Manulife Financial Corporation - Shareholder/Analyst Call

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 |  About: Manulife Financial Corporation (MFC)
by: SA Transcripts

Manulife Financial Corporation (NYSE:MFC)

May 02, 2013 11:00 am ET

Executives

Gail C. A. Cook-Bennett - Former Chairman and Member of Corporate Governance & Nominating Committee

Stephen Bernard Roder - Chief Financial Officer and Senior Executive Vice President

Donald A. Guloien - Chief Executive Officer, President and Director

Edward Sydney Jackson

Gail C. A. Cook-Bennett

Good morning, ladies and gentlemen. I'm Gail Cook-Bennett, Chair of the Board of Manulife Financial Corporation and The Manufacturers Life Insurance Company, and I will be chairing today's meeting and also moderating the question period following. [FRENCH]

It's my pleasure to welcome you to the annual meetings of Manulife Financial Corporation and Manufacturers Life Insurance Company. The meeting will begin with my remarks, followed by the regular business of the meeting and reports from Steve Roder, our Chief Financial Officer; and Donald Guloien, our President and Chief Executive Officer.

Shareholders and policyholders will be asked to vote for the election of directors and the appointment of auditors. Shareholders will be asked to approve a nonbinding advisory resolution on Manulife Financial Corporation's approach to executive compensation. At the end of the business part of the meeting, we will open the floor to a question-and-answer session.

Now I'd like to introduce the people on the stage with me, and starting from my far left is Steve Roder, Senior Executive Vice President and Chief Financial Officer who is speaking at his first Manulife Annual Meeting. And next, Donald Guloien, our President and Chief Executive Officer and Board Nominee; J-P. Bisnaire, Senior Executive Vice President, Corporate Affairs and General Counsel; and Angela Shaffer, Vice President and Corporate Secretary.

I would like to start this morning by recognizing our directors who will not be serving -- or not be seeking reelection. They have reached the board's retirement age. And I'm going to ask them to stand when their name is called. First of all, Thomas d'Aquino, a board member since 2005; second, Robert Dineen, a board member since 1999; and Hugh Sloan, a board member since 1985. These directors were key contributors to the governance committee, the audit committee and the management resources and compensation committee. The richness of their various business and professional involvements also added greatly to the perspectives brought to bear on important board discussions. An eclectic group, indeed. Thank you, Bob, Tom and Hugh for your important contributions to Manulife. As I have also reached board retirement age, I am not seeking reelection to the board.

It's always a pleasure for me to welcome past chairs of the board who are with us today, and I'm going to ask them to stand when their names are called. First of all, Syd Jackson, not only a former nonexecutive chair but also executive chair; Bill Blundell, a former chair and also an acting chair for a period; and finally, Arthur Sawchuk.

On behalf of the board, I would also like to acknowledge and thank the employees and agents of Manulife and John Hancock. Your dedication to customer service, hard work and commitment to our values define our brands. The last years have been a critical time for our company, a transformative time. Without your efforts, this transformation could not have happened. Thank you.

As many of you know, in past years, we've been fortunate enough to have our STARs of Excellence join us at the annual meeting. Our STARs of Excellence program honors employees and sales associates from around the world based on their dedication and outstanding contributions to our company. This year, instead of hosting them at our annual meeting, our Board of Directors and management committee looks forward to welcoming them to Toronto later this summer to celebrate their achievements.

I now call this annual meeting of shareholders of Manulife Financial Corporation and annual meeting of policyholders and the shareholder of The Manufacturers Life Insurance Company to order. This meeting will be conducted in accordance with the rules of procedure set out in the agenda card, which has been provided to you.

Karen Garrod of CIBC Mellon Trust Company and Lynore LeConche of Computershare's Shareowner Services will act as scrutineers for Manulife Financial Corporation. Karen Garrod and Anushe [ph] Farshungand [ph] of CIBC Mellon Trust Company would act as scrutineers for The Manufacturers Life Insurance Company.

Before proceeding with the meeting, I would like to comment on forward-looking statements and also advise you of some of the mechanics involved in the meeting. I draw your attention to the caution regarding forward-looking statements on the slide behind me. It'll take you a while to read. Please also refer to Note to Users regarding the non-GAAP measures used in today's presentations.

The speakers who address the meeting this morning may make forward-looking statements as defined in securities legislation. Actual results may differ materially from those expressed or implied in these statements.

Turning now to the process surrounding the meeting. Before starting the business of the meeting, I first confirm that the notice of this meeting was mailed to shareholders and policyholders required to receive such notice and that the quorum requirements for the joint meeting have been complied with. Accordingly, this meeting is properly convened.

Second, we will be conducting the voting at this meeting by ballot. Certain individuals who are either shareholders or policyholders have agreed to move and second the motions of this meeting. Ballots were handed out at the registration desk prior to the meeting. If you did not receive a ballot when you registered, please raise your hand and the scrutineers will provide you with the required ballots.

