Please stand by, your meeting is ready to begin. Please be advised that this conference call is being recorded. Good afternoon and welcome to the Manulife Financial Fourth Quarter 2015 Financial Results Conference Call for Thursday, February 11, 2016. Your host for today will be Mr. Robert Veloso. Please go ahead, sir.

Thank you, and good afternoon. Welcome to Manulife's conference call to discuss our fourth quarter and year end 2015 financial and operating results. Today's call will reference our earnings announcement, statistical package and webcast slides, which are available in the Investor Relations section of our website at manulife.com. As in prior quarters, our executives will be making some remarks. We will then follow with a question-and-answer session. Today's speakers may make forward-looking statements within the meaning of securities legislation. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied. For additional information about the material factors or assumptions applied and about the important factors that may cause actual results to differ, please consult our webcast slides for this conference call as well as the securities filings referred to in the slide entitled Caution Regarding Forward-Looking Statements. We also have a Note To Users slide that sets out the performance and non-GAAP measures used in today's presentation. When we reach the question-and-answer portion of our conference call, we ask each participant to adhere to a limit of one or two questions. And if you have additional questions, please re-queue as we will do our best to respond to all questions. With that, I'd like to turn the call over to Donald Guloien, our President and Chief Executive Officer. Donald?

Thank you, Robert. Good afternoon, everyone, and thank you for joining us today. This morning we announced our 2015 financial results. We delivered strong top-line growth for the full year most of it coming from businesses that generate our highest returns and I commend you to look to our additional disclosures this quarter on ROEs across the various businesses so you can see evidence for that statement. Insurance sales increased 24% from the prior year driven by another year of record sales in Asia which contributed to a 35% increase in new business value. On the wealth and asset management front we delivered strong gross flows up 46% compared with 2014 and net flows of $34.4 billion which was simply outstanding, up $16 billion or 72% with positive flows in each division across the world and record institutional net flows. Thanks to the customers placing us we now managing an administered $935 billion in assets of which $511 billion relates to our wealth and assets management businesses. We delivered strong core earnings of $3.4 billion which rose 28% for the year before giving effect to investment related impact. This result was ahead our plan and highlighted Manulife’s powerful operating momentum. Including investments related experience core earnings increased 19% versus 2014. From macro-economic perspective 2015 was characterized by headwinds which included persistently low interest rates the impact was very sharp drop in energy prices and concerns about the global economy. The mark-to-market impact of the decline in oil and gas prices in particular diminished an otherwise great year and contributed to a disappointing year in terms of net income. As you know I have repeatedly cautioned that while Manulife has enjoyed as very positive trajectory in net income that it would be overly optimistic to assume that this would continue unabated…

Thank you Donald and good afternoon everyone. Let's start on Slide 8 where we summarize our financial performance for the fourth quarter of 2015 and the full year. In the fourth quarter we delivered outstanding growth in net and gross flows and a strong increase in both insurance sales and new business value. Core earnings were also strong but net income was negatively impact by charges resulting for fair value adjustments related to the continued decline in oil and gas prices and other factors. For the full year of 2015, core earnings rose 19% reflecting the strength of our Asia and wealth and assets management businesses. We were however similarly impacted by fair value losses related to oil and gas investments throughout the year and charges related to our annual review of actual methods and assumptions which led to lower net income. It's worth highlighting that excluding the impact of continued lower commodity prices on our oil and gas related investments 2015 net income would have been $900 million higher and core earnings would have included $346 million in investment related experience. We further improved our financial flexibility by reducing our financial leverage and generating remittances of $2.2 billion while maintaining a solid capital ratio. We achieved excellent top-line results driven by our insurance businesses in Asia and outstanding net flows in our wealth and asset management businesses globally despite heightened market volatility. Return on equity was below where we would like to have seen it. However, we expect core ROE expansion over the medium term as we execute on our strategy and as investment experience normalizes. I'll come back to this point later in the presentation. Turning to Slide 9, we continued to demonstrate solid progress on core earnings despite not having recorded core investment gains. Core earnings increased…

Thank you, sir. [Operator Instructions] And the first question is from Humphrey Lee of Dowling & Partners. Please go ahead.

