use a number of non-GAAP and other financial
measures to evaluate overall performance and to assess each of our businesses. This section includes information required by
National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure in respect of “specified financial measures”
(as defined therein).
Non-GAAP financial measures include core earnings (loss); pre-tax core earnings; core earnings available to common
shareholders; core earnings available to common shareholders excluding the impact of Global Minimum Taxes (“GMT”); core
earnings before interest, taxes, depreciation and amortization (“core EBITDA”); total expenses; core expenses; core Drivers of
Earnings (“DOE”) line items for core net insurance service result, core net investment result, other core earnings, and core
income tax (expenses) recoveries; post-tax contractual service margin (“post-tax CSM”); post-tax contractual service margin net
of NCI (“post-tax CSM net of NCI”); Manulife Bank net lending assets; Manulife Bank average net lending assets; assets under
management (“AUM”); assets under management and administration (“AUMA”); Global WAM managed AUMA; core revenue;
adjusted book value; and net annualized fee income. In addition, non-GAAP financial measures include the following stated on a
constant exchange rate (“CER”) basis: any of the foregoing non-GAAP financial measures; net income attributed to
shareholders; common shareholders’ net income; and new business CSM.
Non-GAAP ratios include core return on shareholders’ equity (“core ROE”); diluted core earnings per common share (“core
EPS”); diluted core EPS excluding the impact of GMT (“core EPS excluding the impact of GMT”); core earnings contributions
from highest potential businesses; core earnings contribution from Asia region; core earnings contribution from LTC and VA
businesses; financial leverage ratio; adjusted book value per common share; common share core dividend payout ratio
(“dividend payout ratio”); expense efficiency ratio; core EBITDA margin; effective tax rate on core earnings; operating segment
core earnings contribution; segment share of the total Company AUMA; and net annualized fee income yield on average AUMA.
In addition, non-GAAP ratios include the percentage growth/decline on a CER basis in any of the above non-GAAP financial
measures and non-GAAP ratios; net income attributed to shareholders; common shareholders’ net income; pre-tax net income
attributed to shareholders; general expenses; CSM; CSM net of NCI; impact of new insurance business net of NCI; new
business CSM; basic earnings per common share (“basic EPS”); and diluted earnings per common share (“diluted EPS”).
Other specified financial measures include assets under administration (“AUA”); consolidated capital; new business value
(“NBV”); new business value margin (“NBV margin”); sales; annualized premium equivalent (“APE”) sales; gross flows; net flows;
average assets under management and administration (“average AUMA”); Global WAM average managed AUMA; average
assets under administration; remittances; any of the foregoing specified financial measures stated on a CER basis; and
percentage growth/decline in any of the foregoing specified financial measures on a CER basis. In addition, we provide an
explanation below of the components of core DOE line items other than the change in expected credit loss, the items that
comprise certain items excluded from core earnings (on a pre-tax and post-tax basis), and the components of CSM movement
other than the new business CSM.
Our reporting currency for the Company is Canadian dollars and U.S. dollars is the functional currency for Asia and U.S.
segment results. Financial measures presented in U.S. dollars are calculated in the same manner as the Canadian dollar
measures. These amounts are translated to U.S. dollars using the period end rate of exchange for financial measures such as
AUMA and the CSM balance and the average rates of exchange for the respective quarter for periodic financial measures such
as our Consolidated Statements of Income, core earnings and items excluded from core earnings, and line items in our CSM
movement schedule and DOE. Year-to-date or full year periodic financial measures presented in U.S. dollars are calculated as
the sum of the quarterly results translated to U.S. dollars. See section 1 “Impact of Foreign Currency Exchange Rates” of the
MD&A above for the Canadian to U.S. dollar quarterly and full year rates of exchange.
Non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under GAAP and, therefore, might
not be comparable to similar financial measures disclosed by other issuers. Therefore, they should not be considered in isolation
or as a substitute for any other financial information prepared in accordance with GAAP.
Core earnings (loss) is a financial measure which we believe aids investors in better understanding the long-term earnings
capacity and valuation of the business. Core earnings allows investors to focus on the Company’s operating performance by
excluding the impact of market related gains or losses, changes in actuarial methods and assumptions that flow directly through
income as well as a number of other items, outlined below, that we believe are material, but do not reflect the underlying
earnings capacity of the business. For example, due to the long-term nature of our business, the mark-to-market movements in
equity markets, interest rates including impacts on hedge accounting ineffectiveness, foreign currency exchange rates and
commodity prices as well as the change in the fair value of ALDA from period-to-period can, and frequently do, have a
substantial impact on the reported amounts of our assets, insurance contract liabilities and net income attributed to shareholders.
These reported amounts may not be realized if markets move in the opposite direction in a subsequent period. This makes it
very difficult for investors to evaluate how our businesses are performing from period-to-period and to compare our performance
with other issuers.
99
We believe that core earnings better reflect the underlying earnings capacity and valuation of our business. We use core
earnings and core EPS as key metrics in our short-term incentive plans at the total Company and operating segment level. We
also base our mid-and long-term strategic priorities on core earnings.
Core earnings includes the expected return on our invested assets and any other gains (charges) from market experience are
included in net income but excluded from core earnings. The expected return for fixed income assets is based on the related
book yields. For ALDA and public equities, the expected return reflects our long-term view of asset class performance. These
returns for ALDA and public equities vary by asset class and range from 3.25% to 11.5%, leading to an average return of
between 9.0% to 9.5% on these assets as of December 31, 2024.
While core earnings is relevant to how we manage our business and offers a consistent methodology, it is not insulated from
macroeconomic factors which can have a significant impact. See below for a reconciliation of core earnings to net income
attributed to shareholders and income before income taxes. Net income attributed to shareholders excludes net income
attributed to participating policyholders and non-controlling interests.
Any future changes to the core earnings definition referred to below, will be disclosed.
Items included in core earnings:
1.
Expected insurance service result on in-force policies, including expected release of the risk adjustment, CSM recognized
for service provided, and expected earnings from short-term products measured under the premium allocation approach
(“PAA”).
2.
Impacts from the initial recognition of new contracts (onerous contracts, including the impact of the associated reinsurance
contracts).
3.
Insurance experience gains or losses that flow directly through net income.
4.
Operating and investment expenses compared with expense assumptions used in the measurement of insurance and
investment contract liabilities.
5.
Expected investment earnings, which is the difference between expected return on our invested assets and the associated
finance income or expense from the insurance contract liabilities.
6.
Net provision for ECL on FVOCI and amortized cost debt instruments.
7.
Expected asset returns on surplus investments.
8.
All earnings for the Global WAM segment, except for applicable net income items excluded from core earnings as noted
below.
9.
All earnings for the Manulife Bank business, except for applicable net income items excluded from core earnings as noted
below.
10.
Routine or non-material legal settlements.
11.
All other items not specifically excluded.
12.
Tax on the above items.
13.
All tax-related items except the impact of enacted or substantively enacted income tax rate changes and taxes on items
excluded from core earnings.
Net income items excluded from core earnings:
1.
Market experience gains (losses) including the items listed below:
•
Gains (charges) on general fund public equity and ALDA investments from returns being different than expected.
•
Gains (charges) on derivatives not in hedging relationships, or gains (charges) resulting from hedge accounting
ineffectiveness.
•
Realized gains (charges) from the sale of FVOCI debt instruments.
•
Market related gains (charges) on onerous contracts measured using the variable fee approach (e.g., variable annuities,
unit linked, participating insurance) net of the performance on any related hedging instruments.
•
Gains (charges) related to certain changes in foreign exchange rates.
2.
Changes in actuarial methods and assumptions used in the measurement of insurance contract liabilities that flow directly
through income. The Company reviews actuarial methods and assumptions annually, and this process is designed to
reduce the Company’s exposure to uncertainty by ensuring assumptions remain appropriate. This is accomplished by
monitoring experience and selecting assumptions which represent a current view of expected future experience and
ensuring that the risk adjustment is appropriate for the risks assumed.
3.
The impact on the measurement of insurance and investment contract assets and liabilities and reinsurance contract held
assets and liabilities from changes in product features and new or changes to in-force reinsurance contracts, if material.
4.
The fair value changes in long-term investment plan (“LTIP”) obligations for Global WAM investment management.
5.
Goodwill impairment charges.
6.
Gains or losses on acquisition and disposition of a business.
7.
Material one-time only adjustments, including highly unusual / extraordinary and material legal settlements and
restructuring charges, or other items that are material and exceptional in nature.
100 | 2024 Annual Report | Management’s Discussion and Analysis
8.
Tax on the above items.
9.
Net income (loss) attributed to participating shareholders and non-controlling interests.
10.
Impact of enacted or substantively enacted income tax rate changes.
Reconciliation of core earnings to net income attributed to shareholders – 2024
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
2024
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Income (loss) before income taxes
$ 3,197
$ 1,679
$
132
$ 1,747
$
335
$ 7,090
Income tax (expenses) recoveries
Core earnings
(267)
(399)
(408)
(171)
(21)
(1,266)
Items excluded from core earnings
(193)
46
411
23
(233)
54
Income tax (expenses) recoveries
(460)
(353)
3
(148)
(254)
(1,212)
Net income (post-tax)
2,737
1,326
135
1,599
81
5,878
Less: Net income (post-tax) attributed to
Non-controlling interests
241
Zero
Zero
2
4
247
Participating policyholders
141
105
Zero
Zero
Zero
246
Net income (loss) attributed to shareholders (post-tax)
2,355
1,221
135
1,597
77
5,385
Less: Items excluded from core earnings (post-tax)
Market experience gains (losses)
(178)
(384)
(1,327)
4
435
(1,450)
Changes in actuarial methods and assumptions that flow
directly through income
(5)
2
(202)
Zero
6
(199)
Restructuring charge
Zero
(6)
Zero
(66)
Zero
(72)
Reinsurance transactions, tax-related items and other
(51)
41
(26)
(77)
(7)
(120)
Core earnings (post-tax)
$ 2,589
$ 1,568
$ 1,690
$ 1,736
$ (357)
$ 7,226
Income tax on core earnings (see above)
267
399
408
171
21
1,266
Core earnings (pre-tax)
$ 2,856
$ 1,967
$ 2,098
$ 1,907
$ (336)
$ 8,492
Core earnings, CER basis and U.S. dollars – 2024
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
2024
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Core earnings (post-tax)
$ 2,589
$ 1,568
$ 1,690
$ 1,736
$ (357)
$ 7,226
CER adjustment(1)
51
Zero
36
27
4
118
Core earnings, CER basis (post-tax)
$ 2,640
$ 1,568
$ 1,726
$ 1,763
$ (353)
$
7,344
Income tax on core earnings, CER basis(2)
272
399
417
171
21
1,280
Core earnings, CER basis (pre-tax)
$ 2,912
$ 1,967
$ 2,143
$ 1,934
$ (332)
$ 8,624
Core earnings (U.S. dollars) – Asia and U.S. segments
Core earnings (post-tax)(3), US $
$ 1,890
$ 1,234
CER adjustment US $(1)
(1)
Zero
Core earnings, CER basis (post-tax), US $
$ 1,889
$ 1,234
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (3)Core earnings (post-tax) in Canadian $ are translated to US $ using the US $ Statement of Income exchange rate for the four respective quarters that make up
2024 core earnings.
101
Reconciliation of core earnings to net income attributed to shareholders – 2023
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
2023
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Income (loss) before income taxes
$ 2,244
$ 1,609
$
751
$ 1,497
$ 351
$ 6,452
Income tax (expenses) recoveries
Core earnings
(279)
(378)
(402)
(204)
99
(1,164)
Items excluded from core earnings
(161)
5
290
6
179
319
Income tax (expenses) recoveries
(440)
(373)
(112)
(198)
278
(845)
Net income (post-tax)
1,804
1,236
639
1,299
629
5,607
Less: Net income (post-tax) attributed to
Non-controlling interests
141
Zero
Zero
2
1
144
Participating policyholders
315
45
Zero
Zero
Zero
360
Net income (loss) attributed to shareholders (post-tax)
1,348
1,191
639
1,297
628
5,103
Less: Items excluded from core earnings (post-tax)
Market experience gains (losses)
(553)
(341)
(1,196)
10
290
(1,790)
Changes in actuarial methods and assumptions that flow
directly through income
(68)
41
132
Zero
Zero
105
Restructuring charge
Zero
Zero
Zero
(36)
Zero
(36)
Reinsurance transactions, tax-related items and other
(79)
4
(56)
2
269
140
Core earnings (post-tax)
$ 2,048
$ 1,487
$ 1,759
$ 1,321
$
69
$ 6,684
Income tax on core earnings (see above)
279
378
402
204
(99)
1,164
Core earnings (pre-tax)
$ 2,327
$ 1,865
$ 2,161
$ 1,525
$
(30)
$ 7,848
Core earnings, CER basis and U.S. dollars – 2023
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
2023
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Core earnings (post-tax)
$ 2,048
$ 1,487
$ 1,759
$ 1,321
$ 69
$ 6,684
CER adjustment(1)
26
Zero
65
32
9
132
Core earnings, CER basis (post-tax)
$ 2,074
$ 1,487
$ 1,824
$ 1,353
$ 78
$ 6,816
Income tax on core earnings, CER basis(2)
280
378
416
206
(99)
1,181
Core earnings, CER basis (pre-tax)
$ 2,354
$ 1,865
$ 2,240
$ 1,559
$ (21)
$ 7,997
Core earnings (U.S. dollars) – Asia and U.S. segments
Core earnings (post-tax)(3), US $
$
1,518
$ 1,304
CER adjustment US $(1)
(34)
Zero
Core earnings, CER basis (post-tax), US $
$
1,484
$
1,304
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (3)Core earnings (post-tax) in Canadian $ are translated to US $ using the US $ Statement of Income exchange rate for the four respective quarters that make up
2023 core earnings.
102 | 2024 Annual Report | Management’s Discussion and Analysis
Reconciliation of core earnings to net income attributed to shareholders – 4Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
4Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Income (loss) before income taxes
$ 781
$ 579
$ 112
$ 419
$ 222
$ 2,113
Income tax (expenses) recoveries
Core earnings
(71)
(97)
(98)
(61)
(18)
(345)
Items excluded from core earnings
(85)
(20)
89
26
(71)
(61)
Income tax (expenses) recoveries
(156)
(117)
(9)
(35)
(89)
(406)
Net income (post-tax)
625
462
103
384
133
1,707
Less: Net income (post-tax) attributed to
Non-controlling interests
18
Zero
Zero
Zero
4
22
Participating policyholders
24
23
Zero
Zero
Zero
47
Net income (loss) attributed to shareholders (post-tax)
583
439
103
384
129
1,638
Less: Items excluded from core earnings (post-tax)
Market experience gains (losses)
(83)
55
(309)
(23)
168
(192)
Changes in actuarial methods and assumptions that flow directly
through income
Zero
Zero
Zero
Zero
Zero
Zero
Restructuring charge
Zero
(6)
Zero
(46)
Zero
(52)
Reinsurance transactions, tax-related items and other
Zero
Zero
Zero
(28)
3
(25)
Core earnings (post-tax)
$ 666
$ 390
$ 412
$ 481
$
(42)
$ 1,907
Income tax on core earnings (see above)
71
97
98
61
18
345
Core earnings (pre-tax)
$ 737
$ 487
$ 510
$ 542
$
(24)
$ 2,252
Core earnings, CER basis and U.S. dollars – 4Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
4Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Core earnings (post-tax)
$ 666
$ 390
$ 412
$ 481
$
(42)
$ 1,907
CER adjustment(1)
Zero
Zero
Zero
Zero
Zero
Zero
Core earnings, CER basis (post-tax)
$ 666
$ 390
$ 412
$ 481
$
(42)
$ 1,907
Income tax on core earnings, CER basis(2)
71
97
98
61
18
345
Core earnings, CER basis (pre-tax)
$ 737
$ 487
$ 510
$ 542
$
(24)
$ 2,252
Core earnings (U.S. dollars) – Asia and U.S. segments
Core earnings (post-tax)(3), US $
$ 477
$ 294
CER adjustment US $(1)
Zero
-
Core earnings, CER basis (post-tax), US $
$ 477
$ 294
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (3)Core earnings (post-tax) in Canadian $ are translated to US $ using the US $ Statement of Income exchange rate for 4Q24.
103
Reconciliation of core earnings to net income attributed to shareholders – 3Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
3Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Income (loss) before income taxes
$ 1,059
$ 578
$
18
$ 519
$ 167
$ 2,341
Income tax (expenses) recoveries
Core earnings
(65)
(104)
(112)
(6)
(28)
(315)
Items excluded from core earnings
26
(10)
99
(14)
(60)
41
Income tax (expenses) recoveries
(39)
(114)
(13)
(20)
(88)
(274)
Net income (post-tax)
1,020
464
5
499
79
2,067
Less: Net income (post-tax) attributed to
Non-controlling interests
130
Zero
Zero
1
Zero
131
Participating policyholders
63
34
Zero
Zero
Zero
97
Net income (loss) attributed to shareholders (post-tax)
827
430
5
498
79
1,839
Less: Items excluded from core earnings (post-tax)
Market experience gains (losses)
213
16
(204)
28
133
186
Changes in actuarial methods and assumptions that flow directly
through income
(5)
2
(202)
Zero
6
(199)
Restructuring charge
Zero
Zero
Zero
(20)
Zero
(20)
Reinsurance transactions, tax-related items and other
Zero
Zero
Zero
(9)
53
44
Core earnings (post-tax)
$ 619
$ 412
$ 411
$ 499
$ (113)
$ 1,828
Income tax on core earnings (see above)
65
104
112
6
28
315
Core earnings (pre-tax)
$ 684
$ 516
$ 523
$ 505
$
(85)
$ 2,143
Core earnings, CER basis and U.S. dollars – 3Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
3Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Core earnings (post-tax)
$ 619
$ 412
$ 411
$ 499
$ (113)
$ 1,828
CER adjustment(1)
12
Zero
11
10
1
34
Core earnings, CER basis (post-tax)
$ 631
$ 412
$ 422
$ 509
$ (112)
$ 1,862
Income tax on core earnings, CER basis(2)
66
104
115
5
28
318
Core earnings, CER basis (pre-tax)
$ 697
$ 516
$ 537
$ 514
$
(84)
$ 2,180
Core earnings (U.S. dollars) – Asia and U.S. segments
Core earnings (post-tax)(3), US $
$ 453
$ 302
CER adjustment US $(1)
(2)
Zero
Core earnings, CER basis (post-tax), US $
$ 451
$ 302
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (3)Core earnings (post-tax) in Canadian $ are translated to US $ using the US $ Statement of Income exchange rate for 3Q24.
104 | 2024 Annual Report | Management’s Discussion and Analysis
Reconciliation of core earnings to net income attributed to shareholders – 2Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
2Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Income (loss) before income taxes
$ 763
$ 141
$ 156
$ 383
$
(59)
$ 1,384
Income tax (expenses) recoveries
Core earnings
(64)
(107)
(95)
(46)
(8)
(320)
Items excluded from core earnings
(51)
68
74
14
(37)
68
Income tax (expenses) recoveries
(115)
(39)
(21)
(32)
(45)
(252)
Net income (post-tax)
648
102
135
351
(104)
1,132
Less: Net income (post-tax) attributed to
Non-controlling interests
38
Zero
Zero
1
Zero
39
Participating policyholders
28
23
Zero
Zero
Zero
51
Net income (loss) attributed to shareholders (post-tax)
582
79
135
350
(104)
1,042
Less: Items excluded from core earnings (post-tax)
Market experience gains (losses)
(58)
(364)
(280)
(7)
44
(665)
Changes in actuarial methods and assumptions that flow directly
through income
Zero
Zero
Zero
Zero
Zero
Zero
Restructuring charge
Zero
Zero
Zero
Zero
Zero
Zero
Reinsurance transactions, tax-related items and other
(7)
41
Zero
(42)
(22)
(30)
Core earnings (post-tax)
$ 647
$ 402
$ 415
$ 399
$ (126)
$ 1,737
Income tax on core earnings (see above)
64
107
95
46
8
320
Core earnings (pre-tax)
$ 711
$ 509
$ 510
$ 445
$ (118)
$ 2,057
Core earnings, CER basis and U.S. dollars – 2Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
2Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Core earnings (post-tax)
$ 647
$ 402
$ 415
$ 399
$ (126)
$ 1,737
CER adjustment(1)
18
1
8
8
1
36
Core earnings, CER basis (post-tax)
$ 665
$ 403
$ 423
$ 407
$ (125)
$ 1,773
Income tax on core earnings, CER basis(2)
66
107
98
46
8
325
Core earnings, CER basis (pre-tax)
$ 731
$ 510
$ 521
$ 453
$ (117)
$ 2,098
Core earnings (U.S. dollars) – Asia and U.S. segments
Core earnings (post-tax)(3), US $
$ 472
$ 303
CER adjustment US $(1)
4
(1)
Core earnings, CER basis (post-tax), US $
$ 476
$ 302
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (3)Core earnings (post-tax) in Canadian $ are translated to US $ using the US $ Statement of Income exchange rate for 2Q24.
105
Reconciliation of core earnings to net income attributed to shareholders – 1Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
1Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Income (loss) before income taxes
$ 594
$ 381
$ (154)
$ 426
$
5
$ 1,252
Income tax (expenses) recoveries
Core earnings
(67)
(91)
(103)
(58)
33
(286)
Items excluded from core earnings
(83)
8
149
(3)
(65)
6
Income tax (expenses) recoveries
(150)
(83)
46
(61)
(32)
(280)
Net income (post-tax)
444
298
(108)
365
(27)
972
Less: Net income (post-tax) attributed to
Non-controlling interests
55
Zero
Zero
Zero
Zero
55
Participating policyholders
26
25
Zero
Zero
Zero
51
Net income (loss) attributed to shareholders (post-tax)
363
273
(108)
365
(27)
866
Less: Items excluded from core earnings (post-tax)
Market experience gains (losses)
(250)
(91)
(534)
6
90
(779)
Changes in actuarial methods and assumptions that flow directly
through income
Zero
Zero
Zero
Zero
Zero
Zero
Restructuring charge
Zero
Zero
Zero
Zero
Zero
Zero
Reinsurance transactions, tax-related items and other
(44)
Zero
(26)
2
(41)
(109)
Core earnings (post-tax)
$ 657
$ 364
$ 452
$ 357
$
(76)
$ 1,754
Income tax on core earnings (see above)
67
91
103
58
(33)
286
Core earnings (pre-tax)
$ 724
$ 455
$ 555
$ 415
$ (109)
$ 2,040
Core earnings, CER basis and U.S. dollars – 1Q24
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
1Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Core earnings (post-tax)
$ 657
$ 364
$ 452
$ 357
$
(76)
$ 1,754
CER adjustment(1)
21
Zero
17
9
1
48
Core earnings, CER basis (post-tax)
$ 678
$ 364
$ 469
$ 366
$
(75)
$ 1,802
Income tax on core earnings, CER basis(2)
69
91
106
59
(33)
292
Core earnings, CER basis (pre-tax)
$ 747
$ 455
$ 575
$ 425
$ (108)
$ 2,094
Core earnings (U.S. dollars) – Asia and U.S. segments
Core earnings (post-tax)(3), US $
$
488
$ 335
CER adjustment US $Refer to footnote number (3)
(3)
Zero
Core earnings, CER basis (post-tax), US $
$
485
$
335
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (3)Core earnings (post-tax) in Canadian $ are translated to US $ using the US $ Statement of Income exchange rate for 1Q24.
106 | 2024 Annual Report | Management’s Discussion and Analysis
Reconciliation of core earnings to net income attributed to shareholders – 4Q23
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
4Q23
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Income (loss) before income taxes
$ 847
$ 498
$ 244
$ 424
$ 110
$ 2,123
Income tax (expenses) recoveries
Core earnings
(76)
(87)
(113)
(55)
37
(294)
Items excluded from core earnings
(33)
(29)
67
(3)
(30)
(28)
Income tax (expenses) recoveries
(109)
(116)
(46)
(58)
7
(322)
Net income (post-tax)
738
382
198
366
117
1,801
Less: Net income (post-tax) attributed to
Non-controlling interests
37
Zero
Zero
1
1
39
Participating policyholders
86
17
Zero
Zero
Zero
103
Net income (loss) attributed to shareholders (post-tax)
615
365
198
365
116
1,659
Less: Items excluded from core earnings (post-tax)
Market experience gains (losses)
Zero
9
(279)
51
86
(133)
Changes in actuarial methods and assumptions that flow directly
through income
89
4
26
Zero
Zero
119
Restructuring charge
Zero
Zero
Zero
(36)
Zero
(36)
Reinsurance transactions, tax-related items and other
(38)
Zero
(23)
(3)
Zero
(64)
Core earnings (post-tax)
$ 564
$ 352
$ 474
$ 353
$
30
$ 1,773
Income tax on core earnings (see above)
76
87
113
55
(37)
294
Core earnings (pre-tax)
$ 640
$ 439
$ 587
$ 408
$
(7)
$ 2,067
Core earnings, CER basis and U.S. dollars – 4Q23
($ millions, post-tax and based on actual foreign exchange rates
in effect in the applicable reporting period, unless otherwise stated)
4Q23
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Core earnings (post-tax)
$ 564
$ 352
$ 474
$ 353
$
30
$ 1,773
CER adjustment(1)
11
Zero
13
7
3
34
Core earnings, CER basis (post-tax)
$ 575
$ 352
$ 487
$ 360
$
33
$ 1,807
Income tax on core earnings, CER basis(2)
78
87
116
56
(38)
299
Core earnings, CER basis (pre-tax)
$ 653
$ 439
$ 603
$ 416
$
(5)
$ 2,106
Core earnings (U.S. dollars) – Asia and U.S. segments
Core earnings (post-tax)(3), US $
$ 414
$ 349
CER adjustment US $Refer to footnote number (3)
(3)
(1)
Core earnings, CER basis (post-tax), US $
$ 411
$ 348
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (3)Core earnings (post-tax) in Canadian $ are translated to US $ using the US $ Statement of Income exchange rate for 4Q23.
107
Segment core earnings by business line or geographic source
($ millions, post-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
Asia
(US $ millions)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Hong Kong
$ 254
$ 254
$ 243
$ 241
$ 218
$
992
$
728
Japan
87
81
92
102
79
362
309
Asia Other(1)
147
127
145
151
119
570
494
International High Net Worth
114
72
Mainland China
41
49
Singapore
216
161
Vietnam
126
133
Other Emerging Markets(2)
73
79
Regional Office
(11)
(9)
(8)
(6)
(2)
(34)
(13)
Total Asia core earnings
$ 477
$ 453
$ 472
$ 488
$ 414
$ 1,890
$ 1,518
Footnote Number (1)Core earnings for Asia Other is reported by country annually, on a full year basis.
(2) Other Emerging Markets includes Indonesia, the Philippines, Malaysia, Thailand, Cambodia and Myanmar.
(US $ millions), CER basisRefer to footnote number (1)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Hong Kong
$ 254
$ 254
$ 243
$ 241
$ 217
$
992
$
727
Japan
87
79
94
100
76
360
286
Asia Other(2)
147
127
147
150
120
571
484
International High Net Worth
114
72
Mainland China
41
48
Singapore
216
163
Vietnam
126
127
Other Emerging MarketsRefer to footnote number (2)
74
74
Regional Office
(11)
(9)
(8)
(6)
(2)
(34)
(13)
Total Asia core earnings, CER basis
$ 477
$ 451
$ 476
$485
$ 411
$ 1,889
$ 1,484
Footnote Number (1)Core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Footnote Number (2)Core earnings for Asia Other are reported by country annually, on a full year basis.
(3) Other Emerging Markets includes Indonesia, the Philippines, Malaysia, Thailand, Cambodia and Myanmar.
Canada
(Canadian $ in millions)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Insurance
$ 295
$ 320
$ 307
$ 266
$ 258
$ 1,188
$ 1,101
Annuities
51
51
55
53
48
210
204
Manulife Bank
44
41
40
45
46
170
182
Total Canada core earnings
$ 390
$ 412
$ 402
$ 364
$ 352
$ 1,568
$ 1,487
U.S.
(US $ in millions)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
U.S. Insurance
$ 256
$ 268
$ 254
$ 286
$ 300
$ 1,064
$ 1,133
U.S. Annuities
38
34
49
49
49
170
171
Total U.S. core earnings
$ 294
$ 302
$ 303
$ 335
$ 349
$ 1,234
$ 1,304
108 | 2024 Annual Report | Management’s Discussion and Analysis
Global WAM by business line
Quarterly Results
Full Year Results
(Canadian $ in millions)
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Retirement
$ 281
$ 304
$ 226
$ 202
$ 203
$ 1,013
$
745
Retail
161
154
135
131
127
581
502
Institutional asset management
39
41
38
24
23
142
74
Total Global WAM core earnings
$ 481
$ 499
$ 399
$ 357
$ 353
$ 1,736
$ 1,321
(Canadian $ in millions), CER basis(1)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Retirement
$ 281
$ 311
$ 230
$ 208
$ 207
$ 1,030
$
766
Retail
161
156
138
133
128
588
510
Institutional asset management
39
42
39
25
25
145
77
Total Global WAM core earnings, CER basis
$ 481
$ 509
$ 407
$ 366
$ 360
$ 1,763
$ 1,353
Footnote Number (1)Core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
Global WAM by geographic source
(Canadian $ in millions)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Asia
$ 157
$ 157
$ 138
$ 108
$ 109
$
560
$
404
Canada
108
107
85
90
100
390
378
U.S.
216
235
176
159
144
786
539
Total Global WAM core earnings
$ 481
$ 499
$ 399
$ 357
$ 353
$ 1,736
$ 1,321
(Canadian $ in millions), CER basis(1)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Asia
$ 157
$ 161
$ 141
$ 112
$ 111
$
571
$
416
Canada
108
107
85
90
100
390
378
U.S.
216
241
181
164
149
802
559
Total Global WAM core earnings, CER basis
$ 481
$ 509
$ 407
$ 366
$ 360
$ 1,763
$ 1,353
Footnote Number (1)Core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
109
Core earnings available to common shareholders is a financial measure that is used in the calculation of core ROE and core
EPS. It is calculated as core earnings (post-tax) less preferred share dividends and other equity distributions.
($ millions, post-tax and based on actual foreign exchange rates in
effect in the applicable reporting period, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Core earnings
$ 1,907
$ 1,828
$ 1,737
$ 1,754
$ 1,773
$ 7,226
$ 6,684
Less: Preferred share dividends and other equity
distributionsRefer to footnote number (1)
101
56
99
55
99
311
303
Core earnings available to common shareholders
1,806
1,772
1,638
1,699
1,674
6,915
6,381
CER adjustment(2)
Zero
34
36
48
34
118
132
Core earnings available to common shareholders, CER
basis
$ 1,806
$ 1,806
$ 1,674
$ 1,747
$ 1,708
$ 7,033
$ 6,513
Footnote Number (1)Preferred share dividends and other equity distributions are recorded in the Corporate and Other segment. As a result, core earnings and core earnings available
to common shareholders are the same figure for Asia, Canada, U.S. and Global WAM segments. Core earnings for Corporate and Other segment is reduced by
preferred shares and other equity distributions to arrive at core earnings available to common shareholders. See above for the reconciliation of core earnings to net
income attributed to shareholders for each segment.
Footnote Number (2)The impact of updating foreign exchange rates to that which was used in 4Q24.
Core ROE measures profitability using core earnings available to common shareholders as a percentage of the capital deployed
to earn the core earnings. The Company calculates core ROE using average common shareholders’ equity quarterly, as the
average of common shareholders’ equity at the start and end of the quarter, and annually, as the average of the quarterly
average common shareholders’ equity for the year.
($ millions, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Core earnings available to common shareholders
$
1,806
$
1,772
$
1,638
$
1,699
$
1,674
$
6,915
$
6,381
Annualized core earnings available to common
shareholders (post-tax)
$
7,185
$
7,049
$
6,588
$
6,833
$
6,641
$
6,915
$
6,381
Average common shareholders’ equity (see
below)
$ 43,613
$ 42,609
$ 41,947
$ 40,984
$ 40,563
$ 42,288
$ 40,201
Core ROE (annualized) (%)
16.5%
16.6%
15.7%
16.7%
16.4%
16.4%
15.9%
Average common shareholders’ equity
Total shareholders’ and other equity
$ 50,972
$ 49,573
$ 48,965
$ 48,250
$ 47,039
$ 50,972
$ 47,039
Less: Preferred shares and other equity
6,660
6,660
6,660
6,660
6,660
6,660
6,660
Common shareholders’ equity
$ 44,312
$ 42,913
$ 42,305
$ 41,590
$ 40,379
$ 44,312
$ 40,379
Average common shareholders’ equity
$ 43,613
$ 42,609
$ 41,947
$ 40,984
$ 40,563
$ 42,288
$ 40,201
Core EPS is equal to core earnings available to common shareholders divided by diluted weighted average common shares
outstanding. Core EPS excluding the impact of GMT is equal to core earnings available to common shareholders excluding
the impact of GMT divided by diluted weighted average common shares outstanding.
110 | 2024 Annual Report | Management’s Discussion and Analysis
Core earnings available to common shareholders excluding the impact of GMT
Core earnings available to shareholders excluding the impact of GMT is calculated as core earnings available to common
shareholders less GMT included in core earnings. We believe this measure will aid investors to better understand the impact that
the adoption of the Global Minimum Tax Act had on our operating performance.
($ millions and post-tax)
Quarterly
Results
Full Year
Results
4Q24
2024
Core earnings available to common shareholders
$ 1,806
$ 6,915
Less: GMT included in core earnings
(57)
(164)
Core earnings available to common shareholders excluding the impact GMT
$ 1,863
$ 7,079
Core earnings related to strategic priorities
The Company measures its progress on certain strategic priorities using core earnings, including core earnings from highest
potential businesses, core earnings from Asia region and core earnings from LTC and VA businesses. The core earnings for
these businesses is calculated consistent with our definition of core earnings and expressed as a percentage of total core
earnings.
Highest potential businesses
For the years ended December 31,
($ millions and post-tax, unless otherwise stated)
2024
2023
Core earnings highest potential businessesRefer to footnote number (1)
$ 5,084
$
4,039
Core earnings – all other businesses
2,142
2,645
Core earnings
7,226
6,684
Items excluded from core earnings
(1,841)
(1,581)
Net income (loss) attributed to shareholders
$ 5,385
$
5,103
Highest potential businesses core earnings contribution
70%
60%
Footnote Number (1)Includes core earnings from Asia and Global WAM segments, Canada Group Benefits, and North American behavioural insurance products.
Asia region
For the years ended December 31,
($ millions and post-tax, unless otherwise stated)
2024
2023
Core earnings of Asia regionRefer to footnote number (1)
$ 3,149
$ 2,452
Core earnings – all other businesses
4,077
4,232
Core earnings
7,226
6,684
Items excluded from core earnings
(1,841)
(1,581)
Net income (loss) attributed to shareholders
$ 5,385
$ 5,103
Asia region core earnings contribution
44%
37%
Footnote Number (1)Includes core earnings from Asia segment and Global WAM’s business in Asia.
111
LTC and VA businesses
For the years ended December 31,
($ millions and post-tax, unless otherwise stated)
2024
2023
Core earnings of LTC and VA businessesRefer to footnote number (1)
$
744
$
821
Core earnings – all other businesses
6,482
5,863
Core earnings
7,226
6,684
Items excluded from core earnings
(1,841)
(1,581)
Net income (loss) attributed to shareholders
$ 5,385
$ 5,103
LTC and VA businesses core earnings contribution
10%
12%
Footnote Number (1)Includes core earnings from U.S. long-term care and Asia, Canada and U.S. variable annuities businesses.
The effective tax rate on core earnings is equal to income tax on core earnings divided by pre-tax core earnings.
The operating segment core earnings contribution measures the core earnings contribution from each operating segment,
expressed as a percentage. The operating segments are Asia, Canada, U.S. and Global WAM. For each operating segment, the
percentage is calculated as the core earnings from that segment divided by the sum of core earnings from all four of the
operating segments. As of December 31, 2024, Asia, Canada, U.S. and Global WAM operating core earnings contributions were
34%, 21%, 22% and 23%, respectively (December 31 2023 – 31%, 22%, 27% and 20%, respectively).
Drivers of Earnings (“DOE”) is used to identify the primary sources of gains or losses in each reporting period. It is one of the
key tools we use to understand and manage our business. The DOE line items are comprised of amounts that have been
included in our financial statements. The core DOE shows the sources of core earnings and the items excluded from core
earnings, reconciled to net income attributed to shareholders. The elements of the core earnings DOE are described below:
Net Insurance Service Result represents the core earnings associated with providing insurance service to policyholders within
the period including:
• Expected earnings on insurance contracts which includes the release of risk adjustment for expired non-financial risk, the
CSM recognized for service provided and expected earnings on short-term PAA insurance business.
• Impact of new insurance business relates to income at initial recognition from new insurance contracts. Losses would occur
if the group of new insurance contracts was onerous at initial recognition. If reinsurance contracts provide coverage for the
direct insurance contracts, then the loss is offset by a corresponding gain on reinsurance contracts held.
• Insurance experience gains (losses) arise from items such as claims, persistency, and expenses, where the actual
experience in the current period differs from the expected results assumed in the insurance and investment contract liabilities.
Generally, this line would be driven by claims and expenses, as persistency experience relates to future service and would be
offset by changes to the carrying amount of the contractual service margin unless the group is onerous, in which case the
impact of persistency experience would be included in core earnings.
• Other represents pre-tax net income on residual items in the insurance result section.
Net Investment Result represents the core earnings associated with investment results within the period. Note that results
associated with Global WAM and Manulife Bank are shown on separate DOE lines. However within the Consolidated Statements
of Income, the results associated with these businesses would impact the total investment result. This section includes:
• Expected investment earnings, which is the difference between expected asset returns and the associated finance income
or expense from insurance and investment contract liabilities, net of investment expenses.
• Change in expected credit loss, which is the gain or charge to net income attributed to shareholders for credit losses to
bring the allowance for credit losses to a level management considers adequate for expected credit-related losses on its
portfolio.
• Expected earnings on surplus reflects the expected investment return on surplus assets.
• Other represents pre-tax net income on residual items in the investment result section.
112 | 2024 Annual Report | Management’s Discussion and Analysis
Global WAM is the pre-tax net income from the Global Wealth and Asset Management segment, adjusted for applicable items
excluded from core earnings as noted in the core earnings (loss) section above.
Manulife Bank is the pre-tax net income from Manulife Bank, adjusted for applicable items excluded from core earnings as
noted in the core earnings (loss) section above.
Other represents net income associated with items outside of the net insurance service result, net investment result, Global
WAM and Manulife Bank. Other includes lines attributed to core earnings such as:
• Non-directly attributable expenses are expenses incurred by the Company which are not directly attributable to fulfilling
insurance contracts. Non-directly attributable expenses exclude non-directly attributable investment expenses as they are
included in the net investment result.
• Other represents pre-tax net income on residual items in the Other section. Most notably this would include the cost of
financing debt issued by Manulife.
Net income attributed to shareholders includes the following items excluded from core earnings:
• Market experience gains (losses) related to items excluded from core earnings that relate to changes in market variables.
• Changes in actuarial methods and assumptions that flow directly through income related to updates in the methods and
assumptions used to value insurance contract liabilities.
• Restructuring charges includes a charge taken to reorganize operations.
• Reinsurance transactions, tax-related items and other include the impacts of new or changes to in-force reinsurance
contracts, the impact of enacted or substantively enacted income tax rate changes and other amounts defined as items
excluded from core earnings not specifically captured in the lines above.
All of the above items are discussed in more detail in our definition of items excluded from core earnings.
113
DOE Reconciliation – 2024
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
2024
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Net insurance service result reconciliation
Total insurance service result – financial statements
$ 2,160
$ 1,320
$
357
Do
llar Zero
$ 164
$ 4,001
Less: Insurance service result attributed to:
Items excluded from core earnings
(11)
(5)
(205)
Zero
1
(220)
NCI
101
Zero
Zero
Zero
Zero
101
Participating policyholders
201
71
Zero
Zero
Zero
272
Core net insurance service result
1,869
1,254
562
Zero
163
3,848
Core net insurance service result, CER adjustmentRefer to footnote number (1)
37
Zero
12
Zero
3
52
Core net insurance service result, CER basis
$ 1,906
$ 1,254
$
574
Do
llar Zero
$ 166
$ 3,900
Total investment result reconciliation
Total investment result per financial statements
$ 1,248
$ 1,789
$
(218)
$ (982)
$1,684
$ 3,521
Less: Reclassify Manulife BankRefer to footnote number (2)and Global WAM to their own DOE
lines
Zero
1,547
Zero
(982)
Zero
565
Add: Consolidation and other adjustments from Other DOE line
Zero
Zero
Zero
Zero
(656)
(656)
Less: Net investment result attributed to:
Items excluded from core earnings
(212)
(397)
(1,809)
Zero
612
(1,806)
NCI
202
Zero
Zero
Zero
4
206
Participating policyholders
24
57
Zero
Zero
Zero
81
Core net investment result
1,234
582
1,591
Zero
412
3,819
Core net investment result, CER adjustmentRefer to footnote number (1)
24
Zero
34
Zero
1
59
Core net investment result, CER basis
$ 1,258
$
582
$ 1,625
Do
llar Zero
$ 413
$ 3,878
Manulife Bank and Global WAM by DOE line reconciliation
Manulife Bank and Global WAM net income attributed to shareholders
Do
llar Zero
$
235
Do
llar Zero
$ 1,747
Do
llar Zero
$
1,982
Less: Manulife Bank and Global WAM attributed to:
Items excluded from core earnings
Zero
Zero
Zero
(160)
Zero
(160)
Core earnings in Manulife Bank and Global WAM
Zero
235
Zero
1,907
Zero
2,142
Core earnings in Manulife Bank and Global WAM, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
27
Zero
27
Core earnings in Manulife Bank and Global WAM, CER basis
Do
llar Zero
$
235
Do
llar Zero
$ 1,934
Do
llar Zero
$ 2,169
Other reconciliation
Other revenue per financial statements
$
155
$
294
$
137
$ 7,439
$ (437)
$ 7,588
General expenses per financial statements
(330)
(613)
(139)
(3,249)
(528)
(4,859)
Commissions related to non-insurance contracts
(8)
(64)
8
(1,454)
38
(1,480)
Interest expenses per financial statements
(28)
(1,047)
(13)
(7)
(586)
(1,681)
Total financial statements values included in Other
(211)
(1,430)
(7)
2,729
(1,513)
(432)
Less: Reclassifications:
Manulife Bank and Global WAM to their own DOE lines
Zero
(1,311)
Zero
2,729
Zero
1,418
Consolidation and other adjustments to net investment result DOE
line
Zero
(1)
Zero
Zero
(656)
(657)
Less: Other attributed to:
Items excluded from core earnings
80
2
48
(2)
54
182
NCI
(1)
Zero
Zero
2
Zero
1
Participating policyholders
(7)
(5)
Zero
Zero
Zero
(12)
Add: Participating policyholders’ earnings transfer to shareholders
36
11
Zero
Zero
Zero
47
Other core earnings
(247)
(104)
(55)
Zero
(911)
(1,317)
Other core earnings, CER adjustmentRefer to footnote number (1)
(5)
Zero
(1)
Zero
Zero
(6)
Other core earnings, CER basis
$ (252)
$ (104)
$
(56)
Do
llar Zero
$ (911)
$ (1,323)
Income tax (expenses) recoveries reconciliation
Income tax (expenses) recoveries per financial statements
$ (460)
$ (353)
$
3
$ (148)
$ (254)
$ (1,212)
Less: Income tax (expenses) recoveries attributed to:
Items excluded from core earnings
(91)
53
411
23
(233)
163
NCI
(61)
Zero
Zero
Zero
Zero
(61)
Participating policyholders
(41)
(7)
Zero
Zero
Zero
(48)
Core income tax (expenses) recoveries
(267)
(399)
(408)
(171)
(21)
(1,266)
Core income tax (expenses) recoveries, CER adjustmentRefer to footnote number (1)
(5)
Zero
(9)
Zero
Zero
(14)
Core income tax (expenses) recoveries, CER basis
$ (272)
$ (399)
$
(417)
$ (171)
$ (21)
$ (1,280)
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
(2) Manulife Bank is part of Canada segment.
114 | 2024 Annual Report | Management’s Discussion and Analysis
(
DOE Reconciliation – 2023
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
2023
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Net insurance service result reconciliation
Total insurance service result – financial statements
$ 1,941
$ 1,193
$
607
Do
llar Zero
$
236
$ 3,977
Less: Insurance service result attributed to:
Items excluded from core earnings
Zero
19
(55)
Zero
(3)
(39)
NCI
87
Zero
Zero
Zero
1
88
Participating policyholders
308
107
Zero
Zero
Zero
415
Core net insurance service result
1,546
1,067
662
Zero
238
3,513
Core net insurance service result, CER adjustmentRefer to footnote number (1)
25
Zero
25
Zero
8
58
Core net insurance service result, CER basis
$ 1,571
$ 1,067
$
687
Do
llar Zero
$
246
$ 3,571
Total investment result reconciliation
Total investment result per financial statements
$
478
$ 1,717
$
233
$ (946)
$ 1,476
$ 2,958
Less: Reclassify Manulife Bank(2) and Global WAM to their own DOE
lines
Zero
1,445
Zero
(946)
Zero
499
Add: Consolidation and other adjustments from Other DOE line
Zero
(20)
Zero
Zero
(557)
(577)
Less: Net investment result attributed to:
Items excluded from core earnings
(605)
(345)
(1,296)
Zero
298
(1,948)
NCI
92
Zero
Zero
Zero
Zero
92
Participating policyholders
74
(17)
Zero
Zero
Zero
57
Core net investment result
917
614
1,529
Zero
621
3,681
Core net investment result, CER adjustment 1)
1
Zero
55
Zero
2
58
Core net investment result, CER basis
$
918
$
614
$ 1,584
Do
llar Zero
$
623
$ 3,739
Manulife Bank and Global WAM by DOE line reconciliation
Manulife Bank and Global WAM net income attributed to shareholders
Do
llar Zero
$
251
Do
llar Zero
$ 1,496
Do
llar Zero
$ 1,747
Less: Manulife Bank and Global WAM attributed to:
Items excluded from core earnings
Zero
2
Zero
(29)
Zero
(27)
Core earnings in Manulife Bank and Global WAM
Zero
249
Zero
1,525
Zero
1,774
Core earnings in Manulife Bank and Global WAM, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
34
Zero
34
Core earnings in Manulife Bank and Global WAM, CER basis
Do
llar Zero
$
249
Do
llar Zero
$ 1,559
Do
llar Zero
$ 1,808
Other reconciliation
Other revenue per financial statements
$
67
$
272
$
79
$ 6,709
$ (381)
$ 6,746
General expenses per financial statements
(220)
(514)
(156)
(2,931)
(509)
(4,330)
Commissions related to non-insurance contracts
(10)
(55)
3
(1,322)
39
(1,345)
Interest expenses per financial statements
(12)
(1,004)
(15)
(13)
(510)
(1,554)
Total financial statements values included in Other
(175)
(1,301)
(89)
2,443
(1,361)
(483)
Less: Reclassifications:
Manulife Bank and Global WAM to their own DOE lines
Zero
(1,194)
Zero
2,443
Zero
1,249
Consolidation and other adjustments to net investment result DOE
line
Zero
(20)
Zero
Zero
(557)
(577)
Less: Other attributed to:
Items excluded from core earnings
(7)
(2)
(59)
(2)
85
15
NCI
4
Zero
Zero
2
Zero
6
Participating policyholders
(2)
(12)
Zero
Zero
Zero
(14)
Add: Participating policyholders’ earnings transfer to shareholders
34
8
Zero
Zero
Zero
42
Other core earnings
(136)
(65)
(30)
Zero
(889)
(1,120)
Other core earnings, CER adjustment(1)
1
Zero
(1)
Zero
(1)
(1)
Other core earnings, CER basis
$ (135)
$
(65)
$
(31)
Do
llar Zero
$ (890)
$ (1,121)
Income tax (expenses) recoveries reconciliation
Income tax (expenses) recoveries per financial statements
$ (440)
$ (373)
$ (112)
$ (198)
$
278
$
(845)
Less: Income tax (expenses) recoveries attributed to:
Items excluded from core earnings
(89)
30
290
7
179
115
417
NCI
(42)
Zero
Zero
(1)
Zero
(43)
Participating policyholders
(30)
(25)
Zero
Zero
Zero
(55)
Core income tax (expenses) recoveries
(279)
(378)
(402)
(204)
99
(1,164)
Core income tax (expenses) recoveries, CER adjustment(1)
(1)
Zero
(14)
(2)
Zero
(17)
Core income tax (expenses) recoveries, CER basis
$ (280)
$ (378)
$ (416)
$ (206)
$
99
$ (1,181)
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
(2) Manulife Bank is part of Canada segment.
DOE Reconciliation – 4Q24
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
4Q24
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Net insurance service result reconciliation
Total insurance service result – financial statements
$ 545
$ 330
$ (257)
Do
llar Zero
$
71
$
689
Less: Insurance service result attributed to:
Items excluded from core earnings
(6)
(3)
(408)
Zero
1
(416)
NCI
18
Zero
Zero
Zero
Zero
18
Participating policyholders
51
7
Zero
Zero
Zero
58
Core net insurance service result
482
326
151
Zero
70
1,029
Core net insurance service result, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
Zero
Zero
Zero
Core net insurance service result, CER basis
$ 482
$ 326
$ 151
Do
llar Zero
$
70
$ 1,029
Total investment result reconciliation
Total investment result per financial statements
$ 279
$ 612
$ 369
$ (316)
$ 615
$ 1,559
Less: Reclassify Manulife Bank(2) and Global WAM to their own DOE lines
Zero
382
Zero
(316)
Zero
66
Add: Consolidation and other adjustments from Other DOE line
1
1
Zero
Zero
(198)
(196)
Less: Net investment result attributed to:
Items excluded from core earnings
(56)
85
(16)
Zero
287
300
NCI
14
Zero
Zero
Zero
4
18
Participating policyholders
(3)
15
Zero
Zero
Zero
12
Core net investment result
325
131
385
Zero
126
967
Core net investment result, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
Zero
Zero
Zero
Core net investment result, CER basis
$ 325
$ 131
$ 385
Do
llar Zero
$ 126
$
967
Manulife Bank and Global WAM by DOE line reconciliation
Manulife Bank and Global WAM net income attributed to shareholders
Do
llar Zero
$
53
Do
llar Zero
$
420
Do
llar Zero
$
473
Less: Manulife Bank and Global WAM attributed to:
Items excluded from core earnings
Zero
(7)
Zero
(122)
Zero
(129)
Core earnings in Manulife Bank and Global WAM
Zero
60
Zero
542
Zero
602
Core earnings in Manulife Bank and Global WAM, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
Zero
Zero
Zero
Core earnings in Manulife Bank and Global WAM, CER basis
Do
llar Zero
$
60
Do
llar Zero
$
542
Do
llar Zero
$
602
Other reconciliation
Other revenue per financial statements
$
79
$
72
$
45
$ 2,005
$ (198)
$ 2,003
General expenses per financial statements
(112)
(162)
(45)
(883)
(126)
(1,328)
Commissions related to non-insurance contracts
(1)
(16)
2
(385)
10
(390)
Interest expenses per financial statements
(9)
(257)
(2)
(2)
(150)
(420)
Total financial statements values included in Other
(43)
(363)
Zero
735
(464)
(135)
Less: Reclassifications:
Manulife Bank and Global WAM to their own DOE lines
Zero
(328)
Zero
735
Zero
407
Consolidation and other adjustments to net investment result DOE line
1
Zero
Zero
1
(198)
(196)
Less: Other attributed to:
Items excluded from core earnings
40
Zero
26
(1)
(46)
19
NCI
1
Zero
Zero
Zero
Zero
1
Participating policyholders
Zero
(2)
Zero
Zero
Zero
(2)
Add: Participating policyholders’ earnings transfer to shareholders
15
3
Zero
Zero
Zero
18
Other core earnings
(70)
(30)
(26)
Zero
(220)
(346)
Other core earnings, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
Zero
Zero
Zero
Other core earnings, CER basis
$
(70)
$
(30)
$
(26)
Do
llar Zero
$ (220)
$ (346)
Income tax (expenses) recoveries reconciliation
Income tax (expenses) recoveries per financial statements
$ (156)
$ (117)
$
(9)
$
(35)
$
(89)
$ (406)
Less: Income tax (expenses) recoveries attributed to:
Items excluded from core earnings
(61)
(26)
89
26
(71)
(43)
NCI
(15)
Zero
Zero
Zero
Zero
(15)
Participating policyholders
(9)
6
Zero
Zero
Zero
(3)
Core income tax (expenses) recoveries
(71)
(97)
(98)
(61)
(18)
(345)
Core income tax (expenses) recoveries, CER adjustment(1)
Zero
Zero
Zero
Zero
Zero
Zero
Core income tax (expenses) recoveries, CER basis
$
(71)
$
(97)
$
(98)
$
(61)
$
(18)
$ (345)
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
(2) Manulife Bank is part of Canada segment.
116 | 2024 Annual Report | Management’s Discussion and Analysis
DOE Reconciliation – 3Q24
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
3Q24
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Net insurance service result reconciliation
Total insurance service result – financial statements
$ 548
$ 363
$ 338
Do
llar Zero
$
48
$ 1,297
Less: Insurance service result attributed to:
Items excluded from core earnings
(3)
6
158
Zero
Zero
161
NCI
33
Zero
Zero
Zero
Zero
33
Participating policyholders
55
18
Zero
Zero
Zero
73
Core net insurance service result
463
339
180
Zero
48
1,030
Core net insurance service result, CER adjustment(1)
9
Zero
4
Zero
2
15
Core net insurance service result, CER basis
$
472
$
339
$
184
Do
llar Zero
$
50
$ 1,045
Total investment result reconciliation
Total investment result per financial statements
$ 644
$ 563
$ (303)
$ (196)
$
393
$ 1,101
Less: Reclassify Manulife Bank(2) and Global WAM to their own DOE lines
Zero
389
Zero
(196)
Zero
193
Add: Consolidation and other adjustments from Other DOE line
(1)
1
Zero
Zero
(148)
(148)
Less: Net investment result attributed to:
Items excluded from core earnings
194
3
(668)
Zero
154
(317)
NCI
125
Zero
Zero
Zero
Zero
125
Participating policyholders
33
26
Zero
Zero
Zero
59
Core net investment result
291
146
365
Zero
91
893
Core net investment result, CER adjustment(1)
5
Zero
10
Zero
(1)
14
Core net investment result, CER basis
$ 296
$
146
$
375
Do
llar Zero
$
90
$
907
Manulife Bank and Global WAM by DOE line reconciliation
Manulife Bank and Global WAM net income attributed to shareholders
Do
llar Zero
$
69
Do
llar Zero
$
518
Do
llar Zero
$
587
Less: Manulife Bank and Global WAM attributed to:
Items excluded from core earnings
Zero
12
Zero
13
Zero
25
Core earnings in Manulife Bank and Global WAM
Zero
57
Zero
505
Zero
562
Core earnings in Manulife Bank and Global WAM, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
9
Zero
9
Core earnings in Manulife Bank and Global WAM, CER basis
Do
llar Zero
$
57
Do
llar Zero
$
514
Do
llar Zero
$
571
Other reconciliation
Other revenue per financial statements
$
(42)
$
74
$
26
$ 1,875
$
(5)
$ 1,928
General expenses per financial statements
(83)
(154)
(41)
(795)
(131)
(1,204)
Commissions related to non-insurance contracts
(3)
(15)
2
(364)
10
(370)
Interest expenses per financial statements
(5)
(253)
(4)
(1)
(148)
(411)
Total financial statements values included in Other
(133)
(348)
(17)
715
(274)
(57)
Less: Reclassifications:
Manulife Bank and Global WAM to their own DOE lines
Zero
(319)
Zero
715
Zero
396
Consolidation and other adjustments to net investment result DOE line
(1)
Zero
Zero
(1)
(148)
(150)
Less: Other attributed to:
Items excluded from core earnings
(49)
3
5
Zero
98
57
NCI
(2)
Zero
Zero
1
Zero
(1)
Participating policyholders
(6)
(3)
Zero
Zero
Zero
(9)
Add: Participating policyholders’ earnings transfer to shareholders
5
3
Zero
Zero
Zero
8
Other core earnings
(70)
(26)
(22)
Zero
(224)
(342)
Other core earnings, CER adjustment(1)
(1)
Zero
Zero
Zero
Zero
(1)
Other core earnings, CER basis
$
(71)
$
(26)
$
(22)
Do
llar Zero
$ (224)
$ (343)
Income tax (expenses) recoveries reconciliation
Income tax (expenses) recoveries per financial statements
$
(39)
$ (114)
$
(13)
$
(20)
$
(88)
$ (274)
Less: Income tax (expenses) recoveries attributed to:
Items excluded from core earnings
66
(6)
99
(14)
(60)
NCI
(26)
Zero
Zero
Zero
Zero
(26)
Participating policyholders
(14)
(4)
Zero
Zero
Zero
(18)
Core income tax (expenses) recoveries
(65)
(104)
(112)
(6)
(28)
(315)
Core income tax (expenses) recoveries, CER adjustment(1)
(1)
Zero
(3)
1
Zero
(3)
Core income tax (expenses) recoveries, CER basis
$
(66)
$ (104)
$ (115)
$
(5)
$
(28)
$ (318)
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
(2) Manulife Bank is part of Canada segment.
117
85
DOE Reconciliation – 2Q24
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
2Q24
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Net insurance service result reconciliation
Total insurance service result – financial statements
$ 520
$ 343
$ 157
Do
llar Zero
$
17
$ 1,037
Less: Insurance service result attributed to:
Items excluded from core earnings
(13)
(5)
43
Zero
1
26
NCI
17
Zero
Zero
Zero
Zero
17
Participating policyholders
47
22
Zero
Zero
Zero
69
Core net insurance service result
469
326
114
Zero
16
925
Core net insurance service result, CER adjustment(1)
13
Zero
3
Zero
1
17
Core net insurance service result, CER basis
$
482
$
326
$
117
Do
llar Zero
$
17
$
942
Total investment result reconciliation
Total investment result per financial statements
$ 271
$ 161
$
6
$ (240)
$ 315
$
513
Less: Reclassify Manulife Bank(2) and Global WAM to their own DOE
lines
Zero
380
Zero
(240)
Zero
140
Add: Consolidation and other adjustments from Other DOE line
Zero
(1)
Zero
Zero
(154)
(155)
Less: Net investment result attributed to:
Items excluded from core earnings
(59)
(385)
(405)
Zero
65
(784)
NCI
23
Zero
Zero
Zero
Zero
23
Participating policyholders
(3)
9
Zero
Zero
Zero
6
Core net investment result
310
156
411
Zero
96
973
Core net investment result, CER adjustment(1)
10
Zero
9
Zero
1
20
Core net investment result, CER basis
$
320
$
156
$
420
Do
llar Zero
$
97
$
993
Manulife Bank and Global WAM by DOE line reconciliation
Manulife Bank and Global WAM net income attributed to shareholders
Do
llar Zero
$
48
Do
llar Zero
$
383
Do
llar Zero
$
431
Less: Manulife Bank and Global WAM attributed to:
Items excluded from core earnings
Zero
(9)
Zero
(62)
Zero
(71)
Core earnings in Manulife Bank and Global WAM
Zero
57
Zero
445
Zero
502
Core earnings in Manulife Bank and Global WAM, CER adjustment(1)
Zero
Zero
Zero
8
Zero
8
Core earnings in Manulife Bank and Global WAM, CER basis
Do
llar Zero
$
57
Do
llar Zero
$
453
Do
llar Zero
$
510
Other reconciliation
Other revenue per financial statements
$
63
$
73
$
27
$ 1,809
$ (123)
$ 1,849
General expenses per financial statements
(79)
(155)
(32)
(828)
(131)
(1,225)
Commissions related to non-insurance contracts
(4)
(15)
1
(356)
10
(364)
Interest expenses per financial statements
(8)
(266)
(3)
(2)
(147)
(426)
Total financial statements values included in Other
(28)
(363)
(7)
623
(391)
(166)
Less: Reclassifications:
Manulife Bank and Global WAM to their own DOE lines
Zero
(333)
Zero
623
Zero
290
Consolidation and other adjustments to net investment result DOE
line
Zero
Zero
Zero
Zero
(154)
(154)
Less: Other attributed to:
Items excluded from core earnings
50
2
8
(1)
(7)
52
NCI
Zero
Zero
Zero
1
Zero
1
Participating policyholders
(2)
Zero
Zero
Zero
Zero
(2)
Add: Participating policyholders’ earnings transfer to shareholders
8
2
Zero
Zero
Zero
10
Other core earnings
(68)
(30)
(15)
Zero
(230)
(343)
Other core earnings, CER adjustment(1)
(3)
1
(1)
Zero
(1)
(4)
Other core earnings, CER basis
$
(71)
$
(29)
$
(16)
Do
llar Zero
$ (231)
$
(347)
Income tax (expenses) recoveries reconciliation
Income tax (expenses) recoveries per financial statements
$ (115)
$
(39)
$
(21)
$
(32)
$
(45)
$
(252)
Less: Income tax (expenses) recoveries attributed to:
Items excluded from core earnings
(43)
74
74
14
(37)
82
NCI
(2)
Zero
Zero
Zero
Zero
(2)
Participating policyholders
(6)
(6)
Zero
Zero
Zero
(12)
Core income tax (expenses) recoveries
(64)
(107)
(95)
(46)
(8)
(320)
Core income tax (expenses) recoveries, CER adjustment(1)
(2)
Zero
(3)
Zero
Zero
(5)
Core income tax (expenses) recoveries, CER basis
$
(66)
$ (107)
$
(98)
$
(46)
$
(8)
$
(325)
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
(2) Manulife Bank is part of Canada segment.
118 | 2024 Annual Report | Management’s Discussion and Analysis
DOE Reconciliation – 1Q24
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
1Q24
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Net insurance service result reconciliation
Total insurance service result – financial statements
$ 547
$ 284
$ 119
Do
llar Zero
$
28
$
978
Less: Insurance service result attributed to:
Items excluded from core earnings
11
(3)
2
Zero
(1)
9
NCI
33
Zero
Zero
Zero
Zero
33
Participating policyholders
48
24
Zero
Zero
Zero
72
Core net insurance service result
455
263
117
Zero
29
864
Core net insurance service result, CER adjustment(1)
15
Zero
5
Zero
Zero
20
Core net insurance service result, CER basis
$
470
$
263
$
122
Do
llar Zero
$
29
$
884
Total investment result reconciliation
Total investment result per financial statements
$
54
$ 453
$ (290)
$ (230)
$ 361
$
348
Less: Reclassify Manulife Bank(2) and Global WAM to their own DOE lines
Zero
396
Zero
(230)
Zero
166
Add: Consolidation and other adjustments from Other DOE line
Zero
(1)
Zero
Zero
(156)
(157)
Less: Net investment result attributed to:
Items excluded from core earnings
(291)
(100)
(720)
Zero
106
(1,005)
NCI
40
Zero
Zero
Zero
Zero
40
Participating policyholders
(3)
7
Zero
Zero
Zero
4
Core net investment result
308
149
430
Zero
99
986
Core net investment result, CER adjustment(1)
9
Zero
15
Zero
1
25
Core net investment result, CER basis
$ 317
$
149
$
445
Do
llar Zero
$
100
$ 1,011
Manulife Bank and Global WAM by DOE line reconciliation
Manulife Bank and Global WAM net income attributed to shareholders
Do
llar Zero
$
65
Do
llar Zero
$
426
Do
llar Zero
$
491
Less: Manulife Bank and Global WAM attributed to:
Items excluded from core earnings
Zero
4
Zero
11
Zero
15
Core earnings in Manulife Bank and Global WAM
Zero
61
Zero
415
Zero
476
Core earnings in Manulife Bank and Global WAM, CER adjustmentRefer to footnote number (1)
Zero
Zero
Zero
10
Zero
10
Core earnings in Manulife Bank and Global WAM, CER basis
Do
llar Zero
$
61
Do
llar Zero
$
425
Do
llar Zero
$
486
Other reconciliation
Other revenue per financial statements
$
55
$
75
$
39
$ 1,750
$ (111)
$ 1,808
General expenses per financial statements
(56)
(142)
(21)
(743)
(140)
(1,102)
Commissions related to non-insurance contracts
Zero
(18)
3
(349)
8
(356)
Interest expenses per financial statements
(6)
(271)
(4)
(2)
(141)
(424)
Total financial statements values included in Other
(7)
(356)
17
656
(384)
(74)
Less: Reclassifications:
Manulife Bank and Global WAM to their own DOE lines
Zero
(331)
Zero
656
Zero
325
Consolidation and other adjustments to net investment result DOE line
Zero
(1)
Zero
Zero
(156)
(157)
Less: Other attributed to:
Items excluded from core earnings
39
(3)
9
Zero
9
54
NCI
Zero
Zero
Zero
Zero
Zero
Zero
Participating policyholders
1
Zero
Zero
Zero
Zero
1
Add: Participating policyholders’ earnings transfer to shareholders
8
3
Zero
Zero
Zero
11
Other core earnings
(39)
(18)
8
Zero
(237)
(286)
Other core earnings, CER adjustment(1)
(1)
Zero
Zero
Zero
Zero
(1)
Other core earnings, CER basis
$
(40)
$
(18)
$
8
Do
llar Zero
$ (237)
$ (287)
Income tax (expenses) recoveries reconciliation
Income tax (expenses) recoveries per financial statements
$ (150)
$
(83)
$
46
$
(61)
$
(32)
$ (280)
Less: Income tax (expenses) recoveries attributed to:
Items excluded from core earnings
(53)
11
149
(3)
(65)
39
NCI
(18)
Zero
Zero
Zero
Zero
(18)
Participating policyholders
(12)
(3)
Zero
Zero
Zero
(15)
Core income tax (expenses) recoveries
(67)
(91)
(103)
(58)
33
(286)
Core income tax (expenses) recoveries, CER adjustment(1)
(2)
Zero
(3)
(1)
Zero
(6)
Core income tax (expenses) recoveries, CER basis
119
$
(69)
$
(91)
$ (106)
$
(59)
$
33
$ (292)
Footnote Number (1) The impact of updating foreign exchange rates to that which was used in 4Q24.
(2) Manulife Bank is part of Canada segment.
DOE Reconciliation – 4Q23
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
4Q23
Canada
U.S.
Asia
Global
WAM
Corporate
and Other
Total
Net insurance service result reconciliation
Total insurance service result – financial statements
$ 644
$ 306
$ 195
Do
llar Zero
$
91
$ 1,236
Less: Insurance service result attributed to:
Items excluded from core earnings
130
12
21
Zero
(2)
161
NCI
19
Zero
Zero
Zero
1
20
Participating policyholders
60
39
Zero
Zero
Zero
99
Core net insurance service result
435
255
174
Zero
92
956
Core net insurance service result, CER adjustment(1)
9
Zero
5
Zero
2
16
Core net insurance service result, CER basis
$
444
$
255
$
179
Do
llar Zero
$
94
$
972
Total investment result reconciliation
Total investment result per financial statements
$ 285
$ 511
$
72
$ (139)
$ 344
$ 1,073
Less: Reclassify Manulife Bank(2) and Global WAM to their own DOE lines
Zero
377
Zero
(139)
Zero
238
Add: Consolidation and other adjustments from Other DOE line
Zero
3
Zero
Zero
(162)
(159)
Less: Net investment result attributed to:
Items excluded from core earnings
(47)
9
(359)
Zero
39
(358)
NCI
37
Zero
Zero
Zero
Zero
37
Participating policyholders
50
(10)
Zero
Zero
Zero
40
Core net investment result
245
138
431
Zero
143
957
Core net investment result, CER adjustment(1)
4
Zero
12
Zero
Zero
16
Core net investment result, CER basis
$
249
$
138
$
443
Do
llar Zero
$
143
$
973
Manulife Bank and Global WAM by DOE line reconciliation
Manulife Bank and Global WAM net income attributed to shareholders
Do
llar Zero
$
72
D
ollar Zero
$
424
Do
llar Zero
$
496
Less: Manulife Bank and Global WAM attributed to:
Items excluded from core earnings
Zero
8
Zero
16
Zero
24
Core earnings in Manulife Bank and Global WAM
Zero
64
Zero
408
Zero
472
Core earnings in Manulife Bank and Global WAM, CER adjustment(1)
Zero
Zero
Zero
8
Zero
8
Core earnings in Manulife Bank and Global WAM, CER basis
Do
llar Zero
$
64
D
ollar Zero
$
416
Do
llar Zero
$
480
Other reconciliation
Other revenue per financial statements
$
(16)
$
75
$
8
$ 1,688
$
(36)
$ 1,719
General expenses per financial statements
(59)
(136)
(28)
(793)
(164)
(1,180)
Commissions related to non-insurance contracts
(3)
(12)
1
(330)
9
(335)
Interest expenses per financial statements
(4)
(246)
(4)
(2)
(134)
(390)
Total financial statements values included in Other
(82)
(319)
(23)
563
(325)
(186)
Less: Reclassifications:
Manulife Bank and Global WAM to their own DOE lines
Zero
(305)
Zero
564
Zero
259
Consolidation and other adjustments to net investment result DOE line
Zero
3
Zero
Zero
(162)
(159)
Less: Other attributed to:
Items excluded from core earnings
(26)
4
(5)
(2)
79
50
NCI
(2)
Zero
Zero
1
Zero
(1)
Participating policyholders
(4)
(1)
Zero
Zero
Zero
(5)
Add: Participating policyholders’ earnings transfer to shareholders
10
2
Zero
Zero
Zero
12
Other core earnings
(40)
(18)
(18)
Zero
(242)
(318)
Other core earnings, CER adjustment(1)
Zero
Zero
(1)
Zero
Zero
(1)
Other core earnings, CER basis
$
(40)
$
(18)
$
(19)
Do
llar Zero
$ (242)
$ (319)
Income tax (expenses) recoveries reconciliation
Income tax (expenses) recoveries per financial statements
$ (109)
$ (116)
$
(46)
$
(58)
$
7
$ (322)
Less: Income tax (expenses) recoveries attributed to:
Items excluded from core earnings
(6)
(20)
67
(3)
(30)
8
NCI
(17)
Zero
Zero
Zero
Zero
(17)
Participating policyholders
(10)
(9)
Zero
Zero
Zero
(19)
Core income tax (expenses) recoveries
(76)
(87)
(113)
(55)
37
(294)
Core income tax (expenses) recoveries, CER adjustment(1)
(2)
Zero
(3)
(1)
1
(5)
Core income tax (expenses) recoveries, CER basis
$
(78)
$
(87)
$ (116)
$
(56)
$
38
$ (299)
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
(2) Manulife Bank is part of Canada segment.
120 | 2024 Annual Report | Management’s Discussion and Analysis
Common share core dividend payout ratio is a ratio that measures the percentage of core earnings paid to common
shareholders as dividends. It is calculated as dividends per common share divided by core EPS.
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Per share dividend
$ 0.40
$ 0.40
$ 0.40
$ 0.40
$ 0.37
$ 1.60
$ 1.46
Core EPS
$ 1.03
$ 1.00
$ 0.91
$ 0.94
$ 0.92
$ 3.87
$ 3.47
Common share core dividend payout ratio
39%
40%
44%
43%
40%
41%
42%
The contractual service margin (“CSM”) is a liability that represents future unearned profits on insurance contracts written. It is
a component of insurance and reinsurance contract liabilities on the Statement of Financial Position and includes amounts
attributed to common shareholders, participating policyholders and NCI.
In 2023, we included amounts attributed to common shareholders, participating policyholders, and NCI in our reporting of
changes in the CSM. Effective January 1, 2024, we no longer include amounts related to NCI in this reporting, and prior year
amounts have been restated. In addition, the new business CSM reconciliation has been adjusted to exclude NCI information.
Changes in the CSM net of NCI are classified as organic and inorganic. CSM growth is the percentage change in the CSM net
of NCI compared with a prior period on a constant exchange rate basis.
Changes in CSM net of NCI that are classified as organic include the following impacts:
• Impact of new insurance business (“impact of new business” or “new business CSM”) is the impact from insurance
contracts initially recognized in the period and includes acquisition expense related gains (losses) which impact the CSM in
the period. It excludes the impact from entering into new in-force reinsurance contracts which would generally be
considered a management action;
• Expected movement related to finance income or expenses (“interest accretion”) includes interest accreted on the
CSM net of NCI during the period and the expected change on VFA contracts if returns are as expected;
• CSM recognized for service provided (“CSM amortization”) is the portion of the CSM net of NCI that is recognized in net
income for service provided in the period; and
• Insurance experience gains (losses) and other is primarily the change from experience variances that relate to future
periods. This includes persistency experience and changes in future period cash flows caused by other current period
experience.
Changes in CSM net of NCI that are classified as inorganic include the following impacts:
• Changes in actuarial methods and assumptions that adjust the CSM;
• Effect of movement in exchange rates over the reporting period;
• Impact of markets; and
• Reinsurance transactions, tax-related and other items that reflect the impact related to future cash flows from items
such as gains or losses on disposition of a business, the impact of enacted or substantively enacted income tax rate
changes, material one-time only adjustments that are exceptional in nature and other amounts not specifically captured in
the previous inorganic items.
Post-tax CSM is used in the definition of financial leverage ratio and consolidated capital and is calculated as the CSM adjusted
for the marginal income tax rate in the jurisdictions that report a CSM balance. Post-tax CSM net of NCI is used in the adjusted
book value per share calculation and is calculated as the CSM net of NCI adjusted for the marginal income tax rate in the
jurisdictions that report this balance.
New business CSM growth is the percentage change in the new business CSM compared with a prior period on a constant
exchange rate basis.
121
CSM and post-tax CSM information
($ millions pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
122 | 2024 Annual Report | Management’s Discussion and Analysis
As at
Dec 31,
2024
Sept 30,
2024
June 30,
2024
Mar 31,
2024
Dec 31,
2023
CSM
$ 23,425
$ 22,213
$ 21,760
$ 22,075
$ 21,301
Less: CSM for NCI
1,298
1,283
1,002
986
861
CSM, net of NCI
$ 22,127
$ 20,930
$ 20,758
$ 21,089
$ 20,440
CER adjustmentRefer to footnote number (1)
Zero
618
889
894
1,118
CSM, net of NCI, CER basis
$ 22,127
$ 21,548
$ 21,647
$ 21,983
$ 21,558
CSM by segment
Asia
$ 15,540
$ 14,715
$ 13,456
$ 13,208
$ 12,617
Asia NCI
1,298
1,283
1,002
986
861
Canada
4,109
4,036
3,769
4,205
4,060
U.S.
2,468
2,171
3,522
3,649
3,738
Corporate and Other
10
8
11
27
25
CSM
$ 23,425
$ 22,213
$ 21,760
$ 22,075
$ 21,301
CSM, CER adjustmentRefer to footnote number (1)
Asia
D
ollar Zero
$
480
$
711
$
674
$
790
Asia NCI
Zero
28
50
54
54
Canada
Zero
Zero
Zero
Zero
Zero
U.S.
Zero
138
178
221
328
Corporate and Other
Zero
Zero
Zero
Zero
Zero
Total
D
ollar Zero
$
646
$
939
$
949
$
1,172
CSM, CER basis
Asia
$ 15,540
$ 15,195
$ 14,167
$ 13,882
$ 13,407
Asia NCI
1,298
1,311
1,052
1,040
915
Canada
4,109
4,036
3,769
4,205
4,060
U.S.