Now to receive a ballot, you must be a shareholder or a policyholder who has not already voted by proxy or a proxy holder who did not receive a ballot at registration. Are there any people who fall in that category, anyone who needs a ballot? Seeing none, I'll proceed.

Now to vote, please mark an X in the appropriate box, and you're required to print your name in the place indicated and sign the ballot. The scrutineers will collect the ballots at the completing of voting on all matters. So we will wait to pick those up.

Now we turn to the first order of business, which is to elect the directors of Manulife Financial Corporation and its main operating subsidiary, The Manufacturers Life Insurance Company. You may either vote for or withhold your vote from each director nominee. If a director does not receive a majority of 4 votes, there are implications under our majority voting policy. That director is required to submit his or her resignation to the Board, and the Board will then consider the circumstances within 90 days, decide either to accept the resignation or disclose the reasons for not accepting it.

We will vote on the election of the directors of Manulife Financial Corporation first. The number of directors to be elected today is determined by the board as 16. I now declare the meeting open for nominations for the election of directors. Paul Tompkins, a shareholder has agreed to move this motion.

Paul Tompkins

Thank you, Madam Chair. I am pleased to nominate Joseph Caron, John Cassaday, Susan Dabarno, Richard DeWolfe, Sheila Fraser, Donald Guloien, Scott Hand, Robert Harding, Luther Helms, Tsun-yan Hsieh, Donald Lindsay, Lorna Marsden, John Palmer, James Prieur, Andrea Rosen and Lesley Daniels Webster as directors of Manulife Financial Corporation to hold office until the close of the next annual meeting of the shareholders of Manulife Financial Corporation or until their successors are elected or appointed.

Gail C. A. Cook-Bennett

Thank you, Mr. Tompkins. Are there any other nominees? Since there are no further nominations, I declare the nominations closed. We will now proceed with voting for the election of directors of Manulife Financial Corporation. So I'd ask you to mark your green ballot.

[Voting]

Gail C. A. Cook-Bennett

Voting has now closed for the election of directors of Manulife Financial Corporation.

The next item on our agenda is the election of the directors of The Manufacturers Life Insurance Company. The participating policyholders of Manufacturers Life vote for the policyholders' directors. Manulife Financial Corporation, the sole shareholder of Manufacturers Life votes for the shareholder's directors. The number of directors to be elected today, as I indicated earlier, is determined by the board as 16. Five policyholders' directors and 11 shareholder's directors. Information regarding the nominees is set out in the report to policyholders.

I now declare the meeting open for nominations for the election of policyholders' directors. Irene Bailey, a policyholder, has agreed to move this motion.

Irene Bailey

Madam Chair, I'm pleased to nominate John Cassaday, Susan Dabarno, Richard DeWolfe, Scott Hand, Lorna Marsden as policyholders' directors of The Manufacturers Life Insurance company to hold office until the close of the next annual meeting until their successors are elected or appointed.

Gail C. A. Cook-Bennett

Thank you, Ms. Bailey. Are there any other nominees? As there are no further nominations, I declare the nominations closed. We will now proceed with voting for the policyholders' directors of Manufacturers Life Insurance Company. And I'd ask you to mark your vote on the yellow ballot.

[Voting]

Gail C. A. Cook-Bennett

The voting is now closed for the election of policyholders' directors of The Manufacturers Life Insurance Company.

We will now move on to the election of the shareholder's directors. All of the common shares of The Manufacturers Life Insurance Company are owned by Manulife Financial Corporation. As the sole shareholder, Manulife Financial Corporation has elected the shareholder's directors by written resolution in accordance with the Insurance Companies Act.

I declare that Joseph Caron, Sheila Fraser, Donald Guloien, Robert Harding, Luther Helms, Tsun-yan Hsieh, Donald Lindsay, John Palmer, James Prieur, Andrea Rosen and Lesley Daniels Webster, have been elected as the shareholder's director of The Manufacturers Life Insurance Company to hold office until the close of the next annual meeting or until their successors are elected or appointed.

Next on the agenda is the appointment of auditors for Manulife Financial Corporation and The Manufacturers Life Insurance Company. Paul Tompkins, a shareholder and policyholder, has agreed to bring this motion.

Paul Tompkins

Madam Chair, I move that Ernst & Young LLP, Charted Accountants be appointed auditors for Manulife Financial Corporation and The Manufacturers Life Insurance Company until the close of the next annual meeting at a remuneration to be fixed by the directors.

Gail C. A. Cook-Bennett

Thank you, Mr. Tompkins. And Irene Bailey, a shareholder and a policyholder, has agreed to second the motion.

Irene Bailey

Madam Chair, I second this motion.

Gail C. A. Cook-Bennett

Thank you, Ms. Bailey. We will now proceed with voting for the appointment of the auditors for Manulife Financial Corporation and The Manufacturers Life Insurance Company. Please mark your ballots. The green ballot is for shareholders of Manulife Financial Corporation, and the yellow ballot is for the policyholders of The Manufacturers Life Insurance Company.

