Manulife Financial Corporation (NYSE:MFC)
May 21, 2013 8:45 am ET
Stephen Bernard Roder - Chief Financial Officer and Senior Executive Vice President
John Aiken - Barclays Capital, Research Division
John Aiken - Barclays Capital, Research Division
Well, ladies and gentlemen, we're going to kick off the Canadian financial services portion of the America's Select Conference.
I'm very happy to have Steve Roder, who's the Senior Executive Vice President and Chief Financial Officer of Manulife Financial. Steve, as he tells me, or has corrected me, is coming up on his first anniversary. He's supposed to walk out -- or actually was just passed his first anniversary with Manulife.
Prior to joining Manulife, Steve was CFO at AIA group through a transition period, I guess, well, I will call it, which capped off 16 years as a partner at KPMG, which ultimately culminated him in heading the Asia Pacific financial services practice for the firm. Anyway, Steve, thank you very much for joining us. We very much look forward to your presentation.
Stephen Bernard Roder
Thank you, John, and thanks for taking the time to come in and listen to this presentation. Ladies and gentlemen, a pleasure to be here. I think this is actually the first time I presented back in my hometown since I joined Manulife, so a special pleasure. And the joke back home is that I'm the other half of the swap trading that involving Mark Carney, the new governor of the Bank of England. And the committees [ph] are not very happy. So let's see how we go. Okay. So I know this is the first time we've presented at this conference in a plenary session. So I'm going to keep this relatively high level with a very quick sort of overview of Manulife. And apologies for those of you who've already done your deep dives. And I will try and leave some time in the end to answer any questions you may have. So let's start off with a sort of recap of where it is that Manulife is trading.
So firstly, Manulife is the sort of iconic financial services company in Canada. It's been present there for 125 years. It's 100% brand recognition, and as I say, an icon of the economy. So we're trading in our home economy of Canada. The secondary area we're trading is in the United States, where we are -- we trading under the name John Hancock. John Hancock was acquired by Manulife in 2004, and it's an iconic brand name in the United States. So our second trading division, the United States. Third trading division is Asia. Manulife's actually been present in Asia for rather a long time. Manulife started its operations in Asia 115 years ago. Someone from Canada had the bright idea of showing up in Hong Kong in 1897 and we now have a footprint across the Asian region, which is essentially everywhere other than Korea and India. You can look at it that way. We're everywhere other than Korea or India, apart from one 1 or 2 places that we probably can't even remember the names of. So we have a pretty broad footprint. I think if you had a bunch of analysts in the room, it wouldn't take them very long to conclude we've got probably the #3 platform in Asia. I think it's fair to say. Add to that the fact that we have a global asset management business and we've been building out our global asset management capability. So we have professionals in 17 countries, we have global fixed income capability and we have some special classes where we have a particular reputation for expertise, and I'll show you a little bit of that later on. So in summary, you could say we're in the 3 largest economies in the world, we're in the sort of safe haven of Canada of our home economy, and we're in the growth economies of Asia.
If you look at our core earnings, what's changed over the last few years since the Asian piece has become bigger? So if you go back about 5 years, you'll see that the Asian share of core earnings was in the mid-20s-percent. In 2012, it actually reached to 38%. And as we go forward, I'd expect this to be sustainable and to increase. In fact, in 2012, it's priced a little bit on the upside in terms of the percentage. But on a go-forward basis, we expect it to be the biggest division. So this is a very significant business for us, the Asian division. It's not a hobby that we do on the side. It's not something we've started to think about in the last 2 years.
Manulife has been a significant player in the region for sometime, but we're benefiting effectively from the activity that's been put into the region and also the massive transformation of that region [ph] and the emergence of the middle class in that region in absolutely massive quantities.
So we're benefiting from the Asian growth story and it's a central piece of our strategy.
On the right hand side, you'll see the division as we define it between Insurance and Wealth. And this is remaining -- it's remained fairly stable in the recent past, and we think it will remain fairly stable as we move forward, and we're quite happy with that. We -- it's quite nice to have that sort of balanced portfolio between the Insurance protection on one side and Wealth on the other.