2,468
2,309
3,700
3,870
4,066
Corporate and Other
10
8
11
27
25
Total CSM, CER basis
$ 23,425
$ 22,859
$ 22,699
$ 23,024
$ 22,473
Post-tax CSM
CSM
$ 23,425
$ 22,213
$ 21,760
$ 22,075
$ 21,301
Marginal tax rate on CSM
(2,599)
(2,488)
(2,576)
(2,650)
(2,798)
Post-tax CSM
$ 20,826
$ 19,725
$ 19,184
$ 19,425
$ 18,503
CSM, net of NCI
$ 22,127
$ 20,930
$ 20,758
$ 21,089
$ 20,440
Marginal tax rate on CSM net of NCI
(2,445)
(2,335)
(2,468)
(2,542)
(2,692)
Post-tax CSM net of NCI
$ 19,682
$ 18,595
$ 18,290
$ 18,547
$ 17,748
Footnote Number (1)The impact of reflecting CSM and CSM net of NCI using the foreign exchange rates for the Statement of Financial Position in effect for 4Q24.
New business CSM(1) detail, CER basis
($ millions pre-tax, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
New business CSM
Hong Kong
$ 299
$ 254
$ 200
$ 168
$ 199
$
921
$
676
Japan
66
86
90
48
42
290
126
Asia Other
221
253
188
275
173
937
747
International High Net Worth
187
231
Mainland China
270
138
Singapore
391
244
Vietnam
17
87
Other Emerging Markets
72
47
Asia
586
593
478
491
414
2,148
1,549
Canada
116
95
76
70
70
357
224
U.S.
140
71
74
97
142
382
394
Total new business CSM
$ 842
$ 759
$ 628
$ 658
$ 626
$ 2,887
$ 2,167
New business CSM, CER adjustment(2),Refer to footnote number (3)
Hong Kong
Do
llar Zero
$
7
$
4
$
6
$
5
$
17
$
25
Japan
Zero
1
4
1
(1)
6
(6)
Asia Other
Zero
4
6
11
6
21
22
International High Net Worth
3
9
Mainland China
7
4
Singapore
9
12
Vietnam
(1)
(4)
Other Emerging Markets
3
1
Asia
Zero
12
14
18
10
44
41
Canada
Zero
Zero
Zero
Zero
Zero
Zero
Zero
U.S.
Zero
1
2
4
4
7
14
Total new business CSM
Do
llar Zero
$
13
$
16
$
22
$
14
$
51
$
55
New business CSM, CER basis
Hong Kong
$ 299
$ 261
$ 204
$ 174
$ 204
$
938
$
701
Japan
66
87
94
49
41
296
120
Asia Other
221
257
194
286
179
958
769
International High Net Worth
190
240
Mainland China
277
142
Singapore
400
256
Vietnam
16
83
Other Emerging Markets
75
48
Asia
586
605
492
509
424
2,192
1,590
Canada
116
95
76
70
70
357
224
U.S.
140
72
76
101
146
389
408
Total new business CSM, CER basis
$ 842
$ 772
$ 644
$ 680
$ 640
$ 2,938
$ 2,222
Footnote Number (1)New business CSM is net of NCI.
Footnote Number (2)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (3)New business CSM for Asia Other is reported by country annually, on a full year basis. Other Emerging Markets within Asia Other include Indonesia, the
Philippines, Malaysia, Thailand, Cambodia and Myanmar.
The Company also uses financial performance measures that are prepared on a constant exchange rate basis, which exclude
the impact of currency fluctuations (from local currency to Canadian dollars at a total Company level and from local currency to
U.S. dollars in Asia). Such financial measures may be stated on a constant exchange rate basis or the percentage growth/
decline in the financial measure on a constant exchange rate basis, using the income statement and balance sheet exchange
rates effective for the fourth quarter of 2024.
Information supporting constant exchange rate basis for GAAP and non-GAAP financial measures is presented below and
throughout this section.
Basic EPS and diluted EPS, CER basis is equal to common shareholders’ net income on a CER basis divided by the weighted
average common shares outstanding and diluted weighted common shares outstanding, respectively.
123
General expenses, CER basis
($ millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
General expenses
$ 1,328
$ 1,204
$ 1,225
$ 1,102
$ 1,180
$ 4,859
$ 4,330
CER adjustmentRefer to footnote number (1)
Zero
17
16
25
18
58
86
General expenses, CER basis
$ 1,328
$ 1,221
$ 1,241
$ 1,127
$ 1,198
$ 4,917
$ 4,416
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Net income financial measures on a CER basis
($ Canadian millions, post-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Net income (loss) attributed to shareholders:
Asia
$
583
$
827
$
582
$
363
$
615
$ 2,355
$1,348
Canada
439
430
79
273
365
1,221
1,191
U.S.
103
5
135
(108)
198
135
639
Global WAM
384
498
350
365
365
1,597
1,297
Corporate and Other
129
79
(104)
(27)
116
77
628
124 | 2024 Annual Report | Management’s Discussion and Analysis
Total net income (loss) attributed to shareholders
1,638
1,839
1,042
866
1,659
5,385
5,103
Preferred share dividends and other equity distributions
(101)
(56)
(99)
(55)
(99)
(311)
(303)
Common shareholders’ net income (loss)
$ 1,537
$ 1,783
$
943
$
811
$ 1,560
$ 5,074
$4,800
CER adjustmentRefer to footnote number (1)
Asia
Do
llar Zero
$
26
$
8
$
18
$
20
$
52
$
60
Canada
Zero
Zero
Zero
4
(8)
4
(6)
U.S.
Zero
5
3
(1)
5
7
47
Global WAM
Zero
11
9
12
9
32
39
Corporate and Other
Zero
2
(2)
Zero
2
Zero
(30)
Total net income (loss) attributed to shareholders
Zero
44
18
33
28
95
110
Preferred share dividends and other equity distributions
Zero
Zero
Zero
Zero
Zero
Zero
Zero
Common shareholders’ net income (loss)
Do
llar Zero
$
44
$
18
$
33
$
28
$
95
$ 110
Net income (loss) attributed to shareholders, CER basis
Asia
$
583
$
853
$
590
$
381
$
635
$ 2,407
$1,408
Canada
439
430
79
277
357
1,225
1,185
U.S.
103
10
138
(109)
203
142
686
Global WAM
384
509
359
377
374
1,629
1,336
Corporate and Other
129
81
(106)
(27)
118
77
598
Total net income (loss) attributed to shareholders, CER
basis
1,638
1,883
1,060
899
1,687
5,480
5,213
Preferred share dividends and other equity distributions, CER
basis
(101)
(56)
(99)
(55)
(99)
(311)
(303)
Common shareholders’ net income (loss), CER basis
$ 1,537
$ 1,827
$
961
$
844
$ 1,588
$ 5,169
$4,910
Asia net income attributed to shareholders, U.S. dollars
Asia net income (loss) attributed to shareholders, US $Refer to footnote number (2)
$
417
$
606
$
424
$
270
$
452
$ 1,717
$ 995
CER adjustment, US $Refer to footnote number (1)
Zero
4
(1)
4
2
7
15
Asia net income (loss) attributed to shareholders, U.S. $,
CER basis(1)
$
417
$
610
$
423
$
274
$
454
$ 1,724
$1,010
Net income (loss) attributed to shareholders (pre-tax)
Net income (loss) attributed to shareholders (post-tax)
$ 1,638
$ 1,839
$ 1,042
$
866
$ 1,659
$ 5,385
$5,103
Tax on net income attributed to shareholders
388
229
238
247
288
1,102
750
Net income (loss) attributed to shareholders (pre-tax)
2,026
2,068
1,280
1,113
1,947
6,487
5,853
CER adjustmentRefer to footnote number (1)
Zero
28
32
27
33
87
111
Net income (loss) attributed to shareholders (pre-tax),
CER basis
$ 2,026
$ 2,096
$ 1,312
$ 1,140
$ 1,980
$ 6,574
$5,964
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Asia net income attributed to shareholders (post-tax) in Canadian dollars is translated to U.S. dollars using the U.S. dollar Statement of Income rate for the
respective reporting period.
AUMA is a financial measure of the size of the Company. It is comprised of AUM and AUA. AUM includes assets of the General
Account, consisting of total invested assets and segregated funds net assets, and external client assets for which we provide
investment management services, consisting of mutual fund, institutional asset management and other fund net assets. AUA are
assets for which we provide administrative services only. Assets under management and administration is a common industry
metric for wealth and asset management businesses.
Our Global WAM business also manages assets on behalf of other segments of the Company. Global WAM-managed AUMA is
a financial measure equal to the sum of Global WAM’s AUMA and assets managed by Global WAM on behalf of other segments.
It is an important measure of the assets managed by Global WAM.
Segment share of total Company AUMA is a measure of the relative AUMA from each segment, expressed as a percentage. It
is calculated as the AUMA in that segment divided by the total Company AUMA. This measure is reported for our operating
segments and as at December 31, 2024, the segment share of total Company AUMA for Asia, Canada, U.S. and Global WAM
was 12%, 9%, 13% and 64%, respectively (as at December 31, 2023 – 12%, 11%, 15% and 61%, respectively).
AUM and AUMA reconciliations
(Canadian $ in millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
As at
CAD $
US $Refer to footnote number (4)
December 31, 2024
December 31, 2024
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Asia
U.S.
Total invested assets
Manulife Bank net lending assets
Do
llar Zero $
26,718 D
ollar Zero D
ollar Zero D
ollar Zero $
26,718
Do
llar Zero D
ollar Zero
Derivative reclassificationRefer to footnote number (1)
Zero
Zero
Zero
Zero
5,600
5,600
Zero
Zero
Invested assets excluding above
items
166,590
80,423
136,833
9,743
16,590
410,179
115,843
95,142
Total
166,590
107,141
136,833
9,743
22,190
442,497
115,843
95,142
Segregated funds net assets
Segregated funds net assets –
Institutional
Zero
Zero
Zero
3,393
Zero
3,393
Zero
Zero
Segregated funds net assets –
OtherRefer to footnote number (2)
28,622
38,099
77,440
288,467
(33)
432,595
19,904
53,845
Total
28,622
38,099
77,440
291,860
(33)
435,988
19,904
53,845
AUM per financial statements
195,212
145,240
214,273
301,603
22,157
878,485
135,747
148,987
Mutual funds
Zero
Zero
Zero
333,598
Zero
333,598
Zero
Zero
Institutional asset management(3)
Zero
Zero
Zero
154,096
Zero
154,096
Zero
Zero
Other funds
Zero
Zero
Zero
19,174
Zero
19,174
Zero
Zero
Total AUM
195,212
145,240
214,273
808,471
22,157
1,385,353
135,747
148,987
Assets under administration
Zero
Zero
Zero
222,614
Zero
222,614
Zero
Zero
Total AUMA
$ 195,212 $ 145,240
$ 214,273 $ 1,031,085 $ 22,157 $ 1,607,967
$ 135,747
$ 148,987
Total AUMA, US $(4)
$ 1,118,042
Total AUMA
$ 195,212 $ 145,240 $ 214,273 $ 1,031,085 $ 22,157 $ 1,607,967
CER adjustmentRefer to footnote number (5)
Zero
Zero
Zero
Zero
Zero
Zero
Total AUMA, CER basis
$ 195,212
$ 145,240 $ 214,273 $ 1,031,085 $ 22,157 $ 1,607,967
Global WAM Managed AUMA
Global WAM AUMA
$ 1,031,085
AUM managed by Global WAM for
Manulife’s other segments
226,752
Total
$ 1,257,837
Footnote Number (1)Corporate and Other consolidation amount is related to net derivative assets reclassified from total invested assets to other lines on the Statement of Financial
Position.
Footnote Number (2)Corporate and Other segregated funds net assets represent elimination of amounts held by the Company.
Footnote Number (3)Institutional asset management excludes Institutional segregated funds net assets.
Footnote Number (4)US $ AUMA is calculated as total AUMA in Canadian $ divided by the US $ exchange rate in effect at the end of the quarter.
Footnote Number (5)The impact of updating foreign exchange rates to that which was used in 4Q24.
125
AUM and AUMA reconciliations
(Canadian $ in millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
As at
CAD $
US $Refer to footnote number (4)
September 30, 2024
September 30, 2024
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Asia
U.S.
Total invested assets
Manulife Bank net lending assets
Do
llar Zero
$
26,371 Do
llar Zero Do
llar Zero Do
llar Zero $
26,371
Do
llar Zero Do
llar Zero
Derivative reclassificationRefer to footnote number (1)
Zero
Zero
Zero
Zero
2,420
2,420
Zero
Zero
Invested assets excluding above
items
160,377
81,874
134,164
9,464
14,482
400,361
118,748
99,311
Total
160,377
108,245
134,164
9,464
16,902
429,152
118,748
99,311
Segregated funds net assets
Segregated funds net assets –
Institutional
Zero
Zero
Zero
3,289
Zero
3,289
Zero
Zero
Segregated funds net assets –
OtherRefer to footnote number (2)
28,163
37,902
74,916
278,759
(50)
419,690
20,852
55,454
Total
28,163
37,902
74,916
282,048
(50)
422,979
20,852
55,454
AUM per financial statements
188,540
146,147
209,080
291,512
16,852
852,131
139,600
154,765
Mutual funds
Zero
Zero
Zero
321,210
Zero
321,210
Zero
Zero
Institutional asset managementRefer to footnote number (3)
Zero
Zero
Zero
148,386
Zero
148,386
Zero
Zero
Other funds
Zero
Zero
Zero
18,131
Zero
18,131
Zero
Zero
Total AUM
188,540
146,147
209,080
779,239
16,852
1,339,858
139,600
154,765
Assets under administration
Zero
Zero
Zero
211,617
Zero
211,617
Zero
Zero
Total AUMA
$ 188,540
$ 146,147 $ 209,080 $
990,856 $ 16,852 $ 1,551,475
$ 139,600 $ 154,765
Total AUMA, US $Refer to footnote number (4)
$ 1,148,433
Total AUMA
$ 188,540
$ 146,147 $ 209,080 $
990,856 $ 16,852 $ 1,551,475
CER adjustmentRefer to footnote number (5)
6,198
Zero
13,388
43,691
Zero
63,277
Total AUMA, CER basis
$ 194,738
$ 146,147 $ 222,468 $ 1,034,547 $ 16,852 $ 1,614,752
Global WAM Managed AUMA
Global WAM AUMA
$
990,856
AUM managed by Global WAM for
Manulife’s other segments
220,309
Total
$ 1,211,165
Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2024 above.
126 | 2024 Annual Report | Management’s Discussion and Analysis
AUM and AUMA reconciliations
(Canadian $ in millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
As at
CAD $
US $Refer to footnote number (1)
June 30, 2024
June 30, 2024
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Asia
U.S.
Total invested assets
Manulife Bank net lending assets
Do
llar Zero $
26,045 D
ollar Zero D
ollar Zero D
ollar Zero $
26,045
Do
llar Zero D
ollar Zero
Derivative reclassificationRefer to footnote number (1)
Zero
Zero
Zero
Zero
5,546
5,546
Zero
Zero
Invested assets excluding above
items
148,153
77,422
130,453
8,989
14,011
379,028
108,216
95,335
Total
148,153
103,467
130,453
8,989
19,557
410,619
108,216
95,335
Segregated funds net assets
Segregated funds net assets –
Institutional
Zero
Zero
Zero
3,380
Zero
3,380
Zero
Zero
Segregated funds net assets –
OtherRefer to footnote number (2)
26,468
36,595
72,950
266,759
(46)
402,726
19,333
53,313
Total
26,468
36,595
72,950
270,139
(46)
406,106
19,333
53,313
AUM per financial statements
174,621
140,062
203,403
279,128
19,511
816,725
127,549
148,648
Mutual funds
Zero
Zero
Zero
304,214
Zero
304,214
Zero
Zero
Institutional asset managementRefer to footnote number (3)
Zero
Zero
Zero
142,314
Zero
142,314
Zero
Zero
Other funds
Zero
Zero
Zero
17,202
Zero
17,202
Zero
Zero
Total AUM
174,621
140,062
203,403
742,858
19,511
1,280,455
127,549
148,648
Assets under administration
Zero
Zero
Zero
201,064
Zero
201,064
Zero
Zero
Total AUMA
$ 174,621 $ 140,062
$ 203,403 $
943,922 $ 19,511 $ 1,481,519
$ 127,549 $ 148,648
Total AUMA, US $Refer to footnote number (4)
$ 1,082,705
Total AUMA
$ 174,621
$ 140,062 $ 203,403 $
943,922 $ 19,511 $ 1,481,519
CER adjustmentRefer to footnote number (5)
8,657
Zero
10,315
36,282
Zero
55,254
Total AUMA, CER basis
$ 183,278
$ 140,062 $ 213,718 $
980,204 $ 19,511 $ 1,536,773
Global WAM Managed AUMA
Global WAM AUMA
$
943,922
AUM managed by Global WAM for
Manulife’s other segments
211,773
Total
$ 1,155,695
Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2024 above.
127
AUM and AUMA reconciliations
(Canadian $ in millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
As at
CAD $
US $Refer to footnote number (4)
March 31, 2024
March 31, 2024
Asia
Canada
U.S.
Global WAM
Corporate
and Other
Total
Asia
U.S.
Total invested assets
Manulife Bank net lending assets
Do
llar Zero $
25,420D o
llar Zero D
ollar Zero D
ollar Zero $
25,420
Do
llar Zero D
ollar Zero
Derivative reclassificationRefer to footnote number (1)
Zero
Zero
Zero
Zero
5,114
5,114
Zero
Zero
Invested assets excluding above
items
144,720
84,075
129,896
8,133
13,318
380,142
106,881
95,988
Total
144,720
109,495
129,896
8,133
18,432
410,676
106,881
95,988
Segregated funds net assets
Segregated funds net assets –
Institutional
Zero
Zero
Zero
3,334
Zero
3,334
Zero
Zero
Segregated funds net assets –
OtherRefer to footnote number (2)
26,203
37,218
72,547
262,854
(47)
398,775
19,360
53,609
Total
26,203
37,218
72,547
266,188
(47)
402,109
19,360
53,609
AUM per financial statements
170,923
146,713
202,443
274,321
18,385
812,785
126,241
149,597
Mutual funds
Zero
Zero
Zero
300,178
Zero
300,178
Zero
Zero
Institutional asset managementRefer to footnote number (3)
Zero
Zero
Zero
121,263
Zero
121,263
Zero
Zero
Other funds
Zero
Zero
Zero
16,981
Zero
16,981
Zero
Zero
Total AUM
170,923
146,713
202,443
712,743
18,385
1,251,207
126,241
149,597
Assets under administration
Zero
Zero
Zero
198,698
Zero
198,698
Zero
Zero
Total AUMA
$ 170,923
$ 146,713 $ 202,443 $
911,441 $ 18,385 $ 1,449,905
$ 126,241 $ 149,597
Total AUMA, US $Refer to footnote number (4)
$ 1,071,424
Total AUMA
$ 170,923 $ 146,713 $ 202,443 $
911,441 $ 18,385 $ 1,449,905
CER adjustmentRefer to footnote number (5)
8,902
Zero
12,650
41,032
Zero
62,584
Total AUMA, CER basis
$ 179,825
$ 146,713 $ 215,093 $
952,473 $ 18,385 $ 1,512,489
Global WAM Managed AUMA
Global WAM AUMA
$
911,441
AUM managed by Global WAM for
Manulife’s other segments
211,528
Total
$ 1,122,969
Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2024 above.
128 | 2024 Annual Report | Management’s Discussion and Analysis
AUM and AUMA reconciliations
(Canadian $ in millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
As at
CAD $
US $(4)
December 31, 2023
December 31, 2023
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Asia
U.S.
Total invested assets
Manulife Bank net lending assets
Do
llar Zero $
25,321 Do
llar ZeroD ol
lar Zero Do
llar Zero $
25,321
Do
llar Zero Do
llar Zero
Derivative reclassificationRefer to footnote number (1)
Zero
Zero
Zero
Zero
3,201
3,201
Zero
Zero
Invested assets excluding above
items
144,433
86,135
133,959
7,090
17,071
388,688
109,533
101,592
Total
144,433
111,456
133,959
7,090
20,272
417,210
109,533
101,592
Segregated funds net assets
Segregated funds net assets –
Institutional
Zero
Zero
Zero
3,328
Zero
3,328
Zero
Zero
Segregated funds net assets –
OtherRefer to footnote number (2)
24,854
36,085
68,585
244,738
(46)
374,216
18,846
52,014
Total
24,854
36,085
68,585
248,066
(46)
377,544
18,846
52,014
AUM per financial statements
169,287
147,541
202,544
255,156
20,226
794,754
128,379
153,606
Mutual funds
Zero
Zero
Zero
277,365
Zero
277,365
Zero
Zero
Institutional asset managementRefer to footnote number (3)
Zero
Zero
Zero
119,161
Zero
119,161
Zero
Zero
Other funds
Zero
Zero
Zero
15,435
Zero
15,435
Zero
Zero
Total AUM
169,287
147,541
202,544
667,117
20,226
1,206,715
128,379
153,606
Assets under administration
Zero
Zero
Zero
182,046
Zero
182,046
Zero
Zero
Total AUMA
$ 169,287 $ 147,541 $ 202,544 $
849,163 $ 20,226 $ 1,388,761
$ 128,379 $ 153,606
Total AUMA, US $Refer to footnote number (4)
$ 1,053,209
Total AUMA
$ 169,287 $ 147,541 $ 202,544 $
849,163 $ 20,226 $ 1,388,761
CER adjustmentRefer to footnote number (5)
10,424
Zero
18,314
52,891
Zero
81,629
Total AUMA, CER basis
$ 179,711 $ 147,541 $ 220,858 $
902,054 $ 20,226 $ 1,470,390
Global WAM Managed AUMA
Global WAM AUMA
$
849,163
AUM managed by Global WAM for
Manulife’s other segments
205,814
Total
$ 1,054,977
Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2024 above.
129
Global WAM AUMA and Managed AUMA by business line and geographic source
($ millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
As at
Dec 31,
2024
Sept 30,
2024
June 30,
2024
Mar 31,
2024
Dec 31,
2023
Global WAM AUMA by business line
Retirement
$
521,979
$
501,173
$
477,740
$
467,579
$
431,601
Retail
348,938
335,570
318,269
316,406
292,629
Institutional asset management
160,168
154,113
147,913
127,456
124,933
Total
$ 1,031,085
$
990,856
$
943,922
$
911,441
$
849,163
Global WAM AUMA by business line, CER basisRefer to footnote number (1)
Retirement
$
521,979
$
526,284
$
496,919
$
490,525
$
461,958
Retail
348,938
348,933
329,593
329,572
309,279
Institutional asset management
160,168
159,330
153,692
132,376
130,817
Total
$ 1,031,085
$ 1,034,547
$
980,204
$
952,473
$
902,054
Global WAM AUMA by geographic source
Asia
$
141,098
$
137,040
$
128,791
$
122,354
$
115,523
Canada
260,651
255,281
242,781
243,678
233,351
U.S.
629,336
598,535
572,350
545,409
500,289
Total
$ 1,031,085
$
990,856
$
943,922
$
911,441
$
849,163
Global WAM AUMA by geographic source, CER basisRefer to footnote number (1)
Asia
$
141,098
$
142,092
$
135,842
$
129,147
$
123,036
Canada
260,651
255,281
242,781
243,678
233,351
U.S.
629,336
637,174
601,581
579,648
545,667
Total
$ 1,031,085
$ 1,034,547
$
980,204
$
952,473
$
902,054
Global WAM Managed AUMA by business line
Retirement
$
521,979
$
501,173
$
477,740
$
467,579
$
431,601
Retail
431,047
416,425
396,457
395,755
368,843
Institutional asset management
304,811
293,567
281,498
259,635
254,533
Total
$ 1,257,837
$ 1,211,165
$ 1,155,695
$ 1,122,969
$ 1,054,977
Global WAM Managed AUMA by business line, CER
basisRefer to footnote number (1)
Retirement
$
521,979
$
526,284
$
496,919
$
490,525
$
461,958
Retail
431,047
433,017
410,229
411,955
389,726
Institutional asset management
304,811
306,398
293,032
271,552
270,346
Total
$ 1,257,837
$ 1,265,699
$ 1,200,180
$ 1,174,032
$ 1,122,030
Global WAM Managed AUMA by geographic source
Asia
$
225,325
$
219,344
$
205,776
$
198,464
$
191,238
Canada
312,816
307,051
292,698
294,591
282,487
U.S.
719,696
684,770
657,221
629,914
581,252
Total
$ 1,257,837
$ 1,211,165
$ 1,155,695
$ 1,122,969
$ 1,054,977
Global WAM Managed AUMA by geographic source, CER
basisRefer to footnote number (1)
Asia
$
225,325
$
229,717
$
216,743
$
210,030
$
205,616
Canada
312,816
307,051
292,698
294,591
282,487
U.S.
719,696
728,931
690,739
669,411
633,927
Total
$ 1,257,837
$ 1,265,699
$ 1,200,180
$ 1,174,032
$ 1,122,030
Footnote Number (1)AUMA adjusted to reflect the foreign exchange rates for the Statement of Financial Position in effect for 4Q24.
Average assets under management and administration (“average AUMA”) is the average of Global WAM’s AUMA during
the reporting period. It is a measure used in analyzing and explaining fee income and earnings of our Global WAM segment. It is
calculated as the average of the opening balance of AUMA and the ending balance of AUMA using daily balances where
available and month-end or quarter-end averages when daily averages are unavailable. Similarly, Global WAM average
managed AUMA and average AUA are the average of Global WAM’s managed AUMA and AUA, respectively, and are
calculated in a manner consistent with average AUMA.
130 | 2024 Annual Report | Management’s Discussion and Analysis
Manulife Bank net lending assets is a financial measure equal to the sum of Manulife Bank’s loans and mortgages, net of
allowances. Manulife Bank average net lending assets is a financial measure which is calculated as the quarter-end average
of the opening and the ending balance of net lending assets. Both of these financial measures are a measure of the size of
Manulife Bank’s portfolio of loans and mortgages and are used to analyze and explain its earnings.
As at
($ millions)
Dec 31,
2024
Sept 30,
2024
June 30,
2024
Mar 31,
2024
Dec 31,
2023
Mortgages
$ 54,447
$ 54,083
$ 53,031
$ 52,605
$ 52,421
Less: mortgages not held by Manulife Bank
30,039
29,995
29,324
29,568
29,536
Total mortgages held by Manulife Bank
24,408
24,088
23,707
23,037
22,885
Loans to Bank clients
2,310
2,283
2,338
2,383
2,436
Manulife Bank net lending assets
$ 26,718
$ 26,371
$ 26,045
$ 25,420
$ 25,321
Manulife Bank average net lending assets
Beginning of period
$ 26,371
$ 26,045
$ 25,420
$ 25,321
$ 25,123
End of period
26,718
26,371
26,045
25,420
25,321
Manulife Bank average net lending assets by quarter
$ 26,545
$ 26,208
$ 25,733
$ 25,371
$ 25,222
Manulife Bank average net lending assets – full year
$ 26,020
$ 25,050
Financial leverage ratio is calculated as the sum of long-term debt, capital instruments and preferred shares and other equity
instruments, divided by the sum of long-term debt, capital instruments, equity and post-tax CSM.
Adjusted book value is the sum of common shareholders’ equity and post-tax CSM net of NCI. It is an important measure for
monitoring growth and measuring insurance businesses’ value. Adjusted book value per common share is calculated by
dividing adjusted book value by the number of common shares outstanding at the end of the period.
As at
($ millions)
Dec 31,
2024
Sept 30,
2024
June 30,
2024
Mar 31,
2024
Dec 31,
2023
Common shareholders’ equity
$ 44,312
$ 42,913
$ 42,305
$ 41,590
$ 40,379
Post-tax CSM, net of NCI
19,682
18,595
18,290
18,547
17,748
Adjusted book value
$ 63,994
$ 61,508
$ 60,595
$ 60,137
$ 58,127
Consolidated capital serves as a foundation of our capital management activities at the MFC level. Consolidated capital is
calculated as the sum of: (i) total equity excluding accumulated other comprehensive income (“AOCI”) on cash flow hedges; (ii)
post-tax CSM; and (iii) certain other capital instruments that qualify as regulatory capital. For regulatory reporting purposes under
the LICAT framework, the numbers are further adjusted for various additions or deductions to capital as mandated by the
guidelines defined by OSFI.
As at
($ millions)
Dec 31,
2024
Sept 30,
2024
June 30,
2024
Mar 31,
2024
Dec 31,
2023
Total equity
$ 52,960
$ 51,639
$ 50,756
$ 49,892
$ 48,727
Less: AOCI gain/(loss) on cash flow hedges
119
70
95
70
26
Total equity excluding AOCI on cash flow hedges
52,841
51,569
50,661
49,822
48,701
Post-tax CSM
20,826
19,725
19,184
19,425
18,503
Qualifying capital instruments
7,532
6,997
7,714
7,196
6,667
Consolidated capital
$ 81,199
$ 78,291
$ 77,559
$ 76,443
$ 73,871
Core EBITDA is a financial measure which Manulife uses to better understand the long-term earnings capacity and valuation of
our Global WAM business on a basis more comparable to how the profitability of global asset managers is generally measured.
Core EBITDA presents core earnings before the impact of interest, taxes, depreciation, and amortization. Core EBITDA excludes
certain acquisition expenses related to insurance contracts in our retirement businesses which are deferred and amortized over
the expected lifetime of the customer relationship. Core EBITDA was selected as a key performance indicator for our Global
WAM business, as EBITDA is widely used among asset management peers, and core earnings is a primary profitability metric
for the Company overall.
131
Reconciliation of Global WAM core earnings to core EBITDA and Global WAM core EBITDA by business line and
geographic source
($ millions, pre-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Global WAM core earnings (post-tax)
$ 481
$ 499
$ 399
$ 357
$ 353
$ 1,736
$ 1,321
Add back taxes, acquisition costs, other expenses and deferred sales
commissions
Core income tax (expenses) recoveries (see above)
61
6
46
58
55
171
204
Amortization of deferred acquisition costs and other depreciation
49
48
49
42
45
188
166
Amortization of deferred sales commissions
20
19
19
20
21
78
80
Core EBITDA
$ 611
$ 572
$ 513
$ 477
$ 474
$ 2,173
$ 1,771
CER adjustment(1)
Zero
11
7
13
7
31
39
Core EBITDA, CER basis
$ 611
$ 583
$ 520
$ 490
$ 481
$ 2,204
$ 1,810
Core EBITDA by business line
Retirement
$ 330
$ 320
$ 284
$ 265
$ 265
$ 1,199
$
957
Retail
214
200
181
178
175
773
704
Institutional asset management
67
52
48
34
34
201
110
Total
$ 611
$ 572
$ 513
$ 477
$ 474
$ 2,173
$ 1,771
Core EBITDA by geographic source
Asia
$ 167
$ 157
$ 144
$ 139
$ 135
$
607
$
505
Canada
160
157
133
139
152
589
582
U.S.
284
258
236
199
187
977
684
Total
$ 611
$ 572
$ 513
$ 477
$ 474
$ 2,173
$ 1,771
Core EBITDA by business line, CER basisRefer to footnote number (2)
Retirement
$ 330
$ 326
$ 288
$ 273
$ 270
$ 1,217
$
981
Retail
214
203
183
182
177
782
715
Institutional asset management
67
54
49
35
34
205
114
Total, CER basis
$ 611
$ 583
$ 520
$ 490
$ 481
$ 2,204
$ 1,810
Core EBITDA by geographic source, CER basisRefer to footnote number (2)
Asia
$ 167
$ 162
$ 146
$ 144
$ 138
$
619
$
520
Canada
160
157
133
139
152
589
582
U.S.
284
264
241
207
191
996
708
Total, CER basis
$ 611
$ 583
$ 520
$ 490
$ 481
$ 2,204
$ 1,810
Footnote Number (1)The impact of updating foreign exchange rates to that which was used in 4Q24.
Footnote Number (2)Core EBITDA adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q24.
132 | 2024 Annual Report | Management’s Discussion and Analysis
Core EBITDA margin is a financial measure which Manulife uses to better understand the long-term profitability of our Global
WAM business on a more comparable basis to how profitability of global asset managers are measured. Core EBITDA margin
presents core earnings before the impact of interest, taxes, depreciation, and amortization divided by core revenue from these
businesses. Core revenue is used to calculate our core EBITDA margin, and is equal to the sum of pre-tax other revenue and
investment income in Global WAM included in core EBITDA, and it excludes such items as revenue related to integration and
acquisitions and market experience gains (losses). Core EBITDA margin was selected as a key performance indicator for our
Global WAM business, as EBITDA margin is widely used among asset management peers, and core earnings is a primary
profitability metric for the Company overall.
($ millions, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Core EBITDA margin
Core EBITDA
$
611
$
572
$
513
$
477
$
474
$
2,173
$
1,771
Core revenue
$ 2,140
$ 2,055
$ 1,948
$ 1,873
$ 1,842
$
8,016
$
7,103
Core EBITDA margin
28.6%
27.8%
26.3%
25.5%
25.7%
27.1%
24.9%
Global WAM core revenue
Other revenue per financial statements
$ 2,003
$ 1,928
$ 1,849
$ 1,808
$ 1,719
$
7,588
$
6,746
Less: Other revenue in segments other than Global WAM
(2)
53
40
58
31
149
37
Other revenue in Global WAM (fee income)
$ 2,005
$ 1,875
$ 1,809
$ 1,750
$ 1,688
$
7,439
$
6,709
Investment income per financial statements
$ 5,250
$ 4,487
$ 4,261
$ 4,251
$ 4,497
$ 18,249
$ 16,180
Realized and unrealized gains (losses) on assets supporting
insurance and investment contract liabilities per financial
statements
(622)
1,730
564
538
2,674
2,210
3,138
Total investment income
4,628
6,217
4,825
4,789
7,171
20,459
19,318
Less: Investment income in segments other than Global
WAM
4,550
5,991
4,687
4,649
6,941
19,877
18,886
Investment income in Global WAM
$
78
$
226
$
138
$
140
$
230
$
582
$
432
Total other revenue and investment income in Global WAM
$ 2,083
$ 2,101
$ 1,947
$ 1,890
$ 1,918
$
8,021
$
7,141
Less: Total revenue reported in items excluded from core
earnings
Market experience gains (losses)
(28)
33
(9)
8
63
4
28
Revenue related to integration and acquisitions
(29)
13
8
9
13
1
10
Global WAM core revenue
$ 2,140
$ 2,055
$ 1,948
$ 1,873
$ 1,842
$
8,016
$
7,103
Core expenses is used to calculate our expense efficiency ratio and is equal to total expenses that are included in core earnings
and excludes such items as material legal provisions for settlements, restructuring charges, and expenses related to integration
and acquisitions.
133
Total expenses include the following amounts from our financial statements:
1.
General expenses that flow directly through income;
2.
Directly attributable maintenance expenses, which are reported in insurance service expenses and flow directly through
income; and
3.
Directly attributable acquisition expenses for contracts measured using the PAA method and for other products without
a CSM, both of which are reported in insurance service expenses, and flow directly through income.
($ millions, and based on actual foreign exchange rates in effect
in the applicable reporting period, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Core expenses
General expenses – Statements of Income
$ 1,328
$ 1,204
$ 1,225
$ 1,102
$ 1,180
$ 4,859
$ 4,330
Directly attributable acquisition expense for contracts
measured using the PAA method and for other
products without a CSMRefer to footnote number (1)
43
36
39
38
42
156
147
Directly attributable maintenance expenseRefer to footnote number (1)
517
509
509
539
565
2,074
2,205
Total expenses
1,888
1,749
1,773
1,679
1,787
7,089
6,682
Less: General expenses included in items excluded from
core earnings
Restructuring charge
67
25
Zero
Zero
46
92
46
Integration and acquisition
Zero
Zero
57
Zero
8
57
8
Legal provisions and Other expenses
24
8
3
6
8
41
78
Total
91
33
60
6
62
190
132
Core expenses
$ 1,797
$ 1,716
$ 1,713
$ 1,673
$ 1,725
$ 6,899
$ 6,550
CER adjustmentRefer to footnote number (2)
Zero
22
28
36
27
86
114
Core expenses, CER basis
$ 1,797
$ 1,738
$ 1,741
$ 1,709
$ 1,752
$ 6,985
$ 6,664
Total expenses
$ 1,888
$ 1,749
$ 1,773
$ 1,679
$ 1,787
$ 7,089
$ 6,682
CER adjustmentRefer to footnote number (2)
Zero
22
29
37
28
88
117
Total expenses, CER basis
$ 1,888
$ 1,771
$ 1,802
$ 1,716
$ 1,815
$ 7,177
$ 6,799
Footnote Number (1)Expenses are components of insurance service expenses on the Statements of Income that flow directly through income.
Footnote Number (2)The impact of updating foreign exchange rates to that which was used in 4Q24.
Expense efficiency ratio is a financial measure which Manulife uses to measure progress towards our target to be more
efficient. It is defined as core expenses divided by the sum of core earnings before income taxes (“pre-tax core earnings”) and
core expenses.
Net annualized fee income yield on average AUMA (“Net fee income yield”) is a financial measure that represents the net
annualized fee income from Global WAM channels over average AUMA. This measure provides information on Global WAM’s
adjusted return generated from managing AUMA.
Net annualized fee income is a financial measure that represents Global WAM income before income taxes, adjusted to
exclude items unrelated to net fee income, including general expenses, investment income, non-AUMA related net benefits and
claims, and net premium taxes. It also excludes the components of Global WAM net fee income from managing assets on behalf
of other segments. This measure is annualized based on the number of days in the year divided by the number of days in the
reporting period.
Reconciliation of income before income taxes to net fee income yield
($ millions, unless otherwise stated)
Quarterly Results
Full Year Results
4Q24
3Q24
2Q24
1Q24
4Q23
2024
2023
Income before income taxes
$
2,113
$
2,341
$
1,384
$
1,252
$
2,123
$
7,090
$
6,452
Less: Income before income taxes for
segments other than Global WAM
1,694
1,822
1,001
826
1,699
5,343
4,955
Global WAM income before income taxes
419
519
383
426
424
1,747
1,497
Items unrelated to net fee income
882
677
771
665
648
2,995
2,715
Global WAM net fee income
1,301
1,196
1,154
1,091
1,072
4,742
4,212
Less: Net fee income from other
segments
181
169
169
155
174
674
624
Global WAM net fee income excluding
net fee income from other segments
1,120
1,027
985
936
898
4,068
3,588
Net annualized fee income
$
4,455
$
4,084
$
3,963
$
3,765
$
3,563
$
4,068
$
3,588
Average Assets under Management and
Administration
$ 1,015,454
$ 963,003
$ 933,061
$ 879,837
$ 816,706
$ 946,087
$ 812,662
Net fee income yield (bps)
43.9
42.4
42.5
42.8
43.6
43.0
44.2
134 | 2024 Annual Report | Management’s Discussion and Analysis
New business value (“NBV”) is calculated as the present value of shareholders’ interests in expected future distributable
earnings, after the cost of capital calculated under the LICAT framework in Canada and the International High Net Worth
business, and the local capital requirements in Asia and the U.S., on actual new business sold in the period using assumptions
with respect to future experience. NBV excludes businesses with immaterial insurance risks, such as the Company’s Global
WAM, Manulife Bank and the P&C Reinsurance businesses. NBV is a useful metric to evaluate the value created by the
Company’s new business franchise.
New business value margin (“NBV margin”) is calculated as NBV divided by APE sales excluding NCI. APE sales are
calculated as 100% of regular premiums and deposits sales and 10% of single premiums and deposits sales. NBV margin is a
useful metric to help understand the profitability of our new business.
Sales are measured according to product type:
For individual insurance, sales include 100% of new annualized premiums and 10% of both excess and single premiums. For
individual insurance, new annualized premiums reflect the annualized premium expected in the first year of a policy that requires
premium payments for more than one year. Single premium is the lump sum premium from the sale of a single premium product,
e.g., travel insurance. Sales are reported gross before the impact of reinsurance.
For group insurance, sales include new annualized premiums and administrative services only premium equivalents on new
cases, as well as the addition of new coverages and amendments to contracts, excluding rate increases.
Insurance-based wealth accumulation product sales include all new deposits into variable and fixed annuity contracts. As we
discontinued sales of new variable annuity contracts in the U.S. in the first quarter of 2013, subsequent deposits into existing
U.S. variable annuity contracts are not reported as sales. Asia variable annuity deposits are included in APE sales.
APE sales are comprised of 100% of regular premiums and deposits and 10% of excess and single premiums and deposits for
both insurance and insurance-based wealth accumulation products.
Gross flows is a new business measure presented for our Global WAM business and includes all deposits into mutual funds,
group pension/retirement savings products, private wealth and institutional asset management products. Gross flows is a
common industry metric for WAM businesses as it provides a measure of how successful the businesses are at attracting assets.
Net flows is presented for our Global WAM business and includes gross flows less redemptions for mutual funds, group
pension/retirement savings products, private wealth and institutional asset management products. In addition, net flows include
the net flows of exchange traded funds and non-proprietary products sold by Manulife Securities. Net flows is a common industry
metric for WAM businesses as it provides a measure of how successful the businesses are at attracting and retaining assets.
When net flows are positive, they are referred to as net inflows. Conversely, negative net flows are referred to as net outflows.
Remittances is defined as the cash remitted or made available for distribution to Manulife Financial Corporation from its
subsidiaries. It is a key metric used by management to evaluate our financial flexibility.
Non-GAAP Measures for 2017
Non-GAAP financial measures include 2017 core earnings (loss), pre-tax 2017 core earnings and 2017 core general
expenses.
Non-GAAP ratio includes the 2017 expense efficiency ratio.
With the implementation of IFRS 17 and IFRS 9 in 2023, we made revisions to the definition of the above non-GAAP financial
measures and non-GAAP ratio. The definitions and reconciliations of the above measures for 2017 are included below.
2017 core earnings (loss) is a financial measure which we believe aids investors in better understanding the long-term earnings
capacity and valuation of the business. 2017 core earnings allows investors to focus on the Company’s operating performance
by excluding the direct impact of changes in equity markets and interest rates, changes in actuarial methods and assumptions as
well as a number of other items, outlined below, that we believe are material, but do not reflect the underlying earnings capacity
of the business. For example, due to the long-term nature of our business, the mark-to-market movements of equity markets,
interest rates, foreign currency exchange rates and commodity prices from period-to-period can, and frequently do, have a
substantial impact on the reported amounts of our assets, liabilities and net income attributed to shareholders. These reported
amounts are not actually realized at the time and may never be realized if the markets move in the opposite direction in a
subsequent period. This makes it very difficult for investors to evaluate how our businesses are performing from period-to-period
and to compare our performance with other issuers.
While core earnings is relevant to how we manage our business and offers a consistent methodology, it is not insulated from
macroeconomic factors which can have a significant impact. See below for reconciliation of 2017 core earnings to net income
attributed to shareholders and income before income taxes. Net income attributed to shareholders excludes net income
attributed to participating policyholders and non-controlling interests.
135
The items included in 2017 core earnings and items excluded from 2017 core earnings are determined in accordance with the
methodology under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline that was in effect at that time,
and are listed below.
Items included in 2017 core earnings:
1.
Expected earnings on in-force policies, including expected release of provisions for adverse deviation, fee income, margins
on group business and spread business such as Manulife Bank and asset fund management.
2.
Macro hedging costs based on expected market returns.
3.
New business strain and gains.
4.
Policyholder experience gains or losses.
5.
Acquisition and operating expenses compared with expense assumptions used in the measurement of policy liabilities.
6.
Up to $400 million of net favourable investment-related experience reported in a single year, which are referred to as “core
investment gains”. This means up to $100 million in the first quarter, up to $200 million on a year-to-date basis in the
second quarter, up to $300 million on a year-to-date basis in the third quarter and up to $400 million on a full year basis in
the fourth quarter. Any investment-related experience losses reported in a quarter will be offset against the net year-to-date
investment-related experience gains with the difference being included in 2017 core earnings subject to a maximum of the
year-to-date core investment gains and a minimum of zero, which reflects our expectation that investment-related
experience will be positive through-the-business cycle. To the extent any investment-related experience losses cannot be
fully offset in a quarter, they will be carried forward to be offset against investment-related experience gains in subsequent
quarters in the same year, for purposes of determining core investment gains. Investment-related experience relates to
fixed income investing, ALDA returns, credit experience and asset mix changes other than those related to a strategic
change. An example of a strategic asset mix change is outlined below.
•
This favourable and unfavourable investment-related experience is a combination of reported investment experience as
well as the impact of investing activities on the measurement of our policy liabilities. We do not attribute specific
components of investment-related experience to amounts included or excluded from 2017 core earnings.
•
The $400 million threshold represents the estimated average annualized amount of net favourable investment-related
experience that the Company reasonably expects to achieve through-the-business cycle based on historical
experience. It is not a forecast of expected net favourable investment-related experience for any given fiscal year.
•
Our average net annualized investment-related experience, including core investment gains, calculated from the
introduction of core earnings in 2012 to the end of 2017 was $475 million (2012 to the end of 2016 was $456 million).
•
The decision announced on December 22, 2017 to reduce the allocation to ALDA in the portfolio asset mix supporting
our legacy businesses was the first strategic asset mix change since we introduced the core earnings metric in 2012.
We refined our description of investment-related experience in 2017 to note that asset mix changes other than those
related to a strategic change are taken into consideration in the investment-related experience component of core
investment gains.
•
While historical investment return time horizons may vary in length based on underlying asset classes generally
exceeding 20 years, for purposes of establishing the threshold, we look at a business cycle that is five or more years
and includes a recession. We monitor the appropriateness of the threshold as part of our annual five-year planning
process and would adjust it, either to a higher or lower amount, in the future if we believed that our threshold was no
longer appropriate.
•
Specific criteria used for evaluating a potential adjustment to the threshold may include, but are not limited to, the extent
to which actual investment-related experience differs materially from actuarial assumptions used in measuring
insurance contract liabilities, material market events, material dispositions or acquisitions of assets, and regulatory or
accounting changes.
Core investment gains are reported in the Corporate and Other segment, with an offsetting adjustment to investment-
related experience gains and losses in items excluded from 2017 core earnings.
7.
Earnings on surplus other than mark-to-market items. Gains on available-for-sale (“AFS”) equities and seed money
investments in segregated and mutual funds are included in 2017 core earnings.
8.
Routine or non-material legal settlements.
9.
All other items not specifically excluded.
10.
Tax on the above items.
11.
All tax-related items except the impact of enacted or substantively enacted income tax rate changes.
136 | 2024 Annual Report | Management’s Discussion and Analysis
Items excluded from 2017 core earnings:
1.
The direct impact of equity markets and interest rates and variable annuity guarantee liabilities includes the items listed
below.
•
The earnings impact of the difference between the net increase (decrease) in variable annuity liabilities that are
dynamically hedged and the performance of the related hedge assets. Our variable annuity dynamic hedging strategy is
not designed to completely offset the sensitivity of insurance and investment contract liabilities to all risks or
measurements associated with the guarantees embedded in these products for a number of reasons, including:
provisions for adverse deviation, fund performance, the portion of the interest rate risk that is not dynamically hedged,
realized equity and interest rate volatilities and changes to policyholder behaviour.
•
Gains (charges) on variable annuity guarantee liabilities not dynamically hedged.
•
Gains (charges) on general fund equity investments supporting policy liabilities and on fee income.
•
Gains (charges) on macro equity hedges relative to expected costs. The expected cost of macro hedges is calculated
using the equity assumptions used in the valuation of insurance and investment contract liabilities.
•
Gains (charges) on higher (lower) fixed income reinvestment rates assumed in the valuation of insurance and
investment contract liabilities.
•
Gains (charges) on sale of AFS bonds and open derivatives not in hedging relationships in the Corporate and Other
segment.
2.
Net favourable investment-related experience in excess of $400 million per annum or net unfavourable investment-related
experience on a year-to-date basis.
3.
Mark-to-market gains or losses on assets held in the Corporate and Other segment other than gains on AFS equities and
seed money investments in new segregated or mutual funds.
4.
Changes in actuarial methods and assumptions. Policy liabilities for IFRS are valued in Canada under standards
established by the Actuarial Standards Board that were in effect at that time. The standards require a comprehensive
review of actuarial methods and assumptions to be performed annually. The review is designed to reduce the Company’s
exposure to uncertainty by ensuring assumptions for both asset related and liability related risks remain appropriate and is
accomplished by monitoring experience and selecting assumptions which represent a current best estimate view of
expected future experience, and margins that are appropriate for the risks assumed. Changes related to ultimate
reinvestment rates are included in the direct impact of equity markets and interest rates and variable annuity guarantee
liabilities. By excluding the results of the annual reviews, 2017 core earnings assist investors in evaluating our operational
performance and comparing our operational performance from period to period with other global insurance companies
because the associated gain or loss is not reflective of current year performance and not reported in net income in most
actuarial standards outside of Canada.
5.
The impact on the measurement of policy liabilities of changes in product features or new reinsurance transactions, if
material.
6.
Goodwill impairment charges.
7.
Gains or losses on disposition of a business.
8.
Material one-time only adjustments, including highly unusual/extraordinary and material legal settlements or other items
that are material and exceptional in nature.
9.
Tax on the above items.
10.
Net income (loss) attributed to participating policyholders and non-controlling interests.
11.
Impact of enacted or substantially enacted income tax rate changes.
Reconciliation of income (loss) before income taxes to 2017 core earnings
For the year ended December 31, 2017, our financial statements reported income before income taxes of $2,501 million, income
tax expense of $239 million and net income of $2,262 million. Income tax expense was comprised of an income tax expense of
$1,137 million on 2017 core earnings and an income tax recovery of $898 million on items excluding 2017 core earnings. Net
income of $2,262 million was comprised of net income attributed to shareholders of $2,104 million and net income attributed to
NCI of $194 million, partially offset by a net loss attributed to participating policyholders of $36 million.
2017 core earnings for the year ended December 31, 2017 of $4,565 million reflected total net income attributed to shareholders
of $2,104 million less a charge of $2,461 million from items excluded from 2017 core earnings. Items excluded from 2017 core
earnings primarily consisted of a charge from the impact related to U.S. tax reform of $1,777 million, and a charge related to the
decision to change portfolio asset mix supporting our legacy businesses of $1,032 million, partially offset by a gain from the
direct impact of markets of $209 million, investment-related experience gains outside of 2017 core earnings of $167 million and a
number of smaller items. Items excluded from 2017 core earnings were disclosed under OSFI’s Source of Earnings Disclosure
(Life Insurance Companies) guideline that was in effect at that time.
2017 core earnings before income taxes (“pre-tax 2017 core earnings”) was $5,702 million, equal to the sum of 2017 core
earnings of $4,565 million and tax on 2017 core earnings of $1,137 million.
137
2017 core earnings related to strategic priorities for the year ended December 31, 2017
The Company measures its progress on certain strategic priorities using 2017 core earnings. These strategic priorities include
2017 core earnings from highest potential businesses, 2017 core earnings from Asia region, and 2017 core earnings from long-
term care insurance (“LTC”) and variable annuities (“VA”) businesses. The 2017 core earnings for these businesses is calculated
consistent with our definition of 2017 core earnings.
Highest potential businesses
For the year ended December 31, 2017
($ millions, post-tax and based on actual foreign exchange rates in effect in the applicable reporting period)
2017 core earnings of highest potential businessesRefer to footnote number (1)
$ 2,475
2017 core earnings – All other businesses excl. core investment gains
1,690
Core investment gainsRefer to footnote number (2)
400
2017 core earnings
4,565
Items excluded from 2017 core earnings
(2,461)
Net income (loss) attributed to shareholders
$ 2,104
Highest potential businesses 2017 core earnings contribution
54%
Footnote Number (1)Includes 2017 core earnings from Asia and Global WAM segments, Canada group benefits, and behavioural insurance products.
Footnote Number (1)This item is disclosed under OSFI’s Source of Earnings guideline in effect at such time.
Asia region
For the year ended December 31, 2017
($ millions, post-tax and based on actual foreign exchange rates in effect in the applicable reporting period)
2017 core earnings of Asia regionRefer to footnote number (1)
$ 1,663
2017 core earnings – All other businesses excl. core investment gains
2,502
Core investment gains(2)
400
2017 core earnings
4,565
Items excluded from 2017 core earnings
(2,461)
Net income (loss) attributed to shareholders
$ 2,104
Asia region 2017 core earnings contribution
36%
Footnote Number (1)Includes 2017 core earnings from Asia segment and Global WAM’s business in Asia.
Footnote Number (2)This item is disclosed under OSFI’s Source of Earnings guideline in effect at such time.
LTC and VA businesses
For the year ended December 31, 2017
($ millions, post-tax and based on actual foreign exchange rates in effect in the applicable reporting period)
2017 core earnings of LTC and VA businessesRefer to footnote number (1)
$ 1,112
2017 core earnings – All other businesses excl. core investment gains
3,053
Core investment gainsRefer to footnote number (2)
400
2017 core earnings
4,565
Items excluded from 2017 core earnings
(2,461)
Net income (loss) attributed to shareholders
$ 2,104
LTC and VA businesses 2017 core earnings contribution
24%
Footnote Number (1)Includes 2017 core earnings from U.S. long-term care and Asia, Canada and U.S. variable annuities businesses.
Footnote Number (2)This item is disclosed under OSFI’s Source of Earnings guideline in effect at such time.
2017 expense efficiency ratio is a financial measure which Manulife uses to measure progress towards our target to be more
efficient. It is defined as 2017 core general expenses divided by the sum of pre-tax 2017 core earnings and 2017 core general
expenses. 2017 core general expenses is used to calculate our 2017 expense efficiency ratio and is equal to pre-tax general
expenses included in 2017 core earnings and excludes such items as material legal provisions for settlements, restructuring
charges and expenses related to integration and acquisitions.
The 2017 expense efficiency ratio for the year ended December 31, 2017 was 55.4%. 2017 core general expenses were
$7,091 million consisting of total general expenses on our financial statements for the year ended December 31, 2017 of
$7,233 million less $142 million of general expenses included in items excluded from 2017 core earnings. General expenses
included in items excluded from 2017 core earnings include integration and acquisition costs of $81 million and legal provisions
and other of $61 million. Pre-tax 2017 core earnings were $5,702 million as noted above.
2017 core earnings available to common shareholders
2017 core earnings available to common shareholders is $4,406 million consisting of 2017 core earnings of $4,565 million less
preferred share dividends of $159 million.
138 | 2024 Annual Report | Management’s Discussion and Analysis
14. Additional Disclosures
Contractual Obligations
In the normal course of business, the Company enters into contracts that give rise to obligations fixed by agreement as to the
timing and dollar amount of payment.
As at December 31, 2024, the Company’s contractual obligations and commitments were as follows:
Payments due by period
($ millions)
Total
Less than 1 year
1 to 3 years
3 to 5 years
Over 5 years
Long-term debtRefer to footnote number (1)
$
10,200
$
247
$
3,211
$
297
$
6,445
Liabilities for capital instruments R
efer to footnote number (1)
10,704
321
681
732
8,970
Investment commitments
15,367
4,360
5,219
4,314
1,474
Lease liabilities
355
105
151
52
47
Insurance contract liabilities
R
efer to footnote number (2)
1,383,939
4,223
9,977
21,385
1,348,354
Reinsurance contract held liabilitiesRefer to footnote number (2)
(9,483)
250
925
792
(11,450)
Investment contract liabilities
R
efer to footnote number (3)
322,793
316,119
2,766
1,170
2,738
Deposits from Bank clients
22,063
15,690
3,774
2,599
Zero
Other
5,229
1,377
2,441
951
460
Total contractual obligations
$ 1,761,167
$ 342,692
$ 29,145
$ 32,292
$ 1,357,038
Footnote Number (1)The contractual payments include principal and interest, and reflect the amounts payable up to and including the final contractual maturity date. The contractual
payments reflect the amounts payable from January 1, 2025 up to and including the final contractual maturity date. In the case of floating rate obligations, the
floating rate index is based on the interest rates as at December 31, 2024 and is assumed to remain constant to the final contractual maturity date. For the 4.061%
MFC Subordinated notes, the reset rate is equal to the Secured Overnight Financing Rate (“SOFR”) Swap Rate as at December 31, 2024, plus a spread
adjustment of 0.26161%, plus 1.647%. For the 2.237% MFC Subordinated notes and 2.818% MFC Subordinated notes, the reset rate is equal to the Canadian
Overnight Repo Rate Average (“CORRA”) as at December 31, 2024, plus a spread adjustment of 0.32138%, plus 1.49% and 1.82%, respectively. The Company
may have the contractual right to redeem or repay obligations prior to maturity and if such right is exercised, total contractual obligations paid and the timing of
payment could vary significantly from the amounts and timing included in the table.
Footnote Number (2)Insurance contract liabilities cash flows include estimates related to the timing and payment of death and disability claims, policy surrenders, policy maturities,
annuity payments, minimum guarantees on segregated fund products, policyholder dividends, commissions and premium taxes offset by contractual future
premiums on in-force contracts and exclude amounts from insurance contract liabilities for account of segregated fund holders. These estimated cash flows are
based on the best estimate assumptions used in the determination of insurance contract liabilities. These amounts are undiscounted. Reinsurance contract held
liabilities cash flows include estimates related to the timing and payment of future reinsurance premiums offset by recoveries on in-force reinsurance agreements.
Due to the use of assumptions, actual cash flows may differ from these estimates. Cash flows include embedded derivatives measured separately at fair value.
Footnote Number (3)Due to the nature of the products, the timing of net cash flows may be before contract maturity. Cash flows are undiscounted.
Legal and Regulatory Proceedings
We are regularly involved in legal actions, both as a defendant and as a plaintiff. Information on legal and regulatory proceedings
can be found in note 18 of the 2024 Annual Consolidated Financial Statements.
139
Quarterly Financial Information
The following table provides summary information related to our eight most recently completed quarters.
As at and for the three months ended
($ millions, except per share amounts or
otherwise stated)
Dec 31,
2024
Sept 30,
2024
June 30,
2024
Mar 31,
2024
Dec 31,
2023
Sept 30,
2023
June 30,
2023
Mar 31,
2023
Revenue
Insurance revenue
$
6,834
$
6,746
$
6,515
$
6,497
$
6,414
$
6,215
$
5,580
$
5,763
Net investment result
4,194
5,912
4,512
4,493
6,784
1,265
4,819
5,153
Other revenue
2,003
1,928
1,849
1,808
1,719
1,645
1,691
1,691
Total revenue
$ 13,031
$ 14,586
$ 12,876
$ 12,798
$ 14,917
$
9,125
$ 12,090
$ 12,607
Income (loss) before income taxes
$
2,113
$
2,341
$
1,384
$
1,252
$
2,123
$
1,174
$
1,436
$
1,719
Income tax (expense) recovery
(406)
(274)
(252)
(280)
(322)
51
(265)
(309)
Net income (loss)
$
1,707
$
2,067
$
1,132
$
972
$
1,801
$
1,225
$
1,171
$
1,410
Net income (loss) attributed to
shareholders
$
1,638
$
1,839
$
1,042
$
866
$
1,659
$
1,013
$
1,025
$
1,406
Basic earnings (loss) per common share
$
0.88
$
1.01
$
0.53
$
0.45
$
0.86
$
0.53
$
0.50
$
0.73
Diluted earnings (loss) per common
share
$
0.88
$
1.00
$
0.52
$
0.45
$
0.86
$
0.52
$
0.50
$
0.73
Segregated funds deposits
$ 11,927
$ 11,545
$ 11,324
$ 12,206
$ 10,361
$ 10,172
$ 10,147
$ 11,479
Total assets (in billions)
$
979
$
953
$
915
$
907
$
876
$
836
$
851
$
862
Weighted average common shares (in
millions)
1,746
1,774
1,793
1,805
1,810
1,826
1,842
1,858
Diluted weighted average common
shares (in millions)
1,752
1,780
1,799
1,810
1,814
1,829
1,846
1,862
Dividends per common share
$
0.400
$
0.400
$
0.400
$
0.400
$
0.365
$
0.365
$
0.365
$
0.365
CDN$ to US$1 – Statement of Financial
Position
1.4382
1.3510
1.3684
1.3533
1.3186
1.3520
1.3233
1.3534
CDN$ to US$1 – Statement of Income
1.3987
1.3639
1.3682
1.3485
1.3612
1.3411
1.3430
1.3524
140 | 2024 Annual Report | Management’s Discussion and Analysis
Selected Annual Financial Information
The following table provides selected annual financial information related to our three most recently completed years.
As at and for the years ended December 31,
($ millions, except per share amounts)
2024
2023
2022
Revenue
Asia
$
13,641
$
11,996
$
6,051
Canada
14,624
13,793
7,299
U.S.
16,279
15,322
11,048
Global Wealth and Asset Management
6,698
5,896
5,267
Corporate and Other
2,049
1,732
(24)
Total revenue
$
53,291
$
48,739
$
29,641
Total assets
$ 978,818
$ 875,574
$ 833,689
Long-term financial liabilities
Long-term debt
$
6,629
$
6,071
$
6,234
Capital instruments
7,532
6,667
6,122
Total financial liabilities
$
14,161
$
12,738
$
12,356
Dividend per common share
$
1.60
$
1.46
$
1.32
Cash dividend per Class A Share, Series 2
1.1625
1.1625
1.1625
Cash dividend per Class A Share, Series 3
1.125
1.125
1.125
Cash dividend per Class 1 Share, Series 3
0.5870
0.5870
0.5870
Cash dividend per Class 1 Share, Series 4
1.5578
1.4946
0.6814
Cash dividend per Class 1 Share, Series 7Refer to footnote number (1)
Zero
Zero
0.2695
Cash dividend per Class 1 Share, Series 9
1.4945
1.4945
1.1894
Cash dividend per Class 1 Share, Series 11
1.5398
1.4505
1.1828
Cash dividend per Class 1 Share, Series 13
1.5875
1.2245
1.1035
Cash dividend per Class 1 Share, Series 15
1.1951
0.9465
0.9465
Cash dividend per Class 1 Share, Series 17
0.950
0.950
0.950
Cash dividend per Class 1 Share, Series 19
0.9188
0.9188
0.9188
Cash dividend per Class 1 Share, Series 23Refer to footnote number (2)
Zero
Zero
0.3031
Cash dividend per Class 1 Share, Series 25
1.4855
1.3303
1.175
Footnote Number (1)MFC redeemed in full the Class 1 Series 7 preferred shares at par, on March 19, 2022, the earliest redemption date.
Footnote Number (2)MFC redeemed in full the Class 1 Series 23 preferred shares at par, on March 19, 2022, the earliest redemption date.
Revenue
Total revenue in 4Q24 was $13.0 billion compared with $14.9 billion in 4Q23. The decrease in total revenue of $1.9 billion was
primarily due to lower net investment income, partially offset by an increase in insurance revenue and other revenue.
By segment, the reduction in total revenue in 4Q24 compared to 4Q23 reflected lower net investment income in all segments
except Corporate and Other, higher insurance revenue in Asia, the U.S. and Canada and higher other revenue mainly in Global
WAM, Asia and the U.S., partially offset by Corporate and Other.
On a full year basis, total revenue in 2024 was $53.3 billion compared with $48.7 billion in 2023. The increase in total revenue of
$4.6 billion was due to higher insurance revenue, net investment income and other revenue.
By segment, the increase in revenue in 2024 compared with 2023 reflected higher insurance revenue in the U.S, Asia and
Canada, higher net investment income in all segments except the U.S., and higher other revenue primarily in Global WAM.
141
Revenue
Revenue
($ millions)
Quarterly Results
Full Year Results
4Q24
4Q23
2024
2023
Insurance revenue
$
6,834
$
6,414
$ 26,592
$ 23,972
Net investment income
4,194
6,784
19,111
18,021
Other revenue
2,003
1,719
7,588
6,746
Total revenue
$ 13,031
$ 14,917
$ 53,291
$ 48,739
Asia
$
2,927
$
3,572
$ 13,641
$ 11,996
Canada
3,682
4,663
14,624
13,793
U.S.
4,055
4,566
16,279
15,322
Global Wealth and Asset Management
1,738
1,632
6,698
5,896
Corporate and Other
629
484
2,049
1,732
Total revenue
$ 13,031
$ 14,917
$ 53,291
$ 48,739
Outstanding Common Shares
As at January 31, 2025, MFC had 1,723,169,992 common shares outstanding.
Additional Information Available
Additional information relating to Manulife, including MFC’s Annual Information Form, is available on the Company’s website at
www.manulife.com and on the SEDAR+ website at www.sedarplus.ca.
142 | 2024 Annual Report | Management’s Discussion and Analysis
Responsibility for Financial Reporting
The accompanying consolidated financial statements of Manulife Financial Corporation are the responsibility of management and
have been approved by the Board of Directors.
The consolidated financial statements have been prepared by management in accordance with International Financial Reporting
Standards and the accounting requirements of the Office of the Superintendent of Financial Institutions, Canada. When
alternative accounting methods exist, or when estimates and judgment are required, management has selected those amounts
that present the Company’s financial position and results of operations in a manner most appropriate to the circumstances.
Appropriate systems of internal control, policies and procedures have been maintained to ensure that financial information is
both relevant and reliable. The systems of internal control are assessed on an ongoing basis by management and the
Company’s internal audit department.
The actuary appointed by the Board of Directors (the “Appointed Actuary”) is responsible for ensuring that assumptions and
methods used in the determination of policy liabilities are appropriate to the circumstances and that reserves will be adequate to
meet the Company’s future obligations under insurance and annuity contracts.
The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and is
ultimately responsible for reviewing and approving the consolidated financial statements. These responsibilities are carried out
primarily through an Audit Committee of unrelated and independent directors appointed by the Board of Directors.
The Audit Committee meets periodically with management, the internal auditors, the peer reviewers, the external auditors and
the Appointed Actuary to discuss internal control over the financial reporting process, auditing matters and financial reporting
issues. The Audit Committee reviews the consolidated financial statements prepared by management, and then recommends
them to the Board of Directors for approval. The Audit Committee also recommends to the Board of Directors for approval the
appointment of external auditors and their fees.
The consolidated financial statements have been audited by the Company’s external auditors, Ernst & Young LLP, in accordance
with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board
(United States). Ernst & Young LLP has full and free access to management and the Audit Committee.
Roy Gori
President and Chief Executive Officer
Colin Simpson
Chief Financial Officer
Toronto, Canada
February 19, 2025
Appointed Actuary’s Report to the Policyholders and Shareholders
I have valued the policy liabilities of Manulife Financial Corporation for its Consolidated Statements of Financial Position as at
December 31, 2024 and 2023 and their change in the Consolidated Statements of Income for the years then ended in
accordance with International Financial Reporting Standards.
In my opinion, the amount of policy liabilities is appropriate for this purpose. The valuation conforms to accepted actuarial
practice in Canada and the Consolidated Financial Statements fairly present the results of the valuation.
Steven Finch
Appointed Actuary
Toronto, Canada
February 19, 2025
143
Independent Auditor’s Report
To the Shareholders and Board of Directors of Manulife Financial Corporation
Opinion
We have audited the consolidated financial statements of Manulife Financial Corporation (the Company), which comprise the
consolidated statements of financial position as at December 31, 2024 and 2023, and the consolidated statements of income,
consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements
of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy
information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Company as at December 31, 2024 and 2023, and its consolidated financial performance and its
consolidated cash flows for the years then ended, in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of
our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.
For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the
basis for our audit opinion on the accompanying consolidated financial statements.
144 | 2024 Annual Report | Consolidated Financial Statements
Valuation of Insurance Contract Liabilities
Key Audit
Matter
The Company recorded insurance contract liabilities of $523 billion at December 31, 2024 on its consolidated statement
of financial position, of which $383 billion as disclosed in Note 6 ‘Insurance and Reinsurance Contract Assets and
Liabilities’ has been measured under the variable fee approach (VFA) and the general measurement model (GMM). At
initial recognition, the Company measures a group of insurance contracts as the total of: (a) fulfilment cash flows, which
comprise of estimates of future cash flows, adjusted to reflect the time value of money and financial risks, and a risk
adjustment for non-financial risk; and (b) a contractual service margin (CSM), which represents the estimate of unearned
profit the Company will recognize as it provides service under the insurance contracts or the loss component when the
contracts are onerous. When projecting future cash flows for these insurance contract liabilities, the Company primarily
uses deterministic projections using best estimate assumptions. Key assumptions are subjective and complex and include
mortality, morbidity, investment returns, policy termination rates, premium persistency, directly attributable expenses,
taxes, and policyholder dividends. Disclosures on this matter are found in Note 1 ‘Nature of Operations and Material
Accounting Policy Information’ and Note 6 ‘Insurance and Reinsurance Contract Assets and Liabilities’ of the consolidated
financial statements.
Auditing the valuation of these insurance contract liabilities was complex and required the application of significant auditor
judgment due to the complexity of the cash flow models, the selection and use of assumptions, and the interrelationship of
these variables in measuring insurance contract liabilities. The audit effort involved professionals with specialized skills
and knowledge to assist in evaluating the audit evidence obtained.
How Our
Audit
Addressed
the Key
Audit Matter
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls
over the valuation of insurance contract liabilities. The controls we tested related to, among other areas, actuarial
methodology, integrity of data used, controls over relevant information technology, and the assumption setting and
implementation processes used by management.
To test the valuation of insurance contract liabilities, our audit procedures included, among other procedures, involving
our actuarial specialists to assess the methodology and assumptions with respect to compliance with IFRS. We
performed audit procedures over key assumptions, including testing the implementation of those assumptions into the
models. These procedures included testing underlying support and documentation, including reviewing a sample of
experience studies supporting specific assumptions, challenging the nature, timing, and completeness of changes
recorded, and assessing whether individual changes were errors or refinements of estimates. We also tested the
methodology and calculation of the insurance contract liabilities through both review of the calculation logic within the
models, and through calculating an independent estimate of the fulfillment cashflows for a sample of insurance contracts
and comparing the results to those determined by the Company and to industry and other external sources for
benchmarking. Additionally, we have performed an independent calculation of the CSM for a sample of groups of
insurance contracts and compared the amounts to the Company’s results. We also assessed the adequacy of the
disclosures related to the valuation of insurance contract liabilities.
Valuation of Invested Assets and Derivatives with Significant Non-Observable Market Inputs
Key Audit
Matter
The Company recorded invested assets of $93.9 billion, as disclosed in Note 3 ‘Invested Assets and Investment Income’,
and derivative assets and liabilities of $0.2 billion, and $3.4 billion, respectively, as disclosed in Note 4 ‘Derivative and
Hedging Instruments’ at December 31, 2024 within its consolidated statement of financial position which are both
(a) measured at fair value and (b) classified as Level 3 within the Company’s hierarchy of fair value measurements. The
Level 3 invested assets include private placements, commercial mortgages, real estate, timber and agriculture, and private
equities valued using internal models. Level 3 derivative assets and liabilities primarily include bond forwards. There is
increased measurement uncertainty in determining the fair value of these invested assets and derivatives due to volatility in
the current economic environment. Fair values are based on internal models or third-party appraisals that incorporate
assumptions with a high-level of subjectivity including discount rates, credit ratings and related spreads, expected future
cash flows, transaction prices of comparable assets, volatilities, correlations, and repurchase rates. Disclosures on this
matter are found in Note 1 ‘Nature of Operations and Material Accounting Policy Information’, Note 3 ‘Invested Assets and
Investment Income’, and Note 4 ‘Derivative and Hedging Instruments’ of the consolidated financial statements.
Auditing the valuation of these invested assets and derivatives was complex and required the application of significant
auditor judgment in assessing the valuation methodologies and non-observable inputs used. The valuation is sensitive to
the significant non-observable market inputs described above, which are inherently forward-looking and could be affected
by future economic and market conditions. The audit effort involved professionals with specialized skills and knowledge to
assist in evaluating the audit evidence obtained.
How Our
Audit
Addressed
the Key
Audit Matter
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls
over the valuation processes. The controls we tested related to, among other areas, management’s determination and
approval of assumptions and methodologies used in model-based valuations. The controls we tested also included
controls over relevant information technology.
To test the valuation, our audit procedures included, among other procedures, involving our valuation specialists to assess
the methodologies and significant inputs and assumptions used by management. These procedures included assessing the
valuation methodologies used with respect to the Company’s policies, valuation guidelines, and industry practice and
comparing a sample of valuation assumptions used against benchmarks including comparable transactions where
applicable. We also performed independent investment valuations on a sample basis to evaluate management’s recorded
values. In addition, we assessed the adequacy of the disclosures related to the valuation of invested assets and derivatives.
145
IFRS 9 Hedge Accounting
Key Audit
Matter
The Company has designated hedge accounting relationships with the objective to reduce potential accounting
mismatches between changes in the fair value of derivatives in income and financial risk of insurance contract liabilities
and financial assets in other comprehensive income. Specifically, the Company has established relationships to hedge
the fair value changes of certain of the Company’s insurance contract liabilities and debt instruments attributable to
interest rate risk. The Company has also established relationships to hedge the risk of fair value changes of certain
foreign currency denominated insurance contract liabilities and debt instruments attributable to foreign currency and
interest rate risk. Related to the application of these hedges, the Company recognized changes in value of hedged assets
of ($462) million, and changes in value of hedged liabilities of $3,646 million, for the year ended December 31, 2024.
Disclosures on this matter are found in Note 1 ‘Nature of Operations and Material Accounting Policy Information’ and Note
4 ‘Derivative and Hedging Instruments’ of the consolidated financial statements.
Auditing the application of hedge accounting was complex and required the application of significant auditor judgement
related to the assessment of the ongoing economic relationship between the risk component of the hedged item and
hedging instrument, the assessment that the hedge ratio between the hedging instrument and the hedged item was
consistent with the risk objectives, and the determination of the resulting accumulated fair value adjustments. The audit
effort involved professionals with specialized skills and knowledge to assist in evaluating the audit evidence obtained.
How Our
Audit
Addressed
the Key
Audit Matter
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls
over the application and execution of those strategies, including the implementation of new strategies where applicable,
and the measurements of the accumulated fair value adjustments. The controls we tested included, among others,
controls over the review of the completeness, accuracy, and eligibility of the hedged items and hedging instruments
included in the hedging relationships, determination of the hedge ratio between the hedging instrument and the hedged
item with reference to the risk objectives, and the determination of the resulting accumulated fair value adjustments. The
controls we tested also included controls over relevant information technology.
To assess the Company’s application of these hedge accounting strategies under IFRS 9, our audit procedures included,
among other procedures, involving our hedge accounting and derivative specialists to support our independent testing of
the application of the hedge ratio by the Company and the valuation of a sample of the accumulated fair value
adjustments. Other procedures performed include testing over the completeness and accuracy of the hedged items and
hedging instruments designated in these relationships and the determination of the resulting accumulated fair value
adjustments. In addition, we assessed the adequacy of the disclosures related to hedge accounting.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis; and
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the 2024 Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this
auditor’s report. We have nothing to report in this regard.
The 2024 Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we
will perform on this other information, we conclude there is a material misstatement of other information, we are required to
report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the
Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
146 | 2024 Annual Report | Consolidated Financial Statements
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The partner in charge of the audit resulting in this independent auditor’s report is Michael Cox.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 19, 2025
147
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Manulife Financial Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Manulife Financial Corporation (the
Company) as of December 31, 2024 and 2023, the related consolidated statements of income, consolidated statements of
comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years
then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of
December 31, 2024 and 2023, its consolidated financial performance and its consolidated cash flows for the years then ended, in
conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 19, 2025, expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
148 | 2024 Annual Report | Consolidated Financial Statements
Valuation of Insurance Contract Liabilities
Description of
the matter
The Company recorded insurance contract liabilities of $523 billion at December 31, 2024 on its consolidated
statement of financial position, of which $383 billion as disclosed in Note 6 ‘Insurance and Reinsurance Contract
Assets and Liabilities’ has been measured under the variable fee approach (VFA) and the general measurement
model (GMM). At initial recognition, the Company measures a group of insurance contracts as the total of:
(a) fulfilment cash flows, which comprise of estimates of future cash flows, adjusted to reflect the time value of money
and financial risks, and a risk adjustment for non-financial risk; and (b) a contractual service margin (CSM), which
represents the estimate of unearned profit the Company will recognize as it provides service under the insurance
contracts or the loss component when the contracts are onerous. When projecting future cash flows for these
insurance contract liabilities, the Company primarily uses deterministic projections using best estimate assumptions.