[Voting]

Gail C. A. Cook-Bennett

Voting is now closed for the appointment of auditors.

The next item of business on the agenda is a nonbinding shareholder advisory vote on our approach to executive compensation. The board believes that shareholders should have an opportunity to understand how and why the board makes its executive compensation decisions and should be able to provide input to the board on executive compensation.

As a result, the board is providing shareholders with a nonbinding advisory vote on the company's executive compensation policy as it has done at each of the past 3 annual meetings.

The board compensation decisions in 2012 are explained in the Compensation Discussion and Analysis section, that's the CD&A in the proxy circular. It illustrates how our compensation programs are centered on pay-for-performance and are aligned with strong risk management principles, as well as the long-term interest of shareholders.

Although the results of this advisory vote are not binding, the board will take into account the results when considering our approach to executive compensation. Paul Tompkins, a shareholder, has agreed to bring this motion.

Paul Tompkins

Madam Chair, I move that the advisory resolution to accept Manulife Financial Corporation's approach to executive compensation as set out on Page 7 of the proxy circular, be approved.

Gail C. A. Cook-Bennett

Thank you, Mr. Tompkins. Irene Bailey, a shareholder and policyholder, will second the motion.

Irene Bailey

Madam Chair, I second the motion.

Gail C. A. Cook-Bennett

Thank you, Ms. Bailey. We will now proceed with voting on the approval of the advisory resolution on Manulife Financial's approach to executive compensation, and please mark your ballot, which is the green ballot.

[Voting]

Gail C. A. Cook-Bennett

Voting is now closed for the approval of the advisory resolution. And the scrutineers will now collect the ballots for the election of the directors, the appointment of auditors and the approval of the advisory resolution on Manulife Financial's approach to executive compensation.

While we're waiting for the results of the ballots, we will move on to the next item of business. The next item on the agenda is the tabling of the 2012 consolidated financial statements of Manulife Financial Corporation and The Manufacturers Life Insurance Company, as well as the reports of the auditor and the actuary on these documents.

Shareholders received the 2012 consolidated financial statements of Manulife Financial Corporation in accordance with the Insurance Companies Act and applicable securities legislation. Policyholders received the 2012 consolidated financial statements of The Manufacturers Life Insurance Company in accordance with the Insurance Companies Act.

Are there any outstanding ballots that have not been picked up? If there are, please raise your hand.

The next item of business is the tabling of information for participating shareholders of Manufacturers Life, which includes summaries of the participating policyholder dividend policy and the participating account management policy. This information can be found on Pages 15 to 16 of the 2012 Report to Policyholders, which was sent to all participating policyholders who requested notice of meeting. Copies of the report to policyholders are available at the registration desk.

At this point, I am pleased to welcome Steve Roder, Senior Executive Vice President and Chief Financial Officer, to the podium to outline the company's performance for 2012 and the first quarter of 2013. I will ask that you please hold any questions until the question-and-answer period.

Stephen Bernard Roder

Thank you, Madam Chair, and good morning, everyone. I appreciate the opportunity to address my first annual meeting here in Toronto. I'm honored to have been named the Chief Financial Officer of Manulife, a company that has stood behind its promises to policyholders, customers and shareholders around the world for over 125 years. I'm also very proud of what we have accomplished as a company in 2012.

This morning, I will report to you on the significant progress we have made in 2012 on our growth strategies. I will review our financial and operating results for 2012, and then I will close with a summary of our performance in the first quarter of 2013.

Let's start with the progress on our growth strategies. Throughout 2012 and thus far in 2013, we have made significant progress on these strategies. We saw substantial benefits in 2012 as a result of the investments that we have made over the last few years.

Let's begin with a recap of our growth strategies, which have remained unchanged since 2010, namely: develop our Asian opportunity to the fullest; grow our wealth and asset management businesses in Asia, Canada and the United States; continue to build our balanced Canadian franchise; and continue to grow higher ROE, lower risk U.S. businesses. I'm pleased with the progress we have made on the execution of each of these growth strategies.

I will now go into some more detail on each of these strategies. We continue to develop our Asian opportunity to the fullest. And in 2012, we achieved record insurance sales of USD 1.4 billion and record wealth sales of USD 5.7 billion. We achieved strong growth in our professional agency force in several key markets, ending the year with a record number of agents of over 53,000, an increase of 88% from 5 years ago.

We secured and deepened strategically important distribution agreements with key partners, particularly in Japan and Indonesia, which contributed to the record sales for the year. And we also further increased our pan-Asian footprint by entering our 50th city in China and becoming the first wholly foreign-owned life insurer to commence operations in Cambodia.

In summary, our efforts to further strengthen our distribution capabilities and geographic footprint in Asia led us to excellent sales results in 2012. More importantly, our successes in 2012 position us to better satisfy the protection and retirement needs of the fast-growing Asian markets in the future.

