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Manulife Financial Corporation (NYSE:MFC)

Annual Meeting of Shareholders

May 03, 2012 11:00 am ET

Executives

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

Michael W. Bell - Chief Financial Officer, Senior Executive Vice President and Member of Executive Committee

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

Analysts

Peter Marlatt

Gail C. A. Cook-Bennett

Good morning, ladies and gentlemen. I'm Gail Cook-Bennett, chair of the board of Manulife Financial and The Manufacturers Life Insurance Company. And it's my very great pleasure to welcome you here this morning to the annual meetings of Manulife Financial Corporation and The Manufacturers Life Insurance Company. I will be chairing today's joint meeting as well as moderating the question period.

This meeting will begin with my remarks followed by the regular business of the meeting and reports from Michael Bell, our Chief Financial Officer; and Donald Guloein, our 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 of Manulife Financial Corporation's approach to executive compensation. We will open the floor to questions at the end of the business part of the meeting.

Now it's my pleasure to introduce the people on the stage here with me. Starting from my far left, we have Michael Bell, Senior Executive Vice President and Chief Financial Officer; next, Donald Guloien, President and Chief Executive Officer and board nominee; then J-P Bisnaire, Senior Executive Vice President, Corporate Development and General Counsel; and finally Angela Shaffer, Vice President and Corporate Secretary.

At this time, I have a very pleasant task and that is to recognize Manulife's stars of excellence, the Employee Stars of Excellence. Manulife has talented employees all around world, and every year at this time, we have the opportunity to honor a select group of employees and sales associates for their outstanding professional achievements and contributions to the company's success.

This year's distinguished Stars of Excellence consist of 53 employees and field Associates. And this is out of a global employee complement of almost 25,000. These individuals serve as role models by significantly going above and beyond expectations in serving both their external clients and their internal clients, our customers. Through their leadership and commitment, they've contributed significantly to the company's operational success. This year's honorees are from 10 countries and territories. And I'm going to ask our stars to please rise when their country or territory is called and remain standing until all have been called.

China. Can you stand? Now I saw people from China last night, so I don't know... please stay standing. Hong Kong, Indonesia, Japan, Singapore, Taiwan, the Philippines, Vietnam, the United States of America and Canada. Please join me in congratulating the 2011 Stars.

For those of you who are not employees, we had the opportunity to recognize socially these Stars of Excellence last night. Congratulations again.

Now I would like to recognize one of our retiring directors, Linda Bammann. And Linda has been on the board since August of 2009. She was unable to be with us today at the annual general meeting, but on behalf of the board, I would like to thank her very sincerely for her contribution, not only to the Board of Directors, but also to the Risk Committee and the Management Resources and Compensation Committee. She was a first-rate director.

I also have the pleasant duty of recognizing past chairs of the board who are here with us today. And I would like to ask them to rise historically. And we'll start with Syd Jackson, who was a former Chairman and CEO as well as nonexecutive Chairman. And then here in the center, we have Bill Blundell, who was a nonexecutive chairman and, for a brief period of time, also an acting CEO. And finally, my immediate predecessor in this role, Arthur Sawchuk. I now call this Annual Meeting of Shareholders of Manulife Financial Corporation and Annual Meeting of Policyholders and the Shareholder of Manufacturers Life Insurance Company to order. This meeting will be conducted in accordance with the rules of procedure that have been set out in the agenda card, which has been provided to you. Angela Shaffer will act as Secretary to the meeting. Karen Garrod of CIBC Mellon Trust and Lynore LeConche of Computershare's Shareowner Services will act as scrutineers for Manulife Financial Corporation. Karen Garrod and Joyce Whitelaw of CIBC Mellon Trust Company will act as scrutineers for The Manufacturers Life Insurance Company.

I would now like to draw your attention to the caution regarding forward-looking statements that appears in fine print on the screen. The speakers who address this meeting may make forward-looking statements as defined in securities legislation. Actual results may differ materially from those expressed or implied in these statements. And I'd ask you to refer to the caution regarding forward-looking statements, as I say, in the slide that's up there now. Please also refer to the note to users regarding the non-GAAP measures used in today's presentation.

Before starting the business of the meeting, I confirm that, first of all, the notice of this meeting was mailed to all shareholders and policyholders required to receive such notice; and secondly, that the quorum requirements for the joint meeting have been complied with. Accordingly, this meeting is properly convened. We will be conducting the voting at this meeting by ballot. Certain individuals who are shareholders, policyholders or proxyholders have agreed to move and second the motions. 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 -- I'll just give you this instruction. To receive a ballot, you must be a shareholder or a policyholder who has not already voted by proxy, or a proxyholder who did not receive a ballot at registration. Now is there anybody who falls in those categories and would like to receive a ballot? I see none. I'd just advise you then, when voting, to please mark an X in the appropriate box. And you're required to print your name in the place indicated and sign the ballot, and the scrutineers will collect all the ballots at the completion of voting on all matters.

The first order of business is to elect the directors of Manulife Financial and its main operating subsidiary, The Manufacturers Life Insurance Company. You may either vote for or withhold your vote from each director nominee. Manulife has adopted a majority voting policy and what this means is that any director who does not receive a majority of 4 votes must submit his or her resignation to the board. And the process following that is that the board will consider the circumstances and, within 90 days, decide either to accept that resignation or to disclose the reasons for not accepting it. We will vote on the election of directors of Manulife Financial Corporation first. The number of directors to be elected today as determined by the board is 17. Information regarding the nominees is set out in the proxy circular. I now declare the meeting open for nominations for the election of directors.

Paul Tompkins, a shareholder, has agreed to move this motion. And if I may, Paul, just -- I'd like to ask the directors, when their name is called, to just rise, so the people in the room will know who they are.

Paul Tompkins

Thank you, Madam Chair. I am pleased to nominate Joseph Caron, John Cassaday, Gail Cook-Bennett, Thomas d'Aquino, Richard DeWolfe, Robert Dineen, Sheila Fraser, Donald Guloien, Scott Hand, Robert Harding, Luther Helms, Tsun-yan Hsieh, Donald Lindsay, Lorna Marsden, John Palmer, Andrea Rosen, Hugh Sloan as directors of Manulife Financial Corporation to hold office until the close of the next Annual Meeting of shareholders of Manulife Financial Corporation or until their successors are elected or appointed.

Gail C. A. Cook-Bennett

These are your directors -- your director nominees, I shouldn't jump the gun there. Thank you very much, Mr. Tompkins. Are there any other nominees? As 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. And you have your green ballot, and I'd ask you to mark your vote.

[Voting]

I'll wait a minute until those of you who just -- well, I guess nobody just received a ballot, so we don't have much waiting to do here. All right. Voting is now closed for the election of directors of Manulife Financial Corporation.

The next item on our agenda is the election of directors of The Manufacturers Life Insurance Company. The participating policyholders of The Manufacturers Life Insurance Company vote for the policyholders' directors. Its sole shareholder, Manulife Financial Corporation, votes for the shareholders' directors. The number of directors to be elected today as determined by the board is 17, 6 policyholder directors and 11 shareholders' directors. Information, again, regarding the nominees is set out in the report to policyholders.

