MFC

Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation First Quarter 2026 Results Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead.

Thank you. Welcome to Manulife's earnings conference call to discuss our first quarter 2026 financial and operating results. Our earnings materials, including webcast live for today's call, are available in the investor relations section of our website at manulife.com. Before we start, please refer to slide two for a caution on forward-looking statements and slide 33 for a note on non-GAAP and other financial measures used in this presentation. Please note that certain material factors assumptions apply in making forward-looking statements. Actual results may differ materially from what is stated. Turning to slide four. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide a highlight of our first quarter 2026 results and a strategic update. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail.

After their prepared remarks, we'll move to the live Q&A portion of the call. With that, I'd like to turn the call over to Phil.

Thanks, Hung, thank you everyone for joining us today. As I reflect on my first year as CEO, I'm proud of what we've accomplished as an organization. We've moved at pace to make significant progress against our refreshed enterprise strategy. As we look to the future, we're well-positioned to achieve our ambition to be the number one choice for customers. I'll begin with an overview of our first quarter financial performance starting on slide six. We delivered solid results in the first quarter, building on our strong 2025 momentum despite heightened macro uncertainty. Our insurance businesses generated strong top-line results, with each segment achieving double-digit growth in new business CSM. This contributed to 18% growth in our CSM balance and further strengthened our future earnings potential. Asia had strong sales this quarter, with meaningful growth from key markets including Hong Kong, Japan, and Singapore.

While Global WAM posted net outflows in the first quarter, we saw sequential improvement, including continued institutional inflows supported by the recently acquired Comvest business as well as CQS. Colin will take you through those details shortly. From a profitability standpoint, we delivered core EPS growth of 11%, in line with our medium-term target. This reflects strong growth in Asia, where core earnings increased 22% year-over-year, as well as the positive impact of share buybacks. We delivered this result despite the impact of the transition to eMPF, which moderated core earnings growth in Global WAM. It was also a challenging quarter for insurance experience in Canada. Nevertheless, we continue to make progress towards our 18%+ core ROE target by 2027 and delivered a solid core ROE of 16.5%, up 90 basis points from the prior year. Onto our balance sheet.

Our LICAT ratio remains strong, and our leverage ratio is well below our target, providing us with ample financial flexibility. In addition, our adjusted book value per share increased 6%, even as we continued to return significant capital to shareholders through dividends and share buybacks. Moving on to slide seven, which shows the refreshed enterprise strategy introduced late last year. The organization remains highly energized about the strategy with a focus on execution to deliver high-quality, sustainable growth. Continuing our strong momentum from last year, we made meaningful progress executing the strategy again this quarter, which you can see on slide eight. A balanced and well-diversified portfolio underpins our ability to deliver earnings resilience and long-term value creation. This is why we continue to expand our global reach and capabilities, which have proven to be especially important during periods of uncertainty.

We were recently named Asia's Best Insurance Provider for Wealth Management, reflecting our innovative product suite, value-added service, and trusted relationships with our distribution partners across our high-net-worth channels. In Global WAM, we completed the acquisition of Schroders Indonesia, strengthening our position as the largest asset manager in Indonesia. We entered into a strategic partnership with L&G, enabling us to leverage complementary strengths in global asset management and distribution and expand access to differentiated investment solutions across institutional, retirement, and retail channels. In the U.S., we further differentiated our Indexed and hybrid Indexed Universal Life offerings, positioning us well to meet evolving income protection and wealth accumulation needs.

We also continued to expand our U.S. distribution footprint. Over the past year, our wholesaling team has grown by more than 50%. This expansion enables us to deepen advisor relationships, improve execution and coverage in key markets, and better support the launch of new products and initiatives. Becoming an AI-powered organization is a key area of focus. We're accelerating progress through targeted strategic actions. This includes recent strategic partnerships such as our collaborations with Akka and Adaptive ML, which improve our ability to deploy AI at scale with speed and consistency. In parallel, we're focused on increasing our capacity and accelerating the pace of our technology initiatives. By further leveraging AI tools, our developers drove a 30% increase in productivity this quarter, enhancing their ability to support business growth and develop new capabilities.

In Global WAM, we deployed an AI-powered sales platform in U.S. retail that has driven a 40% increase in meaningful advisor interactions and is supporting higher flows. We also continued to roll out AI tools across Asia to enhance agent and advisor productivity, including the launch of a new distributor AI tool in Vietnam and enhancements to our advisor AI tool in Japan. These initiatives support faster access to information, enhanced customer service, and enable further improvements to distributor productivity and wider customer reach. In the U.S., we expanded our Quick Quote support tool, automating nearly half of preliminary assessments and reducing average turnaround time from days to minutes. These examples illustrate how we're scaling digital and AI capabilities across the enterprise to deliver measurable improvements in efficiencies, customer experience, and value.

Finally, we're committed to empowering health, wealth, and longevity for our customers across all stages of their lives, and we continue to deepen our leadership in this space. During the quarter, we announced a new partnership with Guardant Health, offering eligible customers in Asia access to the Shield Multi-Cancer Detection blood test. We're proud to be the first insurer in Asia to offer this test, expanding access to early cancer detection. In Canada, we've partnered with Osara Health to offer evidence-based cancer support programs to eligible group benefits customers, helping them navigate the daily challenges of living with cancer, obtaining treatment, and recovery. Overall, I'm pleased with the progress we're making. We're taking decisive action to strengthen our competitive differentiation, which is positioning us for long-term success and contributed to our solid operating results this quarter.

Our financial and operating performance underscores the strength of our strategy, the discipline of our execution, and the quality of our global franchise. We remain steadfast in our commitment to delivering on our targets and driving sustainable growth, and we're confident in our ability to do so. With that, I'll hand it over to Colin to discuss our quarterly results in more detail. Colin.

Thanks, Phil. Good morning, everyone. This quarter marked another period of solid execution for Manulife through a volatile macro environment. Before opening the line to questions, I'll walk you through this quarter's results. Let's begin on slide 10 to discuss our top line. We delivered solid new business results in the first quarter with 16% growth in new business CSM underpinned by double-digit growth from each insurance segment. This was supported by strong APE sales growth in Asia and the U.S. Canada's APE sales declined as growth in individual insurance sales were more than offset by lower large case group insurance sales, which tend to be lumpy. In Global WAM, headwinds and active mutual funds in North America retail, and to a lesser extent, U.S. retirement, led to net outflows of $4.4 billion. Turning to slide 11.

You'll note a few of the key drivers behind our earnings this quarter compared to the first quarter of 2025. Strong business growth in Asia and Canada, along with the net impact of last year's actuarial assumptions review, drove a higher net insurance service result. Overall insurance experience improved compared to the prior year, reflecting claims gains in U.S. life and LTC, as well as the non-recurrence of a P&C provision in the first quarter of 2025, partially offset by unfavorable experience in Canada Group Insurance. I will provide more color on our insurance experience in a few moments. Moving down the DOE table and onto our net investment result where we saw a decrease of 5% versus the prior year, primarily driven by lower investment spreads in the U.S.

Our expected credit loss, or ECL, was a $39 million pre-tax charge, largely in line with the prior year and our medium-term guidance. Lastly, Global WAM generated modest pre-tax earnings growth. Turning to slide 12. Core EPS was up 11% year-over-year, reflecting strong growth in core earnings alongside the impact of continued share buybacks. Net income for the quarter came in at $1.1 billion, reflecting a charge from market experience driven primarily by public equity performance. It's worth highlighting that while we're only halfway through the second quarter, most equity markets have largely reversed their first quarter underperformance. We also saw a $242 million charge in our ALDA portfolio, primarily related to lower than expected returns across real estate, timber, and private equity investments. Moving on to results by segment, we'll start with Asia on slide 13.

You'll notice that we've expanded our regional disclosures for certain sales and other metrics to now include mainland China and Singapore on a quarterly basis. This additional granularity gives you a sense of the diversity and scale of our Asia footprint. APE sales increased 11% from the prior year, supported by double-digit growth in Hong Kong, Japan, and Singapore. After a softer fourth quarter in Hong Kong, focused execution from the team drove 18% year-on-year growth in APE sales, reflecting higher agency and bancassurance sales and resulting in record quarterly sales. Overall, new business margins modestly expanded, supported by a more favorable business mix. From a core earnings perspective, Asia delivered another quarter of impressive results. Core earnings increased 22% year-on-year, reflecting continued business growth and the net favorable impact of last year's basis change, partially offset by less favorable insurance experience.

Now, moving on to Global WAM on slide 14. Despite generating record gross flows this quarter, net flows were challenged. In retail, we experienced higher active mutual fund outflows, primarily driven by higher redemptions through third-party intermediaries in North America, including a few large model redemptions in the U.S., while U.S. retirement outflows were primarily driven by higher plan redemptions. These were partially offset by strong institutional inflows, including contributions from Comvest and CQS. We also saw strength across Canada and Asia retirement, North American ETFs, and Canadian wealth, as well as Asia retail, highlighting the strength of our diversified platform. Our core EBITDA margin expanded 60 basis points from the prior year, supported by AUMA growth, the Comvest acquisition, and continued expense discipline, partially offset by the impact of the eMPF transition in Hong Kong and lower performance fees, which can be lumpy.