We also continue to grow our wealth and asset management businesses in Asia, Canada and the United States. We ended the year with all-time record funds under management of $532 billion. Manulife Asset Management added significant new institutional mandates totaling over $7.8 billion. We increased the number of 4- and 5-star rated funds by Morningstar to 65, a notable increase of 7 funds from 2011. We achieved record mutual fund sales in Canada and the United States. We experienced strong growth in our pension business globally, including a strong start to Hong Kong's employee choice arrangement, which commenced in late 2012 and also bodes well for 2013. And we launched successful new and innovative products in the latter half of 2012, which we believe will contribute to maintaining our success in the wealth management space in 2013 and beyond. Our progress in the wealth and asset management arena positions us well to achieve increasing operational leverage and profitability.

In 2012, we continued to grow our balanced Canadian franchise. We led the market in group business sales and continued our successful cross-selling efforts in our group businesses. We set records in Group Benefits with sales of over $1 billion, Affinity Markets with sales of over $100 million and Manulife Mutual Funds recorded deposits of $2.1 billion and assets under management of over $20 billion. We reported record assets for Manulife Bank of over $21 billion. We improved our product mix in Canada to reduce the volume of products with guaranteed features. We expanded our distribution reach by welcoming new advisers, extending existing relationships and enhancing support to our distribution partners. And we launched Manulife Private Wealth.

In summary, the Canadian division continues to successfully balance and diversify its business to address the protection and retirement needs of Canadians.

In the U.S., we continue to grow our higher ROE, lower risk businesses. In Retirement Plan Services, we achieved record sales of $6 billion and record assets under administration of USD 72 billion. We achieved record mutual fund deposits of USD 13 billion, which contributed to record assets under management of USD 42 billion.

Life Insurance sales increased 12% over 2011, largely driven by innovative new product offerings with a more attractive risk reward profile for our shareholders.

In our retail Long-Term Care business, we had significant success in gaining additional state approvals for in-force price increases and ended the year with 43 state approvals. And we maintained our leadership in asset allocation funds, which contributed to the successes in our mutual fund and pension businesses during the year. We're very happy with the substantial and positive turnaround of our U.S. business and are now focused on continuing to execute on its growth strategy.

The successes in each of our growth strategies are the result of both good execution and considerable investments we have made over the last several years.

As we continue to execute on our growth strategies, we are beginning to see the benefits on our financial and operating results. We have enjoyed positive progression in our earnings since 2010, as you can see in the graph. In 2010, we reported a loss of $1.7 billion, followed by a small gain in 2011.

We ended 2012 with net income of $1.7 billion. This was achieved despite reserve strengthening of $1.1 billion and a goodwill charge of $200 million. Core earnings in 2012 were $2.2 billion despite the increased expenses associated with additional hedging, specific investments in growth initiatives and the continued impact of low interest rates. We ended 2012 with new sales records for both our Insurance and Wealth Management businesses, which contributed to record funds under management of $532 billion for the company.

As you know, we achieved our 2014 interest rate reduction target in 2011. In 2012, we also achieved our equity market risk reduction target. Achieving these targets 2 years ahead of schedule substantially reduces the volatility in our earnings going forward.

Finally, we ended the year with a comfortable capital ratio, which is further supported by our significant hedging programs in place. The MCCSR ratio of our primary operating company was 211% at the end of 2012.

We are pleased with the progress we made in 2012, and I remain confident that Manulife is well positioned to deliver the disciplined and sustained growth required to meet our 2016 objective of delivering $4 billion in sustainable core earnings.

This morning, we announced financial results for the first quarter of 2013. Let me share with you some of the highlights. We reported net income attributable to shareholders of $540 million. We delivered strong core earnings of $619 million, an increase of $93 million from the first quarter of 2012, largely driven by the successful turnaround of our U.S. division. We achieved record wealth sales of $12.4 billion, up 43% over the first quarter of 2012 and contributing to another consecutive quarter of record funds under management of $555 billion. While we were very pleased with our performance in our wealth and asset management businesses, in the first quarter, Insurance sales fell short of our expectations. Insurance sales were down 23% due to prior year tax and product changes in Asia, a normal variability in the Group Benefits business in Canada and pricing actions reflective of the low rate environment.

We ended the first quarter with a further strengthened capital ratio for our main operating company of 217%, an improvement of 6 points over the fourth quarter of 2012.

Overall, we have made a solid start to 2013. Our first quarter results reflect our continued progress on our growth strategies, strong core earnings, strong net income and a very solid capital ratio.

In summary, I'm pleased with the progress we made in 2012. We made excellent progress on our growth strategies. We achieved our 2014 interest rate and equity market risk reduction targets 2 years ahead of schedule and significantly improved our financial results over the prior year despite the continued low interest rate environment.

We believe that our performance in the first quarter represents a sound start to 2013. I'm confident that we remain well positioned to continue to deliver disciplined and sustainable growth to meet our 2016 objectives. Thank you very much.

Gail C. A. Cook-Bennett

Thank you, Steve. I'd now like to invite Donald Guloien, our President and Chief Executive Officer, to the podium to deliver the President's address.