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

Peter Marlatt

Madam Chair, I am pleased to nominate John Cassaday, Thomas d'Aquino, Richard DeWolfe, Scott Hand, Lorna Marsden, Hugh Sloan as policyholders directors of The Manufacturers Life Insurance Company to hold office until the close of the next Annual Meeting of policyholders and shareholder of Manufacturers Life Insurance Company or until their successors are elected or appointed.

Gail C. A. Cook-Bennett

Thank you, Mr. Marlatt. 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 The Manufacturers Life Insurance Company. And please Mark your vote on the yellow ballot.

[Voting]

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

And moving on to the election of the shareholders' 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 shareholders' directors by written resolution in accordance with the Insurance Companies Act. Therefore, I declare that Joseph Caron, Gail Cook-Bennett, Robert Dineen, Sheila Fraser, Donald Guloien, Robert Harding, Luther Helms, Tsun-yan Hsieh, Donald Lindsay, John Palmer, Andrea Rosen have been elected as the shareholders' directors of The Manufacturers Life Insurance Company to hold office until the close of the next Annual Meeting of policyholders and the shareholders of Manufacturers Life 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, Chartered 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 that will be fixed by the directors.

Gail C. A. Cook-Bennett

Thank you, Mr. Tompkins. And Mr. Marlatt, a shareholder and policyholder has agreed to second this motion.

Peter Marlatt

I second that motion. [ph]

Gail C. A. Cook-Bennett

Thank you, Mr. Marlatt. We will now proceed with voting for the appointment of the auditors for Manulife Financial Corporation and The Manufacturers Life Insurance Company. I'd ask you to 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]

Voting is now closed for the appointment of auditors.

The next item of business on the agenda is the 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 2 annual meetings. The compensation discussion and analysis in the proxy circular explains the board's compensation decisions in 2011. The proxy circular illustrates how our compensation programs are centered on pay per performance and are aligned with strong risk management principles, as well as the long-run interests of shareholders. Although the results of these 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. Mr. Marlatt, a shareholder, has agreed to second this motion.

Peter Marlatt

Madam Chair, I second that motion.

Gail C. A. Cook-Bennett

Thank you, Mr. Marlatt. We will now proceed with the voting on the approval of the advisory resolution on Manulife Financial's approach to executive compensation. Please mark your ballot, which is the green ballot. And I don't see too many people marking ballots. So we'll move on to closing. The vote is now closed for the approval of the advisory resolution of Manulife Financial Corporation.

And the scrutineers will now collect the ballots for the election of 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 these ballots, we will move on to the next item of business.

The next item on the agenda is the tabling of the 2011 consolidated financial statements of Manulife Financial Corporation and The Manufacturers Life Insurance Company, as well as the reports of the auditor and the actuary thereon. Shareholders received the 2011 consolidated financial statements of Manulife Financial Corporation in accordance with the Insurance Companies Act and applicable securities legislation. Policyholders received the 2011 consolidated financial statements of The Manufacturers Life Insurance Company in accordance with the Insurance Companies Act.

The next item of business is the tabling of information for participating policyholders 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 14 to 16 of the 2011 report to policyholders, which was sent to all participating policyholders who requested Notice of Meetings. Copies of the Report to Policyholders are available at the registration desk.

At this time, I would like to welcome Mike Bell, Senior Executive Vice President and Chief Financial Officer, to the podium to outline the company's performance for 2011 and the first quarter of 2012. And I would ask that you please hold any questions until the question-and-answer period, and I'll advise you of that timing.

Michael W. Bell

Thank you, Madam Chair. Good morning, everyone.

I appreciate the opportunity to address this Annual Meeting here in Toronto. And I am very proud of what we've accomplished as a company in the last year. And I particularly highlight our strong capital position, the reduction in our risk profile, and the changes that we've made in our business mix.

Now as we announced in February, I will be leaving Manulife in the near future. And I want to emphasize to all of you that it has been a privilege and an honor to be the CFO of our great company for the last 3 years. I feel enormous gratitude to Donald and our Board of Directors for this opportunity.

Now this morning, I'm going to summarize our progress on our 5 strategic priorities, and then review our 2011 financial results. And at the end, I'll summarize our results for the first quarter of 2012.

Throughout 2011, and thus far in 2012, we've continued to make strong progress on all 5 of our strategic priorities. We've leveraged our strong market position and brand to drive profitable growth. We've managed our risk by significantly reducing our equity market and interest rate sensitivities. We've maintained robust capital levels and the financial strength which supports our strong brands. And we've strategically shifted our business mix to improve our ROE and to grow our earnings over the longer term. And importantly, we continued to deliver a quality value proposition to our clients. And we are very pleased with the progress that we've made in these 5 key areas.

Now in terms of our financial results in 2011, our net income attributable to shareholders was $129 million after tax. And this is a significant improvement relative to the net loss that we've reported in 2010. Our 2011 earnings included the unfavorable impacts of a number of items, including changes in interest rates, volatility in equity markets, changes in actuarial methods and assumptions, and a goodwill impairment charge.

Earnings in 2011 also benefited substantially from our decision to significantly expand our hedging programs in 2010 and 2011. And our 2011 results were also supported by significant investment gains.

I'll now review each of our major divisions, beginning with Asia, where we are driving strong top line and bottom line results. Insurance sales reached a record $1.2 billion in Asia in 2011. And this was more than half of Manulife's total insurance sales globally. Compared to 2010, targeted insurance sales grew by 13% and targeted wealth sales grew by 17%, driven by significant increases in distribution capabilities and continued product innovation.

Now in 2011, Asia contributed nearly 1/3 of our company's earnings excluding notable items. And importantly, we continued to grow our earnings in Asia at an impressive rate over the long term.

Now here in Canada, we've built a broad-based, diversified financial services business with a focus on growth in the high return areas. So for example, we are driving strong growth in our Wealth Management businesses. Individual wealth sales targeted for growth were up 8% in 2011 despite some very challenging market conditions. Manulife mutual funds delivered outstanding sales, with record deposits of $2 billion. And we are the second fastest growing mutual fund firm of the top 10 in 2011.

Manulife Bank also continued to deliver its profitable growth, achieving record assets and new loan volumes. And our Group Retirement business ranked #1 in defined contribution sales, surpassing numbers 2 and 3 competitors combined. In our Individual Insurance and Group Benefits businesses, we also continued to demonstrate our market leadership with pricing discipline and strong sales execution.

So in 2011, our Canadian Division contributed 30% of our earnings, excluding notable items. And we value very much the well-diversified source of earnings here in our home market.