These factors also contributed to modest core earnings growth of 2%. With a reduction in one-time eMPF related expenses incurred in the first quarter, along with more trading days, we expect the Q2 core earnings run rate to increase by approximately $25 million. If equity markets were to hold at current levels, they would provide a tailwind to the normalized amount. Next, turning to Canada on slide 15. This quarter, APE sales declined 15% year-over-year, reflecting lower group insurance sales. This partially offset by higher sales in individual insurance as we saw continued strong demand for our participating life products. Overall, we also saw a decline in new business value. New business CSM, however, increased 13%, reflecting the strong growth in individual insurance.

Core earnings declined 6% year-over-year, primarily reflecting unfavorable insurance experience in group insurance compared with favorable experience in the prior year. This was driven by a combination of higher incidence and lower recoveries in our long-term disability business, along with higher expenses to support business growth and transformational investments. We expect recoveries and experience to normalize throughout the year. We continue to invest in our Canadian business to improve customer experience and help our customers return to work. The impact of this experience was partially offset by business growth, the net impact of last year's basis change, and a lower ECL provision charge. Lastly, let's discuss our U.S. segment's results on slide 16. APE sales grew 29% year-over-year, driven by continued strong demand for our insurance accumulation products and translating into robust growth in new business CSM.

Core earnings decreased modestly, primarily reflecting lower investment spreads, though this was partially offset by favorable insurance experience. It's worth noting that this included claims gains in our U.S. life business, reinforcing our view that the unfavorable experience last year was a result of normal course variability rather than a sign of an underlying trend. Also of note, LTC insurance experience was positive across the P&L and CSM this quarter. Moving on to our book value on slide 17, you'll note we continued to grow our adjusted book value per share, which was up 6% from the prior year at $39.01, even as we returned $5.3 billion of capital to shareholders over the past year. As previously announced, our new buyback program began in late February, allowing us to repurchase up to 2.5% of common shares outstanding.

Between dividends and share buybacks, we returned $1.2 billion of capital to shareholders during the quarter. Let's now turn to our balance sheet on slide 18. Our LICAT ratio remains strong at 136%, $25 billion above our supervisory target ratio, and our financial leverage ratio of 22.5% remain well below our medium-term target of 25%. In what remains a dynamic and volatile macroeconomic environment, our balance sheet has held up extremely well. These results highlight the strength and resilience of our capital position and provide us with confidence in our ability to navigate uncertainty while maintaining financial flexibility.

Finally, turning to slide 19, you'll find an overview of our continued progress against our 2027 and medium-term targets. While we face some headwinds this quarter, overall, we are very pleased with our financial performance underpinned by the strength and resilience of our diversified business. Strong underlying business growth and disciplined execution keep us on track to deliver against our targets. This concludes our prepared remarks. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups, and to re-queue if they have additional questions. Operator, we will now open the call to questions.

We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question today comes from John Aiken with Jefferies. Please go ahead.

Good morning. Wanted to drill down the performance in Asia, if I may. I actually want to look at Japan in particular. We've seen several quarters of improving core earnings growth. Wanted to discuss, you know, what the outlook is for the region, what you're doing in terms of product development and, you know, how sustainable are these earnings level or even growth trajectory.

Thanks, John, for the question. It's Steve here. You know, as Phil and Colin noted, we were really pleased with the overall Asia results with the strong growth in our new business metrics. Japan was a key part of that. We're pleased with the new business performance, the APE sales growth, and the value metrics all grew very strongly. You know what we're seeing there, this is really a combination of a couple of things. First is a continuation of the momentum that we had in 2025. We've been really focused on broadening our product propositions, our portfolio, to cover a wider range of customer needs across distribution channels. Then we also note that in Japan there can be some quarter-to-quarter variability, somewhat due to market conditions.

We saw a bit of that this quarter, but the fundamentals, the sustainable part, the business performance, that part is sustainable. The, you know, we've introduced some new whole life products. We've introduced ILP products, all of which have hit the mark in terms of customer needs. Our outlook there is quite positive. You know, what we're seeing is that the environment is supportive of insurance, building on customers' needs to build retirement savings. The interest rate environment has helped the attractiveness of insurance products. We're quite optimistic as we look out there, particularly with the products having hit the mark.

Thanks for the color, Steve. I'll re-queue.

The next question comes from Gabriel Dechaine with National Bank. Please go ahead.

First, question is on the experience in group. Can you break that down between, you know, expense and the disability and why this quarter might be just a bit of a blip as opposed to something we gotta worry about for a few more quarters? I mean, I looked last year, it's not like group had a big sales surge, and 2024 was pretty high. I don't know if there's any connection there. Sometimes you have big sales and the pricing with it needs to be adjusted.

Hi, Gabriel. Naveed here. Thanks for the question. You highlighted that we did have unfavorable insurance experience in Canada, specifically in our long-term disability business. What we saw there was modestly higher incidence and lower recoveries. It's worth noting though that we're seeing overall less favorable experience in this business across the industry in the first quarter. We did also see experience losses on our travel insurance business due to recent global disruptions, which we do not expect to persist going forward. Finally, group insurance had higher expenses in the quarter to support recent growth and transformational investment to elevate the customer experience. On the long-term disability, we are taking targeted actions on the business to address the lower recoveries that I previously mentioned.

You know, specifically in 2025, we started to hire extra case managers as our disability case loads had exceeded our target levels due to business growth. Again, if you sell the business, you mentioned the really strong sales year in 2024. It did take some time for those disability cases to come in.

Okay.

We did need to really ramp up our case managers to deal with the growth. It does take some time to onboard and train the new case managers. We did see higher expenses and lower recoveries co-contributing to deterioration and experience. Now going forward, we do expect Canada segment total insurance experience to improve and trend to get to more normal levels by the end of the year.

Okay.

Gabriel, this is Phil. Just to add, you did ask about sales momentum, and I think the word that Colin used, the adjective he used in his remarks was that group business can be lumpy. I think that's absolutely right. If you look at the next level of detail below sales, in Canada, the individual insurance sales are actually very strong, and that's the driver of the 13% growth in new business CSM in Canada. I would expect that group sales continue to be lumpy. A better metric actually for group business is to look at persistency. Our persistency remains strong.

Okay, great. Now as turning to the investments, I think everybody's focused on private credit exposure, and your disclosures help. I want to ask about, you know, the impact of the oil price shock on your Asia footprint. You know, there are different countries are positioned differently with regards to, you know, how it's impacting them, level of reserves they have, for instance. I'm just wondering, you know, if you could talk about, you know, if there's any impact on consumption or sales that is noteworthy. More importantly, the credit exposure, whether it's in the public or government, the portfolio or maybe the corporate portfolio, if you're starting to see any signs of stress that are tied to this issue.

Okay, great, Gabriel. This is Phil. Let me take the start. There's quite a lot in there. I'll hand over.

Yeah.

To Steve on Asia and Trevor on private credit. Just in relation to where you started on the impact of the oil price shock and the, you know, potential impacts on our business. If I maybe start actually in the Middle East and highlight that we actually don't have much by way of direct exposure to the Middle East.

To the extent that we do have direct exposure, it's very modest. We have seen in the quarter some disruption to our international high net worth business from Middle East customers. However, that's not particularly visible because it's been more than offset by actually very favorable momentum in some key hubs in Asia, Hong Kong and Singapore, for example, in the high net worth segment, have done very well. In terms of the broader impact on Asia, there's nothing that is currently visible in terms of, you know, declines in consumer sentiment. I will hand over to Steve at this point to elaborate further.

Thanks, Gabe. Phil covered it quite well. At this point, you can see from the strength of the Q1 results that we don't see a material impact. You know, we're watching closely for, you know, how this plays out over time. As you noted, I think some of the markets are, in Southeast Asia, more exposed to, you know, oil supply. We haven't seen it yet, and our capital positions are resilient and strong, so we feel quite good overall. I'll pass it to Trevor on the investment specific.

Thanks, Steve. And thanks, Gabe, for the question. Sort of two elements there. First getting on the private credit side, most of that exposure is really in the U.S. There's very limited exposure to either the Middle East, or Asia or in fact, oil. I think very, you know, low concern there at all.

Right.

With respect to Asia.

I meant it more the plain vanilla portfolio I'm thinking about more.

Yeah. Just to the plain vanilla investment portfolio in Asia, it's probably mid-90s investment grade. It's largely government and sort of quasi-government exposures, and even the below investment grade exposure in Asia tends to be sovereigns and quasi-sovereigns in places like Vietnam to match local liability. We're not really seeing anything at this point. I think as I said, I think the quality of the portfolio is quite strong, no particular concerns. Thanks.

All right. Thank you.

The next question comes from Thomas Gallagher with Evercore ISI. Please go ahead.

Morning. First question, just to follow up on Asia. Would you say Q1 earnings are a good baseline to build off of or anything unusual there? Investment spreads look pretty good and expenses low. Just wanna see if you would adjust that at all when you think about the roll forward into 2Q.