Donald A. Guloien

Madam Chair, ladies and gentlemen, fellow policyholders and shareholders, welcome. Before I begin, I'd like to point out that it's always gratifying to see all of our former Chairs here this morning. Mr. Syd Jackson, Mr. Bill Blundell, Mr. Arthur Sawchuk, I deeply appreciate your support.

I'd parenthetically note, we also have the Chairman and CEO and former Chief Investment Officer of another fine financial institution in Canada. I'm very proud to have him as a shareholder. I won't mention him by name.

I'm looking forward to reviewing with all of you our achievements at Manulife over the past year. 2012 was a very strong year for Manulife. It was a year of milestones with Manulife celebrating its 125th year in the business, 115 years in Asia, and John Hancock marking his 150th anniversary. It was a year of growth with discipline. Our company achieved encouraging financial and operational results in many of our markets and sectors in which we do business around the world. And it was another year in which Manulife continued to honor its commitment to our customers, our shareholders to conduct our business in a strong, reliable, trustworthy and forward-thinking manner.

When I stood before you at our 2009 Annual Meeting, I reviewed our strategic goals for the company. We were going to grow and diversify our business, we were going to maintain strong capital and financial strength, we were going to manage risk, we were going to improve on shareholders' equity and we were going to continue to offer a high-quality value proposition for our clients.

At the same time, it was the height of the financial crisis, and we needed to make some very tough decisions if we were going to achieve those long-term goals. So we made the changes necessary to delivering on those long-term goals by addressing our capital needs, dramatically shifting our product mix, some very painful decisions there, putting hedging in place, investing in the growth of our most profitable and promising businesses around the world. As a consequence of those changes, in 2010, we reported a loss of $1.7 billion. 2011, that improved to a slight gain, as Steve showed you. And in 2012, we reported net income of $1.7 billion. That is clearly an improving trajectory.

What's more, we have reduced the volatility of our net income and capital ratios very substantially. We have provided better balance in our business mix. We have led the market in increasing prices. We have substantially improved the risk/reward trade-off for our shareholders. As a consequence, our market capitalization has increased by $5.2 billion over the previous year and total shareholder return was 30%. As Steve mentioned, our regulatory capital ratios stood at a healthy 211% at the end of the year and 217% at the end of the first quarter.

People are now starting to observe that Manulife has turned the corner. But I would humbly suggest that we turned the corner 3 years ago when our management team, fully supported by the Board of Directors, made the right decisions for the long-term good of the company.

Needless to say, these decisions were not easy at the time, and in fact, many of them were highly controversial. But they were the right decisions for the long-term good of our company. And needless to say, we could not have made these changes without the support, hard work and commitment of our management team, our 28,000 dedicated employees, 53,000 agents and other fine distribution partners around the world.

Manulife made good progress towards its objectives last year. And as Steve has explained, we made a very strong start in the first quarter of this year. These results were achieved, thanks to strong performances from all of our global businesses. I would like to go over some of these with you in detail today.

Manulife continues to experience strong, sustained growth in our Asian business. As you know, Asia is the home to many of the world's fastest-growing economies and the world's fastest-growing population of middle class consumers, our addressable population. And Manulife has deep roots in expanding operational footprint across all of this important region.

Manulife achieved record sales for both insurance and wealth products this past year in Asia. These results have proved that our product diversification strategy is, in fact, working. And we continue to build a diverse, multi-channel distribution platform across the many countries that make up this vast region. Our Asia division continued to execute on our long-term growth strategies by expanding the distribution capacity of both the bank and the agency channels.

We also continued to build upon our diversified franchise here in Canada. I'm pleased to report that Manulife achieved record results in several business lines in Canada in 2012. Manulife Mutual Funds had an excellent year achieving sales of $2.1 billion, making it among the fastest-growing mutual fund franchises in Canada. These strong results reflect our expanded distribution reach, as well as the successful launches of several new funds. And while the 2012 sales and our individual insurance business were flat for the prior year, this reflected the impact of price increases made necessary as a result of lower interest rates. We acted earlier than our competitors and will continue to do so.

On the banking side, Manulife Bank achieved assets under management of $21 billion in 2012, an increase of 7% over the prior year. These positive results were fueled by strong client retention rates and steady new lending volumes.

The Manulife One product remains one of the most effective vehicles in the market for our consumers who want to reduce their mortgage debt faster than that allowed by conventional mortgages. And as you might expect with that kind of behavior and attitude, our credit experience is simply outstanding.

Overall, Manulife is very well positioned relative to our competitions here in Canada, and we continue to demonstrate industry leadership and strong momentum across all of our Canadian operations.

Manulife also achieved solid results in our U.S. operations in 2012, and as Steve said, this is a great story. Strong sales of retirement plans, services and mutual funds contributed to record funds under management in both of these businesses. Our Wealth Management business in the United States delivered an impressive full year sales of $20.2 billion. If I may, for a moment, put that in perspective, that is almost equivalent the entire mutual fund sales for the entire industry here in Canada, just a point of reference.