Just a question about the block optimization assessment that you are planning, I saw it on your, as per the presentation mentioned there’re at their the top five priority blocks total approximately, 16 billion reserve. Can you provide some additional color in terms of this exercise and maybe you could talk about in terms of potential timing of these executions?

Thanks Humphrey. Yes, for sure, so we are always looking at our mix of business but we are putting some particular tension on looking of some in-force blocks that don’t meet our return requirements and where we think there may be other people how may have different view of risk or different return requirements and where we may be able to reach some sort of agreements. So it's relatively early days on that I mean clearly some of these transaction's would be easier to executing and then, currently we’re prioritizing a small number of relatively small transactions that we would like be to able to progress. But we’ll keep the street informed of that project progresses and I guess the point we wanted to make really was we are concerned to expand our ROE and we will be looking at various actions that we can take to do so.

Okay got it. And then just a question related to your unfavorable policy experience in long term care in the U.S. We need cases to provide us with some can you just provide us some additional color on what you are seeing and what were the major pressure points?

Yes sure, I think Cindy is probably best placed to answer that one.

Sure thanks Steve, hi Humphrey. We are seeing some adverse experience on the LTC block in the current quarter and over the course of this year on benefit utilization as well as on loft and on mortality.

Okay. And then given your tri-annual review is coming up in the third quarter, how does the experience over the past several quarters affects? How you are going to approach to review this year?

The review will be done as it always, we look at all of our experience over the last three to four years and assess our assumptions, our current assumptions against the emerging experience so be the same process. Our LTC claims losses for the year are about 50 million so that’s the magnitude of the average experience for this year, and note that we have had as I’ve said in the past that the translation from the source of earnings analysis, claims losses too are the impact of annual review, it's not -- you can't really project from one to the others. So at this point in time its early days we don’t have the results of our experience review and so don’t really have insight as to what the impact might be of this year's review assumptions.

So just to clarify, so it was 50 million adverse in 2015 and then I recall there was some kind of adverse experience in late 2014 as well. Is there any way to kind of give us a sense of the accumulative adverse experience relative to when you revised your assumptions back in 2013?

It's probably in the neighborhood of the 50 million because for the prior two years we had positive quarters and negative quarters and it pretty much offset.

Okay. And then in terms of that 50 million unfavorable impact this year, would you say utilization was more adverse or versus the other two? Which one is the main driver?

Actually Humphrey, I don’t really recall it. In terms of the relative magnitude in each of the factors.

Okay aright.

Thank you. The next question is from Steve Theriault from Bank of America Merrill Lynch. Please go ahead.

Thanks very much. A couple of questions. First, Don, I wanted to go back to something that you said, never felt more confident outside of the questions around investment gains. But I would think it's not just all about energy certainly. And I'm thinking about rate, so you're obviously much better hedged than last time the U.S. 10-year was around these levels, but how much does the fact that the U.S. 10-year is back to right around 2012 lows, how does that affect your outlook for the ability to get to your 4 billion next year? If I do the math on your sensitivities I may be not as worried about rate swaps and spreads in terms of the mark to market. That could easily prove a wash, but what about the core business and the risk to core earnings with rates going back down pretty precipitously in the last little bit?

You are right Steve and from an overall perspective I mean that is a bit of the headwind and the question is does it persist or continue to get worst, I mean from a macro perspective we have offset, as rates go down things like real estate tend to go up, so we have that. But that doesn’t affect our core earnings as you well know. I -- on the macro side there is a lot of volatility out there right now that quite frankly I don’t understand, you got the U.S. economy doing pretty well, you got the Chinese economy doing pretty well, you got India doing pretty well, you got Europe and Japan with some challenges that’s for sure. But when you look at falling energy prices the principle beneficiaries of the lower energy prices are the big energy importers, which is Japan, China and Europe. So that impact, people are typically hedged out 12 months or so but that impact is going to start to be felt and I think it will be salubrious for the global economy. So despite the movement in the market today in the overall market sentiment that seems to prevail, I am certainly not pessimistic, the rate are continuing to fall. But as you said we have way more hedging programs in place than we ever have before and we have some prediction against rates falling further. But obviously not absolute protection and that will, as you identified affect core earnings. That’s one of the reason that we are being cautious on our guidance that and energy prices.

