REFINITIV STREETEVENTS EDITED TRANSCRIPT MFC.TO - Q2 2020 Manulife Financial Corp Earnings Call EVENT DATE/TIME: AUGUST 06, 2020 / 12:00PM GMT REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2020 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2020 / 12:00PM, MFC.TO - Q2 2020 Manulife Financial Corp Earnings Call CORPORATE PARTICIPANTS Adrienne O'Neill Manulife Financial Corporation - Global Head of Investor Relations Anil Wadhwani Manulife Financial Corporation - General Manager, Asia Mike Doughty Manulife Financial Corporation - General Manager, Canada Naveed Irshad Manulife Financial Corporation - Head of North American Legacy Business Phil Witherington Manulife Financial Corporation - Chief Financial Officer Roy Gori Manulife Financial Corporation - President & Chief Executive Officer Scott Hartz Manulife Financial Corporation - Chief Investment Officer Steve Finch Manulife Financial Corporation - Chief Actuary CONFERENCE CALL PARTICIPANTS Darko Mihelic RBC Capital Markets - MD & Equity Analyst David Motemaden Evercore ISI, Research Division - Research Analyst Doug Young Desjardins Securities, Research Division - Diversified Financials and Insurance Analyst Gabriel Dechaine National Bank Financial, Research Division - Analyst Humphrey Lee Dowling & Partners Securities, LLC - Analyst Mario Mendonca TD Securities - MD & Research Analyst Meny Grauman Scotiabank Global Banking and Markets, Research Division - MD of Financial Services Equity Research & Analyst Nigel D'Souza Veritas Investment - Investment Analyst Paul Holden CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research Steve Theriault Eight Capital, Research Division - Principal & Head of Research Tom MacKinnon BMO Capital Markets - MD & Analyst PRESENTATION Operator Please stand by, your meeting is about to begin. Please be advised that this conference call is being recorded. Good morning, and welcome to the Manulife Financial Second Quarter 2020 Financial Results Conference Call. Your host for today will be Ms. Adrienne O'Neill. Please go ahead, Ms. O'Neill. Adrienne O'Neill - Manulife Financial Corporation - Global Head of Investor Relations Thank you, and good morning. Welcome to Manulife's earnings conference call to discuss our second quarter 2020 results. We are conducting this call virtually. Our earnings release, financial statements and related MD&A, statistical information package and webcast slides for today's call are available on the Investor Relations section of our website at manulife.com. We will begin today's presentation with an overview of our second quarter and an update on our strategic priorities by Roy Gori, our President and Chief Executive Officer. Following Roy's remarks, Phil Witherington, our Chief Financial Officer, will discuss the company's financial and operating results. We will end today's presentation with Scott Hartz, our Chief Investment Officer, who will discuss the performance of the company's general account investment portfolio and the direct impact of markets. 2 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2020 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2020 / 12:00PM, MFC.TO - Q2 2020 Manulife Financial Corp Earnings Call Following the prepared remarks, which are recorded earlier this week to ensure optimal sound quality, we will move to the live question-and-answer portion of the call. We ask each participant to adhere to a limit of two questions. If you have additional questions, please re-queue and we will do our best to respond to all questions. Before we start, please refer to Slide Two for a caution on forward-looking statements and Slide 36 for a note on the use of non-GAAP financial measures in this presentation. Note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated. With that, I'd like to turn the call over to Roy Gori, our President and Chief Executive Officer. Roy? Roy Gori - Manulife Financial Corporation - President & Chief Executive Officer Thank you, Adrienne. Good morning, everyone, and thank you for joining us today. Turning to Slide Five. Yesterday, we announced our second quarter financial results. The coronavirus pandemic continues to disrupt economies and capital markets worldwide, and as would be expected, COVID-19 had a significant impact on our performance, including first order impacts such as policyholder experience and sales; and second order impacts such as market volatility and ALDA valuations. However, I am pleased that despite these challenging conditions, we delivered solid results which reflects diversity and resilience of our businesses. We delivered net income attributed to shareholders of $727 million and core earnings of $1.6 billion. Core ROE was resilient at 12.2%, and our capital position remains strong with a LICAT ratio of 155%. Book value per share rose to $25.14, up 10% from the prior year quarter. Finally, our culture of expense discipline and the maturity of our expense efficiency program have played a crucial role in our success over the past few months, as evidenced by our expense efficiency ratio of 48.9%, slightly below our 2022 target of 50%. Turning to Slide Six. Manulife entered the downturn in a position of strength thanks to the work we've done over the past decade to de-risk our business and reduce the company's sensitivities to market movements. And the release of over $5 billion of capital through portfolio optimization activity since 2018 further strengthened our position. Our strategy, including the five priorities, is sound and has not changed in light of recent events. I'm very proud of how the Manulife team executed during the second quarter, despite the very challenging backdrop that was triggered by the COVID-19 pandemic. While we've already achieved our portfolio optimization target, we have generated an additional $285 million of capital benefit year-to-date, including $20 million in the second quarter through a variety of initiatives. The initiatives announced to date have resulted in a cumulative capital benefit of $5.4 billion. We have a mature expense efficiency program with processes in place that enable us to respond quickly to headwinds, such as lower sales activity related to COVID-19 and lower interest rates. As a result, core expenses declined by 5% in the second quarter of 2020 versus the prior year quarter. And I'm pleased to announce that we expect to achieve our target of $1 billion of expense efficiencies by the end of 2020, two years ahead of schedule. Our third priority is to accelerate growth in our highest potential businesses, and we aspire to have these businesses generate two thirds of total company core earnings by 2022. Our highest potential business has accounted for 64% of total company core earnings in the first half of 2020. In Asia, we continue to expand our agency force, growing our number of agents by 35% year-over-year. And in Global Wealth and Asset Management, we completed the formation of our previously announced asset management joint venture with Mahindra Finance in India. Our fourth priority is about our customers and how we're using technology to attract, engage and retain customers by delivering an outstanding experience. We achieved a Net Promoter Score of 10, which is a nine-point improvement from the 2017 baseline score of one and a two-point improvement from 2019. During the second quarter of 2020, we continue to enhance and accelerate our digital capabilities to adapt to the current environment and better support our customers during the pandemic. I will discuss our digital capabilities and transformation in greater detail on the following slides. 3 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2020 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2020 / 12:00PM, MFC.TO - Q2 2020 Manulife Financial Corp Earnings Call Our final priority is building a high-performing team. Our target is to achieve top quartile employee engagement compared to global financial services and insurance peers by 2022. I want to take a moment to discuss the importance of civil rights and equality as they relate to Black, Indigenous and People of Colour. The incidence of racism and the subsequent protests across North America have deeply affected us all. I know we're all upset and sad, and those who are more directly impacted are in incredible pain. Regardless of our colour, creed, nationality or beliefs, we must come together and put an end to this injustice. The racist comments, racist actions, the stereotyping, the unjust treatment and much more, impact the daily lives of Black, Indigenous and People of Colour and stand in the way of equal opportunity. I've spent a lot of time listening through conversations with our employee resource group leaders, and in taking input from many of our employees who have taken the time to write to me and share their feelings and ideas. At Manulife, we're not just listening, we are taking action. To be clear, there is no tolerance for any form of discrimination or racism in our company, and we condemn societal actions that threaten anyone's human rights. In line with our values, every colleague, customer and partner is to be treated with respect at all times. Empathy and care for each other are at the core of what it means to be a member of our team and are foundational to achieving diversity and inclusion efforts.