Thanks, Tom. It's Steve here. The short answer is, Q1 is a good baseline to look at for future growth, you know, subject to normal variability, but Q1 is a good base.

Okay. Thanks, Steve. The follow-up is there's been some recent M&A activity in the U.S., and just curious how you're thinking about your position and footprint in that market and whether you think M&A, in that region may make sense for Manulife.

Well, Tom, this is Phil. I think it's probably best for me to take that one. We actually quite recently released our refresh strategy the end of last year. Our focus right now is on the execution of that strategy. It's very much an organic focus plus execution of the transactions that we have already done. We have done a sequence of M&A transactions in recent months, quarters in the last couple of years, CQS, Comvest, as well as Schroders in Indonesia. I do acknowledge we are in a strong capital position. We have, through our refresh strategy, expressed appetite to invest not only in Asia and GWAM, but also in our insurance markets in the U.S. and Canada. We have a strong capital position. The bar is high when it comes to inorganic deployment.

I don't rule inorganic deployment out, but the bar is high, and our primary focus is organic execution.

Thanks, Phil.

The next question comes from Tom MacKinnon with BMO. Please go ahead.

Yeah, thanks. Good morning. Question about the U.S., where sales continue to be strong here. Maybe you can provide a little bit as to what's happening here. Is it just expanded distribution? Is the product working? How is it working? Is it piggybacking on Vitality brand strength? Maybe a little bit about the type of products that are driving that growth. They appear to be a bit more CSM type products. To me, that indicates better earnings visibility going forward, but maybe you can dig a little bit deeper into those exceptional sales growth you're getting in the U.S.

Thanks, Tom. It's Brooks. I appreciate the question. Yeah, Q1 represented the seventh quarter in a row of really strong new business growth, including the underlying value metrics. We're quite pleased with that, and it's a combination of many of the factors you mentioned and some others. Phil mentioned in his introductory remarks that we substantially increased the size of our wholesaling force over 50% up from a year ago, but really more than double from, you know, say 18 months ago. Substantial investments there that are paying off nicely. We have a highly differentiated story.

You know, I would say, you know, in your own lives, if you think about the hot topics these days, longevity, wellness, things like that, they're some of the fastest-growing segments of the economy, and we continue to be the only U.S. life insurer offering life insurance with those embedded features and benefits. Very, very strong appeal there. We've introduced a number of new solutions recently, something called Vitality Pro, which is a companion app to our customer-facing Vitality app. The Vitality Pro is for advisors, and it's intended to drive engagement. Just as we have engagement with our customers around health and wellness, it drives engagement with our advisors and ultimately loyalty. A whole series of initiatives underway there, frankly, with many more plans.

Not only do we feel good about the recent growth and the value it's creating, the ability to restore the CSM balance that you commented on, we're quite optimistic about the future as well. Thank you.

As a follow-up, are these largely more adjustable type products, i.e. the level of guarantees on these things would be?

Yep.

As high as what's in your legacy book?

Great point, Tom. We were really the first U.S. insurer and to move away from long-duration guarantees in a meaningful way all the way back, you know, 2010. We had substantially migrated away from them. In the past 15 years, our block is virtually entirely adjustable.

Okay. Thanks so much for that.

Tom, this is Phil.

Yeah.

Just to make a connection between what Brooks just said and how we expect earnings in the U.S. to emerge in the future. Given this shift from sort of the past of guaranteed products to the future and current state of adjustable products, you would expect the net investment income in our core earnings to actually decline over time. The core insurance component of earnings driven by CSM generation amortizing and then amortizing through earnings, you'd expect that to increase. We should expect that change in dynamics in U.S. earnings. Overall U.S. earnings, I think a good baseline or benchmark for us to look at in terms of run rate is in that sort of Q4, Q1 range that you've seen, $230 million-$240 million.

A bit of a shift in geography, but probably to higher quality items.

Absolutely right.

In your DOE. Okay. Thanks for that, Phil.

Thanks, Tom.

The next question comes from Paul Holden with CIBC. Please go ahead.

Thank you. Good morning. Want to ask you first on the GWAM earnings. Down slightly year-over-year and obviously a few moving parts there. Hoping maybe you can parse it out for us, really, I guess, to get a better sense of sort of how we should be modeling growth going forward. Maybe if you can provide any further breakdown on sort of the eMPF impact from the recent Comvest acquisition, et cetera. Again, anything you can help us sort of with to model what kind of growth rate we should be using going forward. Thanks.

Yeah. Great. Thanks, Paul. It's Paul here. I'll take the question. Yeah, in terms of the run rate earnings this quarter, as Colin mentioned, they were lower than our expected run rate for the quarter. We did have some one-time items. Just to clarify, the impact of the eMPF is reflected in the quarter, and it is consistent with our guidance of $25 million. That was about CAD 33 million in the quarter. But there was also some one-time costs as we transitioned and moved in Q4 to the new platform. We do need to decommission systems, IT, et cetera, and there are some other one-time items.

When you adjust for those, and if you're looking, I guess, for outlook for Q2, as Colin mentioned, there's too fewer calendar days in Q1 as well. In terms of run rate for Q2, if you adjust for those items, you know, recognizing the calendar days, and if you look at where markets would be, you know, as of now, you should expect a run rate to be approaching the $500 million mark.

Okay. That is helpful. Thank you. Sort of similar question on the net investment earnings or expected investment earnings, 'cause those declined, I think it was 10% year-over-year. Obviously you're actually growing the underlying assets and again, I guess a number of moving pieces there. If there's any way you can kind of parse that out and help us understand what that should look like for the remainder of the year would be super helpful. Thank you.

Hi, Paul. It's, it's Trevor. Thanks for the question. Yes, in terms of expected investment spread, as you noted, it was down. That was really largely driven by ALDA sales for the reinsurance, that we executed, I think, at the beginning of last year, as well as some other normal course, ALDA portfolio management trades, in the U.S.

I would also expect to see some variability from quarter to quarter in this line, given sort of differences in the timing of asset maturities and other changes between assets and liabilities on the balance sheet. We did actually see some spread compression in the quarter as well. As Phil mentioned, I think we would also expect to see a slow shift in earnings from this line towards insurance service result over time. You should expect to see that in coming quarters as well. I think in terms of modeling, as a base, I think Q1 is probably a reasonable base to use. Thanks for the question.

Okay. Thank you.

The next question comes from Alex Scott with Barclays. Please go ahead.

Hi, good morning. First thing I wanted to ask about is just if you could provide a high-level update on how you're viewing remittances for this year. I know you have a longer term, you know, plan that you've set, but would be interested in any commentary you're offering up and just, you know, broader thoughts on the balance between growth and remittance.

Hey, Alex, it's Colin here. Remittances, as you remember, we introduced a $22 billion cumulative remittance target at our Investor Day. You know, that would imply a $5.5 billion run rate going forward for those years. We've actually exceeded that each year and continue to look favorably on remittances. There's a couple reasons behind that. One is the shift in our product mix to quite capital generative products, low new business strain. That helps a lot. Two is the underlying capital strength of each of our subsidiaries. We've been able to really, you know, produce good capital generation in each of our markets on the back of a strong capital foundation. We've had a couple capital regime changes. You've got Hong Kong and right now we're working through Japan.

Both of those have actually worked in our favor because they bring the capital regime on a local basis closer to our consolidated capital basis. Everything works towards quite a good outlook for capital generation. We said before that you should expect 60%-70% of our earnings to convert into remittances, and we stand by that. That gives us a nice little buffer every year compared to the 35%-45% dividend that we pay out. Everything's looking very good for remittances, actually.

Great. Thanks for that. Second question is on, you know, the GWAM net flows. I'd be interested in any commentary you'd provide on the outlook, you know, thinking through the different moving pieces there. You know, I think in your commentary, you also mentioned some AI, you know, implementation that was benefiting your retail wealth management interactions. You know, is there any evidence that that is gonna convert to flows as well?

Yeah, Alex, it's Paul here. I'll take the question. In terms of the flows, we're actually quite pleased with the momentum of the business this quarter. If you look at gross flows, it was $56 billion. That was a new record for us. It was up 13% versus prior quarter and 15% from the prior year. We also had a record quarter for ETFs across our retail business in North America. The momentum from a top-line perspective is actually quite strong. The softness came through on the redemption side in a couple specific areas. The first is just general industry pressure and active management in North America. You know, Colin mentioned that in his remarks. Within that, we had two model redemptions late in the quarter where partners were reallocating asset mix.

It wasn't performance-related changes, but it was asset mix, and it did impact us. That was worth $3.4 billion of the $4.4 billion of outflows in the quarter. The other area was U.S. retirement. As Colin mentioned, primarily from, you know, higher withdrawals, but not from a rate perspective. As markets continue to do well, that increases the dollar amount of withdrawals at the participant level and creates a little bit of a headwind on flows, but obviously a tailwind as it relates to fee revenue on the asset base. Then if you look at the businesses within there, it's pretty broad-based on the others. You know, we had a positive net flows in our institutional business again. That was positive contributions from CQS and Comvest.