I definitely appreciate the cautionary tone in your statements and in the press release. It's a tough question, but are you trying to telegraph to us that with energy prices where they are that that ’16 target is still doable but challenging? Or are we in more of the category of it may not be realistic with oil at $25?

No I think, we basically can on 400 million of investment gains and looking at that. So if you assume that oil prices stay where they are now, there is very little possibility, I never say never but extremely low, low, low possibility of us getting that 400 gain. So what 400 of headwind that sets you back 400 against the target of 4 billion, there are other things that Steve and I have explained that are going really, really well in terms of operating performance. But you have to go unbelievably well to overcome 400 million in headwind.

Okay. Maybe that segues into --.

With the core growth we are going get there, it might be a year later I guess I sort of said before we're not going to fixated on that number that we’re going do anything stupid to get there. But we clearly are on the path to achieving that target from our core operations and it's unfortunate what happened to energy prices, but that will happen from time to time. We're also not panicking with respect to that asset class. I am sure somebody is going ask the question, are you planning to get rid of oil and gas and on the contrary this is the time to perhaps load up the truck.

Well, I won't waste my second question on that then. But kind of a segue into coming into the quarter looking at what happened to the oil futures curve it looked like across the curve prices were down about 10%, that resulted in a 250 million charge this quarter. And as I think of Q1, and we're early days here, but it's hard not to think of how it's going to plant given the volatility, but the quarter ended today spot is down almost 30%. And I haven't done the calculation across the curve -- across the forward curve, but let's say that's 20%. How linearly can we think about 10% down in the futures curve in Q4? Is 250 million charge and if it's 20 million in Q1 it could be a 500 million charge. So maybe someone can just help me with how we should think about that math.

Its great question Steve, I am going to pass it over to Scott Hartz.

Sure, thank you Donald and thank you Steve. Yeah you can't just look at spot prices, obviously lower oil prices are going to drive down valuations, but we are really trying to value along reserve life here. So it's a function of what prices are expected to be in the future. Spot oil prices, we’re not actually that optimistic about, a lot of people called for $20 with storage getting full that’s certainly a possibility or even lower. I think what we have much greater confidence around the market, is that ultimately prices have to go up in order for us to produce enough to meet demand. So, it really is that forward look that the most important not the current spot price. And clearly there are couple of elements there. One is that yes there is a five years strip you can look at where there is some but not much trading in the market, and so if you look at that you see that this quarter has not come down nearly so much as spot prices have but has come down about as much or maybe a little bit more than we saw in the fourth quarter. But then the other elements is that for our Canadian oil and gas operation, that’s valued by an outsider appraiser. So, it's also a function of what the outside appraiser is expecting for prices. And our appraiser is pretty much in line with what most appraisers would do in the market. And there I think in the fourth quarter we got a little bit whacked by the third quarter was down a lot and the appraiser sort of delayed a little bit bringing their curve down, they brought it down more than the market did in the fourth quarter. So, in the third and fourth quarter we had about the same amount of hits to our oil and gas even though market prices were down more in the third quarter. So, we had that catch up and yes if prices there will stay where they are this quarter, we’re going taking other loss, but it’s probably more in the realm of what we saw in the fourth quarter and not a bigger numbers than that.

Okay that’s helpful thank you.

Thank you. The next question is from Peter Routledge with National Bank Financials. Please go ahead.

Hi, just a follow on from Steve and just the core earnings momentum. I'm kind of surprised you're stepping off the 4 billion although you've been clear about the reasons for why and I don't quibble with that. Just the momentum in your core business is so strong it seems like you're awful close to 4 billion even if you don't get any investment related gains in core earnings this year. So if I were to promise you or guarantee to you would get 200 million which you got in 2014, could you get 4 billion?