In the U.S., we're continuing to focus on our balanced sales mix, including increasing sales of our higher return, lower risk products. And we're achieving this by leveraging our strong John Hancock brand, our market position and our distribution capabilities. So as an example, John Hancock Mutual Funds delivered record sales of $12.5 billion, up 29% from 2010. Sales of targeted insurance products increased 28% as we reduced our dependence on long-term guarantees. And this is a clear example of the combined strength of our brand, our market position and our distribution capabilities. John Hancock contributed more than 1/3 of our earnings in 2011, excluding notable items. And this business is well positioned for earnings growth in 2012.

Now while we've significantly grown our targeted businesses, we've also reduced our equity market sensitivity. At year-end 2011, we were ahead of our year-end 2012 goal for risk reduction. And we've nearly achieved our year-end 2014 goal to hedge 75% of this sensitivity.

For interest rates, we've already exceeded our 2014 goal for reducing our interest rate sensitivity. And including the natural offset that we achieved with our AFS bonds, our sensitivity to 100-basis-point decline in interest rates was only $200 million at year-end 2011. And it declined even further in 2012. Now in the first quarter of 2012, we delivered strong financial results and continued to make excellent progress on our top priorities. Net income for the quarter was approximately $1.2 billion. Insurance sales were strong, up 35% compared to the first quarter of 2011, which also set a new record for our company. Record first quarter sales in Asia contributed to that positive result.

Wealth management sales were impacted by challenging market conditions, and we're down approximately 8% versus 2011. I'd also point out that while first quarter earnings were very strong, we are expecting a couple of notable items to impact net income later in 2012. First, our current estimate is that the update to the fixed income ultimate reinvestment rate in the second quarter of 2012 could result in a charge ranging from $700 million to $800 million after tax. In addition, the Canadian Institute of Actuaries has published new equity calibration standards in February for guaranteed variable annuities. And we currently estimate that this new standard could result in a third quarter 2012 charge of approximately $250 million to $300 million after tax. And we'll provide additional information on both of these items later this year.

So overall, I'd like to reinforce to you that Manulife is strong. At the end of the first quarter, MLI's MCCSR ratio was 225%, despite no explicit credit for our expanded hedging program. 225% is a very strong capital level, one of the strongest in all of Canada. And as I mentioned, we've also significantly reduced our earnings and capital sensitivity to equity markets and interest rate changes, which means we are in a much stronger position to withstand future strong market shocks.

Importantly, our strong capital position and our overall financial strength support our Manulife and John Hancock brands.

So in summary, we made excellent progress against our strategic priorities in 2011. We also significantly improved our financial results in a very challenging environment. And we've had a strong start to 2012. Overall, I am very proud of what we've accomplished over the last 3 years. Thank you very much.

Gail C. A. Cook-Bennett

Thank you very much, Mike. I would now like to invite Donald Guloien, our President and Chief Executive Officer, to the podium to deliver the President's address. Again, I would ask that you please hold any questions until the question-and-answer session.

Donald A. Guloien

Madam Chair, ladies and gentlemen, honored Stars of Excellence recipients, fellow policyholders and shareholders: Welcome.

I'm pleased to see so many dear friends with us here this morning, to report on -- to you on the achievements of Manulife's past year and our vision for the future.

I can't tell you how meaningful it is for me personally to see 3 of our former chairs here, all of our former chairs with us today. And I really cherish the support that you offer me.

Strong. Reliable. Trustworthy. Forward thinking.

It's all about promises. Whether it's life insurance or wealth management, it is all about promises.

We make promises to our customers, but we also make promises to our shareholders.

We promise to protect and build shareholder value, to be transparent and direct with our shareholders about our opportunities and our challenges, our successes and our shortcomings.

Three years ago, we set several objectives for our company. We said we wanted to grow our business, to maintain our financial strength and stability, to manage our risk prudently, in particular, escalating our hedging efforts. We said we would continue to offer a high-quality value proposition for our clients. And we said we wanted to improve our return on equity for the shareholders. So how are we doing against these objectives?

In terms of growth, we are very proud of our story. Early on, we made some tough decisions to cut back in some areas. Variable annuities, long-term care, no-lapse guarantee universal life products, single premium deferred annuities. These are all products that, in retrospect, gave rise to far too much risk, creating the volatility in earnings that shareholders, regulators and rating agencies don't like. At one time, these were the leading products of our company. Reducing their prominence was a very tough decision, and it caused some short-term pain, through goodwill write-offs and other costs. Nevertheless, it was the right decision for the long term.

At the same time, we pressed hard to grow other parts of the business that will be far less sensitive to the vagaries of capital markets, and which we believe will pay off much better in the long term. Those of you who follow Manulife closely will be familiar with the themes: expansion throughout Asia; pursuing a broad-based strategy in Canada; and focusing on the Mutual Fund business retirement products, the Group Business and less sensitive forms of life insurance in the United States. And as Michael said, we are nicely on track with that objective.

Yes, we have grown our businesses. But more importantly, we have rebalanced successfully, producing a much more healthy overall product mix. And it is now interesting that some of our competitors are starting to follow our lead with some of the largest global companies in the industry announcing cutbacks in products that we identified as issues 3 years ago.

In terms of rebalancing, we've also considerably shifted our business mix by geography. A few years back, our business in the United States represented about 1/2 of our operating results. And Canada and Asia represented 1/4 each. Today, the relatively high margin, lower-risk businesses of Asia and Canada represent 2/3 of our mix. And we expect that Asia, which offers the highest overall return, will continue to grow its share of the pie, further improving our return and risk profile. Having done all that, you can see why we are very optimistic about the future for our great company.

In terms of financial strength and stability, the first line of defense is reserves. And since 2009, we've increased reserves by $7 billion. We've also strengthened our balance sheet by writing off close to $4 billion of goodwill, a good portion of which was related to the product repositioning that I described earlier.

The second line of defense is capital. And we also added or conserved $12 billion of capital over the period. Among other things, that capital gave us the opportunity to hedge more effectively at a time when it was most conducive to the interest of shareholders, rather than at market bottoms. And as Michael said, we got it done. We are now well ahead of our timetable for hedging. At the end of 2011, we achieved our year-end 2012 goal for equity market hedging. And in 2011, we also achieved our 2014 goal for interest-rate hedging.

As a result of that, we entered 2012 with a healthier mix of new business, stronger reserves, less goodwill, and a capital ratio at a healthy 216% and significantly reduced equity market and interest rate sensitivity.

We now have a buffer of safety, including capital and provisions for adverse negation totaling $68 billion. That cushion represents 30% of our assets. So if you think of bank capital ratios, 30% looks pretty healthy, and over half are estimate -- best estimate liabilities.

In terms of delivering high-quality offerings for our clients, I think the growth in sales of targeted products speaks for itself. So do the accolades that we receive for customer service from organizations such as Dalbar and Environics; the awards for investment performance from organizations like Lipper and MorningStar; the quality of advice and service delivered by very fine distributors, a number of which are with us today; and the fact that we have been able to raise prices and still sell products because customers value the unique strength that Manulife and John Hancock bring to the table.