Key assumptions are subjective and complex and include mortality, morbidity, investment returns, policy termination
rates, premium persistency, directly attributable expenses, taxes, and policyholder dividends. Disclosures on this
matter are found in Note 1 ‘Nature of Operations and Material Accounting Policy Information’ and Note 6 ‘Insurance
and Reinsurance Contract Assets and Liabilities’ of the consolidated financial statements.
Auditing the valuation of these insurance contract liabilities was complex and required the application of significant
auditor judgment due to the complexity of the cash flow models, the selection and use of assumptions, and the
interrelationship of these variables in measuring insurance contract liabilities. The audit effort involved professionals
with specialized skills and knowledge to assist in evaluating the audit evidence obtained.
How we
addressed the
matter in our
audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s
controls over the valuation of insurance contract liabilities. The controls we tested related to, among other areas,
actuarial methodology, integrity of data used, controls over relevant information technology, and the assumption
setting and implementation processes used by management.
To test the valuation of insurance contract liabilities, our audit procedures included, among other procedures, involving
our actuarial specialists to assess the methodology and assumptions with respect to compliance with IFRS. We
performed audit procedures over key assumptions, including testing the implementation of those assumptions into the
models. These procedures included testing underlying support and documentation, including reviewing a sample of
experience studies supporting specific assumptions, challenging the nature, timing, and completeness of changes
recorded, and assessing whether individual changes were errors or refinements of estimates. We also tested the
methodology and calculation of the insurance contract liabilities through both review of the calculation logic within the
models, and through calculating an independent estimate of the fulfillment cashflows for a sample of insurance
contracts and comparing the results to those determined by the Company and to industry and other external sources
for benchmarking. Additionally, we have performed an independent calculation of the CSM for a sample of groups of
insurance contracts and compared the amounts to the Company’s results. We also assessed the adequacy of the
disclosures related to the valuation of insurance contract liabilities.
Valuation of Invested Assets and Derivatives with Significant Non-Observable Market Inputs
Description of
the matter
The Company recorded invested assets of $93.9 billion, as disclosed in Note 3 ‘Invested Assets and Investment
Income’, and derivative assets and liabilities of $0.2 billion and $3.4 billion, respectively, as disclosed in Note 4
‘Derivative and Hedging Instruments’ at December 31, 2024 within its consolidated statement of financial position
which are both (a) measured at fair value and (b) classified as Level 3 within the Company’s hierarchy of fair value
measurements. The Level 3 invested assets include private placements, commercial mortgages, real estate, timber
and agriculture, and private equities valued using internal models. Level 3 derivative assets and liabilities primarily
include bond forwards. There is increased measurement uncertainty in determining the fair value of these invested
assets and derivatives due to volatility in the current economic environment. Fair values are based on internal models
or third-party appraisals that incorporate assumptions with a high-level of subjectivity including discount rates, credit
ratings and related spreads, expected future cash flows, transaction prices of comparable assets, volatilities,
correlations, and repurchase rates. Disclosures on this matter are found in Note 1 ‘Nature of Operations and Material
Accounting Policy Information’, Note 3 ‘Invested Assets and Investment Income’, and Note 4 ‘Derivative and Hedging
Instruments’ of the consolidated financial statements.
Auditing the valuation of these invested assets and derivatives was complex and required the application of significant
auditor judgment in assessing the valuation methodologies and non-observable inputs used. The valuation is sensitive
to the significant non-observable market inputs described above, which are inherently forward-looking and could be
affected by future economic and market conditions. The audit effort involved professionals with specialized skills and
knowledge to assist in evaluating the audit evidence obtained.
How we
addressed the
matter in our
audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s
controls over the valuation processes. The controls we tested related to, among other areas, management’s
determination and approval of assumptions and methodologies used in model-based valuations. The controls we
tested also included controls over relevant information technology.
To test the valuation, our audit procedures included, among other procedures, involving our valuation specialists to
assess the methodologies and significant inputs and assumptions used by management. These procedures included
assessing the valuation methodologies used with respect to the Company’s policies, valuation guidelines, and industry
practice and comparing a sample of valuation assumptions used against benchmarks including comparable
transactions where applicable. We also performed independent investment valuations on a sample basis to evaluate
management’s recorded values. In addition, we assessed the adequacy of the disclosures related to the valuation of
invested assets and derivatives.
149
IFRS 9 Hedge Accounting
Description of
the matter
The Company has designated hedge accounting relationships with the objective to reduce potential accounting
mismatches between changes in the fair value of derivatives in income and financial risk of insurance contract
liabilities and financial assets in other comprehensive income. Specifically, the Company has established relationships
to hedge the fair value changes of certain of the Company’s insurance contract liabilities and debt instruments
attributable to interest rate risk. The Company has also established relationships to hedge the risk of fair value
changes of certain foreign currency denominated insurance contract liabilities and debt instruments attributable to
foreign currency and interest rate risk. Related to the application of these hedges, the Company recognized changes
in value of hedged assets of ($462) million, and changes in value of hedged liabilities of $3,646 million, for the year
ended December 31, 2024. Disclosures on this matter are found in Note 1 ‘Nature of Operations and Material
Accounting Policy Information’ and Note 4 ‘Derivative and Hedging Instruments’ of the consolidated financial
statements.
Auditing the application of hedge accounting was complex and required the application of significant auditor
judgement related to the assessment of the ongoing economic relationship between the risk component of the hedged
item and hedging instrument, the assessment that the hedge ratio between the hedging instrument and the hedged
item was consistent with the risk objectives, and the determination of the resulting accumulated fair value adjustments.
The audit effort involved professionals with specialized skills and knowledge to assist in evaluating the audit evidence
obtained.
How we
addressed the
matter in our
audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s
controls over the application and execution of those strategies, including the implementation of new strategies where
applicable, and the measurements of the accumulated fair value adjustments. The controls we tested included, among
others, controls over the review of the completeness, accuracy, and eligibility of the hedged items and hedging
instruments included in the hedging relationships, determination of the hedge ratio between the hedging instrument
and the hedged item with reference to the risk objectives, and the determination of the resulting accumulated fair
value adjustments. The controls we tested also included controls over relevant information technology.
To assess the Company’s application of these hedge accounting strategies under IFRS 9, our audit procedures
included, among other procedures, involving our hedge accounting and derivative specialists to support our
independent testing of the application of the hedge ratio by the Company and the valuation of a sample of the
accumulated fair value adjustments. Other procedures performed include testing over the completeness and accuracy
of the hedged items and hedging instruments designated in these relationships and the determination of the resulting
accumulated fair value adjustments. In addition, we assessed the adequacy of the disclosures related to hedge
accounting.
Chartered Professional Accountants
Licensed Public Accountants
We have served as Manulife Financial Corporation’s auditor since 1905.
Toronto, Canada
February 19, 2025
150 | 2024 Annual Report | Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Manulife Financial Corporation
Opinion on Internal Control over Financial Reporting
We have audited Manulife Financial Corporation’s internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Manulife Financial Corporation (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated statements of financial position of the Company as of December 31, 2024 and 2023, and the related
consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in
equity and consolidated statements of cash flows for the years then ended, and the related notes and our report dated
February 19, 2025, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in Management’s Report on Internal Control
Over Financial Reporting contained in the Management’s Discussion and Analysis. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 19, 2025
151
Consolidated Statements of Financial Position
As at December 31,
(Canadian $ in millions)
2024
2023
Assets
Cash and short-term securities
$
25,789
$
20,338
Debt securities
210,621
212,149
Public equities
33,725
25,531
Mortgages
54,447
52,421
Private placements
49,668
45,606
Loans to Bank clients
2,310
2,436
Real estate
13,263
13,049
Other invested assets
52,674
45,680
Total invested assets (note 3)
442,497
417,210
Other assets
Accrued investment income
2,969
2,678
Derivatives (note 4)
8,667
8,546
Insurance contract assets (note 6)
102
145
Reinsurance contract held assets (note 6)
59,015
42,651
Deferred tax assets
5,884
6,739
Goodwill and intangible assets (note 5)
11,052
10,310
Miscellaneous
12,644
9,751
Total other assets
100,333
80,820
Segregated funds net assets (note 22)
435,988
377,544
Total assets
$ 978,818
$ 875,574
Liabilities and Equity
Liabilities
Insurance contract liabilities, excluding those for account of segregated fund holders (note 6)
$ 396,401
$ 367,996
Reinsurance contract held liabilities (note 6)
2,669
2,831
Investment contract liabilities (note 7)
13,498
11,816
Deposits from Bank clients
22,063
21,616
Derivatives (note 4)
14,252
11,730
Deferred tax liabilities
1,890
1,697
Other liabilities
24,936
18,879
Long-term debt (note 9)
6,629
6,071
Capital instruments (note 10)
7,532
6,667
Total liabilities, excluding those for account of segregated fund holders
489,870
449,303
Insurance contract liabilities for account of segregated fund holders (note 6)
126,545
114,143
Investment contract liabilities for account of segregated fund holders
309,443
263,401
Insurance and investment contract liabilities for account of segregated fund holders (note 22)
435,988
377,544
Total liabilities
925,858
826,847
Equity
Preferred shares and other equity (note 11)
6,660
6,660
Common shares (note 11)
20,681
21,527
Contributed surplus
204
222
Shareholders and other equity holders’ retained earnings
4,764
4,819
Shareholders and other equity holders’ accumulated other comprehensive income (loss) (“AOCI”):
Insurance finance income (expenses)
37,999
30,010
Reinsurance finance income (expenses)
(7,048)
(4,634)
Fair value through other comprehensive income (“OCI”) investments
(19,733)
(16,262)
Translation of foreign operations
7,327
4,801
Other
118
(104)
Total shareholders and other equity holders’ equity
50,972
47,039
Participating policyholders’ equity
567
257
Non-controlling interests
1,421
1,431
Total equity
52,960
48,727
Total liabilities and equity
$ 978,818
$ 875,574
The accompanying notes are an integral part of these Consolidated Financial Statements.
Roy Gori
President and Chief Executive Officer
Don Lindsay
Chair of the Board of Directors
152 | 2024 Annual Report | Consolidated Financial Statements
Consolidated Statements of Income
For the years ended December 31,
(Canadian $ in millions except per share amounts)
2024
2023
Insurance service result
Insurance revenue (note 6)
$ 26,592
$ 23,972
Insurance service expenses (note 6)
(21,822)
(19,382)
Net expenses from reinsurance contracts held (note 6)
(769)
(613)
Total insurance service result
4,001
3,977
Investment result
Investment income (note 3)
Investment income
18,249
16,180
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities
2,210
3,138
Investment expenses
(1,348)
(1,297)
Net investment income (loss)
19,111
18,021
Insurance finance income (expenses) and effect of movement in foreign exchange rates (note 6)
(16,219)
(13,894)
Reinsurance finance income (expenses) and effect of movement in foreign exchange rates (note 6)
1,133
(734)
Decrease (increase) in investment contract liabilities (note 6)
(504)
(435)
3,521
2,958
Segregated funds investment result (note 22)
Investment income related to segregated funds net assets
52,870
49,346
Financial changes related to insurance and investment contract liabilities for account of segregated fund
holders
(52,870)
(49,346)
Net segregated funds investment result
Zero
Zero
Total investment result
3,521
2,958
Other revenue (note 13)
7,588
6,746
General expenses
(4,859)
(4,330)
Commissions related to non-insurance contracts
(1,480)
(1,345)
Interest expenses
(1,681)
(1,554)
Net income (loss) before income taxes
7,090
6,452
Income tax (expenses) recoveries
(1,212)
(845)
Net income (loss)
$
5,878
$
5,607
Net income (loss) attributed to:
Non-controlling interests
$
247
$
144
Participating policyholders
246
360
Shareholders and other equity holders
5,385
5,103
$
5,878
$
5,607
Net income (loss) attributed to shareholders
$
5,385
$
5,103
Preferred share dividends and other equity distributions
(311)
(303)
Common shareholders’ net income (loss)
$
5,074
$
4,800
Earnings per share
Basic earnings per common share (note 11)
$
2.85
$
2.62
Diluted earnings per common share (note 11)
2.84
2.61
Dividends per common share
1.60
1.46
The accompanying notes are an integral part of these Consolidated Financial Statements.
153
Consolidated Statements of Comprehensive Income
For the years ended December 31,
(Canadian $ in millions)
2024
2023
Net income (loss)
$
5,878
$
5,607
Other comprehensive income (loss), net of tax:
Items that may be subsequently reclassified to net income:
Foreign exchange gains (losses) on:
Translation of foreign operations
3,109
(1,301)
Net investment hedges
(583)
183
Insurance finance income (expenses)
6,462
(9,745)
Reinsurance finance income (expenses)
(2,280)
787
Fair value through OCI investments:
Unrealized gains (losses) arising during the year on assets supporting insurance and investment contract
liabilities
(3,573)
9,251
Reclassification of net realized gains (losses) and provision for credit losses recognized in income
1,314
256
Other
158
37
Total items that may be subsequently reclassified to net income
4,607
(532)
Items that will not be reclassified to net income
66
(70)
Other comprehensive income (loss), net of tax
4,673
(602)
Total comprehensive income (loss), net of tax
$ 10,551
$
5,005
Total comprehensive income (loss) attributed to:
Non-controlling interests
$
4
$
18
Participating policyholders
310
334
Shareholders and other equity holders
10,237
4,653
Income Taxes included in Other Comprehensive Income
For the years ended December 31,
(Canadian $ in millions)
2024
2023
Income tax expenses (recoveries) on:
Unrealized foreign exchange gains (losses) on translation of foreign operations
$
1
$
(1)
Unrealized foreign exchange gains (losses) on net investment hedges
(37)
13
Insurance / reinsurance finance income (expenses)
1,207
(1,853)
Unrealized gains (losses) on fair value through OCI investments
(480)
1,863
Reclassification of net realized gains (losses) on fair value through OCI investments
300
(8)
Other
68
(20)
Total income tax expenses (recoveries)
$
1,059
$
(6)
The accompanying notes are an integral part of these Consolidated Financial Statements.
154 | 2024 Annual Report | Consolidated Financial Statements
Consolidated Statements of Changes in Equity
For the years ended December 31,
(Canadian $ in millions)
2024
2023
Preferred shares and other equity
Balance, beginning of year
$
6,660
$
6,660
Issued (note 11)
Zero
Zero
Redeemed (note 11)
Zero
Zero
Balance, end of year
6,660
6,660
Common shares
Balance, beginning of year
21,527
22,178
Repurchased (note 11)
(990)
(745)
Issued on exercise of stock options and deferred share units
144
94
Balance, end of year
20,681
21,527
Contributed surplus
Balance, beginning of year
222
238
Exercise of stock options and deferred share units
(18)
(18)
Stock option expense
Zero
2
Balance, end of year
204
222
Shareholders and other equity holders’ retained earnings
Balance, beginning of year
4,819
3,538
Net income (loss) attributed to shareholders and other equity holders
5,385
5,103
Common shares repurchased (note 11)
(2,282)
(850)
Preferred share dividends and other equity distributions
(311)
(303)
Common share dividends
(2,848)
(2,669)
Other
1
Zero
Balance, end of year
4,764
4,819
Shareholders and other equity holders’ accumulated other comprehensive income (loss) (“AOCI”):
Balance, beginning of year
13,811
14,261
Change in unrealized foreign exchange gains (losses) on net foreign operations
2,526
(1,117)
Changes in insurance / reinsurance finance income (expenses)
5,575
(7,222)
Change in unrealized gains (losses) on fair value through OCI investments
(3,471)
7,923
Other changes in OCI attributed to shareholders and other equity holders
222
(34)
Balance, end of year
18,663
13,811
Total shareholders and other equity holders’ equity, end of year
50,972
47,039
Participating policyholders’ equity
Balance, beginning of year
257
(77)
Net income (loss) attributed to participating policyholders
246
360
Other comprehensive income (losses) attributed to policyholders
64
(26)
Balance, end of year
567
257
Non-controlling interests
Balance, beginning of year
1,431
1,427
Net income (loss) attributed to non-controlling interests
247
144
Other comprehensive income (losses) attributed to non-controlling interests
(243)
(126)
Contributions (distributions and acquisitions), net
(14)
(14)
Balance, end of year
1,421
1,431
Total equity, end of year
$ 52,960
$ 48,727
The accompanying notes are an integral part of these Consolidated Financial Statements.
155
Consolidated Statements of Cash Flows
For the years ended December 31,
(Canadian $ in millions)
2024
2023
Operating activities
Net income (loss)
$
5,878
$
5,607
Adjustments:
Increase (decrease) in insurance contract net liabilities (note 6)
9,435
10,697
Increase (decrease) in investment contract liabilities
504
435
(Increase) decrease in reinsurance contract assets, excluding reinsurance transaction noted below (note 6)
(613)
974
Amortization of (premium) discount on invested assets
(290)
(141)
Contractual service margin (“CSM”) amortization
(2,376)
(1,998)
Other amortization
869
581
Net realized and unrealized (gains) losses and impairment on assets
(860)
(2,845)
Deferred income tax expenses (recoveries)
311
470
Net loss on reinsurance transactions (pre-tax) (note 6)
71
Zero
Stock option expense
Zero
2
Cash provided by operating activities before undernoted items
12,929
13,782
Changes in policy related and operating receivables and payables
13,565
6,641
Cash provided by (used in) operating activities
26,494
20,423
Investing activities
Purchases and mortgage advances
(131,123)
(84,021)
Disposals and repayments
112,671
70,281
Change in investment broker net receivables and payables
290
21
Net cash increase (decrease) from sale (purchase) of subsidiaries
(297)
(1)
Cash provided by (used in) investing activities
(18,459)
(13,720)
Financing activities
Change in repurchase agreements and securities sold but not yet purchased
460
(693)
Issue of capital instruments, net (note 10)
2,591
1,194
Redemption of capital instruments (note 10)
(1,886)
(600)
Secured borrowing from securitization transactions
667
537
Change in deposits from Bank clients, net
413
(895)
Lease payments
(118)
(98)
Shareholders’ dividends and other equity distributions
(3,159)
(2,972)
Contributions from (distributions to) non-controlling interests, net
(14)
(14)
Common shares repurchased (note 11)
(3,272)
(1,595)
Common shares issued, net (note 11)
144
94
Cash provided by (used in) financing activities
(4,174)
(5,042)
Cash and short-term securities
Increase (decrease) during the year
3,861
1,661
Effect of foreign exchange rate changes on cash and short-term securities
1,197
(412)
Balance, beginning of year
19,884
18,635
Balance, end of year
24,942
19,884
Cash and short-term securities
Beginning of year
Gross cash and short-term securities
20,338
19,153
Net payments in transit, included in other liabilities
(454)
(518)
Net cash and short-term securities, beginning of year
19,884
18,635
End of year
Gross cash and short-term securities
25,789
20,338
Net payments in transit, included in other liabilities
(847)
(454)
Net cash and short-term securities, end of year
$
24,942
$
19,884
Supplemental disclosures on cash flow information
Interest received
$
13,496
$
12,768
Interest paid
1,574
1,548
Income taxes paid
755
436
The accompanying notes are an integral part of these Consolidated Financial Statements.
156 | 2024 Annual Report | Consolidated Financial Statements
Notes to Consolidated Financial Statements
Page Number
Note
158
Note 1
Nature of Operations and Material Accounting Policy Information
174
Note 2
Accounting and Reporting Changes
175
Note 3
Invested Assets and Investment Income
186
Note 4
Derivative and Hedging Instruments
195
Note 5
Goodwill and Intangible Assets
197
Note 6
Insurance and Reinsurance Contract Assets and Liabilities
223
Note 7
Investment Contract Liabilities
225
Note 8
Risk Management
241
Note 9
Long Term Debt
242
Note 10
Capital Instruments
243
Note 11
Equity Capital and Earnings Per Share
245
Note 12
Capital Management
246
Note 13
Revenue from Service Contracts
247
Note 14
Stock-Based Compensation
248
Note 15
Employee Future Benefits
253
Note 16
Income Taxes
256
Note 17
Interests in Structured Entities
258
Note 18
Commitments and Contingencies
260
Note 19
Segmented Information
262
Note 20
Related Parties
263
Note 21
Subsidiaries
264
Note 22
Segregated Funds
265
Note 23
Information Provided in Connection with Investments in Deferred Annuity Contracts and SignatureNotes Issued
or Assumed by John Hancock Life Insurance Company (U.S.A.)
269
Note 24
Comparatives
157
Notes to Consolidated Financial Statements
(Canadian $ in millions except per share amounts or unless otherwise stated)
Note 1 Nature of Operations and Material Accounting Policy Information
(a) Reporting entity
Manulife Financial Corporation (“MFC”) is a publicly traded company and the holding company of The Manufacturers Life
Insurance Company (“MLI”), a Canadian life insurance company. MFC, including its subsidiaries (collectively, “Manulife” or the
“Company”) is a leading financial services group with principal operations in Asia, Canada and the United States. Manulife’s
international network of employees, agents and distribution partners offers financial protection and wealth management products
and services to personal and business clients as well as asset management services to institutional customers. The Company
operates as Manulife in Asia and Canada and as John Hancock and Manulife in the United States.
MFC is domiciled in Canada and incorporated under the Insurance Companies Act (Canada) (“ICA”). These Consolidated
Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”).
These Consolidated Financial Statements as at and for the year ended December 31, 2024 were authorized for issue by MFC’s
Board of Directors on February 19, 2025.
(b) Basis of preparation
The preparation of Consolidated Financial Statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
and the disclosure of contingent assets and liabilities as at the date of the Consolidated Financial Statements, and the reported
amounts of insurance service, investment result, and other revenue and expenses during the reporting periods. Actual results
may differ from these estimates. The most significant estimation processes relate to evaluating assumptions used in measuring
insurance and investment contract liabilities and reinsurance contracts held liabilities, assessing assets for impairment,
determining pension and other post-employment benefit obligation and expense assumptions, determining income taxes and
uncertain tax positions, and estimating fair values of certain invested assets. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised
and in any future years affected. Although some variability is inherent in these estimates, management believes that the amounts
recorded are appropriate. The material accounting policies used and the most significant judgments made by management in
applying these accounting policies in the preparation of these Consolidated Financial Statements are summarized below.
The Company’s results and operations have been and may continue to be adversely impacted by the economic environment.
The adverse effects include but are not limited to recessionary economic trends in markets the Company operates in, significant
market volatility, increase in credit risk, strain on commodity markets and alternative long duration asset (“ALDA”) prices, foreign
currency exchange rate volatility, increases in insurance claims, persistency and redemptions, and disruption of business
operations. The breadth and depth of these events and their duration contribute additional uncertainty around estimates used in
determining the carrying value of certain assets and liabilities included in these Consolidated Financial Statements.
The Company has applied appropriate fair value measurement techniques using reasonable judgment and estimates from the
perspective of a market participant to reflect current economic conditions. The impact of these techniques has been reflected in
these Consolidated Financial Statements. Changes in the inputs used could materially impact the respective carrying values.
(c) Fair value measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (not
a forced liquidation or distress sale) between market participants at the measurement date; fair value is an exit value.
When available, quoted market prices are used to determine fair value. If quoted market prices are not available, fair value is
typically based upon alternative valuation techniques such as discounted cash flows, matrix pricing, consensus pricing services
and other techniques. Broker quotes are generally used when external public vendor prices are not available.
The Company has a valuation process in place that includes a review of price movements relative to the market, a comparison of
prices between vendors, and a comparison to internal matrix pricing which uses predominantly external observable data.
Judgment is applied in adjusting external observable data for items including liquidity and credit factors.
The Company categorizes its fair value measurement results according to a three-level hierarchy. The hierarchy prioritizes the
inputs used by the Company’s valuation techniques based on their reliability. A level is assigned to each fair value measurement
based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy
are defined as follows:
Level 1 – Fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that
the Company can access at the measurement date, reflecting market transactions.
158 | 2024 Annual Report | Notes to Consolidated Financial Statements
Level 2 – Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices (such as
interest rates, credit risks, etc.) and inputs that are derived from or corroborated by observable market data. Most debt
investments are classified within Level 2. Also, included in the Level 2 category are derivative instruments that are priced using
models with observable market inputs, including interest rate swaps, equity swaps, credit default swaps and foreign currency
forward contracts.
Level 3 – Fair value measurements using significant non-market observable inputs. These include valuations for assets and
liabilities that are derived using data, some or all of which is not market observable, including assumptions about risk. Level 3
security valuations include less liquid investments such as real estate, other invested assets, timber investments held within
segregated funds, certain long-duration bonds and other investments that have little or no price transparency. Certain derivative
financial instrument valuations are also included in Level 3.
(d) Basis of consolidation
MFC consolidates the financial statements of all entities it controls, including certain structured entities. Subsidiaries are entities
controlled by the Company. The Company has control over an entity when the Company has the power to govern the financial
and operating policies of the entity and is exposed to variable returns from its activities which are significant in relation to the total
variable returns of the entity and the Company is able to use its power over the entity to affect the Company’s share of variable
returns of the entity. In assessing control, significant judgment is applied while considering all relevant facts and circumstances.
When assessing decision making power over an entity, the Company considers the extent of its rights relative to the
management of the entity, the level of voting rights held over the entity which are potentially or presently exercisable, the
existence of any contractual management agreements which may provide the Company with power over the entity’s financial
and operating policies, and to the extent of other parties’ ownership in the entity, if any, the possibility for de facto control being
present. When assessing variable returns from an entity, the Company considers the significance of direct and indirect financial
and non-financial variable returns to the Company from the entity’s activities in addition to the proportionate significance of such
returns to the total variability of the entity. The Company also considers the degree to which its interests are aligned with those of
other parties investing in the entity and the degree to which the Company may act in its own interest while interacting with the
entity.
The financial statements of subsidiaries are included in MFC’s consolidated results from the date control is established and are
excluded from consolidation from the date control ceases. The initial control assessment is performed at the inception of the
Company’s involvement with the entity and is reconsidered if the Company acquires or loses power over key operating and
financial policies of the entity; acquires additional interests or disposes of interests in the entity; the contractual arrangements of
the entity are amended such that the Company’s proportionate exposure to variable returns changes; or if the Company’s ability
to use its power to affect its variable returns from the entity changes. A change in control may lead to gains or losses on
derecognition of a subsidiary when losing control, or on derecognition of previous interests in a subsidiary when gaining control.
The Company’s Consolidated Financial Statements have been prepared using uniform accounting policies for like transactions
and events in similar circumstances. Intercompany balances, and revenue and expenses arising from intercompany transactions,
have been eliminated in preparing the Consolidated Financial Statements.
Non-controlling interests are interests of other parties in the equity of MFC’s subsidiaries and are presented within total equity,
separate from the equity of MFC’s participating policyholders and shareholders. Non-controlling interests in the net income and
other comprehensive income (“OCI”) of MFC’s subsidiaries are included in total net income and total OCI, respectively. An
exception to this occurs where the subsidiary’s shares are either puttable by the other parties or are redeemable for cash on a
fixed or determinable date, in which case other parties’ interests in the subsidiary’s capital are presented as liabilities of the
Company and other parties’ interests in the subsidiary’s net income and OCI are recorded as expenses of the Company.
The equity method of accounting is used to account for entities over which the Company has significant influence or joint control
(“associates” or “joint ventures”), whereby the Company records its share of the associate’s or joint venture’s net assets and
financial results using uniform accounting policies for similar transactions and events. Significant judgment is used to determine
whether voting rights, contractual management rights and other relationships with the entity, if any, provide the Company with
significant influence or joint control over the entity. Gains and losses on the sale of associates or joint ventures are included in
income when realized, while impairment losses are recognized immediately when there is objective evidence of impairment.
Gains and losses on commercial transactions with associates or joint ventures are eliminated to the extent of the Company’s
interest in the equity of the associate or joint venture. Investments in associates and joint ventures are included in other invested
assets on the Company’s Consolidated Statements of Financial Position.
(e) Invested assets
Invested assets are recognized initially at fair value plus, in the case of investments not classified as fair value through profit or
loss (“FVTPL”), directly attributable transaction costs. Invested assets that are considered financial instruments are classified as
159
fair value through other comprehensive income (“FVOCI”), FVTPL or as amortized cost. The Company determines the
classification of its financial assets at initial recognition.
The classification of invested assets which are financial instruments depends on their contractual terms and the Company’s
business model for managing the assets.
The Company assesses the contractual terms of the assets to determine whether their terms give rise on specified dates to cash
flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Only debt instruments may
have SPPI cash flows. The most significant elements of interest within a lending arrangement are typically the consideration for
the time value of money and credit risk. To make the SPPI assessment, the Company applies judgement and considers relevant
factors such as prepayment and redemption rights, conversion features, and subordination of the instrument to other instruments
of the issuer. An asset with contractual terms that introduce a more than de minimis exposure to risks of not collecting principal
or interest would not meet the SPPI test.
Debt instruments which qualify as having SPPI cash flows are classified as amortized cost or FVOCI based on the business
model under which they are held. If held within a business model whose objective is to hold the assets in order to collect
contractual cash flows, they are classified as amortized cost. If held within a business model whose objective is achieved by both
collecting contractual cash flows and selling the assets, they are classified as FVOCI. In either case, the Company may
designate them as FVTPL in order to reduce accounting mismatches with FVTPL liabilities they support. Debt instruments which
fail the SPPI test are required to be measured at FVTPL. To identify the business model financial assets are held within,
considerations include the business purpose of the portfolio they are held within, the risks that are being managed and the
business activities which manage the risks, the basis on which performance of the portfolio is being evaluated, and the frequency
and significance of sales activity within the portfolio.
Realized and unrealized gains and losses on debt instruments classified as FVTPL and realized gains and losses on debt
instruments held at FVOCI or amortized cost are recognized in investment income immediately. Unrealized gains and losses on
FVOCI debt investments are recorded in OCI, except for unrealized gains and losses on foreign currency translation which are
included in income.
Investments in equities which are accounted for as financial instruments are not subject to the SPPI test and are accounted for
as FVTPL.
Valuation methods for the Company’s invested assets are described above in note 1 (c). All fair value valuations are performed
in accordance with IFRS 13 “Fair Value Measurement”. Disclosure of financial instruments carried at fair value within the three
levels of the fair value hierarchy and disclosure of the fair value for financial instruments not carried at fair value on the
Consolidated Statements of Financial Position are presented in note 3. Fair value valuations are performed by the Company and
by third-party service providers. When third-party service providers are engaged, the Company performs a variety of procedures
to corroborate pricing information. These procedures may include, but are not limited to, inquiry and review of valuation
techniques, and of inputs to the valuation and vendor controls reports.
Cash and short-term securities comprise cash, current operating accounts, overnight bank and term deposits, and debt instruments
held for meeting short-term cash commitments. Short-term securities are carried at fair value. Short-term securities comprise
investments due to mature within one year of the date of purchase. Commercial paper and discount notes are classified as Level 2
for fair value purposes because these instruments are typically not actively traded. Net payments in transit and overdraft bank
balances are included in other liabilities.
Debt securities are carried at fair value or amortized cost. Debt investments are generally valued by independent pricing vendors
using proprietary pricing models incorporating current market inputs for similar investments with comparable terms and credit
quality (matrix pricing). The significant inputs include, but are not limited to, yield curves, credit risks and spreads, prepayment
rates and volatility of these inputs. Debt investments are classified as Level 2 but can be Level 3 if significant inputs are not
market observable.
Public equities comprise of common and preferred equities and shares or units of mutual funds and are carried at fair value.
Public equities are generally classified as Level 1, as fair values are normally based on quoted market prices. Realized and
unrealized gains and losses on equities designated as FVTPL are recognized in investment income immediately. The
Company’s risk management policies and procedures related to equities can be found in the denoted components of the “Risk
Management and Risk Factors” section of the Company’s 2024 Management’s Discussion and Analysis (“MD&A”).
Mortgages are classified as Level 3 for fair value purposes due to the lack of market observability of certain significant valuation
inputs.
The Company accounts for insured and uninsured mortgage securitizations as secured financing transactions since the criteria
for sale accounting of securitized mortgages are not met. For these transactions, the Company continues to recognize the
mortgages and records a liability in other liabilities for the amounts owed at maturity. Interest income from these mortgages and
interest expense on the borrowings are recorded using the effective interest rate (“EIR”) method.
Private placements, which include corporate loans for which there is no active market, are generally classified as Level 2 for fair
value disclosure purposes or as Level 3 if significant inputs are not market observable.
160 | 2024 Annual Report | Notes to Consolidated Financial Statements
Loans to Manulife Bank of Canada (“Manulife Bank” or “Bank”) clients are carried at amortized cost and are classified as Level 2
for fair value disclosure purposes.
Interest income is recognized on all debt instruments including securities, private placements, mortgages, and loans to Bank
clients as it accrues and is calculated using the EIR method. Premiums, discounts and transaction costs are amortized over the
life of the underlying investment using the effective yield method for all debt securities as well as private placements and
mortgages.
The Company records purchases and sales of invested assets on a trade date basis. Loans originated by the Company are
recognized on a settlement date basis.
Real estate consists of both own use and investment property. Own use property is carried at cost less accumulated depreciation
and any accumulated impairment losses, or at revalued amount which is the fair value as at the most recent revaluation date
minus accumulated amortization and any accumulated impairment losses. Depreciation is calculated based on the cost of an
asset less its residual value and is recognized in income on a straight-line basis over the estimated useful life ranging from 30 to
60 years. Impairment losses are recorded in income to the extent the recoverable amount is less than the carrying amount. Own
use property is classified as Level 3 for fair value disclosure purposes. Own use real estate properties which are underlying items
for insurance contracts with direct participating features are measured at fair value as if they were investment properties, as
permitted by International Accounting Standards (“IAS”) 16 “Property, Plant and Equipment” which was amended by IFRS 17
“Insurance Contracts” (“IFRS 17”).
An investment property is a property held to earn rental income, for capital appreciation, or both. Investment properties are
measured at fair value, with changes in fair value recognized in income. Fair value of own use properties and investment
properties is determined using the same processes. Fair value for all properties is determined using external appraisals that are
based on the highest and best use of the property. The valuation techniques include discounted cash flows, the direct
capitalization method as well as comparable sales analysis and employ both observable and non-market observable inputs.
Inputs include existing and assumed tenancies, market data from recent comparable transactions, future economic outlook and
market risk assumptions, capitalization rates and internal rates of return. Investment properties are classified as Level 3 for fair
value disclosure purposes.
When a property transfers from own use held at cost to investment property, any gain or loss arising on the re-measurement of
the property and any associated leases to fair value as at the date of change in use is recognized in OCI, to the extent that it is
not reversing a previous impairment loss. Reversals of impairment losses are recognized in income. When a property changes
from investment property to own use held at cost, the property’s deemed cost for subsequent accounting is its fair value as at the
date of change in use.
Other invested assets include private equity and debt investments and property investments held in infrastructure, timber,
agriculture and energy sectors. Private equity investments which are associates or joint ventures are accounted for using the
equity method (as described in note 1 (d) above) or are classified as FVTPL and carried at fair value. Timber and agriculture
properties which are own use properties are carried at cost less accumulated depreciation and any accumulated impairment
losses, except for their biological assets which are measured at fair value. Timber and agriculture properties which are
investment properties are measured at fair value with changes in fair value recognized in income. The fair value of other invested
assets is determined using a variety of valuation techniques as described in note 3. Other invested assets that are measured or
disclosed at fair value are classified as Level 3 for fair value disclosure purposes.
Other invested assets also include investments in leveraged leases, which are accounted for using the equity method. The
carrying value under the equity method reflects the amortized cost of the unconsolidated lease entity’s lease receivable and
related non-recourse debt using the effective yield method.
Expected Credit Loss Impairment
The expected credit loss (“ECL”) impairment allowance model applies to invested assets which are debt instruments and
measured at FVOCI or amortized cost. ECL allowances are measured under four probability-weighted macroeconomic
scenarios, which measure the difference between all contractual cash flows that are due to the Company in accordance with the
contract and all the cash flows that the Company expects to receive, discounted at the original EIR. This process includes
consideration of past events, current market conditions and reasonable supportable information about future economic
conditions. Forward-looking macroeconomic variables used within the estimation models represent variables that are the most
closely related with credit losses in the relevant portfolio.
The estimation and measurement of impairment losses requires significant judgement. These estimates are driven by many
elements, changes in which can result in different levels of allowances. Elements include the estimation of the amount and timing
of future cash flows, the Company’s criteria for assessing if there has been a significant increase in credit risk (“SICR”), the
selection of forward-looking macroeconomic scenarios and their probability weights, the application of expert credit judgment in
the development of the models, inputs and, when applicable, overlay adjustments. It is the Company’s practice to regularly
review its models in the context of actual loss experience and adjust when necessary. The Company has implemented formal
policies, procedures, and controls over all significant impairment processes.
161
The Company’s definitions of default and credit-impaired are based on quantitative and qualitative factors. A financial instrument
is considered to be in default when significant payments of interest, principal or fees are past due for more than 90 days, unless
remedial arrangements with the issuer are in place. A financial instrument may be credit impaired as a result of one or more loss
events that occurred after the date of initial recognition of the instrument and the loss event has a negative impact on the
estimated future cash flows of the instrument. This includes events that indicate or include: significant financial difficulty of the
counterparty; a breach of contract; for economic or contractual reasons relating to the counterparty’s financial difficulty,
concessions are granted that would not otherwise be considered; it is becoming probable that the counterparty will enter
bankruptcy or other financial reorganization; the disappearance of an active market for that financial asset because of the
counterparty’s financial difficulties; or the counterparty is considered to be in default by any of the major rating agencies such as
S&P, Moody’s and Fitch.
The ECL calculations include the following elements:
• Probability of default (“PD”) is an estimate of the likelihood of default over a given time horizon.
• Loss given default (“LGD”) is an estimate of the loss arising on a future default. This is based on the difference between the
contractual cash flows due and those that the Company expects to receive, including from collateral. It is based on credit
default studies performed based on internal credit experience.
• Exposure at default (“EAD”), is an estimate of the exposure at a future default date, considering both the period of exposure
and the amount of exposure at a given reporting date. The EADs are determined by modelling the range of possible exposure
outcomes at various points in time, corresponding to the multiple economic scenarios. The probabilities are then assigned to
each economic scenario based on the outcome of the models.
The Company measures ECLs using a three-stage approach:
• Stage 1 comprise all performing financial instruments that have not experienced a SICR since initial recognition. The
determination of SICR varies by instrument and considers the relative change in the risk of default since origination. 12-
month ECLs are recognized for all Stage 1 financial instruments. 12-month ECLs represent the portion of lifetime ECLs that
result from default events possible within 12 months of the reporting date. These expected 12-month default probabilities are
applied to a forecast EAD, multiplied by the expected LGD, and discounted by the original EIR. This calculation is made for
each of four macroeconomic scenarios.
• Stage 2 comprise all performing financial instruments that have experienced a SICR since original recognition or have
become 30 days in arrears for principal or interest payments, whichever happens first. When assets move to Stage 2, full
lifetime ECLs are recognized, which represent ECLs that result from all possible default events over the remaining lifetime of
the financial instrument. The mechanics are consistent with Stage 1, except PDs and LGDs are estimated over the remaining
lifetime of the instrument instead of over the coming year. In subsequent reporting periods, if the credit risk of a financial
instrument improves such that there is no longer a SICR compared to credit risk at initial recognition, the financial instrument
will migrate back to Stage 1 and 12-month ECLs will be recognized.
• Stage 3 comprise financial instruments identified as credit impaired. Similar to Stage 2 assets, full lifetime ECLs are
recognized for Stage 3 financial instruments, but the PD is set at 100%. A Stage 3 ECL is calculated using the unpaid
principal balance multiplied by LGD which reflects the difference between the asset’s carrying amount and its discounted
expected future cash flows.
Interest income is calculated based on the gross carrying amount for both Stage 1 and 2 exposures. Interest income on Stage 3
financial instruments is determined by applying the EIR to the amortized cost of the instrument, which represents the gross
carrying amount adjusted for the credit loss allowance.
For Stage 1 and Stage 2 exposures, an ECL is generated for each individual exposure; however, the relevant parameters are
modelled on a collective basis with all collective parameters captured by the individual security level. The exposures are grouped
into smaller homogeneous portfolios, based on a combination of internal and external characteristics, such as origination details,
balance history, sector, geographic location, and credit history. Stage 3 ECLs are either individually or collectively assessed,
depending on the nature of the instrument and impairment.
In assessing whether credit risk has increased significantly, the risk of default occurring is compared over the remaining
expected life from the reporting date and as at the date of initial recognition. The assessment varies by instrument and risk
segment. The assessment incorporates internal credit risk ratings and a combination of security-specific and portfolio-level
assessments, including the incorporation of forward-looking macroeconomic data. The assessment of SICR considers both
absolute and relative thresholds. If contractual payments are more than 30 days past due, the credit risk is automatically deemed
to have increased significantly since initial recognition.
When estimating ECLs, the four probability-weighted macroeconomic scenarios are considered. Economic forward-looking
inputs vary by market. Depending on their usage in the models, macroeconomic inputs are projected at the country, province, or
more granular level. Each macroeconomic scenario used includes a projection of all relevant macroeconomic variables for a five-
162 | 2024 Annual Report | Notes to Consolidated Financial Statements
year period, subsequently reverting to long-run averages. In order to achieve an unbiased estimate, economic data used in the
models is supplied by an external source. This information is compared to other publicly available forecasts, and the scenarios
are assigned a probability weighting based on statistical analysis and management judgment. Refer to note 8 (c).
The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the
Consolidated Financial Statements.
Changes in the required ECL allowance are recorded in the provision for credit losses within Investment income in the
Consolidated Statements of Income. Invested assets are written off, either partially or in full, against the related allowance for
credit losses when there is no realistic prospect of recovery in respect of those amounts. This is considered a partial or full
derecognition of the financial asset. In subsequent periods, any recoveries of amounts previously written off are credited to the
provision for credit losses.
(f) Goodwill and intangible assets
Goodwill represents the difference between the fair value of purchase consideration of an acquired business and the Company’s
proportionate share of the net identifiable assets acquired. It is initially recorded at cost and subsequently measured at cost less
any accumulated impairment.
Goodwill is tested for impairment at least annually and whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable at the cash generating unit (“CGU”) or group of CGUs level. The Company allocates goodwill to
CGUs or group of CGUs for impairment testing at the lowest level within the Company where the goodwill is monitored for
internal management purposes. The allocation is made to those CGUs or group of CGUs that are expected to benefit from the
business combination in which the goodwill arose. Any potential impairment of goodwill is identified by comparing the
recoverable amount with the carrying value of a CGU or group of CGUs. Goodwill is reduced by the amount of deficiency, if any.
If the deficiency exceeds the carrying amount of goodwill, the carrying values of the remaining assets in the CGU or group of
CGUs are subject to being reduced by the remaining deficiency on a pro-rata basis.
The recoverable amount of a CGU or group of CGUs is the higher of the estimated fair value less costs to sell or the value-in-use
of the CGU or group of CGUs. In assessing value-in-use, estimated future cash flows are discounted using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the CGU or group of CGUs. In
some cases, the most recent detailed calculation made in a prior period of a recoverable amount is used in the current period
impairment testing. This is the case only if there are no significant changes to the CGU or group of CGUs, the likelihood of
impairment is remote based on the analysis of current events and circumstances, and the most recently calculated recoverable
amount substantially exceeded the current carrying amount of the CGU or group of CGUs.
Intangible assets with indefinite useful lives include the John Hancock brand name, certain investment management contracts
and certain agricultural water rights. The indefinite useful life assessment for the John Hancock brand name is based on the
brand name being protected by indefinitely renewable trademarks in markets where branded products are sold, and for certain
investment management contracts based on the ability to renew these contracts indefinitely. In addition, there are no legal,
regulatory or contractual provisions that limit the useful lives of these intangible assets. Certain agricultural water rights are held
in perpetuity. An intangible asset with an indefinite useful life is not amortized but is subject to an annual impairment test which is
performed more frequently if an indication that it is not recoverable arises.
Intangible assets with finite useful lives include acquired distribution networks, customer relationships, capitalized software, and
certain investment management contracts and other contractual rights. Distribution networks, customer relationships, and other
finite life intangible assets are amortized over their estimated useful lives, six to 68 years, either based on the passage of time or
in relation to asset consumption metrics. Software intangible assets are amortized on a straight-line basis over their estimated
useful lives of three to 10 years. Finite life intangible assets are assessed for indicators of impairment at each reporting period. If
an indication of impairment arises, these assets are tested for impairment.
(g) Miscellaneous assets
Miscellaneous assets include assets held in a rabbi trust with respect to unfunded defined benefit obligations, defined benefit
assets and capital assets. Rabbi trust assets are carried at fair value. Defined benefit assets’ carrying value is explained in note
1 (o). Capital assets are carried at cost less accumulated amortization computed on a straight-line basis over their estimated
useful lives, which vary from two to 10 years.
(h) Segregated funds
The Company manages segregated funds on behalf of policyholders, which are presented as segregated funds net assets with
offsetting insurance and investment contract liabilities for account of segregated fund holders in the amount of their account
balances. The investment returns on these funds are passed directly to policyholders. In some cases, the Company has provided
guarantees associated with these funds. Amounts invested by the Company in segregated funds for seed purposes are
presented within invested asset categories based on the nature of the underlying investments.
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Segregated funds net assets are measured at fair value and include investments in mutual funds, debt securities, equities, cash,
short-term investments and other investments. With respect to the consolidation requirement of IFRS, in assessing the
Company’s degree of control over the underlying investments, the Company considers the scope of its decision-making rights,
the rights held by other parties, its remuneration as an investment manager and its exposure to variability of returns from the
investments. The Company has determined that it does not have control over the underlying investments as it acts as an agent
on behalf of segregated fund policyholders.
The methodology applied to determine the fair value of investments held in segregated funds is consistent with that applied to
invested assets held by the general fund, as described above in note 1 (e). Segregated funds liabilities are measured based on
the value of the segregated funds net assets. Investment returns on segregated funds assets are passed directly to policyholders
and the Company does not bear the risk associated with these assets outside of guarantees offered on certain variable life and
annuity products, for which the underlying investments are held within segregated funds.
Some of the Company’s liabilities for account of segregated fund holders arise from insurance contracts that it issues. These are
reported as Insurance contract liabilities for account of segregated fund holders, representing the Company’s obligation to pay
the policyholder an amount equal to the fair value of the underlying items, and are measured at the aggregate of policyholder
account balances. Changes in fair value of these liabilities are reported as Financial changes related to insurance and
investment contract liabilities for account of segregated fund holders in the Consolidated Statements of Income. Other liabilities
associated with these insurance contracts, such as those associated with guarantees provided by the Company as a result of
certain variable life and annuity contracts, are included in Insurance contract assets or Insurance contract liabilities, excluding
those for account of segregated fund holders on the Consolidated Statements of Financial Position. The Company holds assets
supporting these guarantees in the general fund, which are included in invested assets according to their investment type.
The remaining liabilities for account of segregated fund holders do not arise from insurance contracts that the Company issues,
and are reported as Investment contract liabilities for account of segregated fund holders on the Consolidated Statements of
Financial Position. These are also measured at the aggregate of policyholder account balances and changes in fair value of
these liabilities are reported as Financial changes related to insurance and investment contract liabilities for account of
segregated fund holders in the Consolidated Statements of Income.
(i) Insurance contract liabilities and reinsurance contract assets
Scope and classification
Contracts issued by the Company are classified as insurance, investment, or service contracts at initial recognition. Insurance contracts
are contracts under which the Company accepts significant insurance risk from a policyholder. A contract is considered to have
significant insurance risk if an insured event could cause the Company to pay significant additional amounts in any single scenario with
commercial substance. The additional amounts refer to the present value of amounts that exceed those that would be payable if no
insured event had occurred.
Reinsurance contracts held are contracts held by the Company under which it transfers significant insurance risk related to
underlying insurance contracts to other parties, along with the associated premiums. The purpose of the reinsurance contracts
held is to mitigate the significant insurance risk that the Company may have from the underlying insurance contracts.
Both insurance and reinsurance contracts are accounted for in accordance with IFRS 17. Contracts under which the Company
does not accept significant insurance risk are either classified as investment contracts or considered service contracts and are
accounted for in accordance with IFRS 9 “Financial Instruments” (“IFRS 9”) or IFRS 15 “Revenue from Contracts with
Customers” (“IFRS 15”), respectively.
Insurance contracts are classified as direct participation contracts or contracts without direct participation features based on
specific criteria. Insurance contracts with direct participation features are insurance contracts that are substantially investment-
related service contracts under which the Company promises an investment return based on underlying items. They are viewed
as creating an obligation to pay policyholders an amount that is equal to the fair value of the underlying items, less a variable fee
for service.
Separation of components
At inception of insurance and reinsurance contracts held, the Company analyses whether they contain the following components
that are separated and accounted for under other IFRS standards:
• Derivatives embedded within insurance contracts which contain risks and characteristics that are not closely related to those
of the host contract unless the embedded derivative itself meets the definition of an insurance contract;
• Distinct investment components which represent cash flows paid (received) in all circumstances regardless of whether an
insured event has occurred or not. Investment components are distinct if they are not highly interrelated with insurance
component cash flows and if they could be issued on a stand-alone basis; and
• Distinct service components which are promises to transfer goods or non-insurance services if the policyholder can benefit
from it either on its own or with other resources that are readily available to the policyholder. The service components are
distinct if they are not highly interrelated with the insurance components and the Company provides no significant service in
integrating the service component with the insurance component.
164 | 2024 Annual Report | Notes to Consolidated Financial Statements
The Company applies IFRS 17 to all remaining components of the insurance and reinsurance contracts held.
Level of aggregation
Insurance contracts are aggregated into portfolios of insurance contracts which are managed together and are subject to similar
risks. The Company has defined portfolios by considering various factors such as the issuing subsidiary, measurement model,
major product line and type of insurance risk. The portfolios of insurance contracts are further grouped by:
• Date of issue: the period cannot be longer than one year. Most of the Company’s insurance contracts are aggregated into
annual cohorts; and
• Expected profitability at inception into one of three categories: onerous contracts, contracts with no significant risk of
becoming onerous and other remaining contracts. Onerous contracts are those contracts that at initial inception, the Company
expects to generate net outflow, without considering investment returns or the benefit of any reinsurance contracts held.
The Company establishes the groups at initial recognition and may add contracts to the groups after the end of a reporting
period, however, the Company does not subsequently reassess the composition of the groups.
For reinsurance contracts held, the portfolios align with the direct insurance contract portfolios. Groups of reinsurance contracts
typically comprise a single reinsurance contract, and similar to direct groups they do not contain contracts issued more than one
year apart.
Cash flows within the contract boundaries
The Company includes in the measurement of a group of insurance contracts and reinsurance contracts held, all future cash
flows within the boundary of the contracts in the group. Cash flows are within the boundary of an insurance contract (and a
reinsurance contract held) if they arise from substantive rights and obligations that exist in which the Company can compel the
policyholder to pay the premiums (or is compelled to pay amounts to a reinsurer) or has a substantive obligation to provide
services to the policyholder (or a substantive right to receive services from a reinsurer).
For insurance contracts, a substantive obligation to provide services ends when the Company has the practical ability to
reassess the risks and as a result, can set a new price or level of benefits that fully reflects those risks.
For reinsurance contracts held, a substantive right to receive services ends when the reinsurer has the practical ability to
reassess the risk transferred to it and can set a new price or level of benefits that fully reflects those risks, or the reinsurer can
terminate the coverage.
Measurement models
There are three measurement models for insurance contracts:
• Variable fee approach (“VFA”): The Company applies this approach to insurance contracts with direct participation features
such as participating life insurance contracts, unit linked contracts and variable annuity contracts. The direct participating
feature is identified at inception, where the Company has the obligation to pay the policyholder an amount equal to the fair
value of the underlying items less a variable fee in exchange for investment services provided.
• Premium allocation approach (“PAA”): The Company applies this simplified approach for certain insurance contracts and
reinsurance contracts with a duration of typically one year or less, such as Canadian Group Benefit products, some Canadian
Affinity products, and some Asia short-term individual and group products.
• General measurement model (“GMM”): The Company applies this model to the remaining insurance contracts and
reinsurance contracts not measured using the VFA or the PAA.
Recognition of insurance contracts
The Company recognizes groups of insurance contracts that it issues from the earliest of the following:
• The beginning of the coverage period of the group of contracts,
• The date when the first payment from a policyholder in the group is due or when the first payment is received if there is no due
date, and
• For a group of onerous contracts, as soon as facts and circumstances indicate that the group is onerous.
Insurance contracts measured under the GMM and VFA measurement model
Initial measurement
The measurement of insurance contracts at initial recognition is the same for GMM or VFA. At initial recognition, the Company
measures a group of insurance contracts as the total of: (a) fulfilment cash flows, and (b) a contractual service margin (“CSM”).
Fulfilment cash flows comprise estimates of future cash flows, adjusted to reflect the time value of money and financial risks, and
a risk adjustment for non-financial risk. In determining the fulfilment cash flows, the Company uses estimates and assumptions
considering a range of scenarios which have commercial substance and give a fair representation of possible outcomes.
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If fulfilment cash flows generate a total of net cash inflows at initial recognition, a CSM is set up to fully offset the fulfilment cash
flows, and results in no impact on income at initial recognition. The CSM represents the unearned profit the Company will
recognize as it provides services under the insurance contracts. However, if fulfilment cash flows generate a total of net cash
outflows at initial recognition, a loss is recognized in income or expenses immediately and the group of contracts is considered to
be onerous.
For contracts with fulfilment cash flows in multiple foreign currencies, the group of insurance contracts, including the contractual
service margin, is considered to be denominated in a single currency. If a group of insurance contracts has cash flows in more
than one currency, on initial recognition the Company determines a single currency in which the multicurrency group of contracts
is denominated. The Company determines the single currency to be the currency of the predominant cash flows.
The unit of account for CSM or loss is on a group of contracts basis consistent with the level of aggregation specified above.
Subsequent measurement of fulfilment cash flows
The fulfilment cash flows at each reporting date are measured using the current estimates of expected cash flows and current
discount rates. In the subsequent periods, the carrying amount of a group of insurance contracts at each reporting date is the
sum of:
• The liability for remaining coverage (“LRC”), which comprises the fulfilment cash flows that relate to services to be provided in
the future and any remaining CSM at that date; and
• The liability for incurred claims (“LIC”), which comprises the fulfilment cash flows for incurred claims and expenses that have not
yet been paid.
For onerous contracts, the LRC is further divided into a loss component, which represents the remaining net outflow for the
group of insurance contracts; and the LRC excluding the loss component, which represents the amount of liability with offsetting
inflows.
Premiums received increases the LRC. Where a third-party administrator is involved in the collection and remittance of premiums,
amounts receivable from the third party are included in the measurement of insurance contract liabilities until actual cash is remitted
to the Company.
Subsequent measurement of the CSM under the GMM measurement model
For contracts without direct participation features, when applying the GMM measurement model, the carrying amount of the CSM
at the end of reporting period is adjusted to reflect the following changes:
(a) effect of new contracts added to the group;
(b) interest accreted on the carrying amount of CSM, measured at the locked-in discount rate. The locked-in discount rate is
the weighted average of the rates applicable at the date of initial recognition of contracts that joined a group over a 12-
month period, and is determined using the bottom-up approach;
(c) changes in fulfilment cash flows that relate to future services such as:
• Experience differences between actual and expected premiums and related cash flows at the beginning of the period
measured at the locked-in rate.
• Non-financial changes in estimates of the present value of future cash flows measured at the locked-in rate.
• Changes in the risk adjustment for non-financial risk that relate to future service measured at the locked-in rate.
• Differences between actual and expected investment component that becomes payable in the period. The same applies
to a policyholder loan that becomes repayable;
(d) effect of any currency exchange differences on the CSM;
(e) CSM amortization, which is the recognition of unearned profit into insurance revenue for services provided in the period.
The CSM is recognized into insurance revenue over the duration of the group of insurance contracts based on the
respective coverage units as insurance services are provided. The number of coverage units is the quantity of services
provided by the contracts in the group, determined by considering the quantity of benefits provided and its expected
coverage period. The coverage units are reviewed and updated at each reporting date. The Company allocates the CSM
equally to each coverage unit and recognizes the amount allocated to coverage units provided and expected to be provided
in each period.
When measuring the fulfilment cash flows, changes that relate to future services are measured using the current discount rate;
however, the CSM is adjusted for these changes using the locked-in rate at initial recognition. The application of the two different
discount rates gives rise to a gain or loss that is recognized as part of insurance finance income or expense.
166 | 2024 Annual Report | Notes to Consolidated Financial Statements
Subsequent measurement of the CSM under the VFA measurement model
For contracts with direct participation features applying the VFA measurement model, subsequent measurement of the CSM is
similar to the GMM model with the following exceptions or modifications:
For changes in fulfilment cash flows that do not vary with the underlying items:
• Non-financial changes adjust the CSM at the current discount rate, there is no interest accretion on CSM at the locked-in rate,
• Changes in the effect of time value of money and financial risks such as the effect of financial guarantees adjust the CSM,
however, income or expenses would be impacted if the risk mitigation option is elected.
For changes in fulfilment cash flows that vary with the fair value of the underlying items:
• Changes in the shareholders’ share adjust the CSM, however, income or expenses would be impacted if the risk mitigation option
is elected,
• Changes in the policyholders’ share are recognized in income or expenses or OCI.
The Company uses derivatives, non-derivative financial instruments measured at fair value through profit or loss, and
reinsurance contracts to mitigate the financial risk arising from direct participation contracts applying the VFA measurement
model. The Company may elect the risk mitigation option to recognize some or all changes of financial guarantees and
shareholders’ share of the underlying items in income or expenses instead of adjusting CSM.
Groups of GMM or VFA insurance contracts with a CSM at initial recognition can subsequently become onerous when increases
in fulfilment cash flows that do not vary with the underlying items or declines in the shareholder’s share of the underlying items
exceed the carrying amount of the CSM. The excess establishes a loss which is recognized in income or expenses immediately,
and the LRC is then divided into the loss component and the LRC excluding the loss component.
Subsequent measurement of the loss component
The loss component represents the net outflow attributable to each group of onerous insurance contracts (or contracts profitable
at inception that have subsequently become onerous), any subsequent decrease relating to future service in estimates of future
cash flows and risk adjustment for non-financial risk or any subsequent increase in the shareholders’ share of the fair value of
underlying items will reverse the loss component. Any remaining loss component will be reversed systematically as actual cash
flows are incurred.
When actual cash flows are incurred, the LIC is recognized and the LRC is derecognized accordingly. The Company uses the
proportion on initial recognition to determine the systematic allocation of LRC release between the loss component and the LRC
excluding the loss component, resulting in both components being equal to zero by the end of the coverage period.
Insurance contracts measured under the PAA measurement
The Company applies the PAA to all insurance contracts it issues if the coverage period of the contract is one year or less; or the
coverage period is longer than one year and the measurement of the LRC for the contracts under the PAA does not differ
materially from the measurement that would be produced applying the GMM approach under possible future scenarios.
The LRC is initially measured as the premium received at initial recognition minus any insurance acquisition cash flows at that
date. There is generally no allowance for the time value of money as the premiums are mostly received within one year of the
coverage period.
For acquisition cash flows allocated to recognized groups of contracts applying the PAA, the Company is permitted to defer and
amortize the amount over the coverage period or recognize the amount as an expense as incurred provided that the coverage
period of the contracts in the group is no more than one year. This election can be made at the level of each group of insurance
contracts. For the majority of the Company’s insurance contracts applying the PAA, such as Canadian Group Benefit products,
some Canadian Affinity products, and some Asia short-term individual and group products, the Company has elected to defer
directly attributable acquisition costs and recognize them in net income over the coverage period in a systematic way based on
the passage of time.
In these lines of business, directly attributable insurance acquisition cash flows paid are to acquire the current contract with an
expectation of a number of renewals over future years. As such, directly attributable insurance acquisition cash flows are
allocated to the group in which the current contract belongs to as well as to future groups that will include expected renewals
applying a systematic methodology. If facts and circumstances indicate that there is an onerous group of contracts at initial
measurement, a loss is immediately recognized in the income or expenses for the net outflow and a loss component of the LRC
is created for the group.
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Subsequent measurement
Subsequently, the Company measures the carrying amount of the LRC at the end of each reporting period as:
• The LRC at the beginning of the period; plus
• Premium received in the period; minus
• Directly attributable acquisition costs net of related amortization (unless expensed as incurred); minus
• Amount recognized as insurance revenue for the period; minus
• Investment component paid or transferred to the LIC.
The amount recognized as insurance revenue for the period is typically based on the passage of time. For the Company’s
property & casualty reinsurance business, the expected pattern of release of risk during the coverage period differs significantly
from the passage of time, and as such the amount recognized as insurance revenue is on the basis of the expected timing of
incurred service expenses.
If at any time during the coverage period, facts and circumstances indicate that a group of contracts is onerous, the Company will
recognize a loss in income or expenses and an increase in the LRC to the extent that the current estimate of the fulfilment cash flows
that relate to remaining coverage (including the risk adjustment for non-financial risk) exceed the carrying amount of the LRC.
The Company estimates the LIC as the fulfilment cash flows related to incurred claims. The Company does not adjust the future cash
flows for the time value of money, except when claims are expected to settle more than one year after the actual claim occurs.
Assets for insurance acquisition cash flows
Insurance acquisition cash flows arise from the costs of selling, underwriting and starting a group of insurance contracts (issued
or expected to be issued) that are directly attributable to the portfolio of insurance contracts to which the group belongs.
Insurance acquisition cash flows paid or incurred before the recognition of the related group of contracts are recognized as an
asset within the portfolio of insurance contract liabilities in which the group of contracts is expected to be included. The Company
applies a systematic basis to allocate these costs, which includes:
• Insurance acquisition cash flows directly attributable to a group of contracts that will include future expected renewals of in-
force contracts; and
• Insurance acquisition cash flows directly attributable to a portfolio of insurance contracts, which will include future new business.
When facts and circumstances indicate the assets for insurance acquisition cash flows might be impaired, the Company
conducts impairment tests. If an asset is impaired, an impairment loss will be recognized in income or expenses, which can be
subsequently reversed when the impairment condition no longer exists.
Recognition of reinsurance contracts held
The Company recognizes a group of reinsurance contracts held from the earliest of the following:
• The beginning of the coverage period of the group of reinsurance contracts held. However, the Company delays the
recognition of a group of reinsurance contracts held that provide proportionate coverage until the date when any underlying
insurance contract is initially recognized, if that date is later than the beginning of the coverage period of the group of
reinsurance contracts held; and
• The date the Company recognizes an onerous group of underlying insurance contracts if the Company entered into the
related reinsurance contract held in the group of reinsurance contracts held at or before that date.
Reinsurance contracts held measured under the GMM model
Initial measurement
The measurement of reinsurance contracts held follows the same principles as the GMM for insurance contracts issued, with the
following exceptions or modifications specified in this section below. Reinsurance contracts held and assumed cannot use the VFA
measurement model.
At initial recognition, the Company recognizes any net gain or net cost as a CSM in the consolidated statement of financial position,
with some exceptions. If any net cost of obtaining reinsurance contracts held relates to insured events that occurred before initial
recognition of any insurance contracts, it is recognized immediately in income or expenses. In addition, if the underlying insurance
contracts are in an onerous position, the Company is required to recognize a reinsurance gain immediately in income for the portion
of claims that the Company expects to recover from the reinsurance, if the reinsurance contract held was entered into prior to or at
the same time as the onerous contracts.
For contracts with fulfilment cash flows in multiple foreign currencies, the group is denominated in a single currency as defined
by the predominant cash flows.
168 | 2024 Annual Report | Notes to Consolidated Financial Statements
Measurement of reinsurance contract cash flows is consistent with the underlying insurance contracts, but with an adjustment for
any risk of non-performance by the reinsurer. The risk adjustment for non-financial risk represents the amount of risk being
transferred by the Company to the reinsurer.
Subsequent measurement
Subsequently, the carrying amount of a group of reinsurance contracts held at each reporting date is the sum of:
• The asset for remaining coverage (“ARC”), which comprises the fulfilment cash flows that relate to services to be received
under the contracts in future periods, and any remaining CSM at that date; and
• The asset for incurred claims (“AIC”), which comprises the fulfilment cash flows for incurred claims and expenses that have
not yet been received.
If the underlying insurance contracts are onerous at inception and a reinsurance gain is recognized in income as described
above, the asset for remaining coverage is made up of a loss-recovery component and the ARC excluding the loss-recovery
component. The loss-recovery component reflects changes in the loss component of the underlying onerous insurance contracts
and determines the amounts that are subsequently presented in income or expenses as reversals of recoveries of losses from
the reinsurance contracts held and are excluded from the allocation of reinsurance premiums paid.
The Company adjusts the carrying amount of the CSM of a group of reinsurance contracts held to reflect changes in the
fulfilment cash flows applying the same approach as for insurance contracts issued, except:
• Income recognized to cover the losses from onerous underlying contracts also adjusts the carrying amount of CSM;
• Reversals of the loss-recovery component, to the extent that those reversals are not changes in fulfilment cash flows of the
group of reinsurance contracts held, also adjust the carrying amount of CSM; and
• Changes in fulfilment cash flows related to future services also adjust the carrying amount of CSM provided that changes in
fulfilment cash flows related to the group of underlying insurance contracts also adjust the CSM.
Where a loss component has been set up subsequent to initial recognition of a group of underlying insurance contracts, the
reinsurance gain that has been recognized adjusts the loss-recovery component of the reinsurance asset for remaining
coverage. The carrying amount of the loss-recovery component must not exceed the portion of the carrying amount of the loss
component of the onerous group of underlying insurance contracts that the Company expects to recover from the group of
reinsurance contracts. On this basis, the loss-recovery component is reduced to zero when the loss component of underlying
insurance contracts is reduced to zero.
Reinsurance contracts held measured under the PAA model
Reinsurance contracts held may be classified and measured under the PAA model if they meet the eligibility requirements, which
are similar to the PAA requirements for direct insurance contracts.
For reinsurance contracts held applying the PAA model, the Company measures them on the same basis as insurance contracts
that it issues, adapted to reflect the features of reinsurance contracts held that differ from insurance contracts issued.
If a loss-recovery is created for a group of reinsurance contracts measured under the PAA, the Company adjusts the carrying
amount of the ARC as there is no CSM to adjust under PAA.
Derecognition of insurance contracts
The Company derecognizes insurance contracts when the rights and obligations relating to the contract are extinguished (i.e.,
discharged, cancelled, or expired) or the contract is modified such that the modification results in a change in the measurement
model, or the applicable standard for measuring a component of the contract. In the case of modification, the Company
derecognizes the initial contract and recognizes the modified contract as a new contract.
Presentation and disclosure
The Company has presented the carrying amount of portfolios of insurance contracts that are in a net asset or liability position,
and portfolios of reinsurance contracts that are in a net asset or liability position separately in the consolidated statements of
financial position.
The Company separately presents the insurance service result, which comprises insurance revenue and insurance service
expenses, from the investment result, which comprises insurance finance income or expenses in the Consolidated Statements of
Income. IFRS 17 provides an option to disaggregate the changes in risk adjustment between insurance service results and
insurance finance income. The Company disaggregates the change in risk adjustment for non-financial risk between the
insurance service expenses and insurance finance income or expenses.
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Net insurance service result
The insurance revenue depicts the performance of insurance services and excludes investment components. For the GMM and
the VFA contracts, the insurance revenue represents the change in the LRC relating to insurance services for which the
Company expects to receive consideration. This insurance revenue comprises: (a) expected claims and other insurance
expenses including policyholder taxes where applicable; (b) changes in risk adjustment for non-financial risk; (c) release of CSM
based on coverage units; and (d) portion of premiums that relate to recovering of insurance acquisition cash flows. For contracts
measured under the PAA, the insurance revenue for each period is the amount of expected premium receipts for providing
insurance services in the period.
The insurance service expenses arising from insurance contracts are recognized in income or expenses generally as they are
incurred and exclude repayment of investment components. The insurance service expenses comprise: (a) incurred claims and
other insurance service expenses; (b) losses on onerous contracts and reversal of such losses; (c) adjustments to LIC;
(d) amortization of insurance acquisition cash flows; and (e) impairment losses on assets for insurance acquisition cash flows, if
any, and reversals of such impairment losses.
The amortization of insurance acquisition cash flows within insurance service expense is equal to the recovery of insurance
acquisition cash flows in insurance revenue for contracts measured under the GMM and VFA. For contracts measured under the
PAA with deferred acquisition cash flows, the Company amortizes insurance acquisition cash flows over the duration of the
group of insurance contracts based on the respective coverage units.
Net expenses from reinsurance contracts held comprise allocation of reinsurance premiums paid and the amounts expected to
be recovered from reinsurers. Reinsurance cash flows that are contingent on claims on the underlying contracts are treated as
part of the claims expected to be recovered from reinsurers, whereas reinsurance cash flows that are not contingent on claims
on the underlying contracts (for example, some types of ceding commissions) are treated as a reduction in reinsurance
premiums paid. For reinsurance contracts measured under the GMM, the allocation of reinsurance premiums paid represents the
total of the changes in the asset for remaining coverage that relate to services for which the Company expects to pay
consideration. For reinsurance contracts measured under the PAA, the allocation of reinsurance premiums paid is the amount of
expected premium payments for receiving services in the period.
Insurance finance income or expenses
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts arising
from: (a) the effect of the time value of money and changes in the time value of money; and (b) the effect of financial risk and
changes in financial risk.
The Company disaggregates insurance finance income or expenses on insurance contracts issued for most of its groups of
insurance contracts between income or expenses and OCI. The impact of changes in market interest rates on the value of the
life insurance and related reinsurance assets and liabilities are reflected in OCI in order to minimize accounting mismatches
between the accounting for insurance assets and liabilities and the supporting financial assets. The impacts from differences
between current period rates and locked-in rates are presented in OCI.
The Company’s invested assets which are debt instruments (including bonds, private placements, mortgages, and loans) are
predominantly measured at FVOCI. As a result, the effect of the time value of money for the groups of insurance contracts and
supporting fixed maturity assets is reflected in income or expenses and the effect of financial risk and changes in financial risk is
reflected in OCI.
The systematic allocation of expected total insurance finance income or expenses depends on whether changes in assumptions
that relate to financial risk have a substantial effect on the expected amounts paid to the policyholders.
• For groups of insurance contracts for which changes in assumptions that relate to financial risk do not have a substantial
effect on the amounts paid to the policyholders, the Company systematically allocates expected total insurance finance
income or expenses over the duration of the group of contracts to income or expenses using discount rates determined on
initial recognition of the group of contracts.
• For groups of insurance contracts for which changes in assumptions that relate to financial risk have a substantial effect on
the amounts paid to the policyholders, the Company systematically allocates expected total insurance finance income or
expenses over the duration of the group of contracts to income or expenses using either a constant rate, or an allocation that
is based on the amounts credited in the period and expected to be credited in future periods for fulfilment cash flows. The
CSM accretion rate would use the discount rates determined on initial recognition of the group of contracts for contractual
service margin.
In the event of a transfer of a group of insurance contracts or derecognition of an insurance contract, the Company reclassifies
any amounts that were previously recognized in OCI to income or expenses as insurance finance income or expense. There are
no changes in the basis of disaggregation of insurance finance income or expenses between income or expenses and OCI in the
period.
170 | 2024 Annual Report | Notes to Consolidated Financial Statements
Transition methods
IFRS 17 became effective for years beginning on January 1, 2023. The Company has applied the full retrospective approach to
most contracts issued on or after January 1, 2021, except for participating insurance contracts and variable annuity contracts for
which the fair value approach was used. The Company has applied the fair value approach to all insurance contracts issued prior
to January 1, 2021, as obtaining reasonable and supportable information to apply the full retrospective approach was deemed
impracticable.
Under the fair value approach, the Company has determined the CSM of the GMM and VFA liabilities for remaining coverage at
the transition date as the difference between the fair value of the groups of insurance contracts and the fulfilment cash flows
measured at that date. In determining the fair value, the Company has applied the requirements of IFRS 13 “Fair Value
Measurement”, except for the demand deposit floor requirement. The Company used the income approach to determine the fair
value of the insurance contracts at the transition date, in which future cash flows are discounted to a single amount that reflects
current market expectations about those future amounts.
(j)
Investment contract liabilities
Investment contract liabilities include contracts issued to retail and institutional investors that do not contain significant insurance
risk. Investment contract liabilities and deposits are measured at amortized cost or at FVTPL by election. The election is made
when these liabilities, as well as the related assets are managed, and their performance is evaluated, on a fair value basis or
when doing so reduces the accounting mismatches between assets supporting these contracts and the related policy liabilities.
Investment contract liabilities are derecognized when the contracts expire, are discharged or are cancelled.
(k)
Other financial instruments accounted for as liabilities
The Company issues a variety of other financial instruments classified as liabilities, including notes payable, term notes, senior
notes, senior debentures, subordinated notes, surplus notes, and preferred shares. These financial liabilities are measured at
amortized cost, with issuance costs deferred and amortized using the effective interest rate method.
(l)
Income taxes
The provision for income taxes is calculated based on income tax laws and income tax rates substantively enacted as at the date
of the Consolidated Statements of Financial Position. The income tax provision is comprised of current income taxes and
deferred income taxes. Current and deferred income taxes relating to items recognized in OCI and directly in equity are similarly
recognized in OCI and directly in equity, respectively.
Current income taxes are amounts expected to be receivable or payable for the current year and any adjustments to taxes
payable in respect of previous years.
Deferred income taxes are provided for using the liability method and result from temporary differences between the carrying
values of assets and liabilities and their respective tax bases. Deferred income taxes are measured at the substantively enacted
tax rates that are expected to be applied to temporary differences when they reverse.
A deferred tax asset is recognized to the extent that future realization of the tax benefit is probable. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the tax benefit will be realized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and
they relate to income taxes levied by the same tax authority on the same taxable entity.
Deferred tax liabilities are recognized for all taxable temporary differences, except in respect of taxable temporary differences
associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
The Company records liabilities for uncertain tax positions if it is probable that the Company will make a payment on tax
positions due to examinations by tax authorities. These provisions are measured at the Company’s best estimate of the amount
expected to be paid. Provisions are reversed to income in the period in which management assesses they are no longer required
or determined by statute.
The Company is subject to income tax laws in various jurisdictions. Tax laws are complex and potentially subject to different
interpretations by the taxpayer and the relevant tax authority. The provision for current income taxes and deferred income taxes
represents management’s interpretation of the relevant tax laws and its estimate of current and future income tax implications of
the transactions and events during the year. The Company may be required to change its provision for income taxes or deferred
income tax balances when the ultimate deductibility of certain items is successfully challenged by taxing authorities, or if
estimates used in determining the amount of deferred tax balances to recognize change significantly, or when receipt of new
information indicates the need for adjustment in the amount of deferred income taxes to be recognized. Additionally, future
events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the
provision for income taxes, deferred tax balances and the effective tax rate. Any such changes could materially affect the
amounts reported in the Consolidated Financial Statements in the period these changes occur.
171
(m) Foreign currency translation
Items included in the financial statements of each of the Company’s subsidiaries, joint ventures and associates are measured by
each entity using the currency of the primary economic environment in which the entity operates (the “functional currency”). If
their functional currency is other than the Canadian dollar, these entities are foreign operations of the Company.