Peter I admire your entrepreneurial style and I just suspect that whatever answer is going to e then you will ask for 100 or 300 and parse it that way. No seriously, so you are saying 200 million of investment gains if we got that. Okay in that hypothetical which is extremely hypothetical, I just want to be honest with people because given oil prices where they are today again they can go up to $100 tomorrow, but that’s not our expectation. But in that hypothetical it would be different, might be a different answer. You are quite right that the operating momentum is incredibly strong. I think the likelihood of operating momentum alone getting us that extra 400 is remote we have to conservative on that view and appropriate. As you get it to a different number sure there is some number that if you said investment gains at 399 I don’t know what I’d have to say, but I think I’d said it's not in jeopardy. But anywhere between those two there is a big gulf and I guess the expectation is we don’t think anybody should be baking in 400 million of investments gains. So, your hypothetically is extremely hypothetical.

Right.

And Peter just a follow up on that, it's Steve. Bear in mind that we have an obligation to sort of set out the risk to the market. So, when we just felt that we ought to highlight the risk associated with that 400 million and almost just sort of [pure math leads you to believe that would put the 4 billion risk, but that doesn’t sound really fundamentally, mean that we have any different opinion as to our sort of underlying earnings power. So I’d look at it that way.

And then I guess another question that one might ask or when somebody, we make that pronouncement are we giving up the ghost or something like that, I mean no we are driving our organizations to deliver that number despite the investment impacts. We’re just saying that there is a really good chance that will not get us to that target.

Right. The other I think issue pressing on the stock is Asia and what's going on in China. So apologies, it's another hypothetical, but China devalues from 650 roughly to 8 yuan or renminbi, pardon me to the dollar. What happens to your Asian business in that scenario?

Well. Our Asian business, there is always currency translation gain or losses, but in any fan of outcomes on the Chinese currency in relation to the Canadian dollar it's going to be small and earnings from China are small. I think as it relates to Manulife China, ex-Hong Kong. But the concern about China is one of this huge fear of China slowing down and I guess remind people that while the manufacturing sector is slow in China the services sector is incredibly robust and it's approximately 50% of the economy right now and consumer spending is high. Robert our life insurance business in China alone is up 35% and our wealth business and mutual fund flows?

On the growth flows were up well over 100%.

And those products are denominated in renminbi?

Yes those are renminbi products. So as 35% and over 100%. Do I guess when I read the newspapers about China slowing to a halt I find it hard to relate to, if you look at BMW their sales of cars into China, you’re look at a lot of indicators, there is no indication that Chine is coming to a screeching half which half the world seems to think is factual.

In 2015 we had record insurance sales and just about every location in Asia I think there were two exceptions to that and they were both smallish locations and in the fourth quarter we had record insurance sales including in four location Hong Kong, Vietnam, Singapore and even Malaysia. Now Malaysia is probably one of the economies supposedly most impacted by the China slowdown because it's an export economy to China. And yet we still seeing very strong sales, so the core earnings growth year-over-year 18% in Asia and the earnings translation risk associated with the renminbi is not material at all.

Okay, thank you.

Thank you. The next question is from Robert Sedran from CIBC World Markets. Please go ahead.

Just curious about what you think the impact is of the recent changes by the Chinese authorities in terms of the ability to purchase -- for mainland Chinese to purchase insurance contracts in Hong Kong. And not just the impact of that, but if there's any other similar issues that perhaps aren't obvious today but that you might be concerned about from a regulatory or political perspective in China?

Okay so let me take that and then I will pass to Roy he can give you some more color. So actually Manulife has a very diverse business in Hong Kong. Our exposure to what we call mainland visitors if you like is relatively low compared to the market as a whole and so this is not going to being material to Manulife because the sales from mainland China to Hong Kong represents less than 1% of our group sales, but let's ask Roy to give you a bit more color.

Yes, thanks Steve. Robert I think Steve covered the key point and that is that firstly our Hong Kong business is a very strong business, it’s well diversified. Not only have we got a strong insurance franchise here but we also have a very strong wealth management business and that is focusing on our NPF or retirement pension business where we are the second largest provider and the largest in terms of new flows. In terms of the Union Pay regulation change that we saw announced recently mainland Chinese visitors really only account for about 15% of our sales in Hong Kong and that's much less than many of our competitors and therefore that statement represents about 4% of our total Asia sales. So quite we really does see this change to be very material to our business. And again as highlighted earlier our total insurance sales for the year are 28% and our other world sales are north of 100% for the full year. So we see very solid momentum, very optimistic about the progress we are making and that we will continue to making the regulations is one that it's obviously is going to have somewhat of an impact on markets limited for us and quite frankly feel still very optimistic.