Asia retail and retirement were positive, our North America wealth and Canadian retirement business were also positive net flow. It's pretty broad-based. We have a couple areas obviously we're focused on. In terms of outlook, you know, we're cautiously optimistic of our flows, particularly considering the strong top line. However, I would say we do expect some of these pressures in fact with market uncertainty to persist. I would, you know, we're still confident that we can get back to positive net flows over long term and with to the extent market uncertainty starts to get some clarity there, we would expect our net flows to slowly improve over time. As it relates to your AI question, it's a great question.

We've been investing significantly across the business, across all of our distribution platforms, and we are seeing the benefit of that. One of our strategic levers is making our wholesaling team more productive but also extending the size of the team. That will take some time to do, but we're seeing the benefits of the productivity with AI. As we also expand the teams globally, we should expect that to come through our top-line results as well.

Got it. Thank you.

The next question comes from Darko Mihelic with RBC Capital Markets. Please go ahead.

Hi. Thank you. I just wanted to revisit the U.S. business for a moment. Phil, in your answer to a previous question, you mentioned that the investment earnings should be lower as a result of the sort of the change product mix. Presumably, maybe there's some ALM matching going on, and you're changing the investment portfolio. In Colin's remarks, it was spreads, like investment spreads were lower. My question is it really like spreads? As you continue to alter the investment portfolio, the investment, the expected investment returns will be even lower than the current run rate going forward.

Maybe you can just provide a little more color on the two sort of forces there that are impacting that and give us a sense of, you know, the run rate going forward would be helpful for the model.

Hey, Darko, it's Phil. Thank you for asking the question. It's quite a technical question. I will hand over to Trevor in a moment. I think the reality, there are various factors going on here, various factors at play. One is a very commercial factor that our new business mix in the U.S. is exclusively focused on or very much focused on the adjustable product, so universal life type products. That gives rise to future earnings that don't come through the net investment result line. It emerges through the core insurance result line. That's one dynamic that will happen over time.

Another dynamic is the fact that in recent years, including just over a year ago, we have transacted on some quite significant reinsurance transactions, and that relates to components of our business that as those transactions have been executed, have resulted in a lower net investment result in our drivers of earnings analysis. I think another sort of related factor is the fact that as we have reduced our legacy portfolio as a result of reinsurance as well as organic runoff, we are reducing our holdings of older within the guaranteed segment. All of those factors are at play. Trevor, is there anything that you'd like to add to that?

Not really. I think you've basically covered it. I think we have been selling down older. That's obviously a driver of lower expected investment spreads going forward. I think Colin's point, obviously, lower spreads are a little bit of a headwind. I think it's a slow emerging headwind. Right, the older impacts, I think, are much quicker to manifest themselves. I think as Phil had said earlier, there is a sort of a geographic shift going on as well, moving effectively moving overall earnings from expected investment spread into, you know, CSM amortization over time.

This is a good run rate? Is this the way I should factor it into the model from here?

Yes. Yes. Yes, this is a good run rate.

Okay. Thank you.

The next question comes from Mike Rizvanovic with Scotiabank. Please go ahead.

Good morning. Just a quick one maybe for Colin. Just wanted to get some more color on the ALDA, maybe an update on what drove the negative experience in the quarter. I guess more broadly, more high level, should investors be concerned about maybe a change in that run rate assumption, which I think would impact your core EPS as presented today? The 9% or 9%-9.5% assumption, is that something that's being thought about as maybe for potential change?

Hey, Mike. I'll quickly pass over to Trevor on that because there's actually quite a lot going on in the ALDA portfolio.

Thanks, Colin. Thanks, Mike, for the question. Firstly, just in terms of performance on the ALDA portfolio for the quarter, it was actually similar to Q4. We were, however, adversely impacted by a fire on one of our large Australia timber assets, and that generated a one-off charge of about CAD 50 million for the quarter. If you adjust for that, the quarter was actually better with most of the portfolio showing continued improvement with infrastructure being quite strong while real estate was again largely flat. In terms of the assumptions, I mean, these are very long-term assumptions. They're not set for any specific year. They're also basically a forward-looking assumption rather than retrospective.

While we do look at our own and benchmark experience, we also look at market expectations and current transactions that we're underwriting generally with return expectations well above our long-term assumptions. You know, throughout the rest of the year, we will go through that process again. I think given the factors that I just mentioned, I think changes in the asset mix over the last few years, including sales of underperforming office real estate, I think we do still feel the assumptions are appropriate for long-term forward-looking, you know, ALDA assumptions. Thanks.

Yeah. Just a quick follow-up. I guess it sounds like you do have the ability to shift that portfolio into something a bit more conducive to higher returns over time. You still have a lot more potential work to do there, or is it sort of later innings?

I think it's just normal course portfolio management. We are generally making ongoing changes to the portfolio, selling things that we think are that are at a good time to sell and buying things that we think are sort of relatively cheap, and that's how we basically managed the portfolio for the last, you know, 20 years. I think that is our expectation, that we will be transitioning into assets and asset classes that will meet those long-term assumptions.

Great. Thanks for the color.

The next question comes from Tom MacKinnon with BMO. Please go ahead.

Thanks. With respect to the reported, the impact from public equity markets seemed to be a little bit more severe than your, you guys do a pretty good job of outlaying outlying sensitivities and providing how to try to model that. We do have, you know, equity markets, particularly in the U.S., that are heavily weighted to Mag 7. Is that probably why the impact was more pronounced in the first quarter, in terms of a negative impact, or just some color with respect to that. Thanks.

Hey, Tom, it's Trevor again. Thanks for the question. Yes, in terms of the market impact that you're seeing relative to the sensitivity. There was a larger than expected non-core charge given weak performance in some equity markets. It was really focused on the U.S. To your point, it was worse than the sensitivities, but it was largely driven by more active fund underperformance relative to local indices in what was a pretty noisy quarter. It wasn't really specific to the Mag 7.

Yeah. Like, do you think, maybe more of a question, the reported number, you know, that really impacts really the book value? I think the book value per share was probably better than people were looking for. How do you think those who look really at the reported number, do you believe they should be looking more at the, you know, the book value that comes out at the end of the day? If that's better than anticipated, doesn't that indicate reasonably good quality?

Yeah. Tom, it's Colin. I'll take that because it's such a great question and a great debate. You know, do you stop at core earnings? Do you go to net income? Do you look at book value? Do you go to adjusted book value, which was up even more, actually 6% and 8% excluding FX. You know, I personally believe that book value and book value growth encompasses everything that we, you know, you are exposed to as a shareholder or an analyst. Book value growth is really important to us. Obviously, during the, you know, as on a per share basis, it's adjusted for the buyback, so that's helpful. Yeah, we saw modest book value growth this quarter, in part because of equity and ALDA up of underperformance.

You know, bear in mind that equities, if markets stay where they are, should or should reverse and some. Continued book value growth and a reasonable output for that.

Thanks.

The next question comes from Mario Mendonca with TD Securities. Please go ahead.

Good morning. Can we go back to the GWAM business for a moment? It's a business where I've become very accustomed to seeing solid positive operating leverage and margin expansion. I appreciate you're going through a transition here with the eMPF. My question is this: As you look forward a year from now, would you expect the revenue, the EBITDA margin, revenue margin to be higher? Would you expect to be delivering positive operating leverage? Once you are through this period, is it a few more quarters? Is it a few more years of transition? How would you characterize that?

Yeah. Hey, thanks, Mario. It's Paul here. The short answer to the question is you should expect margin expansion going forward, subject to, you know, regular markets and growth. As we discussed in the past or provided guidance, we try and manage our expense growth to 50% of revenue, and we still think we can do that with the investments of GenAI and efficiency. As we mentioned, the transition to eMPF, it is behind us. It has happened. We had some one-time costs in Q1 that will not recur in Q2. From this point forward, we provided kind of that new run rate go forward. From that, you should expect us, you know, subject to markets obviously, to see margin improvement over time.

Do you have an outlook for the EBITDA margin over the next 12 or 24 months?

Well, the outlook is we do have the Investor Day target that we set for next year of 30%. You know, we feel good that we're on track to achieve that target. Again, if you look at just where we were Q1 of 2029, looking forward with market growth and our ability to manage expenses, again, we feel optimistic in terms of our outlook to achieving that next year.

Okay. That brings me to the Investor Day was still, was pretty important. I think it's a reasonable time to ask you, does the 18% in 2027 still feel achievable? If so, how do you bridge that gap from the 16.5% today to 18% in 2027?

Let me start, Mario.

Let me-

It is Colin. I think the 16 and a half% is impacted by some seasonal factors in the first quarter, and I'll highlight a few. Paul talked about calendar days for GWAM. Actually, our group benefits business always exhibits an element of seasonality in the first quarter as people submit claims at a different period during Q1 versus other quarters. You know, the P&C earnings have historically emerged much more in the second half. Even if you look at last year's ROE numbers, you know, the second half ROE numbers were 18.1%, 17.1%, much closer to our target. While the 16.5% does seem like quite a leap to the 18%, it is 90 bps higher than Q1 last year. We are making progress.