So last November, we've -- we held an Investor Day, where we put out some new targets for 2016. And basically, we were saying, right, we want to go back to greatness, you could say. Before the financial services crisis in 2008, '09, Manulife was the -- at one stage, the largest capitalized stock in Canada in any sector and had a stock price of $46 at the peak of our core. So -- and there's a long way back to that. And we were trading at the end of last week at $16. For having said that, we're off the floor of low $10s about a year ago. This is why I meant to say the stock price has increased 40% since I joined the company. And then I have to rapidly say there's no correlation between those 2 statistics. So the ambition is to get back to where we were, if you like, and we were a $4-billion company -- $4-billion-earning company. Currently, we are depending how you want to get there. We're a $2.2-billion company based on last year's earnings. Or if you multiply this year's first quarter by 4, you'll get to a $2.4-billion company.
How do we get there? Well, of course, we have the earnings that will roll off our in-force block of business and there will be some growth in that. But what else is going to get us there? Any analyst will tell you that they'll sit down and apply growth rates and they can't quite get to $4 billion, so where's -- what's the magic? Well, first of all, what we have to remind people of is that despite the fact for the last several years, the focus has really been on risk management and hedging and derisking the earnings sensitivity to interest rate shocks and the like. At the same time, we have been investing for the greater benefit of the business and I'll show some examples of that in a moment. The second thing I'll highlight to you is the fact that we do have what we term our efficiency and effectiveness program, which is trying to make us a more nimble, flexible, agile organization. But also make sure we do take benefit from our global scale and reach in a way we haven't previously done, and I'll talk about that again in a moment. And thirdly, we obviously are continuing to pursue growth strategies. And I'll talk again in a moment about the growth strategies which have remained pretty much unchanged for the last 3 years.
So firstly, what have we been investing in over the last 2 or 3 years? Well, if you take each of our regions, Asia, Canada or in the United States, you can find examples of where we have been making acquisitions either of companies or lift outs of teams of investment professionals. We've been pursuing new market opportunities, and we've also been investing in expansion of our existing businesses.
So let's start on the left with some highlights in terms of acquisitions. So as part of our drive into Asia, and also consistent with our build out of our global asset management capability, a couple of years ago, we acquired the Mainland China business of -- at a time from ABN Amro and this is now Manulife-TEDA. And we basically spent a lot of years aligning this business and putting it where we want it to be and is now significantly -- significant contributor to the Asian earnings. We've continued to make bolt-on acquisitions in Canada. Because we have a pretty broad-based financial services offering in Canada, we are able to make a lot of sense of quite a lot of acquisition opportunities and these tend to come about through bilateral arrangements. These are typically not auction processes. And we subsequently or recently announced another deal, which is called Benesure. Right, I think it was early this year or late -- very late last year. So I would not be surprised if we see more deals of this nature. But they tend to be pretty small by nature, they're quite accretive for us. And then the third category in the United States, we've been very successful. Rather than spending a lot of money to acquire asset managers, we've been lifting out teams of asset managers and we've successfully been doing that particularly in the United States.
In terms of new markets, I'll just highlight a couple here. We did put down our flag in Cambodia. So we were the first foreign insurer to be authorized in Cambodia, and we opened for business there last year July. And we now have -- I believe we have about 600 agents in Cambodia. We actually paid our first claim in Cambodia last summer, and that was a matter of the national newspaper stories, because people weren't sure whether these funny foreign insurance companies would ever actually pay their claims, and the claims came along. But we rapidly paid the first claim just to make the point that we do.