Okay and just a quick one on Japan, or maybe not a quick one on Japan. But obviously the country has been dealing with very low interest rates for a very long time but are there any further implications to a negative interest rate policy on your business, in any aspect of your business whether just technical accounting or actual operational implications to the business?

So well let me have a go at that and again I will pass to Roy. I think t think the low interest rate environment in Japan is obviously being perceived as being potentially a negative to the Abenomics success if you like, so perhaps the biggest risk to us is that it slows down the behavioral changes we seen in Japan. Having said that we have seen some significant changes starting to emerge in Japan with move on personal balance sheets away from bank deposits into mutual fund products and other world products, and we have been benefiting from that. And beyond that we have some new products and new distribution in Japan which have gained a lot of traction. So in fact Japan for us in 2015 was a raging success story and we have a lot of momentum in our business there. So maybe Roy may want to talk a bit more about some of that success in Japan.

Let me just add to the comments that Steve provide, I think the first comment I would make is that not all of our product are interest sensitive and we re-price regularly. I think that would be the deciding comments. We are really quite happy with our and momentum in Japan, we have expanded distribution quite extensively throughout 2015, in fact we’ve got 13 new bancassurance partnerships and that contributed significantly to our sales momentum and obviously we’ve also expanded our product range. So it's obviously interest rates are a factor. But we obviously keep a very close eye on that we we-price accordingly.

Thank you. The next question is from Meny Grauman from Cormark Securities. Please go ahead.

Just to follow up on Rob's question about negative rates, you answered it in terms of Japan but in your view would there be significant disruptions to your business with negative rates if they came to North America? Is that something you've thought about at all?

Well Meny, Don wants to get in here. Negative rates typically are at the short end right, created by central banks trying to stimulate the economy. What is really relevant to us is rate out at the 10, 20, 30 year tenor not at the short end now. And you see instances I think recently when the Fed increased short rates and the long rates came down. I think a lot of people sort of thought our stocks was -- and it did go up for a period, but that’s not a good thing when long rates down. It's really the long end of the curve. I mean if people institute negative rates and that gets the economy moving in the right directions, it’s a very positive things for us. But what really counts is what’s happening at the longer end of the curve.

Thanks for that. And then I just wanted to ask a question about the dividend and just curious about your response to maybe some criticism that given the kind of uncertainty and the moves that we're seeing that you should have held off on a dividend hike to kind of wait for the dust to settle.

Well, we are long term thinkers, we take a long term view of business, the core earnings, the growth has been fantastic. We’re projecting that despite the headwinds that we have talked about in this call, we feel pretty good about that going forward and that’s the base of which the decision is made. I mean you know oil prices may remain depressed for the rest of the year and other things could happen that would be negative. But our capital is strong and our outlook for core earnings to the growth is strong and outlook for longer term net income hopefully some reasonableness will prevail. I guess we have the view that when things look dire, look lowish, seldom as bad as they appear, and when things look really good they’re seldom as good they appear and this one of those insistent.

Thank you. The next question is from Gabriel Dechaine of Canaccord Genuity. Please go ahead.

Donald, why no buyback?

Well, we don’t have one in place. We historically, we’ve never said no buyback for all time and then there is times like this where we had nice time it be kind of nice to have it in place, on the other hand as we’ve talked other questions on the call, we are going to air on the conserver side because when the world is skittish as it appears to be, bad things can happen for longer periods of time. So while we feel really good about the long term. We want to protect ourselves from short term movements that could go against you. So we are going to air on the conserver side, but you are right, if you wanted to say criticize and see if you get a buyback in place you'd be picking up some Manulife stock at really cheap prices, that’s a fair comment.