Three years ago, we also set the objective in improving our return on equity. But let's be clear, we have not yet achieved that objective. The strengthening of our reserves, the product repositioning, the goodwill write-downs and the hedging activities, while clearly in the long-term interest of the company, entailed very significant costs. In 2011, our net income attributable to shareholders was only $129 million. Now we can tell you that that's a significant improvement over the net loss of $1.7 billion in 2010. I could also tell you that if you exclude the negative impacts of goodwill and impairment charges, actuarial basis changes, our net income would've been $1.6 billion. But whether it's $129 million or $1.6 billion, let's be clear: it is not acceptable for a company of our size and our capability.

That said, I am very confident that we are clearly moving in the right direction. I think this quarter gives investors and our employees some sense of the earnings capacity of our company over the long term.

In the past 3 years, we have taken on 3 other very important initiatives. We wanted to continue to increase the transparency and understanding of our business for the benefit of shareholders. We have a very complicated business, as you well know. We continue to lead the pack in terms of comprehensive and comprehensible disclosure. We are the only insurer that shows financial performance according to Canadian IFRS rules, U.S. GAAP, and embedded value. We present our financial results in 3 ways, so that investors can be better informed when they make their decisions.

We also want to strengthen management of human resources. We are committed to attracting, developing and engaging high-performing, high potential talent, recognized by The Globe and Mail when they named Manulife as one of Canada's top 100 employers. I am very proud to know that our businesses throughout Asia and the United States operate on the very same fine human resource principles. And the people over in the right-hand side, from my perspective, are a really good example of that.

Finally, we want to build our brands, leveraging the strength of John Hancock and Manulife Financial with creative advertising and other initiatives, some of which you see around the room. We launched campaigns focused on growing and enhancing and promoting our brands in all 3 of our geographies.

Having provided the perspective of the past 3 years, I'd now like to quickly discuss the performance in 2011, our outlook for 2012 and beyond, before closing with some perspectives on public policy here in Canada. Looking closely at our performance in 2011, we delivered strong top line growth across most of our businesses. Michael provided you with an overview of that, so I'm going to focus on a few other elements that he didn't touch upon.

One constant theme across all our divisions was product repositioning, which is now largely complete. My comments about 2011 results will be about the sales of those products targeted for growth. In 2012, thankfully, we will no longer need to make that distinction. Asia now represents a third of our operating results, clearly an important component of our company. The investments we're making in people, brand and distribution in the region are paying off. Asian insurance sales in 2011 were up 13% from 2010. Wealth sales rose 17%, and we now have more than 50,000 agents in the region.

We continue to diversify our sales channels, adding 6 new bancassurance relationships, including strategic partnerships with Bank Danamon in Indonesia, Bank of China in China and CITIC Bank in Hong Kong.

In Canada, we're pleased with our sales throughout 2011. Sales of individual wealth products were 8% higher than 2010. This reflected record mutual fund deposits and regular new loan volumes -- record new loan volumes at Manulife Bank.

In 2011, as some of you know, we took the controversial yet necessary step to increase prices of our universal life policies. No one ever takes pleasure in raising prices, but our actions were necessary to adjust these products for the current low-interest-rate environment. It is also notable that most of our competitors subsequently followed our lead. As a result, individual insurance sales were down slightly as a result of our actions.

The United States' full year sales of insurance products increased 28% over 2010, and sales of wealth products increased 12%. We successfully repositioned our insurance product portfolio to reduce interest rate risk. We've also raised prices, and we took the difficult step to increase prices on our long-term care business.

Notably, John Hancock Mutual Funds, a business that didn't really exist 10 years ago, is now the sixth highest net sales in our segment of the mutual fund marketplace in the United States.

Manulife Asset Management, which manages portfolios for both institutional and retail customers, had a very good year, reporting assets under management of more than $210 billion. Our strength has attracted industry recognition. At the end of 2011, 58 of our mutual funds were rated 4 or 5 stars by MorningStar. That is our best showing ever. Our investment division has served us exceptionally well throughout the challenges of the current market. Business continues to produce excellent investment performance for our general account, managing a diversified while high-quality portfolio, and maintaining a very disciplined approach to extending credit. We see others beginning to turn to alternative investments in order to enhance their portfolio returns. I guess imitation is the finest form of flattery.

We have been successfully investing for over 20 years in real estate, timber, agriculture, infrastructure, oil and gas, private equity and mezzanine lending with great success. Our expertise in managing alternative assets is well recognized. And we manage most of these assets not only for our own balance sheet, but also for third parties.

As a result of these activities, Manulife ended 2011 with funds under management of a record $0.5 trillion.

Turning to outlook for 2012 and beyond, let's be clear: we are very optimistic about the future of our company. True, we still face some of the macroeconomic issues that made 2011 an exceptionally challenging year: a fragile economic recovery in the United States, significant economic concerns in Europe, low interest rates precipitated by unprecedented easing by central banks around world, volatile equity markets. But on the other hand, there are very encouraging signs, particularly in those regions where our operations are focused.

Asia continues to be strong and relatively unaffected by the travails of the Western world. I know there are naysayers out there who would love to depict an 8.1% rate of economic growth in China as a hard landing. It is anything but. In Canada, largely due to the foresight and good management of the Governor of the Bank of Canada and our finance minister, our economy is now operating at close to full capacity. And tangible steps are being taken to close the deficit and to take the heat off the housing market.

Finally, the U.S. economy appears to be improving, demonstrating a measure of resiliency that many people underestimated. Corporate balance sheets have been strengthened over the past few years and consumers have deleveraged. So now confidence is growing, businesses are starting to invest and expand, and consumers are selectively spending and investing for the future, rather than sitting on hoards of cash. I am hopeful that following the election this year, greater political consensus will emerge, and that steps to resolve longer-term issues will, in fact, be taken. But the fact of the matter is, the U.S. economy is performing well despite the politics. And that is a credit to the American economy. It stands only to get better if greater political consensus does in fact emerge.

By virtue of Manulife's significant operations in Asia, Canada and the United States, we will be poised to benefit from the growth in these 3 great economies. And thankfully, we will have no direct exposure to the issues in Europe.

Going forward, in terms of growth, Manulife is focused on the following strategic priorities: to develop our Asian opportunity to the fullest; to grow the full range of wealth and asset management businesses in Canada, the United States and Asia, with particular emphasis on less guaranty-dependent products; to continue building our balanced Canadian franchise; to continue growing higher ROE, lower risk U.S. businesses; leveraging the very fine reputation of John Hancock, which of course is one of America's most recognized and trusted brands.

Let me expand on these initiatives. In Asia, we have deep roots, a strategic commitment to region and an expanding operational footprint across 11 countries. As good as it is, the Asian growth story is greater than most people imagine. Whether it is China, Indonesia, Vietnam, Malaysia, Singapore or the Philippines, people know and expect that the economies of Asia are growing at 69% per year. But Asia is home to approximately 25% of the world's middle class population. And this is expected to grow dramatically, in fact double, over the next decade. These middle and upper middle income classes represent our addressable population. They need to provide security for their families, save for retirement and education, and therefore buy life insurance, mutual funds and pension plans.