Transactions in a foreign currency are translated to the functional currency at the exchange rate prevailing at the date of the
transaction. Assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate
in effect at the reporting date. Revenue and expenses denominated in foreign currencies are translated at the average exchange
rate prevailing during the quarter reported. Exchange gains and losses are recognized in income except for translation of net
investments in foreign operations and the results of hedging these positions, and for non-monetary items designated as amortized
cost or FVOCI. These foreign exchange gains and losses are recognized in OCI until such time that the foreign operation or
non-monetary item is disposed of or control or significant influence over it is lost, when they are reclassified to income.
The Consolidated Financial Statements are presented in Canadian dollars. The financial statements of the Company’s foreign
operations are translated from their functional currencies to Canadian dollars; assets and liabilities are translated at the
exchange rate at the reporting date, and revenue and expenses are translated using the average exchange rates for the period.
(n) Stock-based compensation
The Company provides stock-based compensation to certain employees and directors as described in note 14. Compensation
expense of equity instruments granted is accrued based on the best estimate of the number of instruments expected to vest, with
revisions made to that estimate if subsequent information indicates that actual forfeitures are likely to differ from initial forfeiture
estimates, unless forfeitures are due to market-based conditions.
Stock options are expensed with a corresponding increase in contributed surplus. Restricted share units and deferred share units
are expensed with a corresponding liability accrued based on the market value of MFC’s common shares at the end of each
quarter. Performance share units are expensed with a corresponding liability accrued based on specific performance conditions
and the market value of MFC’s common shares at the end of each quarter. The change in the value of the awards resulting from
changes in the market value of MFC’s common shares or changes in the specific performance conditions and credited dividends
is recognized in income, offset by the impact of total return swaps used to manage the variability of the related liabilities.
Stock-based compensation cost is recognized over the applicable vesting period, unless the employee is eligible to retire at the
time of grant or will be eligible to retire during the vesting period. Compensation costs attributable to stock options, restricted
share units, and performance share units granted to employees who are eligible to retire on the grant date or who will become
eligible to retire during the vesting period, are recognized at the grant date or over the period from the grant date to the date of
retirement eligibility, respectively.
The Company’s contributions to the Global Share Ownership Plan (“GSOP”) (refer to note 14 (d)), are expensed as incurred.
Under the GSOP, subject to certain conditions, the Company will match a percentage of an employee’s eligible contributions to
certain maximums. All contributions are used by the plan’s trustee to purchase MFC common shares in the open market on
behalf of participating employees.
(o) Employee future benefits
The Company maintains defined contribution and defined benefit pension plans and other post-employment plans for employees
and agents including registered (tax qualified) pension plans that are typically funded as well as supplemental non-registered
(non-qualified) pension plans for executives, and retiree and disability welfare plans that are typically not funded.
The Company’s obligation in respect of defined benefit pension and other post-employment benefits is calculated for each plan
as the estimated present value of future benefits that eligible employees have earned in return for their service up to the
reporting date using the projected benefit method. The discount rate used is based on the yield, as at the reporting date, of high-
quality corporate debt securities that have approximately the same term as the benefit obligations and that are denominated in
the same currency in which the benefits are expected to be paid.
To determine the Company’s net defined benefit asset or liability, the defined benefit obligations are deducted from the fair value
of plan assets. When this calculation results in a surplus, the asset that can be recognized is limited to the present value of future
economic benefit available in the form of future refunds from the plan or reductions in future contributions to the plan (the asset
limit). Defined benefit assets are included in other assets and defined benefit liabilities are included in other liabilities.
Changes in the net defined benefit asset or liability due to re-measurement of pension and retiree welfare plans are recorded in
OCI in the period in which they occur and are not reclassified to income in subsequent periods. They consist of actuarial gains
and losses, changes in the effect of the asset limit, if any, and the return on plan assets, excluding amounts included in net
interest income or expense. Changes in the net defined benefit asset or liability due to re-measurement of disability welfare plans
are recorded in income in the period in which they occur.
172 | 2024 Annual Report | Notes to Consolidated Financial Statements
The cost of defined benefit pension plans is recognized over the employees’ years of service to retirement while the cost of
retiree welfare plans is recognized over the employees’ years of service to their date of full eligibility. The net benefit cost for the
year is recorded in income and is calculated as the sum of the service cost in respect of the fiscal year, the net interest income or
expense and any applicable administration expenses, plus past service costs or credits resulting from plan amendments or
curtailments. The net interest income or expense is determined by applying the discount rate to the net defined benefit asset or
liability. The current year cost of disability welfare plans is the year-over-year change in the defined benefit obligation, including
any actuarial gains or losses.
The cost of defined contribution plans is the contribution provided by the Company and is recorded in income in the periods
during which services are rendered by employees.
(p)
Derivative and hedging instruments
The Company uses derivative financial instruments (“derivatives”) including swaps, forward and futures agreements, and options
to manage current and anticipated exposures to changes in interest rates, foreign exchange rates, commodity prices and equity
market prices, and to replicate exposure to different types of investments. Derivatives embedded in other financial instruments
are separately recorded as derivatives when their economic characteristics and risks are not closely related to those of the host
instrument, the terms of the embedded derivative are the same as those of a stand-alone derivative and the host instrument itself
is not recorded at FVTPL. Derivatives which are separate financial instruments are recorded at fair value, and those with
unrealized gains are reported as derivative assets and those with unrealized losses are reported as derivative liabilities.
A determination is made for each derivative as to whether to apply hedge accounting. Where hedge accounting is not applied,
changes in the fair value of derivatives are recorded in investment income.
Where the Company has elected to apply hedge accounting, a hedging relationship is designated and documented at inception.
Hedge effectiveness is evaluated at inception and throughout the term of the hedge. Hedge accounting is only applied when the
Company expects that the risk management objective will be met, and that the hedging relationship will qualify for hedge
accounting requirements both at inception and throughout the hedging period. The assessment of hedge effectiveness is
performed at the end of each reporting period prospectively. When it is determined that the risk management objective is no
longer met, a hedging relationship is no longer effective, or the hedging instrument or the hedged item ceases to exist, the
Company discontinues hedge accounting prospectively. In such cases, if the derivatives are not sold or terminated, any
subsequent changes in fair value of the derivatives are recognized in investment income.
For derivatives that are designated as hedging instruments, changes in fair value are recorded according to the nature of the
risks being hedged, as discussed below.
In a fair value hedging relationship, changes in fair value of the hedging instruments are recorded in total investment result,
offsetting changes in fair value of the hedged items attributable to the hedged risk, which would otherwise not be carried at fair
value through profit or loss. Hedge ineffectiveness is recognized in total investment result and arises from differences between
changes in the fair values of hedging instruments and hedged items. When hedge accounting is discontinued, the carrying value
of the hedged item is no longer adjusted and the cumulative fair value adjustments are amortized to total investment result over
the remaining term of the hedged item unless the hedged item ceases to exist, at which time the balance is recognized
immediately in total investment result.
In a cash flow hedging relationship, the effective portion of the change in the fair value of the hedging instrument is recorded in
OCI while the ineffective portion is recognized in total investment result. Gains and losses in AOCI are recognized in income
during the same periods that the variability in the hedged cash flows or the hedged forecasted transactions are recognized in
income. The reclassifications from AOCI are made to total investment result, except for total return swaps that hedge stock-
based compensation awards, which are reclassified to general expenses.
Gains and losses on cash flow hedges in AOCI are reclassified immediately to total investment result when the hedged item
ceases to exist or the forecasted transaction is no longer expected to occur. When a hedge is discontinued, but the hedged
forecasted transaction is expected to occur, the amounts in AOCI are reclassified to total investment result in the periods during
which variability in the cash flows hedged or the hedged forecasted transaction is recognized in income.
In a net investment in foreign operation hedging relationship, gains and losses relating to the effective portion of the hedge are
recorded in OCI. Gains and losses in AOCI are recognized in income during the periods when gains or losses on the underlying
hedged net investment in foreign operation are recognized in income upon disposal of the foreign operation or upon loss of
control or significant influence over it.
(q)
Revenue from service contracts
The Company recognizes revenue from service contracts in accordance with IFRS 15. The Company’s service contracts
generally impose single performance obligations, each consisting of a series of similar related services for each customer.
173
Revenue is recorded as performance obligations are satisfied over time because the customers simultaneously receive and
consume the benefits of the services rendered, measured using an output method. Revenue for variable consideration is
recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will
not occur when the uncertainty is subsequently resolved. Refer to note 13.
Note 2 Accounting and Reporting Changes
(a)
Future accounting and reporting changes
(I)
Annual Improvements to IFRS Accounting Standards – Volume 11
Annual Improvements to IFRS Accounting Standards – Volume 11 was issued in July 2024 and is effective on or after January 1,
2026. The IASB issued eight minor amendments to different standards as part of the Annual Improvements process, to be
applied retrospectively except for amendments to IFRS 1 “First-Time Adoption of International Financial Reporting Standards” for
first time adopters and to IFRS 9 “Financial Instruments” (“IFRS 9”) for derecognition of lease liabilities. Adoption of these
amendments is not expected to have a significant impact on the Company’s Consolidated Financial Statements.
(II)
Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7)
Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 “Financial Instruments”
and IFRS 7 “Financial Instruments: Disclosures” (“IFRS 7”)) were issued in May 2024 to be effective for years beginning on
January 2026 and to be applied retrospectively. The amendments clarify guidance on timing of derecognition of financial
liabilities, on the assessment of cash flow characteristics and resulting classification and disclosure of financial assets with terms
referencing contingent events including environmental, social and corporate governance events, and of the treatment of non-
recourse assets and contractually linked instruments. The Company is assessing the impact of these amendments on the
Company’s Consolidated Financial Statements.
(III)
IFRS 18 “Presentation and Disclosure in the Financial Statements”
IFRS 18 “Presentation and Disclosure in Financial Statements” (“IFRS 18”) was issued in April 2024 to be effective for years
beginning on January 1, 2027 and to be applied retrospectively. The standard replaces IAS 1 “Presentation of Financial
Statements” (“IAS 1”) while carrying forward many elements of IAS 1 unchanged. IFRS 18 introduces three sets of new
requirements for presentation of financial statements and disclosures within financial statements:
• Introduction of five defined categories of income and expenses: operating, investing, financing, income taxes and
discontinued operations, with defined subtotals and totals for “operating income (loss)”, “income or loss before financing and
income taxes” and “income (loss)”,
• disclosure within a note to financial statements of management-defined performance measures (“MPMs”) with a reconciliation
between MPMs and IFRS performance measures. MPMs are defined as subtotals of income and expenses not specified by
IFRS Accounting Standards, which are used in public communications outside financial statements to communicate
management’s view of the Company’s financial performance, and
• enhanced guidance on organizing information and determining whether to provide the information in the financial statements
or in the notes. IFRS 18 also requires enhanced disclosure of operating expenses based on their characteristics, including
their nature, function or both.
The Company is assessing the impact of this standard on the Company’s Consolidated Financial Statements.
(IV)
Amendments to IAS 12 “Income Taxes”
Amendments to IAS 12 “Income Taxes” were issued in May 2023. The amendments relate to the Organization for Economic Co-
operation and Development’s International Pillar Two tax reform, which seeks to establish a global minimum income tax rate of
15% and addresses inter-jurisdictional base erosion and profit shifting, targeting larger international companies. Most
jurisdictions have agreed to participate and effective dates for Global Minimum Taxes (“GMT”) vary by jurisdiction based on local
legislation.
The amendments require that, effective for years beginning on or after January 1, 2023, disclosure of current tax expense or
recovery related to GMT is required along with, to the extent that GMT legislation is enacted or substantively enacted but not yet
in effect, disclosure of known or reasonably estimable information that helps users of financial statements understand the
Company’s exposure to GMT arising from that legislation. The amendments introduce a temporary mandatory exception in IAS
12 from recognizing and disclosing deferred tax assets and liabilities related to GMT. The Company has applied the temporary
exception from accounting for deferred taxes in respect of GMT.
On June 20, 2024, Canada enacted the Global Minimum Tax Act, retrospective to fiscal periods commencing on or after
December 31, 2023. The Company is in scope of this legislation because it is located in Canada and will be required to pay
additional GMT in Canada in respect of its global entities whose effective tax rate is below 15%. The Company’s entities will also
be subject to GMT in those jurisdictions where a Qualifying Domestic Minimum Top-up Tax (“QDMTT”) is in effect.
174 | 2024 Annual Report | Notes to Consolidated Financial Statements
The Company expects to pay GMT of $231 for the year ended December 31, 2024 arising from its operations in Hong Kong,
China, Macau and Barbados. GMT arising from the Company’s operations in Hong Kong, China, and Macau, is expected to be
payable in Canada for 2024 as these jurisdictions do not have a QDMTT in effect for 2024. Barbados passed legislation on
May 28, 2024, introducing a QDMTT retrospective to January 1, 2024. As such, GMT arising from the Company’s operations in
Barbados will be payable in Barbados.
As at December 31, 2024, certain other jurisdictions in which the Company operates, including Australia, Belgium, Brazil,
Germany, Ireland, Luxembourg, Malaysia, Netherlands, Singapore, Switzerland, Thailand, the United Kingdom, and Vietnam,
have enacted legislation to adopt GMT. The assessment of the Company’s potential exposure to GMT in these jurisdictions is
based on the most recent information available regarding the financial performance of the constituent entities and the associated
statutory income tax rate. Based on the assessment, the Company’s operations within these jurisdictions do not have a material
exposure to GMT and therefore no disclosure of current tax expense or recovery related to GMT is provided.
The United States adopted a Corporate Alternative Minimum Tax (“CAMT”) of 15%, with an effective date of January 1, 2023.
CAMT is not a QDMTT for the purposes of GMT.
In response to GMT, Bermuda enacted the Corporate Income Tax 2023 Act on December 27, 2023. The Company’s Bermuda
tax-resident subsidiaries and branches became subject to this new tax regime effective January 1, 2025, at a rate of 15%. The
Bermuda corporate income tax is not a QDMTT for the purposes of GMT.
Note 3 Invested Assets and Investment Income
(a)
Carrying values and fair values of invested assets
As at December 31, 2024
FVTPL(1)
FVOCI(2)
Other(3)
Total carrying
value
Total fair
value(4)
Cash and short-term securities(5)
$
25
$
19,909
$
5,855
$
25,789
$
25,789
Debt securities(6)
Canadian government and agency
1,056
18,671
Zero
19,727
19,727
U.S. government and agency
58
27,628
968
28,654
28,366
Other government and agency
68
35,402
Zero
35,470
35,470
Corporate
2,761
121,674
527
124,962
124,762
Mortgage / asset-backed securities
17
1,791
Zero
1,808
1,808
Public equities (FVTPL mandatory)
33,725
Zero
Zero
33,725
33,725
Mortgages
1,239
28,792
24,416
54,447
54,812
Private placements
866
48,802
Zero
49,668
49,668
Loans to Bank clients
Zero
Zero
2,310
2,310
2,285
Real estate
Own use propertyRefer to footnote number (7),(8)
Zero
Zero
2,674
2,674
2,798
Investment property
Zero
Zero
10,589
10,589
10,589
Other invested assets
Alternative long-duration assets(9)
34,334
389
13,140
47,863
48,875
Various otherRefer to footnote number (10)
140
Zeo
4,671
4,811
4,811
Total invested assets
$ 74,289
$ 303,058
$ 65,150
$ 442,497
$ 443,485
Footnote Number (1) FVTPL classification was elected for debt instruments backing certain insurance contract liabilities to substantially reduce any accounting mismatch arising from
changes in the fair value of these assets, or changes in the carrying value of the related insurance contract liabilities.
Footnote Number (2) FVOCI classification for debt instruments backing certain insurance contract liabilities inherently reduces any accounting mismatch arising from changes in the fair
value of these assets, or changes in the carrying value of the related insurance contract liabilities.
Footnote Number (3) Other includes mortgages and loans to Bank clients held at amortized cost, own use properties held at fair value or cost, investment properties held at fair value,
and equity method accounted investments (including leveraged leases). Also includes debt securities, which qualify as having SPPI, are held to collect contractual
cash flows and are carried at amortized cost.
Footnote Number (4) Invested assets above include debt securities, mortgages, private placements and approximately $389 (2023 – $360) of other invested assets, which primarily
qualify as having SPPI qualifying cash flows. Invested assets which do not have SPPI qualifying cash flows as at December 31, 2024 include debt securities,
private placements and other invested assets with fair values of $nil, $132 and $547, respectively (2023 – $nil, $115 and $539, respectively). The change in the
fair value of these non-SPPI invested assets for the year ended December 31, 2024 was an increase of $25 (2023 – an increase of $49). The methodologies
used in determining fair values of invested assets are described in note 1 (c) and note 3 (g).
Footnote Number (5) Includes short-term securities with maturities of less than one year at acquisition amounting to $10,121 (2023 – $6,162), cash equivalents with maturities of less
than 90 days at acquisition amounting to $9,813 (2023 – $7,832) and cash of $5,855 (2023 – $6,344).
Footnote Number (6) Debt securities include securities which were acquired with remaining maturities of less than one year and less than 90 days of $1,266 and $145, respectively
(2023 – $1,294 and $1,413, respectively).
(7) Includes accumulated depreciation of $65 (2023 – $57).
Footnote Number (8) Own use property of $2,500 as at December 31, 2024 (December 31, 2023 – $2,430), are underlying items for insurance contracts with direct participating
features and are measured at fair value as if they were investment properties, as permitted by IAS 16. Own use property of $174 (December 31, 2023 – $161) is
carried at cost less accumulated depreciation and any accumulated impairment losses.
Footnote Number (9) ALDA include investments in private equity of $18,343, infrastructure of $17,804, timber and agriculture of $5,917, energy of $1,916 and various other ALDA of
$3,883 (2023 – $15,445, $14,950, $5,719, $1,859 and $3,461, respectively).
Footnote Number (10) Includes $4,300 (2023 – $3,790) of leveraged leases. Refer to note 1 (e).
175
As at December 31, 2023
FVTPL(1)
FVOCI(2)
OtherRefer to footnote number (3)
Total carrying
value
Total fair
value(4)
Cash and short-term securitiesRefer to footnote number (5)
$
1
$
13,993
$
6,344
$
20,338
$
20,338
Debt securitiesRefer to footnote number (6)
Canadian government and agency
1,219
19,769
Zero
20,988
20,988
U.S. government and agency
1,303
26,287
888
28,478
28,251
Other government and agency
90
30,576
Zero
30,666
30,666
Corporate
2,372
127,190
484
130,046
129,899
Mortgage / asset-backed securities
16
1,955
Zero
1,971
1,971
Public equities (FVTPL mandatory)
25,531
Zero
Zero
25,531
25,531
Mortgages
1,055
28,473
22,893
52,421
52,310
Private placements
654
44,952
Zero
45,606
45,606
Zero
Zero
Zero
2,436
2,436
2,411
Real estate
Own use property(7),(8)
Zero
Zero
2,591
2,591
2,716
Zero
Zero
Zero
10,458
10,458
10,458
Other invested assets
Alternative long-duration assets(9)
29,671
360
11,403
41,434
42,313
Various other(10)
126
Zero
4,120
4,246
4,246
Total invested assets
$ 62,038
$ 293,555
$ 61,617
$ 417,210
$ 417,704
Note: For footnotes (1) to (10), refer to the “Carrying values and fair values of invested assets” table as at December 31, 2024 above.
176 | 2024 Annual Report | Notes to Consolidated Financial Statements
(b)
Investment income
For the year ended December 31, 2024
FVTPL
FVOCI
Other(1)
Total
Cash and short-term securities
Interest income
$
1
$
978
Do
llar Zero
$
979
Gains (losses)(2)
Zero
72
Zero
72
Debt securities
Interest income
156
7,914
29
8,099
Gains (losses)Refer to footnote number (2)
(44)
(1,621)
Zero
(1,665)
Impairment (loss) / recovery, net
Zero
92
Zero
92
Public equities
Dividend income
814
Zero
Zero
814
Gains (losses)(2)
4,324
Zero
Zero
4,324
Mortgages
Interest income
47
1,203
1,154
2,404
Gains (losses)(2)
32
(165)
5
(128)
Impairment (loss) / recovery, net
Zero
104
1
105
Private placements
Interest income
36
2,473
Zero
2,509
Gains (losses)(2)
25
284
Zero
309
Impairment (loss) / recovery, net
Zero
(47)
Zero
(47)
Loans to Bank clients
Interest income
Zero
Zero
176
176
Impairment (loss) / recovery, net
Zero
Zero
(3)
(3)
Real estate
Rental income, net of depreciationRefer to footnote number (3)
Zero
Zero
460
460
Gains (losses)(2)
Zero
Zero
(596)
(596)
Impairment (loss) / recovery, net
Zero
Zero
Zero
Zero
Derivatives
Interest income, net
(438)
Zero
Zero
(438)
Gains (losses)(2)
(675)
Zero
Zero
(675)
Other invested assets
Interest income
20
12
Zero
32
Timber, agriculture and other income
1,675
Zero
770
2,445
Gains (losses)(2)
1,098
8
123
1,229
Impairment (loss) / recovery, net
Zero
(8)
(30)
(38)
Total investment income (loss)
$
7,071
$
11,299
$
2,089
$
20,459
Investment income
Interest income
$
(178)
$
12,580
$
1,359
$
13,761
Dividends, rental income and other income
2,489
Zero
1,230
3,719
Impairment (loss) / recovery, net
Zero
141
(32)
109
Other
354
309
(3)
660
2,665
13,030
2,554
18,249
Realized and unrealized gains (losses) on assets supporting insurance and
investment contract liabilities
Debt securities
(45)
(1,812)
Zero
(1,857)
Public equities
4,178
Zero
Zero
4,178
Mortgages
32
(188)
5
(151)
Private placements
25
210
Zero
235
Real estate
Zero
Zero
(592)
(592)
Other invested assets
1,075
59
122
1,256
Derivatives
(859)
Zero
Zero
(859)
4,406
(1,731)
(465)
2,210
Total investment income (loss)
$
7,071
$
11,299
$
2,089
$
20,459
Investment expenses
(1,348)
Net investment income (loss)
$
19,111
Footnote Number (1)Includes investment income on debt securities, mortgages and loans carried at amortized cost, own use real estate properties, investment real estate properties,
equity method accounted investments, energy investments and leveraged leases.
Footnote Number (2)Includes net realized and unrealized gains (losses) for financial instruments at FVTPL, investment real estate properties, and other invested assets measured at
fair value. Also includes net realized gains (losses) for financial instruments at FVOCI and other invested assets carried at amortized cost.
Footnote Number (3)Rental income from investment real estate properties is net of direct operating expenses.
177
For the year ended December 31, 2023
FVTPL
FVOCI
Other(1)
Total
Cash and short-term securities
Interest income
Do
llar Zero
$
837
D
ollar Zero
$
837
Gains (losses)Refer to footnote number (2)
Zero
10
Zero
10
Debt securities
Interest income
212
7,437
28
7,677
Gains (losses)(2)
152
262
Zero
414
Impairment (loss) / recovery, net
Zero
(4)
Zero
(4)
Public equities
Dividend income
625
Zero
Zero
625
Gains (losses)(2)
2,255
Zero
Zero
2,255
Mortgages
Interest income
Zero
2,290
Zero
2,290
Gains (losses)(2)
99
Zero
Zero
99
Impairment (loss) / recovery, net
Zero
Zero
(150)
(150)
Private placements
Interest income
Zero
2,318
Zero
2,318
Gains (losses)(2)
20
355
Zero
375
Impairment (loss) / recovery, net
Zero
(72)
Zero
(72)
Loans to Bank clients
Interest income
Zero
Zero
201
201
Impairment (loss) / recovery, net
Zero
Zero
(3)
(3)
Real estate
Rental income, net of depreciation(3)
Zero
Zero
496
496
Gains (losses)(2)
Zero
Zero
(1,286)
(1,286)
Impairment (loss) / recovery, net
Zero
Zero
Zero
Zero
Derivatives
Interest income, net
(561)
Zero
Zero
(561)
Gains (losses)(2)
1,147
Zero
Zero
1,147
Other invested assets
Interest income
17
23
Zero
40
Timber, agriculture and other income
2,197
Zero
Zero
2,197
Gains (losses)Refer to footnote number (2)
487
Zero
1
488
Impairment (loss) / recovery, net
(74)
Zero
(1)
(75)
Total investment income (loss)
$
6,576
$ 13,456
$ (714)
$ 19,318
Investment income
Interest income
$
(332)
$ 12,905
$
229
$ 12,802
Dividends, rental income and other income
2,822
Zero
496
3,318
Impairment (loss) / recovery, net
(74)
(76)
(154)
(304)
Other
372
(12)
4
364
2,788
12,817
575
16,180
Realized and unrealized gains (losses) on assets supporting insurance and investment
contract liabilities
Debt securities
153
277
Zero
430
Public equities
2,157
Zero
Zero
2,157
Mortgages
99
Zero
Zero
99
Private placements
20
355
Zero
375
Real estate
Zero
Zero
(1,289)
(1,289)
Other invested assets
484
7
Zero
491
Derivatives
875
Zero
Zero
875
3,788
639
(1,289)
3,138
Total investment income (loss)
$
6,576
$ 13,456
$ (714)
$ 19,318
Investment expenses
(1,297)
Net investment income (loss)
$ 18,021
Note: For footnotes (1) to (3), refer to the “Investment income” table for the year ended December 31, 2024 above.
178 | 2024 Annual Report | Notes to Consolidated Financial Statements
(c) Equity method accounted invested assets
Other invested assets include investments in associates and joint ventures which are accounted for using the equity method of
accounting as presented in the following table.
As at December 31,
2024
2023
Carrying
value
% of
total
Carrying
value
% of
total
Leveraged leases
$
4,300
34%
$
3,790
35%
Infrastructure
4,848
38%
3,942
37%
Timber and agriculture
837
7%
854
8%
Real estate
2,098
16%
1,704
16%
Other
673
5%
443
4%
Total
$ 12,756
100%
$ 10,733
100%
The Company recorded income of $398 (2023 – $399) for these equity method accounted invested assets for the year ended
December 31, 2024.
(d) Investment expenses
The following table presents total investment expenses.
For the years ended December 31,
2024
2023
Related to invested assets
$
731
$
720
Related to segregated, mutual and other funds
617
577
Total investment expenses
$ 1,348
$ 1,297
(e) Investment properties rental income
The following table presents the rental income and direct operating expenses of investment properties.
For the years ended December 31,
2024
2023
Rental income from investment properties
$
859
$
840
Direct operating expenses of rental investment properties
(483)
(473)
Total
$
376
$
367
179
(f) Mortgage securitization
The Company securitizes certain insured and uninsured fixed and variable rate residential mortgages and Home Equity Lines of
Credit (“HELOC”) mortgages through creation of mortgage-backed securities under the Canadian Mortgage Bond Program
(“CMB”), and the HELOC securitization program.
Benefits received from these securitizations include interest spread between the securitized assets and related secured borrowing
liabilities. There is no credit exposure from securitized mortgages under the Canada Mortgage and Housing Corporation
(“CMHC”) sponsored CMB securitization program as they are insured by CMHC and other third-party insurance programs against
borrowers’ default. Mortgages securitized in the Platinum Canadian Mortgage Trust II (“PCMT II”) program are uninsured.
Cash flows received from the underlying securitized mortgages are used to settle the related secured borrowing liabilities. For
CMB transactions, receipts of mortgage principal are deposited into a trust account for settlement of the related liabilities at time
of maturity. These securitized assets and their related cash flows cannot be further transferred or used for other purposes by the
Company. For HELOC transactions, investors are entitled to periodic interest payments, and the remaining cash receipts of
mortgage principal are allocated to the Company (the “Seller”) during the revolving periods of the transactions and are
accumulated for settlement during accumulation periods or repaid to the investors monthly during reduction periods, based on
the terms of the notes.
Securitized assets and secured borrowing liabilities
As at December 31, 2024
Securitized assets
Secured borrowing
liabilities(1)
Net
Securitization program
Securitized
mortgages
Restricted cash and
short-term securities
Total
HELOC securitizationRefer to footnote number (2)
$ 3,141
$ 22
$ 3,163
$ 3,000
$ 163
CMB securitization
R
efer to footnote number (3)
3,274
Zero
3,274
3,217
57
Total
$ 6,415
$ 22
$ 6,437
$ 6,217
$ 220
As at December 31, 2023
Securitized assets
Secured borrowing
liabilities(1)
Net
Securitization program
Securitized
mortgages
Restricted cash and
short-term securities
Total
HELOC securitization(2)
$ 2,880
$ 32
$ 2,912
$ 2,750
$ 162
CMB securitization(3)
2,900
Zero
2,900
2,806
94
Total
$ 5,780
$ 32
$ 5,812
$ 5,556
$ 256
Footnote Number (1)The PCMT II notes payable have floating rates of interest and are secured by the PCMT II assets. Under the terms of the agreements, principal of $nil is expected
to be repaid within one year, $1,036 within 1-3 years, $1,964 within 3-5 years and $nil beyond 5 years (2023 – $27, $1,973, $750 and $nil, respectively). There is
no specific maturity date for the contractual agreements. Under the terms of the notes, additional collateral must be provided to the series as added credit
protection and the Series Purchase Agreements govern the amount of over-collateralization for each of the term notes outstanding.
Footnote Number (2)Manulife Bank securitizes a portion of its HELOC receivables through PCMT II. PCMT II funds the purchase of the co-ownership interests from Manulife Bank by
issuing term notes collateralized by an underlying pool of uninsured HELOCs to institutional investors. The restricted cash balance for the HELOC securitization
reflects a cash reserve fund established in relation to the transactions. The reserve will be drawn upon only in the event of insufficient cash flows from the
underlying HELOCs to satisfy the secured borrowing liabilities.
Footnote Number (3)Manulife Bank also securitizes insured amortizing mortgages under the National Housing Act Mortgage-Backed Securities (“NHA MBS”) program sponsored by
CMHC. Manulife Bank participates in CMB programs by selling NHA MBS securities to Canada Housing Trust (“CHT”), as a source of fixed-rate funding.
As at December 31, 2024, the fair values of securitized assets and related liabilities were $6,521 and $6,182, respectively (2023
– $5,782 and $5,456, respectively).
180 | 2024 Annual Report | Notes to Consolidated Financial Statements
(g) Fair value measurement
The following tables present fair values and the fair value hierarchy of invested assets and segregated funds net assets
measured at fair value in the Consolidated Statements of Financial Position.
As at December 31, 2024
Total fair value
Level 1
Level 2
Level 3
Cash and short-term securities
FVOCI
$
19,909
Do
llar Zero
$
19,909
Do
llar Zero
FVTPL
25
Zero
25
Zero
Other
5,855
5,855
Zero
Zero
Debt securities
FVOCI
Canadian government and agency
18,671
Zero
18,671
Zero
U.S. government and agency
27,628
Zero
27,628
Zero
Other government and agency
35,402
Zero
35,392
10
Corporate
121,674
Zero
121,630
44
Residential mortgage-backed securities
5
Zero
5
Zero
Commercial mortgage-backed securities
270
Zero
270
Zero
Other asset-backed securities
1,516
Zero
1,516
Zero
FVTPL
Canadian government and agency
1,056
Zero
1,056
Zero
U.S. government and agency
58
Zero
58
Zero
Other government and agency
68
Zero
68
Zero
Corporate
2,761
Zero
2,761
Zero
Commercial mortgage-backed securities
2
Zero
2
Zero
Other asset-backed securities
15
Zero
15
Zero
Private placements R
efer to footnote number (1)
FVOCI
48,802
Zero
40,038
8,764
FVTPL
866
Zero
730
136
Mortgages
FVOCI
28,792
Zero
Zero
28,792
FVTPL
1,239
Zero
Zero
1,239
Public equities
FVTPL
33,725
33,650
75
Zero
Real estateRefer to footnote number (2)
Investment property
10,589
Zero
Zero
10,589
Own use property
2,500
Zero
Zero
2,500
Other invested assets(3)
38,543
77
Zero
38,466
Segregated funds net assets(4)
435,988
399,043
33,611
3,334
Total
$ 835,959
$ 438,625
$ 303,460
$ 93,874
Footnote Number (1)Fair value of private placements is determined through an internal valuation methodology using both observable and non-market observable inputs. Non-market
observable inputs include credit assumptions and liquidity spread adjustments. Private placements are classified within Level 2 unless the liquidity spread
adjustment constitutes a significant price impact, in which case they are classified as Level 3.
Footnote Number (2)For real estate properties, the significant non-market observable inputs are capitalization rates ranging from 3.10% to 9.50% during the year ended December 31,
2024 (2023 – ranging from 2.72% to 10.75%), terminal capitalization rates ranging from 3.10% to 10.00% during the year ended December 31, 2024 (2023 –
ranging from 3.00% to 10.00%) and discount rates ranging from 3.60% to 13.75% during the year ended December 31, 2024 (2023 – ranging from 3.20% to
14.00%). Holding other factors constant, a lower capitalization or terminal capitalization rate will tend to increase the fair value of an investment property. Changes
in fair value based on variations in non-market observable inputs generally cannot be extrapolated because the relationship between the directional changes of
each input is not usually linear.
Footnote Number (3)Other invested assets measured at fair value are held in infrastructure and timberland sectors and include fund investments of $31,435 (2023 – $27,532) recorded
at net asset value. The significant inputs used in the valuation of the Company’s infrastructure investments are primarily future distributable cash flows, terminal
values and discount rates. Holding other factors constant, an increase to future distributable cash flows or terminal values would tend to increase the fair value of
an infrastructure investment, while an increase in the discount rate would have the opposite effect. Discount rates during the year ended December 31, 2024
ranged from 7.42% to 20.00% (2023 – ranged from 7.35% to 15.60%). Disclosure of distributable cash flow and terminal value ranges are not meaningful given the
disparity in estimates by project. The significant inputs used in the valuation of the Company’s investments in timberland properties are timber prices and discount
rates. Holding other factors constant, an increase to timber prices would tend to increase the fair value of a timberland investment, while an increase in the
discount rates would have the opposite effect. Discount rates during the year ended December 31, 2024 ranged from 3.25% to 6.25% (2023 – ranged from 4.00%
to 7.00%). A range of prices for timber is not meaningful as the market price depends on factors such as property location and proximity to markets and export
yards.
Footnote Number (4)Segregated funds net assets are measured at fair value. The Company’s Level 3 segregated funds underlying assets are predominantly investment properties and
timberland properties valued as described above.
181
As at December 31, 2023
Total fair value
Level 1
Level 2
Level 3
Cash and short-term securities
FVOCI
$ 13,993
Do
llar Zero
$ 13,993
Do
llar Zero
FVTPL
1
Zero
1
Zero
Other
6,343
6,343
Zero
Zero
Debt securities
FVOCI
Canadian government and agency
19,769
Zero
19,769
Zero
U.S. government and agency
26,287
Zero
26,287
Zero
Other government and agency
30,576
Zero
30,566
10
Corporate
127,190
Zero
126,959
231
Residential mortgage-backed securities
6
Zero
6
Zero
Commercial mortgage-backed securities
370
Zero
370
Zero
Other asset-backed securities
1,579
Zero
1,558
21
FVTPL
Canadian government and agency
1,219
Zero
1,219
Zero
U.S. government and agency
1,303
Zero
1,303
Zero
Other government and agency
90
Zero
90
Zero
Corporate
2,372
Zero
2,372
Zero
Commercial mortgage-backed securities
1
Zero
1
Zero
Other asset-backed securities
Private placements
R
efer to footnote number (1)
15
Zero
15
Zero
FVOCI
44,952
Zero
37,270
7,682
FVTPL
654
Zero
575
79
Mortgages
FVOCI
28,473
Zero
Zero
28,473
FVTPL
1,055
Zero
Zero
1,055
Public equities
FVTPL
25,531
25,423
67
41
Real estate R
efer to footnote number (2)
Investment property
10,458
Zero
Zero
10,458
Own use property
2,430
Zero
Zero
2,430
Other invested assets
R
efer to footnote number (3)
33,653
68
Zero
33,585
Segregated funds net assets R
efer to footnote number (4)
377,544
343,061
30,991
3,492
Total
$755,864
$374,895
$293,412
$87,557
Note: For footnotes (1) to (4), refer to the “Fair value measurement” table as at December 31, 2024 above.
The following tables present fair value of invested assets not measured at fair value by the fair value hierarchy.
As at December 31, 2024
Carrying value
Total fair value
Level 1
Level 2
Level 3
Mortgages R
efer to footnote number (1)
$ 24,416
$ 24,781
Do
llar Zero
Do
llar Zero
$ 24,781
Loans to Bank clients
R
efer to footnote number (2)
2,310
2,285
Zero
2,285
Zero
Real estate - own use property R
efer to footnote number (3)
174
298
Zero
Zero
298
Public bonds held at amortized cost
1,495
1,007
Zero
1,007
Zero
Other invested assets R
efer to footnote number (4)
14,131
15,143
542
Zero
14,601
Total invested assets disclosed at fair value
$ 42,526
$ 43,514
$ 542
$ 3,292
$ 39,680
As at December 31, 2023
Carrying value
Total fair value
Level 1
Level 2
Level 3
Short-term securities
$
1
$
1
Do
llar Zero
Do
llar Zero
Do
llar Zero
Mortgages R
efer to footnote number (1)
22,893
22,782
Zero
Zero
22,782
Loans to Bank clients(2)
2,436
2,411
Zero
2,411
Zero
Real estate - own use property(3)
161
286
Zero
Zero
286
Public bonds held at amortized cost
1,372
998
Zero
998
Zero
Other invested assets(4)
12,027
12,906
240
Zero
12,666
Total invested assets disclosed at fair value
$ 38,890
$ 39,384
$ 240
$ 3,410
$ 35,734
Footnote Number (1)Fair value of commercial mortgages is determined through an internal valuation methodology using both observable and non-market observable inputs. Non-
market observable inputs include credit assumptions and liquidity spread adjustments. Fair value of fixed-rate residential mortgages is determined using the
discounted cash flow method. Inputs used for valuation are primarily comprised of prevailing interest rates and prepayment rates, if applicable. Fair value of
variable-rate residential mortgages is assumed to be their carrying value.
Footnote Number (2)Fair value of fixed-rate loans to Bank clients is determined using the discounted cash flow method. Inputs used for valuation are primarily comprised of current
interest rates. Fair value of variable-rate loans is assumed to be their carrying value.
Footnote Number (3)Fair value of own use real estate and the fair value hierarchy are determined in accordance with the methodologies described for real estate – investment property
in note 1 (e).
Footnote Number (4)The carrying value of other invested assets includes leveraged leases of $4,300 (2023 – $3,790), other equity method accounted investments and other invested
assets of $9,831 (2023 – $8,237). Fair value of leveraged leases is disclosed at its carrying value as fair value is not routinely calculated on these investments. Fair
value of equity method accounted investments and other invested assets is determined using a variety of valuation techniques including discounted cash flows and
market comparable approaches. Inputs vary based on the specific investment.
182 | 2024 Annual Report | Notes to Consolidated Financial Statements
Transfers between Level 1 and Level 2
The Company records transfers of assets and liabilities between Level 1 and Level 2 at their fair values as at the end of each
reporting period, consistent with the date of the determination of fair value. Assets are transferred out of Level 1 when they are
no longer transacted with sufficient frequency and volume in an active market. Conversely, assets are transferred from Level 2 to
Level 1 when transaction volume and frequency are indicative of an active market. During the year ended December 31, 2024,
the Company had $nil transfers between Level 1 and Level 2 (2023 – $nil).
For segregated funds net assets, during the year ended December 31, 2024, the Company had $nil transfers from Level 1 to
Level 2 (2023 – $nil). During the year ended December 31, 2024, the Company had $nil transfers from Level 2 to Level 1 (2023
– $nil).
Invested assets and segregated funds net assets measured at fair value using significant non-market observable inputs
(Level 3)
The Company classifies fair values of invested assets and segregated funds net assets as Level 3 if there are no observable
market inputs for these assets, or in the presence of active markets significant non-market observable inputs are used to
determine fair value. The Company prioritizes the use of market-based inputs over non-market observable inputs in determining
Level 3 fair values. The gains and losses in the table below include the changes in fair value due to both observable and non-
market observable factors.
The following tables present the movement in invested assets, net derivatives and segregated funds net assets measured at fair
value using significant non-market observable inputs (Level 3) for the year ended December 31, 2024 and 2023.
For the year ended
December 31, 2024
Balance,
January 1,
2024
Total
gains
(losses)
included
in net
incomeRefer to footnote number (1)
i
i
Total
gains
(losses)
ncluded
n OCI(2) Purchases
Sales Settlements
Transf
in
er
Refer to footnote number (3)
Transfer
outRefer to footnote number (3)
Currency
movement
Balance,
December 31,
2024
Change in
unrealized
gains
(losses)
on assets
still held
Debt securities
FVOCI
Other government & agency
$
10 Do
llar Zero
Do
llar ZeroDo
llar ZeroDo
llar Zero
$
(5) $
4 Do
llar Zero
$
1
$
10 Do
llar Zero
Corporate
231
Zero
(33)
Zero
Zero
(7)
Zero
(151)
4
44
Zero
Other securitized assets
21
Zero
33
Zero
Zero
(22)
Zero
(33)
1
Zero
Zero
Public equities
FVTPL
41
(3)
Zero
Zero
(1)
Zero
Zero
(36)
(1)
Zero
(3)
Private placements
FVOCI
7,682
(47)
50
3,039
(1,115)
(1,040)
254
(624)
565
8,764
Zero
FVTPL
79
1
Zero
49
Zero
(13)
29
(14)
5
136
1
Mortgages
FVOCI
28,473
(73)
109
2,243
(2,834)
(763)
Zero
Zero
1,637
28,792
Zero
FVTPL
1,055
32
Zero
339
(152)
(38)
Zero
Zero
3
1,239
Zero
Investment property
10,458
(504)
Zero
222
(66)
Zero
Zero
Zero
479
10,589
(514)
Own use property
2,430
(82)
Zero
19
Zero
Zero
Zero
Zero
133
2,500
(82)
Other invested assets
33,585
1,502
14
4,308
(2,007)
(1,187)
Zero
Zero
2,251
38,466
1,251
Total invested assets
84,065
826
173
10,219
(6,175)
(3,075)
287
(858)
5,078
90,540
653
Derivatives, net
(2,166)
(2,248)
Zero
Zero
Zero
(166)
Zero
1,509
(164)
(3,235)
(2,065)
Segregated funds net assets
3,492
119
(67)
148
(527)
17
Zero
Zero
152
3,334
(76)
Total
$ 85,391 $ (1,303) $ 106 $ 10,367 $ (6,702) $ (3,224) $ 287 $
651 $ 5,066
$ 90,639 $ (1,488)
Footnote Number (1)These amounts are included in net investment income on the Consolidated Statements of Income except for the amount related to segregated funds net assets,
where the amount is recorded in Investment income related to segregated funds net assets. Refer to notes 1 (h) and 22.
Footnote Number (2)These amounts are included in OCI on the Consolidated Statements of Comprehensive Income.
Footnote Number (3)The Company uses fair value of the assets at the beginning of the year for assets transferred into and out of Level 3 except for derivatives, where the Company
uses fair value at the end of the year and at the beginning of the year, respectively.
183
For the year ended
December 31, 2023
Balance,
January 1,
2023
Total
gains
(losses)
included
in net
incomeRefer to footnote number (1)
Total
gains
(losses)
included
in OCI(2) Purchases
Sales Settlements
Transfer
inRefer to footnote number (3)
Transfer
out(3),(4)
Currency
movement
Balance,
December 31,
2023
Change in
unrealized
gains
(losses) on
assets still
held
Debt securities
FVOCI
Other government & agency
$
9D ol
lar Zero Do
llar Zero
$
2Dol
lar Zero
Do
llar Zero Dol
lar Zero Do
llar Zero $
(1) $
10D
ol
lar Zero
Corporate
32
Zero
3
178
Zero
(7)
25
Zero
Zero
231
Zero
Other securitized assets
26
Zero
1
Zero
Zero
(5)
Zero
Zero
(1)
21
Zero
Public equities
FVTPL
71
Zero
Zero
37
Zero
Zero
Zero
(67)
Zero
41
Zero
Private placements
FVOCI
7,828
(4)
258
1,942
(497)
(1,172)
2,546
(2,907)
(312)
7,682
Zero
FVTPL
31
44
Zero
17
Zero
(1)
34
(47)
1
79
44
Mortgages
FVOCI
28,621
65
830
1,984
(1,626)
(856)
Zero
Zero
(545)
28,473
Zero
FVTPL
1,138
37
Zero
160
(239)
(39)
Zero
Zero
(2)
1,055
Zero
Investment property
11,417 (1,054)
Zero
416
(122)
Zero
Zero
Zero
(199)
10,458
(1,055)
Own use property
2,682
(234)
Zero
20
Zero
Zero
Zero
Zero
(38)
2,430
(234)
Other invested assets
31,069
423
7
4,760
(522)
(1,219)
Zero
(68)
(865)
33,585
647
Total invested assets
82,924
(723)
1,099
9,516
(3,006)
(3,299)
2,605
(3,089)
(1,962)
84,065
(598)
Derivatives, net
(3,188)
(144)
Zero
Zero
Zero
960
Zero
165
41
(2,166)
17
Segregated funds net
assets
3,985
(97)
Zero
110
(466)
24
Zero
(15)
(49)
3,492
32
Total
$ 83,721 $ (964) $ 1,099 $ 9,626 $ (3,472) $ (2,315) $ 2,605 $ (2,939) $ (1,970)
$ 85,391
$ (549)
Footnote Number (1)These amounts are included in net investment income on the Consolidated Statements of Income except for the amount related to segregated funds net assets,
where the amount is recorded in Investment income related to segregated funds net assets. Refer to notes 1 (h) and 22.
Footnote Number (2)These amounts are included in OCI on the Consolidated Statements of Comprehensive Income.
Footnote Number (3)The Company uses fair value of the assets at the beginning of the year for assets transferred into and out of Level 3 except for derivatives, where the Company
uses fair value at the end of the year and at the beginning of the year, respectively.
Footnote Number (4)Private placement bonds of $1,771 with maturity dates beyond 30 years were reclassified from Level 3 to Level 2 in 2023 to align with the fair value leveling
treatment of public bonds.
Transfers into Level 3 primarily result where a lack of observable market data (versus the previous period) arises. Transfers from
Level 3 primarily result from observable market data becoming available for derivatives, or for the entire term structure of the
private placements.
184 | 2024 Annual Report | Notes to Consolidated Financial Statements
(h) Remaining term to maturity
The following tables present remaining term to maturity for invested assets.
As at December 31, 2024
Remaining term to maturityRefer to footnote number (1)
Less than
1 year
1 to 3
years
3 to 5
years
5 to 10
years
Over 10
years
With no
specific
maturity
Total
Cash and short-term securities
$ 25,789
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
$
25,789
Debt securities
Canadian government and agency
543
2,282
678
3,339
12,885
Zero
19,727
U.S. government and agency
644
640
1,473
4,699
21,198
Zero
28,654
Other government and agency
372
1,208
1,056
3,566
29,268
Zero
35,470
Corporate
7,810
15,763
15,817
33,818
51,754
Zero
124,962
Mortgage / asset-backed securities
60
260
213
450
825
Zero
1,808
Public equities
Zero
Zero
Zero
Zero
Zero
33,725
33,725
Mortgages
4,741
11,944
10,478
7,617
9,876
9,791
54,447
Private placements
1,534
5,093
4,986
10,463
27,500
92
49,668
Loans to Bank clients
47
13
3
Zero
Zero
2,247
2,310
Real estate
Own use property
Zero
Zero
Zero
Zero
Zero
2,674
2,674
Investment property
Zero
Zero
Zero
Zero
Zero
10,589
10,589
Other invested assets
Alternative long-duration assets
67
Zero
85
276
524
46,911
47,863
Various other
Zero
20
Zero
3,623
657
511
4,811
Total invested assets
$ 41,607
$ 37,223
$ 34,789
$ 67,851
$ 154,487
$ 106,540
$ 442,497
As at December 31, 2023
Remaining term to maturity
R
efer to footnote number (1)
Less than
1 year
1 to 3
years
3 to 5
years
5 to 10
years
Over 10
years
With no
specific
maturity
Total
Cash and short-term securities
$ 20,338
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
$
20,338
Debt securities
Canadian government and agency
657
1,435
1,580
3,656
13,660
Zero
20,988
U.S. government and agency
297
725
744
4,504
22,208
Zero
28,478
Other government and agency
412
1,052
1,892
3,864
23,446
Zero
30,666
Corporate
8,475
15,512
18,548
33,361
54,100
50
130,046
Mortgage / asset-backed securities
106
153
279
556
877
Zero
1,971
Public equities
Zero
Zero
Zero
Zero
Zero
25,531
25,531
Mortgages
3,363
12,076
10,181
7,690
9,644
9,467
52,421
Private placements
1,418
3,486
4,704
9,137
26,790
71
45,606
Loans to Bank clients
39
23
1
Zero
Zero
2,373
2,436
Real estate
Own use property
Zero
Zero
Zero
Zero
Zero
2,591
2,591
Investment property
Zero
Zero
Zero
Zero
Zero
10,458
10,458
Other invested assets
Alternative long-duration assets
Zero
67
22
82
732
40,531
41,434
Various other
Zero
Zero
19
1,528
2,242
457
4,246
Total invested assets
$ 35,105
$ 34,529
$ 37,970
$ 64,378
$ 153,699
$
91,529
$ 417,210
Footnote Number (1)Represents contractual maturities. Actual maturities may differ due to prepayment privileges in the applicable contract.
185
Note 4 Derivative and Hedging Instruments
Derivatives are financial contracts whose value is derived from various factors described in note 4 (a). The Company uses
derivatives including swaps, forward and futures agreements, and options to manage current and anticipated exposures to
changes in interest rates, foreign exchange rates, commodity prices and equity market prices, and to replicate exposure to
different types of investments.
Swaps are contractual agreements between the Company and a third party to exchange a series of cash flows based upon rates
applied to a notional amount. For interest rate swaps, counterparties generally exchange fixed or floating interest rate payments
based on a notional value in a single currency. Cross-currency swaps involve the exchange of principal amounts between
parties, as well as the exchange of interest payments in one currency for the receipt of interest payments in another currency.
Total return swaps are contracts that involve the exchange of payments based on changes in the values of a reference asset,
including any returns such as interest earned on these assets, in return for amounts based on reference rates specified in the
contract.
Forward and futures agreements are contractual obligations to buy or sell a financial instrument, foreign currency or other
underlying commodity on a predetermined future date at a specified price. Forward contracts are over-the-counter (“OTC”)
contracts negotiated between counterparties, whereas futures agreements are contracts with standard amounts and settlement
dates that are traded on regulated exchanges.
Options are contractual agreements whereby the holder has the right, but not the obligation, to buy (call option) or sell (put
option) a security, exchange rate, interest rate, or other financial instrument at a predetermined price / rate within a specified
time.
See variable annuity dynamic hedging strategy in note 8 (a) for an explanation of the Company’s dynamic hedging strategy for its
variable annuity product guarantees.
(a) Fair value of derivatives
The pricing models used to value derivatives are based on market-standard valuation methodologies, and the inputs to these
models are consistent with what a market participant would use when pricing the instruments. Derivative valuations can be
affected by changes in interest rates, foreign exchange rates, financial indices, commodity prices or indices, credit spreads,
default risk (including the counterparties to the contract), and market volatility.
The significant inputs to the pricing models for most derivatives are inputs that are observable or can be corroborated by
observable market data and are classified as Level 2. Inputs that are observable generally include interest rates, foreign
exchange rates and interest rate curves. However, certain derivatives may rely on inputs that are significant to the fair value that
are not observable in the market or cannot be derived principally from, or corroborated by, observable market data and these
derivatives are classified as Level 3. Level 3 derivative assets and liabilities include bond forwards. Inputs that are unobservable
generally include broker quoted prices, volatilities and inputs that are outside of the observable portion of the interest rate curve
or other relevant market measures, such as repurchase rates. These non-market observable inputs may involve significant
management judgment or estimation. Even though these inputs are non-market observable, they are based on assumptions
deemed appropriate given the circumstances and consistent with what market participants would use when pricing such
instruments. The credit risk of both the counterparty and the Company are considered in determining the fair value for all
derivatives after considering the effects of netting agreements and collateral arrangements.
186 | 2024 Annual Report | Notes to Consolidated Financial Statements
The following table presents gross notional amount and fair value of derivative instruments by the underlying risk exposure.
As at December 31,
2024
2023
Type of hedge
Instrument type
Notional
amount
Fair value
Notional
amount
Fair value
Assets
Liabilities
Assets
Liabilities
Qualifying hedge accounting relationships
Fair value hedges
Interest rate swaps
$ 206,181
$ 2,734
$
3,533
$ 184,309
$ 2,627
$
3,044
Foreign currency swaps
14,121
145
2,114
9,055
78
1,518
Forward contracts
25,692
74
3,420
23,461
165
2,672
Cash flow hedges
Interest rate swaps
9,036
24
48
8,372
20
48
Foreign currency swaps
650
Zero
216
1,150
35
181
Forward contracts
Zero
Zero
Zero
Zero
Zero
Zero
Equity contracts
324
6
Zero
240
3
Zero
Net investment hedges
Forward contracts
602
18
Zero
654
Zero
16
Total derivatives in qualifying hedge accounting relationships
256,606
3,001
9,331
227,241
2,928
7,479
Derivatives not designated in qualifying hedge
accounting relationships
Interest rate swaps
110,114
2,188
2,906
103,806
2,361
3,098
Interest rate futures
9,054
Zero
Zero
9,449
Zero
Zero
Interest rate options
5,633
16
Zero
5,841
33
Zero
Foreign currency swaps
33,924
1,854
272
33,148
1,873
398
Currency rate futures
2,238
Zero
Zero
2,581
Zero
Zero
Forward contracts
52,044
882
1,675
34,080
769
597
Equity contracts
25,290
724
63
19,760
579
115
Credit default swaps
114
2
Zero
131
3
Zero
Equity futures
4,004
Zero
Zero
4,040
Zero
Zero
Total derivatives not designated in qualifying hedge
accounting relationships
242,415
5,666
4,916
212,836
5,618
4,208
Total derivatives
$ 499,021
$ 8,667
$ 14,247
$ 440,077
$ 8,546
$ 11,687
The following tables present the fair values of the derivative instruments by the remaining term to maturity. Fair values disclosed
below do not incorporate the impact of master netting agreements (refer to note 8 (g)).
As at December 31, 2024
Remaining term to maturity
Total
Less than
1 year
1 to 3
years
3 to 5
years
Over 5
years
Derivative assets
$ 1,171
$ 578
$ 635
$ 6,283
$ 8,667
Derivative liabilities
2,320
2,304
1,244
8,379
14,247
As at December 31, 2023
Remaining term to maturity
Total
Less than
1 year
1 to 3
years
3 to 5
years
Over 5
years
Derivative assets
$ 1,189
$ 603
$ 573
$ 6,181
$ 8,546
Derivative liabilities
1,561
1,982
717
7,427
11,687
187
The following tables present gross notional amount by the remaining term to maturity, total fair value (including accrued interest),
credit equivalent amount and capital requirement by contract type.
As at December 31, 2024
Remaining term to maturity (notional amounts)
Fair value
Less than
1 year
1 to 5
years
Over
5 years
Total
Positive
Negative
Net
Credit
equivalent
amountRefer to footnote number (1)
Capital
requirementRefer to footnote number (2)
Interest rate contracts
OTC swap contracts
$
6,999
$ 25,019
$ 112,685
$ 144,703
$ 5,103
$
(6,976) $ (1,873)
$
323
$ 9
Cleared swap contracts
9,507
31,033
140,088
180,628
240
(189)
51
Zero
Zero
Forward contracts
20,661
21,028
Zero
41,689
231
(4,467)
(4,236)
36
1
Futures
9,054
Zero
Zero
9,054
Zero
Zero
Zero
Zero
Zero
Options purchased
863
1,086
3,684
5,633
16
Zero
16
17
Zero
Subtotal
47,084
78,166
256,457
381,707
5,590
(11,632)
(6,042)
376
10
Foreign exchange
Swap contracts
2,044
13,733
32,918
48,695
1,983
(2,709)
(726)
1,028
19
Forward contracts
29,423
1,105
6,121
36,649
743
(628)
115
698
17
Futures
2,238
Zero
Zero
2,238
Zero
Zero
Zero
Zero
Zero
Subtotal
33,705
14,838
39,039
87,582
2,726
(3,337)
(611)
1,726
36
Credit derivatives
Zero
114
Zero
114
2
Zero
2
Zero
Zero
Equity contracts
Swap contracts
1,926
762
Zero
2,688
31
(14)
17
27
Zero
Futures
4,004
Zero
Zero
4,004
Zero
Zero
Zero
Zero
Zero
Options purchased
19,437
3,489
Zero
22,926
699
(43)
656
375
3
Subtotal
25,367
4,365
Zero
29,732
732
(57)
675
402
3
Subtotal including accrued
interest
106,156
97,369
295,496
499,021
9,048
(15,026)
(5,978)
2,504
49
Less accrued interest
Zero
Zero
Zero
Zero
381
(779)
(398)
Zero
Zero
Total
$ 106,156
$ 97,369
$ 295,496
$ 499,021
$ 8,667
$ (14,247) $ (5,580)
$ 2,504
$ 49
As at December 31, 2023
Remaining term to maturity (notional amounts)
Fair value
Credit
equivalent
amountRefer to footnote number (1)
Capital
requirementRefer to footnote number (2)
Less than
1 year
1 to 5
years
Over 5
years
Total
Positive
Negative
Net
Interest rate contracts
OTC swap contracts
$
4,645
$ 20,923
$ 106,445
$ 132,013
$ 5,295
$
(6,850) $ (1,555)
$
300
$ 7
Cleared swap contracts
4,634
33,082
126,758
164,474
220
(180)
40
Zero
Zero
Forward contracts
17,809
16,182
Zero
33,991
771
(2,986)
(2,215)
Zero
Zero
Futures
9,449
Zero
Zero
9,449
Zero
Zero
Zero
Zero
Zero
Options purchased
795
1,362
3,684
5,841
33
Zero
33
8
Zero
Subtotal
37,332
71,549
236,887
345,768
6,319
(10,016)
(3,697)
308
7
Foreign exchange
Swap contracts
2,110
11,782
29,461
43,353
1,978
(2,179)
(201)
1,087
19
Forward contracts
24,204
Zero
Zero
24,204
163
(299)
(136)
19
Zero
Futures
2,581
Zero
Zero
2,581
Zero
Zero
Zero
Zero
Zero
Subtotal
28,895
11,782
29,461
70,138
2,141
(2,478)
(337)
1,106
19
Credit derivatives
14
117
Zero
131
4
Zero
4
Zero
Zero
Equity contracts
Swap contracts
1,452
723
Zero
2,175
18
(78)
(60)
32
Zero
Futures
4,040
Zero
Zero
4,040
Zero
Zero
Zero
Zero
Zero
Options purchased
14,830
2,995
Zero
17,825
562
(28)
534
215
2
Subtotal
20,336
3,835
Zero
24,171
584
(106)
478
247
2
Subtotal including accrued
interest
86,563
87,166
266,348
440,077
9,044
(12,600)
(3,556)
1,661
28
Less accrued interest
Zero
Zero
Zero
Zero
498
(913)
(415)
Zero
Zero
Total
$ 86,563
$ 87,166
$ 266,348
$ 440,077
$ 8,546
$ (11,687) $ (3,141)
$ 1,661
$ 28
Footnote Number (1)Credit equivalent amount is the sum of replacement cost and the potential future credit exposure less any collateral held. Replacement cost represents the current
cost of replacing all contracts with a positive fair value. The amounts take into consideration legal contracts that permit offsetting of positions. The potential future
credit exposure is calculated based on a formula prescribed by the Office of the Superintendent of Financial Institutions (“OSFI”).
Footnote Number (2)Capital requirement represents the credit equivalent amount, weighted according to the creditworthiness of the counterparty, as prescribed by OSFI.
188 | 2024 Annual Report | Notes to Consolidated Financial Statements
The total notional amount of $499 billion (2023 – $440 billion) includes $90 billion (2023 – $82 billion) related to derivatives
utilized in the Company’s variable annuity guarantee dynamic hedging. Due to the Company’s variable annuity hedging
practices, many trades are in offsetting positions, resulting in materially lower net fair value exposure for the Company than what
the gross notional amount would suggest.
The following tables present the average rate of the hedging instruments in key hedge relationships that do not frequently reset.
As at December 31, 2024
Remaining term to maturity
(notional amounts)
Fair value
Hedged item
Hedging instrument
Average rate
Less than
1 year
1 to 5
years
Over
5 years
Total
Positive Negative
Net
Inflation risk
Inflation linked insurance
liabilities
Interest rate swaps
CPI rate: 290.22
$
92 $ 568 $ 8,376 $ 9,036
$ 24
$
(48) $
(24)
Foreign exchange risk
Foreign currency assets
Foreign currency
swaps
CAD/EUR: 0.66703
Zero
160
1,311
1,471
16
Zero
16
Foreign currency assets
Foreign currency
swaps
CAD/GBP: 0.56259
Zero
115
434
549
22
Zero
22
Foreign currency assets
Foreign currency
swaps
CAD/USD: 0.73009
165
407
1,067
1,639
9
(27)
(18)
Foreign exchange and
interest rate risk
Floating rate foreign currency
liabilities
Foreign currency
swaps
CAD/USD: 0.86655
Zero
Zero
650
650
Zero
(216)
(216)
Debt securities at fair value
through OCI
Foreign currency
swaps
CAD/USD: 1.22914
42
9
Zero
51
7
Zero
7
Equity risk
Stock-based compensation
Equity contracts
MFC price: $30.12
20
304
Zero
324
6
Zero
6
Total
$ 319 $1,563 $11,838 $13,720
$ 84
$ (291) $ (207)
As at December 31, 2023
Remaining term to maturity
(notional amounts)
Fair value
Hedged item
Hedging instrument
Average rate
Less than
1 year
1 to 5
years
Over 5
years
Total
Positive Negative
Net
Inflation risk
Inflation linked insurance
liabilities
Interest rate swaps
CPI rate: 290.13
$
87
$ 459 $ 7,826 $ 8,372
$ 20
$
(48)
$
(28)
Foreign exchange risk
Fixed rate liabilities
Foreign currency
swaps
SGD/CAD: 0.93503
500
Zero
Zero
500
35
Zero
35
Foreign exchange and
interest rate risk
Floating rate foreign currency
liabilities
Foreign currency
swaps
CAD/USD: 0.86655
Zero
Zero
650
650
Zero
(181)
(181)
Debt securities at fair value
through OCI
Foreign currency
swaps
CAD/USD: 1.22914
Zero
46
Zero
46
5
Zero
5
Equity risk
Stock-based compensation
Equity contracts
MFC price: $26.28
11
229
Zero
240
3
Zero
3
Total
$ 598 $ 734 $ 8,476 $ 9,808
$ 63
$ (229) $ (166)
189
Fair value and the fair value hierarchy of derivative instruments
As at December 31, 2024
Fair value
Level 1
Level 2
Level 3
Derivative assets
Interest rate contracts
$ 5,193
Do
llar Zero
$ 5,026
$
167
Foreign exchange contracts
2,742
Zero
2,742
Zero
Equity contracts
730
Zero
730
Zero
Credit default swaps
2
Zero
2
Zero
Total derivative assets
$ 8,667
Do
llar Zero
$ 8,500
$
167
Derivative liabilities
Interest rate contracts
$ 10,954
Do
llar Zero
$ 7,571
$ 3,383
Foreign exchange contracts
3,230
Zero
3,227
3
Equity contracts
63
Zero
47
16
Total derivative liabilities
$ 14,247
Do
llar Zero
$ 10,845
$ 3,402
As at December 31, 2023
Fair value
Level 1
Level 2
Level 3
Derivative assets
Interest rate contracts
$ 5,813
Do
llar Zero
$ 5,262
$
551
Foreign exchange contracts
2,148
Zero
2,148
Zero
Equity contracts
582
Zero
572
10
Credit default swaps
3
Zero
3
Zero
Total derivative assets
$ 8,546
Do
llar Zero
$ 7,985
$
561
Derivative liabilities
Interest rate contracts
$ 9,176
Do
llar Zero
$ 6,451
$ 2,725
Foreign exchange contracts
2,396
Zero
2,395
1
Equity contracts
115
Zero
114
1
Total derivative liabilities
$ 11,687
Do
llar Zero
$ 8,960
$ 2,727
Movement in net derivatives measured at fair value using significant non-market observable inputs (Level 3) is presented in
note 3 (g).
(b) Hedging relationships
The Company uses derivatives for economic hedging purposes. In certain circumstances, these derivatives meet the
requirements of hedge accounting and designating them in qualifying hedge accounting relationships achieves the desired IFRS
presentation. Risk management strategies eligible for hedge accounting are designated as fair value hedges, cash flow hedges
or net investment hedges.
At the inception of a hedge accounting relationship, the Company documents the relationship between the hedging instrument
and hedged item, its risk management objective, and its strategy for undertaking the hedge. At hedge inception and on an
ongoing basis, an assessment is performed and documented to demonstrate that the hedging relationship qualifies or continues
to qualify for hedge accounting. In order to qualify for hedge accounting, there has to be an economic relationship between the
hedging instrument and the hedged item, an assessment that the effect of credit risk does not dominate the economic
relationship, and the hedge ratio between the hedging instrument and the hedged item will be based on the approach used by
risk management, unless the hedge ratio used by risk management results in an imbalance that would create hedge
ineffectiveness that is inconsistent with the purpose of hedge accounting.
• The Company designates a specific risk component or a combination of risk components as the hedged risk, including
benchmark interest rate, foreign exchange rate, equity price and consumer price index components. All these risk components
are observable in the relevant market environment and the changes in fair value or variability in cash flows attributable to these
risk components can be reliably measured for hedged items. The hedged risk is generally the most significant risk component of
the overall changes in fair value or in cash flows. The Company acquires derivatives for economic hedging purposes with
underlying characteristics that offset the hedged risk based on the risk management strategy.
• The Company executes hedging derivatives with counterparties with high credit quality and monitors the creditworthiness
of the counterparties to ensure they are expected to meet cash flow obligations on the hedging instruments as they come
due, and that the probability of counterparty default is remote. Further, changes in the Company’s own credit risk are
immaterial and have insignificant impact to the hedging relationships.
• A hedge ratio is calculated as the ratio between the quantity of the hedged item that the Company hedges and the quantity
of the hedging instrument the Company uses to hedge that quantity of hedged item.
O
For group fair value hedges of foreign exchange and interest rate risk of insurance liabilities and group fair value hedges of
foreign exchange and interest rate risk of debt instruments, the Company constructs the hedge relationship by comparing
interest rate sensitivities of the group of hedging derivatives and the group of hedged items in the same currency. Interest
rate sensitivities are compared by estimating the change in the present value of cash flows of hedged items and of hedging
derivatives from an instantaneous shock to interest rates, assuming no rebalancing actions are undertaken.
O
For the rest of the Company’s hedge accounting relationships, the Company generally constructs the hedge
relationships by comparing the notional amounts of the hedging derivatives with that of the hedged items.
190 | 2024 Annual Report | Notes to Consolidated Financial Statements
Hedge ineffectiveness in various hedging relationships may still exist and potential sources of hedge ineffectiveness by risk
category are summarized below:
Interest
rate risk
Foreign
currency
risk
Equity
risk
Consumer
price index
risk
Mismatches in some critical terms of hedging instrument and hedged item
Tick
Tick
Tick
Tick
Differences in valuation methodologies including discounting factor
Tick
Tick
Tick
Changes in timing and amount of forecasted hedged items
Tick
Tick
Differences due to the use of non-zero fair value hedging instruments
Tick
Tick
Hedging relationships that frequently reset
The Company uses a portfolio of derivatives as a fair value hedge of foreign exchange rate and interest rate fluctuations of fixed-
rate debt instruments denominated in non-functional currencies, as well as interest rate fluctuations of guaranteed insurance
liabilities. The risk management objective is to hedge these foreign exchange and interest rate fluctuations with a hedge horizon
of three months. At the end of each hedge horizon, the hedging relationships mature; and new fair value hedging relationships
are designated with a newly designated pool of hedging instruments and hedged items.
Fair value hedges
The Company uses interest rate swaps to manage its exposure to changes in the fair value of fixed-rate financial instruments
and guaranteed insurance liabilities due to changes in interest rates. The Company also uses cross-currency swaps to manage
its exposure to foreign exchange rate fluctuations, interest rate fluctuations, or both.
The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges in total investment
result. These investment gains (losses) are shown in the following tables.
For the year ended
December 31, 2024
Change in value
of the hedged
item for
ineffectiveness
measurement
Change in value
of the hedging
instrument for
ineffectiveness
measurement
Ineffectiveness
recognized in
Total investment
result
Carrying
amount for
hedged
itemsRefer to footnote number (1)
Accumulated fair
value
adjustments on
hedged items
Accumulated fair
value adjustments
on de-designated
hedged items
Assets
Interest rate risk
Debt securities at FVOCI
$ (833)
$
812
$
(21)
$ 117,538
$
(1)
$ (601)
Foreign currency risk
Debt securities at FVOCI
(80)
80
Zero
3,561
Zero
Zero
Foreign currency and interest
rate risk
Debt securities at FVOCI
451
(559)
(108)
11,130
(367)
196
Total assets
$ (462)
$
333
$ (129)
$ 132,229
$
(368)
$ (405)
Liabilities
Interest rate risk
Insurance contract liabilities
$ 3,591
$ (3,329)
$
262
$
47,747
$ 3,386
$
237
Foreign currency and interest
rate risk
Insurance contract liabilities
55
(17)
38
3,167
137
Zero
Total liabilities
$ 3,646
$ (3,346)
$ 300
$
50,914
$ 3,523
$
237
For the year ended
December 31, 2023
Change in value
of the hedged
item for
ineffectiveness
measurement
Change in value
of the hedging
instrument for
ineffectiveness
measurement
Ineffectiveness
recognized in
Total investment
result
Carrying
amount for
hedged
itemsRefer to footnote number (1)
Accumulated fair
value
adjustments on
hedged items
Accumulated fair
value adjustments
on de-designated
hedged items
Assets
Interest rate risk
Debt securities at FVOCI
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
$
241
Foreign currency and interest
rate risk
Debt securities at FVOCI
742
(778)
(36)
9,191
576
(405)
Total assets
$
742
$
(778)
$
(36)
$
9,191
$
576
$ (164)
Liabilities
Interest rate risk
Insurance contract liabilities
$
(53)
$
185
$ 132
$
29,133
$ (2,658)
$ 2,642
Total liabilities
$
(53)
$
185
$
132
$
29,133
$ (2,658)
$ 2,642
(1) The carrying amounts for hedged items presented are related to hedged items in active hedging relationships as at the reporting date.
191
Cash flow hedges
The Company uses interest rate swaps to hedge the variability in cash flows from variable rate financial instruments and from
forecasted transactions. The Company also uses cross-currency swaps and foreign currency forward contracts to hedge the
variability from foreign currency financial instruments and foreign currency expenses. Total return swaps are used to hedge the
variability in cash flows associated with certain stock-based compensation awards. Inflation swaps are used to reduce inflation
risk generated from inflation-indexed liabilities.
The effects of derivatives in cash flow hedging relationships on the Consolidated Statements of Income and the Consolidated
Statements of Comprehensive Income are shown in the following tables. The effective portion of the change in fair value of
hedging instruments associated with the Consumer Price Index (“CPI”) cash flow hedge accounting program is presented in
AOCI – Insurance finance income (expenses), in the same line as the hedged item. The accumulated other comprehensive
income (loss) balances of $10 as at December 31, 2024 (2023 – $(149)) were all related to continuing cash flow hedges, of
which $(42) (December 31, 2023 – $(85)) related to CPI cash flow hedges that were reported in AOCI – Insurance finance
income (expenses). There were $nil and $nil balance in AOCI related to de-designated hedges as at December 31, 2024 and
2023, respectively.
For the year ended
December 31, 2024
Hedged items in qualifying cash flow
hedging relationships
Change in fair
value of hedged
items for
ineffectiveness
measurement
Change in fair
value of hedging
instruments for
ineffectiveness
measurement
Gains (losses)
deferred in
AOCI on
derivatives
Gains (losses)
reclassified from
AOCI into Total
investment result
Ineffectiveness
recognized in
Total investment
result
Interest rate risk
Treasury locks
Forecasted liability issuance
$
3
$
(3)
$
(3)
Do
llar Zero
Do
llar Zero
Foreign exchange risk
Foreign currency swaps
Fixed rate liabilities
(23)
23
23
26
Zero
Interest and foreign
exchange risk
Foreign currency swaps
Floating rate liabilities
32
(32)
(32)
(75)
Zero
Equity price risk
Equity contracts
Stock-based compensation
(145)
145
145
66
Zero
CPI risk
Interest rate swaps(1)
Inflation linked insurance liabilities
(60)
60
60
17
Zero
Total
$ (193)
$ 193
$ 193
$
34
D
ollar Zero
For the year ended
December 31, 2023
Hedged items in qualifying
cash flow hedging relationships
Change in fair
value of hedged
items for
ineffectiveness
measurement
Change in fair
value of hedging
instruments for
ineffectiveness
measurement
Gains (losses)
deferred in
AOCI on
derivatives
Gains (losses)
reclassified from
AOCI into Total
investment result
Ineffectiveness
recognized in
Total investment
result
Interest rate risk
Treasury locks
Forecasted liability issuance
$
(1)
$
1
$
1
Do
llar Zero
Do
llar Zero
Foreign exchange risk
Foreign currency swaps
Fixed rate liabilities
10
(10)
(10)
(8)
Zero
Interest and foreign
exchange risk
Foreign currency swaps
Floating rate liabilities
(23)
23
23
16
Zero
Equity price risk
Equity contracts
Stock-based compensation
(40)
40
40
3
Zero
CPI risk
Interest rate swaps(1)
Inflation linked insurance liabilities
4
(4)
(4)
81
Zero
Total
$
(50)
$
50
$
50
$
92
D
ollar Zero
Footnote Number (1)Gains (losses) deferred in AOCI on derivatives are presented in AOCI under Insurance finance income (expenses).
The Company anticipates that net losses of approximately $14 will be reclassified from AOCI to net income within the next 12
months. The maximum time frame for which variable cash flows are hedged is 12 years with exception to CPI hedge
relationships where the maximum time frame for which variable cash flows are hedged is 28 years.
The table below details the balances in the Company’s cash flow hedge reserve.
As at December 31,
2024
2023
Balances in the cash flow hedge reserve for continuing hedges
$ 10
$ (149)
Balances remaining in the cash flow hedge reserve on de-designated hedges
Zero
Zero
Total
$ 10
$ (149)
192 | 2024 Annual Report | Notes to Consolidated Financial Statements
Hedges of net investments in foreign operations
The Company uses non-functional currency denominated long-term debt (refer to note 9) and forward currency contracts to
mitigate the foreign exchange translation risk of net investments in foreign operations.
The effects of net investment hedging relationships on the Consolidated Statements of Income and the Consolidated Statements
of Other Comprehensive Income are shown in the following tables.