That's exactly what I was thinking. You spend the post-crisis period building the fortress balance sheet, reducing your macro sensitivity, all very good moves for shareholders. But at a time like in companies in general, they buy back stock when it's at the peak and they don't want to do it -- they don't do it when it's at a trough. I mean it would seem like you're in a good position to shift from defense to offense so that the market can put some value on that fortress balance sheet.

It's a fair observations, I guess the only thing I would say in our defenses. We didn’t buy it back at the peak, so I am thankful for that.

Right.

If you are saying you’re going to miss the opportunity while it’s low, you are right there too. So it's a good comment and we’re giving some consideration to whether or not a buyback would fit in the overall context of prefect capital usage overtime.

Well, I think a lot of debate around buybacks and it's a signaling theory at the very least and in this case probably would be a good one. That's pretty much it. Thanks.

Thank you. The next question is from Sumit Malhotra with Scotia Capital. Please go ahead.

Let me go back to Scott for a minute. I just want to make sure I'm thinking about the energy exposure correctly. So on your Slide 32 in the presentation you show us just over 13 billion of fixed income exposure to the energy sector and 1.7 billion in the alternative book. When you talk about the 875 million of write-downs that were taken against energy this year, round numbers what was the percentage that was allocated to the alternative portfolio relative to fixed income?

That was all the alternative book. The fixed income had very little impact of the oil price environment.

So when we're talking about 2016 now and the fact that the core earnings target has been - you're signaling off that number largely due to the oil and gas, are we still contemplating alternative being the only issue or are you now expecting there are going to be losses that are emerging in the fixed income book as well? I'm kind of looking for your thoughts on where that portfolio trends next year?

Yeah, now that’s a really good question, it’s something we spend a lot of time on. We are examining all the exposures on that Page 32 very closely and while yes our bond portfolio which has been 95% investment grade has held up very well thus far, to the extent these oil prices keep extending we’re looking at definitely some downgrades coming. I think the agencies the longer prices stay down, they will look to move to downgrade. I would say a lot of the company have done a lot of the right things in terms of cutting dividend and raising equity and certainly cutting CapEx so that’s helping them and we feel good about the long-term survival of these companies, I’m not sort of forecasting any impairment or anything for the future, but I think as you know downgrades do run through our investment experience gains. And so while we didn’t -- we had a little bit but not very much of that in 2015 and 2016. To the extent prices stay where they are, we would expect to see some of that. So, while we've had five or six years of positive credit experience in 50 to 100 and even a little above $100 million, I think that will be very hard to achieve this coming year unless we get a rebound in oil prices because that will be a drag.

That's helpful. Let me wrap up with just, I'll call it a request for Steve. Steve, I know we've talked about this before, but now that it's yearend hopefully you get a chance to rethink or add to the disclosure. I do think it would be helpful if you could provide us with the pre-tax after-tax numbers on the adjustments that take you from the reported number to core. I think it would give us a better understanding of what's happening in the underlying businesses once we clean up if you will for some of these items. So hopefully that's something you can think about for 2016.

So we haven’t forgotten that, we have it on the agenda to consider for 2016.

Okay thanks a lot for your time.

Thank you. The next question comes from Tom MacKinnon from BMO Capital markets. Please go ahead.

Yes, thanks for a much. Good afternoon. I just want to talk about the investment losses outside of oil and gas actually in the quarter and if you had 361 million of the total investment losses of which 250 million were oil and gas that leaves 111 million in other things. Now you did some actuarial cash flow modeling update. So trying to figure out what the impact of that was? And then really just talk about investment gains you make outside of oil and outside of actuarial modeling and things, like what were they in the quarter? What's the outlook for those? Because I think those things were pretty good in 2015.

Tom you are absolutely correct. So that’s estimation process that we have to true up if you like a quarter in arrears produced quite a significant negative this quarter. That processes is something that we have as you know we have to go through each quarter it can be positive, it can be negative in this quarter was actually quite significant negative, If I recall correctly it’s in the region of 150 million. So, that is a big piece of the explanation and in fact the various other assets classes produce I think virtually produce positive returns. So credit was positive, private equity was positive, et cetera.