When you combine the fast growth of the economies with fast growth in the addressable population, you'll realize that Manulife's growth potential is roughly twice the rate of GDP growth in the region. Asia is not a homogeneous region. We look at each country differently. Japan is the second largest insurance market in the world. And if you take healthcare out, which in the United States is privately provided, it's arguably the largest insurance market in the world. It's a relatively low-growth economy overall, but we move from success to success in Japan, expanding our market and distribution effectively in selected segments.

China has enormous promise. Over the past 15 years, Manulife has built, with our partner Sinochem, a national platform of 50 cities to capitalize on the opportunity. We are well positioned with our joint ventures that provide insurance, wealth management, mutual fund businesses and, hopefully in the future, pension plans. In Hong Kong, we are very well regarded, perhaps with even more brand recognition than we enjoy here in Canada, and offering a full range of products. In Taiwan, there's great wealth, and we have a diverse array of products and distribution channels to serve its people.

In Southeast Asia, our businesses are experiencing exceptional growth led by our successful businesses in Indonesia, the Philippines and Vietnam. Our 6 existing operations are positioned well to offer a great range of products to consumers. In addition, we continue to rapidly increase our distribution capability, expanding our agency forces, forming new bank partnerships, and developing other initiatives like the imminent launch of our newest operating company in Cambodia.

Ladies and gentlemen, I believe few other companies are as well positioned for success in Asia as Manulife. Here in Canada, as Michael said, we have a balanced and diversified business. The market is clearly more mature than most of Asia, but the opportunity is equally interesting. We are building on a highly competitive franchise with a very broad product line. From insurance to benefits to retirement products, our operations in Canada rank either first or second in their respective categories.

We are now driving cross-selling activity that is proving to be highly beneficial for our business, our advisors and our clients. We have created a financial services company with multiple distribution channels. We now serve 1 in 5 Canadians, providing them with a spectrum of products and services. We see tremendous opportunity in meeting the needs of current and future needs created by Canadian's aging baby boomers, and by the reality that governments and employers need to reduce the costs of providing their benefits.

Very simply, we see increasing demand in Canada in 6 areas where we excel: products and services focused on savings and retirement, intergenerational wealth transfer and managing healthcare costs.

In the United States, our operations have gone through challenging times. That's no secret to anyone in this room. But we're now stronger and poised to benefit from renewed economic growth. We are targeting the ongoing and considerable demands from Americans for retirement plans, mutual funds and a range of protection products.

Across our distribution network, John Hancock insurance products are among the leading sellers. Similarly, we expect the high regard for our diversified portfolio to drive sustainable growth in our John Hancock Funds business.

As the acknowledged leaders in providing 401(k) retirement plans to smaller organizations, we are also now looking to leverage that knowledge, expertise and distribution capacity to larger plans. Clearly, we stand apart from our competitors as a result of our leading position in important distribution channels. But our high standards of customer service and the high consumer awareness of the great John Hancock brand are very important contributors.

The power of the John Hancock brand should not be overlooked. It has been recognized amongst the hundred most powerful brands of the 20th century. It has a 94% consumer awareness of rate. And it's clearly one of the top brands in the financial services category. And with all the financial turmoil, it's getting stronger. Our investment division is a source of strength for Manulife. Fueled by consistent performance, I expect it'll be a contributor to future growth. Manulife Asset Management and John Hancock Asset Management are performing very well, taking advantage of global capabilities to deliver sound investment products to our customers.

We execute well against our priorities in each of our businesses and achieve the targeted level of effectiveness and efficiency. We believe we can attain our goal of $4 billion earnings and 13% return on equity.

We set those objectives back in 2010 with the ambition to achieve it within 5 years, by 2015, and it remains today our management objective. But there are a number of factors, including those that are outlined plainly in our financial disclosure, that might constrain our ability to achieve those results. My belief is that if we focus on the long term, make the right decisions to position our company for the future, the quarterly results will fall into place. And frankly, it is less about the timing of the realization of that goal than doing everything today to ensure the greatest probability that it will in fact happen.

As I said earlier, we set out the objective to improve transparency of our complex financial reporting. And as Michael said, this is the last annual General Meeting. I want to give credit to Michael and his team for all that they've done in this regard. Well, Michael is a very quality guy, and he'd be the first to admit it's a team effort. I want to recognize, in addition to Michael, Cindy Forbes, J-P Bisnaire, Linda Sullivan, David Campbell, Anthony Ostler, Bev Margolian, Rahim Hirji, Greg Taylor, Craig Merdian, Steve Finch and others who have done much of the heavy lifting to enhance the transparency and understandability of the finances of our company.

As we announced this morning, we are bringing in a new CFO, Steve Roder, who will continue to lead these improvements. Steve brings to Manulife 25 years of experience in public accounting. And his integrity, his values, his professionalism and communication skills will ensure that our disclosure continues to be of the highest quality. But let's be clear, he's got a tough act to follow. In addition, Steve's deep understanding of financial services in Asia will be a key asset, given our focus on that region.

I'm looking forward working with Steve when he joins us formally at the end of June. Michael will be staying on for as long as necessary to ensure a smooth transition of responsibilities, but we expect he will be able to rejoin his family in Philadelphia at the end of June. Michael has helped guide Manulife through some of its most challenging times, and I want to thank him for his considerable contributions.

Clearly, Manulife has always been proud to be a Canadian company with an international view to achieving growth. And I am a very proudly Canadian CEO. I know firsthand that respect for the prudence and stability of the Canadian government and the Canadian financial services industry has made us attractive to people around world. I am personally grateful for the support provided by the Canadian government and the many men and women in the Department of Foreign Affairs and International Trade. They are invaluable resources and facilitators for Canadian companies doing business abroad.

Right now, we have the unprecedented opportunity for the best Canadian financial companies to expand into the global marketplace. So it should come as no surprise that I am confounded by some of the onerous and difficult constraints imposed by some of our regulations and accounting regime. Make no mistake, I'm in favor of strong and predictable regulation and effective accounting rules. Yet I fear that the overly conservative regulatory and accounting regime serves to depict Canadian life insurers as being far weaker than our global counterparts, when in fact, nothing could be further from the truth.

It is beyond debate that conservative accounting and even more restrictive capital standards are further tilting an already uneven playing field. The impact of this goes beyond the technical and esoteric.

When Manulife's financial performance is viewed through the lens of U.S. Generally Accepted Accounting Principles, our company has, for a number of years, earned substantially more on a U.S. basis than we reported under Canadian rules.

At the end of 2011, shareholders equity, according to U.S. rules, was $16 billion higher than under Canadian guidelines. Our regulators must be mindful of the excessive pro-cyclicality of capital rules when combined with mark-to-market accounting. These add volatility to our company's financial results. And by the way, when I say our company's, I mean the industry's financial results. But more importantly, they add volatility to the entire economic system.