For the year ended December 31, 2024
Change in fair value
of hedged items for
ineffectiveness
measurement
Change in fair
value of hedging
instruments for
ineffectiveness
measurement
Gains (losses)
deferred in AOCI
Gains
(losses)
reclassified
from AOCI
into Total
investment
result
Ineffectiveness
recognized in
Total investment
result
Non-functional currency denominated debt
$ 665
$ (665)
$ (665)
Do llar Zero
Do llar Zero
Forward currency contracts
(45)
45
45
Zero
Zero
Total
$ 620
$ (620)
$ (620)
Do llar Zero
Do llar Zero
For the year ended December 31, 2023
Change in fair value
of hedged items for
ineffectiveness
measurement
Change in fair
value of hedging
instruments for
ineffectiveness
measurement
Gains (losses)
deferred in AOCI
Gains
(losses)
reclassified
from AOCI
into Total
investment
result
Ineffectiveness
recognized in
Total investment
result
Non-functional currency denominated debt
$ (195)
$ 195
$ 195
Do llar Zero
Do llar Zero
Forward currency contracts
(1)
1
1
Zero
Zero
Total
$ (196)
$ 196
$ 196
Do llar Zero
Do llar Zero
The table below details the balances in the Company’s net investment hedge reserve.
As at December 31,
2024
2023
Balances in the foreign currency translation reserve for continuing hedges
$ (561)
$ 59
Balances remaining in the net investment hedge reserve on de-designated hedges
Zero
Zero
Total
$ (561)
$ 59
Reconciliation of accumulated other comprehensive income (loss) related to cash flow hedges
For the year ended December 31, 2024
Accumulated other
comprehensive
income (loss),
beginning of year
Hedging gains
(losses)
recognized in
AOCI during the
year
Reclassification
from AOCI to
income
Accumulated
other
comprehensive
income (loss),
end of year
Reclassification
adjustment related
to de-designated
hedges as hedged
item affects
income
Reclassification
adjustment related
to items for which
the hedged future
cash flows are no
longer expected to
occur
Interest rate risk
$
1
$
(3)
Do
llar Zero
$
(2)
Do llar Zero
Do llar Zero
Interest rate and foreign exchange
risk
(107)
(32)
(75)
(64)
Zero
Zero
Foreign exchange translation risk
3
23
26
Zero
Zero
Zero
CPI risk
(85)
60
17
(42)
Zero
Zero
Equity price risk
39
145
66
118
Zero
Zero
Total
$ (149)
$ 193
$ 34
$
10
Do llar Zero
Do llar Zero
For the year ended December 31, 2023
Accumulated other
comprehensive
income (loss),
beginning of year
Hedging gains
(losses)
recognized in
AOCI during the
year
Reclassification
from AOCI to
income
Accumulated
other
comprehensive
income (loss),
end of year
Reclassification
adjustment related
to de-designated
hedges as hedged
item affects
income
Reclassification
adjustment related
to items for which
the hedged future
cash flows are no
longer expected to
occur
Interest rate risk
Do
llar Zero
$
1
Do
llar Zero
$
1
Do llar Zero
Do llar Zero
Interest rate and foreign exchange
risk
(114)
23
16
(107)
Zero
Zero
Foreign exchange translation risk
5
(10)
(8)
3
Zero
Zero
CPI risk
Zero
(4)
81
(85)
Zero
Zero
Equity price risk
2
40
3
39
Zero
Zero
Total
$ (107)
$
50
$ 92
$ (149)
Do llar Zero
Do llar Zero
193
Reconciliation of accumulated other comprehensive income (loss) related to net investment hedges
For the year ended December 31, 2024
Accumulated other
comprehensive
income (loss),
beginning of year
Hedging gains
(losses)
recognized in
AOCI during
the year
Reclassification
from AOCI to
income
Accumulated
other
comprehensive
income (loss),
end of year
Reclassification
adjustment
related to
de-designated
hedges as
hedged item
affects income
Reclassification
adjustment
related to items
for which the
hedged future
cash flows are no
longer expected
to occur
Foreign exchange translation risk
$
59
$ (620)
Do llar Zero
$ (561)
Do llar Zero
Do llar Zero
For the year ended December 31, 2023
Accumulated other
comprehensive
income (loss),
beginning of year
Hedging gains
(losses)
recognized in
AOCI during
the year
Reclassification
from AOCI to
income
Accumulated
other
comprehensive
income (loss),
end of year
Reclassification
adjustment
related to
de-designated
hedges as
hedged item
affects income
Reclassification
adjustment
related to items
for which the
hedged future
cash flows are no
longer expected
to occur
Foreign exchange translation risk
$ (137)
$ 196
Do llar Zero
$
59
Do llar Zero
Do llar Zero
Cost of hedging
The Company has elected to apply IFRS 9’s cost of hedging guidance for certain hedging relationships. The excluded
components from hedging relationships related to forward elements and foreign currency basis spreads on time period related
hedged items, are presented in AOCI as cost of hedging. The following table provides details of the movement in the cost of
hedging by hedged risk category.
For the year ended December 31,
2024
2023
Foreign exchange risk
Balance, beginning of year
Do
llar Zero
$ (3)
Changes in fair value
111
5
Amount reclassified to profit or loss
Zero
2
Balance, end of year
$ 111
Do
llar Zero
Foreign exchange and interest rate risk
Balance, beginning of year
$
18
$ 25
Changes in fair value
(10)
(8)
Amount reclassified to profit or loss
Zero
(1)
Balance, end of year
$
8
$ 18
(c) Derivatives not designated in qualifying hedge accounting relationships
The Company uses derivatives to economically hedge various financial risks, however, not all derivatives qualify for hedge
accounting and in some cases, the Company has not elected to apply hedge accounting. Below are the investment income
impacts of derivatives not designated in qualifying hedge accounting relationships.
Investment income (loss) on derivatives not designated in qualifying hedge accounting relationships
For the years ended December 31,
2024
2023
Interest rate swaps
$ (116)
$
667
Interest rate futures
52
57
Interest rate options
(20)
(13)
Foreign currency swaps
108
(4)
Currency rate futures
(137)
(22)
Forward contracts
(626)
612
Equity futures
(423)
(449)
Equity contracts
437
325
Credit default swaps
(1)
Zero
Total
$ (726)
$ 1,173
(d) Embedded derivatives
Certain insurance contracts contain features that are classified as embedded derivatives and are measured separately at
FVTPL, including reinsurance contracts related to guaranteed minimum income benefits and contracts containing certain credit
and interest rate features.
194 | 2024 Annual Report | Notes to Consolidated Financial Statements
Certain reinsurance contracts with guaranteed minimum income benefits contain embedded derivatives requiring separate
measurement at FVTPL as the financial components contained in the reinsurance contracts do not contain significant insurance
risk. Claims expenses and claims paid on the reinsurance assumed offset claims recovered under reinsured contracts.
Reinsured contracts with guaranteed minimum income benefits had a fair value of $281 (2023 – $402) and reinsurance assumed
with guaranteed minimum income benefits had a fair value of $nil (2023 – $46).
The Company’s credit and interest rate embedded derivatives promise to pay the returns on a portfolio of assets to the contract
holder. These embedded derivatives contain credit and interest rate risks that are financial risks embedded in the underlying
insurance and investment contract. As at December 31, 2024, these embedded derivative liabilities had a fair value of $265
(2023 – $487).
Other insurance contract features which are classified as embedded derivatives but are exempt from separate measurement at
fair value include variable universal life and variable life products’ minimum guaranteed credited rates, no lapse guarantees,
guaranteed annuitization options, Consumer Price Index (“CPI”) indexing of benefits, and segregated fund minimum guarantees
other than reinsurance ceded / assumed guaranteed minimum income benefits. These embedded derivatives are measured and
reported within insurance contract liabilities and are exempt from separate fair value measurement as they contain insurance risk
and / or are closely related to the insurance host contract.
Note 5 Goodwill and Intangible Assets
(a) Change in the carrying value of goodwill and intangible assets
The following tables present the changes in carrying value of goodwill and intangible assets.
For the year ended December 31, 2024
Balance,
January 1,
2024
Net additions/
(disposals)Refer to footnote number (1)
Amortization
expense
Effect of changes
in foreign
exchange rates
Balance,
December 31,
2024
Goodwill
$
5,919
$ 150
$
n/a
$ 206
$
6,275
Indefinite life intangible assets
Brand
791
3
n/a
72
866
Fund management contracts and otherRefer to footnote number (2)
1,034
156
n/a
68
1,258
1,825
159
n/a
140
2,124
Finite life intangible assetsRefer to footnote number (3)
Distribution networks
834
13
(56)
49
840
Customer relationships
582
Zero
(52)
12
542
Software
1,102
329
(257)
38
1,212
Other
48
7
(9)
13
59
2,566
349
(374)
112
2,653
Total intangible assets
4,391
508
(374)
252
4,777
Total goodwill and intangible assets
$ 10,310
$ 658
$ (374)
$ 458
$ 11,052
For the year ended December 31, 2023
Balance,
January 1,
2023
Net
additions/
(disposals)
Amortization
expense
Effect of changes
in foreign
exchange rates
Balance,
December 31,
2023
Goodwill
$
6,014
Do
llar Zero
$
n/a
$
(95)
$
5,919
Indefinite life intangible assets
Brand
813
Zero
n/a
(22)
791
Fund management contracts and other(2)
1,048
Zero
n/a
(14)
1,034
1,861
Zero
n/a
(36)
1,825
Finite life intangible assetsRefer to footnote number (3)
Distribution networks
881
31
(53)
(25)
834
Customer relationships
643
(4)
(53)
(4)
582
Software
1,068
274
(217)
(23)
1,102
Other
52
11
(5)
(10)
48
2,644
312
(328)
(62)
2,566
Total intangible assets
4,505
312
(328)
(98)
4,391
Total goodwill and intangible assets
$ 10,519
$ 312
$ (328)
$ (193)
$ 10,310
Footnote Number (1)In April 2024, the Company acquired control of CQS Management Limited, the London-based alternative credit investment manager, through purchase of 100% of
its shares outstanding. The transaction included cash consideration of $334 and contingent consideration of $8. Goodwill, brand, indefinite lived and definite lived
management contracts of $150, $3, $153 and $7 were recognized.
Footnote Number (2)Fund management contracts are mostly allocated to Canada WAM and U.S. WAM CGUs with carrying values of $273 (2023 – $273) and $421 (2023 – $386),
respectively.
Footnote Number (3)Gross carrying amount of finite life intangible assets was $3,408 for software, $1,617 for distribution networks, $1,156 for customer relationships and $156 for other
(2023 – $2,955, $1,511, $1,136 and $138), respectively.
195
(b) Goodwill impairment testing
The Company completed its annual goodwill impairment testing in the fourth quarter of 2024 by determining the recoverable
amounts of its businesses using valuation techniques discussed below (refer to notes 1 (f) and 5 (c)). The testing resulted in $nil
impairment of goodwill in 2024 (2023 – $nil).
The following tables present the carrying value of goodwill by CGU or group of CGUs.
For the year ended December 31, 2024
CGU or group of CGUs
Balance,
January 1,
2024
Net additions/
(disposals)
Effect of
changes
in foreign
exchange
rates
Balance,
December 31,
2024
Asia
Asia Insurance (excluding Japan)
$
159
Do
llar Zero
$
11
$
170
Japan Insurance
328
Zero
(7)
321
Canada Insurance
1,958
Zero
8
1,966
U.S. Insurance
350
Zero
32
382
Global Wealth and Asset Management
Asia WAM
438
Zero
41
479
Canada WAM
1,436
Zero
Zero
1,436
U.S. WAM
1,250
150
121
1,521
Total
$ 5,919
$ 150
$ 206
$ 6,275
For the year ended December 31, 2023
CGU or group of CGUs
Balance,
January 1,
2023
Net additions/
(disposals)
Effect of
changes
in foreign
exchange
rates
Balance,
December 31,
2023
Asia
Asia Insurance (excluding Japan)
$
162
Do
llar Zero
$
(3)
$
159
Japan Insurance
360
Zero
(32)
328
Canada Insurance
1,960
Zero
(2)
1,958
U.S. Insurance
360
Zero
(10)
350
Global Wealth and Asset Management
Asia WAM
450
Zero
(12)
438
Canada WAM
1,436
Zero
Zero
1,436
U.S. WAM
1,286
Zero
(36)
1,250
Total
$ 6,014
D
ollar Zero
$ (95)
$ 5,919
The valuation techniques, significant assumptions and sensitivities, where applicable, applied in the goodwill impairment testing
are described below.
(c) Valuation techniques
When determining if a CGU is impaired, the Company compares its recoverable amount to the allocated capital for that unit,
which is aligned with the Company’s internal reporting practices. The recoverable amounts were based on fair value less costs to
sell (“FVLCS”) for Asia Insurance (excluding Japan) and Asia WAM. For other CGUs, value-in-use (“VIU”) was used.
Under the FVLCS approach, the Company determines the fair value of the CGU or group of CGUs using an earnings-based
approach which incorporates forecasted earnings, excluding interest and equity market impacts and normalized new business
expenses multiplied by an earnings-multiple derived from the observable price-to-earnings multiples of comparable financial
institutions. The price-to-earnings multiple used by the Company for testing ranged from 6.7 to 13.6 (2023 – 5.1 to 12.7). These
FVLCS valuations are categorized as Level 3 of the fair value hierarchy (2023 – Level 3).
Under the VIU approach, used for CGUs with insurance business, an embedded appraisal value is determined from a projection
of future distributable earnings derived from both the in-force business and new business expected to be sold in the future, and
therefore, reflects the economic value for each CGU’s or group of CGUs’ profit potential under a set of assumptions. This
approach requires assumptions including sales and revenue growth rates, capital requirements, interest rates, equity returns,
mortality, morbidity, policyholder behaviour, tax rates and discount rates. For non-insurance CGUs, the VIU is based on
discounted cash flow analysis which incorporates relevant aspects of the embedded appraisal value approach.
(d) Significant assumptions
To calculate an insurance appraisal value, the Company discounted projected earnings from in-force contracts and valued 80
years (2023 – 20 years) of new business growing at expected plan levels, consistent with the periods used for forecasting
long-term businesses such as insurance. In arriving at its projections, the Company considered past experience, economic
196 | 2024 Annual Report | Notes to Consolidated Financial Statements
trends such as interest rates, equity returns and product mix as well as industry and market trends. Where growth rate
assumptions for new business cash flows were used in the embedded appraisal value calculations, they ranged from zero per
cent to 13.0 per cent (2023 – zero per cent to 13.0 per cent).
Interest rate assumptions are based on prevailing market rates at the valuation date.
Tax rates applied to the projections include the impact of internal reinsurance treaties and were 28.0 per cent, 27.8 per cent and
21.0 per cent for the Japan, Canada and U.S. jurisdictions, respectively (2023 – 28.0 per cent, 27.8 per cent and 21.0 per cent,
respectively). Tax assumptions are sensitive to changes in tax laws as well as assumptions about the jurisdictions in which
profits are earned. It is possible that effective tax rates could differ from those assumed.
Discount rates assumed in determining the value-in-use for applicable CGUs or group of CGUs ranged from 10.0 per cent to
13.0 per cent on an after-tax basis or 12.5 per cent to 16.3 per cent on a pre-tax basis (2023 – 10.0 per cent to 13.0 per cent on
an after-tax basis or 12.5 per cent to 16.3 per cent on a pre-tax basis).
Key assumptions may change as economic and market conditions change, which may lead to impairment charges in the future.
Adverse changes in discount rates (including from changes in interest rates) and growth rate assumptions for new business cash
flow projections used in the determination of embedded appraisal values or reductions in market-based earnings multiples
calculations may result in impairment charges in the future which could be material.
Note 6 Insurance and Reinsurance Contract Assets and Liabilities
(a) Composition
Portfolios of insurance contracts that are assets and those that are liabilities, and portfolios of reinsurance contracts that are
assets and those that are liabilities, are presented separately in the Consolidated Statements of Financial Position. The
components of net insurance and reinsurance contract liabilities are shown below. The composition of insurance contract assets
and liabilities, and reinsurance contract held assets and liabilities by the reporting segment is as follows.
Insurance contract assets and liabilities
As at December 31,
2024
2023
Insurance
contract
assets
Insurance
contract
liabilities
Insurance
contract
liabilities for
account of
segregated
fund
holders
Net
insurance
contract
liabilities
Insurance
contract
assets
Insurance
contract
liabilities
Insurance
contract
liabilities for
account of
segregated
fund
holders
Net
insurance
contract
liabilities
Asia
$
(53)
$ 154,222
$
26,367
$ 180,536
$ (108)
$ 131,729
$
22,696
$ 154,317
Canada
(32)
82,459
38,099
120,526
(33)
80,169
36,085
116,221
U.S.
Zero
161,484
62,079
223,563
Zero
157,699
55,362
213,061
Corporate and Other
(6)
(897)
Zero
(903)
(4)
(781)
Zero
(785)
Insurance contract balances
(91)
397,268
126,545
523,722
(145)
368,816
114,143
482,814
Assets for insurance acquisition
cash flows
(11)
(867)
Zero
(878)
Zero
(820)
Zero
(820)
Total
$ (102)
$ 396,401
$ 126,545
$ 522,844
$ (145)
$ 367,996
$ 114,143
$ 481,994
Reinsurance contract held assets and liabilities
As at December 31,
2024
2023
Assets
Liabilities
Net
reinsurance
contract
held assets
Assets
Liabilities
Net
reinsurance
contract
held assets
Asia
$
9,204
$ (2,394)
$
6,810
$
3,540
$ (1,909)
$
1,631
Canada
7,021
(262)
6,759
1,922
(913)
1,009
U.S.
43,043
(13)
43,030
37,437
(14)
37,423
Corporate and Other
(253)
Zero
(253)
(248)
5
(243)
Total
$ 59,015
$ (2,669)
$ 56,346
$ 42,651
$ (2,831)
$ 39,820
As at December 31,
2024
2023
Net insurance contract held liabilities
$ 522,844
$ 481,994
Net reinsurance contract held assets
(56,346)
(39,820)
Net insurance and reinsurance contract held liabilities
$ 466,498
$ 442,174
197
(b) Movements in carrying amounts of insurance and reinsurance contracts
The following tables present the movement in the net carrying amounts of insurance contracts issued and reinsurance contracts
held during the year for the Company and for each reporting segment. The changes include amounts that are recognized in
income and OCI, and movements due to cash flows.
There are two types of tables presented:
• Tables which analyze movements in the net assets or liabilities for remaining coverage and for incurred claims separately
and reconcile them to the relevant Consolidated Statements of Income and Consolidated Statements of Comprehensive
Income line items.
• Tables which analyze movements of contracts by measurement components including estimates of the present value of
future cash flows, risk adjustment and CSM.
198 | 2024 Annual Report | Notes to Consolidated Financial Statements
(I) Total
Insurance contracts – Analysis by remaining coverage and incurred claims
The following tables present the movement in the net assets or liabilities for insurance contracts issued, showing the amounts for
remaining coverage and the amounts for incurred claims and assets for insurance acquisition cash flows for the years ended
December 31, 2024 and 2023.
Liabilities for remaining
coverage
Liabilities for incurred claims
Assets for
insurance
acquisition
cash flows
Total
Excluding loss
component
Loss
component
Products not
under PAA
PAA Estimates
of PV of future
cash flows
PAA Risk
adjustment for
non-financial risk
Opening insurance contract assets
$
(201) Do
ll ar Zero
$
56
Do
llar Zero
Do
llar Zero
Do
llar Zero $
(145)
Opening insurance contract liabilities
351,045
1,092
5,609
10,445
625
(820)
367,996
Opening insurance contract liabilities for account
of segregated fund holders
114,143
Ze ro
Zero
Zero
Zero
Zero
114,143
Net opening balance, January 1, 2024
464,987
1,092
5,665
10,445
625
(820)
481,994
Insurance revenue
Expected incurred claims and other insurance
service expenses
(14,340)
Zero
Zero
Zero
Zero
Zero
(14,340)
Change in risk adjustment for non-financial risk
expired
(1,414)
Zero
Zero
Zero
Zero
Zero
(1,414)
CSM recognized for services provided
(2,697)
Zero
Zero
Zero
Zero
Zero
(2,697)
Recovery of insurance acquisition cash flows
(1,351)
Zero
Zero
Zero
Zero
Zero
(1,351)
Contracts under PAA
(6,790)
Zero
Zero
Zero
Zero
Zero
(6,790)
(26,592)
Zero
Zero
Zero
Zero
Zero
(26,592)
Insurance service expense
Incurred claims and other insurance service
expenses
Zero
(105)
13,855
7,423
224
Zero
21,397
Losses and reversal of losses on onerous
contracts (future service)
Zero
882
Zero
Zero
Zero
Zero
882
Changes to liabilities for incurred claims (past
service)
Zero
Ze ro
(12)
(2,391)
(202)
Zero
(2,605)
Amortization of insurance acquisition cash
flows
2,148
Ze ro
Zero
Zero
Zero
Zero
2,148
Net impairment of assets for insurance
acquisition cash flows
Zero
Ze ro
Zero
Zero
Zero
Zero
Zero
2,148
777
13,843
5,032
22
Zero
21,822
Investment components and premium refunds
(23,554)
Ze ro
20,835
2,719
Zero
Zero
Zero
Insurance service result
(47,998)
777
34,678
7,751
22
Zero
(4,770)
Insurance finance (income) expenses
2,645
44
(85)
689
44
Zero
3,337
Effects of movements in foreign exchange rates
24,962
115
272
29
Zero
(21)
25,357
Insurance finance (income) expenses, per disclosure in note 6 (f)
Total changes in income and OCI
(20,391)
936
34,865
8,469
66
(21)
23,924
Cash flows
Premiums and premium tax received
55,437
Ze ro
Zero
Zero
Zero
Zero
55,437
Claims and other insurance service expenses
paid, including investment components
Zero
Ze ro
(34,776)
(7,657)
Zero
Zero
(42,433)
Insurance acquisition cash flows
(8,287)
Ze ro
Zero
Zero
Zero
Zero
(8,287)
Total cash flows
47,150
Ze ro
(34,776)
(7,657)
Zero
Zero
4,717
Allocation from assets for insurance acquisition
cash flows to groups of insurance contracts
(156)
Ze ro
Zero
Zero
Zero
156
Zero
Acquisition cash flows incurred in the year
Zero
Ze ro
Zero
Zero
Zero
(193)
(193)
Movements related to insurance contract liabilities
for account of segregated fund holders
12,402
Ze ro
Zero
Zero
Zero
Zero
12,402
Net closing balance
503,992
2,028
5,754
11,257
691
(878)
522,844
Closing insurance contract assets
(153)
5
56
1
Zero
(11)
(102)
Closing insurance contract liabilities
377,600
2,023
5,698
11,256
691
(867)
396,401
Closing insurance contract liabilities for account of
segregated fund holders
126,545
Ze ro
Zero
Zero
Zero
Zero
126,545
Net closing balance, December 31, 2024
$
503,992
$ 2,028
$ 5,754
$ 11,257
$ 691
$ (878) $ 522,844
Insurance finance (income) expenses (“IFIE”)
Insurance finance (income) expenses, per disclosure above
$
3,337
Reclassification of derivative OCI to IFIE – cash flow hedges
(52)
Reclassification of derivative (income) loss changes to IFIE – fair value hedge
3,346
199
Insurance finance (income) expenses, per disclosure in note 6 (f)
$
6,631
Insurance contracts – Analysis by remaining coverage and incurred claims (continued)
Liabilities for remaining
coverage
Liabilities for incurred claims
Excluding loss
component
Loss
component
Products not
under PAA
PAA Estimates
of PV of future
cash flows
PAA Risk
adjustment for
non-financial risk
Assets for
insurance
acquisition
cash flows
Total
Opening insurance contract assets
$
(659) Do
l lar Zero
$
7
$
(12)
Do
llar Zero
$
(9) $
(673)
Opening insurance contract liabilities
336,981
1,328
5,857
10,877
602
(796)
354,849
Opening insurance contract liabilities for account
of segregated fund holders
110,216
Zero
Zero
Zero
Zero
Zero
110,216
Net opening balance, January 1, 2023
446,538
1,328
5,864
10,865
602
(805)
464,392
Insurance revenue
Expected incurred claims and other
insurance service expenses
(13,165)
Zero
Zero
Zero
Zero
Zero
(13,165)
Change in risk adjustment for non-financial
risk expired
(1,497)
Zero
Zero
Zero
Zero
Zero
(1,497)
CSM recognized for services provided
(2,162)
Z ero
Zero
Zero
Zero
Zero
(2,162)
Recovery of insurance acquisition cash flows
(853)
Z ero
Zero
Zero
Zero
Zero
(853)
Contracts under PAA
(6,295)
Z ero
Zero
Zero
Zero
Zero
(6,295)
(23,972)
Zero
Zero
Zero
Zero
Zero
(23,972)
Insurance service expense
Incurred claims and other insurance service
expenses
Zero
(320)
13,446
6,136
254
Zero
19,516
Losses and reversal of losses on onerous
contracts (future service)
Zero
90
Zero
Zero
Zero
Zero
90
Changes to liabilities for incurred claims (past
service)
Zero
Zero
(31)
(1,605)
(242)
Zero
(1,878)
Amortization of insurance acquisition cash
flows
1,654
Zero
Zero
Zero
Zero
Zero
1,654
Net impairment of assets for insurance
acquisition cash flows
Zero
Zero
Zero
Zero
Zero
Zero
Zero
1,654
(230)
13,415
4,531
12
Zero
19,382
Investment components and premium refunds
(19,080)
Zero
17,148
1,932
Zero
Zero
Zero
Insurance service result
(41,398)
(230)
30,563
6,463
12
Zero
(4,590)
Insurance finance (income) expenses
24,268
32
15
848
11
Zero
25,174
Effects of movements in foreign exchange rates
(9,657)
(38)
(71)
(12)
Zero
7
(9,771)
Total changes in income and OCI
(26,787)
(236)
30,507
7,299
23
7
10,813
Cash flows
Premiums and premium tax received
48,381
Z ero
Zero
Zero
Zero
Zero
48,381
Claims and other insurance service expenses
paid, including investment components
Zero
Z ero
(30,706)
(7,719)
Zero
Zero
(38,425)
Insurance acquisition cash flows
(6,920)
Z ero
Zero
Zero
Zero
Zero
(6,920)
Total cash flows
41,461
Zero
(30,706)
(7,719)
Zero
Zero
3,036
Allocation from assets for insurance acquisition
cash flows to groups of insurance contracts
(152)
Z ero
Zero
Zero
Zero
152
Zero
Acquisition cash flows incurred in the year
Zero
Z ero
Zero
Zero
Zero
(174)
(174)
Movements related to insurance contract liabilities
for account of segregated fund holders
3,927
Zero
Zero
Zero
Zero
Zero
3,927
Net closing balance
464,987
1,092
5,665
10,445
625
(820)
481,994
Closing insurance contract assets
(201)
Zero
56
Zero
Zero
Zero
(145)
Closing insurance contract liabilities
351,045
1,092
5,609
10,445
625
(820)
367,996
Closing insurance contract liabilities for
account of segregated fund holders
114,143
Zero
Zero
Zero
Zero
Zero
114,143
Net closing balance, December 31, 2023
$ 464,987
$ 1,092
$ 5,665
$ 10,445
$ 625
$ (820) $
481,994
Insurance finance (income) expenses
Insurance finance (income) expenses, per disclosure above
$
25,174
Reclassification of derivative OCI to IFIE – cash flow hedges
3
Reclassification of derivative (income) loss changes to IFIE – fair value hedge
(185)
Insurance finance (income) expenses, per disclosure in note 6 (f)
$
24,992
200 | 2024 Annual Report | Notes to Consolidated Financial Statements
Insurance contracts – Analysis by measurement components
The following tables present the movement in the net assets or liabilities for insurance contracts issued, showing estimates of the
present value of future cash flows, risk adjustment, CSM and assets for insurance acquisition cash flows for the years ended
December 31, 2024 and 2023.
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
CSM
Assets for
insurance
acquisition
cash flows
Total
Fair value
Other
Opening GMM and VFA insurance contract assets
$
(416) $
141 $
32 $
99
Do
llar Zero $
(144)
Opening GMM and VFA insurance contract liabilities
310,807
22,697
17,381
4,592
(59)
355,418
Opening PAA insurance contract net liabilities
12,712
626
Zero
Zero
(761)
12,577
Opening insurance contract liabilities for account of segregated fund
holders
114,143
Zero
Zero
Zero
Zero
114,143
Net opening balance, January 1, 2024
437,246
23,464
17,413
4,691
(820)
481,994
CSM recognized for services provided
Zero
Zero
(2,097)
(600)
Zero
(2,697)
Change in risk adjustment for non-financial risk for risk expired
Zero
(1,430)
Zero
Zero
Zero
(1,430)
Experience adjustments
(532)
Zero
Zero
Zero
Zero
(532)
Changes that relate to current services
(532)
(1,430)
(2,097)
(600)
Zero
(4,659)
Contracts initially recognized during the year
(4,043)
952
2
3,193
Zero
104
Changes in estimates that adjust the CSM
(459)
(1,866)
2,388
(63)
Zero
Zero
Changes in estimates that relate to losses and reversal of losses on
onerous contracts
770
7
Zero
Zero
Zero
777
Changes that relate to future services
(3,732)
(907)
2,390
3,130
Zero
881
Adjustments to liabilities for incurred claims
(8)
(4)
Zero
Zero
Zero
(12)
Changes that relate to past services
(8)
(4)
Zero
Zero
Zero
(12)
Insurance service result
(4,272)
(2,341)
293
2,530
Zero
(3,790)
Insurance finance (income) expenses
2,317
(59)
233
121
Zero
2,612
Effects of movements in foreign exchange rates
21,946
1,866
1,068
416
Zero
25,296
Total changes in income and OCI
19,991
(534)
1,594
3,067
Zero
24,118
Total cash flows
3,840
Zero
Zero
Zero
Zero
3,840
Allocation from assets for insurance acquisition cash flows to groups of
insurance contracts
(6)
Zero
Zero
Zero
6
Zero
Acquisition cash flows incurred in the year
Zero
Zero
Zero
Zero
(8)
(8)
Change in PAA balance
489
65
Zero
Zero
(56)
498
Movements related to insurance contract liabilities for account of
segregated fund holders
12,402
Zero
Zero
Zero
Zero
12,402
Net closing balance
473,962
22,995
19,007
7,758
(878)
522,844
Closing GMM and VFA insurance contract assets
(490)
144
100
148
Zero
(98)
Closing GMM and VFA insurance contract liabilities
334,706
22,160
18,907
7,610
(61)
383,322
Closing PAA insurance contract net liabilities
13,201
691
Zero
Zero
(817)
13,075
Closing insurance contract liabilities for account of segregated fund
insurance holders
126,545
Zero
Zero
Zero
Zero
126,545
Net closing balance, December 31, 2024
$ 473,962
$ 22,995 $ 19,007 $ 7,758
$ (878) $ 522,844
Insurance finance (income) expenses
Insurance finance (income) expenses, per disclosure above
$
2,612
Reclassification of derivative OCI to IFIE – cash flow hedges
(52)
Reclassification of derivative (income) loss changes to IFIE – fair value hedge
3,333
PAA items:
PAA IFIE per disclosure
725
PAA Reclassification of derivative OCI to IFIE – cash flow hedges
Zero
PAA Reclassification of derivative (income) loss changes to IFIE – fair value hedge
13
Insurance finance (income) expenses, per disclosure in note 6 (f)
$
6,631
201
Insurance contracts – Analysis by measurement components (continued)
CSM
Estimates of
PV of future
cash flows
Risk
adjustment for
on-financial risk Fair value
Other
Assets for
insurance
acquisition
cash flows
Total
Opening GMM and VFA insurance contract assets
$
(1,827)
$
512 $
100 $
557
Do
llar Zero $
(658)
Opening GMM and VFA insurance contract liabilities
297,967
25,750
17,105
2,087
(56)
342,853
Opening PAA insurance contract net liabilities
12,125
605
Zero
Zero
(749)
11,981
Opening insurance contract liabilities for account of segregated fund
holders
n
110,216
Zero
Zero
Zero
Zero
110,216
Net opening balance, January 1, 2023
418,481
26,867
17,205
2,644
(805)
464,392
CSM recognized for services provided
Zero
Zero
(1,812)
(350)
Zero
(2,162)
Change in risk adjustment for non-financial risk for risk expired
Zero
(1,620)
Zero
Zero
Zero
(1,620)
Experience adjustments
152
Zero
Zero
Zero
Zero
152
Changes that relate to current services
152
(1,620)
(1,812)
(350)
Zero
(3,630)
Contracts initially recognized during the year
(3,295)
1,180
Zero
2,368
Zero
253
Changes in estimates that adjust the CSM
1,585
(3,859)
2,214
60
Zero
Zero
Changes in estimates that relate to losses and reversal of losses on
onerous contracts
(174)
12
Zero
Zero
Zero
(162)
Changes that relate to future services
(1,884)
(2,667)
2,214
2,428
Zero
91
Adjustments to liabilities for incurred claims
(28)
(4)
Zero
Zero
Zero
(32)
Changes that relate to past services
(28)
(4)
Zero
Zero
Zero
(32)
Insurance service result
(1,760)
(4,291)
402
2,078
Zero
(3,571)
Insurance finance (income) expenses
22,340
1,646
244
76
Zero
24,306
Effects of movements in foreign exchange rates
(8,405)
(779)
(438)
(107)
Zero
(9,729)
Total changes in income and OCI
12,175
(3,424)
208
2,047
Zero
11,006
Total cash flows
2,081
Zero
Zero
Zero
Zero
2,081
Allocation from assets for insurance acquisition cash flows to groups of
insurance contracts
(5)
Zero
Zero
Zero
5
Zero
Acquisition cash flows incurred in the year
Zero
Zero
Zero
Zero
(8)
(8)
Change in PAA balance
587
21
Zero
Zero
(12)
596
Movements related to insurance contract liabilities for account of
segregated fund holders
3,927
Zero
Zero
Zero
Zero
3,927
Net closing balance
437,246
23,464
17,413
4,691
(820)
481,994
Closing GMM and VFA insurance contract assets
(416)
141
32
99
Zero
(144)
Closing GMM and VFA insurance contract liabilities
310,807
22,697
17,381
4,592
(59)
355,418
Closing PAA insurance contract net liabilities
12,712
626
Zero
Zero
(761)
12,577
Closing insurance contract liabilities for account of segregated fund
insurance holders
114,143
Zero
Zero
Zero
Zero
114,143
Net closing balance, December 31, 2023
$ 437,246
$ 23,464 $ 17,413 $ 4,691
$ (820) $ 481,994
Insurance finance (income) expenses
Insurance finance (income) expenses, per disclosure above
$
24,306
Reclassification of derivative OCI to IFIE – cash flow hedges
3
Reclassification of derivative (income) loss changes to IFIE – fair value hedge
(120)
PAA items:
PAA IFIE per disclosure
868
PAA Reclassification of derivative OCI to IFIE – cash flow hedges
Zero
PAA Reclassification of derivative (income) loss changes to IFIE – fair value hedge
(65)
Insurance finance (income) expenses, per disclosure in note 6 (f)
$
24,992
202 | 2024 Annual Report | Notes to Consolidated Financial Statements
Reinsurance contracts held – Analysis by remaining coverage and incurred claims
The following tables present the movement in the net assets or liabilities for reinsurance contracts held, showing assets for
remaining coverage and amounts recoverable on incurred claims arising from business ceded to reinsurers for the years ended
December 31, 2024 and 2023.
Assets (liabilities) for
remaining coverage
Assets (liabilities) for incurred claims
Total
Excluding loss
recovery
component
Loss
recovery
component
Products not
under PAA
PAA Estimates
of PV of future
cash flows
PAA Risk
adjustment for
non-financial risk
Opening reinsurance contract held assets
$ 35,079
$ 246
$ 7,035
$ 275
$ 16
$ 42,651
Opening reinsurance contract held liabilities
(2,634)
2
(136)
(63)
Zero
(2,831)
Net opening balance, January 1, 2024
32,445
248
6,899
212
16
39,820
Changes in income and OCI
Allocation of reinsurance premium paid
(7,709)
Zero
Zero
Zero
Zero
(7,709)
Amounts recoverable from reinsurers
Recoveries of incurred claims and other
insurance service expenses
Zero
(32)
6,002
607
1
6,578
Recoveries and reversals of recoveries of
losses on onerous underlying contracts
Zero
372
Zero
Zero
Zero
372
Adjustments to assets for incurred claims
Zero
Zero
11
(14)
(7)
(10)
Insurance service result
(7,709)
340
6,013
593
(6)
(769)
Investment components and premium refunds
(1,939)
Zero
1,939
Zero
Zero
Zero
Net expenses from reinsurance contracts
(9,648)
340
7,952
593
(6)
(769)
Net finance (income) expenses from reinsurance
contracts
(1,859)
12
4
3
4
(1,836)
Effect of changes in non-performance risk of
reinsurers
(58)
Zero
Zero
Zero
Zero
(58)
Effects of movements in foreign exchange rates
4,021
36
575
Zero
Zero
4,632
Contracts measured under PAA
Zero
Zero
Zero
Zero
Zero
Zero
Total changes in income and OCI
(7,544)
388
8,531
596
(2)
1,969
Cash flows
Premiums paidRefer to footnote number (1)
23,130
Z
ero
Zero
Zero
Zero
23,130
Amounts received
Zero
Z
ero
(7,991)
(582)
Zero
(8,573)
Total cash flows
23,130
Z
ero
(7,991)
(582)
Zero
14,557
Net closing balance
48,031
636
7,439
226
14
56,346
Closing reinsurance contract held assets
50,723
631
7,395
252
14
59,015
Closing reinsurance contract held liabilities
(2,692)
5
44
(26)
Zero
(2,669)
Net closing balance, December 31, 2024
$ 48,031
$ 636
$ 7,439
$ 226
$ 14
$ 56,346
Footnote Number (1)The Company recorded $18.6 billion (2023 - $nil) reinsurance contract held assets from reinsurance transactions which closed during the year. Refer to note 6 (m).
203
Reinsurance contracts held – Analysis by remaining coverage and incurred claims (continued)
Assets (liabilities) for
remaining coverage
Assets (liabilities) for incurred claims
Total
Excluding loss
recovery
component
Loss
recovery
component
Products not
under PAA
PAA Estimates of
PV of future
cash flows
PAA Risk
adjustment for
non-financial risk
Opening reinsurance contract held assets
$ 37,853
$ 209
$ 7,521
$ 280
$
8
$ 45,871
Opening reinsurance contract held liabilities
(2,196)
4
(137)
(62)
Zero
(2,391)
Net opening balance, January 1, 2023
35,657
213
7,384
218
8
43,480
Changes in income and OCI
Allocation of reinsurance premium paid
(6,430)
Zero
Zero
Zero
Zero
(6,430)
Amounts recoverable from reinsurers
Recoveries of incurred claims and other
insurance service expenses
Zero
(45)
5,228
568
Zero
5,751
Recoveries and reversals of recoveries
of losses on onerous underlying
contracts
Zero
77
Zero
Zero
Zero
77
Adjustments to assets for incurred
claims
Zero
Zero
5
(24)
8
(11)
Insurance service result
(6,430)
32
5,233
544
8
(613)
Investment components and premium refunds
(1,519)
Zero
1,519
Zero
Zero
Zero
204 | 2024 Annual Report | Notes to Consolidated Financial Statements
Net expenses from reinsurance contracts
(7,949)
32
6,752
544
8
(613)
Net finance (income) expenses from
reinsurance contracts
719
8
(97)
9
Zero
639
Effect of changes in non-performance risk of
reinsurers
(14)
Z
ero
Zero
Zero
Zero
(14)
Effects of movements in foreign exchange
rates
(924)
(5)
(169)
Zero
Zero
(1,098)
Contracts measured under PAA
Zero
Z
ero
Zero
Zero
Zero
Zero
Total changes in income and OCI
(8,168)
35
6,486
553
8
(1,086)
Cash flows
Premiums paid
4,956
Z
ero
Zero
Zero
Zero
4,956
Amounts received
Zero
Z
ero
(6,971)
(559)
Zero
(7,530)
Total cash flows
4,956
Zero
(6,971)
(559)
Zero
(2,574)
Net closing balance
32,445
248
6,899
212
16
39,820
Closing reinsurance contract held assets
35,079
246
7,035
275
16
42,651
Closing reinsurance contract held liabilities
(2,634)
2
(136)
(63)
Zero
(2,831)
Net closing balance, December 31, 2023
$ 32,445
$ 248
$ 6,899
$ 212
$ 16
$ 39,820
Reinsurance contracts held – Analysis by measurement components
The following tables present the movement in the net assets or liabilities for reinsurance contracts held, showing estimates of the
present value of future cash flows, risk adjustment and CSM for the years ended December 31, 2024 and 2023.
Estimates of
PV of future
cash flows
Risk adjustment
for non-financial
risk
CSM
Total
Fair value
Other
Opening reinsurance contract held assets
$ 38,156
$ 3,685
$
565
$
(51)
$ 42,355
Opening reinsurance contract held liabilities
(4,384)
1,305
116
173
(2,790)
Opening PAA reinsurance contract net assets
239
16
Zero
Zero
255
Net opening balance, January 1, 2024
34,011
5,006
681
122
39,820
CSM recognized for services received
Zero
Zero
(62)
(259)
(321)
Change in risk adjustment for non-financial risk for risk expired
Zero
(536)
Zero
Zero
(536)
Experience adjustments
(265)
Zero
Zero
Zero
(265)
Changes that relate to current services
(265)
(536)
(62)
(259)
(1,122)
Contracts initially recognized during the year
(1,826)
1,261
2
620
57
Changes in recoveries of losses on onerous underlying contracts that
adjust the CSM
Zero
Zero
110
32
142
Changes in estimates that adjust the CSM
(1,577)
(290)
1,657
210
Zero
Changes in estimates that relate to losses and reversal of losses on
onerous contracts
171
1
Zero
Zero
172
Changes that relate to future services
(3,232)
972
1,769
862
371
Adjustments to liabilities for incurred claims
11
Zero
Zero
Zero
11
Changes that relate to past services
11
Zero
Zero
Zero
11
Insurance service result
(3,486)
436
1,707
603
(740)
Insurance finance (income) expenses from reinsurance contracts
(1,858)
(62)
16
62
(1,842)
Effects of changes in non-performance risk of reinsurers
(58)
Zero
Zero
Zero
(58)
Effects of movements in foreign exchange rates
4,069
411
103
47
4,630
Total changes in income and OCI
(1,333)
785
1,826
712
1,990
Total cash flows
14,528
Zero
Zero
Zero
14,528
Change in PAA balance
10
(2)
Zero
Zero
8
Net closing balance
47,216
5,789
2,507
834
56,346
Closing reinsurance contract held assets
50,275
5,442
2,619
389
58,725
Closing reinsurance contract held liabilities
(3,308)
333
(112)
445
(2,642)
Closing PAA reinsurance contract net assets
249
14
Zero
Zero
263
Net closing balance, December 31, 2024
$ 47,216
$ 5,789
$ 2,507
$ 834
$ 56,346
205
Reinsurance contracts held - Analysis by measurement components (continued)
Estimates of
PV of future
cash flows
Risk adjustment
for non-financial
risk
CSM
Total
Fair value
Other
Opening reinsurance contract held assets
$ 39,656
$ 4,049
$ 1,774
$
99
$ 45,578
Opening reinsurance contract held liabilities
(3,919)
1,574
(39)
38
(2,346)
Opening PAA reinsurance contract net assets
240
8
Zero
Zero
248
Net opening balance, January 1, 2023
35,977
5,631
1,735
137
43,480
CSM recognized for services received
Zero
Zero
(217)
53
(164)
Change in risk adjustment for non-financial risk for risk expired
Zero
(478)
Zero
Zero
(478)
Experience adjustments
(19)
Zero
Zero
Zero
(19)
Changes that relate to current services
(19)
(478)
(217)
53
(661)
Contracts initially recognized during the year
(64)
399
Zero
(263)
72
Changes in recoveries of losses on onerous underlying contracts that
adjust the CSM
Zero
Zero
(36)
17
(19)
Changes in estimates that adjust the CSM
1,433
(821)
(821)
209
Zero
Changes in estimates that relate to losses and reversal of losses on
onerous contracts
43
(20)
Zero
Zero
23
Changes that relate to future services
1,412
(442)
(857)
(37)
76
Adjustments to liabilities for incurred claims
5
Zero
Zero
Zero
5
Changes that relate to past services
5
Zero
Zero
Zero
5
Insurance service result
1,398
(920)
(1,074)
16
(580)
Insurance finance (income) expenses from reinsurance contracts
173
447
41
(31)
630
Effects of changes in non-performance risk of reinsurers
(14)
Zero
Zero
Zero
(14)
Effects of movements in foreign exchange rates
(916)
(160)
(21)
Zero
(1,097)
Total changes in income and OCI
641
(633)
(1,054)
(15)
(1,061)
Total cash flows
(2,606)
Zero
Zero
Zero
(2,606)
Change in PAA balance
(1)
8
Zero
Zero
7
Net closing balance
34,011
5,006
681
122
39,820
Closing reinsurance contract held assets
38,156
3,685
565
(51)
42,355
Closing reinsurance contract held liabilities
(4,384)
1,305
116
173
(2,790)
Closing PAA reinsurance contract net assets
239
16
Zero
Zero
255
Net closing balance, December 31, 2023
$ 34,011
$ 5,006
$
681
$ 122
$ 39,820
206 | 2024 Annual Report | Notes to Consolidated Financial Statements
(II) Segment
Carrying balance by measurement components
The following tables present the carrying balances of net assets or liabilities for insurance contracts issued and reinsurance
contracts held by measurement components, by reporting segment for the years ended December 31, 2024 and 2023.
Insurance contracts issued
As at December 31, 2024
Excluding contracts applying the PAA
Contracts applying the PAA
CSM
Assets for
insurance
acquisition
cash flows
Total insurance
contract
liabilities
(assets)
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Fair value
Other
Asia
$ 153,801
$
7,630
$
1,497
$
3 $ 11,338 $ 6,267
$ (290)
$ 180,246
Canada
100,296
3,350
11,452
688
3,986
753
(588)
119,937
U.S.
207,665
11,337
Zero
Zero
3,823
738
Zero
223,563
Corporate and Other
(1,001)
(14)
252
Zero
(140)
Zero
Zero
(903)
$ 460,761
$ 22,303
$ 13,201
$ 691 $ 19,007 $ 7,758
$
(878)
$
522,843
As at December 31, 2023
Excluding contracts applying the PAA
Contracts applying the PAA
CSM
Assets for
insurance
acquisition
cash flows
Total insurance
contract
liabilities
(assets)
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Fair value
Other
Asia
$ 132,135
$
6,764
$
1,242
$
5 $ 10,431 $ 3,740
$
(271)
$
154,046
Canada
96,455
3,649
11,153
621
3,851
492
(549)
115,672
U.S.
196,921
12,438
Zero
Zero
3,243
459
Zero
213,061
Corporate and Other
(977)
(13)
317
Zero
(112)
Zero
Zero
(785)
$ 424,534
$ 22,838
$ 12,712
$ 626
$ 17,413
$ 4,691
$ (820)
$ 481,994
Reinsurance contracts held
As at December 31, 2024
Excluding contracts applying the PAA
Contracts applying the PAA
CSM
Total reinsurance
contract
liabilities
(assets)
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Fair value
Other
Asia
$
4,462
$ 1,580
Do
llar Zero
Do
llar Zero
$
627
$ 141
$
6,810
Canada
4,308
1,561
248
13
426
203
6,759
U.S.
38,295
2,641
Zero
1
1,603
490
43,030
Corporate and Other
(98)
(7)
1
Zero
(149)
Zero
(253)
$ 46,967
$
5,775
$
249
$
14
$
2,507
$
834
$
56,346
As at December 31, 2023
Excluding contracts applying the PAA
Contracts applying the PAA
CSM
Total reinsurance
contract
liabilities
(assets)
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Estimates of
PV of future
cash flows
Risk
adjustment for
non-financial risk
Fair value
Other
Asia
$
(351)
$
1,326
$
(37)
Do
llar Zero
$
623
$
70
$
1,631
Canada
(1,238)
1,674
275
16
338
(56)
1,009
U.S.
35,461
1,997
Zero
Zero
(143)
108
37,423
Corporate and Other
(100)
(7)
1
Zero
(137)
Zero
(243)
$ 33,772
$ 4,990
$ 239
$ 16
$
681
$ 122
$ 39,820
207
(c) Insurance revenue by transition method
The following tables provide information as a supplement to the insurance revenue disclosures in note 6 (b).
For the year ended December 31, 2024
Asia
Canada
U.S.
Other
Total
Contracts under the fair value method
$ 2,629
$ 3,322
$ 10,975
$ (14)
$ 16,912
Contracts under the full retrospective method
489
62
141
Zero
692
Other contracts
2,691
5,912
287
98
8,988
Total
$ 5,809
$ 9,296
$ 11,403
$ 84
$ 26,592
For the year ended December 31, 2023
Asia
Canada
U.S.
Other
Total
Contracts under the fair value method
$ 2,499
$ 3,288
$ 10,123
$ (18)
$ 15,892
Contracts under the full retrospective method
531
48
152
Zero
731
Other contracts
2,026
5,283
(81)
121
7,349
Total
$ 5,056
$ 8,619
$ 10,194
$ 103
$ 23,972
(d) Effect of new business recognized in the year
The following tables present components of new business for insurance contracts issued for the years presented.
As at December 31, 2024
Asia
Canada
U.S.
Total
Non-Onerous
Onerous
Non-Onerous
Onerous
Non-Onerous
Onerous
Non-Onerous
Onerous
New business insurance contracts
Estimates of present value of cash
outflows
$ 26,508 $ 1,019
$ 5,386
$ 193
$ 3,439 $
958
$ 35,333 $ 2,170
Insurance acquisition cash flows
4,764
147
860
40
802
211
6,426
398
Claims and other insurance service
expenses payable
21,744
872
4,526
153
2,637
747
28,907
1,772
Estimates of present value of cash inflows
(29,664)
(1,002)
(5,876)
(203)
(3,841)
(960)
(39,381)
(2,165)
Risk adjustment for non-financial risk
600
27
117
26
136
46
853
99
Contractual service margin
2,556
Zero
373
Zero
266
Zero
3,195
Zero
Amount included in insurance contract
liabilities for the year
Do
llar Zero
$
44
Do
llar Zero
$
16
Do
llar Zero
$
44
Do
llar Zero
$
104
As at December 31, 2023
Asia
Canada
U.S.
Total
Non-Onerous
Onerous
Non-Onerous
Onerous
Non-Onerous
Onerous
Non-Onerous
Onerous
New business insurance contracts
Estimates of present value of cash
outflows
$ 16,209 $ 2,399
$ 3,478
$ 271
$ 2,524 $ 1,126
$ 22,211 $ 3,796
Insurance acquisition cash flows
3,011
322
608
68
676
233
4,295
623
Claims and other insurance service
expenses payable
13,198
2,077
2,870
203
1,848
893
17,916
3,173
Estimates of present value of cash inflows
(18,765)
(2,330)
(3,823)
(286)
(2,953)
(1,145)
(25,541)
(3,761)
Risk adjustment for non-financial risk
679
89
115
41
168
88
962
218
Contractual service margin
1,877
Zero
230
Zero
261
Zero
2,368
Zero
Amount included in insurance contract
liabilities for the year
Do
llar Zero
$
158
Do
llar Zero
$
26
Do
llar Zero
$
69
Do
llar Zero
$
253
The following tables present components of new business for reinsurance contracts held portfolios for the years presented.
As at December 31, 2024
Asia
Canada
U.S.
Total
New business reinsurance contracts
Estimates of present value of cash outflows
$ (7,144)
$ (6,153)
$ (7,519)
$ (20,816)
Estimates of present value of cash inflows
6,950
5,876
6,164
18,990
Risk adjustment for non-financial risk
189
68
1,004
1,261
Contractual service margin
21
217
384
622
Amount included in reinsurance assets for the year
$
16
$
8
$
33
$
57
As at December 31, 2023
Asia
Canada
U.S.
Total
New business reinsurance contracts
Estimates of present value of cash outflows
$
(916)
$
(331)
$
(750)
$
(1,997)
Estimates of present value of cash inflows
815
319
799
1,933
Risk adjustment for non-financial risk
170
76
153
399
Contractual service margin
(57)
(51)
(155)
(263)
Amount included in reinsurance assets for the year
$
12
$
13
$
47
$
72
208 | 2024 Annual Report | Notes to Consolidated Financial Statements
(e)
Expected recognition of contractual service margin
The following tables present expectations for the timing of recognition of CSM in income in future years.
As at December 31, 2024
Less than
1 year
1 to 5
years
5 to 10
years
10 to 20
years
More than
20 years
Total
Canada
Insurance contracts issued
$
426
$
1,347
$
1,116
$
1,173
$
677
$
4,739
Reinsurance contracts held
(53)
(150)
(126)
(144)
(156)
(629)
373
1,197
990
1,029
521
4,110
U.S.
Insurance contracts issued
474
1,510
1,194
1,023
360
4,561
Reinsurance contracts held
(278)
(835)
(569)
(381)
(30)
(2,093)
196
675
625
642
330
2,468
Asia
Insurance contracts issued
1,527
5,006
2,861
2,815
5,396
17,605
Reinsurance contracts held
(72)
(295)
(194)
(58)
(149)
(768)
1,455
4,711
2,667
2,757
5,247
16,837
Corporate
Insurance contracts issued
(10)
(36)
(35)
(42)
(17)
(140)
Reinsurance contracts held
13
67
59
11
(1)
149
3
31
24
(31)
(18)
9
Total
$
2,027
$
6,614
$
4,306
$
4,397
$
6,080
$
23,424
As at December 31, 2023
Less than
1 year
1 to 5
years
5 to 10
years
10 to 20
years
More than
20 years
Total
Canada
Insurance contracts issued
$
379
$
1,213
$
1,016
$
1,084
$
651
$
4,343
Reinsurance contracts held
(36)
(83)
(52)
(46)
(65)
(282)
343
1,130
964
1,038
586
4,061
U.S.
Insurance contracts issued
388
1,235
968
823
288
3,702
Reinsurance contracts held
(50)
(139)
(35)
90
169
35
338
1,096
933
913
457
3,737
Asia
Insurance contracts issued
1,273
4,066
3,320
3,308
2,204
14,171
Reinsurance contracts held
(44)
(202)
(173)
(105)
(169)
(693)
1,229
3,864
3,147
3,203
2,035
13,478
Corporate
Insurance contracts issued
(8)
(28)
(28)
(34)
(14)
(112)
Reinsurance contracts held
10
51
53
19
4
137
2
23
25
(15)
(10)
25
Total
$
1,912
$
6,113
$
5,069
$
5,139
$
3,068
$
21,301
209
(f)
Investment income and insurance finance income and expenses
For the year ended December 31, 2024
Insurance
contracts
Non-insurance(1)
Total
Investment return
Investment-related income
$
14,214
$
3,268
$
17,482
Net gains (losses) on financial assets at FVTPL
1,788
63
1,851
Unrealized gains (losses) on FVOCI assets
5,590
(6,803)
(1,213)
Impairment and recovery (loss) on financial assets
137
(28)
109
Investment expenses
(644)
(704)
(1,348)
Interest on required surplus
672
(672)
-
Total investment return
21,757
(4,876)
16,881
Portion recognized in income (expenses)
16,489
2,622
19,111
Portion recognized in OCI
5,268
(7,498)
(2,230)
Insurance finance income (expenses) from insurance contracts issued and effect of
movement in exchange rates
Interest accreted to insurance contracts
(10,283)
26
(10,257)
Due to changes in interest rates and other financial assumptions
10,199
(67)
10,132
Changes in fair value of underlying items of direct participation contracts
(5,231)
Zero
(5,231)
Effects of risk mitigation option
1,755
Zero
1,755
Net foreign exchange income (expenses)
(2)
Zero
(2)
Hedge accounting offset from insurance contracts issued
(128)
Zero
(128)
Reclassification of derivative OCI to IFIE – cash flow hedges
52
Zero
52
Reclassification of derivative income (loss) changes to IFIE – fair value hedge
(3,346)
Zero
(3,346)
Other
394
Zero
394
Total insurance finance income (expenses) from insurance contracts issued
(6,590)
(41)
(6,631)
Effect of movements in foreign exchange rates
(1,417)
Zero
(1,417)
Total insurance finance income (expenses) from insurance contracts issued and effect of
movement in foreign exchange rates
(8,007)
(41)
(8,048)
Portion recognized in income (expenses), including effects of exchange rates
(16,252)
33
(16,219)
Portion recognized in OCI, including effects of exchange rates
8,245
(74)
8,171
Reinsurance finance income (expenses) from reinsurance contracts held and effect of
movement in foreign exchange rates
Interest accreted to insurance contracts
2,135
Zero
2,135
Due to changes in interest rates and other financial assumptions
(3,886)
4
(3,882)
Changes in risk of non-performance of reinsurers
(57)
Zero
(57)
Other
(88)
Zero
(88)
Total reinsurance finance income (expenses) from reinsurance contracts held
(1,896)
4
(1,892)
Effect of movements in foreign exchange rates
243
Zero
243
Total reinsurance finance income (expenses) from reinsurance contracts held and effect
of movement in foreign exchange rates
(1,653)
4
(1,649)
Portion recognized in income (expenses), including effects of foreign exchange rates
1,133
Zero
1,133
Portion recognized in OCI, including effects of exchange rates
(2,786)
4
(2,782)
Decrease (increase) in investment contract liabilities
(6)
(498)
(504)
Total net investment income (loss), insurance finance income (expenses) and reinsurance
finance income (expenses)
12,091
(5,411)
6,680
Amounts recognized in income (expenses)
1,364
2,157
3,521
Amounts recognized in OCI
10,727
(7,568)
3,159
(1) Non-insurance includes consolidations and eliminations of transactions between operating segments.
210 | 2024 Annual Report | Notes to Consolidated Financial Statements
For the year ended December 31, 2023
Insurance
contracts
Non-insurance(1)
Total
Investment return
Investment-related income
$ 13,036
$ 3,079
$ 16,115
Net gains (losses) on financial assets at FVTPL
2,176
506
2,682
Unrealized gains (losses) on FVOCI assets
11,212
1,018
12,230
Impairment and recovery (loss) on financial assets
(247)
(57)
(304)
Investment expenses
(540)
(757)
(1,297)
Interest on required surplus
521
(521)
Zero
Total investment return
26,158
3,268
29,426
Portion recognized in income (expenses)
15,830
2,191
18,021
Portion recognized in OCI
10,328
1,077
11,405
Insurance finance income (expenses) from insurance contracts issued and effect of
movement in exchange rates
Interest accreted to insurance contracts
(8,214)
28
(8,186)
Due to changes in interest rates and other financial assumptions
(11,008)
21
(10,987)
Changes in fair value of underlying items of direct participation contracts
(7,384)
Zero
(7,384)
Effects of risk mitigation option
1,267
Zero
1,267
Net foreign exchange income (expenses)
(80)
Zero
(80)
Hedge accounting offset from insurance contracts issued
(41)
Zero
(41)
Reclassification of derivative OCI to IFIE – cash flow hedges
(3)
Zero
(3)
Reclassification of derivative income (loss) changes to IFIE – fair value hedge
185
Zero
185
Other
237
Zero
237
Total insurance finance income (expenses) from insurance contracts issued
(25,041)
49
(24,992)
Effect of movements in foreign exchange rates
(952)
Zero
(952)
Total insurance finance income (expenses) from insurance contracts issued and effect of
movement in foreign exchange rates
(25,993)
49
(25,944)
Portion recognized in income (expenses), including effects of exchange rates
(13,930)
36
(13,894)
Portion recognized in OCI, including effects of exchange rates
(12,063)
13
(12,050)
Reinsurance finance income (expenses) from reinsurance contracts held and effect of
movement in foreign exchange rates
Interest accreted to insurance contracts
241
(12)
229
Due to changes in interest rates and other financial assumptions
598
(28)
570
Changes in risk of non-performance of reinsurers
(15)
Zero
(15)
Other
(159)
Zero
(159)
Total reinsurance finance income (expenses) from reinsurance contracts held
665
(40)
625
Effect of movements in foreign exchange rates
(120)
Zero
(120)
Total reinsurance finance income (expenses) from reinsurance contracts held and effect of
movement in foreign exchange rates
545
(40)
505
Portion recognized in income (expenses), including effects of foreign exchange rates
(719)
(15)
(734)
Portion recognized in OCI, including effects of exchange rates
1,264
(25)
1,239
Decrease (increase) in investment contract liabilities
(17)
(418)
(435)
Total net investment income (loss), insurance finance income (expenses) and reinsurance
finance income (expenses)
693
2,859
3,552
Amounts recognized in income (expenses)
1,164
1,794
2,958
Amounts recognized in OCI
(471)
1,065
594
(1) Non-insurance includes consolidations and eliminations of transactions between operating segments.
211
The following tables present Investment income and insurance finance income and expenses recognized in income or expenses
or other comprehensive income, by reporting segments for the years ended December 31, 2024 and December 31, 2023.
For the year ended December 31, 2024
Insurance and reinsurance contracts
Non-insurance(1)
Total
Asia
Canada
U.S.
Corporate
Total investment return
Portion recognized in income (expenses)
$
7,994
$ 3,529
$ 4,943
$
23
$ 2,622
$ 19,111
Portion recognized in OCI
801
5,876
(1,411)
2
(7,498)
(2,230)
8,795
9,405
3,532
25
(4,876)
16,881
Total insurance finance income (expenses) from
insurance contracts issued and effect of movement in
foreign exchange rates
Portion recognized in income (expenses), including effects of
exchange rates
(7,334)
(3,650)
(5,278)
10
33
(16,219)
Portion recognized in OCI, including effects of exchange rates
(977)
473
8,749
Zero
(74)
8,171
(8,311)
(3,177)
3,471
10
(41)
(8,048)
Total reinsurance finance income (expenses) from
reinsurance contracts held and effect of movement in
foreign exchange rates
Portion recognized in income (expenses), including effects of
foreign exchange rates
604
347
185
(3)
Zero
1,133
Portion recognized in OCI, including effects of exchange rates
(168)
59
(2,677)
Zero
4
(2,782)
436
406
(2,492)
(3)
4
(1,649)
(1) Non-insurance includes consolidations and eliminations of transactions between operating segments.
For the year ended December 31, 2023
Insurance and reinsurance contracts
Non-insurance(1)
Total
Asia
Canada
U.S.
Corporate
Total investment return
Portion recognized in income (expenses)
$
7,095
$ 3,514
$ 5,193
$
28
$ 2,191
$ 18,021
Portion recognized in OCI
4,675
2,454
3,197
2
1,077
11,405
11,770
5,968
8,390
30
3,268
29,426
Total insurance finance income (expenses) from
insurance contracts issued and effect of movement in
foreign exchange rates
Portion recognized in income (expenses), including effects of
exchange rates
(6,436)
(3,315)
(4,868)
689
36
(13,894)
Portion recognized in OCI, including effects of exchange rates
(4,601)
(2,394)
(5,068)
Zero
13
(12,050)
(11,037)
(5,709)
(9,936)
689
49
(25,944)
Total reinsurance finance income (expenses) from
reinsurance contracts held and effect of movement in
foreign exchange rates
Portion recognized in income (expenses), including effects of
foreign exchange rates
(105)
57
11
(682)
(15)
(734)
Portion recognized in OCI, including effects of exchange rates
117
33
1,114
Zero
(25)
1,239
12
90
1,125
(682)
(40)
505
(1) Non-insurance includes consolidations and eliminations of transactions between operating segments.
(g)
Significant judgements and estimates
(I)
Fulfilment cash flows
Fulfilment cash flows have three major components:
• Estimate of future cash flows
• An adjustment to reflect the time value of money and the financial risk related to future cash flows if not included in the
estimate of future cash flows
• A risk adjustment for non-financial risk
The determination of insurance fulfilment cash flows involves the use of estimates and assumptions. A comprehensive review of
valuation assumptions and methods is performed annually. The review reduces the Company’s exposure to uncertainty by ensuring
assumptions for liability risks remain appropriate. This is accomplished by monitoring experience and updating assumptions which
represent a best estimate of expected future experience and margins that are appropriate for the risks assumed. While the
assumptions selected represent the Company’s current best estimates and assessment of risk, the ongoing monitoring of experience
and the changes in the economic environment are likely to result in future changes to the actuarial assumptions, which could
materially impact the insurance contract liabilities.
212 | 2024 Annual Report | Notes to Consolidated Financial Statements
Method used to measure insurance and reinsurance contract fulfilment cash flows
The Company primarily uses deterministic projections using best estimate assumptions to determine the present value of future
cash flows. For product features such as universal life minimum crediting rates guarantees, participating life zero dividend floor
implicit guarantees and variable annuities guarantees, the Company developed a stochastic approach to capture the asymmetry
of the risk.
Determination of assumptions used
For the deterministic projections, assumptions are made with respect to mortality, morbidity, rates of policy termination, operating
expenses and certain taxes. Actual experience is monitored to ensure that assumptions remain appropriate and assumptions are
changed as warranted. Assumptions are discussed in more detail in the following table.
Nature of factors and assumption methodology
Risk management
Mortality
Mortality relates to the occurrence of death. Mortality is a key
assumption for life insurance and certain forms of annuities.
Mortality assumptions are based on the Company’s internal
experience as well as past and emerging industry
experience. Assumptions are differentiated by sex,
underwriting class, policy type and geographic market.
Assumptions are made for future mortality improvements.
The Company maintains underwriting standards to
determine the insurability of applicants. Claim trends are
monitored on an ongoing basis. Exposure to large claims is
managed by establishing policy retention limits, which vary
by market and geographic location. Policies in excess of the
limits are reinsured with other companies. Mortality is
monitored monthly, and the overall 2024 experience was
favourable (2023 – favourable) when compared to the
Company’s assumptions.
Morbidity
Morbidity relates to the occurrence of accidents and
sickness for insured risks. Morbidity is a key assumption for
long-term care insurance, disability insurance, critical illness
and other forms of individual and group health benefits.
Morbidity assumptions are based on the Company’s internal
experience as well as past and emerging industry
experience and are established for each type of morbidity
risk and geographic market. Assumptions are made for
future morbidity improvements.
The Company maintains underwriting standards to
determine the insurability of applicants. Claim trends are
monitored on an ongoing basis. Exposure to large claims is
managed by establishing policy retention limits, which vary
by market and geographic location. Policies in excess of the
limits are reinsured with other companies. Morbidity is also
monitored monthly and the overall 2024 experience was
favourable (2023 – favourable) when compared to the
Company’s assumptions.
Policy
termination
and premium
persistency
Policies are terminated through lapses and surrenders,
where lapses represent the termination of policies due to
non-payment of premiums and surrenders represent the
voluntary termination of policies by policyholders. Premium
persistency represents the level of ongoing deposits on
contracts where there is policyholder discretion as to the
amount and timing of deposits. Policy termination and
premium persistency assumptions are primarily based on the
Company’s recent experience adjusted for expected future
conditions. Assumptions reflect differences by type of
contract within each geographic market.
The Company seeks to design products that minimize
financial exposure to lapse, surrender and premium
persistency risk. The Company monitors lapse, surrender
and persistency experience. In aggregate, 2024 policyholder
termination and premium persistency experience was
unfavourable (2023 – unfavourable) when compared to the
Company’s assumptions used in the computation of actuarial
liabilities.
Directly
attributable
expenses
Directly attributable operating expense assumptions reflect
the projected costs of maintaining and servicing in-force
policies, including associated directly attributable overhead
expenses. The directly attributable expenses are derived
from internal cost studies projected into the future with an
allowance for inflation. For some developing businesses,
there is an expectation that unit costs will decline as these
businesses grow.
Directly attributable acquisitions expenses are derived from
internal cost studies.
The Company prices its products to cover the expected
costs of servicing and maintaining them. In addition, the
Company monitors expenses monthly, including
comparisons of actual expenses to expense levels allowed
for in pricing and valuation. Maintenance expenses for 2024
were unfavourable (2023 – unfavourable) when compared to
the Company’s assumptions used in the computation of
actuarial liabilities.
Tax
Taxes reflect assumptions for future premium taxes and
other non-income related taxes.
The Company prices its products to cover the expected cost
of taxes.
Policyholder
dividends,
experience
rating
refunds, and
other
adjustable
policy
elements
The best estimate projections for policyholder dividends and
experience rating refunds, and other adjustable elements of
policy benefits are determined to be consistent with
management’s expectation of how these elements will be
managed should experience emerge consistently with the
best estimate assumptions.
The Company monitors policy experience and adjusts policy
benefits and other adjustable elements to reflect this
experience. Policyholder dividends are reviewed annually for
all businesses under a framework of Board-approved
policyholder dividend policies.
The Company reviews actuarial methods and assumptions on an annual basis. If changes are made to non-economic
assumptions, the impact based on locked-in economic assumptions would adjust the contractual service margin for general
213
model and VFA contracts if there is any remaining contractual service margin for the group of policies where the change was
made. This amount would then be recognized in income over the period of service provided. Changes could also impact net
income and other comprehensive income to the extent that the contractual service margin has been depleted, or discount rates
are different than the locked-in rates used to quantify changes to the contractual service margin.
(II) Determination of discretionary changes
The terms of some contracts measured under the GMM give the Company discretion over the cash flows to be paid to the
policyholders, either in timing or amount. Changes in discretionary cash flows are regarded as relating to future service and
accordingly adjust the CSM. The Company determines how to identify a change in discretionary cash flows by specifying the
basis on which it expects to determine its commitment under the contract; for example, based on a fixed interest rate or on
returns that vary based on specified asset returns. This determination is specified at the inception of the contract.
(III) Discount rates
Insurance contract cash flows for non-participating business are discounted using risk-free yield curves adjusted by an illiquidity
premium to reflect the liquidity characteristics of the liabilities. Cash flows that vary based on returns of underlying items are
adjusted to reflect their variability under these adjusted yield curves. Each yield curve is interpolated between the spot rate at the
last observable market data point and an ultimate spot rate, which reflects the long-term real interest rate plus inflation
expectations.
For participating business, insurance contract cash flows that vary based on the return of underlying items are discounted at
rates reflecting that variability.
For insurance contracts with cash flows that vary with the return of underlying items and where the present value is measured by
stochastic modelling, cash flows are both projected and discounted at scenario specific rates, calibrated on average to be the
risk-free yield curves adjusted for liquidity.
The spot rates used for discounting liability cash flows are presented in the following tables and include illiquidity premiums
determined with reference to net asset spreads indicative of the liquidity characteristics of the liabilities by geography.
December 31, 2024
Currency
Liquidity category
Observable
years
Ultimate
year
1 year
5 years
10 years
20 years
30 years
Ultimate
Canada
CAD
Illiquid
30
70
3.46%
3.93%
4.86%
5.00%
5.32%
4.40%
Somewhat liquid(1)
30
70
3.44%
3.89%
4.76%
4.98%
5.21%
4.40%
U.S.
USD
Illiquid
30
70
4.48%
5.05%
6.01%
6.33%
6.15%
5.15%
Somewhat liquid(1)
30
70
4.56%
5.09%
5.91%
6.33%
6.14%
5.03%
Japan
JPY
Somewhat liquid(1)
30
70
0.82%
1.17%
1.55%
2.33%
2.97%
1.60%
Hong Kong
HKD
Illiquid
15
55
3.73%
4.36%
5.23%
4.70%
4.17%
3.70%
December 31, 2023
Currency
Liquidity category
Observable
years
Ultimate
year
1 year
5 years
10 years
20 years
30 years
Ultimate
Canada
CAD
Illiquid
30
70
5.17%
4.33%
4.92%
4.86%
4.80%
4.40%
Somewhat liquidRefer to footnote number (1)
30
70
5.14%
4.22%
4.69%
4.72%
4.69%
4.40%
U.S.
USD
Illiquid
30
70
5.38%
4.54%
5.37%
5.65%
5.27%
5.00%
Somewhat liquidRefer to footnote number (1)
30
70
5.32%
4.57%
5.25%
5.56%
5.18%
4.88%
Japan
JPY
Somewhat liquidRefer to footnote number (1)
30
70
0.53%
0.77%
1.08%
1.75%
2.24%
1.60%
Hong Kong
HKD
Illiquid
15
55
4.20%
4.01%
4.98%
4.61%
4.19%
3.80%
Footnote Number (1)Somewhat liquid refers to liquidity level that is between liquid and illiquid. It is higher liquidity than illiquid and lower liquidity than liquid.
Amounts presented in income for policies where changes in assumptions that relate to financial risk do not have a substantial
impact on amounts paid to policyholders reflect discount rates locked in beginning with the adoption of IFRS 17 or locked in at
issue for later insurance contracts. These policies include term insurance, guaranteed whole life insurance, and health products
including critical illness and long-term care. For policies where changes in assumptions to financial risk have a substantial impact
on amounts paid to policyholders, discount rates are updated as future cash flows change due to changes in financial risk, so
that the amount presented in income from future changes in financial variables is $nil. These policies include adjustable universal
life contracts. Impacts from differences between current period rates and discount rates used to determine income are presented
in other comprehensive income.
(IV) Risk adjustment and confidence level used to determine risk adjustment
Risk adjustment for non-financial risk represents the compensation the Company requires for bearing the uncertainty about the
amount and timing of the cash flows that arises from non-financial risk as the Company fulfils insurance contracts. The risk
adjustment process considers insurance, lapse and expense risks, includes both favourable and unfavourable outcomes, and
reflects diversification benefits from the insurance contracts issued.
214 | 2024 Annual Report | Notes to Consolidated Financial Statements
The Company estimates the risk adjustment using a margin approach. This approach applies a margin for adverse deviation,
typically in terms of a percentage of best estimate assumptions, where future cash flows are uncertain. The resulting cash flows
are discounted at rates consistent with the best estimate cash flows to arrive at the total risk adjustment. The ranges for these
margins are set by the Company and reviewed periodically.
The risk adjustment for non-financial risk for insurance contracts corresponds to a 90 – 95% confidence level for all segments.
(V) Investment component, Investment-return service and Investment-related service
The Company identifies the investment component, investment-return service (contract without direct participation features) and
investment-related service (contract with direct participation features) of a contract as part of the product governance process.
Investment components are amounts that are to be paid to the policyholder under all circumstances. Investment components are
excluded from insurance revenue and insurance service expenses.
Investment-return services and investment-related services are investment services rendered as part of an insurance contract
and are part of the insurance contract services provided to the policyholder.
(VI) Relative weighting of the benefit provided by insurance coverage, investment-return service and investment-
related service
The contractual service margin is released into income, when insurance contract services are provided, by using coverage units.
Coverage units represent the quantity of service (insurance coverage, investment-return and investment-related services)
provided and are determined by considering the benefit provided under the contract and its expected coverage duration. When
the relative size of the investment-related service coverage or the investment-return service coverage unit is disproportionate
compared to the insurance service coverage unit, or vice versa, the Company must determine a relative weighting of the services
to reflect the delivery of each of those services. The Company identifies the coverage units as part of the product governance
process and did not identify contracts where such weighting was required.
(h) Sensitivity of insurance contract liabilities to changes in non-economic assumptions
The following tables present information on how reasonably possible changes in assumptions made by the Company on
insurance contracts’ non-economic risk variables and certain economic risk variables impact contractual service margin, net
income attributed to shareholders, other comprehensive income attributed to shareholders, and total comprehensive income
attributed to shareholders. For non-economic risk variables, the impacts are shown separately gross and net of the impacts of
reinsurance contracts held. The method used for deriving sensitivity information and significant assumptions made did not
change from the previous period.
The analysis is based on a simultaneous change in assumptions across all businesses and holds all other assumptions constant.
In practice, experience for each assumption will frequently vary by geographic market and business, and assumption updates
are specifically made on a business and geographic basis. Actual results can differ materially from these estimates for a variety
of reasons including the interaction among these factors when more than one changes, actual experience differing from the
assumptions, changes in business mix, effective tax rates, and the general limitations of the Company’s internal models.