So we're on the map in Cambodia. Now that won't move the needle for sometime, on the other hand, in terms of earnings. On the other hand, I'm quite convinced that everything we do there now will create value in terms of the embedded value of our business and the franchise value of our business. Take another example, in Canada, we've launched a private wealth channel as an adjunct to our bank in Canada. That's been a success story since they launched late last year. The strength of the Manulife branch and combined with the reputation of Manulife and the bank in Canada has enabled us to get into that space. On the right-hand side, some efforts to expand our existing business. So for example, in Asia, we have invested in expanding our agency force. We currently have around 53,000 agents in Asia. The major agency forces would be in the Philippines, China and Indonesia and Hong Kong. And we have invested here, so we've taken opportunities to acquire teams of agents when they become available to us. But beyond that, we invest in recruiting and retaining and training high-quality agents. It's fair to say in Asia, Manulife's reputation is one for quality of agency. Rather than driving pure numbers of agents, we very much focused on the quality and effectiveness and productivity of our existing agents. We'd rather have a smaller number of high-quality agents who are producing rather than a lot of names on our books of agents who are not doing very much, whatsoever. That's -- it's easier control, it's lower overall cost and it's easier from a compliance perspective. We've also built out our offices in China. We're now up to 50 of -- cities in China out of which we operate. We operate in a joint venture with Sinochem, and we were the first foreign joint venture to be authorized in China, and we believe we're the most profitable foreign joint venture in China. And we've been investing in bancassurance. So the last sort of flagship deal we did, if you like, was last summer where we entered into a comprehensive bancassurance arrangement with Bank Danamon in Indonesia. And we now have somewhere between 300 and 400 of our representatives in their branches across Indonesia, which I'm sure you know is a very wide-spread geographically diversed nation, and our agents are across a broad spectrum of those branches across Indonesia. If you look further down, if you take the U.S. perhaps as another example of investment. In the U.S., John Hancock is the leading provider in the small-case-size market of 401(k) plans, and those will be cases where the number of employees is 50 or less, that was our market niche. But we were not where we wanted to be in the larger-case-size markets, so we have invested approximately $50 million in developing the chassis to be able to go to the next-case-size market, which is the 50-plus, 50- to 100-type market, which requires a different sort of software to -- requires different sort of training. And we nearly have the first clients on the system as a reference sign -- reference sites preparing for the full-scale launch of that new product or design for that particular market. So investment has been going on despite all the derisking and hedging and everything else that we've been focused on the last 3 years, and this should translate into earnings growth.
Let me talk next about the efficiency and effectiveness project, because this will also give a kicker to earnings growth. Manulife, as an organization, and this is a sort of a personal perspective, I suppose, coming from the outside, has historically allowed a huge amount of autonomy to business unit leaders. So business unit general managers have typically controlled their resources and they've ran their operation on a sort of a virtual standalone basis for many, many, many years. And that business model has a great deal to recommend it in terms of entrepreneurship and the like. But there comes a time when it's in the best interest of the organization to run global functions and bring some sort of global commonality to the party, otherwise, you tend to get this economy to scale rather than economies of scale. Essentially, you create complexity but you don't get the same things from having scale. And so last year, we were able to put in place global functions. We changed to having global functions. So for example, the CFOs in the various divisions now report to me directly. And this produces a couple of instant most supportable things. Firstly, the information flow tends to improve; and secondly, it's easier to bring about change. And in particular, it's easier to bring about change that involves acting on a global basis when it comes to things like procurement, doing things once and once only well, rather than doing things 3x, et cetera. And there's a huge amount of potential synergy that we can get out of this through these organizational changes that we've been making. As a precursor to the major change, we've been going through an organizational design project, which is you can sort of see on the top right of the sort of umbrella to this overall project. And this project entailed, starting right at the top of the organization, and basically redesigning the organization chart right through the organization into do 2 things. One was to broaden out the spans of control, so the average number of people reporting into a manager would increase from an average of 4, say, to something like 6. So a significant increase in the average, but also to limit the number of layers in the organization. We had in the thickest part of the organization, if you like, we have 14 layers between the bottom and the top, which is far too many. And we've basically cut that down to 9. And as a consequence of all of this, we're already a much more nimble organization in my view and there's a side effects of this, which is that we need less people. So we're now built for the future rather than the past, and there will be some cost savings that result from this. But as a precursor really to the major savings, which will come from some of these other work streams, and I highlight here, the ones at the top, that have the most dollars