We've got plans in place to get us to 18%. It does need, you know, very strong execution, and that's exactly what Phil is driving through the organization with his comments around all about execution of the refresh strategy. It's absolutely a big focus for us, and we have plans in place to get there.

Mario, this is Phil. Just to be clear, we stand by the 18%+ Investor Day target by the end of 2027. I expect to see improvements from where we are at the moment, 16.5%. It's an improvement year-over-year, and I expect to see improvements as we go through 2026.

Thank you.

This concludes the question and answer session. I would like to turn the conference back over to Mr. Hung Ko for any closing remarks.

Thank you, operator. We'll be available after the call if there are any follow-up questions. Have a good day, everyone.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead.

Thank you. Welcome to Manulife's earnings conference call to discuss our fourth quarter and full year 2025 financial and operating results. Our earnings materials, including the webcast slide for today's call are available in the Investor Relations section of our website at manulife.com. Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 41 for a note on non-GAAP and other financial measures used in this presentation. Please note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated. Turning to Slide 4. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide highlights of our full year 2025 results and the progress made towards our new and elevated strategic priorities. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial reporting results in more detail. After the prepared remarks, we move to the live Q&A portion of the call. With that, I'd like to turn the call over to Phil.

Thanks, Hung, and thank you, everyone, for joining us today. 2025 was a defining year for Manulife. We delivered strong financial results, announced our refreshed enterprise strategy to shape Manulife's next chapter of growth and are laser-focused on executing against our vision through targeted strategic investments. While macroeconomic and geopolitical uncertainty remains, we're confident that the diversified nature of our business positions us well to navigate the current environment and capitalize on the opportunities ahead. So let's start with our 2025 financial results, which we announced yesterday. We delivered strong top line results with new business CSM growth exceeding 20% in each insurance segment, contributing to a double-digit growth in our CSM balance and supporting our future earnings potential. Despite experiencing net outflows in the second half of 2025, Global WAM continues to deliver strong margins and core earnings growth. The strong results in Global WAM, combined with the double-digit earnings growth in Asia contributed to our record core earnings this year. Together with the benefit of continued share buybacks, we delivered 8% core EPS growth. We also continue to generate attractive returns with core ROE expanding 30 basis points from the prior year, and we're tracking well towards our 2027 target of 18% plus. Moving to our balance sheet. We generated $6.4 billion of remittances this year and returned nearly $5.5 billion of capital to shareholders. Our LICAT ratio of 136% and leverage ratio of 23.9% provides significant financial flexibility. And I'm pleased to share that we announced a 10% increase in our quarterly common share dividend. In addition, we have received OSFI approval for a new NCIB program, which will allow us to repurchase up to 42 million shares or approximately 2.5% of issued and outstanding common shares, highlighting our continued commitment to returning capital to shareholders. We plan to commence buybacks under this new program in late February, subject to approval by Toronto Stock Exchange. Moving on to Slide 7. In November, we introduced our refreshed enterprise strategy, which builds on our strength is growth focused and is anchored in our ambition to be the #1 choice for customers. There is tremendous enthusiasm across the company as we execute on our new and elevated strategic priorities, which provide logical continuity as we progress in our new chapter with refreshed ambition. As a result, we've already made meaningful progress in 2025. Starting with our winning team and culture. Our world-class talent is one of our greatest strengths, and this year marked our sixth consecutive year of top quartile employee engagement. I'm encouraged by the energy and commitment of our colleagues around the world who've embraced our ambition to be the #1 choice for customers. Together, we will continue to bring focused execution and innovation to the work ahead. And as we drive high-quality sustainable growth, we will maintain a balanced, diversified business model. This year, we've made strategic investments both organically and inorganically to further strengthen our portfolio. We acquired Comvest Credit Partners, announced a joint venture to enter the India life insurance market and entered into an agreement to acquire Schroders Indonesia, with the latter two subject to regulatory approval. We also became the first international life insurer to establish an office in the Dubai International Financial Center dedicated to advising on and arranging life insurance solutions for high net worth customers. And we've expanded our customer solutions, including a new indexed universal life offering in the U.S., while in Canada, we launched a simplified specialized lending suite of products in Manulife Bank. As Colin will highlight, the benefit of a diversified portfolio was evident in our fourth quarter results, and I expect our diversification to serve as well amidst rising global uncertainty. On to Slide 8 and our focus on being the most trusted partner in health, wealth and financial well-being. We took meaningful steps to further empower our customers this year, including a significant milestone in our ambition to be the health partner of choice in Asia. Through a strategic collaboration in Hong Kong with Bupa International, we will offer greater choice and sustainable healthcare solutions that empower individuals and communities to this healthier and more fulfilling lives. In Canada, we became the first insurer to offer access to GRAIL's Galleri multi-cancer early detection test, supporting earlier detection and longevity for our customers. And in the U.S., we're providing additional resources and offerings to eligible U.S. customers to proactively manage their health and wellness. These actions deliver measurable benefits for customers while generating value for Manulife, and we're proud to be a leader in this space. We also continued to invest to make it easier for customers to buy and advisers to sell our solutions. We renewed our bancassurance partnership with Chinabank in the Philippines, extending the exclusive partnership to 2039. In Singapore, we leveraged our digital capabilities to enhance our Manulife iFUNDS platform through using a single platform and leveraging AI-powered analytics, advisers can deliver more personalized and insightful financial guidance. And in the U.S., we expanded our wholesaling team to accelerate our penetration into the high net worth and mass affluent markets. By expanding our reach and scaling our digital and AI capabilities, we can more effectively reach our customers and enhance their experience. Finally, over to Slide 9. Becoming an AI-powered organization is core to delivering on our ambitions and while we've been an early adopter of AI and built the underlying infrastructure necessary to support our vision, it's very important that we sustain our leadership position. We're investing with discipline and a clear focus on areas where AI can be deployed at scale and further improve our efficiency, enhance our customer and colleague experiences and support sustainable growth. In 2025, we ranked 1st among global life insurers for AI maturity by evident, and achieved 30% of the $1 billion plus of AI enterprise value generation by 2027. To drive measurable outcomes, we're concentrating on core focus areas where AI can make the greatest difference for Manulife, and we're already deploying initiatives across businesses and geographies to continue to drive value. Across the organization, we're deploying virtual assistance that create efficiencies while equipping employees and advisers with deeper insights, more personalized outreach and instant product guidance, strengthening the quality and consistency of customer interactions. In underwriting, AI is accelerating decision-making by automating data analysis, enabling faster and more accurate assessments while maintaining strong risk discipline. And we're prioritizing AI solutions that remove manual transactions, driving measurable improvements in efficiency and operational outcomes. Within distribution, AI is enhancing client engagement through tailored sales support, leading to improved sales close ratios and outcomes. We're strengthening our internal productivity by equipping our global technology teams with modern engineering tools, helping us build better solutions and faster. And we're also exploring how AI can help close the advice-access gap and support more meaningful ongoing investor engagement at scale. Moving forward, we're progressing towards a proprietary Agentic AI platform that will make it easier to manage and coordinate AI tools across the company, allowing us to scale AI even faster and more consistently, while ensuring a robust governance process. Overall, these are high-impact areas that reduce friction, support long-term growth and will enable us to deliver on our 2027 and medium-term targets. In closing, I am thrilled with the progress we've made in 2025. We've delivered strong financial results and are already making meaningful strides against our refreshed strategy. As we begin 2026, we're executing from a position of strength with clear momentum and confidence in our ability to achieve our 2027 targets while generating high-quality, sustainable growth for all our stakeholders for the long term. With that, I'll hand it over to Colin to discuss our results in more detail. Colin?