215
Potential impact on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders arising from changes to non-
economic assumptionsFootnote Number (1)
As at December 31, 2024
(post-tax except CSM)
CSM net of NCI
Net income
attributed to shareholders
Other
comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality
ratesRefer to footnote number (2),(3),(5)
Portfolios where an increase in rates
increases insurance contract liabilities
$
(700)
$
(200)
$
(700)
$
(300)
$ 200
$ 100
$
(500)
$ (200)
Portfolios where a decrease in rates
increases insurance contract liabilities
(100)
(600)
Zero
Zero
100
200
100
200
5% adverse change in future morbidity
rates(4),(5),(6) (incidence and termination)
(2,200)
(1,800)
(3,000)
(2,700)
700
600
(2,300)
(2,100)
10% change in future policy termination ratesRefer to footnote number (3),(5)
Portfolios where an increase in rates
increases insurance contract liabilities
(700)
(600)
(100)
(100)
(200)
(200)
(300)
(300)
Portfolios where a decrease in rates
increases insurance contract liabilities
(900)
(700)
(700)
(400)
400
300
(300)
(100)
5% increase in future expense levels
(600)
(600)
(100)
(100)
100
100
Zero
Zero
As at December 31, 2024
(post-tax except CSM)
CSM net of NCI
Net income
attributed to shareholders
Other
comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality
ratesRefer to footnote number (2),(3),(5)
Portfolios where an increase in rates
increases insurance contract liabilities
$
(800)
$
(200)
$
(400)
$
(200)
Do
llar Zero
Do
llar Zero
$
(400)
$ (200)
Portfolios where a decrease in rates
increases insurance contract liabilities
Zero
(500)
Zero
Zero
Zero
100
Zero
100
5% adverse change in future morbidity
ratesRefer to footnote number (4),(5),(6)(incidence and termination)
(1,500)
(1,300)
(3,300)
(3,300)
500
400
(2,800)
(2,900)
10% change in future policy termination ratesRefer to footnote number (3),(5)
Portfolios where an increase in rates
increases insurance contract liabilities
(600)
(500)
(100)
(100)
(100)
(100)
(200)
(200)
Portfolios where a decrease in rates
increases insurance contract liabilities
(1,200)
(800)
(400)
(300)
300
200
(100)
(100)
5% increase in future expense levels
(600)
(600)
Zero
Zero
Zero
Zero
Zero
Zero
Footnote Number (1)The participating policy funds are largely self-supporting and experience gains or losses would generally result in changes to future dividends reducing the direct
impact on the CSM and shareholder income.
Footnote Number (2)An increase in mortality rates will generally increase insurance contract liabilities for life insurance contracts, whereas a decrease in mortality rates will generally
increase insurance contract liabilities for policies with longevity risk such as payout annuities.
Footnote Number (3)The sensitivity is measured for each direct insurance portfolio net of the impacts of any reinsurance held on the policies within that portfolio to determine if the
overall insurance contract liabilities increased.
Footnote Number (4)No amounts related to morbidity risk are included for policies where the insurance contract liability provides only for claims costs expected over a short period,
generally less than one year, such as Group Life and Health.
Footnote Number (5)The impacts of the sensitivities on LTC for morbidity, mortality and lapse do not assume any offsets from the Company’s ability to contractually raise premium
rates in such events, subject to state regulatory approval. In practice, the Company would plan to file for rate increases equal to the amount of deterioration
resulting from the sensitivity.
Footnote Number (6)This includes a 5% deterioration in incidence rates and a 5% deterioration in claim termination rates.
216 | 2024 Annual Report | Notes to Consolidated Financial Statements
Potential impact on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders arising from changes to non-
economic assumptions on Long Term CareRefer to footnote number (1)
As at December 31, 2024
(post-tax except CSM)
CSM net of NCI
Net income
attributed to
shareholders
Other
comprehensive
income attributed to
shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality ratesRefer to footnote number (2), (3)
$ (300)
$ (300)
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
5% adverse change in future morbidity incidence
ratesRefer to footnote number (2),(3)
(1,400)
(1,300)
(500)
(400)
200
200
(300)
(200)
5% adverse change in future morbidity claims
termination ratesRefer to footnote number (2),(3)
(1,400)
(1,300)
(1,300)
(1,100)
500
400
(800)
(700)
10% adverse change in future policy termination
ratesRefer to footnote number (2),(3)
(400)
(400)
Zero
Zero
100
100
100
100
5% increase in future expense levelsRefer to footnote number (3)
(100)
(100)
Zero
Zero
Zero
Zero
Zero
Zero
As at December 31, 2023
(post-tax except CSM)
CSM net of NCI
Net income
attributed to
shareholders
Other
comprehensive
income attributed
to shareholders
Total comprehensive
income attributed to
shareholders
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Policy related assumptions
2% adverse change in future mortality ratesRefer to footnote number (2),(3)
$ (300)
$ (300)
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
Do
llar Zero
5% adverse change in future morbidity incidence
ratesRefer to footnote number (2), (3)
(900)
(900)
(800)
(800)
100
100
(700)
(700)
5% adverse change in future morbidity claims
termination ratesRefer to footnote number (2),(3)
(900)
(900)
(1,600)
(1,600)
200
200
(1,400)
(1,400)
10% adverse change in future policy termination
ratesRefer to footnote number (2),(3)
(400)
(400)
Zero
Zero
Zero
Zero
Zero
Zero
5% increase in future expense levelsRefer to footnote number (3)
(100)
(100)
Zero
Zero
Zero
Zero
Zero
Zero
Footnote Number (1)The potential impacts on CSM were translated from US$ at 1.4382 (2023 – 1.3186) and the potential impacts on net income attributed to shareholders, OCI
attributed to shareholders and total comprehensive income attributed to shareholders were translated from US$ at 1.3987 (2023 – 1.3612).
Footnote Number (2)The impacts of the sensitivities on LTC for morbidity, mortality and lapse do not assume any offsets from the Company’s ability to contractually raise premium
rates in such events, subject to state regulatory approval. In practice, the Company would plan to file for rate increases equal to the amount of deterioration
resulting from the sensitivities.
Footnote Number (3)The impact of favourable changes to all the sensitivities is relatively symmetrical.
Potential impact on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders arising from changes to certain
economic financial assumptions used in the determination of insurance contract liabilitiesRefer to footnote number (1)
As at December 31, 2024
(post-tax except CSM)
CSM net of NCI
Net income
attributed to
shareholders
Other
comprehensive
income attributed
to shareholders
Total
comprehensive
income attributed
to shareholders
Financial assumptions
10 basis point reduction in ultimate spot rate
$
(300)
Do
llar Zero
$
(200)
$
(200)
50 basis point increase in interest rate volatilityRefer to footnote number (2)
(100)
Zero
Zero
Zero
50 basis point increase in non-fixed income return volatilityRefer to footnote number (2)
(100)
Zero
Zero
Zero
As at December 31, 2023
(post-tax except CSM)
CSM net of NCI
Net income
attributed to
shareholders
Other
comprehensive
income attributed
to shareholders
Total
comprehensive
income attributed
to shareholders
Financial assumptions
10 basis point reduction in ultimate spot rate
$
(200)
Do
llar Zero
$
(300)
$
(300)
50 basis point increase in interest rate volatilityRefer to footnote number (2)
Zero
Zero
Zero
Zero
50 basis point increase in non-fixed income return volatility(2)
(100)
Zero
Zero
Zero
Footnote Number (1)Note that the impact of these assumptions is not linear.
Footnote Number (2)Used in the determination of insurance contract liabilities with financial guarantees. This includes universal life minimum crediting rate guarantees, participating
life zero dividend floor implicit guarantees, and variable annuities guarantees, where a stochastic approach is used to capture the asymmetry of the risk.
217
(i) Actuarial methods and assumptions
The Company performs a comprehensive review of actuarial methods and assumptions annually. The review is designed to
reduce the Company’s exposure to uncertainty by ensuring assumptions for insurance contract liability risks remain appropriate.
This is accomplished by monitoring experience and updating assumptions that represent a best estimate of expected future
experience, and maintaining a risk adjustment that is appropriate for the risks assumed. While the assumptions selected
represent the Company’s best estimates and assessment of risk, the ongoing monitoring of experience and changes in the
economic environment are likely to result in future changes to the actuarial assumptions, which could materially impact the
insurance contract net liabilities. The changes implemented from the review are generally implemented in the third quarter of
each year, though updates may be made outside the third quarter in certain circumstances.
2024 review of actuarial methods and assumptions
The completion of the 2024 annual review of actuarial methods and assumptions resulted in a decrease in pre-tax fulfilment cash
flows of $174, excluding the portion related to non-controlling interests. These changes resulted in a decrease in pre-tax net
income attributed to shareholders of $250 ($199 post-tax), an increase in pre-tax net income attributed to participating
policyholders of $29 ($21 post-tax), a decrease in CSM of $421, an increase in pre-tax other comprehensive income attributed to
shareholders of $771 ($632 post-tax), and an increase in pre-tax other comprehensive income attributed to participating
policyholders of $45 ($32 post-tax).
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flowsRefer to footnote number (1)
For the year ended December 31, 2024
Total
Lapse and policyholder behaviour updates
$
620
Reinsurance contract and other risk adjustment review
427
Expense updates
(406)
Financial related updates
(386)
Mortality and morbidity updates
(273)
Methodology and other updates
(156)
Impact of changes in actuarial methods and assumptions, pre-tax
$ (174)
Footnote Number (1)Excludes the portion related to non-controlling interests of $(215). The impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flows,
including the portion related to non-controlling interests, would be $(389).
Impact of changes in actuarial methods and assumptions on pre-tax net income attributed to shareholders, pre-tax net
income attributed to participating policyholders, OCI and CSMRefer to footnote number (1)
For the year ended December 31, 2024
Total
Portion recognized in net income (loss) attributed to:
Participating policyholders
$
29
Shareholders
(250)
(221)
Portion recognized in OCI attributed to:
Participating policyholders
45
Shareholders
771
816
Portion recognized in CSM
(421)
Impact of changes in actuarial methods and assumptions, pre-tax
$ 174
Footnote Number (1)Excludes the portion related to non-controlling interests of $215. The impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flows,
including the portion related to non-controlling interests, would be $389.
Lapse and policyholder behaviour updates
Updates to lapses and policyholder behaviour assumptions resulted in an increase in pre-tax fulfilment cash flows of $620.
The increase was primarily driven by a detailed review of the lapse assumptions for the Company’s non-participating products in
its U.S. life insurance business and its International High Net Worth business in Asia segment. For U.S. protection products,
lapse rates declined during the COVID-19 pandemic and continue to remain low, while for U.S. indexed universal life, U.S. bank-
owned life insurance, and Asia’s International High Net Worth business, lapse rates increased due to the impact of higher short-
term interest rates. The Company updated its lapse assumptions to reflect these experience trends. The ultimate lapse rates for
products with no-lapse guarantees were not changed.
Reinsurance contract and other risk adjustment review
The review of the Company’s reinsurance contracts and risk adjustment, excluding changes that were a direct result of other
assumption updates, resulted in an increase in pre-tax fulfilment cash flows of $427.
218 | 2024 Annual Report | Notes to Consolidated Financial Statements
The increase was driven by updates to the Company’s reinsurance contract fulfilment cash flows to reflect current reinsurance
market conditions and the resulting expected cost on older U.S. mortality reinsurance, partially offset by updates to the
Company’s risk adjustment methodology in North America related to non-financial risk.
The Company’s overall risk adjustment continues to be within the 90 – 95% confidence level.
Expense updates
Expense updates resulted in a decrease in pre-tax fulfilment cash flows of $406.
The decrease was driven by a detailed review of the Company’s global expenses, including investment expenses. The Company
aligned them with its current cost structure and included the impact of changes in classification of certain expenses from directly
attributable to non-directly attributable.
Financial related updates
Financial related updates resulted in a decrease in pre-tax fulfilment cash flows of $386.
The decrease was driven by a review of the discount rates used in the valuation of the Company’s non-participating business,
which included increases to ultimate risk-free rates in the U.S. to align with historical averages, as well as updates to parameters
used to determine illiquidity premiums. This was partially offset by refinements to crediting rate projections on certain U.S.
universal life products.
Mortality and morbidity updates
Mortality and morbidity updates resulted in a decrease in pre-tax fulfilment cash flows of $273.
The decrease was driven by morbidity updates to health insurance products in Hong Kong to reflect lower hospital claims on
certain business that the Company accounts for under the general measurement model, partially offset by updates to mortality
and morbidity assumptions on critical illness products in Hong Kong to reflect emerging experience.
Methodology and other updates
Methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $156.
The decrease was driven by the impact of annual updates to the Company’s valuation models for participating products in Asia
and Canada reflecting higher interest rates during the year, partially offset by various other smaller items that netted to an
increase in fulfilment cash flows.
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flows, net income attributed to
shareholders, CSM and OCI by segmentRefer to footnote number (1)
The impact of changes in actuarial methods and assumptions in Canada resulted in a decrease in pre-tax fulfilment cash flows of
$266. The decrease was primarily driven by updates to the risk adjustment methodology related to non-financial risks and the
review of the discount rates used in the valuation of non-participating business. These changes resulted in an increase in pre-tax
net income attributed to shareholders of $3 ($2 post-tax), an increase in CSM of $222, and a decrease in pre-tax other
comprehensive income attributed to shareholders of $15 ($10 post-tax).
The impact of changes in actuarial methods and assumptions in the U.S. resulted in an increase in pre-tax fulfilment cash flows
of $895. The increase was primarily driven by the net impact of updates to the Company’s reinsurance contract fulfilment cash
flows and risk adjustment methodology related to non-financial risks, a detailed review of the lapse assumptions in its life
insurance business, and refinements to its crediting rate projections on certain universal life products, partially offset by a review
of the discount rates used in the valuation of non-participating business. These changes resulted in a decrease in pre-tax net
income attributed to shareholders of $256 ($202 post-tax), a decrease in CSM of $1,228, and an increase in pre-tax other
comprehensive income attributed to shareholders of $589 ($466 post-tax).
The impact of changes in actuarial methods and assumptions in Asia resulted in a decrease in pre-tax fulfilment cash flows of
$818. The decrease was primarily driven by the impact of morbidity updates to certain health insurance products in Hong Kong
to reflect emerging experience, updates from the Company’s detailed review of global expenses, including investment expenses,
as well as the impact of annual updates to its valuation models for participating products, partially offset by a review of lapse
assumptions for the International High Net Worth business. These changes resulted in a decrease in pre-tax net income
attributed to shareholders of $4 ($5 post-tax), an increase in CSM of $591, and an increase in pre-tax other comprehensive
income attributed to shareholders of $213 ($190 post-tax).
The impact of changes in actuarial methods and assumptions in Corporate and Other (which includes the Company’s property
and casualty reinsurance businesses, run-off insurance operations including variable annuities and health, and consolidation
adjustments including intercompany eliminations) resulted in an increase in pre-tax fulfilment cash flows of $15. These changes
resulted in an increase in pre-tax net income attributed to shareholders of $7 ($6 post-tax), a decrease in CSM of $6, and a
decrease in pre-tax other comprehensive income attributed to shareholders of $16 ($14 post-tax).
Footnote Number (1) The Company’s annual update of actuarial methods and assumptions also impacts net income and other comprehensive income attributed to participating
policyholders. The total company impact of these metrics can be found in the above table.
219
2023 review of actuarial methods and assumptions
On a full year basis, the 2023 review of actuarial methods and assumptions resulted in a decrease in pre-tax fulfilment cash
flows of $3,197. These changes resulted in an increase in pre-tax net income attributed to shareholders of $171 ($105 post-tax),
an increase in pre-tax net income attributed to participating policyholders of $173 ($165 post-tax), an increase in CSM of $2,754,
and an increase in pre-tax other comprehensive income of $99 ($73 post-tax).
In the third quarter of 2023, the completion of the 2023 annual review of actuarial methods and assumptions resulted in a
decrease in pre-tax fulfilment cash flows of $347, excluding the portion related to non-controlling interests. These changes
resulted in an increase in pre-tax net income attributed to shareholders of $27 (a decrease of $14 post-tax), an increase in pre-
tax net income attributed to participating policyholders of $58 ($74 post-tax), an increase in CSM of $116, and an increase in pre-
tax other comprehensive income of $146 ($110 post-tax).
In the fourth quarter of 2023, the Company also updated the actuarial methods and assumptions which decreased the overall
level of the risk adjustment for non-financial risk. This change moves the risk adjustment to approximately the middle of the
Company’s existing 90 – 95% confidence level range. The risk adjustment would have exceeded the 95% confidence level in the
fourth quarter of 2023 without making the change. This change led to a decrease in pre-tax fulfilment cash flows of $2,850,
excluding the portion related to non-controlling interests, an increase in pre-tax net income attributed to shareholders of $144
($119 post-tax), an increase in pre-tax net income attributed to participating policyholders of $115 ($91 post-tax), an increase in
CSM of $2,638, and a decrease in pre-tax other comprehensive income of $47 ($37 post-tax).
Since the beginning of 2020, some lines of business have seen impacts to mortality and policyholder behaviour driven by the
COVID-19 pandemic. Given the long-term nature of the Company’s assumptions, the Company’s 2023 experience studies have
excluded experience that was materially impacted by COVID-19 as this is not seen to be indicative of the levels of actual future
claims or lapses.
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flowsRefer to footnote number (1)
For the three and
nine months ended
September 30, 2023
For the three
months ended
December 31, 2023
For the year ended
December 31, 2023
Canada variable annuity product review
$
(133)
Do
llar Zero
$
(133)
Mortality and morbidity updates
265
Zero
265
Lapse and policyholder behaviour updates
98
Zero
98
Methodology and other updates
(577)
Zero
(577)
Risk adjustment review
Zero
(2,850)
(2,850)
Impact of changes in actuarial methods and assumptions, pre-tax
$
(347)
$
(2,850)
$
(3,197)
Footnote Number (1)Excludes the portion related to non-controlling interests of $103 for the three and nine months ended September 30, 2023, and $97 for the three months ended
December 31, 2023, respectively.
Impact of changes in actuarial methods and assumptions on pre-tax net income attributed to shareholders, pre-tax net
income attributed to participating policyholders, OCI and CSMRefer to footnote number (1)
For the three and
nine months ended
September 30, 2023
For the three
months ended
December 31, 2023
For the year ended
December 31, 2023
Portion recognized in net income (loss) attributed to:
Participating policyholders
$
58
$
115
$
173
Shareholders
27
144
171
85
259
344
Portion recognized in OCI attributed to:
Participating policyholders
Zero
(21)
(21)
Shareholders
146
(26)
120
146
(47)
99
Portion recognized in CSM
116
2,638
2,754
Impact of changes in actuarial methods and assumptions, pre-tax
$
347
$
2,850
$
3,197
Footnote Number (1)Excludes the portion related to non-controlling interests, of which $72 is related to CSM for the three and nine months ended September 30, 2023, and $87 is
related to CSM for the three months ended December 31, 2023.
220 | 2024 Annual Report | Notes to Consolidated Financial Statements
Canada variable annuity product review
The review of the Company’s variable annuity products in Canada resulted in a decrease in pre-tax fulfilment cash flows of $133.
The decrease was driven by a reduction in investment management fees, partially offset by updates to product assumptions,
including surrenders, incidence, and utilization, to reflect emerging experience.
Mortality and morbidity updates
Mortality and morbidity updates resulted in an increase in pre-tax fulfilment cash flows of $265.
The increase was driven by a strengthening of incidence rates for certain products in Vietnam to align with emerging experience
and updates to mortality assumptions in the Company’s U.S. life insurance business to reflect industry trends, as well as
emerging experience. This was partially offset by updates to morbidity assumptions for certain products in Japan to reflect actual
experience.
Lapse and policyholder behaviour updates
Updates to lapses and policyholder behaviour assumptions resulted in an increase in pre-tax fulfilment cash flows of $98.
The increase was primarily driven by a detailed review of lapse assumptions for the Company’s universal life level cost of
insurance products in Canada, which resulted in a reduction to the lapse rates to align with emerging trends.
Methodology and other updates
Methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $3,427.
In the third quarter of 2023, methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $577. The
decrease was driven by the impact of cost-of-guarantees for participating policyholders across all segments from annual updates
related to parameters, dividend recalibration, and market movements during the year, as well as modelling refinements for
certain products in Asia. This was partially offset by a modelling methodology update to project future premiums on the
Company’s U.S. life insurance business.
In the fourth quarter of 2023, methodology and other updates resulted in a decrease in pre-tax fulfilment cash flows of $2,850.
The decrease was driven by a decrease in the overall level of the risk adjustment for non-financial risk. This change moves the
risk adjustment to approximately the middle of the Company’s existing 90 – 95% confidence level range.
Impact of changes in actuarial methods and assumptions on pre-tax fulfilment cash flows, net income attributed to
shareholders, CSM and OCI by segment
For the three and nine months ended September 30, 2023
The impact of changes in actuarial methods and assumptions in Canada resulted in a decrease in pre-tax fulfilment cash flows of
$159. The decrease was driven by updates to the Company’s variable annuity product assumptions, as well as by updates to its
valuation models for participating products, driven by the annual dividend recalibration, partially offset by a reduction in lapse
rates on its universal life level cost of insurance products to reflect emerging trends. These changes resulted in an increase in
pre-tax net income attributed to shareholders of $52 ($37 post-tax), an increase in CSM of $142, and an increase in pre-tax other
comprehensive income attributed to shareholders of $2 ($1 post-tax).
The impact of changes in actuarial methods and assumptions in the U.S. resulted in an increase in pre-tax fulfilment cash flows
of $270. The increase was related to the Company’s life insurance business and primarily driven by a modelling methodology
update to project future premiums, as well as updates to mortality assumptions. These changes resulted in an increase in pre-tax
net income attributed to shareholders of $134 ($106 post-tax), a decrease in CSM of $600, and an increase in pre-tax other
comprehensive income attributed to shareholders of $196 ($155 post-tax).
The impact of changes in actuarial methods and assumptions in Asia resulted in a decrease in pre-tax fulfilment cash flows of
$457. The decrease largely relates to participating products, primarily driven by model refinements, dividend recalibration
updates, as well as annual updates to reflect market movements during the year. This, and the updates to morbidity assumptions
on certain products in Japan, were partially offset by updates to incidence rates on certain products in Vietnam. These changes
resulted in a decrease in pre-tax net income attributed to shareholders of $159 ($157 post-tax), an increase in CSM of $574, and
a decrease in pre-tax other comprehensive income attributed to shareholders of $53 ($47 post-tax).
The impact of changes in actuarial methods and assumptions in Corporate and Other (which includes the Company’s property
and casualty reinsurance businesses, run-off insurance operations including variable annuities and health, and consolidation
adjustments including intercompany eliminations) resulted in a decrease in pre-tax fulfilment cash flows of $1. These changes
resulted in no impacts to pre-tax net income attributed to shareholders or CSM, and an increase in pre-tax other comprehensive
income attributed to shareholders of $1 ($1 post-tax).
221
For the three months ended December 31, 2023
The reduction in the risk adjustment level resulted in the following impacts by segment:
The impact of changes in actuarial methods and assumptions in Canada resulted in a decrease in pre-tax fulfilment cash flows of
$246. These changes resulted in an increase in pre-tax net income attributed to shareholders of $4 ($3 post-tax), an increase in
pre-tax net income attributed to policyholder of $40 ($29 post-tax), an increase in CSM of $213, and a decrease in pre-tax other
comprehensive income of $11 ($8 post-tax).
The impact of changes in actuarial methods and assumptions in the U.S. resulted in a decrease in pre-tax fulfilment cash flows of
$91. These changes resulted in an increase in pre-tax net income attributed to shareholders of $33 ($26 post-tax), an increase in
CSM of $78, and a decrease in pre-tax other comprehensive income of $20 ($15 post-tax).
The impact of changes in actuarial methods and assumptions in Asia resulted in a decrease in pre-tax fulfilment cash flows of $2,513.
These changes resulted in an increase in pre-tax net income attributed to shareholders of $107 ($90 post-tax), an increase in pre-tax
net income attributed to policyholders of $75 ($62 post-tax), an increase in CSM of $2,348, and a decrease in pre-tax other
comprehensive income of $17 ($14 post-tax).
(j) Composition of underlying items
The following table sets out the composition and fair value of the underlying items supporting the Company’s liabilities for direct
participation contracts as at the dates presented.
As at December 31,
2024
2023
Participating
Variable
annuity
Unit linked
Participating
Variable
annuity
Unit linked
Underlying assets
Debt securities
$
54,238
Do
llar Zero
Do
llar Zero
$
44,682
Do
llar Zero
Do
llar Zero
Public equities
19,846
Zero
Zero
14,442
Zero
Zero
Mortgages
4,535
Zero
Zero
4,449
Dollar ZeroZero
Zero
Private placements
8,398
Zero
Zero
6,720
Zero
Zero
Real estate
4,525
Zero
Zero
3,907
Zero
Zero
Other(1)Refer to footnote number (2)
31,952
72,061
18,771
27,017
68,749
15,539
Total
$ 123,494
$ 72,061
$ 18,771
$ 101,217
$ 68,749
$ 15,539
Footnote Number (1)Other for participating life insurance contracts include derivatives, reinsurance contract held assets, and other invested assets.
Footnote Number (2)Other for variable annuity contracts and unit linked contracts include investments in segregated funds.
(k) Asset for insurance acquisition cash flow
The following table presents the expected future derecognition of asset for insurance acquisition cash flow as at the dates presented.
As at December 31,
2024
2023
Less than
1 year
1 to 5
years
More than
5 years
Total
Less than
1 year
1 to 5
years
More than
5 years
Total
Asia
$
65
$ 168
$
57
$ 290
$ 59
$ 150
$
62
$ 271
Canada
72
213
303
588
72
205
272
549
Total
$ 137
$ 381
$ 360
$ 878
$131
$ 355
$ 334
$ 820
(l) Insurance and reinsurance contracts contractual obligations – maturity analysis and amounts payable on demand
The tables below represent the maturities of the insurance contract and reinsurance contract held liabilities as at the dates
presented.
As at December 31, 2024
Payments due by period
Less than
1 year
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
Over 5
years
Total
Insurance contract liabilitiesRefer to footnote number (1)
$ 4,223
$ 3,711
$ 6,266
$ 8,741
$ 12,644
$ 1,348,354
$ 1,383,939
Reinsurance contract held liabilitiesRefer to footnote number (1)
250
395
530
419
373
(11,450)
(9,483)
As at December 31, 2023
Payments due by period
Less than
1 year
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
Over 5
years
Total
Insurance contract liabilitiesRefer to footnote number (1)
$ 3,400
$ 5,546
$ 6,766
$ 8,849
$ 11,320
$ 1,074,764
$ 1,110,645
Reinsurance contract held liabilitiesRefer to footnote number (1)
332
460
492
592
475
6,097
8,448
Footnote Number (1)Insurance contract liabilities cash flows include estimates related to the timing and payment of death and disability claims, policy surrenders, policy maturities,
annuity payments, minimum guarantees on segregated fund products, policyholder dividends, commissions and premium taxes offset by contractual future
premiums on in-force contracts and exclude amounts from insurance contract liabilities for account of segregated fund holders. These estimated cash flows are
based on the best estimate assumptions used in the determination of insurance contract liabilities. These amounts are undiscounted. Reinsurance contract held
liabilities cash flows include estimates related to the timing and payment of future reinsurance premiums offset by recoveries on in-force reinsurance agreements.
Due to the use of assumptions, actual cash flows may differ from these estimates. Cash flows include embedded derivatives measured separately at fair value.
222 | 2024 Annual Report | Notes to Consolidated Financial Statements
The amounts from insurance contract liabilities that are payable on demand are set out below as at the dates presented.
As at December 31,
2024
2023
Amounts
payable on
demand
Carrying
amount
Amounts
payable on
demand
Carrying
amount
Asia
$ 121,197
$ 131,829
$ 100,060
$ 129,117
Canada
31,100
53,224
28,264
56,887
U.S.
48,918
66,524
44,360
63,092
Total
$ 201,215
$ 251,577
$ 172,684
$ 249,096
The amounts payable on demand represent the policyholders’ cash and / or account values less applicable surrender fees as at
the time of the reporting date. Segregated fund insurance liabilities for account of segregated fund holders are excluded from the
amounts payable on demand and the carrying amount.
(m) Reinsurance transactions
Agreement with Global Atlantic Financial Group
On December 11, 2023, the Company announced it entered into agreements with Global Atlantic Financial Group Ltd. (“GA”) to
reinsure policies from the U.S. long-term care (“LTC”), U.S. structured settlements, and Japan whole life legacy blocks. Under
the terms of the transaction, the Company retained responsibility for the administration of the policies, with no intended impact to
policyholders. The transaction was structured as coinsurance of an 80% quota share for the LTC block and 100% quota shares
for the other blocks.
The transaction closed on February 22, 2024, with the Company transferring invested assets measured at FVOCI of $13.4 billion
and reinsuring insurance and investment contract net liabilities of $13.2 billion. The Company recognized a reinsurance
contractual service margin of $308 and financial assets of $134.
Agreement with RGA Life Reinsurance Company of Canada
On March 25, 2024, the Company announced it entered into an agreement with RGA Life Reinsurance Company of Canada
(“RGA Canada”) to reinsure policies from its Canadian universal life block. Under the terms of the transaction, the Company
retained responsibility for the administration of the policies, with no intended impact to policyholders. The transaction was
structured as coinsurance with a 100% quota share.
The transaction closed on April 2, 2024, with the Company transferring invested assets measured at FVOCI of $5.5 billion and
reinsuring insurance contract liabilities of $5.4 billion. The Company recognized a reinsurance contractual service margin of
$213.
Agreement with Reinsurance Group of America
On November 20, 2024, the Company announced it entered into an agreement with Reinsurance Group of America,
Incorporated (“RGA”) to reinsure policies from the U.S. LTC and U.S. structured settlement legacy blocks. Under the terms of the
transaction, the Company retained responsibility for the administration of the policies, with no intended impact to policyholders.
The transaction was structured as a 75% quota share for both the LTC and structured settlements blocks.
The transaction closed on January 2, 2025, with an effective date of January 1, 2025, with the Company transferring invested
assets of $5.4 billion and reinsuring insurance contract liabilities of $5.4 billion.
Note 7
Investment Contract Liabilities
Investment contract liabilities are contractual financial obligations of the Company that do not contain significant insurance risk.
Those contracts are subsequently measured either at fair value or at amortized cost.
(a) Investment contract liabilities measured at fair value
Investment contract liabilities measured at fair value include certain investment savings and pension products which are
designated as FVTPL on initial recognition. The Company has no investment contract liabilities that are mandatorily designated
as FVTPL.
The following table presents the movement in investment contract liabilities measured at fair value.
For the years ended December 31,
2024
2023
Balance, excluding those for account of segregated fund holders, January 1
$
749
$
798
New contracts
70
48
Changes in market conditions
67
47
Redemptions, surrenders and maturities
(154)
(122)
Impact of changes in foreign exchange rates
76
(22)
Balance, excluding those for account of segregated fund holders, December 31
808
749
Investment contract liabilities for account of segregated fund holders
309,443
263,401
Balance, December 31
$ 310,251
$ 264,150
223
The amount due to contract holders is contractually determined based on specified assets and therefore, the fair value of the
liabilities is subject to asset specific performance risk but not to the Company’s own credit risk, being fully collateralized by the
specified assets. The Company has determined that any residual credit risk is insignificant and has no significant impact on the
fair value of the liabilities.
(b) Investment contract liabilities measured at amortized cost
Investment contract liabilities measured at amortized cost include fixed annuity products that provide guaranteed income
payments for contractually determined periods and are not contingent on survivorship.
The following table presents carrying and fair values of investment contract liabilities measured at amortized cost, by reporting
segment.
As at December 31,
2024
2023
Amortized cost
Fair value
Amortized cost
Fair value
Asia
$
325
$
315
$
451
$
438
Canada
7,571
7,548
7,642
7,534
U.S.
1,406
1,375
1,381
1,440
GWAM
3,388
3,557
1,593
1,582
Investment contract liabilities
$ 12,690
$ 12,795
$ 11,067
$ 10,994
The following table presents the movement in investment contract liabilities measured at amortized cost, by business activity.
For the years ended December 31,
2024
2023
Balance, January 1
$ 11,067
$ 9,281
Policy deposits
3,218
3,365
Interest
316
218
Withdrawals
(2,240)
(1,629)
Fees
Zero
1
Impact of changes in foreign exchange rates
351
(108)
Other
(22)
(61)
Balance, December 31
$ 12,690
$ 11,067
Carrying value reflects amortization at rates that exactly discount the projected cash flows to the net carrying amount of the
liabilities at the dates of issue.
Fair value is determined by projecting cash flows according to the contract terms and discounting the cash flows at current
market rates adjusted for the Company’s own credit standing. As at December 31, 2024 and 2023, the fair value of all investment
contract liabilities was determined using Level 2 valuation techniques.
(c) Investment contracts contractual obligations
The following table presents the Company’s contractual obligations and commitments relating to these investment contracts as
at December 31, 2024 and 2023.
Investment contract liabilitiesRefer to footnote number (1)
As at December 31,
Payments due by period
Less than
1 year(2)
1 to 3
years
3 to 5
years
Over 5
years
Total
2024
$ 316,119
$ 2,766
$ 1,170
$ 2,738
$ 322,793
2023
268,537
2,978
1,408
3,488
276,411
Footnote Number (1)Due to the nature of the products, the timing of net cash flows may be before contract maturity. Cash flows are undiscounted.
Footnote Number (2)Includes amounts which have no specific maturity, being payable on demand.
(d) Reinsurance contract assets backing investment contract liabilities
The Company holds reinsurance contracts backing investment contract liabilities described above. These reinsurance contracts
do not expose the reinsurer to significant insurance risk and are measured at FVOCI or amortized cost. There are no reinsurance
contract assets measured at FVTPL.
Fair value for all reinsurance contract assets backing investment contract liabilities is determined by projecting cash flows
according to the contract terms and discounting these cash flows at current market rates. As at December 31, 2024 and 2023,
the fair value of all reinsurance contract assets backing investment contract liabilities was determined using Level 2 valuation
techniques.
224 | 2024 Annual Report | Notes to Consolidated Financial Statements
As at December 31, 2024, the fair value of reinsurance contract assets measured at FVOCI was $669 (2023 – $nil). The fair
value and carrying value of reinsurance contract assets measured at amortized cost were $978 and $1,052, respectively (2023 –
$27 and $27, respectively).
For contracts measured at FVOCI, interest income of $29 was recorded in the Consolidated Statements of Income and changes
in fair value of $24 was recorded in OCI for the year ended December 31, 2024 (2023 – $nil and $nil, respectively). There were
no amounts reclassified from AOCI to the Consolidated Statements of Income during the years presented.
For contracts measured at amortized cost, interest income of $41 was recorded in the Consolidated Statements of Income for
the year ended December 31, 2024 (2023 – $2).
Note 8 Risk Management
Manulife offers insurance, wealth and asset management products and other financial services, which subjects the Company to
a broad range of risks. Manulife manages these risks within an enterprise-wide risk management framework. Manulife’s goal in
managing risk is to strategically optimize risk taking and risk management to support long-term revenue, earnings and capital
growth. Manulife seeks to achieve this by capitalizing on business opportunities and strategies with appropriate risk/return
profiles; ensuring sufficient management expertise is in place to effectively execute strategies, and to identify, understand and
manage underlying inherent risks; ensuring strategies and activities align with its corporate and ethical standards and operational
capabilities; pursuing opportunities and risks that enhance diversification; and in making all risk taking decisions with analyses of
inherent risks, risk controls and mitigations, and risk / return trade-off.
(a) Market and liquidity risk
Market risk is the risk of loss resulting from market price volatility, interest rate change, credit and swap spread changes, and
adverse foreign currency exchange rate movements. Market price volatility primarily relates to changes in prices of publicly
traded equities and alternative long-duration assets. The profitability of the Company’s insurance and annuity products, as well
as the fees the Company earns in its investment management business, are subject to market risk.
Liquidity risk is the risk of loss resulting from the inability to access sufficient funds or liquid assets to meet expected and
unexpected cash and collateral demands.
Please read below for details on factors that could impact the level of market risk and the strategies used to manage this risk:
Market and liquidity risk management strategy
Market and liquidity risk management strategy is governed by the Global Asset Liability Committee which oversees the market
and liquidity risk program. The Company’s overall strategy to manage its market & liquidity risks incorporates several
component strategies, each targeted to manage one or more of the market & liquidity risks arising from the Company’s
businesses. At an enterprise level, these strategies are designed to manage the Company’s aggregate exposures to market &
liquidity risks against limits associated with earnings and capital volatility.
The following table outlines the Company’s key market & liquidity risks and identifies the risk management strategies which
contribute to managing these risks.
225
Risk Management Strategy
Key Market & Liquidity Risk
Public
Equity Risk
Interest Rate
and Spread Risk
ALDA
Risk
Foreign Currency
Exchange Risk
Liquidity Risk
Product design and pricing
✓
✓
✓
✓
✓
Variable annuity guarantee dynamic hedging
✓
✓
✓
✓
Macro equity risk hedging
✓
✓
✓
Asset liability management
✓
✓
✓
✓
✓
Foreign currency exchange management
✓
✓
Liquidity risk management
✓
Product design and pricing strategy
The Company’s policies, standards, and guidelines, with respect to product design and pricing, are designed with the objective of
aligning its product offerings with its risk taking philosophy and risk appetite, and in particular, ensuring that incremental risk
generated from new sales aligns with its strategic risk objectives and risk limits. The specific design features of Manulife’s
product offerings, including level of benefit guarantees, policyholder options, fund offerings and availability restrictions as well as
its associated investment strategies, help to mitigate the level of underlying risk. Manulife regularly reviews and modifies key
features within its product offerings, including premiums and fee charges with a goal of meeting profit targets and staying within
risk limits. Certain of the Company’s general fund adjustable benefit products have minimum rate guarantees. The rate
guarantees for any particular policy are set at the time the policy is issued and governed by insurance regulation in each
jurisdiction where the products are sold. The contractual provisions allow crediting rates to be reset at pre-established intervals
subject to the established minimum crediting rate guarantees. The Company may partially mitigate the interest rate exposure by
setting new rates on new business and by adjusting rates on in-force business where permitted. In addition, the Company
partially mitigates this interest rate risk through its asset liability management process, product design elements, and crediting
rate strategies. All material new product, reinsurance and underwriting initiatives must be reviewed and approved by the Chief
Risk Officer or key individuals within risk management functions.
Hedging strategies for variable annuity and other equity risks
The Company’s exposure to movement in public equity market values primarily arises from insurance contract liabilities related
to variable annuity guarantees and general fund public equity investments.
Dynamic hedging is the primary hedging strategy for variable annuity market risks. Dynamic hedging is employed for new
variable annuity guarantees business when written or as soon as practical thereafter.
Manulife seeks to manage public equity risk arising from unhedged exposures in its insurance contract liabilities through the
macro equity risk hedging strategy. The Company seeks to manage interest rate risk arising from variable annuity business not
dynamically hedged through its asset liability management strategy.
Variable annuity dynamic hedging strategy
The variable annuity dynamic hedging strategy is designed to hedge the sensitivity of variable annuity guarantee insurance
contract liabilities to fund performance (both public equity and bond funds) and interest rate movements. The objective of the
variable annuity dynamic hedging strategy is to offset, as closely as possible, the change in the economic value of guarantees
with the profit and loss from the hedge asset portfolio.
The Company’s variable annuity hedging program uses a variety of exchange-traded and over-the-counter (“OTC”) derivative
contracts to offset the change in value of variable annuity guarantees. The main derivative instruments used are equity index
futures, government bond futures, currency futures, interest rate swaps, total return swaps, equity options, and interest rate
swaptions. The hedge instruments’ positions against insurance contract liabilities are continuously monitored as market
conditions change. As necessary, the hedge asset positions will be dynamically rebalanced to stay within established limits. The
Company may also utilize other derivatives with the objective to improve hedge effectiveness opportunistically.
The Company’s variable annuity guarantee dynamic hedging strategy is not designed to completely offset the sensitivity of
insurance contract liabilities to all risks associated with the guarantees embedded in these products. The profit (loss) on the
hedge instruments will not completely offset the underlying losses (gains) related to the guarantee liabilities hedged because:
• Policyholder behaviour and mortality experience are not hedged;
• Risk adjustment related to cost of guarantees in the insurance contract liabilities is largely hedged;
• A portion of interest rate risk is not hedged;
• Credit spreads may widen and actions might not be taken to adjust accordingly;
• Fund performance on a small portion of the underlying funds is not hedged due to lack of availability of effective exchange-
traded hedge instruments;
• Performance of the underlying funds hedged may differ from the performance of the corresponding hedge instruments;
• Correlations between interest rates and equity markets could lead to unfavourable material impacts;
• Unfavourable hedge rebalancing costs can be incurred during periods of high volatility from equity markets, bond markets,
and / or interest rates, which is magnified when these impacts occur concurrently; and
• Not all other risks are hedged.
Differences in the profit (loss) on the hedge instruments versus the underlying losses (gains) related to the guarantee liabilities
hedged are reported in CSM.
Macro equity risk hedging strategy
The objective of the macro equity risk hedging program is to maintain the Company’s overall earnings sensitivity to public equity
market movements within the Board approved risk appetite limits. The macro equity risk hedging program is designed to hedge
earnings sensitivity due to movements in public equity markets arising from all sources (outside of dynamically hedged
exposures). Sources of equity market sensitivity addressed by the macro equity risk hedging program include general fund equity
holdings backing guaranteed, and adjustable liabilities.
226 | 2024 Annual Report | Notes to Consolidated Financial Statements
Asset liability management strategy
Manulife’s asset liability management strategy is designed to help ensure that the market risks embedded in its assets and
liabilities held in the Company’s general fund are effectively managed and that risk exposures arising from these assets and
liabilities are maintained within risk limits. The embedded market risks include risks related to the level and movement of interest
rates and credit and swap spreads, public equity market performance, ALDA performance, and foreign currency exchange rate
movements.
General fund product liabilities are categorized into groups with similar characteristics in order to support them with a specific
asset strategy. The Company seeks to align the asset strategy for each group to the premium and benefit patterns, policyholder
options and guarantees, and crediting rate strategies of the products they support. The strategies are set using portfolio analysis
techniques intended to optimize returns, subject to considerations related to regulatory and economic capital requirements, and
risk tolerances. They are designed to achieve broad diversification across asset classes and individual investment risks while
being suitably aligned with the liabilities they support. The strategies encompass asset mix, quality rating, term profile, liquidity,
currency, and industry concentration targets.
Foreign currency exchange risk management strategy
Manulife’s policy is to generally match the currency of its assets with the currency of the liabilities they support. Where assets
and liabilities are not currency matched, the Company seeks to hedge this exposure where appropriate to stabilize its earnings
and consolidated capital positions and remain within its enterprise foreign exchange risk limits.
Liquidity risk management strategy
Global liquidity management policies and procedures are designed to provide adequate liquidity to cover cash and collateral
obligations as they come due, and to sustain and grow operations in both normal and stressed conditions. They consider legal,
regulatory, tax, operational or economic impediments to inter-entity funding. The asset mix of the Company’s balance sheet
takes into account the need to hold adequate unencumbered and appropriate liquid assets to satisfy the requirements arising
under stressed scenarios and to allow Manulife’s liquidity ratios to remain strong. Manulife manages liquidity centrally and closely
monitors the liquidity positions of its principal subsidiaries.
Manulife seeks to mitigate liquidity risk by diversifying its business across different products, markets, geographical regions, and
policyholders. The Company designs insurance products to encourage policyholders to maintain their policies in-force, to help
generate a diversified and stable flow of recurring premiums. The Company designs the policyholder termination features with
the goal of mitigating the financial exposure and liquidity risk related to unexpected policyholder terminations. The Company
establishes and implements investment strategies intended to match the term profile of the assets to the liabilities they support,
taking into account the potential for unexpected policyholder terminations and resulting liquidity needs. Liquid assets represent a
large portion of the Company’s total assets. Manulife aims to reduce liquidity risk in the Company’s businesses by diversifying its
funding sources and appropriately managing the term structure of its funding. The Company forecasts and monitors daily
operating liquidity and cash movements in various individual entities and operations as well as centrally, aiming to ensure
liquidity is available and cash is employed optimally.
The Company also maintains centralized cash pools and access to other sources of liquidity and contingent liquidity such as
repurchase funding agreements. Manulife’s centralized cash pools consist of cash or near-cash, high quality short-term
investments that are continually monitored for their credit quality and market liquidity.
Manulife has established a variety of contingent liquidity sources. These include, among others, a $500 committed unsecured
revolving credit facility with certain Canadian chartered banks available for the Company, and a US$500 committed unsecured
revolving credit facility with certain U.S. banks available to the Company and certain of its U.S. subsidiaries. There were no
outstanding borrowings under these facilities as at December 31, 2024 (2023 – $nil). In addition, John Hancock Life Insurance
Company (U.S.A.) (“JHUSA”) is a member of the Federal Home Loan Bank of Indianapolis (“FHLBI”), which enables the
Company to obtain loans from FHLBI as an alternative source of liquidity that is collateralizable by qualifying mortgage loans,
mortgage-backed securities, municipal bonds, and U.S. Treasury and Agency securities. As at December 31, 2024, JHUSA had
an estimated maximum borrowing capacity of US$3.8 billion (2023 – US$4.3 billion) based on regulatory limitations with an
outstanding balance of US$500 (2023 – US$500) under the FHLBI facility.
227
The following table outlines the maturity of the Company’s significant financial liabilities.
Maturity of financial liabilitiesRefer to footnote number (1)
As at December 31, 2024
Less than
1 year
1 to 3
years
3 to 5
years
Over 5
years
Total
Long-term debt
Do
llar Zero
$ 2,829
Do
llar Zero
$ 3,800
$
6,629
Capital instruments
Zero
Zero
Zero
7,532
7,532
Derivatives
2,320
2,304
1,244
8,379
14,247
Deposits from Bank clientsRefer to footnote number (2)
15,690
3,774
2,599
Zero
22,063
Lease liabilities
105
151
52
47
355
Footnote Number (1)The amounts shown above are net of the related unamortized deferred issue costs.
Footnote Number (2)Carrying value and fair value of deposits from Bank clients as at December 31, 2024 were $22,063 and $22,270, respectively (2023 – $21,616 and $21,518
respectively). Fair value is determined by discounting contractual cash flows, using market interest rates currently offered for deposits with similar terms and
conditions. All deposits from Bank clients were categorized in Level 2 of the fair value hierarchy (2023 – Level 2).
Through the normal course of business, pledging of assets is required to comply with jurisdictional regulatory and other
requirements including collateral pledged to partially mitigate derivative counterparty credit risk, assets pledged to exchanges as
initial margin, and assets held as collateral for repurchase funding agreements. Total unencumbered assets were $516.6 billion
as at December 31, 2024 (2023 – $470.2 billion).
(b) Market risk sensitivities and market risk exposure measures
Variable annuity and segregated fund guarantees sensitivities and risk exposure measures
Guarantees on variable annuity products and segregated funds may include one or more of death, maturity, income and
withdrawal guarantees. Variable annuity and segregated fund guarantees are contingent and only payable upon the occurrence
of the relevant event, if fund values at that time are below guarantee values. Depending on future equity market levels, liabilities
on current in-force business would be due primarily in the period from 2025 to 2044.
Manulife seeks to mitigate a portion of the risks embedded in the Company’s retained (i.e., net of reinsurance) variable annuity
and segregated fund guarantee business through the combination of dynamic and macro hedging strategies (see “Publicly
traded equity performance risk sensitivities and exposure measures” below).
The table below shows selected information regarding the Company’s variable annuity and segregated fund investment-related
guarantees, gross and net of reinsurance.
Variable annuity and segregated fund guarantees, net of reinsurance
As at December 31,
2024
2023
Guarantee
valueRefer to footnote number (1)
Fund
value
Net amount
at risk(1),(2),Refer to footnote number (3)
Guarantee
valueRefer to footnote number (1)
Fund
value
Net amount
at risk(1),(2),(3)
Guaranteed minimum income benefit
$
3,628
$
2,780
$
918
$
3,864
$
2,735
$ 1,156
Guaranteed minimum withdrawal benefit
33,473
33,539
3,339
34,833
33,198
4,093
Guaranteed minimum accumulation benefit
18,987
19,097
70
18,996
19,025
116
Gross living benefitsRefer to footnote number (4)
56,088
55,416
4,327
57,693
54,958
5,365
Gross death benefitsRefer to footnote number (5)
8,612
19,851
644
9,133
17,279
975
Total gross of reinsurance
64,700
75,267
4,971
66,826
72,237
6,340
Living benefits reinsured
23,768
23,965
3,016
24,208
23,146
3,395
Death benefits reinsured
3,430
2,776
289
3,400
2,576
482
Total reinsured
27,198
26,741
3,305
27,608
25,722
3,877
Total, net of reinsurance
$ 37,502
$ 48,526
$ 1,666
$ 39,218
$ 46,515
$ 2,463
Footnote Number (1)Guarantee Value and Net Amount at Risk in respect of guaranteed minimum withdrawal business in Canada and the U.S. reflect the time value of money of these
claims.
Footnote Number (2)Amount at risk (in-the-money amount) is the excess of guarantee values over fund values on all policies where the guarantee value exceeds the fund value. For
guaranteed minimum death benefit, the amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account balance and
assumes that all claims are immediately payable. In practice, guaranteed death benefits are contingent and only payable upon the eventual death of policyholders
if fund values remain below guarantee values. For guaranteed minimum withdrawal benefit, the amount at risk assumes that the benefit is paid as a lifetime annuity
commencing at the earliest contractual income start age. These benefits are also contingent and only payable at scheduled maturity/income start dates in the
future, if the policyholders are still living and have not terminated their policies and fund values remain below guarantee values. For all guarantees, the amount at
risk is floored at zero at the single contract level.
Footnote Number (3)The amount at risk net of reinsurance at December 31, 2024 was $1,666 (December 31, 2023 – $2,463) of which: US$293 (December 31, 2023 – US$391) was on
the Company’s U.S. business, $1,021 (December 31, 2023 – $1,559) was on the Company’s Canadian business, US$100 (December 31, 2023 – US$140) was on
the Company’s Japan business, and US$56 (December 31, 2023 – US$155) was related to Asia (other than Japan) and the Company’s run-off reinsurance
business.
Footnote Number (4)Where a policy includes both living and death benefits, the guarantee in excess of the living benefit is included in the death benefit category as outlined in
footnote 5.
Footnote Number (5)Death benefits include stand-alone guarantees and guarantees in excess of living benefit guarantees where both death and living benefits are provided on a policy.
228 | 2024 Annual Report | Notes to Consolidated Financial Statements
Investment categories for variable contracts with guarantees
Variable contracts with guarantees, including variable annuities and variable life, are invested at the policyholder’s discretion subject
to contract limitations, in various fund types within the segregated fund accounts and other investments. The account balances by
investment category are set out below.
As at December 31,
2024
2023
Investment category
Equity funds
$
51,457
$ 45,593
Balanced funds
37,381
35,801
Bond funds
9,017
8,906
Money market funds
1,712
1,559
Other debt investments
2,082
1,907
Total
$ 101,649
$ 93,766
Caution related to sensitivities
In the sections that follow, the Company provides sensitivities and risk exposure measures for certain risks. These include
sensitivities due to specific changes in market prices and interest rate levels projected using internal models as at a specific date,
and are measured relative to a starting level reflecting the Company’s assets and liabilities at that date. The risk exposures
measure the impact of changing one factor at a time and assume that all other factors remain unchanged. Actual results can
differ significantly from these estimates for a variety of reasons including the interaction among these factors when more than
one changes; changes in liabilities from updates to non-economic assumptions, changes in business mix, effective tax rates and
other market factors; and the general limitations of the Company’s internal models. For these reasons, the sensitivities should
only be viewed as directional estimates of the underlying sensitivities for the respective factors based on the assumptions
outlined below. Given the nature of these calculations, the Company cannot provide assurance that the actual impact on
contractual service margin, net income attributed to shareholders, other comprehensive income attributed to shareholders, and
total comprehensive income attributed to shareholders will be as indicated.
Publicly traded equity performance risk sensitivities and exposure measures
The tables below include the potential impacts from an immediate 10%, 20% and 30% change in market values of publicly traded
equities on net income attributed to shareholders, CSM, other comprehensive income attributed to shareholders, and total
comprehensive income attributed to shareholders. The potential impact is shown after taking into account the impact of the
change in markets on the hedge assets. While the Company cannot reliably estimate the amount of the change in dynamically
hedged variable annuity and segregated fund guarantee liabilities that will not be offset by the change in the dynamic hedge
assets, the Company makes certain assumptions for the purposes of estimating the impact on net income attributed to
shareholders.
This estimate assumes that the performance of the dynamic hedging program would not completely offset the gain/loss from the
dynamically hedged variable annuity and segregated fund guarantee liabilities. It assumes that the hedge assets are based on
the actual position at the period end, and that equity hedges in the dynamic program offset 95% of the hedged variable annuity
liability movement that occurs as a result of market changes.
It is also important to note that these estimates are illustrative, and that the dynamic and macro hedging programs may
underperform these estimates, particularly during periods of high realized volatility and/or periods where both interest rates and
equity market movements are unfavourable. The method used for deriving sensitivity information and significant assumptions did
not change from the previous period.
229
Potential immediate impact on net income attributed to shareholders arising from changes to public equity returnsRefer to footnote number (1)
Net income attributed to shareholders
As at December 31, 2024
-30%
-20%
-10%
+10%
+20%
+30%
Underlying sensitivity
Variable annuity and segregated fund guaranteesRefer to footnote number (2)
$ (2,050)
$ (1,240)
$
(560)
$ 470
$
860
$ 1,190
General fund equity investmentsRefer to footnote number (3)
(1,240)
(820)
(400)
390
780
1,180
Total underlying sensitivity before hedging
(3,290)
(2,060)
(960)
860
1,640
2,370
Impact of macro and dynamic hedge assetsRefer to footnote number (4)
720
430
190
(150)
(260)
(360)
Net potential impact on net income attributed to shareholders after
impact of hedging and before impact of reinsurance
(2,570)
(1,630)
(770)
710
1,380
2,010
Impact of reinsurance
1,320
810
370
(320)
(590)
(830)
Net potential impact on net income attributed to shareholders after
impact of hedging and reinsurance
$ (1,250)
$
(820)
$
(400)
$ 390
$
790
$ 1,180
Net income attributed to shareholders
As at December 31, 2023
-30%
-20%
-10%
+10%
+20%
+30%
Underlying sensitivity
Variable annuity and segregated fund guarantees
(2)
$ (2,370)
$ (1,460)
$
(670)
$
550
$ 1,010
$ 1,390
General fund equity investments(3)
(1,170)
(770)
(390)
380
760
1,140
Total underlying sensitivity before hedging
(3,540)
(2,230)
(1,060)
930
1,770
2,530
Impact of macro and dynamic hedge assetsRefer to footnote number (4)
880
530
240
(190)
(340)
(460)
Net potential impact on net income attributed to shareholders after
impact of hedging and before impact of reinsurance
(2,660)
(1,700)
(820)
740
1,430
2,070
Impact of reinsurance
1,470
900
420
(350)
(650)
(910)
Net potential impact on net income attributed to shareholders after
impact of hedging and reinsurance
$ (1,190)
$
(800)
$
(400)
$ 390
$
780
$ 1,160
(1) See “Caution related to sensitivities” above.
Footnote Number (2)For variable annuity contracts measured under the VFA approach, the impact of financial risk and changes in interest rates adjusts CSM, unless the risk mitigation
option applies. The Company has elected to apply risk mitigation and therefore, a portion of the impact is reported in net income attributed to shareholders instead
of adjusting the CSM. If the CSM for a group of variable annuity contracts is exhausted, the full impact is reported in net income attributed to shareholders.
Footnote Number (3)This impact for general fund equity investments includes general fund investments supporting the Company’s insurance contract liabilities, investment in seed
money investments (in segregated and mutual funds made by Global WAM segment), and the impact on insurance contract liabilities related to the projected future
fee income on variable universal life and other unit-linked products. The impact does not include any potential impact on public equity weightings. The participating
policy funds are largely self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in equity markets.
Footnote Number (4)Includes the impact of assumed rebalancing of equity hedges in the macro and dynamic hedging program. The impact of dynamic hedging represents the impact of
equity hedges offsetting 95% of the dynamically hedged variable annuity liability movement that occurs as a result of market changes, but does not include any
impact in respect of other sources of hedge accounting ineffectiveness (e.g., fund tracking, realized volatility, and equity and interest rate correlations different from
expected among other factors).
230 | 2024 Annual Report | Notes to Consolidated Financial Statements
Potential immediate impact on contractual service margin, other comprehensive income to shareholders and total
comprehensive income to shareholders from changes to public equity market valuesRefer to footnote number (1),(2),(3)
As at December 31, 2024
-30%
-20%
-10%
+10%
+20%
+30%
Variable annuity and segregated fund guarantees reported in CSM
$ (3,420) $ (2,110) $
(970) $ 840
$ 1,580
$ 2,250
Impact of risk mitigation – hedgingRefer to footnote number (4)
940
560
250
(190)
(350)
(470)
Impact of risk mitigation – reinsurance(4)
1,670
1,020
470
(400)
(740)
(1,050)
VA net of risk mitigation
(810)
(530)
(250)
250
490
730
General fund equity
(1,140)
(740)
(370)
370
750
1,110
Contractual service margin (pre-tax)
$ (1,950) $ (1,270) $
(620) $ 620
$ 1,240
$ 1,840
Other comprehensive income attributed to shareholders (post-tax)Refer to footnote number (5)
$
(840) $
(560) $
(280) $ 270
$
530
$
790
Total comprehensive income attributed to shareholders (post-tax)
$ (2,090) $ (1,380) $
(680) $ 660
$ 1,320
$ 1,970
As at December 31, 2023
-30%
-20%
-10%
+10%
+20%
+30%
Variable annuity and segregated fund guarantees reported in CSM
$ (3,810) $ (2,370) $ (1,100) $ 940
$ 1,760
$ 2,470
Impact of risk mitigation – hedging(4)
1,150
700
310
(250)
(450)
(600)
Impact of risk mitigation – reinsurance(4)
1,850
1,140
530
(450)
(830)
(1,150)
VA net of risk mitigation
(810)
(530)
(260)
240
480
720
General fund equity
(940)
(610)
(300)
290
590
870
Contractual service margin (pre-tax)
$ (1,750) $ (1,140) $
(560)
$ 530
$ 1,070
$ 1,590
Other comprehensive income attributed to shareholders (post-tax)Refer to footnote number (5)
$
(730) $
(490) $
(240)
$ 230
$
460
$
680
Total comprehensive income attributed to shareholders (post-tax)
$ (1,920) $ (1,290) $
(640)
$ 620
$ 1,240
$ 1,840
(1) See “Caution related to sensitivities” above.
Footnote Number (2)
This estimate assumes that the performance of the dynamic hedging program would not completely offset the gain/loss from the dynamically hedged variable
annuity and segregated fund guarantee liabilities. It assumes that the hedge assets are based on the actual position at the period end, and that equity hedges in
the dynamic program offset 95% of the hedged variable annuity liability movement that occur as a result of market changes.
Footnote Number (3)OSFI rules for segregated fund guarantees reflect full capital impacts of shocks over 20 quarters within a prescribed range. As such, the deterioration in equity
markets could lead to further increases in capital requirements after the initial shock.
Footnote Number (4)For variable annuity contracts measured under VFA the impact of financial risk and changes in interest rates adjusts CSM, unless the risk mitigation option applies.
The Company has elected to apply risk mitigation and therefore a portion of the impact is reported in net income attributed to shareholders instead of adjusting the
CSM. If the CSM for a group of variable annuity contracts is exhausted the full impact is reported in net income attributed to shareholders.
Footnote Number (5)The impact of financial risk and changes to interest rates for variable annuity contracts is not expected to generate sensitivity in Other Comprehensive Income.
Interest rate and spread risk sensitivities and exposure measures
As at December 31, 2024, the Company estimated the sensitivity of net income attributed to shareholders to a 50 basis point parallel
decline in interest rates to be a benefit of $100, and to a 50 basis point parallel increase in interest rates to be a charge of $100.
The table below shows the potential impacts from a 50 basis point parallel move in interest rates on CSM, net income attributed
to shareholders, other comprehensive income attributed to shareholders, and total comprehensive income attributed to
shareholders. This includes a change in current government, swap and corporate rates for all maturities across all markets with
no change in credit spreads between government, swap and corporate rates. Also shown separately are the potential impacts
from a 50 basis point parallel move in corporate spreads and a 20 basis point parallel move in swap spreads. The impacts reflect
the net impact of movements in asset values in liability and surplus segments and movements in the present value of cash flows
for insurance contracts including those with cash flows that vary with the returns of underlying items where the present value is
measured by stochastic modelling. The method used for deriving sensitivity information and significant assumptions did not
change from the previous period.
The disclosed interest rate sensitivities reflect the accounting designations of the Company’s financial assets and corresponding
insurance contract liabilities. In most cases these assets and liabilities are designated as FVOCI and as a result, impacts from
changes to interest rates are largely in other comprehensive income. There are also changes in interest rates that impact the
CSM for VFA contracts that relate to amounts that are not passed through to policyholders. In addition, changes in interest rates
impact net income as it relates to derivatives not in hedge accounting relationships and on VFA contracts where the CSM has
been exhausted.
The disclosed interest rate sensitivities assume no hedge accounting ineffectiveness, as the Company’s hedge accounting
programs are optimized for parallel movements in interest rates, leading to immaterial net income impacts under these shocks.
However, the actual hedge accounting ineffectiveness is sensitive to non-parallel interest rate movements and will depend on the
shape and magnitude of the interest rate movements which could lead to variations in the impact to net income attributed to
shareholders.
The Company’s sensitivities vary across all regions in which the Company operates, and the impacts of yield curve changes will
vary depending upon the geography where the change occurs. Furthermore, the impacts from non-parallel movements may be
materially different from the estimated impacts of parallel movements.
The interest rate and spread risk sensitivities are determined in isolation of each other and therefore do not reflect the combined
impact of changes in government rates and credit spreads between government, swap and corporate rates occurring
231
simultaneously. As a result, the impact of the summation of each individual sensitivity may be materially different from the impact
of sensitivities to simultaneous changes in interest rate and spread risk.
The potential impacts also do not take into account other potential effects of changes in interest rate levels, for example, CSM at
recognition on the sale of new business or lower interest earned on future fixed income asset purchases.
The impacts do not reflect any potential effect of changing interest rates on the value of the Company’s ALDA. Rising interest
rates could negatively impact the value of the Company’s ALDA. More information on ALDA can be found below in the
“Alternative long-duration asset performance risk sensitivities and exposure measures” section.
Potential impacts on contractual service margin, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders of an immediate parallel change
in interest rates, corporate spreads or swap spreads relative to current rates(1),(2),(3)
As at December 31, 2024
(post-tax except CSM)
Interest rates
Corporate spreads
Swap spreads
-50bp
+50bp
-50bp
+50bp
-20bp
+20bp
CSM
$ 100
$ (200)
Do
llar Zero
$ (100)
Do
llar Zero
Do
llar Zero
Net income attributed to shareholders
100
(100)
100
(100)
100
(100)
Other comprehensive income attributed to shareholders
(100)
200
(200)
300
(100)
100
Total comprehensive income attributed to shareholders
Zero
100
(100)
200
Zero
Zero
As at December 31, 2023
(post-tax except CSM)
Interest rates
Corporate spreads
Swap spreads
-50bp
+50bp
-50bp
+50bp
-20bp
+20bp
CSM
Do
llar Zero
$ (100)
Do
llar Zero
$ (100)
Do
llar Zero
Do
llar Zero
Net income attributed to shareholders
100
(100)
Zero
Zero
100
(100)
Other comprehensive income attributed to shareholders
(300)
300
(200)
300
(100)
100
Total comprehensive income attributed to shareholders
(200)
200
(200)
300
Zero
Zero
(1) See “Caution related to sensitivities” above.
Footnote Number (2)Estimates include changes to the net actuarial gains/losses with respect to the Company’s pension obligations as a result of changes in interest rates.
Footnote Number (3)Includes guaranteed insurance and annuity products, including variable annuity contracts as well as adjustable benefit products where benefits are generally
adjusted as interest rates and investment returns change, a portion of which have minimum credited rate guarantees. For adjustable benefit products subject to
minimum rate guarantees, the sensitivities are based on the assumption that credited rates will be floored at the minimum.
Alternative long-duration asset performance risk sensitivities and exposure measures
The following table shows the potential impact on CSM, net income attributed to shareholders, other comprehensive income
attributed to shareholders, and total comprehensive income attributed to shareholders resulting from an immediate 10% change
in market values of ALDA. The method used for deriving sensitivity information and significant assumptions made did not change
from the previous period.
ALDA used in this sensitivity analysis includes commercial real estate, private equity, infrastructure, timber and agriculture,
energy1 and other investments.
The impacts do not reflect any future potential changes to non-fixed income return volatility. Refer to “Publicly traded equity
performance risk sensitivities and exposure measures” above for more details.
Potential immediate impacts on contractual service margin, net income attributed to shareholders, other
comprehensive income attributed to shareholders, and total comprehensive income attributed to shareholders from
changes in ALDA market values
Refer to footnote number (1)
As at
(post-tax except CSM)
December 31, 2024
December 31, 2023
- 10%
+10%
- 10%
+10%
CSM excluding NCI
$ (200)
$ 200
$ (100)
$ 100
Net income attributed to shareholders(2)
(2,500)
2,500
(2,400)
2,400
Other comprehensive income attributed to shareholders
(200)
200
(200)
200
Total comprehensive income attributed to shareholders
(2,700)
2,700
(2,600)
2,600
(1) See “Caution related to sensitivities” above.
Footnote Number (2)Net income attributed to shareholders includes core earnings and the amounts excluded from core earnings.
Footnote Number 1 Energy includes legacy oil and gas equity interests related to upstream and midstream assets that are in runoff, and energy transition private equity interests in
areas supportive of the transition to lower carbon forms of energy, such as wind, solar, and carbon sequestration.
232 | 2024 Annual Report | Notes to Consolidated Financial Statements
Foreign exchange risk sensitivities and exposure measures
The Company generally matches the currency of its assets with the currency of the insurance and investment contract liabilities
they support. As at December 31, 2024, the Company did not have a material unmatched currency exposure.
Liquidity risk exposure strategy
Manulife manages liquidity levels of the consolidated group and key subsidiaries against established thresholds, which are based
on extreme but plausible liquidity stress scenarios over varying time horizons.
The Company’s use of derivatives for hedging purposes is a significant source of liquidity risk through collateral and cash
settlement requirements for OTC bilateral and centrally cleared derivatives under adverse market conditions. To assess these
potential liquidity needs, the Company regularly stress tests the market value of its derivative portfolio under various stress
scenarios and measures and monitors the contingent requirements against its liquid asset holdings. Additionally, the Company
maintains a liquidity contingency plan with diverse sources of contingent liquidity that can be utilized under severe stress
conditions.
(c) Credit risk
Credit risk is the risk of loss due to inability or unwillingness of a borrower, or counterparty, to fulfill its payment obligations.
Worsening regional and global economic conditions, segment or industry sector challenges, or company specific factors could
result in defaults or downgrades and could lead to increased provisions or impairments related to the Company’s general fund
invested assets.
The Company’s exposure to credit risk is managed through risk management policies and procedures which include a defined
credit evaluation and adjudication process, delegated credit approval authorities and established exposure limits by borrower,
corporate connection, credit rating, industry and geographic region. The Company measures derivative counterparty exposure as
net potential credit exposure, which takes into consideration fair values of all transactions with each counterparty, net of any
collateral held, and an allowance to reflect future potential exposure. Reinsurance counterparty exposure is measured reflecting
the level of ceded liabilities. The Company also ensures where warranted, that mortgages, private placements and loans to Bank
clients are secured by collateral, the nature of which depends on the credit risk of the counterparty.
Credit risk associated with derivative counterparties is discussed in note 8 (f) and credit risk associated with reinsurance
counterparties is discussed in note 8 (k).
(I) Credit quality
The following tables present financial instruments subject to credit exposure, without considering any collateral held or other
credit enhancements, and other significant credit risk exposures from loan commitments, with allowances, presenting separately
Stage 1, Stage 2, and Stage 3 credit risk profiles. For each asset type presented in the table, amortized cost and FVOCI financial
instruments are presented together. Amortized cost financial instruments are shown gross of the allowance for credit losses,
which is shown separately. FVOCI financial instruments are shown at fair value with the allowance for credit losses shown
separately.
233
As at December 31, 2024
Stage 1
Stage 2
Stage 3
Total
Debt securities, measured at FVOCI
Investment grade
$ 197,840
$
1,338
Do
llar Zero
$ 199,178
Non-investment grade
5,625
363
Zero
5,988
Total carrying value
203,465
1,701
Zero
205,166
Allowance for credit losses
228
42
Zero
270
Debt securities, measured at amortized cost
Investment grade
1,496
Zero
Zero
1,496
Non-investment grade
Zero
Zero
Zero
Zero
Total
1,496
Zero
Zero
1,496
Allowance for credit losses
1
Zero
Zero
1
Total carrying value, net of allowance
1,495
Zero
Zero
1,495
Private placements, measured at FVOCI
Investment grade
41,796
721
Zero
42,517
Non-investment grade
5,004
1,133
148
6,285
Total carrying value
46,800
1,854
148
48,802
Allowance for credit losses
126
127
123
376
Commercial mortgages, measured at FVOCI
AAA
205
Zero
Zero
205
AA
7,234
Zero
Zero
7,234
A
14,035
Zero
Zero
14,035
BBB
5,679
873
Zero
6,552
BB
11
663
Zero
674
B and lower
Zero
21
71
92
Total carrying value
27,164
1,557
71
28,792
Allowance for credit losses
41
39
55
135
Commercial mortgages, measured at amortized cost
AAA
Zero
Zero
Zero
Zero
AA
Zero
Zero
Zero
Zero
A
225
15
Zero
240
BBB
Zero
Zero
Zero
Zero
BB
Zero
Zero
Zero
Zero
B and lower
112
5
5
122
Total
337
20
5
362
Allowance for credit losses
1
1
Zero
2
Total carrying value, net of allowance
336
19
5
360
Residential mortgages, measured at amortized cost
Performing
22,870
1,151
Zero
24,021
Non-performing
Zero
Zero
41
41
Total
22,870
1,151
41
24,062
Allowance for credit losses
3
2
1
6
Total carrying value, net of allowance
22,867
1,149
40
24,056
Loans to Bank clients, measured at amortized cost
Performing
2,265
38
Zero
2,303
Non-performing
Zero
Zero
10
10
Total
2,265
38
10
2,313
Allowance for credit losses
1
1
1
3
Total carrying value, net of allowance
2,264
37
9
2,310
Other invested assets, measured at FVOCI
Investment grade
Zero
Zero
Zero
Zero
Non-investment grade
389
Zero
Zero
389
Total carrying value
389
Zero
Zero
389
Allowance for credit losses
22
Zero
Zero
22
Other invested assets, measured at amortized cost
Investment grade
4,302
Zero
Zero
4,302
Non-investment grade
Zero
Zero
Zero
Zero
Total
4,302
Zero
Zero
4,302
Allowance for credit losses
2
Zero
Zero
2
Total carrying value, net of allowance
4,300
Zero
Zero
4,300
Loan commitments
Allowance for credit losses
9
1
1
11
Total carrying value, net of allowance
$ 309,080
$
6,317
$
273
$ 315,670
234 | 2024 Annual Report | Notes to Consolidated Financial Statements
As at December 31, 2023
Stage 1
Stage 2
Stage 3
Total
Debt securities, measured at FVOCI
Investment grade
$ 197,562
$
2,252
Do
llar Zero
$ 199,814
Non-investment grade
5,367
596
Zero
5,963
Total carrying value
202,929
2,848
Zero
205,777
Allowance for credit losses
283
54
6
343
Debt securities, measured at amortized cost
Investment grade
1,373
Zero
Zero
1,373
Non-investment grade
Zero
Zero
Zero
Zero
Total
1,373
Zero
Zero
1,373
Allowance for credit losses
1
Zero
Zero
1
Total carrying value, net of allowance
1,372
Zero
Zero
1,372
Private placements, measured at FVOCI
Zero
Zero
Investment grade
37,722
1,644
Zero
39,366
Non-investment grade
5,210
295
81
5,586
Total carrying value
42,932
1,939
81
44,952
Allowance for credit losses
126
108
83
317
Commercial mortgages, measured at FVOCI
AAA
279
Zero
Zero
279
AA
6,815
Zero
Zero
6,815
A
14,111
86
Zero
14,197
BBB
5,513
984
Zero
6,497
BB
10
532
Zero
542
B and lower
Zero
36
107
143
Total carrying value
26,728
1,638
107
28,473
Allowance for credit losses
40
42
143
225
Commercial mortgages, measured at amortized cost
AAA
Zero
Zero
Zero
Zero
AA
Zero
Zero
Zero
A
148
48
Zero
196
BBB
Zero
Zero
Zero
Zero
BB
Zero
Zero
Zero
Zero
B and lower
145
35
Zero
180
Total
293
83
Zero
376
Allowance for credit losses
1
2
Zero
3
Total carrying value, net of allowance
292
81
Zero
373
Residential mortgages, measured at amortized cost
Performing
20,898
1,570
Zero
22,468
Non-performing
Zero
Zero
60
60
Total
20,898
1,570
60
22,528
Allowance for credit losses
4
2
2
8
Total carrying value, net of allowance
20,894
1,568
58
22,520
Loans to Bank clients, measured at amortized cost
Performing
2,387
44
Zero
2,431
Non-performing
Zero
Zero
8
8
Total
2,387
44
8
2,439
Allowance for credit losses
2
Zero
1
3
Total carrying value, net of allowance
2,385
44
7
2,436
Other invested assets, measured at FVOCI
Investment grade
Zero
Zero
Zero
Zero
Non-investment grade
360
Zero
Zero
360
Total carrying value
360
Zero
Zero
360
Allowance for credit losses
16
Zero
Zero
16
Other invested assets, measured at amortized cost
Investment grade
3,791
Zero
Zero
3,791
Non-investment grade
Zero
Zero
Zero
Total
3,791
Zero
Zero
3,791
Allowance for credit losses
1
Zero
Zero
1
Total carrying value, net of allowance
3,790
Zero
Zero
3,790
Loan commitments
Allowance for credit losses
9
1
2
12
Total carrying value, net of allowance
$ 301,682
$
8,118
$
253
$ 310,053
235
(II) Allowance for credit losses
The following tables provide details on the allowance for credit losses by stage as at and for the year ended December 31, 2024
and 2023.
As at December 31, 2024
Stage 1
Stage 2
Stage 3
Total
Balance, beginning of year
$ 483
$ 209
$ 237
$ 929
Net re-measurement due to transfers
4
(22)
18
Zero
Transfer to stage 1
12
(12)
Zero
Zero
Transfer to stage 2
(7)
7
Zero
Zero
Transfer to stage 3
(1)
(17)
18
Zero
Net originations, purchases, disposals and repayments
36
(8)
(159)
(131)
Changes to risk, parameters, and models
(107)
21
81
(5)
Foreign exchange and other adjustments
18
13
4
35
Balance, end of year
$ 434
$ 213
$ 181
$ 828
As at December 31, 2023
Stage 1
Stage 2
Stage 3
Total
Balance, beginning of year
$ 511
$ 141
$
72
$ 724
Net re-measurement due to transfers
4
6
(10)
Zero
Transfer to stage 1
12
(11)
(1)
Zero
Transfer to stage 2
(6)
28
(22)
Zero
Transfer to stage 3
(2)
(11)
13
Zero
Net originations, purchases, disposals and repayments
45
8
(23)
30
Changes to risk, parameters, and models
(71)
48
233
210
Foreign exchange and other adjustments
(6)
6
(35)
(35)
Balance, end of year
$ 483
$ 209
$ 237
$ 929
(III) Significant judgements and estimates
The following tables show certain key macroeconomic variables used to estimate the ECL allowances by market. For the base
case, upside and downside scenarios, the projections are provided for the next 12 months and then for the remaining forecast
period, which represents a medium-term view.
