Manulife Financial (MFC) Status Update summary

Leadership transition and strategic progress

• CEO Roy Gori announced his retirement after a decade, highlighting the transformation journey and achievements, including expanding core ROE to nearly 17% and setting an 18%+ target.

• Phil Witherington, current CFO, will succeed as CEO, recognized for his strategic leadership and execution in Asia and global transformation.

Transaction overview

• A $5.4 billion reinsurance agreement with RGA covers $2.4 billion of LTC reserves and $3.0 billion of U.S. structured settlements, with a 75% quota share and full risk transfer for the LTC block.

• The LTC block reinsured is younger, with a higher proportion of active life reserves and lower average attained age compared to previous transactions.

• The deal is priced at close to 1.0x book value, with a modest negative ceding commission of 4% on LTC reserves.

• Manulife will continue to administer all reinsured policies, ensuring seamless customer service.

• The transaction is expected to close in early 2025, subject to customary conditions.

Financial impact and capital management

• The transaction is accretive to core ROE (+0.14pps) and neutral to core EPS after share buybacks, with an 11.4x core earnings multiple.

• $0.8 billion of capital will be released and returned to shareholders via share buybacks under a new NCIB program, with up to 90 million shares repurchased, subject to regulatory approvals.

• Annual reduction to core earnings and net income attributed to shareholders is expected to be $70 million and $50 million, respectively, as the blocks run off.

• The transaction reduces ALDA by $1.5 billion and is expected to recognize $0.5 billion in unrealized losses on assets in OCI, with no impact to book value or LICAT capital.

• The deal transacts at close to book value, validating reserve assumptions and business quality.