Thanks, Phil, and good morning, everyone. 2025 was a fantastic year for Manulife as we delivered another year of strong financial and operational performance. Let me take a moment to walk you through the quarter's results before we open the line for Q&A. Let's begin with our top line results on Slide 11. We generated strong growth in new business CSM, reflecting more favorable business mix and margin improvements. This marked our sixth consecutive quarter in which new business CSM growth exceeded 20%, a testament to the strength of our balanced and globally diverse business profile. APE sales for the quarter were largely in line with the prior year. Global WAM saw net outflows of $9.5 billion, reflecting several large retirement plan redemptions in the U.S. and to a lesser extent, in Canada as well as net outflows in our North American retail business. This was partially offset by strong institutional flows, including contributions from CQS and Comvest. The redemptions in our U.S. retirement business reflects seasonally higher planned redemptions and higher participant withdrawals as market strength has given rise to higher customer balances. Our retail business saw continued pressure in North American intermediary and Canada Wealth. Though I'd highlight our U.S. retail business performed well relative to peers in what was a challenging quarter for active fund managers in the industry. Moving on to Slide 12. I'd like to highlight some of the key earnings drivers comparing them to the same period last year. We continued to see strong growth in our insurance businesses in Asia and Canada, driving a higher insurance service results. We generated positive overall insurance experience this quarter, including a release of P&C provisions from prior year events as well as strong gains in Canada. Though positive, total insurance experience was less favorable than the prior year, largely reflecting unfavorable U.S. life claims experience. Our investment results decreased a modest 5%, mainly driven by lower investment spreads. In the bottom half of the table, you will see that Global WAM reported solid pretax core earnings growth of 8% this quarter, supported by strong AUMA growth and margin expansion but this was partially offset by the transition to eMPF in Hong Kong. Turning to Slide 13. Core EPS increased 9% from the prior year quarter as we continue to grow core earnings and actively buy back shares. We reported $1.5 billion of net income this quarter, which reflects unfavorable market experience, largely driven by a charge of $232 million in our ALDA portfolio, primarily due to lower-than-expected returns from infrastructure, private equity and real estate. We also reported a $162 million loss from hedge accounting and effectiveness, primarily due to swap spread widening in Canada and, to a lesser extent, derivatives without hedge accounting. Moving to the segment results. We'll start with Asia on Slide 14. APE sales decreased by a modest 3% from the prior year as double-digit growth in Japan and Asia Other was more than offset by lower sales in Hong Kong. While we expected some moderation in Hong Kong given a strong prior year comparative, we also saw anticipated pressure in the broker channel in the fourth quarter as distributors transitioned to new regulations. Even so, we remain confident in the outlook, supported by the strength of our proprietary distribution channels. Despite softer volume, Asia's new business CSM and new business value delivered strong double-digit growth on the back of a more favorable business mix. As such, NBV margin expanded by 5.5 percentage points from the prior year to 41.2%. These top line results demonstrate both the strength and diversity of our business in Asia. In fact, when you look at our full year new business CSM growth, we saw greater than 20% growth in multiple markets, including Hong Kong, Japan, Mainland China and Singapore. Asia core earnings in the quarter were even stronger, increasing 24% year-over-year as we benefited from continued business growth and the net favorable impact of the basis change last quarter. Over to Global WAM on Slide 15. We maintained our growth momentum in Global WAM, delivering a solid 7% year-over-year increase in core earnings. This was supported by higher average AUMA, the addition of Comvest Credit Partners and sustained expense discipline. This was partially offset by lower earnings as a result of our transition to the new eMPF platform in Hong Kong in November. Net outflows were elevated this quarter, reaching $9.5 billion, as I noted earlier. Our gross flows this quarter, up 15% from the prior year to $50 billion continued to be strong, supported by growth across each business line. And our core EBITDA margin expanded 60 basis points from the prior year to 29.2%, strong results given the eMPF transition. Next, let's head over to Canada on Slide 16, where we delivered solid growth in new business metrics and core earnings. APE sales and new business value increased by 2% and 4%, respectively, from the prior year, reflecting strong growth in individual insurance and annuity sales, partially offset by lower large case sales in group insurance. New business CSM maintained strong momentum and continued to deliver double-digit year-over-year growth, supported by higher sales volumes in individual insurance. Core earnings increased by 6% year-over-year, driven in part by favorable insurance experience in individual insurance, higher investment spreads and business growth in group insurance. These tailwinds were partially offset by less favorable insurance experience in group insurance. Lastly, our U.S. segment results on Slide 17. In the U.S., we saw continued broad-based demand for our suite of products, resulting in a 9% increase in APE sales versus the prior year quarter. Together with product mix changes, we saw very strong growth in new business CSM of 34%. Core earnings decreased 22% year-on-year, primarily due to lower investment spreads and unfavorable life insurance claims experience, compared with favorable experience in the prior year. Moving on to cash generation and capital allocation on Slide 18. In 2025, we generated remittances of $6.4 billion, exceeding our $6 billion expectation, positioning us firmly to meet our cumulative 2027 target of $22 billion plus. Over the past 3 years, remittances have averaged over 85% of our core earnings. And while this has been positively impacted by in-force reinsurance activities and favorable market movements, we continue to expect 60% to 70% of core earnings to materialize as cash remittances on a go-forward basis, a testament to our capital-efficient and cash-generative businesses. As Phil mentioned earlier, we will initiate a new share buyback program in late February 2026 to repurchase up to 2.5% of our outstanding common shares. In addition, our Board has approved a 10% increase in our quarterly common share dividend. Together, these actions reflect our continued commitment to shareholder value creation. Let's now move to our balance sheet on Slide 19. We grew our adjusted book value per share by 6% from the prior year to $38.27 even after returning significant capital to shareholders as well as the impact of a strengthening Canadian dollar that reduced the growth rate by 3%. We ended the year with a strong LICAT ratio of 136%, which was $24 billion above the supervisory target ratio. Our financial leverage ratio of 23.9% remained well below our medium-term target of 25%. These robust metrics underpin the strength and resilience of our capital position and balance sheet. Moving to Slide 20, which summarizes how we are progressing toward our targets. Our 2025 results reflect disciplined execution and momentum across the business, with meaningful progress towards achieving our Investor Day core ROE remittances and efficiency targets. You can see the 3-year progress of our core ROE expansion in the appendix of the presentation. While our core EPS growth was slightly below our target due in part to headwinds in our U.S. segment this year, we achieved or are tracking well towards the remainder of our targets. And by executing our refreshed strategy, I'm confident in our ability to achieve our 2027 and medium-term targets going forward. This concludes our prepared remarks. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups and to requeue if they have additional questions. Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from John Aiken from Jefferies.

Thank you. Sorry about that. Colin, one clarification in terms of your commentary on the Hong Kong sales, down because of the broker pressure and regulatory changes. Is this a step function? Or can we see the sales levels maybe back further -- sorry, back up to a run rate level in 2026?

John, it's Steven Finch here. So for Hong Kong sales, maybe I'll take a step back first. For the full year, we're very happy with the Hong Kong performance. We saw strong sales for the full year up 21%, NBV up 31%, NBCSM up 21% and strong core earnings up 26%. So really good results. What we're seeing in the quarter is, as Colin mentioned in his opening, both a tough year-over-year comparative. We had very strong results in Q4 prior year. But isolated to softness that we're seeing in the broker channel and in particular, the MCV broker channel. The distributors there, they're adjusting to some regulatory changes. And this is not unusual from what we see in different markets in Asia with regulatory changes coming in, some adjustment period and then a resumption of growth. We benefit from a diversified distribution strategy in Asia, and we saw a continued growth in Q4 in both our agency and banca channel. So as we look to the future, we're confident the underlying customer demand is still there. The fundamentals are strong. So we expect that the brokers will adjust, and we'll see sales increase over time.

And John, this is Phil. Just if I could add one thing. Consistently on this call in recent years, I've said that we have appetite for the broker channel, but we can see quarters where there will be variability in volume, particularly if there are changes in the regulatory environment, which we have seen over the past 6 months and because of competitive factors in the competitive environment. The environment is competitive in the broker channel. I think the really important point is that our core channels of agency as well as bank delivered strong growth in the fourth quarter, as Steve said.

Our next question comes from Tom MacKinnon from BMO.

Yes. Just a follow-up with respect to that and then one other question. If I look at the NBV margin, it's in Hong Kong, it's 52.4% in fourth quarter '25 and 39.7% in the fourth quarter of '24. So substantially increased. Is this due to mix, is the agency and the banca channel certainly more profitable than the broker channel? And if so, why focus more on the -- on that MCV broker channel if the others are -- provide better like new business value and better CSM -- new business CSM growth and better NBV margin?

Yes. Thanks, Tom. It's Steve. You noted an important point there. We saw the margin in Hong Kong NBV margin year-over-year increased over 12%. And it is a mix. We saw the -- with the MCV broker sales dropping, that is a lower margin channel certainly. We see it as attractive. We regularly adjust our overall focus on volume versus margin and optimize there. But the core of our business continues to be domestic agency where we've got strong margins and continue to have strong growth. So we're happy with that mix overall. We did see also a product mix shift. We've been emphasizing and meeting the customer needs around health and protection, and we saw an increase in our health and protection sales, which also contributed to the margin expansion.

All right. And a question perhaps for Paul. I mean, we're just into the Comvest close here, but I think you've noted an impact from eMPF in terms of what it would be post tax to GWAM earnings. What about Comvest? I know you've talked about overall accretion, but I mean you used a lot of cash to make this acquisition. How should we be looking at the GWAM segment going forward in light of the incremental earnings from Comvest?

Yes. Thanks, Tom. It's Paul here. So just in terms of outlook, as you mentioned, we're quite pleased with -- maybe I'll start with the eMPF, just in terms of the rationale or change there, we're about halfway -- even though we've converted, I would say about half of the impact that we provided guidance is reflected in the current quarter, and that's still an accurate guidance going forward. As it relates to Comvest, we don't disclose the metrics separately at this point. But what I would say is, it was a positive contributor to marginally because it closed late in the year to gross flows, net flows and core earnings. And it is tracking in line with what we had expected early. We're quite excited about it in terms of what we're seeing in terms of customer demand. The category itself is expected to double. And just to give you a little bit of a proof point of why we're so optimistic. We look at CQS, which closed a number of years -- 1.5 years ago, which is alternative credit. Our AUM was up 40% since deal close and it's driving a lot of positive top line, and we expect to see similar excitement around the Comvest product suite just because of the demand. So it's early, but we're quite optimistic and quite happy with how it's proceeding so far.