As at December 31, 2024
Current
quarter
Base case scenario
Upside scenario
Downside scenario 1
Downside scenario 2
Next 12
months
Ensuing 4
years
Next 12
months
Ensuing 4
years
Next 12
months
Ensuing 4
years
Next 12
months
Ensuing 4
years
Canada
Gross Domestic Product (GDP),
in U.S. $ billions
$
1,983
1.8%
2.0%
3.3%
2.3%
(2.0)%
2.3%
(3.9)%
2.2%
Unemployment rate
6.7%
6.8%
6.3%
6.5%
5.8%
8.1%
8.2%
8.5%
10.0%
NYMEX Light Sweet Crude Oil, in
U.S. dollars, per barrel
$
76.0
$ 75.0
$ 72.0
$ 79.0
$ 74.0
$
59.0
$ 66.0
$
50.0
$ 61.0
U.S.
Gross Domestic Product (GDP),
in U.S. $ billions
$
23,534
2.1%
2.2%
3.6%
2.3%
(2.0)%
2.7%
(4.2)%
2.5%
Unemployment rate
4.2%
4.1%
4.0%
3.3%
3.3%
7.3%
6.1%
7.8%
8.1%
7-10 Year BBB U.S. Corporate
Index
5.5%
6.1%
6.1%
5.9%
6.2%
5.4%
5.6%
6.0%
5.4%
Japan
Gross Domestic Product (GDP),
in JPY billions
¥ 563,281
0.9%
0.7%
2.8%
0.8%
(3.6)%
1.0%
(7.1)%
1.6%
Unemployment rate
2.5%
2.5%
2.2%
2.4%
2.1%
3.1%
2.9%
3.2%
3.5%
Hong Kong
Unemployment rate
3.0%
2.9%
3.0%
2.5%
2.7%
4.1%
3.8%
4.6%
4.6%
Hang Seng Index
19,448
7.0%
4.1%
18.1%
3.7%
(19.7)%
9.9%
(37.0)%
13.5%
China
Gross Domestic Product (GDP),
in CNY billions
¥ 114,931
4.0%
4.1%
6.5%
4.3%
(3.0)%
4.6%
(5.7)%
3.9%
FTSE Xinhua A200 Index
10,938
(0.6)%
4.8%
13.8%
2.8%
(31.1)%
11.7%
(40.5)%
13.5%
236 | 2024 Annual Report | Notes to Consolidated Financial Statements
(IV) Sensitivity to changes in economic assumptions
The following table shows the ECL allowance balance which resulted from all four macroeconomic scenarios (including the more
heavily weighted best estimate baseline scenario, one upside and two downside scenarios) weighted by probability of
occurrence and shows an ECL allowance resulting from only the baseline scenario.
As at December 31,
2024
2023
Probability-weighted ECL
$
828
$
929
Baseline ECL
$
629
$
659
Difference – in amount
$
199
$
270
Difference – in percentage
24.03%
29.06%
(d) Securities lending, repurchase and reverse repurchase transactions
The Company engages in securities lending to generate fee income. Collateral exceeding the market value of the loaned
securities is retained by the Company until the underlying security has been returned to the Company. The market value of the
loaned securities is monitored daily and additional collateral is obtained or refunded as the market value of the underlying loaned
securities fluctuates. As at December 31, 2024, the Company had loaned securities (which are included in invested assets) with
a market value of $1,021 (2023 – $626). The Company holds collateral with a current market value that exceeds the value of
securities lent in all cases.
The Company engages in reverse repurchase transactions to generate fee income to take possession of securities to cover short
positions in similar instruments and to meet short-term funding requirements. As at December 31, 2024, the Company had
outstanding reverse repurchase transactions of $1,594 (2023 – $466) which are recorded as short-term receivables. In addition, the
Company had outstanding repurchase transactions of $668 as at December 31, 2024 (2023 – $202) which are recorded as payables.
(e) Credit default swaps
The Company replicates exposure to specific issuers by selling credit protection via credit default swaps (“CDS”) to complement
its cash debt securities investing. The Company does not write CDS protection more than its government bond holdings. A CDS
is a derivative instrument representing an agreement between two parties to exchange the credit risk of a single specified entity
or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of
“reference entities”), in return for a periodic premium. CDS contracts typically have a five-year term.
The following tables present details of the credit default swap protection sold by type of contract and external agency rating for
the underlying reference security.
As at December 31, 2024
Notional
amount(1)
Fair value
Weighted
average maturity
(in years)Refer to footnote number (2)
Single name CDS(3),(4) – Corporate debt
AA
$
23
$
1
3
A
68
1
3
BBB
23
Zero
2
Total single name CDS
$
114
$
2
3
Total CDS protection sold
$
114
$
2
3
As at December 31, 2023
Notional
amount(1)
Fair value
Weighted
average maturity
(in years)Refer to footnote number (2)
Single name CDS(3),(4) – Corporate debt
AA
$
23
$
1
4
A
94
2
3
BBB
14
Zero
1
Total single name CDS
$
131
$
3
3
Total CDS protection sold
$
131
$
3
3
Footnote Number (1)Notional amounts represent the maximum future payments the Company would have to pay its counterparties assuming a default of the underlying credit and zero
recovery on the underlying issuer obligations.
Footnote Number (2)The weighted average maturity of the CDS is weighted based on notional amounts.
Footnote Number (3)Ratings are based on S&P where available followed by Moody’s, Morningstar DBRS, and Fitch. If no rating is available from a rating agency, an internally
developed rating is used.
Footnote Number (4)The Company held no purchased credit protection as at December 31, 2024 and 2023.
(f) Derivatives
The Company’s point-in-time exposure to losses related to credit risk of a derivative counterparty is limited to the amount of any
net gains that may have accrued with the particular counterparty. Gross derivative counterparty exposure is measured as the total
fair value (including accrued interest) of all outstanding contracts in a gain position excluding any offsetting contracts in a loss
position and the impact of collateral on hand. The Company limits the risk of credit losses from derivative counterparties by:
237
using investment grade counterparties, entering into master netting arrangements which permit the offsetting of contracts in a loss
position in the case of a counterparty default and entering into Credit Support Annex agreements whereby collateral must be
provided when the exposure exceeds a certain threshold.
All contracts are held with or guaranteed by investment grade counterparties, the majority of whom are rated A- or higher. As at
December 31, 2024, the percentage of the Company’s derivative exposure with counterparties rated AA- or higher was 30 per
cent (2023 – 33 per cent). As at December 31, 2024, the largest single counterparty exposure, without taking into consideration
the impact of master netting agreements or the benefit of collateral held, was $1,319 (2023 – $1,357). The net exposure to this
counterparty, after taking into consideration master netting agreements and the fair value of collateral held, was $nil (2023 – $nil).
(g) Offsetting financial assets and financial liabilities
Certain derivatives, securities lent and repurchase agreements have conditional offset rights. The Company does not offset
these financial instruments in the Consolidated Statements of Financial Position, as the rights of offset are conditional.
In the case of derivatives, collateral is collected from and pledged to counterparties and clearing houses to manage credit risk
exposure in accordance with Credit Support Annexes to swap agreements and clearing agreements. Under master netting
agreements, the Company has a right of offset in the event of default, insolvency, bankruptcy or other early termination.
In the case of reverse repurchase and repurchase transactions, additional collateral may be collected from or pledged to
counterparties to manage credit exposure according to bilateral reverse repurchase or repurchase agreements. In the event of
default by a reverse purchase transaction counterparty, the Company is entitled to liquidate the collateral held to offset against
the same counterparty’s obligation.
The following tables presents the effect of conditional master netting and similar arrangements. Similar arrangements may
include global master repurchase agreements, global master securities lending agreements, and any related rights to financial
collateral pledged or received.
As at December 31, 2024
Gross amounts of
financial instrumentsRefer to footnote number (1)
Related amounts not set off in the
Consolidated Statements of
Financial Position
Net
amounts
including
financing
entityRefer to footnote number (3)
Net
amounts
excluding
financing
entity
Amounts subject to
an enforceable
master netting
arrangement or
similar agreements
Financial
and cash
collateral
pledged
(received)Refer to footnote number (2)
Financial assets
Derivative assets
$
9,048
$ (6,633)
$ (1,986)
$ 429
$ 429
Securities lending
1,021
Zero
(1,021)
Zero
Zero
Reverse repurchase agreements
1,594
(569)
(1,025)
Zero
Zero
Total financial assets
$ 11,663
$ (7,202)
$ (4,032)
$ 429
$ 429
Financial liabilities
Derivative liabilities
$ (15,026)
$
6,633
$
8,305
$
(88)
$ (15)
Repurchase agreements
(668)
569
99
Zero
Zero
Total financial liabilities
$ (15,694)
$ 7,202
$ 8,404
$
(88)
$ (15)
As at December 31, 2023
Gross amounts of
financial instrumentsRefer to footnote number (1)
Related amounts not set off in the
Consolidated Statements of
Financial Position
Net
amounts
including
financing
entityRefer to footnote number (3)
Net
amounts
excluding
financing
entity
Amounts subject to
an enforceable
master netting
arrangement or
similar agreements
Financial
and cash
collateral
pledged
(received)Refer to footnote number (2)
Financial assets
Derivative assets
$
9,044
$ (6,516)
$ (2,374)
$ 154
$ 154
Securities lending
626
Zero
(626)
Zero
Zero
Reverse repurchase agreements
466
(202)
(264)
Zero
Zero
Total financial assets
$ 10,136
$ (6,718)
$ (3,264)
$ 154
$ 154
Financial liabilities
Derivative liabilities
$ (12,600)
$ 6,516
$ 5,958
$ (126)
$ (57)
Repurchase agreements
(202)
202
Zero
Zero
Zero
Total financial liabilities
$ (12,802)
$
6,718
$
5,958
$ (126)
$ (57)
Footnote Number (1)Financial assets and liabilities include accrued interest of $388 and $779 respectively (2023 – $502 and $913 respectively).
Footnote Number (2)Financial and cash collateral exclude over-collateralization. As at December 31, 2024, the Company was over-collateralized on OTC derivative assets, OTC
derivative liabilities, securities lending and reverse repurchase agreements and repurchase agreements in the amounts of $641, $2,472, $35 and $nil respectively
(2023 – $424, $1,420, $20 and $nil respectively). As at December 31, 2024, collateral pledged (received) does not include collateral-in-transit on OTC instruments
or initial margin on exchange-traded contracts or cleared contracts.
Footnote Number (3)Includes derivative contracts entered between the Company and its unconsolidated financing entity. The Company does not exchange collateral on derivative
contracts entered with this entity. Refer to note 17.
238 | 2024 Annual Report | Notes to Consolidated Financial Statements
The Company also has certain credit linked note assets and variable surplus note liabilities which have unconditional offsetting
rights. Under the netting agreements, the Company has rights of offset including in the event of the Company’s default,
insolvency, or bankruptcy. These financial instruments are offset in the Consolidated Statements of Financial Position.
A credit linked note is a debt instrument the term of which, in this case, is linked to a variable surplus note. A surplus note is a
subordinated debt obligation that often qualifies as surplus (the U.S. statutory equivalent of equity) by some U.S. state insurance
regulators. Interest payments on surplus notes are made after all other contractual payments are made. The following tables
present the effect of unconditional netting.
As at December 31, 2024
Gross amounts of
financial instruments
Amounts subject to
an enforceable
netting arrangement
Net amounts of
financial instruments
Credit linked noteRefer to footnote number (1)
$ 1,392
$
(1,392)
Do llar Zero
Variable surplus note
(1,392)
1,392
Zero
As at December 31, 2023
Gross amounts of
financial instruments
Amounts subject to
an enforceable
netting arrangement
Net amounts of
financial instruments
Credit linked note(1)
$
1,276
$ (1,276)
Do llar Zero
Variable surplus note
(1,276)
1,276
Zero
Footnote Number (1)As at December 31, 2024 and 2023, the Company had no fixed surplus notes outstanding. Refer to note 18 (g).
(h) Risk concentrations
The Company defines enterprise-wide investment portfolio level targets and limits to ensure that portfolios are diversified across
asset classes and individual investment risks. The Company monitors actual investment positions and risk exposures for
concentration risk and reports its findings to the Executive Risk Committee and the Risk Committee of the Board of Directors.
As at December 31,
2024
2023
Debt securities and private placements rated as investment grade BBB or higherRefer to footnote number (1)
96%
95%
Government debt securities as a per cent of total debt securities
40%
38%
Government private placements as a per cent of total private placements
9%
10%
Highest exposure to a single non-government debt security or private placement issuer
$ 1,121
$
1,131
Largest single issuer as a per cent of the total equity portfolio
2%
2%
Income producing commercial office properties (2024 – 35% of real estate, 2023 – 37%)
$ 4,696
$
4,829
Largest concentration of mortgages and real estate(2) – Ontario Canada (2024 – 28%, 2023 – 29%)
$ 19,052
$ 19,003
Footnote Number (1)Investment grade debt securities and private placements include 37% rated A, 17% rated AA and 15% rated AAA (2023 – 38%, 17% and 15%) investments based
on external ratings where available.
Footnote Number (2)Mortgages and real estate investments are diversified geographically and by property type.
The following table presents debt securities and private placements portfolio by sector and industry.
As at December 31,
2024
2023
Carrying value
% of total
Carrying value
% of total
Government and agency
$
88,376
34%
$
84,739
33%
Utilities
45,812
18%
45,952
18%
Financial
38,656
15%
39,069
15%
Consumer
31,529
12%
31,181
12%
Energy
15,840
6%
15,782
6%
Industrial
24,233
9%
24,209
9%
Other
15,843
6%
16,823
7%
Total
$ 260,289
100%
$ 257,755
100%
(i) Insurance risk
Insurance risk is the risk of loss due to actual experience for mortality and morbidity claims, policyholder behaviour and expenses
emerging differently than assumed when a product was designed and priced. A variety of assumptions are made related to these
experience factors, for reinsurance costs, and for sales levels when products are designed and priced, as well as in the
determination of policy liabilities. Assumptions for future claims are generally based on both Company and industry experience,
and assumptions for future policyholder behaviour and expenses are generally based on Company experience. Such assumptions
require significant professional judgment, and actual experience may be materially different than the assumptions made by the
Company. Claims may be impacted unexpectedly by changes in the prevalence of diseases or illnesses, medical and technology
advances, widespread lifestyle changes, natural disasters, large-scale man-made disasters and acts of terrorism. Policyholder
behaviour including premium payment patterns, policy renewals, lapse rates and withdrawal and surrender activity are influenced
by many factors including market and general economic conditions, and the availability and relative attractiveness of other
products in the marketplace. Some reinsurance rates are not guaranteed and may be changed unexpectedly. Adjustments the
Company seeks to make to Non-Guaranteed elements to reflect changing experience factors may be challenged by regulatory or
legal action and the Company may be unable to implement them or may face delays in implementation.
239
The Company manages insurance risk through global policies, standards and best practices with respect to product design,
pricing, underwriting and claim adjudication, and a global underwriting manual. Each business unit establishes underwriting
policies and procedures, including criteria for approval of risks and claims adjudication policies and procedures. The current
global life retention limit is US$30 for individual policies (US$35 for survivorship life policies) and is shared across businesses.
Lower limits are applied in some markets and jurisdictions. The Company aims to further reduce exposure to claims
concentrations by applying geographical aggregate retention limits for certain covers. Enterprise-wide, the Company aims to
reduce the likelihood of high aggregate claims by operating globally, insuring a wide range of unrelated risk events, and
reinsuring some risk.
(j) Concentration risk
The geographic concentration of the Company’s insurance and investment contract liabilities, including embedded derivatives, is
shown below. The disclosure is based on the countries in which the business is written.
As at December 31, 2024
Insurance
contract liabilities
Investment
contract liabilities
Reinsurance
assets
Net liabilities
U.S. and Canada
$ 342,146
$ 305,563
$ (52,055)
$ 595,654
Asia and Other
180,698
17,378
(6,294)
191,782
Total
$ 522,844
$ 322,941
$ (58,349)
$ 787,436
As at December 31, 2023
Insurance
contract liabilities
Investment
contract liabilities
Reinsurance
assets
Net liabilities
U.S. and Canada
$ 327,458
$ 260,046
$ (39,080)
$ 548,424
Asia and Other
154,536
15,171
(1,169)
168,538
Total
$ 481,994
$ 275,217
$ (40,249)
$ 716,962
(k) Reinsurance risk
In the normal course of business, the Company limits the amount of loss on any one policy by reinsuring certain levels of risk
with other insurers. In addition, the Company accepts reinsurance from other reinsurers. Reinsurance ceded does not discharge
the Company’s liability as the primary insurer. Failure of reinsurers to honour their obligations could result in losses to the
Company; consequently, allowances are established for amounts deemed uncollectible. To minimize losses from reinsurer
insolvency, the Company monitors the concentration of credit risk both geographically and with any one reinsurer. In addition, the
Company selects reinsurers with high credit ratings.
As at December 31, 2024, the Company had $58,349 (2023 – $40,249) of reinsurance assets. Of this, 93 per cent (2023 – 91
per cent) were ceded to reinsurers with Standard and Poor’s ratings of A- or above. The Company’s exposure to credit risk was
mitigated by $40,753 fair value of collateral held as security as at December 31, 2024 (2023 – $22,264). Net exposure after
considering offsetting agreements and the benefit of the fair value of collateral held was $17,595 as at December 31, 2024 (2023
– $17,984).
240 | 2024 Annual Report | Notes to Consolidated Financial Statements
Note 9 Long Term Debt
(a) Carrying value of long-term debt instruments
Issue date
Maturity date
Par value
As at December 31,
2024
2023
3.050% Senior notes(1),Refer to footnote number (2)
August 27, 2020
August 27, 2060
US$ 1,155
$ 1,659
$ 1,519
5.375% Senior notes(1),Refer to footnote number (3)
March 4, 2016
March 4, 2046
US$
750
1,067
977
3.703% Senior notes(1),Refer to footnote number (4)
March 16, 2022
March 16, 2032
US$
750
1,074
983
2.396% Senior notes(1),Refer to footnote number (5)
June 1, 2020
June 1, 2027
US$
200
287
263
2.484% Senior notes(1),Refer to footnote number (5)
May 19, 2020
May 19, 2027
US$
500
717
657
3.527% Senior notes(1),Refer to footnote number (3)
December 2, 2016
December 2, 2026
US$
270
388
356
4.150% Senior notes(1),Refer to footnote number (3)
March 4, 2016
March 4, 2026
US$ 1,000
1,437
1,316
Total
$ 6,629
$ 6,071
(1) These U.S. dollar senior notes have been designated as hedges of the Company’s net investment in its U.S. operations which reduces the earnings volatility that
would otherwise arise from the re-measurement of these senior notes into Canadian dollars.
Footnote Number (2)MFC may redeem the notes in whole, but not in part, on August 27, 2025, and thereafter on every August 27 at a redemption price equal to par, together with
accrued and unpaid interest. Issuance costs are amortized to the earliest par redemption date.
Footnote Number (3)MFC may redeem the senior notes in whole or in part, at any time, at a redemption price equal to the greater of par and a price based on the yield of a comparable
Treasury bond with a tenor approximately equal to the period, from the redemption date to the respective maturity date, plus a specified number of basis
points, together with accrued and unpaid interest. The specified number of basis points is as follows: 5.375% notes – 40 bps, 3.527% notes – 20 bps, and 4.150%
notes – 35 bps. Issuance costs are amortized over the term of the debt.
U.S.
Footnote Number (4)MFC may redeem the senior notes in whole or in part, at any time, at a redemption price equal to the greater of par and a price based on the yield of a comparable
U.S. Treasury bond with a tenor approximately equal to the period, from the redemption date to December 16, 2031, plus 25 bps, together with accrued and unpaid
interest. Issuance costs are amortized over the term of the debt.
Footnote Number (5)MFC may redeem the senior notes in whole or in part, at any time, at a redemption price equal to the greater of par and a price based on the yield of a comparable
U.S. Treasury bond with a tenor approximately equal to the period, from the redemption date to two months before the respective maturity date, plus a specified
number of basis points, together with accrued and unpaid interest. The specified number of basis points is as follows: 2.396% notes – 30 bps, and 2.484% notes –
30 bps. For the period from two months before the respective maturity date, MFC may redeem the senior notes, in whole or in part, at a redemption price equal to
par, together with accrued and unpaid interest. Issuance costs are amortized over the term of the debt.
The cash amount of interest paid on long-term debt during the year ended December 31, 2024 was $233 (2023 – $231).
(b) Fair value measurement
The Company measures its long-term debt at amortized cost in the Consolidated Statements of Financial Position. As at
December 31, 2024, the fair value of long-term debt was $5,741 (2023 – $5,525). The fair value of long-term debt was
determined using Level 2 valuation techniques (2023 – Level 2).
(c) Aggregate maturities of long-term debt
As at December 31,
Less than 1 year
1 to 3 years
3 to 5 years
Over 5 years
Total
2024
Do
llar Zero
$
2,829
Do
llar Zero
$
3,800
$
6,629
2023
Zero
1,672
920
3,479
6,071
241
Note 10 Capital Instruments
(a) Carrying value of capital instruments
Issuance date
Earliest par
redemption date
Maturity date
Par value
As at December 31,
2024
2023
JHFC Subordinated notes(1),Refer to footnote number (2)
December 14, 2006 n/a
December 15, 2036
$
650 $
648 $
647
2.818% MFC Subordinated debentures(1),Refer to footnote number (3)
May 12, 2020
May 13, 2030
May 13, 2035
$ 1,000
997
996
4.064% MFC Subordinated debenturesRefer to footnote number (4)
December 6, 2024
December 6, 2029
December 6, 2034
$ 1,000
995
Zero
4.275% MFC Subordinated notes(5),Refer to footnote number (6)
June 19, 2024
June 19, 2029
June 19, 2034
S$
500
524
Zero
5.054% MFC Subordinated debenturesRefer to footnote number (7)
February 23, 2024
February 23, 2029
February 23, 2034
$ 1,100
1,095
Zero
5.409% MFC Subordinated debenturesRefer to footnote number (8)
March 10, 2023
March 10, 2028
March 10, 2033
$ 1,200
1,196
1,195
4.061% MFC Subordinated notes(1),(9),Refer to footnote number (10)
February 24, 2017
February 24, 2027
February 24, 2032
US$
750
1,077
987
2.237% MFC Subordinated debentures(1),Refer to footnote number (11)
May 12, 2020
May 12, 2025
May 12, 2030
$ 1,000
1,000
999
3.00% MFC Subordinated notes(1),(12),Refer to footnote number (13)
November 21, 2017 November 21, 2024 November 21, 2029
S$
500
Zero
499
3.049% MFC Subordinated debentures(1),Refer to footnote number (13)
August 18, 2017
August 20, 2024
August 20, 2029
$
750
Zero
750
7.375% JHUSA Surplus notesRefer to footnote number (13)
February 25, 1994
n/a
February 15, 2024
US$
450
Zero
594
Total
$ 7,532 $ 6,667
Footnote Number (1) The Canadian Dollar Offered Rate (“CDOR”) was decommissioned on June 28, 2024. On July 1, 2024, capital instruments of $648 (2023 – $647) which had an
interest rate referencing CDOR, transitioned to an interest rate referencing CORRA. In addition, capital instruments with interest rates resetting in the future that
reference CDOR and the U.S. Dollar Mid-Swap rate (based on London Interbank Offered Rate (LIBOR)) amount to $1,997 and $1,077, respectively (2023 –
$2,745 and $987, respectively). Future rate resets for these capital instruments may rely on alternative reference rates such as CORRA, the alternative rate for
CDOR, and the Secured Overnight Financing Rate (SOFR) and the alternative rate for USD LIBOR. As at December 31, 2024, the interest rate benchmark reform
has not resulted in material changes in the Company’s risk management strategy.
Footnote Number (2) Issued by Manulife Holdings (Delaware) LLC (“MHDLL”), now John Hancock Financial Corporation (“JHFC”), a wholly owned subsidiary of MFC, to Manulife
Finance (Delaware) LLC (“MFLLC”), a subsidiary of Manulife Finance (Delaware) L.P. (“MFLP”). MFLP and its subsidiaries are wholly owned unconsolidated
related parties of the Company. Effective July 1, 2024, the notes bear interest at a floating rate equal to CORRA, plus a spread adjustment of 0.32138%, plus
0.72%. With regulatory approval, JHFC may redeem the note, in whole or in part, at any time, at par, together with accrued and unpaid interest. Refer to note 17.
Footnote Number (3) After May 13, 2030, the interest rate will reset to equal 3-month CDOR plus 1.82%. With regulatory approval, MFC may redeem the debentures, in whole or in
part, on or after May 13, 2025, at a redemption price together with accrued and unpaid interest. If the redemption date is on or after May 13, 2025, but prior to
May 13, 2030, the redemption price shall be the greater of: (i) the Canada yield price as defined in the prospectus; and (ii) par. If the redemption date is on or after
May 13, 2030, the redemption price shall be equal to par.
Footnote Number (4) Issued by MFC during the fourth quarter of 2024, interest is payable semi-annually. After December 6, 2029, the interest rate will reset to equal the Daily
Compounded CORRA plus 1.25%. With regulatory approval, MFC may redeem the notes, in whole or in part, on or after December 6, 2029 at a redemption price
equal to par, together with accrued and unpaid interest to, but excluding, the date fixed for redemption.
Footnote Number (5) Designated as a hedge of the Company’s net investment in its Singapore operations which reduces the earnings volatility that would otherwise arise from the
remeasurement of the subordinated notes into Canadian dollars.
Footnote Number (6) Issued by MFC during the second quarter of 2024, interest is payable semi-annually. After June 19, 2029, the interest rate will reset to equal the prevailing 5-year
SORA Overnight Indexed Swap (SORA OIS) Rate plus 1.201%. With regulatory approval, MFC may redeem the notes, in whole, but not in part, on June 19, 2029
and on any interest payment date thereafter, at a redemption price equal to par, together with accrued and unpaid interest to, but excluding, the date fixed for
redemption.
Footnote Number (7) Issued by MFC during the first quarter of 2024, interest is payable semi-annually. After February 23, 2029, the interest rate will reset to equal the Daily
Compounded CORRA plus 1.44%. With regulatory approval, MFC may redeem the debentures, in whole, but not in part, on or after February 23, 2029 at a
redemption price equal to par, together with accrued and unpaid interest to, but excluding, the date fixed for redemption.
Footnote Number (8) Issued by MFC, interest is payable semi-annually. After March 10, 2028, the interest rate will reset to equal the Daily Compounded CORRA plus 1.85%. With
regulatory approval, MFC may redeem the debentures, in whole or in part, on or after March 10, 2028, at a redemption price equal to par, together with accrued
and unpaid interest.
Footnote Number (9) On the earliest par redemption date, the interest rate will reset to equal the 5-Year U.S. Dollar Mid-Swap Rate plus 1.647%. With regulatory approval, MFC may
redeem the debentures, in whole, but not in part, on the earliest par redemption date, at a redemption price equal to par, together with accrued and unpaid
interest.
Footnote Number (10)Designated as a hedge of the Company’s net investment in its U.S. operations which reduces the earnings volatility that would otherwise arise from the
remeasurement of the subordinated notes into Canadian dollars.
Footnote Number (11)Issued by MFC, interest is payable semi-annually. After May 12, 2025, the interest rate will reset to equal 3-month CDOR plus 1.49%. With regulatory approval,
MFC may redeem the debentures, in whole or in part, on or after May 12, 2025, at a redemption price equal to par, together with accrued and unpaid interest.
Footnote Number (12)On the earliest par redemption date, the interest rate will reset to equal the 5-Year Singapore Dollar Swap Rate plus 0.832%. With regulatory approval, MFC may
redeem the debentures, in whole, but not in part, on the earliest par redemption date and thereafter on each interest payment date, at a redemption price equal to
par, together with accrued and unpaid interest.
Footnote Number (13)The 3.00% MFC Subordinated notes and 3.049% MFC Subordinated debentures were redeemed at par. The 7.375% JHUSA Surplus notes matured and were
redeemed.
(b) Fair value measurement
The Company measures capital instruments at amortized cost in the Consolidated Statements of Financial Position. As at
December 31, 2024, the fair value of capital instruments was $7,575 (2023 – $6,483). The fair value of capital instruments was
determined using Level 2 valuation techniques (2023 – Level 2).
242 | 2024 Annual Report | Notes to Consolidated Financial Statements
Note 11 Equity Capital and Earnings Per Share
The authorized capital of MFC consists of:
• an unlimited number of common shares without nominal or par value; and
• an unlimited number of Class A, Class B and Class 1 preferred shares without nominal or par value, issuable in series.
(a) Preferred shares and other equity instruments
The following table presents information about the outstanding preferred shares and other equity instruments as at
December 31, 2024 and December 31, 2023.
Issue date
Annual dividend /
distribution rateRefer to footnote number (1)
Earliest redemption
date(2),Refer to footnote number (3)
Number of
shares
(in millions)
Face
amount
Net amount(4) as at
December 31,
2024
2023
Preferred shares
Class A preferred shares
Series 2
February 18, 2005
4.650%
n/a
14
$
350
$
344
$
344
Series 3
January 3, 2006
4.500%
n/a
12
300
294
294
Class 1 preferred shares
Series 3(5),Refer to footnote number (6)
March 11, 2011
2.348%
June 19, 2026
7
163
160
160
Series 4Refer to footnote number (7)
June 20, 2016
floating
June 19, 2026
1
37
36
36
Series 9(5),Refer to footnote number (6)
May 24, 2012
5.978%
September 19, 2027
10
250
244
244
Series 11(5),(6)
December 4, 2012
6.159%
March 19, 2028
8
200
196
196
Series 13(5),Refer to footnote number (6)
June 21, 2013
6.350%
September 19, 2028
8
200
196
196
Series 15(5),(6),Refer to footnote number (8)
February 25, 2014
5.775%
June 19, 2029
8
200
195
195
Series 17(5),(6),Refer to footnote number (9)
August 15, 2014
5.542%
December 19, 2029
14
350
343
343
Series 19(5),(6)
December 3, 2014
3.675%
March 19, 2025
10
250
246
246
Series 25(5),Refer to footnote number (6)
February 20, 2018
5.942%
June 19, 2028
10
250
245
245
Other equity instruments
Limited recourse capital
notes (LRCN)Refer to footnote number (10)
Series 1Refer to footnote number (11)
February 19, 2021
3.375%
May 19, 2026
n/a
2,000
1,982
1,982
Series 2Refer to footnote number (11)
November 12, 2021
4.100%
February 19, 2027
n/a
1,200
1,189
1,189
Series 3Refer to footnote number (11)
June 16, 2022
7.117%
June 19, 2027
n/a
1,000
990
990
Total
102
$ 6,750
$ 6,660
$ 6,660
Footnote Number (1) Holders of Class A and Class 1 preferred shares are entitled to receive non-cumulative preferential cash dividends on a quarterly basis, as and when declared by
the Board of Directors. Non-deferrable distributions are payable to all LRCN holders semi-annually at the Company’s discretion.
Footnote Number (2) Redemption of all preferred shares is subject to regulatory approval. MFC may redeem each series, in whole or in part, at par, on the earliest redemption dates or
every five years thereafter, except for Class A Series 2, Class A Series 3 and Class 1 Series 4 preferred shares. Class A Series 2 and Series 3 preferred shares
are past their respective earliest redemption date and MFC may redeem these preferred shares, in whole or in part, at par at any time, subject to regulatory
approval. MFC may redeem the Class 1 Series 4 preferred shares, in whole or in part, at any time, at $25.00 per share if redeemed on June 19, 2026 (the earliest
redemption date) and on June 19 every five years thereafter, or at $25.50 per share if redeemed on any other date after June 19, 2021, subject to regulatory
approval.
Footnote Number (3) Redemption of all LRCN series is subject to regulatory approval. MFC may at its option redeem each series in whole or in part, at a redemption price equal to par,
together with accrued and unpaid interest. The redemption period for Series 1 is every five years during the period from May 19 and including June 19,
commencing in 2026. The redemption period for Series 2 is every five years during the period from February 19 to and including March 19, commencing in 2027.
After the first redemption date, the redemption period for Series 3 is every five years during the period from May 19 to and including June 19, commencing in
2032.
(4) Net of after-tax issuance costs.
Footnote Number (5) On the earliest redemption date and every five years thereafter, the annual dividend rate will be reset to the five-year Government of Canada bond yield plus a
yield specified for each series. The specified yield for Class 1 preferred shares is: Series 3 – 1.41%, Series 9 – 2.86%, Series 11 – 2.61%, Series 13 – 2.22%,
Series 15 – 2.16%, Series 17 – 2.36%, Series 19 – 2.30%, and Series 25 – 2.55%.
Footnote Number (6) On the earliest redemption date and every five years thereafter, Class 1 preferred shares are convertible at the option of the holder into a new series that is one
number higher than their existing series, and the holders are entitled to non-cumulative preferential cash dividends, payable quarterly if and when declared by the
Board of Directors, at a rate equal to the three-month Government of Canada Treasury bill yield plus the rate specified in footnote 5 above.
Footnote Number (7) The floating dividend rate for the Class 1 Series 4 shares equals the three-month Government of Canada Treasury bill yield plus 1.41%.
Footnote Number (8) MFC did not exercise its right to redeem the outstanding Class 1 Shares Series 15 on June 19, 2024, which was the earliest redemption date. The dividend rate
was reset as specified in footnote 5 above to an annual fixed rate of 5.775%, for a five-year period commencing on June 20, 2024.
Footnote Number (9) MFC did not exercise its right to redeem the outstanding Class 1 Shares Series 17 on December 19, 2024, which was the earliest redemption date. The dividend
rate was reset as specified in footnote 5 above to an annual fixed rate of 5.542%, for a five-year period commencing on December 20, 2024.
Footnote Number (10)Non-payment of distributions or principal on any LRCN series when due will result in a recourse event. The recourse of each noteholder will be limited to their
proportionate amount of the Limited Recourse Trust’s assets which comprise of Class 1 Series 27 preferred shares for LRCN Series 1, Class 1 Series 28
preferred shares for LRCN Series 2, and Class 1 Series 29 preferred shares for LRCN Series 3. All claims of the holders of LRCN series against MFC will be
extinguished upon receipt of the corresponding trust assets. The Class 1 Series 27, Class 1 Series 28 and Class 1 Series 29 preferred shares are eliminated on
consolidation while being held in the Limited Recourse Trust.
Footnote Number (11)The LRCN Series 1 pay a distribution at a fixed rate of 3.375% payable semi-annually, until June 18, 2026; on June 19, 2026 and every five years thereafter until
June 19, 2076, the rate will be reset at a rate equal to the five-year Government of Canada yield as defined in the prospectus, plus 2.839%. The LRCN Series 2
pay a distribution at a fixed rate of 4.10% payable semi-annually, until March 18, 2027; on March 19, 2027 and every five years thereafter until March 19, 2077,
the rate will be reset at a rate equal to the five-year Government of Canada yield as defined in the prospectus, plus 2.704%. The LRCN Series 3 pay a distribution
at a fixed rate of 7.117% payable semi-annually, until June 18, 2027; on June 19, 2027 and every five years thereafter until June 19, 2077, the rate will be reset at
a rate equal to the five-year Government of Canada yield as defined in the prospectus, plus 3.95%.
243
(b) Common shares
As at December 31, 2024, there were 12 million outstanding stock options and deferred share units that entitle the holders to
receive common shares or payment in cash or common shares, at the option of the holders (2023 – 17 million).
The following table presents changes in common shares issued and outstanding.
For the years ended December 31,
2024
2023
Number of
shares
(in millions)
Amount
Number of
shares
(in millions)
Amount
Balance, beginning of year
1,806
$ 21,527
1,865
$ 22,178
Repurchased for cancellation
(83)
(989)
(63)
(745)
Issued on exercise of stock options and deferred share units
6
143
4
94
Balance, end of year
1,729
$ 20,681
1,806
$ 21,527
Normal course issuer bid
On February 20, 2024, the Company announced that the Toronto Stock Exchange (“TSX”) approved a normal course issuer bid
(the “2024 NCIB”) permitting the purchase for cancellation of up to 50 million of its common shares, representing approximately
2.8% of its common shares outstanding as at February 12, 2024. On May 7, 2024, the Company announced that the TSX
approved an amendment to the 2024 NCIB to increase the number of common shares that it may repurchase for cancellation to
90 million of its common shares, representing approximately 5% of common shares outstanding as at February 12, 2024.
Purchases under the 2024 NCIB, as subsequently amended, commenced on February 23, 2024, and will continue until
February 22, 2025, when the NCIB expires, or such earlier date as the Company completes its purchases. During the year
ended December 31, 2024, the Company purchased for cancellation under the 2024 NCIB 82.8 million common shares for
$3,212 and incurred $60 of tax on net repurchases of equity. Of this, $990 was recorded in common shares and $2,282 was
recorded in retained earnings in the Consolidated Statements of Changes in Equity.
The Company’s 2023 NCIB which was announced on February 21, 2023, expired on February 22, 2024, with no purchases
during the year ended December 31, 2024. The Company’s 2022 NCIB, which was announced on February 1, 2022, expired on
February 2, 2023.
During the year ended December 31, 2023, the Company purchased for cancellation 62.6 million common shares for a total cost
of $1,595, including 6.9 million common shares for $175 under the 2022 NCIB. Of this, $745 was recorded in common shares
and $850 was recorded in retained earnings in the Consolidated Statements of Changes in Equity.
On February 19, 2025, the Company announced that it is launching a normal course issuer bid (the “2025 NCIB”) permitting the
purchase for cancellation of up to 51.5 million common shares, representing approximately 3.0% of common shares outstanding.
The Company has received approval from both the TSX and OSFI for the 2025 NCIB. Purchases under the 2025 NCIB may
commence on February 24, 2025 and continue until February 23, 2026, when the 2025 NCIB expires, or such earlier date as the
Company completes its purchases.
(c) Earnings per share
The following table presents basic and diluted earnings per common share of the Company.
For the years ended December 31,
2024
2023
Basic earnings per common share
$ 2.85
$ 2.62
Diluted earnings per common share
2.84
2.61
The following is a reconciliation of the denominator (number of shares) in the calculation of basic and diluted earnings per
common share.
For the years ended December 31,
2024
2023
Weighted average number of common shares (in millions)
1,779
1,834
Dilutive stock-based awards(1) (in millions)
6
4
Weighted average number of diluted common shares (in millions)
1,785
1,838
Footnote Number (1)The dilutive effect of stock-based awards was calculated using the treasury stock method. This method calculates the number of incremental shares by assuming
the outstanding stock-based awards are (i) exercised and (ii) then reduced by the number of shares assumed to be repurchased from the issuance proceeds,
using the average market price of MFC common shares for the year. Excluded from the calculation was a weighted average of nil (2023 – nil) anti-dilutive stock-
based awards.
(d) Quarterly dividend declaration subsequent to year end
On February 19, 2025, the Company’s Board of Directors approved a quarterly dividend of $0.44 per share on the common
shares of MFC, payable on or after March 19, 2025 to shareholders of record at the close of business on March 5, 2025.
244 | 2024 Annual Report | Notes to Consolidated Financial Statements
The Board also declared dividends on the following non-cumulative preferred shares, payable on or after March 19, 2025 to
shareholders of record at the close of business on March 5, 2025.
Class A Shares Series 2 – $0.290630 per share
Class A Shares Series 3 – $0.281250 per share
Class 1 Shares Series 3 – $0.146750 per share
Class 1 Shares Series 4 – $0.301500 per share
Class 1 Shares Series 9 – $0.373625 per share
Class 1 Shares Series 11 – $0.384938 per share
Class 1 Shares Series 13 – $0.396875 per share
Class 1 Shares Series 15 – $0.360938 per share
Class 1 Shares Series 17 – $0.346375 per share
Class 1 Shares Series 19 – $0.229688 per share
Class 1 Shares Series 25 – $0.371375 per share
Note 12 Capital Management
(a) Capital management
The Company monitors and manages its consolidated capital in compliance with the Life Insurance Capital Adequacy Test
(“LICAT”) guideline, the capital framework issued by OSFI. Under the capital framework, the Company’s consolidated capital
resources, including available capital, surplus allowance, and eligible deposits, are measured against the base solvency buffer,
which is the risk based capital requirement determined in accordance with the guideline.
The Company’s operating activities are primarily conducted within MLI and its subsidiaries. MLI is also regulated by OSFI and is
therefore subject to consolidated risk based capital requirements using the OSFI LICAT framework.
The Company seeks to manage its capital with the objectives of:
• Operating with sufficient capital to be able to honour all commitments to its policyholders and creditors with a high degree of
confidence;
• Retaining the ongoing confidence of regulators, policyholders, rating agencies, investors and other creditors in order to ensure
access to capital markets; and
• Optimizing return on capital to meet shareholders’ expectations subject to constraints and considerations of adequate levels
of capital established to meet the first two objectives.
Capital is managed and monitored in accordance with the Capital Management Policy. The policy is reviewed and approved by
the Board of Directors annually and is integrated with the Company’s risk and financial management frameworks. It establishes
guidelines regarding the quantity and quality of capital, internal capital mobility, and proactive management of ongoing and future
capital requirements.
The capital management framework considers the requirements of the Company as a whole as well as the needs of each of the
Company’s subsidiaries. Internal capital targets are set above the regulatory requirements, and consider a number of factors,
including expectations of regulators and rating agencies, results of sensitivity and stress testing and the Company’s own risk
assessments. The Company monitors against these internal targets and initiates actions appropriate to achieving its business
objectives.
Consolidated capital, whose components are based on accounting standards, is presented in the table below for MFC. For
regulatory reporting purposes, under the LICAT framework, the numbers are further adjusted for various additions or deductions
to capital as mandated by the guidelines used by OSFI.
Consolidated capital
As at December 31,
2024
2023
Total equity
$ 52,960
$ 48,727
Exclude AOCI gain / (loss) on cash flow hedges
119
26
Total equity excluding AOCI on cash flow hedges
52,841
48,701
Post-tax CSM
20,826
18,503
Qualifying capital instruments
7,532
6,667
Consolidated capital
$ 81,199
$ 73,871
(b) Restrictions on dividends and capital distributions
Dividends and capital distributions are restricted under the Insurance Companies Act (“ICA”). These restrictions apply to both
MFC and its primary operating subsidiary MLI. The ICA prohibits the declaration or payment of any dividend on shares of an
insurance company if there are reasonable grounds for believing a company does not have adequate capital and adequate and
appropriate forms of liquidity or the declaration or payment of the dividend would cause the company to be in contravention of
any regulation made under the ICA respecting the maintenance of adequate capital and adequate and appropriate forms of
liquidity, or of any direction made to the company by OSFI. The ICA also requires an insurance company to notify OSFI of the
245
declaration of a dividend at least 15 days prior to the date fixed for its payment. Similarly, the ICA prohibits the purchase for
cancellation of any shares issued by an insurance company or the redemption of any redeemable shares or other similar capital
transactions, if there are reasonable grounds for believing that the company does not have adequate capital and adequate and
appropriate forms of liquidity or the payment would cause the company to be in contravention of any regulation made under the
ICA respecting the maintenance of adequate capital and adequate and appropriate forms of liquidity, or any direction made to
the company by OSFI. These latter transactions would require the prior approval of OSFI.
The ICA requires Canadian insurance companies to maintain adequate levels of capital at all times.
Since MFC is a holding company that conducts all of its operations through regulated insurance subsidiaries (or companies
owned directly or indirectly by these subsidiaries), its ability to pay future dividends will depend on the receipt of sufficient funds
from its regulated insurance subsidiaries. These subsidiaries are also subject to certain regulatory restrictions under laws in
Canada, the United States and certain other countries that may limit their ability to pay dividends or make other upstream
distributions.
Note 13 Revenue from Service Contracts
The Company provides investment management services, transaction processing and administrative services, and distribution
and related services to proprietary and third-party investment funds, retirement plans, group benefit plans, institutional investors
and other arrangements. The Company also provides real estate management services to tenants of its investment properties.
The Company’s service contracts generally impose single performance obligations, each consisting of a series of similar related
services for each customer.
The Company’s performance obligations within service arrangements are generally satisfied over time as the customer
simultaneously receives and consumes the benefits of the services rendered, measured using an output method. Fees typically
include variable consideration and the related revenue is recognized to the extent that it is highly probable that a significant
reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved.
Asset-based fees vary with the asset values of accounts under management, subject to market conditions and investor
behaviours beyond the Company’s control. Transaction processing and administrative fees vary with activity volumes, also
beyond the Company’s control. Some fees, including distribution fees, are based on account balances and transaction volumes.
Fees related to account balances and transaction volumes are measured daily. Real estate management service fees include
fixed portions plus recovery of variable costs of services rendered to tenants. Fees related to services provided are generally
recognized as services are rendered, which is when it becomes highly probable that no significant reversal of cumulative
revenue recognized will occur. The Company has determined that its service contracts have no significant financing components
because fees are collected monthly. The Company has no significant contract assets or contract liabilities.
The following tables present revenue from service contracts by service lines and reporting segments as disclosed in note 19.
For the year ended December 31, 2024
Global
WAM
Asia,
Canada,
U.S., and
Corporate
and Other
Total
Investment management and other related fees
$ 3,612
$ (489)
$ 3,123
Transaction processing, administration and service fees
2,908
298
3,206
Distribution fees and other
918
46
964
Total included in other revenue
7,438
(145)
7,293
Revenue from non-service lines
1
294
295
Total other revenue
$ 7,439
$ 149
$ 7,588
Real estate management services included in net investment income
Do
llar Zero
$ 317
$
317
For the year ended December 31, 2023
Global
WAM
Asia,
Canada,
U.S., and
Corporate
and Other
Total
Investment management and other related fees
$ 3,298
$ (412)
$ 2,886
Transaction processing, administration and service fees
2,566
269
2,835
Distribution fees and other
842
54
896
Total included in other revenue
6,706
(89)
6,617
Revenue from non-service lines
3
126
129
Total other revenue
$ 6,709
$
37
$ 6,746
Real estate management services included in net investment income
$
-
$ 303
$
303
246 | 2024 Annual Report | Notes to Consolidated Financial Statements
Note 14 Stock-Based Compensation
(a) Stock options
The Company grants stock options under its Executive Stock Option Plan (“ESOP”) to selected individuals. The options provide
the holder the right to purchase MFC common shares at an exercise price equal to the higher of the prior day, prior five-day or
prior ten-day average closing market price of the shares on the Toronto Stock Exchange on the date the options are granted.
The options vest over a period not exceeding four years and expire not more than ten years from the grant date. Effective with
the 2015 grant, options may only be exercised after the fifth-year anniversary. A total of 73,600,000 common shares have been
reserved for issuance under the ESOP.
Options outstanding
For the years ended December 31,
2024
2023
Number of
options
(in millions)
Weighted
average
exercise price
Number of
options
(in millions)
Weighted
average
exercise price
Outstanding, January 1
16
$ 22.73
20
$ 22.42
Forfeited
Zero
Zero
Zero
24.27
Exercised
(5)
21.56
(4)
21.02
Outstanding, December 31
11
$ 23.35
16
$ 22.73
Exercisable, December 31
6
$ 22.66
9
$ 21.99
For the year ended December 31, 2024
Options outstanding
Options exercisable
Number of
options
(in millions)
Weighted
average
exercise price
Weighted average
remaining
contractual life
(in years)
Number of
options
(in millions)
Weighted
average
exercise price
Weighted average
remaining
contractual life
(in years)
$17.59 - $20.99
1
$ 17.59
1.15
1
$ 17.59
1.15
$21.00 - $24.73
10
$ 23.93
4.04
5
$ 23.58
3.21
Total
11
$ 23.35
3.78
6
$ 22.66
2.89
No stock options were granted in 2024 or 2023.
Compensation expense related to stock options was $nil for the year ended December 31, 2024 (2023 – $2).
(b) Deferred share units
In 2000, the Company granted deferred share units (“DSUs”) on a one-time basis to certain employees under the ESOP. These
DSUs vest over a three-year period and each DSU entitles the holder to receive one common share on retirement or termination
of employment. When dividends are paid on common shares, holders of DSUs are deemed to receive dividends at the same
rate, payable in the form of additional DSUs. The number of these DSUs outstanding was 149,000 as at December 31, 2024
(2023 – 143,000).
In addition, for certain employees and pursuant to the Company’s deferred compensation program, the Company grants DSUs
under the Restricted Share Units (“RSUs”) Plan which entitle the holder to receive payment in cash equal to the value of the
same number of common shares plus credited dividends on retirement or termination of employment. In 2024, the Company
granted 45,000 DSUs (2023 – 38,000) to certain employees which vest after 36 months. In 2024, 44,000 DSUs (2023 – 33,000)
were granted to certain employees who elected to defer receipt of all or part of their annual bonus, and these DSUs vested
immediately. In 2024, 19,000 DSUs (2023 – 18,000) were granted to certain employees who elected to defer payment of all or
part of their RSUs, and these DSUs also vested immediately.
Under the Stock Plan for Non-Employee Directors, each eligible director may elect to receive his or her annual director’s retainer
and fees in DSUs (which vest immediately) or common shares in lieu of cash. In 2024, 85,000 DSUs (2023 – 117,000) were
issued under this arrangement. Upon termination of their Board service, an eligible director who has elected to receive DSUs will
be entitled to receive cash equal to the value of the DSUs accumulated in their account, or at their direction, an equivalent
number of common shares. The Company is allowed to issue up to one million common shares under this plan, after which
awards may be settled using shares purchased in the open market.
247
The fair value of 193,000 DSUs issued during the year was $44.16 per unit as at December 31, 2024 (2023 – 206,000 at $29.28
per unit).
For the years ended December 31,
Number of DSUs (in thousands)
2024
2023
Outstanding, January 1
1,963
2,373
Issued
193
206
Reinvested
86
131
Redeemed
(191)
(744)
Forfeitures and cancellations
(1)
(3)
Outstanding, December 31
2,050
1,963
Of the DSUs outstanding as at December 31, 2024, 149,000 (2023 – 143,000) entitle the holder to receive common shares,
867,000 (2023 – 913,000) entitle the holder to receive payment in cash and 1,034,000 (2023 – 907,000) entitle the holder to
receive payment in cash or common shares, at the option of the holder.
Compensation expense related to DSUs was $10 for the year ended December 31, 2024 (2023 – $9).
The carrying and fair value of the DSUs liability as at December 31, 2024 was $84 (2023 – $62) and was included in other
liabilities.
(c) Restricted share units and performance share units
For the year ended December 31, 2024, 6.7 million RSUs (2023 – 8.5 million) and 1.5 million PSUs (2023 – 1.6 million) were
granted to certain eligible employees under MFC’s Restricted Share Unit Plan. The fair value of the RSUs and PSUs granted
during the year was $44.16 per unit as at December 31, 2024 (2023 – $29.28 per unit). Each RSU and PSU entitles the holder to
receive payment equal to the market value of one common share, plus credited dividends, at the time of vesting, subject to any
performance conditions.
RSUs and PSUs granted in March 2024 will vest after 36 months from their grant date and the related compensation expense is
recognized over this period, unless the employee is eligible to retire at the time of grant or will be eligible to retire during the
vesting period, in which case the cost is recognized at the grant date or over the period between the grant date and the date on
which the employee is eligible to retire, respectively. Compensation expense related to RSUs and PSUs was $215 and $96,
respectively, for the year ended December 31, 2024 (2023 – $207 and $45, respectively).
The carrying and fair value of the RSUs and PSUs liability as at December 31, 2024 was $910 (2023 – $514) and was included
in other liabilities.
(d) Global share ownership plan
The Company’s Global Share Ownership Plan allows qualifying employees to apply up to five per cent of their annual base
earnings toward the purchase of common shares. The Company matches a percentage of the employee’s eligible contributions
up to a maximum amount. The Company’s contributions vest immediately. All contributions are used to purchase common
shares in the open market on behalf of participating employees.
Note 15 Employee Future Benefits
The Company maintains defined contribution and defined benefit pension plans and other post-employment plans for employees
and agents including registered (tax-qualified) pension plans that are typically funded, as well as supplemental non-registered
(non-qualified) pension plans for executives, retiree welfare plans and disability welfare plans that are typically not funded.
(a) Plan characteristics
The Company’s final average pay defined benefit pension plans and retiree welfare plans are closed to new members. All
employees may participate in capital accumulation plans including defined benefit cash balance plans, 401(k) plans and / or
defined contribution plans, depending on the country of employment.
All pension arrangements are governed by local pension committees or management or the Company’s Board of Directors, but
all significant plan changes require approval from the Board of Directors.
The Company’s funding policy for defined benefit pension plans is to make the minimum annual contributions required by
regulations in the countries in which the plans are offered. Assumptions and methods prescribed for regulatory funding purposes
typically differ from those used for accounting purposes.
The Company’s remaining defined benefit pension and / or retiree welfare plans are in the U.S., Canada, Japan and Taiwan
(China). There are also disability welfare plans in the U.S. and Canada.
The largest defined benefit pension and retiree welfare plans are the primary plans for employees in the U.S. and Canada.
These are the material plans discussed in the balance of this note. The Company measures its defined benefit obligations and
fair value of plan assets for accounting purposes as at December 31 each year.
248 | 2024 Annual Report | Notes to Consolidated Financial Statements
U.S. defined benefit pension and retiree welfare plans
The Company operates a qualified cash balance plan that is open to new members, a closed non-qualified cash balance plan,
and a closed retiree welfare plan.
Actuarial valuations to determine the Company’s minimum funding contributions for the qualified cash balance plan are required
annually. Deficits revealed in the funding valuations must generally be funded over a period of up to seven years. It is expected
that there will be no required funding for this plan in 2025. No assets are held in the non-qualified cash balance plan.
The retiree welfare plan subsidizes the cost of life insurance and medical benefits. The majority of those members who retired
after 1991 receive a fixed-dollar subsidy from the Company based on length of service. The plan was closed to employees hired
after 2004. While assets have been set aside in a qualified trust to pay future retiree welfare benefits, this funding is optional.
Retiree welfare benefits offered under the plan coordinate with the U.S. Medicare program to make optimal use of available
federal financial support.
The qualified pension and retiree welfare plans are governed by the U.S. Benefits Committee, while the non-qualified pension
plan is governed by the U.S. Non-Qualified Plans Subcommittee.
Canadian defined benefit pension and retiree welfare plans
The Company’s defined benefit plans in Canada include two registered final average pay pension plans, a non-registered
supplemental final average pay pension plan and a retiree welfare plan, all of which have been closed to new members.
Actuarial valuations to determine the Company’s minimum funding contributions for the registered pension plans are required at
least once every three years. Deficits revealed in the funding valuation must generally be funded over a period of ten years. For
2025, the required funding for these plans is expected to be $2. No assets are held in the non-registered supplemental pension
plan.
The retiree welfare plan subsidizes the cost of life insurance, medical and dental benefits. These subsidies are a fixed-dollar
amount for members who retired after April 30, 2013 and have been eliminated for members who retire after 2019. No assets are
held in this plan.
The registered pension plans are governed by Pension Committees, while the supplemental non-registered plan is governed by
the Board of Directors. The retiree welfare plan is governed by management.
(b) Risks
In final average pay pension plans and retiree welfare plans, the Company generally bears the material risks which include
interest rate, investment, longevity and health care cost inflation risks. In defined contribution plans, these risks are typically
borne by the employee. In cash balance plans, the interest rate, investment and longevity risks are partially transferred to the
employee.
Material sources of risk to the Company for all plans include:
• A decline in discount rates that increases the defined benefit obligations by more than the increase in value of plan assets;
• Lower than expected rates of mortality; and
• For retiree welfare plans, higher than expected health care costs.
The Company has managed these risks through plan design and eligibility changes that have limited the size and growth of the
defined benefit obligations. Investment risks for funded plans are managed by investing significantly in asset classes which are
highly correlated with the plans’ liabilities.
In the U.S., delegated committee representatives and management review the financial status of the qualified defined benefit
pension plan at least monthly, and steps are taken in accordance with an established dynamic investment policy to increase the
plan’s allocation to asset classes which are highly correlated with the plan’s liabilities and reduce investment risk as the funded
status improves. As at December 31, 2024, the target asset allocation for the plan was 30% return-seeking assets and 70%
liability-hedging assets (2023 – 30% and 70%, respectively).
In Canada, internal committees and management review the financial status of the registered defined benefit pension plans on at
least a quarterly basis. As at December 31, 2024, the target asset allocation for the plans was 17% return-seeking assets and
83% liability-hedging assets (2023 – 17% and 83%, respectively).
249
(c) Pension and retiree welfare plans
The following tables present the reconciliation of defined benefit obligation and fair value of plan assets for the pension plans and
retiree welfare plans.
For the years ended December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
Changes in defined benefit obligation:
Opening balance, January 1
$ 3,789
$ 3,794
$ 450
$ 466
Current service cost
44
41
Zero
Zero
Past service cost - amendment
Zero
Zero
Zero
Zero
Interest cost
176
184
21
22
Plan participants’ contributions
Zero
Zero
2
3
Actuarial losses (gains) due to:
Experience
2
11
(16)
(10)
Demographic assumption changes
Zero
14
Zero
1
Economic assumption changes
(101)
119
(19)
16
Benefits paid
(303)
(308)
(40)
(38)
Impact of changes in foreign exchange rates
219
(66)
30
(10)
Defined benefit obligation, December 31
$ 3,826
$ 3,789
$ 428
$ 450
For the years ended December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
Changes in plan assets:
Fair value of plan assets, opening balance, January 1
$ 3,706
$ 3,722
$ 526
$ 523
Interest income
174
181
26
25
Return on plan assets (excluding interest income)
(31)
129
(19)
17
Employer contributions
57
59
12
12
Plan participants’ contributions
Zero
Zero
2
3
Benefits paid
(303)
(308)
(40)
(38)
Administration costs
(8)
(10)
(2)
(1)
Impact of changes in foreign exchange rates
225
(67)
48
(15)
Fair value of plan assets, December 31
$ 3,820
$ 3,706
$ 553
$ 526
(d) Amounts recognized in the Consolidated Statements of Financial Position
The following table presents the deficit (surplus) and net defined benefit liability (asset) for the pension plans and retiree welfare
plans.
As at December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
Development of net defined benefit liability
Defined benefit obligation
$ 3,826
$ 3,789
$ 428
$ 450
Fair value of plan assets
3,820
3,706
553
526
Deficit (surplus)
6
83
(125)
(76)
Effect of asset limitRefer to footnote number (1)
44
41
Zero
Zero
Deficit (surplus) and net defined benefit liability (asset)
50
124
(125)
(76)
Deficit (surplus) is comprised of:
Funded or partially funded plans
(483)
(422)
(221)
(190)
Unfunded plans
533
546
96
114
Deficit (surplus) and net defined benefit liability (asset)
$
50
$
124
$ (125)
$ (76)
Footnote Number (1)The asset limit relates to a registered pension plan in Canada. The surplus in that plan is above the present value of economic benefits that can be derived by the
Company through reductions in future contributions. For other funded pension plans in surplus position, the present value of the economic benefits available in the
form of reductions in future contributions to the plans remains greater than the current surplus.
250 | 2024 Annual Report | Notes to Consolidated Financial Statements
(e) Disaggregation of defined benefit obligation
The following table presents components of the defined benefit obligation between active members and inactive and retired
members.
As at December 31,
U.S. plans
Canadian plans
Pension plans
Retiree welfare plans
Pension plans
Retiree welfare plans
2024
2023
2024
2023
2024
2023
2024
2023
Active members
$
578
$
526
$
8
$
9
$
106
$
116
Do
llar Zero
Do
llar Zero
Inactive and retired members
1,922
1,907
324
327
1,220
1,240
96
114
Total
$ 2,500
$ 2,433
$ 332
$ 336
$ 1,326
$ 1,356
$ 96
$ 114
(f) Fair value measurements
The following tables present major categories of plan assets and the allocation to each category.
As at December 31, 2024
U.S. plansRefer to footnote number (1)
Canadian plansRefer to footnote number (2)
Pension plans
Retiree welfare plans
Pension plans
Retiree welfare plans
Fair value
% of total
Fair value
% of total
Fair value
% of total
Fair value
% of total
Cash and cash equivalents
$
35
1%
$
23
4%
$
11
1%
D ollar Zero
Zero Percentage
Public equity securities(3)
346
14%
41
7%
205
17%
Zero
Zero Percentage
Public debt securities
1,513
57%
476
87%
968
82%
Zero
Zero Percentage
Other investments(4)
741
28%
13
2%
1
Zero Percentage
Zero
Zero Percentage
Total
$ 2,635
100%
$ 553
100%
$ 1,185
100%
D ollar Zero
Zero Percentage
Footnote Number (1)The U.S. pension and retiree welfare plan assets have daily quoted prices in active markets, except for the private debt, infrastructure, private equity, real estate,
timberland and agriculture assets. In the aggregate, the latter assets represent approximately 16% of all U.S. pension and retiree welfare plan assets as at
December 31, 2024 (2023 – 16%).
Footnote Number (2)All the Canadian pension plan assets have daily quoted prices in active markets, except for group annuity contract assets that represent approximately 0.1% of all
Canadian pension plan assets as at December 31, 2024 (2023 – 0.1%).
Footnote Number (3)Equity securities include direct investments in Manulife common shares of $2.1 (2023 – $1.4) in the U.S. retiree welfare plan.
Footnote Number (4)Other U.S. plan assets include investments in private debt, infrastructure, private equity, real estate, timberland and agriculture assets and managed futures. Other
Canadian pension plan assets include investments in the group annuity contracts.
As at December 31, 2023
U.S. plansRefer to footnote number (1)
Canadian plansRefer to footnote number (2)
Pension plans
Retiree welfare plans
Pension plans
Retiree welfare plans
Fair value
% of total
Fair value
% of total
Fair value
% of total
Fair value
% of total
Cash and cash equivalents
$
28
1%
$
25
5%
$
15
1%
Do llar Zero
Zero Percentage
Public equity securitiesRefer to footnote number (3)
315
13%
39
7%
195
17%
Zero
Zero Percentage
Public debt securities
1,437
57%
448
85%
974
82%
Zero
Zero Percentage
Other investments(4)
741
29%
14
3%
1
-%
-
-%
Total
$ 2,521
100%
$ 526
100%
$ 1,185
100%
Do llar Zero
Zero Percentage
Note: For footnotes (1) to (4), refer to the “Fair value measurements” table as at December 31, 2024 above.
(g) Net benefit cost recognized in the Consolidated Statements of Income
The following table presents components of the net benefit cost for the pension plans and retiree welfare plans.
For the years ended December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
Defined benefit current service costRefer to footnote number (1)
$
44
$
41
D
ollar Zero
D
ollar Zero
Defined benefit administrative expenses
8
10
2
1
Past service cost – plan amendments and curtailments
Zero
Zero
Zero
Zero
Service cost
52
51
2
1
Interest on net defined benefit (asset) liability
4
5
(5)
(3)
Defined benefit cost
56
56
(3)
(2)
Defined contribution cost
97
93
Zero
Zero
Net benefit cost
$ 153
$ 149
$ (3)
$ (2)
Footnote Number (1)There are no significant current service costs for the retiree welfare plans as they are closed and mostly frozen. The re-measurement gain or loss on these plans is
due to the volatility of discount rates and investment returns.
251
(h) Re-measurement effects recognized in Other Comprehensive Income
The following table presents components of the re-measurement effects recognized in Other Comprehensive Income for the
pension plans and retiree welfare plans.
For the years ended December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
Actuarial gains (losses) on defined benefit obligations due to:
Experience
$ (2)
$ (11)
$ 16
$ 10
Demographic assumption changes
Zero
(14)
Zero
(1)
Economic assumption changes
101
(119)
19
(16)
Return on plan assets (excluding interest income)
(31)
129
(19)
17
Change in effect of asset limit (excluding interest)
(1)
10
Zero
Zero
Total re-measurement effects
$ 67
$
(5)
$ 16
$ 10
(i) Assumptions
The following table presents key assumptions used by the Company to determine the defined benefit obligation and net benefit
cost for the defined benefit pension plans and retiree welfare plans.
For the years ended December 31,
U.S. Plans
Canadian Plans
Pension plans
Retiree welfare plans
Pension plans
Retiree welfare plans
2024
2023
2024
2023
2024
2023
2024
2023
To determine the defined benefit obligation at end of
year(1):
Discount rate
5.5%
4.8%
5.4%
4.8%
4.6%
4.6%
4.7%
4.7%
Initial health care cost trend rateRefer to footnote number (2)
n/a
n/a
8.8%
9.0%
n/a
n/a
3.9%
3.9%
To determine the net defined benefit cost for the year(1):
Discount rate
4.8%
5.0%
4.8%
5.0%
4.6%
5.3%
4.7%
5.3%
Initial health care cost trend rateRefer to footnote number (2)
n/a
n/a
9.0%
7.8%
n/a
n/a
3.9%
5.3%
Footnote Number (1)Inflation and salary increase assumptions are not shown as they do not materially affect obligations and costs.
Footnote Number (2)The health care cost trend rate used to measure the U.S. based retiree welfare obligation was 8.8% grading to 4.8% for 2041 and years thereafter (2023 – 9.0%
grading to 4.8% for 2041 and years thereafter) and to measure the net benefit cost was 9.0% grading to 4.8% for 2041 and years thereafter (2023 – 7.8% grading
to 4.8% for 2035 and years thereafter). In Canada, the rate used to measure the retiree welfare obligation was 3.9% grading to 4.0% for 2029 and years thereafter
(2023 – 5.1% in 2023 and 3.9% in 2024, grading to 4.0% for 2029 and years thereafter) and to measure the net benefit cost was 5.1% in 2023 and 3.9% in 2024,
grading to 4% for 2029 and years thereafter (2023 – 5.3% grading to 4.8% for 2026 and years thereafter).
Assumptions regarding future mortality are based on published statistics and mortality tables. The following table presents
current life expectancies underlying the values of the obligations in the defined benefit pension and retiree welfare plans.
As at December 31,
U.S.
Canada
2024
2023
2024
2023
Life expectancy (in years) for those currently age 65
Males
22.2
22.2
24.4
24.3
Females
23.7
23.7
26.2
26.2
Life expectancy (in years) at age 65 for those currently age 45
Males
23.6
23.6
25.3
25.3
Females
25.1
25.0
27.1
27.1
252 | 2024 Annual Report | Notes to Consolidated Financial Statements
(j) Sensitivity of assumptions on obligations
Assumptions used can have a significant effect on the obligations reported for defined benefit pension and retiree welfare plans.
The following table sets out the potential impact on the obligations arising from changes in the key assumptions. Each sensitivity
assumes that all other assumptions are held constant. In actuality, inter-relationships among assumptions may exist.
As at December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
Discount rate:
Impact of a 1% increase
$ (260)
$ (274)
$ (34)
$ (38)
Impact of a 1% decrease
305
316
40
44
Health care cost trend rate:
Impact of a 1% increase
n/a
n/a
9
11
Impact of a 1% decrease
n/a
n/a
(8)
(10)
Mortality rates(1):
Impact of a 10% decrease
89
89
9
6
Footnote Number (1)If the actuarial estimates of mortality are adjusted in the future to reflect unexpected decreases in mortality, the effect of a 10% decrease in mortality rates at each
future age would be an increase in life expectancy at age 65 of 0.8 years for U.S. and Canadian males and females.
(k) Maturity profile
The following table presents the weighted average duration (in years) of the defined benefit obligations.
As at December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
U.S. plans
8.0
8.4
7.7
8.2
Canadian plans
10.1
9.9
10.9
11.1
(l) Cash flows – contributions
The following table presents total cash payments for all employee future benefits, comprised of cash contributed by the Company
to fund defined benefit pension and retiree welfare plans, cash payments made directly to beneficiaries in respect of unfunded
pension and retiree welfare plans, and cash contributed to defined contribution pension plans.
For the years ended December 31,
Pension plans
Retiree welfare plans
2024
2023
2024
2023
Defined benefit plans
$
57
$
59
$ 12
$ 12
Defined contribution plans
97
93
Zero
Zero
Total
$ 154
$ 152
$ 12
$ 12
The Company’s best estimate of expected cash payments for employee future benefits for the year ending December 31, 2025 is
$64 for defined benefit pension plans, $102 for defined contribution pension plans and $18 for retiree welfare plans.
Note 16 Income Taxes
(a) Income tax expense
The following table presents income tax expenses (recoveries) recognized in the Consolidated Statements of Income.
For the years ended December 31,
2024
2023
Current tax
Current year
$
655
$
568
Global Minimum Taxes
231
Zero
Adjustments related to prior years
15
(193)
Total current tax
901
375
Deferred tax
Origination and reversal of temporary differences
424
489
Adjustments related to prior years
(113)
(19)
Total deferred tax
311
470
Income tax expenses (recoveries)
$ 1,212
$
845
253
The following table discloses income tax expenses (recoveries) recognized directly in equity.
For the years ended December 31,
2024
2023
Recognized in other comprehensive income
Current income tax expenses (recoveries)
$
174
$ 320
Deferred income tax expenses (recoveries)
885
(326)
Total recognized in other comprehensive income
$ 1,059
$
(6)
Recognized in equity, other than other comprehensive income
Current income tax expenses (recoveries)
$
4
$
5
Deferred income tax expenses (recoveries)
(5)
(4)
Total income tax recognized directly in equity
$
(1)
$
1
(b) Current tax receivable and payable
As at December 31, 2024, the Company had approximately $1,070 of current tax receivable included in other assets (2023 –
$1,056) and a current tax payable of $453 included in other liabilities (2023 – $147).
(c) Tax reconciliation
The effective income tax rate reflected in the Consolidated Statements of Income varies from the Canadian tax rate of 27.80%
for the year ended December 31, 2024 (2023 – 27.80%) for the items outlined in the following table.
For the years ended December 31,
2024
2023
Net income (loss) before income taxes
$ 7,090
$ 6,452
Income tax expenses (recoveries) at Canadian statutory tax rate
$ 1,971
$ 1,794
Increase (decrease) in income taxes due to:
Tax-exempt investment income
(306)
(199)
Differences in tax rate on income not subject to tax in Canada
(938)
(770)
Adjustments to taxes related to prior years
(98)
(212)
Tax losses and temporary differences not recognized as deferred taxes
94
(38)
Global Minimum Taxes
231
Zero
Other differences
258
270
Income tax expenses (recoveries)
$ 1,212
$
845
254 | 2024 Annual Report | Notes to Consolidated Financial Statements
(d) Deferred tax assets and liabilities
The following table presents the Company’s deferred tax assets and liabilities reflected on the Consolidated Statements of
Financial Position.
As at December 31,
2024
2023
Deferred tax assets
$ 5,884
$ 6,739
Deferred tax liabilities
(1,890)
(1,697)
Net deferred tax assets (liabilities)
$ 3,994
$ 5,042
The following tables present movement of deferred tax assets and liabilities.
For the year ended December 31,
Balance,
January 1, 2024
Acquired in
business
combination
Disposals
Recognized in
income
Recognized in other
comprehensive
income
Recognized
in equity
Translation
and other
Balance,
December 31,
2024
Loss carryforwards
$
670
Do
llar Zero
Do
llar Zero
$
180
Do
llar Zero
$ (13)
$
14
$
851
Actuarial liabilities
5,813
Zero
Zero
(972)
(1,059)
(1)
383
4,164
Pensions and post-
employment benefits
171
Zero
Zero
1
(20)
Zero
1
153
Tax credits
122
Zero
Zero
109
Zero
Zero
7
238
Accrued interest
1
Zero
Zero
4
Zero
Zero
Zero
5
Real estate
(1,135)
Zero
Zero
214
1
Zero
(50)
(970)
Lease liability
38
Zero
Zero
7
Zero
1
(1)
45
Right of use asset and
sublease receivable
(34)
Zero
Zero
(8)
Zero
(1)
Zero
(43)
Securities and other
investments
86
Zero
Zero
276
197
2
(171)
390
Sale of investments
(18)
Zero
Zero
10
Zero
Zero
Zero
(8)
Goodwill and intangible assets
(822)
Zero
Zero
24
Zero
Zero
(31)
(829)
Other
150
4
Zero
(156)
(4)
17
(13)
(2)
Total
$ 5,042
$
4
Do
llar Zero
$ (311)
$ (885)
$
5
$
139
$ 3,994
For the year ended December 31,
Balance,
January 1, 2023
Acquired in
business
combination Disposals
Recognized in
income
Recognized in other
comprehensive
income
Recognized
in equity
Translation
and other
Balance,
December 31,
2023
Loss carryforwards
$
701
Do
llar Zero
Do
llar Zero
$
(18)
Do
llar Zero
$ (8)
$
(5)
$
670
Actuarial liabilities
4,507
Zero
Zero
188
1,198
Zero
(80)
5,813
Pensions and post-
employment benefits
142
Zero
Zero
4
26
Zero
(1)
171
Tax credits
109
Zero
Zero
15
Zero
Zero
(2)
122
Accrued interest
1
Zero
Zero
Zero
Zero
Zero
Zero
1
Real estate
(1,317)
Zero
Zero
168
Zero
Zero
14
(1,135)
Lease liability
47
Zero
Zero
(7)
Zero
Zero
(2)
38
Right of use asset and
sublease receivable
(41)
Zero
Zero
7
Zero
Zero
Zero
(34)
Securities and other
investments
1,560
Zero
Zero
(293)
(1,245)
2
62
86
Sale of investments
(30)
Zero
Zero
12
Zero
Zero
Zero
(18)
Goodwill and intangible assets
(828)
Zero
Zero
(12)
Zero
Zero
18
(822)
Other
321
Zero
Zero
(534)
347
10
6
150
Total
$ 5,172
Do
llar Zero
D
ollar Zero
$ (470)
$
326
$
4
$
10
$ 5,042
The total deferred tax assets as at December 31, 2024 of $5,884 (2023 – $6,739) includes $27 (2023 – $6,136) where the
Company has suffered losses in either the current or preceding year and where the recognition is dependent on future taxable
profits in the relevant jurisdictions and feasible management actions.
As at December 31, 2024, tax loss carryforwards available were approximately $4,837 (2023 – $3,549), of which $4,068 expire
between the years 2025 and 2044 while $769 have no expiry date, and capital loss carryforwards available were approximately
$27 (2023 – $5) and have no expiry date. An $851 (2023 – $670) tax benefit related to these tax loss carryforwards has been
recognized as a deferred tax asset as at December 31, 2024, and a benefit of $356 (2023 – $222) has not been recognized. The
Company has approximately $412 (2023 – $282) of tax credit carryforwards which will expire between the years 2026 and 2044
of which a benefit of $174 (2023 – $160) has not been recognized. In addition, the Company has not recognized a deferred tax
asset of $1,152 (2023 – $1,171) on other temporary differences of $5,341 (2023 – $5,333).
255
The total deferred tax liability as at December 31, 2024 was $1,890 (2023 – $1,697). This amount includes the deferred tax
liability of consolidated entities. The aggregate amount of taxable temporary differences associated with the Company’s own
investments in subsidiaries is not included in the Consolidated Financial Statements and was $14,955 (2023 – $10,908).
Note 17 Interests in Structured Entities
The Company is involved with both consolidated and unconsolidated structured entities (“SEs”) which are established to
generate investment and fee income. The Company is also involved with SEs that are used to facilitate financing for the
Company. These entities may have some or all of the following features: control is not readily identified based on voting rights;
restricted activities designed to achieve a narrow objective; high amount of leverage; and / or highly structured capital.