If we must find a silver lining, it might be this: Canadian accounting and capital regimes may have depressed earnings and exaggerated capital issues, but our company is left well fortified for both macro shocks and a prolonged low-interest-rate environment. And I, as a policyholder, am very comforted by a cushion of $68 billion. Canada has weathered recent crises as well or better than most in the world, in part, because of that very tough, those very high regulatory standards.

In my opinion, that's well enough. We have a sophisticated regulator in OSFI, with many good people who understand the complexities of our industry and understand how stringent the combination of our accounting rules and our capital rules already are. I am optimistic that they will maintain extremely high standards, but resist the temptation to become even more conservative. It is my sincere hope that Canadian financial companies can leverage our company's reputation -- our country's reputation and expand globally to exploit their full potential. And whether it's Manulife, one of our competitors, or one of our friends at the banks, Canadian institutions should take advantage of our success in the financial crisis by expanding and flourishing abroad. It is our time to seize the opportunity.

Ladies and gentlemen, it has been my honor to be CEO for the past 3 years. I am enormously proud of all that Manulife team has achieved. We have the right strategies that will produce growth and create value for both customers and shareholders. I am truly excited about our future possibilities. I am grateful for the tremendous support and counsel of Manulife's Board of Directors, particularly Dr. Gail Cook-Bennett, our chair. And thank you to Michael, again, for all that you've done. I also want to thank and acknowledge our employees, agents, distribution partners and all of Manulife's policyholders and clients. Thank you. [French] [Japanese] [Cantonese] [Mandarin] [Indonesian] [Thai] [Filipino] [Vietnamese] Thank you.

Gail C. A. Cook-Bennett

Thank you very much, Donald. I've now received the reports of the scrutineers. And on the election of directors of Manulife Financial Corporation, all nominees received at least 86.6% of the votes cast in favor. Therefore, all 17 director nominees were elected as directors of Manulife Financial Corporation.

On the election of policyholder's directors of Manufacturers Life, all policyholder director nominees received at least 92.69% -- that's precision -- of the votes cast in favor, therefore all 6 nominees were elected as policyholder's directors of The Manufacturers Life Insurance Company.

On the appointment of auditors, 99.36% of the votes were cast in favor of the appointment of Ernst & Young as auditor of Manulife Financial Corporation, and 99.99% 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, 82.63% voted for, 17.37% voted against. Therefore, I declare that the shareholders have accepted Manulife's approach to executive compensation. The board obviously will take the results of this vote into account in determining whether there's a need to increase the board's engagement with shareholders on Manulife's approach to executive compensation.

Now this completes the official business of the meeting. We'd like 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 meeting, or the conclusion of the question-and-answer session, you could 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.

When you make your comments or ask a question in this room, please give your name and state whether you are a shareholder, policyholder or proxyholder. Please direct all of your questions to me as chair. And in the interest of giving orders the opportunity to ask questions, kindly keep your comments to no more than 3 minutes. If you're seated in the overflow rooms and have a question, please raise your hand and ask to be escorted to the international room. If you're unable to move to the microphone in this room, again, just please raise your hand, and we will bring a microphone to you. Now we open it to questions.

Question-and-Answer Session

Unknown Shareholder

Could you tell us about the board's view on the importance of diversity in selecting new directors?

Gail C. A. Cook-Bennett

The board seeks excellence, and the board seeks diversity of views and opinions around the table because they feel that decision-making is better the more alternatives you have -- the alternative perspectives and expertise. So the way we approach this question is to look, first of all, at our strategic direction and establish what sort of expertise that we're going to require in the next few years. We then -- and this is very important, we believe, in the context of getting the right people, you have to search appropriately. So you have to execute. You have to -- we use a search firm, and we invest a good deal of time in looking at alternative sources of expertise. In the last few years where we've had 7 new directors in about 3.5 years now, a number of them have Asian experience, which fits with our strategy. 3 out of the 7 are women, not because they're women, because they bring to us and have brought to us risk background, financial services background at a senior level and, another one that everybody knows in the room, the auditor general's experience with a proven record of backbone and integrity. So we look at all these: the personal characteristics, we look at the experience and expertise, and we demand both the excellence, and we believe it's important to have the diversity.

Unknown Attendee

David Walker, policyholder since 1952, an agent since 1963, and 5-star master builder, retired 13 years. I'd like to just congratulate you, Madam Chair and Mr. Donald Guloien, on a wonderful comeback. 1963, when I first came to one of these meetings, President George Holmes then said with great pride, we have hit the billion-dollar asset level. We're now at $496 billion. That's not bad.

Two questions. Massive housing bubbles in Vancouver, perhaps you may direct this to Don, in Vancouver and Toronto. They may deflate next week, they may deflate next year. How much exposure do we have to that? The operative phrase here might be, are we properly hedged?

Number 2, China is by far the largest of the Asian colossus, where funds are under management and as somebody said, Don, a flag of 50,000 agents. There are many middle-class people there. If we had another 2008, 2009 disruption, they'd lose a lot of jobs. We might have a China spring. They don't have a democracy, where they can throw the bums out, put Harper out, put Mulcair in. That doesn't happen over there. Just see how easily it happened in Montréal. $375 tuition hike has caused 78 days of lags. If you're talking about -- with great deference to my Chinese friend down here, the pretty Chinese gal, we're talking about a communist dictatorship, and they don't have any bend. Are you prepared for that as a board?

Gail C. A. Cook-Bennett

Before I hand the microphone over to our CEO, just thank you very much on behalf of the management team for your comments on the progress that has been made in the last few years. The Board of Directors supports that very much. We believe the same thing, but it's always good to have it come from the shareholders, so thank you. Donald, would like to talk to the issues?

Donald A. Guloien

Well, David, thank you for your compliments and reminding us of a bit of history. I was thinking today our provisions for adverse deviation loan is 68x the assets of the company, which is hard to imagine.