attached of them. Operations, information services and procurement. So the fact that we've now built these global functions means that no longer do we have each general manager making their own decisions about something like data centers. So we don't need to have numerous data centers in Canada, for example; we can combine data. Or in procurement, we don't need to run a print procurement request for proposal process in the United States and do exactly the same thing 2 weeks later in Canada. We can run one from North America, and guess what, you get millions of dollars of savings. So this whole project, which kicks off in earnest in the autumn last year and has a great deal of momentum behind it. It's not entirely new to me, I've been through this sort of thing before, so I'm probably regarded as one of the key executives driving this project along with particularly our Chief Operating Officer, Paul Rooney, and we are determined to make this pave the organization and bring about some significant and meaningful savings. We haven't put a specific number on that yet, but we have said publicly, we expect this to be used several hundred million dollars of earnings -- sorry, run rate savings by the time we get to 2016. I would emphasize, in the short term, this won't immediately obvious, because some of these savings, you have to invest to get out from an organization. And therefore, on a net basis, the -- I don't think we'll see much in 2013. We might see some -- a fairly modest net increment on the positive side in '14, and I think we'll start to see some really good net impact in '15. Okay, let's go to our growth strategies. So when Donald Guloien was appointed Chief Executive in 2009, he said he'd placed the growth strategies for the go ahead at the time. And those have basically remained unchanged.
Here they are. So the first one was to develop our Asian opportunity to fullest and build our Asian platform, our Asian story. And so our Asian division does receive a lot of attention. It's front-and-center of attention in the board room and at the executive committee and quite right, too. Having said that, we mustn't forget the big organization out there, outside Asia. So our second initiative was to build out this wealth and asset management business across our entire organization. Donald's view at that time back in 2009 was that we ran significant monies for backing our policy holder's liabilities very successfully and why was it therefore that we shouldn't be doing more of this in support of mutual funds or even third-party mandates in a way that other people did or be it not always in the life industry. But we didn't see why we couldn't extend our asset management platform beyond our core general account activity and really drive it across third parties and stand-alone mutual funds. And we've been putting a lot of effort into that, and I'll give you some more information. The third is to continue to build a highly balanced Canadian financial services franchise. So in Canada, we have strength in mutual funds. We're in pensions. We're in -- we have a bank. We're in a lot of parts of financial services industry and we continue to have a very broad-based approach to financial services. The fourth was ready to pivot on our U.S. product offering and stop selling higher risk, higher capital-intensive products and start selling lower risk, lower capital-intensive products. And that's been a huge success, and I'll talk a little bit more about that in a moment. So those are the 4 strategies.
In terms of the Asian ambition, the Asian ambition would mean that we achieved earnings growth on a compound basis over the plan period of around 14%. And let's just talk a little bit more about what we have in Asia. So these are our bigger operations. The top 3 are our biggest 3 operations, Japan, Hong Kong, Indonesia. The top 2 are, by far and away, our biggest right now. Japan was an acquisition which we made back in 1999. If -- you may recall at that time, the Japanese insurance industry, the entire industry virtually would've been bankrupt were it not for regulatory forbearance at that time. And as a consequence of that, Manulife was able to acquire a vulnerable Japanese financial services company called Daihyaku Seimei, which is now our Japanese business. Now, you may say, "Oh, well, that's very dull, because Japan is very boring and mature." That's not actually the case. I didn't believe that when I lived in Japan for 5 years, and I certainly don't believe it today. I would characterize it differently. Japan is a country which rewards those who are fresh, nimble, agile, imaginative and able to take advantage where others fail to do so. So I'd like to describe this as the garden where the lumbering dinosaurs are still wandering around and a few little monkeys like Manulife and another few foreign companies can have a very, very good time, because this a very substantial market. So to give you an example of that, we launched a strategic income product in Japan in November last year. And by the end of this March this year, that's 5 months, we had sold over $1 billion of this product in Japan through -- largely through Nikko SMBC. Basically, it's a time when the Japanese were looking for enhanced yield, they were looking for non-yen exposure. So it's a great product brought from inside the Manulife empire, tailored to the Japanese market by our team in Japan, got traction with a major distribution engine, and it can turn into a very significant -- sums very quickly in this, or on some measures, it's the biggest market in the world. But most, it's usually referred to as the second largest. So we like our Japanese business a lot. We are very happy in Japan, and we have great hopes for the Japanese market. So if people tell you Japan's mature, don't believe them, because it's not. It means they don't know anything about Japan. In the second market, it's Hong Kong. We've been there a very long time. We have around 5,500 agents in Hong Kong. We used to be over reliant on agency. We've more recently managed to diversify our distribution, and we do have some bancassurance there in Hong Kong.