John Hancock Retirement Plan Services grew their funds under management by 14% from 2011 to the end of 2012. John Hancock Funds, our mutual fund company, had full year sales of $13 billion and saw increases across all of the sales channels.

Happily, after all of our price and product changes in the United States, other companies are beginning to react and are now making changes to their products and product features similar to those that we had taken some years ago.

As a consequence, our Insurance sales in the United States were also strong in 2012, laying a very strong foundation for 2013 and beyond.

As you well know, at one point in the last few years, some investors and analysts questioned whether it made sense for us to continue doing business in the United States given some of the challenges that we and others faced. But when you see the tremendous contributions from our U.S. operation in the first quarter of this year, and to me at least, not at all surprising slow but steady improvement in the U.S. economy. I would remind people once again, don't bet against the U.S. economy and don't bet against the very fine people in our U.S. operations.

Our Investment division also delivered impressive results in 2012, and those results continue this year. Manulife Asset Management marked significant growth across its global franchise, increasing its assets under management by 12% from 2011 to $238 billion at the end of the year.

Manulife also garnered the industry claim for the quality of its funds and their performance. At the end of the first quarter of this year, we had 68 funds, earning a 4- or 5-star Morningstar rating.

We also continued to further diversify our portfolio of alternative long-duration assets. Our expertise in managing these alternative assets has been well recognized, to the extent that Manulife manages these asset classes not only for the company's own balance sheet, but also for an increasing number of third parties who happen to be -- just happen to be among the world's most sophisticated investors.

This past year, we continued to make acquisitions across numerous asset classes, including real estate, timberland, private equities and infrastructure, to name only a few. As you know and as Steve mentioned and reiterated, we have an objective of delivering $4 billion in core earnings by the year 2016. And we are making progress towards that highly ambitious goal through: products that we have sold for the past 3 years with higher-profit margins; new business being added each and every day; entirely new businesses, new distribution channels and new marketing strategies; and efficiency and effectiveness initiatives. All of these will contribute to the achievement of that goal.

Looking ahead, I want to provide more detail on how we will develop the growth strategies. We have 4 central ambitions: we want to build a premier, top-tier, pan-Asian life insurance and wealth franchise that is well positioned to satisfy the protection and retirement needs of a fast-growing customer base in that region; we want to build a world-class asset management company, providing innovative investment solutions to retail and institutional investors; we want to build a broad-based diversified financial services company in Canada that develops and delivers integrated solutions to address our customers' protection and retirement needs; and we want to build a leading company in the United States that helps Americans with their retirement long-term care and the state planning needs very effectively.

To make this work, we need to get closer to our customers. We need to increase the use of technology to achieve brand recognition, to attract and retain customers, to service them better and to improve collaboration across our business units and divisions.

Our company has 2 very significant brands that have a lot of brand equity: John Hancock in the United States; and Manulife here and in the rest of the world. We will need both of these brands to attain leading rankings in their respective markets. We will need to provide people with choices on how they get their financial advice, continuing to focus on our adviser-based distribution strategy, which is core to what we do, but also supplementing it with other channels as dictated by customer preference. We will continue to build a world-class asset management operation, one that provides innovative investment solutions to both retail and institutional customers.

In our continued pursuit of operational excellence, we will identify activities that benefit from global scale and the adoption of best practices to improve our operations and preserve our competitive advantage; and last, but certainly not least, talent. We will continue to build upon and leverage our status as an employer of choice, attract and retain industry-leading talent.

With these aspirations and approaches, we believe we are building a strong and solid foundation for our company's future success. As you well know, progress can be measured in several different ways. It can be quantitative as in sales earnings or capital ratios. But we should also be very proud of the qualitative measures, which speaks to how we achieve that success. And frankly, where most financial institutions have lost their way, they delivered the numerical, the quantitative results but they lost sight of how they achieve those results. For us, we have some great examples where we have not.

In 2010, Manulife was named one of Canada's top employers, as well as a top employer for young people. John Hancock Financial Services was honored for its leadership in corporate social responsibility. Manulife-Sinochem was awarded best supplier of group insurance. Manulife Indonesia, the most reliable. We earned our 6th consecutive Sing Tao Excellent Services Brand Award and, for the ninth time, the Most Trusted Brand in Hong Kong insurance. I can go on. But suffice to say, your company and its people are representing you very well in the communities that they serve.

Now one of my roles as Chief Executive Officer is to also reflect on the regulatory conditions under which we operate in order to ensure that the company continues to deliver for customers and shareholders, as well as making contribution to the broader economy.

At past annual meetings, I've talked about how mark-to-market accounting rules and other regulatory issues impact our company and our industry. These are no small issues because, in addition to what they do for our customers and shareholders, insurance companies have a vital and important role to play in contributing to the health and vitality of our capital markets and our economies.