Your comment first about the housing bubble. I think we have a very conservative attitude towards what's happening in housing here in Canada. It shows that there's been no great national superiority because Canadians are, by and large, doing exactly what Americans did. And rather than learn the lesson from our friends south of the border and say, "Let's not do it here," we seem to be recreating it. But our underwriting standards are very, very tough in the Manulife Bank. Our credit results are absolutely superb. And most of our customers use the flexibility of the Manulife One product to pay down their mortgages faster than they would with a conventional amortizing mortgage, and are in fact doing exactly the right thing. Notwithstanding that, our government has taken a number of steps which I think are very prudent. They hurt the bank in the short term, things like cutting back on the CMH availability and so on, but I think are very prudent things. And when I talk about public policy, I think we should speak with an honest voice and talk about what's good for the country, not what's good for Manulife. And the steps that are being taken by the Bank of Canada and by the finance minister in OSFI, with respect to that, I think, are entirely appropriate. They can create a little bit more challenge to growing our bank, but our bank, you can be very sure, is very risk averse on the price of housing. We don't assume houses are worth what they are today. I'm not predicting a bubble, but they do -- they seem to be growing faster than most of us are comfortable. With respect to China, I guess I just want to make sure everybody understands, we have 50,000 agents throughout Asia, and the number in China is about 12,000 agents. The Chinese government, I think prides itself on stability. And they have -- various parts of their constitution ensure that. And I think that's good. Nobody wants to see 1.3 billion people in China vulcanizing and fighting against each other. And their major objective in managing their economy is that of stability. And I think that's good for the world, frankly. And I think they've done that masterfully. Again, I feel quite strongly when people start depicting 8% growth rates as a hard landing. It was engineered by the Chinese government because they, like the Canadian government, looked at things like housing and said, "It's getting overheated. We need to dampen it," and they changed reserve ratios for banks and interest rates and so on, have taken a number of various forward-looking steps to ensure that their economy does not get overheated. On the other hand, they don't want it to get too low. They want to manage growth within a certain range. And I think that's a very prudent thing to do. I think the Chinese government is also making very, very sound long-term investments in their economy. We, in North America -- I'm almost embarrassed at the number of cars we have per household. The Chinese have recognized that with 1.3 billion people, if everyone wanted to go out and buy a car, there isn't enough steel, rubber and oil to meet their needs, so they're building high-speed train corridors. If you go through, all the major cities now are -- or will soon be connected by high-speed trains that are far more pleasant than driving in traffic, in my opinion. And some them are built by fine Canadian companies such as Bombardier. So in fact, it's manufacturing the -- supplying the commodities that go into it. So this is enormously positive for Canada. It's enormously positive for China because what you see is a growing middle-class. That is a very positive thing. The Chinese government has, I think, one of the greatest human development records of all time, and probably will stay untested. 400 million people have been brought over the poverty line.

I think I've done a lot of good things for Manulife, but I tell you, it doesn't do anything compared with that record. I'd be very proud to have that on on my resume: 400 million people over the poverty line. So we've got to be very careful about telling them that our way of doing business is the right way.

Unknown Shareholder

My name is Alec Baron, I'm a shareholder. And I'd like the executive to say a few words on possible mergers and acquisitions. Do you plan to acquire any companies? I'd like to also know your views on joint ventures with maybe banks or other companies. And finally, I'd like to know your views on expanding in Latin America and thinking ahead to tomorrow. It seems that Russia is trying to get its act together. I don't know if they have yet, but I'd like to have a few comments on your thoughts about expanding in Latin America and possibly the Far East Russia.

Gail C. A. Cook-Bennett

Donald?

Donald A. Guloien

I think I can answer 2 of your questions. I'm going to disappoint you on the mergers and acquisitions, sir. We're open to the idea and -- but if we had a really good idea, we just couldn't tell it in a big audience like this. Our competitors are on the line, and they might just go and steal it. Not that they would but -- they're good people, but they might just do that. But we're in a deal flow, as it were. And we have the resources and capability to execute the transactions. We've been very successful in the past. I guess one of the strengths of our company is when we integrate, we take the best resources. When I look at that management team, we've people from John Hancock North American Life, a whole range of different organizations that made up Manulife. We have a practice of picking the best and brightest. And if we want to merge with a company that's of equal size, and they've got a CEO that's smarter than me, he's entitled to my spot, too. So that is the real heritage of Manulife, and I think a real strength in the way we approach acquisitions. We don't come in with the attitude that Manulife people know better than anyone else.

Joint ventures, we're open to joint ventures. I guess people like to speculate about us and Canadian banks. I think that's less likely than the kind of joint ventures that we're doing with banks in bancassurance. We supply all the Canadian banks with life insurance product right now; it's sold through their -- primarily through their dealer networks to their higher net worth customers. And we sell a lot through bancassurance in Asia. And that is a growing -- and in the United States, it's a huge business for us. In Latin America, that one I can give you a pretty strong answer. I guess we like to focus on what we do well. We've got such a great opportunity in Asia with so many of those economies growing so fast, and the growth of the middle-class, which you don't always see in Latin America, right? The rich getting richer kind of thing. There are exceptions to that where there's a greater distribution, but we really like to see that growth of a solid middle class with solid economic growth. And frankly, with our heritage and strength in Asia, it makes more sense for us to keep leveraging that strength over and over again. I think other opportunities will emerge over time, especially with what's going on in Europe. Could -- 3 or 4 years down the road, could we take a look there? There might be opportunities created. And I guess you -- I guess that, similar to Latin America, Russia is a bit further afield, I think, has -- if I can say this in as un-pejorative way as I can, and as anodyne as I can, has more risk in it than Asia.

Gail C. A. Cook-Bennett

Thank you, Donald.

Unknown Attendee

Madam chair. Our venerable board. President Don. Firstly, congratulations, President Don, on how you've handled those last baptismal fire for 3 years. You've been absolutely remarkable, may I say. First again, congratulations on your appointments to the board, especially the excellent mind of Madam Fraser, which I really personally appreciate. Again, a question I'd like to ask, and I hate to rain on your parade. The errors -- this morning, you crushed the guru, so-called, by producing $0.66 instead of $0.36. But the few errors you talk about, that worries the Scotsman. So what's the errors to come up on the start, if you might?

Donald A. Guloien

Sir, could you... the errors?

Unknown Shareholder

In the next quarter. There was talk about 3 negatives in the next quarter.

Donald A. Guloien

Oh, thank you, yes. The -- thank you. And I appreciate your fine compliments. I hope my wife takes it to heart. The -- the thing of the things that we've signaled, we've tried to adopt the philosophy of being very direct with our shareholders. If we see a storm cloud on the horizon, we tell them about it. We may not know if it's got rain in there or whatever, but there's something there. And as they gets closer, we can maybe say yes, it is a storm cloud. As it shows up, we can quantify how much rain is going to be associated with it. I think if we do that consistently, investors will grow their confidence in our company, and that will become a virtual circle and, ultimately, lower our cost of capital.

The storm clouds in the horizon are, we told people that we do URR, Ultimate Reinvestment Rate assumption changes in the second quarter. We've estimated that to be in the past over $500 million. It was impossible to get more specificity than that. With interest rates dropping further, Mike is now estimating it at $700 million to $800 million. So it's a little bit higher than what we had -- but in fairness to Mike and all of us, we'd always said greater than $500 million, so I guess some people just wrote in $500 million, so that created a bit of a surprise. And of course, the number itself is a negative. It's the reflection of interest rates averaging over time.