In Indonesia, I mentioned the Bank Danamon deal that gave us a lot more distribution there. We also have a strong agency story there. And this is probably one of our fastest growing markets. The fourth market right now neck-to-neck with China is actually the Philippines, but we normally get a question about China. And so just to remind you, we have a JV in China. It's been there 15, 16 years. We're at 50 cities. It's a national license, so the constraint for us is really on how much we can manage how fast, how quickly can we recruit great agency people and turn them into agency managers and then have them help us grow additional offices. That's the -- that's probably the most constraining factor for us in China.
Why is Asia so compelling? I suspect you know some of this. But basically, we have this massive emergence of the middle class. It's not just China or India, it's also Indonesia, it's the Philippines. And I've been in Indonesia and the Philippines and Vietnam this year. And when you go there, you can really feel the buzz, the story is really starting to happen in those countries. I've been visiting the Philippines for many, many years and I haven't felt anything like the confidence and buzz I felt when I was there earlier this year. And at the same time, insurance penetration is very low in Asia compared with mature markets in the West. So you would expect that the level -- not only is this -- the middle class going to emerge, but also the level of penetration you would expect to increase.
At the same time, there is a significant aging population issue in some of the "more mature" economies of Japan, Hong Kong and Singapore and even China for the different reason, which was the one-child policy. So all these reasons give rise to potential need for our products. So our addressable population is increasing.
And on this slide, you can see some of the data points and it basically compares the development world on the left to our Asian world of the right. And you can see it's a very, very different world. But I'd again remind you that Japan, although not passing the test of this level, does pass the test if you get under the skin and see what the dynamics are in the country. So Canada, what's our ambition for the Canadian growth story? We're looking at a compound growth rate there of around 15% to achieve our ambition. And that's by continuing to build this diversified financial services base. And you can see here the scale of the business in Canada. The great thing about the Canadian business is that it's a sensible market. This is not a captured market. We've been joking about the fact I talk about living 3.5 sensible -- or 3.5 credible large life-insurance players in Canada. The reason for the 1/2 is that one of them is more of a regional player. But there are really a number -- only a small number of players, and repricing tends to get followed. So this is a great place to have in your home economy, your home market, the safe economy of Canada and a rational market. So we continue to see great opportunities in Canada and are experiencing some very good results, particularly on the mutual fund side and in the retirement solution side. So good, great hopes to Canada.
In the U.S., looking at more modest compound growth. I think when we put this plan together, we were concerned about the U.S. economy, et cetera. Having said that, since we put the plan together, we had a fantastic first quarter in the United States, and the U.S. seems to be coming back strongly. So I think if we're going to surprise on the upside in the near future, it could just be the U.S.
The real attribute in the U.S. is the John Hancock brand. If you've spent time in the U.S., you're fond in the U.S., you'll know this. But particularly, if you were to visit Boston, you cannot escape the John Hancock brand. It enabled us, therefore, to change what we've been selling almost 100% from about 3 or 4 years ago. It's a huge pivot which can only come about through having, I think, such a strong brand. But we're now the #5 provider of mutual funds in the United States, which is a very significant business, and we're experiencing some great results as a consequence of that.