And if I could just squeeze one quick one in here. The 2.5% NCIB, you got a pretty good track record, I think it's over 3% you purchased in 2025. Colin, is there anything you can say about what your intentions would be with respect to this NCIB, given that you've generally historically purchased the bulk of these NCIBs?

Well, thanks for the question, Tom. Let me jump in on that one. It's Phil. You're right. Our last NCIB program was 3%, and we completed that in full. This year, we've announced 2.5%. And it's hard to predict the future. But where we stand now, our intention is to complete the program in full. And if anything changes there, I'm happy to update on future calls. From our perspective, our capital deployment strategy is balanced and NCIB remains an appropriate use of capital. But at this level, 2.5%, it's not something that constrains our ability to invest organically in our businesses, which is really important in the context of the refreshed strategy that we laid out 3 months ago.

Our next question comes from Doug Young from Desjardins Capital Markets.

Maybe just going to the U.S. division. It feels like -- and correct me if I'm wrong, that we've had unfavorable mortality experience for three to four quarters or for sure, unfavorable claims experience or experience in general for about three to four quarters in a row. I'm just hoping you can unpack what you're seeing this quarter. I think it's mortality. Is there a particular product line? We had heard a little bit more about competition on the mortality side in the U.S. market. So just trying to kind of gauge kind of what you're seeing and what to expect going forward.

Doug, it's Brooks Tingle. Thanks for the question. And I guess I'd start with a quick reminder that we operate at the very high end of the market in the U.S., quite large policies. Now that's a very attractive segment of the market, and you see that reflected in our new business value metrics. It does result in some variability quarter-to-quarter and even year-to-year from a mortality perspective. And you'll recall that Q2 of '25 represented a particularly unusual level of variability. But we're pleased that Q3 showed significant normalization improvement from there. In Q4, still further improvement from there. And I'd actually characterize where we finished Q4 is within sort of a normal range of variability. And I'll probably leave it at that.

So you're not seeing a particular trend here that would in the end result in some form of actuarial reserve increase that's required for these businesses? I guess that's where I'm trying to go.

It's Stephanie here. I think Brooks covered it well. What we saw this quarter is sequentially improved claims experience, and I really view this as normal variability due to slightly elevated severity. And we'll see variability from time to time given where we are in the large case business. I don't view this as a trend. In fact, same quarter last year, we had -- and for the full year of 2024, we saw claims gains through P&L in this business.

Okay. And then second question, maybe for Colin or for Phil. I guess my question is, can you achieve an 18% plus core ROE target by 2027 with the level of excess capital that you have and you're under levered as well? Or do those things need to kind of normalize? And I assume you're going to say yes. But maybe if you can map out how you get 16.5% to 18% plus in the next 2 years? Just to give a sense of what those drivers could be? And then maybe if you can kind of tie in, like why not be more aggressive on the NCIB given the amount of capital or cash that you're generating and the amount of excess capital you currently sit on?

So Doug, this is Phil. I will hand over to Colin, but I do want to say, yes, we do remain confident that we can get to the 18% plus core ROE target, and there are various reasons underpinning that, but I'll let Colin walk through it.

Yes. Doug, I think the important point to note is we've mapped out a number of scenarios to get us to the 18%. We're confident that we're going to get there. We were at 18.1% last quarter, 17.1% this quarter. So the trajectory is good. We live in a fluid environment, and we will use share buybacks not as the primary driver to get to the 18% ROE, but as a lever to pull in order for us to get there. You mentioned excess capital being a drag on our ability to grow ROE. That's certainly the case. We have got around about $10 billion above our upper operating limit, but that becomes a competitive strength in either difficult times or in a whole range of scenarios. So we're in no hurry to deplete what is a very favorable capital position.

Our next question comes from Gabriel Dechaine from National Bank Financial.

Actually, just a follow-up on that mortality issue in the U.S. So you're confident this isn't some trend. I guess one way to confirm your view more or less is, is there any impact from what's happening in this business mortality wise on your appetite for LTC dispositions? Because that business would be as a hedge to higher mortality.

We're here, Gabriel. We just -- I think it's probably best for Brooks to take a start on that, and maybe Naveed will comment from an LTC perspective.

Yes. I would just say that certainly, we don't view this as a long-term trend. We look at it very carefully. There's variability for sure. If you look at our Q4 results from a core earnings impact, you see a little bit more -- it looks a little bit like an outsized impact, because we actually had a gain in the prior Q4, which again reflects that variability. But if you look at, sort of, post-COVID, the range of tailwind and headwind from mortality in the Life segment in U.S. it's been within a reasonably tight range, and the Q4 result was in that range. So we're pleased to see it normalizing, though there'll always be some amount of variability. Again, I would point to that, while there is that variability associated with operating at the high end of the market, the value metrics are very strong. You saw that last year, and we're very confident about our ability to continue to grow that business.

It's Naveed here. I would just add that given that we don't feel the mortality is a sort of long-term trend. It's not really affecting how we're thinking about LTC transactions. As you know, we've done two significant transactions with different counterparties at or near book value, which provides sort of external validation of our assumptions in LTC. And we're continuing to focus on evaluating opportunistic transactions that drive shareholder value, that won't go away.

Okay. And I guess just to continue down that path with regards to legacy book dispositions, a, quickly, is the mortality issue tied to a legacy block. But the real question is, when I look at the transactions that you've announced in the past and how you've neutralized the earnings per share impact from the disposition is buying back stock. Is that dynamic much more challenging now, i.e., makes dispositions a lot more difficult to do and make them EPS neutral? Because it's a different discussion when you stock at 2x book versus just over 1x when the first deal was announced a couple of years back. Or I guess, are you committed to making dispositions earnings per share neutral?

So Gabriel, thanks. It's Brooks. I'll turn to Naveed on the broader question of legacy dispositions or not. But I will say on the claims, we've seen really Q2 of '25 and a little bit beyond it's not anything notable as it relates to a particular block. Incidents, the number of claims is actually favorable. It's really, again, because we write these large policies, a confluence in a quarter of a small number of large cases that drove that result. So there -- it's not early duration business. This is generally business written 20-plus years ago. So nothing really abnormal there, just works out to a variability quarter-to-quarter, year-to-year.

Yes. I would just add that -- on our legacy businesses, I feel really good about how we're managing them organically. You've seen our success in obtaining premium rate increases on LTC, that's contractually allowed. We've continually beat our assumptions on that. We're investing significant amounts on fraud waste and abuse. That said, we have -- we connect regularly with the market in terms of opportunistic transactions. There is interest in the market, and we continue to follow up with them. And I don't think we're constrained with respect to what we can do there.

Yes. I think, Gabe, just to pile on there. You talked about the book value multiple in the shares. I mean, that is not a constraint for us to grow our earnings per share. We'll look at each deal on an individual basis and then make any according capital allocation decision based on that deal on its own merit. So I don't -- I wouldn't read anything into how the current share price is affecting our ability to do future deals.

Our next question comes from Mike Ward from UBS.

I was curious about the Japan business actually. One of your global kind of peers has run into a little bit of a hiccup in terms of just distribution in Japan. So I'm just wondering what you see in this kind of high net worth market for insurance and wealth products in Japan? And if you see any disruption or anything changing there in terms of the market structure?

Yes. Thanks, Mike. It's Steve here. Yes, I'm well aware of what's been reported by one of our peers in Japan, and it's not directly applicable to Manulife. One thing I'd point out is, we're very experienced in running a multichannel distribution model in many countries in Asia, including Japan. And over time, we've built and continue to build strong controls and compliance programs. Whenever there are isolated issues, we address them very swiftly. And then to your point around the Japan market, what we're seeing is some strong success in the Japan market. You see from our numbers double-digit growth this year. We've been executing on a strategy to capitalize on customer needs. And so those needs are driven by interest rates that are structurally higher than they have been in the past, an aging society with a long longevity, so a big need for retirement planning. We've expanded the product portfolio to meet more of these customer needs, in terms of unit-linked product, whole life product. And that's been driving our success, and we're optimistic as we look forward in Japan.

Right. My other questions were answered.

The next question comes from Paul Holden from CIBC.

I want to ask a couple of follow-up questions related to topics that have already been discussed. So first one is around Asia sales and I guess, Hong Kong, particularly, you gave us a number of different measures or metrics to follow. And I think we've all been conditioned to follow APE sales because of IFRS 4 accounting. But now maybe there's an argument that, that shouldn't be the number one metric to follow, maybe it should be new CSM growth because that's what's really going to drive future earnings. So point is like, to agree with that if you were to focus on one metric, that should be the most important one. And then second part of the question, like does that influence or to what degree does that influence? How you think about sales mix?