The second thing is the Canadian Institute of Actuaries have changed the calibration standards for our safe fund liabilities, not for Manulife but for the industry. So again, in trying to be transparent, and that one we can actually calculate with a fairly tight range, I mean, not perfect. So we told people, that wouldn't occur until the third quarter when those adjustments get made, but we've told people what they could expect. Because, again, if we know something, it's not a good deal when I'm going to sleep knowing something, or Mike's going to sleep knowing something that shareholders don't know, right? That just doesn't -- it isn't right. It wouldn't make one feel comfortable, and it's not the right thing to do. So when we have a feel for a number, we will try and communicate that to the shareholders if we can. And so we told them of that one. And the third one is we said, in the third quarter, we look at the actual basis changes, and we have about -- I'm going to show my ignorance here. What? $150 billion of liabilities, approximately? If you make a tiny change with an assumption on that, just imagine -- take a present value of $150 billion. And remember, that's the present value. So the real number is trillions, if you go far enough, and you change an investment rate assumption by 3 basis points, that's a gigantic impact. So if we change anything like a lapse rate or a policy or a behavior whatever, or interest rate, that could be a very big impact. So we do those in the third quarter. We signal to people that some of the policyholder behavior on variable annuities is not as positive as we have reflected in our valuation. There might be an adjustment associated with that. We can't quantify the magnitude. I think in the second quarter, we'll be closer to quantifying, putting a range on it perhaps. And then in the in third quarter, we'll know the number with some specifics. But we've told people about that in advance. The truth is there's a range of things that get balanced. There will be some positive, there will be some negatives. We're sort of telegraphing on balance, it's going to be probably more negative than positive, but that's all we can say at this time. I would hope that it wouldn't be as big a change as what we've had in the prior 3 quarters, in the third quarter, but that's a hope, and hope is not a strategy. So...

Gail C. A. Cook-Bennett

Is there another?

Unknown Attendee

My name is Don Parkinson, policyholder. First of all, I'd also like to extend my congratulations to you, Don, and your team. I'm sure everyone in this room feels one heck of a lot better than they did 2 or 3 years ago with the state of affairs. And you've done a tremendous job, and I give you all the encouragement for the years ahead.

My question is, with the tremendous growth in Asia and getting yourself up to -- or the company up to 50,000 agents, how are they doing it? Are they doing mergers to get experienced people or is it basically taking raw rookies and putting them through our own educational training process?

Donald A. Guloien

Great question. The fact is, it's -- we have a very organized training program, and quality control is our biggest factor. They are -- they're people who've typically had some degree of selling experience or capability in the background, but not necessarily in financial services. We put them through a very rigorous training program. They learn with other very successful agents, and we have very high standards and code of conduct to make sure they maintain their -- the quality of advice and service to their customers. It's one of things that frankly distinguishes us in Asia. We could grow a lot faster. And there are companies who, in any given year in any territory, will grow a lot faster than we will. But what inevitably happens is they discover they've got a quality issue and pull back. And that is the worst use of shareholders' money. And so we tried and take -- when I say the go-slow, I was about to say, the go-slow approach. I mean, go slow, let's put in perspective: it's growth of 25% a year. It's not exactly 2% or 3%. But we have a very high-quality standard. And we don't get embarrassed. The regulators throughout Asia have huge regard for our distribution system. So again, that's just a long-term strategy that's going to serve this company really well over the next 30 or 40 years.

And your other comment -- thank you much, but I really have to be straight with everybody. It's obviously a team effort. We've had exceptional -- the amount of work that people put in, in the last 3 years, I think they've done the finest work that they've done in their entire careers. And I'm enormously -- I get to get the compliments, but they're the ones who deserve it.

Unknown Shareholder

My name is Michael Haberman, shareholder. I have a fairly simple but quick question. And I think the company should devote some time and attention to the fact that within the financial community, I've never seen such a disparity in thinking and opinions about Manulife. I think a large part of that has to do with the different reporting standards. But is there not -- and the diversity takes the opinion whether it's the Asian operations, the U.S. operations, the hedging operations. You get opinions from soup to nuts on those issues. And my question is, can the company do something from a financial reporting or communication point of view that will at least get a lot of the important financial people on board and singing from the same hymn book with respect to how the company is performing and/or educating them as to what the right standard should be in terms of how do we measure our success?

Gail C. A. Cook-Bennett

Donald, do you want to try that one?

Donald A. Guloien

Well, that is an outstanding question. I mean, the -- I think, frankly, it's going to be building people's confidence over time. I mean, I think during the financial crisis, we exposed a lot of things in a lot of companies, including our own. And people lost some confidence in our company, so we've got to earn that back. Now when you talk about important financial people, most of our really large stockholders have hung in and been very supportive. Even when we had to cut dividends and raise equity, they were there contributing. Didn't like it, but were there contributing, have been very, very good supporters of the company and have, by and large, maintaining their shareholdings, which is very positive. I think other people who have less resources to understand all of the complexity that goes into understanding our industry and our company and what it's done and what it hasn't done and so on in the path to healing, I think those who don't have the resources to understand it are more inclined to look at it superficially and say, "Oh, the stock price went down, the dividend went down," and feel bad things about the company. And I think the real solution to that is to build, over time, that confidence back that we absolutely deserve. There are a whole bunch of people, and I think this is -- let me get philosophical here for a second, that are way too short-term oriented when they judge companies. And that's true -- there's people who wanted Nortel to stop doing R&D in order to maximize its earnings. And some would say that, that's what they did, and look at where they are. Take the short-term path to success and -- Roger Martin, the dean of the business school here, has written a very good book called Fixing the Game that I recommend to everyone. And it basically -- the summary of the book is, there's way too much focus on the short term and not enough on the long term, and building shareholder value by doing meaningful things for customers. And people just trying to focus on the next quarter's earnings, and they deliver those earnings and have a nice string of it and then, poof, it's gone. And there's too many examples of that in our Western society, quite frankly. So I think it's a long process of building it back, but we will build that confidence. And I'm absolutely dedicated to that. The other thing, I guess, that is troubling here in Canada, when you look at the plurality of Canadian society and the caudal nature of our cities, whether it's Vancouver or Toronto or other places in between, I guess it's really sad that Canadians don't get it in terms of the importance of Asia to our future. And this is not to deny our important and special relationship with the United States that will endure forever. But to look to the Asian opportunity -- and I'll just put in the words of one of my competitors. I won't say who it is, but the CEO of an Asian company, who came over to do an investor roadshow here. And I was complimenting because he said something really nice. People said, "Are you worried about competition in Asia?" And he said, "You know what, there's enough growth there for all of us. We don't have to go chase each other in order to be successful." And I was commenting on that; he said, "That was the toughest audience I've ever seen. I don't think I'll come back to Toronto." He said, "Investors in Toronto don't seem to get Asia, the importance of it. It's not reflected in your stock price, and we quickly concluded after talking to a bunch of investors that they don't get it. I'm not sure I'll ever go back." Wow. I think that's very sad. We certainly get it at Manulife. So thank you.

Gail C. A. Cook-Bennett

I wonder if I could just add from the board's perspective that we've been very interested in extensive disclosure. And third parties have indicated that we're one of the best on that front. But we continue to be involved in this continuous improvement to try and make very complex matters somewhat simpler. But I was heartened by one of our major institutional shareholders, who volunteered that our 2011 proxy circular was one of the best, and then he said, if not the best, that he had ever seen. So we're trying to make the effort to disclose and be transparent. It's difficult in terms of the complexity sometimes and how people add up the pieces.

Are there other questions? If there are no further questions, this concludes our meeting. And ladies and gentlemen, thank you for your interest and attendance today. And we look forward to seeing you again next year. Thank you.

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