The Company only discloses its involvement in significant consolidated and unconsolidated SEs. In assessing the significance,
the Company considers the nature of its involvement with the SE, including whether it is sponsored by the Company (i.e., initially
organized and managed by the Company). Other factors considered include the Company’s investment in the SE as compared
to total invested assets, its returns from the SE as compared to total net investment income, the SE’s size as compared to total
funds under management, and its exposure to any other risks from its involvement with the SE.
The Company does not provide financial or other support to its SEs, when it does not have a contractual obligation to do so.
(a) Consolidated SEs
(I) Investment SEs
The Company acts as an investment manager of timberlands and timber companies. The Company’s general fund and
segregated funds invest in many of these companies. The Company has control over one timberland company which it
manages, Hancock Victoria Plantations Holdings PTY Limited (“HVPH”). HVPH is a SE primarily because the Company’s
employees exercise voting rights over it on behalf of other investors. As at December 31, 2024, the Company’s consolidated
timber assets owned by HVPH were $1,273 (2023 – $1,236). The Company does not provide guarantees to other parties against
the risk of loss from their investments in HVPH.
(II) Financing SEs
The Company securitizes certain HELOC collateralized by residential property. This activity is facilitated by consolidated entities
that are SEs because their operations are limited to issuing and servicing the Company’s funding. Further information regarding
the Company’s mortgage securitization program is included in note 3.
(b) Unconsolidated SEs
Investment SEs
The following table presents the Company’s investments and maximum exposure to loss from significant unconsolidated
investment SEs, some of which are sponsored by the Company. The Company does not provide guarantees to other parties
against the risk of loss from their investments in these SEs.
As at December 31,
Company’s investmentRefer to footnote number (1)
Company’s maximum
exposure to lossRefer to footnote number (2)
2024
2023
2024
2023
Leveraged leasesRefer to footnote number (3)
$ 4,300
$ 3,790
$ 4,300
$ 3,790
Infrastructure entitiesRefer to footnote number (4)
3,282
2,468
4,174
3,035
Timberland entities(5)
759
811
759
811
Real estate entitiesRefer to footnote number (6)
601
676
601
676
Total
$ 8,942
$ 7,745
$ 9,834
$ 8,312
Footnote Number (1) The Company’s investments in these unconsolidated SEs are included in invested assets and the Company’s returns from them are included in net investment
income and OCI.
Footnote Number (2) The Company’s maximum exposure to loss from each SE is limited to amounts invested in each, plus unfunded capital commitments, if any. The Company’s
investment commitments are disclosed in note 18. The maximum loss from any SE is expected to occur only upon the SE’s bankruptcy / liquidation.
Footnote Number (3) These entities are statutory business trusts which use capital provided by the Company and senior debt provided by other parties to finance the acquisition of
assets. These assets are leased by the trusts to third-party lessees under long-term leases. The Company owns equity capital in these trusts. The Company does
not consolidate any of these trusts because the Company does not have power to govern their financial and operating policies.
Footnote Number (4) These entities invest in infrastructure assets. The Company invests in their equity. The Company’s returns include investment income, investment management
fees, and performance fees. The Company does not control these entities because it either does not have the power to govern their financial and operating
policies or does not have significant variable returns from them, or both.
Footnote Number (5) These entities own and operate timberlands. The Company invests in their equity and debt. The Company’s returns include investment income, investment
advisory fees, forestry management fees and performance advisory fees. The Company does not control these entities because it either does not have the power
to govern their financial and operating policies or does not have significant variable returns from them, or both.
Footnote Number (6) These entities, which include the Manulife U.S. REIT, own and manage commercial real estate. The Company invests in their equity. The Company’s returns
include investment income, investment management fees, property management fees, acquisition/disposition fees and leasing fees. The Company does not
control these entities because it either does not have the power to govern their financial and operating policies or does not have significant variable returns from
them, or both.
256 | 2024 Annual Report | Notes to Consolidated Financial Statements
Financing SEs
The Company’s interests in and maximum exposure to loss from significant unconsolidated financing SEs are as follows.
As at December 31,
Company’s interestsRefer to footnote number (1)
2024
2023
Manulife Finance (Delaware), L.P.(2)
$ 710
$ 709
Total
$ 710
$ 709
Footnote Number (1)The Company’s interests include amounts borrowed from the SE; the Company’s investment in its equity and subordinated capital; and foreign currency and
interest rate swaps with it.
Footnote Number (2)This entity is a wholly owned partnership used to facilitate the Company’s financing. Refer to notes 10 and 18.
(I) Other invested assets
The Company has investment relationships with a variety of other entities, which result from its direct investment in their debt
and / or equity and which have been assessed for control. These other entities’ investments include but are not limited to
investments in infrastructure, energy, private equity, real estate and agriculture, organized as limited partnerships and limited
liability companies. Most of these other entities are not sponsored by the Company. The Company’s involvement with these
other entities is not individually significant. As such, the Company neither provides summary financial data for these entities nor
individually assesses whether they are SEs. The Company’s maximum exposure to losses because of its involvement with these
other entities is limited to its investment in them and amounts committed to be invested but not yet funded. The Company
records its income from these entities in net investment income and AOCI. The Company does not provide guarantees to other
parties against the risk of loss from their investments in these other entities.
(II) Interest in securitized assets
The Company invests in mortgage/asset-backed securities issued by securitization vehicles sponsored by other parties,
including private issuers and government sponsored issuers, to generate investment income. The Company does not own a
controlling financial interest in any of the issuers. These securitization vehicles are SEs based on their narrow scope of activities
and highly leveraged capital structures. Investments in mortgage/asset-backed securities are reported on the Consolidated
Statements of Financial Position as debt securities and private placements, and their fair value and carrying value are disclosed
in note 3. The Company’s maximum loss from these investments is limited to amounts invested.
Commercial mortgage-backed securities (“CMBS”) are secured by commercial mortgages and residential mortgage backed
securities (“RMBS”) are secured by residential mortgages. Asset-backed securities (“ABS”) may be secured by various
underlying assets including credit card receivables, automobile loans and aviation leases. The mortgage/asset-backed securities
that the Company invests in primarily originate in North America.
The following table presents investments in securitized holdings by the type and asset quality.
As at December 31,
2024
2023
CMBS
RMBS
ABS
Total
Total
AAA
$ 309
$ 2
$
870
$ 1,181
$ 1,375
AA
Zero
Zero
319
319
227
A
Zero
3
375
378
438
BBB
Zero
Zero
41
41
107
BB and below
Zero
Zero
53
53
7
Total exposure
$ 309
$ 5
$ 1,658
$ 1,972
$ 2,154
(III) Mutual funds
The Company sponsors and may invest in a range of public mutual funds with a broad range of investment styles. As sponsor,
the Company organizes mutual funds that implement investment strategies on behalf of current and future investors. The
Company earns fees which are at market rates for providing advisory and administrative services to these mutual funds.
Generally, the Company does not control its sponsored mutual funds because either the Company does not have power to
govern their financial and operating policies, or its returns in the form of fees and ownership interests are not significant, or both.
Certain mutual funds are SEs because their decision-making rights are not vested in voting equity interests and their investors
are provided with redemption rights.
The Company’s relationships with these mutual funds are not individually significant. As such, the Company neither provides
summary financial data for these mutual funds nor individually assesses whether they are SEs. The Company’s interest in
mutual funds is limited to its investment and fees earned, if any. The Company’s investments in mutual funds are recorded as
part of its investment in public equities within the Consolidated Statements of Financial Position. For information regarding the
Company’s invested assets, refer to note 3. The Company does not provide guarantees to other parties against the risk of loss
from these mutual funds.
257
As sponsor, the Company’s investment in (“seed”) startup capital of mutual funds as at December 31, 2024 was $1,149 (2023 –
$1,319). The Company’s retail mutual fund assets under management as at December 31, 2024 were $333,598 (2023 –
$277,365).
Note 18 Commitments and Contingencies
(a) Legal proceedings
The Company is regularly involved in legal actions, both as a defendant and as a plaintiff. The legal actions where the Company
is a party ordinarily relate to its activities as a provider of insurance protection or wealth management products, reinsurance, or in
its capacity as an investment adviser, employer, or taxpayer. Other life insurers and asset managers, operating in the
jurisdictions in which the Company does business, have been subject to a wide variety of other types of actions, some of which
resulted in substantial judgments or settlements against the defendants; it is possible that the Company may become involved in
similar actions in the future. In addition, government and regulatory bodies in Canada, the United States, Asia and other
jurisdictions where the Company conducts business regularly make inquiries and, from time to time, require the production of
information or conduct examinations concerning the Company’s compliance with, among other things, insurance laws, securities
laws, and laws governing the activities of broker-dealers.
In September 2023, a lawsuit was initiated against the Company in the U.S. District Court of the Southern District of New York as
a putative class action on behalf of all current and former owners of universal life insurance policies issued by the Company that
state that “cost of insurance rates will be based on future expectations that include taxes.” The Plaintiff’s theory is that the
Company impermissibly failed to decrease the cost of insurance rates charged to these policy owners after the implementation of
the Tax Cuts and Jobs Act of 2018. It is too early in the litigation to offer any reliable opinion about the scope of the class policies
that may be at issue or the likely outcome.
(b) Investment commitments
In the normal course of business, various investment commitments are outstanding which are not reflected in the Consolidated
Financial Statements. There were $15,367 (2023 – $15,117) of outstanding investment commitments as at December 31, 2024,
of which $1,143 (2023 – $781) mature in 30 days, $3,217 (2023 – $4,627) mature in 31 to 365 days and $11,007 (2023 –
$9,709) mature after one year.
(c) Letters of credit
In the normal course of business, third-party relationship banks issue letters of credit on the Company’s behalf. The Company’s
businesses utilize letters of credit for which third parties are the beneficiaries, as well as for affiliate reinsurance transactions
between its subsidiaries. As at December 31, 2024, letters of credit for which third parties are beneficiaries, in the amount of
$271 (2023 – $466), were outstanding.
258 | 2024 Annual Report | Notes to Consolidated Financial Statements
(d) Guarantees
(I) Guarantees regarding Manulife Finance (Delaware), L.P. (“MFLP”)
MFC has guaranteed the payment of amounts on the $650 subordinated debentures due on December 15, 2041 issued by
MFLP, a wholly owned unconsolidated financing entity.
The following tables present certain condensed consolidated financial information for MFC and MFLP.
Condensed Consolidated Statements of Income Information
For the year ended December 31, 2024
MFC
(Guarantor)
Subsidiaries
on a
combined
basis
Consolidation
adjustments
Total
consolidated
amounts
MFLP
Insurance service result
Do
llar Zero
$
4,001
Do
llar Zero
$
4,001
Do
llar Zero
Investment result
871
4,329
(1,679)
3,521
52
Other revenue
(34)
7,620
2
7,588
20
Net income (loss) attributed to shareholders and other equity holders
5,385
4,910
(4,910)
5,385
26
For the year ended December 31, 2023
MFC
(Guarantor)
Subsidiaries
on a
combined
basis
Consolidation
adjustments
Total
consolidated
amounts
MFLP
Insurance service result
Do
llar Zero
$
3,977
Do
llar Zero
$
3,977
Do
llar Zero
Investment result
638
3,646
(1,326)
2,958
51
Other revenue
14
6,736
(4)
6,746
(7)
Net income (loss) attributed to shareholders and other equity holders
5,103
4,785
(4,785)
5,103
1
Condensed Consolidated Statements of Financial Position
As at December 31, 2024
MFC
(Guarantor)
Subsidiaries
on a
combined
basis
Consolidation
adjustments
Total
consolidated
amounts
MFLP
Invested assets
$
126
$ 442,371
Do
llar Zero
$ 442,497
$ 16
Insurance contract assets
Zero
102
Zero
102
Zero
Reinsurance contract held assets
Zero
59,015
Zero
59,015
Zero
Total other assets
65,898
46,450
(71,132)
41,216
995
Segregated funds net assets
Zero
435,988
Zero
435,988
Zero
Insurance contract liabilities, excluding those for account of segregated
fund holders
Zero
396,401
Zero
396,401
Zero
Reinsurance contract held liabilities
Zero
2,669
Zero
2,669
Zero
Investment contract liabilities
Zero
13,498
Zero
13,498
Zero
Total other liabilities
15,052
63,825
(1,575)
77,302
726
Insurance contract liabilities for account of segregated fund holders
Zero
126,545
Zero
126,545
Zero
Investment contract liabilities for account of segregated fund holders
Zero
309,443
Zero
309,443
Zero
As at December 31, 2023
MFC
(Guarantor)
Subsidiaries
on a
combined
basis
Consolidation
adjustments
Total
consolidated
amounts
MFLP
Invested assets
$
86
$ 417,124
Do
llar Zero
$ 417,210
$
9
Insurance contract assets
Zero
145
Zero
145
Zero
Reinsurance contract held assets
Zero
42,651
Zero
42,651
Zero
Total other assets
59,023
42,411
(63,410)
38,024
969
Segregated funds net assets
Zero
377,544
Zero
377,544
Zero
Insurance contract liabilities, excluding those for account of segregated
fund holders
Zero
367,996
Zero
367,996
Zero
Reinsurance contract held liabilities
Zero
2,831
Zero
2,831
Zero
Investment contract liabilities
Zero
11,816
Zero
11,816
Zero
Total other liabilities
12,070
55,129
(539)
66,660
718
Insurance contract liabilities for account of segregated fund holders
Zero
114,143
Zero
114,143
Zero
Investment contract liabilities for account of segregated fund holders
Zero
263,401
Zero
263,401
Zero
259
(II) Guarantees regarding John Hancock Life Insurance Company (U.S.A.) (“JHUSA”)
Details of guarantees regarding certain securities issued or to be issued by JHUSA are outlined in note 23.
(e) Pledged assets
In the normal course of business, the Company pledges its assets in respect of liabilities incurred, strictly for providing collateral
to the counterparty. In the event of the Company’s default, the counterparty is entitled to apply the collateral to settle the liability.
Where pledged assets have been delivered to a counterparty, the pledged assets are returned to the Company if the underlying
transaction is terminated or, in the case of derivatives and Manulife Bank securitized mortgages, are partially returned if there is
a decrease in the net exposure due to market value changes.
The amounts pledged are as follows.
As at December 31,
2024
2023
Debt securities
Other
Debt securities
Other
In respect of:
Derivatives
$ 14,517
$
25
$ 10,431
$
26
Secured borrowingsRefer to footnote number (1)
Zero
2,216
Zero
2,220
Regulatory requirements
303
91
307
74
Repurchase agreements
658
Zero
201
Zero
Mortgages on ALDA properties
Zero
284
Zero
278
Manulife Bank securitized mortgagesRefer to footnote number (2)
Zero
7,603
Zero
6,990
Non-registered retirement plans in trust
Zero
286
Zero
298
Other
Zero
289
Zero
283
Total
$ 15,478
$ 10,794
$ 10,939
$ 10,169
Footnote Number (1)During the year, the Company pledged certain of its mortgage loans with the FHLBI. Of this amount, $1,098 (2023 – $998) is required collateral for the US$500
outstanding borrowing to JHUSA under the FHLBI facility; and $1,118 (2023 – $1,222) is excess collateral that can be called back by JHUSA at any time.
Footnote Number (2)The Manulife Bank mortgage securitization program includes CMB securitization of $3,274 (2023 – $2,900), HELOC securitization, which includes restricted cash
and short-term securities, of $3,163 (2023 – $2,912), and additional encumbrances of mortgages and cash required by the securitization program’s operations of
$1,166 (2023 – $1,178).
(f) Participating business
In some markets where the Company maintains participating accounts, there are regulatory restrictions on the amounts of profit
that can be transferred to shareholders. Where applicable, these restrictions generally take the form of a fixed percentage of
policyholder dividends. For participating businesses operating as separate “closed blocks”, transfers are governed by the terms
of MLI’s and John Hancock Mutual Life Insurance Company’s plans of demutualization.
(g) Fixed surplus notes
A third party contractually provides standby financing arrangements for the Company’s U.S. operations under which, in certain
circumstances, funds may be provided in exchange for the issuance of fixed surplus notes. As at December 31, 2024 and 2023,
the Company had no fixed surplus notes outstanding.
Note 19 Segmented Information
The Company’s reporting segments are Asia, Canada, U.S., Global WAM and Corporate and Other. Each reporting segment is
responsible for managing its operating results, developing products, defining strategies for services and distribution based on the
profile and needs of its business and market. The Company’s significant product and service offerings by the reporting segments
are mentioned below.
Wealth and asset management businesses (Global WAM) – branded as Manulife Investment Management, provides
investment advice and innovative solutions to retirement, retail, and institutional clients. Products and services are distributed
through multiple distribution channels, including agents and brokers affiliated with the Company, independent securities
brokerage firms and financial advisors pension plan consultants and banks.
Insurance and annuity products (Asia, Canada and U.S.) – include a variety of individual life insurance, individual and group
long-term care insurance and guaranteed and partially guaranteed annuity products. Products are distributed through multiple
distribution channels, including insurance agents, brokers, banks, financial planners and direct marketing. Manulife Bank of
Canada offers a variety of deposit and credit products to Canadian customers.
Corporate and Other segment – comprised of investment performance of assets backing capital, net of amounts allocated to
operating segments; costs incurred by the corporate office related to shareholder activities (not allocated to the operating
segments); financing costs; Property and Casualty Reinsurance Business; and run-off reinsurance operations including variable
annuities and accident and health. In addition, consolidations and eliminations of transactions between operating segments are
also included.
260 | 2024 Annual Report | Notes to Consolidated Financial Statements
261
(a)
Reporting segments
The following tables present results by reporting segments.
For the year ended December 31, 2024
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Insurance service result
Life, health and property and casualty insurance
$
2,228 $
1,081 $
241 Do
llar Zero
$
164 $
3,714
Annuities and pensions
(68)
239
116
Zero
Zero
287
Total insurance service result
2,160
1,320
357
Zero
164
4,001
Net investment income (loss)
7,987
5,169
4,962
(655)
1,648
19,111
Insurance finance income (expenses)
Life, health and property and casualty insurance
(5,495)
(3,846)
(5,450)
Zero
43
(14,748)
Annuities and pensions
(1,839)
196
172
Zero
Zero
(1,471)
Total insurance finance income (expenses)
(7,334)
(3,650)
(5,278)
Zero
43
(16,219)
Reinsurance finance income (expenses)
Life, health and property and casualty insurance
(65)
347
705
Zero
(2)
985
Annuities and pensions
669
(1)
(520)
Zero
Zero
148
Total reinsurance finance income (expenses)
604
346
185
Zero
(2)
1,133
Decrease (increase) in investment contract liabilities
(9)
(76)
(87)
(327)
(5)
(504)
Net segregated fund investment result
Zero
Zero
Zero
Zero
Zero
Zero
Total investment result
1,248
1,789
(218)
(982)
1,684
3,521
Other revenue
155
294
137
7,439
(437)
7,588
Other expenses
(338)
(677)
(131)
(4,703)
(490)
(6,339)
Interest expenses
(28)
(1,047)
(13)
(7)
(586)
(1,681)
Net income (loss) before income taxes
3,197
1,679
132
1,747
335
7,090
Income tax (expenses) recoveries
(460)
(353)
3
(148)
(254)
(1,212)
Net income (loss)
2,737
1,326
135
1,599
81
5,878
Less net income (loss) attributed to:
Non-controlling interests
Zero
Zero
Zero
2
4
247
Participating policyholders
141
105
Zero
Zero
Zero
246
Net income (loss) attributed to shareholders and other equity
holders
$
2,355 $
1,221
$
135
$
1,597
$
77 $
5,385
Total assets
$ 209,623 $ 158,803 $ 263,736 $ 305,968 $ 40,688 $ 978,818
For the year ended December 31, 2023
Asia
Canada
U.S.
Global
WAM
Corporate
and Other
Total
Insurance service result
Life, health and property and casualty insurance
$
2,070 $
995 $
526 Do
llar Zero $
236 $
3,827
Annuities and pensions
(129)
198
81
Zero
Zero
150
Total insurance service result
1,941
1,193
607
Zero
236
3,977
Net investment income (loss)
7,057
5,048
5,236
(771)
1,451
18,021
Insurance finance income (expenses)
Life, health and property and casualty insurance
(4,970)
(3,288)
(4,815)
Zero
723
(12,350)
Annuities and pensions
(1,466)
(27)
(51)
Zero
Zero
(1,544)
Total insurance finance income (expenses)
(6,436)
(3,315)
(4,866)
Zero
723
(13,894)
Reinsurance finance income (expenses)
Life, health and property and casualty insurance
(106)
58
385
Zero
(697)
(360)
Annuities and pensions
1
(1)
(374)
Zero
Zero
(374)
Total reinsurance finance income (expenses)
(105)
57
11
Zero
(697)
(734)
Decrease (increase) in investment contract liabilities
(38)
(73)
(148)
(175)
(1)
(435)
Net segregated fund investment result
Zero
Zero
Zero
Zero
Zero
Zero
Total investment result
478
1,717
233
(946)
1,476
2,958
Other revenue
67
272
79
6,709
(381)
6,746
Other expenses
(231)
(569)
(153)
(4,252)
(470)
(5,675)
Interest expenses
(11)
(1,004)
(15)
(14)
(510)
(1,554)
Net income (loss) before income taxes
2,244
1,609
751
1,497
351
6,452
Income tax (expenses) recoveries
(440)
(373)
(112)
(198)
278
(845)
Net income (loss)
1,804
1,236
639
1,299
629
5,607
Less net income (loss) attributed to:
Non-controlling interests
141
Zero
Zero
2
1
144
Participating policyholders
315
45
Zero
Zero
Zero
360
Net income (loss) attributed to shareholders and other equity
holders
$
1,348 $
1,191 $
639 $
1,297 $
628 $
5,103
Total assets
$ 177,623 $ 157,111 $ 244,659 $ 257,764 $ 38,417 $ 875,574
(b) Geographical location
The results of the Company’s reporting segments differ from its results by geographical location primarily due to the allocation of
Global WAM and Corporate and Other segments into the geographical location to which its businesses relate.
The following tables present results by geographical location.
For the year ended December 31, 2024
Asia
Canada
U.S.
Other
Total
Insurance service result
Life, health and property and casualty insurance
$ 2,230
$ 1,075
$
235
$ 174
$ 3,714
Annuities and pensions
(68)
239
116
Zero
287
Total insurance service result
2,162
1,314
351
174
4,001
Net investment income (loss)
8,052
5,882
5,118
59
19,111
Insurance finance income (expenses)
Life, health and property and casualty insurance
(5,495)
(3,844)
(5,409)
Zero
(14,748)
Annuities and pensions
(1,839)
196
172
Zero
(1,471)
Total insurance finance income (expenses)
(7,334)
(3,648)
(5,237)
Zero
(16,219)
Reinsurance finance income (expenses)
Life, health and property and casualty insurance
(65)
344
706
Zero
985
Annuities and pensions
669
(1)
(520)
Zero
148
Total reinsurance finance income (expenses)
604
343
186
Zero
1,133
Decrease (increase) in investment contract liabilities
(187)
(163)
(149)
(5)
(504)
Net segregated fund investment result
Zero
Zero
Zero
Zero
Zero
Total investment result
$ 1,135
$ 2,414
$
(82)
$
54
$ 3,521
Other revenue
$ 1,790
$ 2,325
$ 3,616
$ (143)
$ 7,588
For the year ended December 31, 2023
Asia
Canada
U.S.
Other
Total
Insurance service result
Life, health and property and casualty insurance
$ 2,087
$
981
$
511
$ 248
$ 3,827
Annuities and pensions
(128)
198
80
Zero
150
Total insurance service result
1,959
1,179
591
248
3,977
Net investment income (loss)
7,259
5,724
4,975
63
18,021
Insurance finance income (expenses)
Life, health and property and casualty insurance
(4,971)
(2,606)
(4,793)
20
(12,350)
Annuities and pensions
(1,466)
(27)
(51)
Zero
(1,544)
Total insurance finance income (expenses)
(6,437)
(2,633)
(4,844)
20
(13,894)
Reinsurance finance income (expenses)
Life, health and property and casualty insurance
(121)
(623)
384
Zero
(360)
Annuities and pensions
1
(1)
(374)
Zero
(374)
Total reinsurance finance income (expenses)
(120)
(624)
10
Zero
(734)
Decrease (increase) in investment contract liabilities
(220)
(130)
(79)
(6)
(435)
Net segregated fund investment result
Zero
Zero
Zero
Zero
Zero
Total investment result
$
482
$ 2,337
$
62
$
77
$ 2,958
Other revenue
$ 1,332
$ 2,147
$ 3,239
$
28
$ 6,746
Note 20 Related Parties
The Company enters into transactions with related parties in the normal course of business and at terms that would exist in
arm’s-length transactions.
(a) Transactions with certain related parties
Transactions with MFLP, a wholly owned unconsolidated partnership, are described in notes 10, 17 and 18.
(b) Compensation of key management personnel
The Company’s key management personnel are those personnel who have the authority and responsibility for planning, directing
and controlling the activities of the Company. Directors (both executive and non-executive) and senior management are
considered key management personnel. A summary of compensation of key management personnel is as follows.
For the years ended December 31,
2024
2023
Short-term employee benefits
$
99
$
83
Post-employment benefits
7
6
Share-based payments
79
73
Termination benefits
2
3
Other long-term benefits
3
3
Total
$ 190
$ 168
262 | 2024 Annual Report | Notes to Consolidated Financial Statements
Note 21 Subsidiaries
The following is a list of Manulife’s directly and indirectly held major operating subsidiaries.
As at December 31, 2024
(100% owned unless otherwise noted in brackets beside company name)
Equity
interest
Address
Description
The Manufacturers Life Insurance Company
$ 65,338
Toronto, Canada
A leading financial services group with principal
operations in Asia, Canada and the United
States that offers a diverse range of financial
protection products and wealth management
services
Manulife Holdings (Alberta) Limited
$ 22,118
Calgary, Canada
Holding company
John Hancock Financial Corporation
Boston, U.S.A.
Holding company
The Manufacturers Investment Corporation
Boston, U.S.A.
Holding company
John Hancock Reassurance Company Ltd.
Boston, U.S.A.
Captive insurance subsidiary that provides life,
annuity and long-term care reinsurance to
affiliates
John Hancock Life Insurance Company (U.S.A.)
Boston, U.S.A.
U.S. life insurance company licensed in all
states, except New York
John Hancock Subsidiaries LLC
Boston, U.S.A.
Holding company
John Hancock Financial Network, Inc.
Boston, U.S.A.
Financial services distribution organization
John Hancock Investment Management LLC
Boston, U.S.A.
Investment advisor
John Hancock Investment Management
Distributors LLC
Boston, U.S.A.
Broker-dealer
Manulife Investment Management (US) LLC
Boston, U.S.A.
Investment advisor
Manulife Investment Management Timberland and
Agriculture Inc.
Boston, U.S.A.
Manager of globally diversified timberland and
agricultural portfolios
John Hancock Life Insurance Company of New York
New York, U.S.A.
U.S. life insurance company licensed in New
York
John Hancock Variable Trust Advisers LLC
Boston, U.S.A.
Investment advisor for open-end mutual funds
John Hancock Life & Health Insurance Company
Boston, U.S.A.
U.S. life insurance company licensed in all
states
John Hancock Distributors LLC
Boston, U.S.A.
Broker-dealer
John Hancock Insurance Agency, Inc.
Boston, U.S.A.
Insurance agency
Manulife Reinsurance Limited
Hamilton, Bermuda
Provides life and financial reinsurance to
affiliates
Manulife Reinsurance (Bermuda) Limited
Hamilton, Bermuda
Provides life and financial reinsurance to
affiliates
Manulife Bank of Canada
$
1,882
Waterloo, Canada
Provides integrated banking products and
service options not available from an insurance
company
Manulife Investment Management Holdings (Canada) Inc.
$
1,477
Toronto, Canada
Holding company
Manulife Investment Management Limited
Toronto, Canada
Provides investment counseling, portfolio and
mutual fund management in Canada
First North American Insurance Company
$
8
Toronto, Canada
Property and casualty insurance company
Manulife Holdings (Bermuda) Limited
$ 21,658
Hamilton, Bermuda
Holding company
Manufacturers P&C Limited
St. Michael, Barbados
Provides property and casualty reinsurance
Manufacturers Life Reinsurance Limited
St. Michael, Barbados
Provides life and annuity reinsurance to
affiliates
Manulife Financial Asia Limited
Hong Kong, China
Holding company
Manulife (Cambodia) PLC
Phnom Penh, Cambodia
Life insurance company
Manulife Myanmar Life Insurance Company Limited
Yangon, Myanmar
Life insurance company
Manulife (Vietnam) Limited
Ho Chi Minh City, Vietnam Life insurance company
Manulife Investment Fund Management (Vietnam)
Company Limited
Ho Chi Minh City, Vietnam Fund management company
Manulife International Holdings Limited
Hong Kong, China
Holding company
Manulife (International) Limited
Hong Kong, China
Life insurance company
Manulife-Sinochem Life Insurance Co. Ltd. (51%)
Shanghai, China
Life insurance company
Manulife Investment Management International
Holdings Limited
Hong Kong, China
Holding company
263
As at December 31, 2024
(100% owned unless otherwise noted in brackets beside company name)
Equity
interest
Address
Description
Manulife Investment Management (Hong Kong)
Limited
Hong Kong, China
Investment management and advisory
company marketing mutual funds
Manulife Investment Management (Taiwan) Co.,
Ltd.
Taipei, Taiwan (China)
Investment management company
Manulife Life Insurance Company (Japan)
Tokyo, Japan
Life insurance company
Manulife Investment Management (Japan) Limited
Tokyo, Japan
Investment management and advisory
company and mutual fund business
Manulife Holdings Berhad (62.6%)
Kuala Lumpur, Malaysia
Holding company
Manulife Insurance Berhad (62.6%)
Kuala Lumpur, Malaysia
Life insurance company
Manulife Investment Management (Malaysia) Berhad
(62.6%)
Kuala Lumpur, Malaysia
Asset management company
Manulife (Singapore) Pte. Ltd.
Singapore
Life insurance company
Manulife Investment Management (Singapore) Pte. Ltd.
Singapore
Asset management company
Manulife Fund Management Co., Ltd.
Beijing, China
Mutual fund company in China
The Manufacturers Life Insurance Co. (Phils.), Inc.
Makati City, Philippines
Life insurance company
Manulife Chinabank Life Assurance Corporation (60%)
Makati City, Philippines
Life insurance company
PT Asuransi Jiwa Manulife Indonesia
Jakarta, Indonesia
Life insurance company
PT Manulife Aset Manajemen Indonesia
Jakarta, Indonesia
Investment management and investment
advisor
Manulife Investment Management (Europe) Limited
$
456
London, England
Investment management company providing
advisory services for Manulife Investment
Management’s funds, internationally
Manulife Assurance Company of Canada
$
55
Toronto, Canada
Life insurance company
EIS Services (Bermuda) Limited
$ 1,235
Hamilton, Bermuda
Investment holding company
Berkshire Insurance Services Inc.
$ 2,343
Toronto, Canada
Investment holding company
JH Investments (Delaware) LLC
Boston, U.S.A.
Investment holding company
Manulife Wealth Inc.
$
349
Oakville, Canada
Investment dealer
Manulife Investment Management (North America) Limited
$
5
Toronto, Canada
Investment advisor
Note 22 Segregated Funds
The Company manages a number of segregated funds on behalf of policyholders. Policyholders are provided with the
opportunity to invest in different categories of segregated funds that hold a range of underlying investments. The underlying
investments consist of both individual securities and mutual funds.
Segregated funds’ underlying investments may be exposed to a variety of financial and other risks. These risks are primarily
mitigated by investment guidelines that are actively monitored by professional and experienced portfolio advisors. The Company
is not exposed to these risks beyond the liabilities related to the guarantees associated with certain variable life and annuity
products included in segregated funds. Accordingly, the Company’s exposure to loss from segregated fund products is limited to
the value of these guarantees.
These guarantees are recorded within the Company’s insurance contract liabilities and amount to $1,886 (2023 – $2,675), of
which $530 are reinsured (2023 – $980). Assets supporting these guarantees, net of reinsurance, are recognized in invested
assets according to their investment type. Insurance contract liabilities for account of segregated fund holders on the
Consolidated Statements of Financial Position exclude these guarantees and are considered to be a non-distinct investment
component of insurance contract liabilities. Note 8 provides information regarding market risk sensitivities associated with
variable annuity and segregated fund guarantees.
264 | 2024 Annual Report | Notes to Consolidated Financial Statements
Note 23 Information Provided in Connection with Investments in Deferred Annuity Contracts
and SignatureNotes Issued or Assumed by John Hancock Life Insurance Company (U.S.A.)
The following condensed consolidated financial information, presented in accordance with IFRS, and the related disclosure have
been included in these Consolidated Financial Statements with respect to JHUSA in compliance with Regulation S-X and Rule
12h-5 of the United States Securities and Exchange Commission (the “Commission”). These financial statements are
incorporated by reference in certain of the MFC and its subsidiaries registration statements that are described below and relate
to MFC’s guarantee of certain securities to be issued by its subsidiaries.
JHUSA maintains a book of deferred annuity contracts that feature a market value adjustment, some of which are registered with
the Commission. The deferred annuity contracts may contain variable investment options along with fixed investment period
options, or may offer only fixed investment period options. The fixed investment period options enable the participant to invest
fixed amounts of money for fixed terms at fixed interest rates, subject to a market value adjustment if the participant desires to
terminate a fixed investment period before its maturity date. The annuity contract provides for the market value adjustment to
keep the parties whole with respect to the fixed interest bargain for the entire fixed investment period. These fixed investment
period options that contain a market value adjustment feature are referred to as “MVAs”.
JHUSA has sold medium-term notes to retail investors under its SignatureNotes program.
Effective December 31, 2009, John Hancock Variable Life Insurance Company (the “Variable Company”) and John Hancock Life
Insurance Company (the “Life Company”) merged with and into JHUSA. In connection with the mergers, JHUSA assumed the
Variable Company’s rights and obligations with respect to the MVAs issued by the Variable Company and the Life Company’s
rights and obligations with respect to the SignatureNotes issued by the Life Company.
MFC fully and unconditionally guaranteed the payment of JHUSA’s obligations under the MVAs and under the SignatureNotes
(including the MVAs and SignatureNotes assumed by JHUSA in the merger), and such MVAs and the SignatureNotes were
registered with the Commission. The SignatureNotes and MVAs assumed or issued by JHUSA are collectively referred to in this
note as the “Guaranteed Securities”. JHUSA is, and each of the Variable Company and the Life Company was, a wholly owned
subsidiary of MFC.
MFC’s guarantees of the Guaranteed Securities are unsecured obligations of MFC and are subordinated in right of payment to
the prior payment in full of all other obligations of MFC, except for other guarantees or obligations of MFC which by their terms
are designated as ranking equally in right of payment with or subordinate to MFC’s guarantees of the Guaranteed Securities.
The laws of the State of New York govern MFC’s guarantees of the SignatureNotes issued or assumed by JHUSA and the laws
of the Commonwealth of Massachusetts govern MFC’s guarantees of the MVAs issued or assumed by JHUSA. MFC has
consented to the jurisdiction of the courts of New York and Massachusetts. However, because a substantial portion of MFC’s
assets is located outside the United States, the assets of MFC located in the United States may not be sufficient to satisfy a
judgment given by a federal or state court in the United States to enforce the subordinate guarantees. In general, the federal
laws of Canada and the laws of the Province of Ontario, where MFC’s principal executive offices are located, permit an action to
be brought in Ontario to enforce such a judgment provided that such judgment is subsisting and unsatisfied for a fixed sum of
money and not void or voidable in the United States and a Canadian court will render a judgment against MFC in a certain dollar
amount, expressed in Canadian dollars, subject to customary qualifications regarding fraud, violations of public policy, laws
limiting the enforcement of creditor’s rights and applicable statutes of limitations on judgments. There is currently no public policy
in effect in the Province of Ontario that would support avoiding the recognition and enforcement in Ontario of a judgment of a
New York or Massachusetts court on MFC’s guarantees of the SignatureNotes issued or assumed by JHUSA or a
Massachusetts court on guarantees of the MVAs issued or assumed by JHUSA.
MFC is a holding company. MFC’s assets primarily consist of investments in its subsidiaries. MFC’s cash flows primarily consist
of dividends and interest payments from its operating subsidiaries, offset by expenses and shareholder dividends and MFC stock
repurchases. As a holding company, MFC’s ability to meet its cash requirements, including, but not limited to, paying any
amounts due under its guarantees, substantially depends upon dividends from its operating subsidiaries.
These subsidiaries are subject to certain regulatory restrictions under laws in Canada, the United States and certain other
countries, which may limit their ability to pay dividends or make contributions or loans to MFC. For example, some of MFC’s
subsidiaries are subject to restrictions prescribed by the ICA on their ability to declare and pay dividends. The restrictions related
to dividends imposed by the ICA are described in note 12.
In the United States, insurance laws in Michigan, New York, and Massachusetts, the jurisdictions in which certain of MFC’s U.S.
insurance company subsidiaries are domiciled, impose general limitations on the payment of dividends and other upstream
distributions or loans by these insurance subsidiaries. These limitations are described in note 12.
In Asia, the insurance laws of the jurisdictions in which MFC operates either provide for specific restrictions on the payment of
dividends or other distributions or loans by subsidiaries or impose solvency or other financial tests, which could affect the ability
of subsidiaries to pay dividends in certain circumstances.
There can be no assurance that any current or future regulatory restrictions in Canada, the United States or Asia will not impair
MFC’s ability to meet its cash requirements, including, but not limited to, paying any amounts due under its guarantees.
265
The following condensed consolidated financial information, presented in accordance with IFRS, reflects the effects of the
mergers and is provided in compliance with Regulation S-X and in accordance with Rule 12h-5 of the Commission.
Condensed Consolidated Statement of Financial Position
As at December 31, 2024
MFC
(Guarantor)
JHUSA
(Issuer)
Other
subsidiaries
Consolidation
adjustments
Consolidated
MFC
Assets
Invested assets
$
126
$ 112,444
$ 330,044
$
(117) $ 442,497
Investments in unconsolidated subsidiaries
65,350
9,393
21,510
(96,253)
Zero
Insurance contract assets
Zero
Zero
177
(75)
102
Reinsurance contract held assets
Zero
46,811
22,440
(10,236)
59,015
Other assets
548
11,182
34,660
(5,174)
41,216
Segregated funds net assets
Zero
218,909
218,681
(1,602)
435,988
Total assets
$ 66,024
$ 398,739
$ 627,512
$ (113,457) $ 978,818
Liabilities and equity
Insurance contract liabilities, excluding those for account of
segregated fund holders
Do
llar Zero
$ 148,828
$ 258,007
$
(10,434) $ 396,401
Reinsurance contract held liabilities
Zero
Zero
2,669
Zero
2,669
Investment contract liabilities
Zero
5,260
8,854
(616)
13,498
Other liabilities
1,539
8,432
58,333
(5,163)
63,141
Long-term debt
6,629
Zero
Zero
Zero
6,629
Capital instruments
6,884
Zero
648
Zero
7,532
Insurance contract liabilities for account of segregated fund holders
Zero
58,137
68,408
Zero
126,545
Investment contract liabilities for account of segregated fund holders
Zero
160,772
150,273
(1,602)
309,443
Shareholders’ and other equity
50,972
17,357
78,285
(95,642)
50,972
Participating policyholders’ equity
Zero
(47)
614
Zero
567
Non-controlling interests
Zero
Zero
1,421
Zero
1,421
Total liabilities and equity
$ 66,024
$ 398,739
$ 627,512
$ (113,457) $ 978,818
Condensed Consolidated Statement of Financial Position
As at December 31, 2023
MFC
(Guarantor)
JHUSA
(Issuer)
Other
subsidiaries
Consolidation
adjustments
Consolidated
MFC
Assets
Invested assets
$
86
$ 109,433
$ 307,930
$
(239) $ 417,210
Investments in unconsolidated subsidiaries
58,694
8,674
17,916
(85,284)
Zero
Insurance contract assets
Zero
Zero
217
(72)
145
Reinsurance contract held assets
Zero
42,418
10,380
(10,147)
42,651
Other assets
329
8,731
32,700
(3,736)
38,024
Segregated funds net assets
Zero
188,067
191,241
(1,764)
377,544
Total assets
$ 59,109
$ 357,323
$ 560,384
$ (101,242) $ 875,574
Liabilities and equity
Insurance contract liabilities, excluding those for account of
segregated fund holders
Do
llar Zero
$ 145,589
$ 232,972
$
(10,565) $ 367,996
Reinsurance contract held liabilities
Zero
Zero
2,831
Zero
2,831
Investment contract liabilities
Zero
3,487
8,928
(599)
11,816
Other liabilities
573
5,869
51,266
(3,786)
53,922
Long-term debt
6,071
Zero
Zero
Zero
6,071
Capital instruments
5,426
594
647
Zero
6,667
Insurance contract liabilities for account of segregated fund holders
Zero
51,719
62,424
Zero
114,143
Investment contract liabilities for account of segregated fund holders
Zero
136,348
128,817
(1,764)
263,401
Shareholders’ and other equity
47,039
13,773
70,755
(84,528)
47,039
Participating policyholders’ equity
Zero
(56)
313
Zero
257
Non-controlling interests
Zero
Zero
1,431
Zero
1,431
Total liabilities and equity
$ 59,109
$ 357,323
$ 560,384
$ (101,242) $ 875,574
266 | 2024 Annual Report | Notes to Consolidated Financial Statements
Condensed Consolidated Statement of Income
For the year ended December 31, 2024
MFC
(Guarantor)
JHUSA
(Issuer)
Other
subsidiaries
Consolidation
adjustments
Consolidated
MFC
Insurance service result
Insurance revenue
Do
llar Zero
$ 11,022
$ 16,654
$ (1,084)
$ 26,592
Insurance service expenses
Zero
(10,501)
(12,384)
1,063
(21,822)
Net expenses from reinsurance contracts held
Zero
(309)
(499)
39
(769)
Total insurance service result
Zero
212
3,771
18
4,001
Investment result
Net investment income (loss)
871
4,548
14,880
(1,188)
19,111
Insurance / reinsurance finance income (expenses)
Zero
(3,894)
(11,022)
(170)
(15,086)
Other investment result
Zero
(34)
(367)
(103)
(504)
Total investment result
871
620
3,491
(1,461)
3,521
Other revenue
(34)
853
7,257
(488)
7,588
Other expenses
(45)
(1,209)
(5,359)
274
(6,339)
Interest expenses
(494)
(19)
(2,825)
1,657
(1,681)
Net income (loss) before income taxes
298
457
6,335
Zero
7,090
Income tax (expenses) recoveries
(30)
52
(1,234)
Zero
(1,212)
Net income (loss) after income taxes
268
509
5,101
Zero
5,878
Equity in net income (loss) of unconsolidated subsidiaries
5,117
550
1,059
(6,726)
Zero
Net income (loss)
$ 5,385
$
1,059
$
6,160
$ (6,726)
$
5,878
Net income (loss) attributed to:
Non-controlling interests
Do
llar Zero
Do
llar Zero
$
247
Do
llar Zero
$
247
Participating policyholders
Zero
135
246
(135)
246
Shareholders and other equity holders
5,385
924
5,667
(6,591)
5,385
$ 5,385
$
1,059
$
6,160
$ (6,726)
$
5,878
Condensed Consolidated Statement of Income
For the year ended December 31, 2023
MFC
(Guarantor)
JHUSA
(Issuer)
Other
subsidiaries
Consolidation
adjustments
Consolidated
MFC
Insurance service result
Insurance revenue
Do
llar Zero
$
9,858
$ 15,754
$ (1,640)
$
23,972
Insurance service expenses
Zero
(8,928)
(12,195)
1,741
(19,382)
Net expenses from reinsurance contracts held
Zero
(315)
(175)
(123)
(613)
Total insurance service result
Zero
615
3,384
(22)
3,977
Investment result
Net investment income (loss)
638
4,232
14,179
(1,028)
18,021
Insurance / reinsurance finance income (expenses)
Zero
(4,723)
(9,993)
88
(14,628)
Other investment result
Zero
100
(432)
(103)
(435)
Total investment result
638
(391)
3,754
(1,043)
2,958
Other revenue
14
790
6,384
(442)
6,746
Other expenses
(55)
(1,112)
(4,776)
268
(5,675)
Interest expenses
(433)
(79)
(2,281)
1,239
(1,554)
Net income (loss) before income taxes
164
(177)
6,465
Zero
6,452
Income tax (expenses) recoveries
7
175
(1,027)
Zero
(845)
Net income (loss) after income taxes
171
(2)
5,438
Zero
5,607
Equity in net income (loss) of unconsolidated subsidiaries
4,932
811
809
(6,552)
Zero
Net income (loss)
$ 5,103
$
809
$
6,247
$ (6,552)
$
5,607
Net income (loss) attributed to:
Non-controlling interests
Do
llar Zero
Do
llar Zero
$
144
Do
llar Zero
$
144
Participating policyholders
Zero
(74)
360
74
360
Shareholders and other equity holders
5,103
883
5,743
(6,626)
5,103
$ 5,103
$
809
$
6,247
$ (6,552)
$
5,607
267
Consolidated Statement of Cash Flows
For the year ended December 31, 2024
MFC
(Guarantor)
JHUSA
(Issuer)
Other
subsidiaries
Consolidation
adjustments
Consolidated
MFC
Operating activities
Net income (loss)
$ 5,385
$
1,059
$
6,160
$ (6,726)
$ 5,878
Adjustments:
Equity in net income of unconsolidated subsidiaries
(5,117)
(550)
(1,059)
6,726
Zero
Increase (decrease) in insurance contract net liabilities
Zero
441
8,994
Zero
9,435
Increase (decrease) in investment contract liabilities
Zero
70
434
Zero
504
(Increase) decrease in reinsurance contract assets, excluding
reinsurance transactions
Zero
(136)
(477)
Zero
(613)
Amortization of (premium) discount on invested assets
Zero
37
(327)
Zero
(290)
Contractual service margin (“CSM”) amortization
Zero
(441)
(1,935)
Zero
(2,376)
Other amortization
11
147
711
Zero
869
Net realized and unrealized (gains) losses and impairment on
assets
(38)
587
(1,409)
Zero
(860)
Deferred income tax expenses (recoveries)
22
49
240
Zero
311
Net loss on reinsurance transactions (pre-tax)
Zero
33
38
Zero
71
Cash provided by (used in) operating activities before undernoted
items
263
1,296
11,370
Zero
12,929
Dividends from unconsolidated subsidiaries
7,150
689
(595)
(7,244)
Zero
Changes in policy related and operating receivables and payables
221
1,387
11,957
Zero
13,565
Cash provided by (used in) operating activities
7,634
3,372
22,732
(7,244)
26,494
Investing activities
Purchases and mortgage advances
Zero
(19,159)
(111,964)
Zero
(131,123)
Disposals and repayments
Zero
16,485
96,186
Zero
112,671
Changes in investment broker net receivables and payables
Zero
(22)
312
Zero
290
Net cash increase (decrease) from sale (purchase) of subsidiaries
Zero
Zero
(297)
Zero
(297)
Investment in common shares of subsidiaries
(3,432)
Zero
Zero
3,432
Zero
Capital contribution to unconsolidated subsidiaries
Zero
(2)
Zero
2
Zero
Return of capital from unconsolidated subsidiaries
Zero
17
Zero
(17)
Zero
Notes receivable from parent
Zero
Zero
(938)
938
Zero
Notes receivable from subsidiaries
(135)
Zero
Zero
135
Zero
Cash provided by (used in) investing activities
(3,567)
(2,681)
(16,701)
4,490
(18,459)
Financing activities
Change in repurchase agreements and securities sold but not yet
purchased
Zero
Zero
460
Zero
460
Issue of capital instruments, net
2,591
Zero
Zero
Zero
2,591
Redemption of capital instruments
(1,277)
(609)
Zero
Zero
(1,886)
Secured borrowing from securitization transactions
Zero
Zero
667
Zero
667
Changes in deposits from Bank clients, net
Zero
Zero
413
Zero
413
Lease payments
Zero
(3)
(115)
Zero
(118)
Shareholders’ dividends and other equity distributions
(3,159)
Zero
Zero
Zero
(3,159)
Common shares repurchased
(3,272)
Zero
Zero
Zero
(3,272)
Common shares issued, net
144
Zero
3,432
(3,432)
144
Contributions from (distributions to) non-controlling interests, net
Zero
Zero
(14)
Zero
(14)
Dividends paid to parent
Zero
595
(7,839)
7,244
Zero
Capital contributions by parent
Zero
Zero
2
(2)
Zero
Return of capital to parent
Zero
Zero
(17)
17
Zero
Notes payable to parent
Zero
Zero
135
(135)
Zero
Notes payable to subsidiaries
938
Zero
Zero
(938)
Zero
Cash provided by (used in) financing activities
(4,035)
(17)
(2,876)
2,754
(4,174)
Cash and short-term securities
Increase (decrease) during the year
32
674
3,155
Zero
3,861
Effect of foreign exchange rate changes on cash and short-term
securities
8
363
826
Zero
1,197
Balance, beginning of year
86
4,004
15,794
Zero
19,884
Balance, end of year
126
5,041
19,775
Zero
24,942
Cash and short-term securities
Beginning of year
Gross cash and short-term securities
86
4,329
15,923
Zero
20,338
Net payments in transit, included in other liabilities
Zero
(325)
(129)
Zero
(454)
Net cash and short-term securities, beginning of year
86
4,004
15,794
Zero
19,884
End of year
Gross cash and short-term securities
126
5,436
20,227
Zero
25,789
Net payments in transit, included in other liabilities
Zero
(395)
(452)
Zero
(847)
Net cash and short-term securities, end of year
$
126
$
5,041
$
19,775
Do
llar Zero
$ 24,942
Supplemental disclosures on cash flow information:
Interest received
$
831
$
3,872
$
10,582
$ (1,789)
$ 13,496
Interest paid
475
69
2,819
(1,789)
1,574
Income taxes paid (refund)
8
1
746
Zero
755
268 | 2024 Annual Report | Notes to Consolidated Financial Statements
Consolidated Statement of Cash Flows
For the year ended December 31, 2023
MFC
(Guarantor)
JHUSA
(Issuer)
Other
subsidiaries
Consolidation
adjustments
Consolidated
MFC
Operating activities
Net income (loss)
$ 5,103
$
809
$ 6,247
$ (6,552)
$
5,607
Adjustments:
Equity in net income of unconsolidated subsidiaries
(4,932)
(811)
(809)
6,552
Zero
Increase (decrease) in insurance contract net liabilities
Zero
455
10,242
Zero
10,697
Increase (decrease) in investment contract liabilities
Zero
(112)
547
Zero
435
(Increase) decrease in reinsurance contract assets, excluding
reinsurance transactions
Zero
28
946
Zero
974
Amortization of (premium) discount on invested assets
Zero
30
(171)
Zero
(141)
Contractual service margin (“CSM”) amortization
Zero
(455)
(1,543)
Zero
(1,998)
Other amortization
10
147
424
Zero
581
Net realized and unrealized (gains) losses and impairment on assets
3
471
(3,319)
Zero
(2,845)
Deferred income tax expenses (recoveries)
(11)
(141)
622
Zero
470
Stock option expense
Zero
(3)
5
Zero
2
Cash provided by (used in) operating activities before undernoted items
173
418
13,191
Zero
13,782
Dividends from unconsolidated subsidiaries
5,600
386
(679)
(5,307)
Zero
Changes in policy related and operating receivables and payables
(4)
(649)
7,294
Zero
6,641
Cash provided by (used in) operating activities
5,769
155
19,806
(5,307)
20,423
Investing activities
Purchases and mortgage advances
Zero
(15,165)
(68,856)
Zero
(84,021)
Disposals and repayments
Zero
16,159
54,122
Zero
70,281
Changes in investment broker net receivables and payables
Zero
12
9
Zero
21
Net cash increase (decrease) from sale (purchase) of subsidiaries
Zero
Zero
(1)
Zero
(1)
Investment in common shares of subsidiaries
(1,843)
Zero
Zero
1,843
Zero
Capital contribution to unconsolidated subsidiaries
Zero
(1)
Zero
1
Zero
Return of capital from unconsolidated subsidiaries
Zero
5
Zero
(5)
Zero
Notes receivable from parent
Zero
Zero
(4)
4
Zero
Notes receivable from subsidiaries
(25)
Zero
Zero
25
Zero
Cash provided by (used in) investing activities
(1,868)
1,010
(14,730)
1,868
(13,720)
Financing activities
Change in repurchase agreements and securities sold but not yet
purchased
Zero
Zero
(693)
Zero
(693)
Issue of capital instruments, net
1,194
Zero
Zero
Zero
1,194
Redemption of capital instruments
(600)
Zero
Zero
Zero
(600)
Secured borrowing from securitization transactions
Zero
Zero
537
Zero
537
Changes in deposits from Bank clients, net
Zero
Zero
(895)
Zero
(895)
Lease payments
Zero
(3)
(95)
Zero
(98)
Shareholders’ dividends and other equity distributions
(2,972)
Zero
Zero
Zero
(2,972)
Common shares repurchased
(1,595)
Zero
Zero
Zero
(1,595)
Common shares issued, net
94
Zero
1,843
(1,843)
94
Contributions from (distributions to) non-controlling interests, net
Zero
Zero
(14)
Zero
(14)
Dividends paid to parent
Zero
679
(5,986)
5,307
Zero
Capital contributions by parent
Zero
Zero
1
(1)
Zero
Return of capital to parent
Zero
Zero
(5)
5
Zero
Notes payable to parent
Zero
Zero
25
(25)
Zero
Notes payable to subsidiaries
4
Zero
Zero
(4)
Zero
Cash provided by (used in) financing activities
(3,875)
676
(5,282)
3,439
(5,042)
Cash and short-term securities
Increase (decrease) during the year
26
1,841
(206)
Zero
1,661
Effect of foreign exchange rate changes on cash and short-term
securities
(3)
(52)
(357)
Zero
(412)
Balance, beginning of year
63
2,215
16,357
Zero
18,635
Balance, end of year
86
4,004
15,794
Zero
19,884
Cash and short-term securities
Beginning of year
Gross cash and short-term securities
63
2,614
16,476
Zero
19,153
Net payments in transit, included in other liabilities
Zero
(399)
(119)
Zero
(518)
Net cash and short-term securities, beginning of year
End of year
63
2,215
16,357
Zero
18,635
Gross cash and short-term securities
86
4,329
15,923
Zero
20,338
Net payments in transit, included in other liabilities
Zero
(325)
(129)
Zero
(454)
Net cash and short-term securities, end of year
$
86
$ 4,004
$ 15,794
Do
llar Zero
$ 19,884
Supplemental disclosures on cash flow information:
Interest received
$
650
$ 3,369
$ 10,166
$ (1,417)
$ 12,768
Interest paid
418
115
2,432
(1,417)
1,548
Income taxes paid (refund)
2
(1)
435
Zero
436
Note 24 Comparatives
Certain comparative amounts have been reclassified to conform to the current year’s presentation.
269
Board of Directors
Current as of March 1, 2025
Donald R. Lindsay
Chair of the Board
Manulife
Vancouver, BC, Canada
Director Since: 2010
Susan F. DabarnoRefer to footnote number 1
Corporate Director
Bracebridge, ON, Canada
Director Since: 2013
Donald P. Kanak
Corporate Director
Bellevue, WA, U.S.A
Director Since: 2024
May Tan
Corporate Director
Hong Kong
Director Since: 2021
Nicole S. Arnaboldi
Corporate Director
Greenwich, CT, U.S.A.
Director Since: 2020
Julie E. Dickson
Corporate Director
Ottawa, ON, Canada
Director Since: 2019
Anna Manning
Corporate Director
Toronto, ON, Canada
Director Since: 2024
Leagh E. Turner
Chief Executive Officer
Coupa Software Inc.
Toronto, ON, Canada
Director Since: 2020
Guy L.T. Bainbridge
Corporate Director
Edinburgh, Midlothian,
United Kingdom
Director Since: 2019
J. Michael Durland
Corporate Director
Toronto, ON, Canada
Director Since: 2024
John S. Montalbano
Corporate Director
West Vancouver, BC, Canada
Director Since: 2025
John W. P-K Wong
Corporate Director
Hong Kong
Director Since: 2024
Nancy J. Carroll
Corporate Director
Toronto, ON, Canada
Director Since: 2025
Roy GoriRefer to footnote number 2
President and Chief
Executive Officer
Manulife
Toronto, ON, Canada
Director Since: 2017
C. James PrieurRefer to footnote number 1
Corporate Director
Chicago, IL, U.S.A.
Director Since: 2013
Executive Leadership Team
Current as of March 1, 2025
Roy Gori
President and Chief
Executive OfficerRefer to footnote number 2
Rahim B. Hirji
Global Head of Audit and
Advisory Services
Trevor Kreel
Chief Investment Officer
Brooks E. Tingle
President and Chief
Executive Officer,
John Hancock
Marc M. Costantini
Global Head of Inforce
Management
Naveed Irshad
President and Chief
Executive Officer,
Manulife Canada
Karen A. Leggett
Global Chief Marketing
Officer
Halina von dem Hagen
Chief Risk Officer
Steven A. Finch
Chief Actuary
Rahul M. Joshi
Chief Operations Officer
Paul R. Lorentz
President and Chief
Executive Officer,
Global Wealth and Asset
Management
Shamus E. Weiland
Chief Information Officer
James D. Gallagher
General Counsel
Pamela O. Kimmet
Chief Human Resources
Officer
Colin L. Simpson
Chief Financial Officer
Philip J. WitheringtonRefer to footnote number 2
President & Chief
Executive Officer,
Manulife Asia
Footnote Number 1 Effective May 8, 2025, Susan F. Dabarno and C. James Prieur have served their full terms and are not standing for re-election.
Footnote Number 2 Roy Gori shared his intention to retire as President and CEO in May of 2025 and is not standing for re-election. Following Roy Gori’s retirement, Philip J. Witherington will be
appointed President & CEO upon successful election at Manulife’s annual meeting in May 2025.
270 | 2024 Annual Report | Board of Directors
Office ListingRefer to footnote *
Corporate Headquarters
Manulife Financial Corporation
200 Bloor Street East
Toronto, ON M4W 1E5
Canada
Tel: +1 416-926-3000
Belgium
International Group Program –
Europe
John Hancock International
Services S.A.
Avenue de Tervueren 270
1150 Brussels, Belgium
Tel: +32 02 775 2940
Bermuda
International Life – US Segment
3/F, O’Hara House
3 Bermudiana Road
Tower 2 (North Tower)
Hamilton, Bermuda
HM 08
Tel: +441 296-8710
Cambodia
Manulife (Cambodia) PLC
14/F, TK Central
No. 12, Street 289
Sangkat Boeung Kak 1
Khan Toul Kork
Phnom Penh, Cambodia
Tel: 1-800-211-211
Canada
Canada Head Office
500 King Street North
Waterloo, ON N2J 4C6
Canada
Tel: +1 519-747-7000
Affinity Markets
2/F, 250 Bloor Street East
Toronto, ON M4W 1E5
Canada
Tel: +1 800-668-0195
Group Benefits
500 King Street North
Waterloo, ON N2J 4C6
Canada
Tel: +1 519-747-7000
Individual Insurance
500 King Street North
Waterloo, ON N2J 4C6
Canada
Tel: +1 519-747-7000
Manulife Bank of Canada
500 King Street North
Waterloo, ON N2J 4C6
Canada
Tel: +1 519-747-7000
Manulife Investment Management
6/F, 200 Bloor Street East
Toronto, ON M4W 1E5
Canada
Public Markets Tel: +1 416-852-2204
5/F, 200 Bloor Street East
Toronto, ON M4W 1E5
Canada
Private Markets/Real Estate
Tel: +1 416-926-5500
Manulife Quebec
Maison Manuvie
900 de Maisonneuve Ouest
Montréal, QC H3A 0A8
Canada
Tel: +1 514-499-7999
Manulife Wealth Inc. (formerly
Manulife Securities)
1235 North Service Road West
Oakville, ON L6M 2W2
Canada
Tel: +1 905-469-2100
China
Manulife-Sinochem Life
Insurance Co., Ltd.
6/F, Jin Mao Tower
88 Century Avenue
Pudong District
Shanghai, 200121
China
Tel: +86 21 2069-8888
+86 21 2069-8930
Manulife Fund Management
Co., Ltd.
6/F, China Life Financial Centre
No. 23, Zhenzhi Road
Chaoyang District
Beijing 10026
China
Tel: +86 10 6657-7777
Germany
Manulife Investment
Management (Ireland) Ltd.
23/F, Messeturm
Friedrich-Ebert-Anlage 49
D-60308 Frankfurt am Main
Germany
Tel: +49 69 5095-5676
Hong Kong
Asia Head Office
Manulife Tower
One Bay East
83 Hoi Bun Road
Kwun Tong, Kowloon
Hong Kong
Tel: +852-2956 5320
Manulife Investment
Management (Asia), a division
of Manulife Investment
Management (Hong Kong) Ltd.
23/F, Manulife Tower
One Bay East
83 Hoi Bun Road
Kwun Tong, Kowloon
Hong Kong
Tel: +852-2956 5320
Manulife (International) Ltd.
Manulife Tower
One Bay East
83 Hoi Bun Road
Kwun Tong, Kowloon
Hong Kong
Tel: +852-2956 5320
Manulife Provident Funds
Trust Co., Ltd.
22/F, Tower A
Manulife Financial Centre
223-231 Wai Yip Street
Kwun Tong, Kowloon
Hong Kong
Tel: +852 2310-5600
Indonesia
PT Asuransi Jiwa Manulife
Indonesia
Sampoerna Strategic Square
Jl. Jend. Sudirman Kav 45-46
South Tower
Jakarta 12930
Indonesia
Tel: +62 21 2555-7788
PT Manulife Aset Manajemen
Indonesia
Sampoerna Strategic Square
Jl. Jend, Sudirman Kav 45-46
12A/F, South Tower
Jakarta 12930
Indonesia
Tel: +62 21 2555-7788
Ireland
Manulife Investment
Management (Ireland) Ltd.
The Exchange Building
George’s Dock, IFSC, Dublin 1
D01 P2V6
Ireland
Tel: +353 1 584-1503
Italy
Manulife Investment
Management (Ireland) Ltd.
Corso Italia n.3
Milan, 20123
Italy
Tel: +44 7760 141413
Japan
Manulife Investment
Management (Japan) Ltd.
15/F Marunouchi Trust Tower
North Building
1-6-1 Marunouchi, Chiyoda-ku
Tokyo, Japan 100-0005
Tel: +81 3 6267-1955
Manulife Life Insurance Co.
30/F, Tokyo Opera City Tower
3-20-2 Nishi Shinjuku
Shinjuku-ku
Tokyo 163-1430
Japan
Tel: +81 3 6331-7000
Macau
Manulife (International) Ltd.
Avenida De Almeida Ribeiro No. 61
Circle Square, 14 andar A
Macau
Tel: +853 8398-0388
Malaysia
Manulife Investment
Management (M) Berhad
Menara Manulife
13/F, No. 6 Jalan Gelenggang
Damansara Heights
50490 Kuala Lumpur
Malaysia
Tel: +60 3 2719-9228
Manulife Holdings Berhad
Menara Manulife
16/F, No. 6 Jalan Gelenggang
Damansara Heights
50490 Kuala Lumpur
Malaysia
Tel: +60 3 2719-9228
Myanmar
Manulife Myanmar Life
Insurance Company Limited
16/F, Kantharyar Office Tower
No.11, Cor. Kan Yeik Thar Road & U
Aung Myat Road
Mingalar Taung Nyunt Township
Yangon
Myanmar
Tel: +09 765 467 110
Philippines
The Manufacturers Life
Insurance Co. (Phils.), Inc.
10/F, NEX Tower
6786 Ayala Avenue
Makati City,
Metro Manila
Philippines, 1229
Tel: +632 8884 7000
Singapore
Manulife Investment
Management (Singapore)
Pte. Ltd.
8 Cross Street
#15-01 Manulife Tower
Singapore 048424
Tel: +65 6501-5411
Manulife (Singapore) Pte Ltd.
8 Cross Street
#15-01 Manulife Tower
Singapore 048424
Tel: +65 6501-5411
Switzerland
Manulife IM (Switzerland) LLC
Europaallee 41
CH-8004 Zurich
Switzerland
Tel: +41 44 214 69 30
Taiwan
Manulife Investment
Management (Taiwan) Co., Ltd.
3/F, Exchange Square 2
No. 97, Songren Road
Xinyi District
Taipei City 110
Taiwan, R.O.C.
Tel: +886 2 2757-5969
United Kingdom
Manulife Investment
Management (Europe) Ltd.
3/F, One London Wall
London EC2Y 5EA
United Kingdom
Tel: +44 20 7256 3500
United States
John Hancock Head Office and
John Hancock Investment
Management
Back Bay
200 Berkeley Street/
197 Clarendon Street
Boston, MA 02116-5010
U.S.A.
Tel: +1 617-663-3000
Tel: +1 617-572-6000
Manulife Investment
Management Timberland and
Agriculture
8/F, 197 Clarendon Street
Boston, MA 02116-5010
U.S.A.
Tel: +1 617-747-1600
International Group Program
3/F, 197 Clarendon Street
Boston, MA 02116-5023
U.S.A.
Tel: +1 617-572-6000
John Hancock Insurance
200 Berkeley Street
Boston, MA 02116-5023
U.S.A.
Tel: +1 617-572-6000
Manulife Investment
Management (US) LLC
197 Clarendon Street
Boston, MA 02116-5010
U.S.A.
Tel: +1 617-375-1500
Vietnam
Manulife Investment Fund
Management (Vietnam) Co., Ltd.
4/F, Manulife Plaza
75 Hoang Van Thai Street
Tan Phu Ward, District 7
Ho Chi Minh City
Vietnam
Tel: +84 8 5416-6777
Manulife (Vietnam) Ltd.
Manulife Plaza
75 Hoang Van Thai Street
Tan Phu Ward, District 7
Ho Chi Minh City
Vietnam
Tel: +84 8 5416-6888
West Indies
Manulife Re
Manulife P&C Limited
The Goddard Building
Haggatt Hall
St. Michael, BB-11059
Barbados, West Indies
Tel: +246 228-4910
Footnote *Select Major Global Locations
271
Glossary of Terms
Note: Refer to “Non-GAAP and Other Financial Measures” in
Section 13 of the Management’s Discussion and Analysis for
additional terms.
Accumulated Other Comprehensive Income (AOCI): A separate
component of shareholders’ equity which includes net unrealized
gains or losses on financial instruments classified as fair value
through other comprehensive income (“FVOCI”), net unrealized
gains or losses on derivative instruments designated within an
effective cash flow hedge, net unrealized gains or losses from the
cost of hedging, unrealized foreign currency translation gains or
losses, and insurance and reinsurance finance income or
expenses reflected in other comprehensive income. These items
have been recognized in other comprehensive income and may be
subsequently reclassified to net income. AOCI also includes
remeasurement of pension and other post-employment plans and
real estate revaluation reserve. These items are recognized in
other comprehensive income and will never be reclassified to net
income.
Book Value per Share: Ratio obtained by dividing common
shareholders’ equity by the number of common shares
outstanding at the end of the period.
Cash Flow Hedges: A hedge of the exposure to variability in cash
flows associated with a recognized asset or liability, a forecasted
transaction or a foreign currency risk in an unrecognized firm
commitment that is attributable to a particular risk and could
affect reported net income.
Expected Credit Loss (ECL) allowance: The determination of
impairment losses on invested assets that are debt financial
instruments measured at FVOCI or amortized cost.
Fair Value: Amount of consideration that would be agreed upon in
an arm’s length transaction between knowledgeable, willing
parties who are under no compulsion to act.
Fair Value through Profit or Loss (FVTPL), Fair Value through
Other Comprehensive Income (FVOCI) or Amortized Cost:
Under IFRS 9, financial assets should be classified and measured
at fair value, with changes in fair value recognized in profit and
loss as they arise (FVTPL), unless criteria are met for classifying
and measuring the asset at either amortized cost or fair value
through other comprehensive income (FVOCI).
Fulfilment cash flows: An explicit, probability-weighted estimate
(i.e., expected value) of the present value of the future cash
outflows less the present value of the future cash inflows that will
arise as insurance contracts are being fulfilled, including a risk
adjustment for non-financial risk.
Guarantee Value: Typically within variable annuity and
segregated fund products, the guarantee value refers to the level
of the policyholder’s protected account balance which is
unaffected by market fluctuations.
Hedging: The practice of making an investment in a market or
financial instrument for the purpose of offsetting or limiting
potential losses from other investments or financial exposures.
Dynamic Hedging: A hedging technique which seeks to
limit an investment’s market exposure by adjusting the
hedge as the underlying security changes (hence,
“dynamic”).
Macro hedging: An investment technique used to offset the
risk of an entire portfolio of assets. A macro hedge reflects
a more broad-brush approach which is not frequently
adjusted to reflect market changes.
In-Force: Refers to the policies that are currently active.
Insurance and Investment Contract Liabilities: An amount
which represents the Company’s obligation to pay future expected
policyholder benefits and expenses net of policyholder premiums
while also providing some conservatism in our assumptions, and
for insurance contracts specifically, an amount for unearned
future profits called the contractual service margin. Expected
assumptions are reviewed and updated annually.
Long Term Care (LTC) Insurance: Insurance coverage available
on an individual or group basis to provide reimbursement for
medical and other services to the chronically ill, disabled, or
mentally challenged.
Return on Common Shareholders’ Equity: A profitability
measure that presents the net income available to common
shareholders as a percentage of the average capital deployed to
earn the income.
Risk Adjustment for non-financial risk: The compensation
required for bearing the uncertainty about the amount and timing
of the cash flows arising from non-financial risk in insurance
contracts.
Onerous contracts: An insurance contract is onerous at the date
of initial recognition if the fulfilment cash flows allocated to the
contract and premiums, acquisition expenses and commissions
arising from the contract at the date of initial recognition, in total
are a net outflow (a loss at initial recognition).
Universal Life Insurance: A form of permanent life insurance with
flexible premiums. The customer may vary the premium payment
and death benefit within certain restrictions. The contract is
credited with a rate of interest based on the return of a portfolio of
assets held by the Company, possibly with a minimum rate
guarantee, which may be reset periodically at the discretion of the
Company.
Variable Annuity: Funds are invested in segregated funds (also
called separate accounts in the U.S.) and the return to the
contract holder fluctuates according to the earnings of the
underlying investments. In some instances, guarantees are
provided.
Variable Universal Life Insurance: A form of permanent life
insurance with flexible premiums in which the cash value and
possibly the death benefit of the policy fluctuate according to the
investment performance of segregated funds (or separate
accounts).
272 | 2024 Annual Report | Glossary of Terms
Shareholder Information
MANULIFE FINANCIAL CORPORATION
HEAD OFFICE
200 Bloor Street East
Toronto, ON M4W 1E5
Canada
Telephone: 416 926-3000
Website: www.manulife.com
ANNUAL MEETING OF SHAREHOLDERS
Shareholders are invited to attend the annual
meeting of Manulife Financial Corporation to
be held on May 8, 2025 at 11:00 a.m.
STOCK EXCHANGE LISTINGS
Manulife Financial Corporation’s common
shares are listed on:
Toronto Stock Exchange (MFC)
The New York Stock Exchange (MFC)
The Stock Exchange of Hong Kong (945)
Philippine Stock Exchange (MFC)
INVESTOR RELATIONS
Financial analysts, portfolio managers and
other investors requiring financial information
may contact our Investor Relations department
or access our website at www.manulife.com.
E-mail: investrel@manulife.com
NORMAL COURSE ISSUER BID
We are engaged in a normal course issuer bid
(NCIB) which allows us to repurchase for
cancellation up to 51.5 million common shares
during the period from February 24, 2025 to
February 23, 2026, when the bid expires, or
such earlier date as we complete our
purchases pursuant to our Notice of Intention
to Make a NCIB filed with the Toronto Stock
Exchange. For further details, refer to the
Capital Management Framework section in the
Management’s Discussion and Analysis above.
A copy of our Notice of Intention to Make a
NCIB may be obtained, without charge, by
contacting our Corporate Secretary at our
Toronto mailing address.
SHAREHOLDER SERVICES
For information or assistance regarding your
share account, including dividends, changes of
address or ownership, lost certificates, to
eliminate duplicate mailings or to receive
shareholder material electronically, please
contact our Transfer Agents in Canada, the
United States, Hong Kong or the Philippines. If
you live outside one of these countries, please
contact our Canadian Transfer Agent.
Direct Deposit of Dividends
Shareholders resident in Canada, the United
States and Hong Kong may have their Manulife
common share dividends deposited directly
into their bank account. To arrange for this
service please contact our Transfer Agents.
Dividend Reinvestment Program
Canadian and U.S. resident common
shareholders may purchase additional
common shares without incurring brokerage or
administrative fees by reinvesting their cash
dividend through participation in Manulife’s
Dividend Reinvestment and Share Purchase
Programs. For more information, please
contact our Canadian or US Transfer Agents.
For other shareholder issues please contact
Manulife Shareholder Services via e-mail to
shareholder_services@manulife.com
More information
Information about Manulife Financial
Corporation, including electronic versions of
documents and share and dividend information
is available online at www.manulife.com
TRANSFER AGENTS
Canada
TSX Trust Company
301 – 100 Adelaide St. West
Toronto, ON M5H 4H1
Canada
Toll Free: 1 800 783-9495
Collect: 416 682-3864
E-mail: manulifeinquiries@tmx.com
Website: www.tsxtrust.com/manulife
TSX Trust Company offices are also located in
Toronto, Vancouver and Calgary.
United States
Equiniti Trust Company, LLC
P.O. Box 27756
Newark, NJ 07101
United States
Toll Free: 1 800 249-7702
Collect: 416 682-3864
E-mail: manulifeinquiries@tmx.com
Hong Kong
Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Telephone: 852 2980-1333
E-mail: is-enquiries@hk.tricorglobal.com
Philippines
RCBC Stock Transfer
Ground Floor, West Wing,
GPL (Grepalife) Building,
221 Senator Gil Puyat Avenue,
Makati City, Metro Manila
Philippines
Telephone: 632 5318-8567
E-mail: rcbcstocktransfer@rcbc.com
AUDITORS
Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
MFC DIVIDENDS
Common Share Dividends Paid for 2024 and 2023
Year 2024
Record Date
Payment Date
Per Share
Amount
Canadian ($)
Fourth Quarter
March 5, 2025
March 19, 2025
0.44
Third Quarter
November 20, 2024 December 19, 2024
0.40
Second Quarter August 21, 2024
September 19, 2024
0.40
First Quarter
May 22, 2024
June 19, 2024
0.40
Year 2023
Fourth Quarter
February 28, 2024
March 19, 2024
0.400
Third Quarter
November 22, 2023 December 19, 2023
0.365
Second Quarter August 23, 2023
September 19, 2023
0.365
First Quarter
May 24, 2023
June 19, 2023
0.365
273
Common and Preferred Share Dividend Dates in 2025Refer to footnote number *
Footnote Number *Dividends are not guaranteed and are subject to approval by the Board of Directors.
Record Date
Payment Date
Common and
Preferred Shares
Common Shares
Preferred Shares
March 5, 2025
March 19, 2025
March 19, 2025
May 21, 2025
June 19, 2025
June 19, 2025
August 20, 2025
September 19, 2025
September 19, 2025
November 26, 2025
December 19, 2025
December 19, 2025
Decisions made easier.
Lives made beter.
Manulife, Manulife & Stylized M Design, and Stylized M Design are trademarks of The Manufacturers Life Insurance Company
and are used by it, and by its affiliates, including Manulife Financial Corporation, under license.
IR3936E