Turning finally to the full strategy, which is the growth of the asset management business. And I can just show you here what's happened to our funds under management at the top, and we keep having these sort of record quarters of funds under management. It's a bit embarrassing, because we were -- told you used the word "record" too many times. This is the one sort of keeps being a record every quarter and year. So what else do you want me to say? It's a record. So last quarter, again, it was a record. It was $552 million at the end of Q1. The things to highlight here though, a couple of things, I think. The little green bar that we've exploded out at the bottom is the mutual fund assets under management. And that's grown very significantly since we've put in place this new strategy when Donald Guloien took over as Chief Executive. So we are getting traction in the mutual fund space. With our mutual funds, we're significantly increasing the number of our funds that are 4 or 5-star rated by Morningstar, and we have great hopes to drive this on. And I'll come to one of the reasons in a minute. But we -- partly it's because we're seen as a sound global player. We have global capability and fixed income. We have fixed-income teams in places like Indonesia and the Philippines in support of our Insurance business and we can utilize those in our bond categories in the Wealth space. The last piece is just to point out -- it's the orange piece right at the top. And we did get a significant pickup in 2012 because we started winning some significant third-party institutional mandates. And that's because I seem to have expertise in certain categories of alternative long-duration assets. So in these times of trouble, deals as they were, and people are looking some pickup, people are pretty interested in categories and assets like timber and farmland. And John Hancock brought with it a very, very long history of expertise in managing timber product, of timber assets and farmland assets. And Manulife has always had a strength in oil and gas assets. So we are seen as having a specific expertise in these asset classes, and so we're tending to pick up a lot of -- well, firstly, we're picking up third-party mandates in this area, but we're also being able to originate more and more assets in these each classes, because people see us as a likely operator and buyer of these sorts of assets. So that's all very helpful. The piece that we haven't explored fully yet, and we now are thinking about is, can we somehow take these assets to the Asian high-net workspace, where people are looking for some alternative-type yield opportunities? Can we constructive a fund based around some of these assets that would be of interest in the high-net workspace. So there's all sorts of opportunity for us that we haven't really explored, and that's the fourth of them.
So just in wrap up, and then I'll take questions, we have global operations in 3 divisions, well balanced in terms of our earnings. The past is behind us in terms of derisking, so I haven't labored with that today. We're now about the strategic growth story. The Asian growth story is very important to us, and I don't think we've historically, perhaps, articulated that as well as we might have done, but we have other things to worry about. And at the same time, I don't think we've received the value for it that is there. And going forward, the way I like to look at this is we have exposure to the Asian growth story. But at the same time, we have exposure for the U.S. recovery, and we have it from the comfort of the safe haven economy of Canada.
So I thank you for that, and I'm very happy to take your questions.
I got you -- got 3 questions, rather greatly. One is, you presented us a turnaround, and I'm not familiar with the company, so if you can give us a positive history of were there problems before that got you to this point where actually individual buckets of whether it permeated to the whole company, is one question. The second question is management incentives, what are you management hocused on and remunerated to produce now in a month since launch? And the third question is uses of cash.
Stephen Bernard Roder
Okay. All right. First one, okay, so this is a story according to the man who's been around less than a year, okay, but I think I get what happened. So basically, up until 2008, 2009, this was a Canadian stock market dialing. It was $46. It has highly valued, it had earnings growth, it had high earnings. When the financial services crash came, what became apparent was the risk that have been retained on the balance sheet arguably was more than was advisable when it came to dealing with the severity of shock that was experienced in 2008. So had people foreseen what could transpire if actually markets plummeted by more than 30%. And it would appear probably not, and therefore a great deal of pain was taken on to the balance sheet through what happened to interest rates and what happened to equities and the like. So since then, the great focus for at least 2 years has been on hedging and derisking, basically taking the earnings sensitivity off the balance sheet. And...