Yes. Thanks, Paul. It's Steve here. And you hit on an important point. I mean, the way we think about this, under IFRS 17, when we see sales variability, it does not translate into core earnings variability as the CSM amortizes into income. So we are focused on generating the most value for shareholders. NBV and NBCSM, we report both. They're both a good indicator of the value that we're generating for different reasons. So we focus on both of those. And we drive maximum dollar magnitude with an important guiding light of the company's medium-term ROE target of 18% plus. So we optimize for dollar of value while meeting that -- meeting or exceeding that hurdle rate, and that's what we're looking to optimize.

Okay. So if I measure this quarter on that basis, then it was a really good result for Asia sales. Yes.

As Colin noted, NBV up for the segment of 10% and NBCSM up 19%, helping drive year-over-year CSM was up organically 11% total 19% and a little over USD 2 billion.

Yes. Okay. Okay. Good. And then my second question, again, a follow-up to prior discussions is on the U.S. core insurance experience. So the questions were a little bit more focused on the short term. But when I think about the U.S. segment over the long term, negative experience or unfavorable experience as kind of being the issue or concern for investors for a long period of time for different reasons. So given the refreshed strategy and the renewed focus on wanting to grow the U.S., I think it would be helpful to give people more comfort around the experience there and how you're growing. So I don't know if there's any actions you can take to kind of get that experience to more neutral or positive? Or again, how you're thinking about that? Because I think addressing that issue, again, would give people a lot more comfort around this renewed growth emphasis on U.S. So just thoughts, comments there.

Paul, this is Phil. It's an excellent question, and thank you for asking it. In our strategy refresh, one of the things that we emphasized was the importance of having a diversified portfolio. And when I think about that, of course, diversification is a risk mitigant. But in particular, for the U.S., there are many things that the U.S. business, John Hancock, contributes to Manulife that we value a great deal, including the earnings generation, including the capital generation and the stability of our capital generation. And one of the things that we changed as part of the strategy refresh is actually having a clearer appetite to invest in that business so that we can sustain for the long term earnings and capital generation. Now when we're talking about investing in the business, it's not about going back to where we've been before. It's actually growing in product lines that we have demonstrated tremendous value and success in recent years. And the drivers of adverse experience that you've referenced are quite different lines of business. The short-term matter that we've discussed on this call of some mortality variability, we do believe that short-term variability. But I think it will be helpful to hear from Brooks some of the specific initiatives that we're taking in the U.S. and build that confidence that they're profitable, they're sustainable and from a risk perspective within appetite. Brooks, over to you.

Yes, sure. Thanks, Phil, and thanks, Paul. Just quickly on policyholder experience. We -- you look at it and certainly over a very long period of time, yes, whether it's mortality, persistency or LTC experience lots of attention there. But we've taken a whole range of options with respect to the U.S. segment to optimize shareholder value. And that's really resulted in, I think, a winnowing of a lot of that policyholder experience variability. LTC experience in Q4 was benign. The life claims experience, as I've said, was really represented a particularly unusual level of variability in Q2, now normalizing. So we actually feel quite a bit better about policyholder experience in the U.S. But to pick up on Phil's point, feel really great about our ability to contribute to strong and profitable growth for Manulife via our new business franchise in the U.S. And I won't go on too long about this, but I think everyone knows we've got a strong brand. We have an innovative and broad product suite. We have top relationships with independent distribution. And I'd point out, a couple of the fastest-growing segments in the U.S. economy are the so-called wellness economy and longevity economy. And we remain the only carrier in the U.S. that offers such services to their policyholders, early cancer screening, things like that. Very strong consumer appeal. And you see that reflected in our new business value metrics for last year, similar to the discussion you had with Steve. Our APE was up nicely last year, 24% for the full year, but new business CSM up 42%. So a lots of other initiatives, in the interest of time, I won't get into backing a quite ambitious growth plan for the U.S. and we feel very good about the risk and expected policyholder experience profile of that business we're putting on the books.

Our next question comes from Darko Mihelic from RBC Capital Markets.

I just had a modeling question, maybe looking for a range here. I'm actually want to switching gears here and look to Canada for a moment. When I look at 2024 in Canada, you had a 43% increase in group sales. This year, it's down 24%. So when I think about 2025, you had 12% growth in your expected earnings on the short-term business. And now that we've had a very big decline in sales, I wonder if you can give me an idea of what we could expect with respect to that important line item. I don't think we should think about a decline, but maybe you can give me a sort of a range or some sort of an outlook on expected earnings and short-term business for 2026.

Darko, it's Naveed here. So what you saw in 2024 was a very large case that we sold, a jumbo case. So as you know, in this business, there's normal large-case variability. So you have small- and medium-sized cases that generally have a consistent trend year-over-year, then you get these large cases that jump around year-over-year. What we look at, in addition to sales, is our persistency and our sort of overall in-force premium, and that continues a good trajectory. And so I think you can -- our recent sort of trends on P/E profits is something that should continue going forward.

Okay. But at a similar pace? Or should we at least expect a slowdown in the pace?

Yes, at a similar pace because again, our persistency remains very strong.

Our next question comes from Mario Mendonca from TD Securities.

There have been a lot of healthy discussions there on the liability side of the balance sheet. Could we flip over to the asset side. There's growing concern among investors around private equity, private debt, and that obviously draws my attention to Manulife's large private placement debt, the $52 -- almost $52 billion. You talk about how credit experience has evolved in that asset category and what proportion of that would you sort of you would label as higher risk or sort of topical areas in that specific line, that $51.8 billion of private placement?

Mario, it's Trevor. Thanks for the question. So as you noted, there's -- there are a wide range of definitions as to what you include in private credit, in private debt and private placements. We have, for example, successfully participated in the investment-grade private placement market for many years. We like the diversification, the spreads, the covenants that you get relative to public markets. Just breaking down the $52 million that you mentioned, our investment-grade portfolio is around $45 billion and our below investment-grade private credit portfolio, which, to your point, I would consider to be higher risk. That's around $4 billion, $4.5 billion. It's about 1% of our general account assets. It is focused on middle market loans to private equity-sponsored companies, but it's also quite diverse by issuer sector and sponsors. So there's no real concentrations there. And we do manage underwriting rate most of those assets in-house. And as I suggested, I would see this as being at the lower end of the risk spectrum and about 90% of those assets are actually priced by an external vendor each quarter, and we've also executed multiple third-party sales from that portfolio, which I think also validates the asset valuations. To your point about performance, I think our investment grade private placement portfolio has actually done the same or better than our public portfolio. So we have no concerns with that part of the portfolio. And on the private credit portfolio, performance has also been strong even with COVID and relatively recent rate increases, and our credit experience is still comfortably within our underwriting loss assumption. So really quite happy with both parts of the strategy.

Okay. And then looking down a little bit on that portfolio composition, the private equity, the $18 billion there. Can you talk about the ALDA related charges this quarter and the extent to which private equity played a role or any other segment played a role?

Sure. Thanks for the follow-up. So yes, in terms of ALDA performance this quarter, as I think we disclosed, the ALDA returns did improve. Both real estate and private equity were actually better than Q3. The area that was actually worse was infrastructure, which over the long term has actually been very strong for us. Private equity, it did underperform, but to your point, it is a large portfolio. And so we would expect to see some variability from quarter-to-quarter. Obviously, given some of the broader economic and geopolitical uncertainty, there's going to be a little bit of noise there. But at the same time, I think strong public markets, the likelihood of short-term rate declines as well as, I think, improving M&A and IPO activity on the middle market private equity section of the market, I think as -- I think all of those make us cautiously optimistic of an improvement in 2026.

So I'll be quick here. So if you buy the notion that sponsors are going to be active as in returning capital to investors IPOing, all the things you referred to. Is that supportive of ALDA performance like the private equity performance? Or how would you describe that?

I think it would be positive. I'd be looking forward to more of the IPO and M&A activity. I think it will improve liquidity. It will improve price discovery. And I think it will improve go-forward returns.

Our next question is a follow-up from Darko Mihelic from RBC Capital Markets.

I just wanted to follow up on the ALDA question there. Slightly different angle, though. I am curious on how you're capable of growing the ALDA portfolio but not having the sensitivity to ALDA go up. And in fact, the insensitivity is going down. So if I just look at it, it's up $7.5 billion over the last 2 years. But your sensitivity is actually down a little bit. So what is it that you're doing there? What am I missing in the sort of market calculation?

Darko, it's Trevor. Thanks for the question. So it's actually not that complicated. So we do have on the balance sheet, I think, $62 billion, $63 billion of ALDA in total. But it backs a different group of liabilities, some of which are guaranteed, which is shareholder risk and some of which is participating or adjustable, which is policyholder risk. So basically, we expect the ALDA backing the guaranteed liabilities to be flat and slowly decline as those liabilities age. And if we do more reinsurance transactions. At the same time, the ALDA backing the adjustable and participating liabilities where investment experience is passed back to the policyholders will grow as those businesses grow. So basically, what you're seeing is that the overall ALDA portfolio that you see on the balance sheet may continue to grow, but not the income exposure for shareholders. And that's why you're seeing it slowly decline.

Okay. I figured it was something like that, but that's great.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hung Ko for any closing remarks.

Thank you, operator. We will be available after the call if there are any follow-up questions. Have a good day, everyone.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.