For example, Canada's insurance industry alone provides financial security to more than 26 million Canadians. Each week, our industry pays up more than $1.2 billion in benefits to Canadians. We meet these obligations by investing in every part of the economy from toll roads, hospitals, hydroelectric-generating facilities, energy transmission projects, private equity water utilities, pipelines, forests, sustainable energy, to name but a few.

I'm generally pleased with the direction of regulation here in Canada. Make no mistake, we have one of the toughest regulators around, one of the few that took strong action well before the economic crisis began and moved swiftly to make things more secure during the crisis. But by being proactive, they were able to avoid wildly knee-jerk reactions to some of the issues that you see more in play today.

The regulators are also becoming far more understanding of the differences between banking and insurance and being thoughtful about which measures require a similar approach and which matters, because of the fundamental difference in the business model, suggest a differentiated approach.

We enjoy here in Canada a good dialogue between the regulator and the industry, forging intelligent responses to issues, risks and threats. Our regulators are tough as nails, but our regulators are also capable of sensible, practical solutions for the benefit of Canadians.

And this is not necessarily true in other jurisdictions. I recently heard an estimate of the cost to the U.K. industry, the insurance industry alone for European development called Solvency II. The cost of administration alone, this is not the capital. The cost of administration alone was almost $3 billion to implement and upwards of $300 million a year to administer. And that cost will be borne by shareholders and policyholders. In Canada, we tend to find more practical approaches. The Geneva Association, which is a think tank representing the 80th [ph] largest insurance companies in the world, is holding its annual general meeting in Canada next year for the very first time in its history. And one of the key objectives of the members and the rationale for doing the meeting here in Canada is to find out more about the good governance and intelligent regulation of the Canadian insurance industry.

It should also then come as no surprise that the Bank of England, when searching to find the very best person to lead their institution through challenging times, chose a Canadian, Mark Carney. Steve wasn't available.

I'd like to close my remarks by recognizing the contributions of 4 directors who are retiring from our Board of Directors. Before I do that, I want to recognize once again Mr. Sydney Jackson. Syd was Chairman and CEO of Manulife. He has been attending Manulife annual meetings since 1948. And Syd, I believe this is your 64th meeting?

Edward Sydney Jackson

Something like that.

Donald A. Guloien

Something like that. Thank you, sir, for your dedication, and we'll see you again next year.

And now I'd like to pay tribute to our retiring directors. A director since 2005, Tom D'Aquino is a highly influential Canadian who has advised prime ministers, business executives, Boards of Directors and had an impact in an array of fields, including academia and the arts as well as business. Tom's insights into public policy and government thinking and wide-ranging views on strategy provide very substantial contribution in a number of our board committees and the board as a whole. Thank you, Tom.

Robert Dineen joined our board in 1999, bringing with him extensive experience in international banking and public finance. He was always a proponent of the international expansion. And his advice was not only professional but always practical and is used to inform the board on a wide number of issues. Thank you, Bob.

For nearly 3 decades, which is surprising for such a young man, Hugh Sloan has been a vital part of our board, shaping our work through various committees and handling some of the toughest board assignments. His hands-on experience as a former CEO provided valuable and practical insight for many board discussions. Thank you, Hugh.

And last, but certainly not least, our Chair, Gail Cook-Bennett. A steady hand on the tiller, with unimpeachable integrity, always an advocate of doing the right thing in the long term, ensuring that everyone gets heard, encouraging active discussion as a means of ensuring the right decisions get taken, always thoughtful, always prepared, stubbornly honest, enforcing intellectual honesty when arriving at conclusions, a memory like an elephant on all important matters. Gail set a strategy and helped recruit a Board of Directors with diverse and complementary skills and background but with one thing in common, none of them are shrinking violets. This ensures the widest range of board discussions, and in my opinion, is the single best measure of good governance. When Gail took over as Chair of the board, we faced an extremely difficult economic climate. Gail's perseverance, resolve and commitment were unshakable and essential to making the right long-term decisions.

I ask you to show your appreciation for the contribution of these 4 retiring directors.

Gail hates the attention focused on her. I'm going to pay for this in the morning.

And finally, Dick DeWolfe who was been a trusted Manulife board member since 2004. Dick is a very savvy and seasoned corporate director and has worked tirelessly on behalf of the shareholders. Should you decide to elect Dick once again as a director, which I would heavily recommend, I know he'll continue to make those same and valuable contribution to our board. And I look forward to working with you, Dick.

Ladies and gentlemen, I'd like to thank you once again for your attendance here today. And on behalf of our employees, senior management team, the Board of Directors, I'd like to thank you for your confidence and support of our very fine company. Thank you.

Gail C. A. Cook-Bennett

Donald, thank you. Does not do justice to what you have just said, but I'm running a meeting here today.

I now have the reports of the scrutineers. And we find that on the Manulife Financial Corporation directors, all director nominees received at least 83% of the votes cast in favor.