And those proves on the North American business?
Stephen Bernard Roder
The problem was mainly the U.S. business, not entirely. There was also some of this in relation to the Japanese business, where we've written variable annuity business with guarantees as well. So it wasn't entirely that. So that was the -- that's the real turnaround. And you can tell from our quarterly earnings calls that the tone, even since I've been around, has started to change from risk hedging, risk hedging, risk hedging, is more now about the future growth, how are we going to get to $4 billion. That's really it. Management incentives. I guess it's fair to say our incentive program is pretty similar to most people in North America. So I think it's true to say, 80% of our remuneration is incentive or performance-based. It's something like 20% cash, 20% annual bonus, which is performance-based, and the other 60% is a combination of -- I think it's a combination of performance stock units, restricted stock units and options. And when it comes to performance, the performance is concerned with, if you like, the immediate financials as represented by certain key performance indicators. But it's also concerned with the ongoing health of the company, which might be reflected in the future profitability of the company. So for example, have we -- take an example, we will be concerned about our employee engagement score. We'd be concerned about assets under management. We'd be concerned about the rollout of a particular program that we'd agree we needed to get done. It's so it's not wholly around first-level KPIs. It's a bit -- it's broader than that at the moment.
So the key financial performance indicators.
Stephen Bernard Roder
The main key finance -- key performance indicator would be net income. We talk a lot about core earnings because it's easier to talk about. It's an easier conversation with the Street. But as I've said, when I introduced core earnings, we're still remunerated on net income, basically. Because at the end of the day, we can't run away from net income. Why should we? We should be aligned with shareholders, and that's our intent. Third one. Uses of cash. Okay. Can you just sort of clarify a little bit by what you mean by uses of cash?
Because you spoke a lot about sort of building out Asia and where you see now -- it's just where do you fit over the next 5 years and [indiscernible] buyback, revenue growth [indiscernible].
Stephen Bernard Roder
Okay. Well, first of all, currently, our leverage is 32.6%. We want that to be lower, so I don't think that we'll buy back it on the agenda at all. And the dividend, we got about questions about the dividend. The dividend was halved in 2009 when the new Chief Executive Officer came onboard. What we've said publicly, and I will repeat now, is that what we'd like to see is our quarterly earnings stable and increasing. We'd like to see the volatility much reducing our net income line. We'd like to see our leverage ratio coming down. And if we have that in place for several quarters, then I guess it's incumbent upon us as management to think about what we might recommend to our Board of Directors, because at the end of the day, it's their decision. So we're not having conversations about the dividend now and we're not saying we would have to wait to achieve those targets to have that conversation, if I could put it that way. And I would say we've had 2 quarters that we would classify as high satisfactory: Q4 last year; and the Q1, which we just announced. Sir?
John Aiken - Barclays Capital, Research Division
Exactly. One last quick question.
The U.S. business, John Hancock, you said it was #5. What is the AUMs or product revenues or -- and how was your asset mix of fixed income versus equities, and how is it growing? Like the last 6 months have been a strong market. Have you collected faster than the comps?
Stephen Bernard Roder
Okay, right. I think we may have to get back to you on the detail of that, because I don't have all that data in my head or available to me here. My understanding is that we have been outperforming the markets. One of the reasons is that we were able to become a preferred family of Edward Jones, which is a major distributor in the U.S. I believe they only have 7 preferred families, and we are now 1 of those 7 preferred families, and that happened last October. So that was a significant breakthrough. It's fixed income and equity. We have both those capabilities in the U.S., so it's all of the above. And I guess and I do believe that we have been performing better than the market. I think we've -- other than that, we'll come back to you on the individual detail of that.
John Aiken - Barclays Capital, Research Division
Well, unfortunately, we've run out of time. But, Steve, thank you very much for your presentation. And ladies and gentlemen, please enjoy the rest of day plus of the conference. Thank you, all.
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