Now I'm going to ask each one of the directors elected to rise when I call their names: Joseph Caron, John Cassaday, Susan Dabarno, Richard DeWolfe, Sheila Fraser, Donald Guloien, Scott Hand, Robert Harding, Luke Helms, and Tsun-yan Hsieh was not able to join us today, Donald Lindsay, Lorna Marsden, John Palmer, James Prieur, Andrea Rosen was here earlier but had to attend a related funeral and Lesley Daniels Webster. Your Board of Directors.

Now all policyholder director nominees received at least 93% of the votes cast in favor. Therefore, all 5 nominees were elected as policyholders' directors of the Manufacturers Life Insurance Company. Now among the elected directors is Richard DeWolfe, who was named Vice Chair of the board in December 2012 in anticipation of my retirement at this meeting. As a result of his knowledge, his diligence and his enthusiasm, Dick DeWolfe has the full support of the board as he becomes the next Chair and leader of the outstanding group of directors whom you have elected today. Congratulations, Dick.

Turn to the appointment of auditors. 99% of the votes were cast in favor of the appointment of Ernst & Young as auditor of Manulife Financial Corporation, and 99% of the votes were cast in favor of the appointment of Ernst & Young as auditor of the Manufacturers Life Insurance Company. Therefore, I declare Ernst & Young LLP appointed as auditors of Manulife Financial Corporation and The Manufacturers Life Insurance Company.

On the advisory resolution to accept Manulife Financial Corporation's approach to executive compensation, 84.2% voted for and 15.8% voted against. Therefore, I declare that the shareholders have accepted Manulife's approach to executive compensation. The board will take the results of this particular vote into account in determining whether there is a need to increase the board's engagement with shareholders on Manulife's approach to executive compensation.

Now this concludes the official business of the meeting. But before we move into the question period, I'd just like to tell you that it has been a privilege, indeed, a privilege, to serve both as a director and a chair of this company. And I can also tell you that those branding words, strong, reliable, trustworthy and forward-thinking, describes not only our management team but our Board of Directors who are working on your behalf with the support of those employees worldwide that I acknowledged earlier. And I thank each one of them. I think that the shareholders are being well served.

We would like now to open the floor to your questions about the company's business. The agenda card at your seat provides the procedural guidelines governing this question period. If your question relates to a product or a personal issue, members of Manulife's customer service team are available to assist you. Either now or at the conclusion of the question-and-answer session, go to our registration desk in the foyer and they will direct you to a member of Manulife's customer service team who can be of assistance to you.

Now when you make your comments or ask a question, please give your name and state whether you are a shareholder, policyholder or proxy holder. Please direct all your questions to me as Chair. In the interest of giving others the opportunity to ask questions, kindly keep your comments to not more than 3 minutes. I do have a clock here in front of me.

If you're seated in the overflow rooms and have a question, please raise your hand and ask to be escorted here to the international room. If you are unable to move to the microphone in this room, please raise your hand and a microphone will be taken to you.

I open now the floor to any questions from the people designated.

Question-and-Answer Session

Gail C. A. Cook-Bennett

Do I have some questions? Not one? Wait a little longer. Can I take it from this that you were pretty pleased with these 2 reports?

Unknown Shareholder

My name is Jerry [ph] Sherman [ph]. I'm a shareholder and a policyholder. When I got up this morning and put on the business news, the first -- the lead comment was about the loss in insurance sales that was suffered by Manulife. I believe it was in the first quarter of the year. So I thought that, that was a major event. But there was hardly any comment about it here and I wondered if you could comment on that news bulletin, I guess, it was.

Gail C. A. Cook-Bennett

Well, Steve Roder did allude to it in his presentation, and I'll ask him to elaborate.

Stephen Bernard Roder

Thank you, Madam Chair. There were actually some specific reasons why insurance sales fell, which we anticipated because in the previous year, we had some, you could say, special sales that took place in Asia ahead of certain changes that took place in tax laws and things of that nature. So we knew that was going to happen. And secondly, in Canada, we do experience lumpiness in our sales because of group insurance sales, which tend to be very, very large. And therefore, our results can fluctuate from one quarter to the next. So we actually did anticipate a year-on-year decline in insurance sales. Having said that, we did also carry out some repricing in Canada and in Asia in response to what's going on in the economy. And as a consequence of that, we would, in the short term, not be surprised by experiencing some downturn in sales. But most of it was actually anticipated.

Unknown Shareholder

How much was involved in dollars? You gave a 23 percentage difference, but what did that amount to in dollars?

Stephen Bernard Roder

It would be a substantial amount, but we would expect to recover that over time. And as I say, from one quarter to another, things can change particularly in the Canadian group business. And we do have periods where we will have a run-up toward a regulatory or tax change in any particular jurisdiction. And we'll experience the positives and negatives that come out of that.

Gail C. A. Cook-Bennett

Are there other questions now? The ice has been broken. Well, seeing none, I'm going to conclude this meeting. And ladies and gentlemen, the Board of Directors and the management team looks forward to seeing you this time next year. Thank you.

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