If I can just add for the full year, its Warren here Tom. On the full year basis the oil and gas charges I think we are in the over 800 million but our net investment experience gain was about 350 million post-tax and if you think that relative to 100 million to quarter with no contribution from oil and gas which otherwise we expect something from oil and gas. We would otherwise be running at pretty much our indicated long-term trend line rate.

And that's even with this CAD150 million actuarial modeling?

Yes that's correct.

And this actuarial, what should we think -- what are you doing here, just adjusting some cash flows and all of a sudden you've got 150 million charge? Like you wouldn't anticipate that number to be to swing that much. How should we think of that number?

Yes. Tom, its Cindy. So maybe I can explain. Because the call and reserve process takes quite a bit of time we can't complete it all within the quarter end window. So our standard practice is to take the prior quarter reserve and roll it forward for changes in markets and new business. And then after the quarter we do the actual calculation using the actual live rolling asset cash flows. Take into account the fact that we've got 250 billion of liabilities on our balance sheet that's not really a very large number, it is on the large side of what we see, but as the Steve were saying it can be positive or negative and there's been quarters when it's been positive and in the same ballpark. So it really is just the impact of updating our assumptions to bring the reserves to the end of quarter value and the differences between what we actually booked in that trued up reserve is what you see coming through in terms of actuarial modeling.

So in an environment things don't change much from quarter to quarter you wouldn't anticipate that to change significantly quarter to quarter?

True, but keep in mind that the liabilities cash flows can be different. We assume that they are the same and we just drop off one quarter of cash flows, so they can turn out to be different. We also Q4 is the quarter after our annual review of assumptions that can lead to some noise and there can be even some impact from equity from the direct impact of interest rates in that number because it's not possible always to take everything out.

And is that numbers showing more on a rising or falling interest rate environment?

I can't say that I’ve ever looked at it to give an answer, but I think Scott would like to add something.

Yes I just like to add when we put that 400 million number out there, we looked really hard and what has happened over the last five or six years and this is a number as Cindy said that's in there every quarter, tends to be fairly small and there was no bias to it over that time period so we didn’t -- we felt comfortable assuming that would be sort of net zero going forward. It's obviously unfortunate you have a quarter where isn’t big negative, but and over that period we've had largely falling rates, so I don’t see a bias with respect to the rate environment.

Okay, that's great. Thanks. And then the MCCSR going from quarter-over-quarter change in it, it was 226% and I assume I'm adding about 5 from the debt to 231% and then you ended up at 223%. You recaptured some reinsurance and then you had I guess just a little bit more drag on the MCCSR as a result of what kind of happened in the quarter. So can you separate those two items and then give us some sort of a feeling as to how we should be looking at the MCCSR going forward excluding any other kind of capital movements?

Yes. So it's just very high level, Tom. So in an average quarter if this there is such a thing we probably expect the growth in required capital to be in the order of 3 points, but it could be more it could be less it can vary and so we would expect that normally to be more than covered by earnings. So this quarter there were two specific issues, one was that the growth in required capital was actually at the high end of that range whereas the earnings where obviously low, so there was a net negative there and then the reinsurance treaty recapture cost us about 3 points on the MCCSR.

Okay, thanks for that.

Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead.

Just to put a final point on these investment gains, are you suggesting that you're still confident in 400 million a quarter -- sorry, a year ignoring anything to do with oil that that 400 million when you proposed it early in ’15 still stands or has something changed that caused you to be less confident in that number?

Mario nothing has really changed, we continue to believe through this cycle. It is the correct number because again I mentioned that we had close to 350 million post-tax for the year almost all the other components of that were performing as per our expectations now the reality is and this is again if you even go over the last five years and remodeled it, in any given quarter we have had negatives from let's say the given quarter, real estate or agriculture is something that underperform briefly in a quarter, but through that full year we do see everything emerge and credit goes up and down but again over that time frame. But the best piece because it is such a well-diversified portfolio in total does tend to deliver it and obviously in the current environment a good example would be, while rates are down spreads are up. Wider spreads actually presents an opportunity for us to invest in realized trading gains from investing in that wider spread credit product obviously in the same environment again we may see a few more default charges. So there's going to be tos and fros on the thing all the time but our general expectation given the diversity of our book and how things work we feel very comfortable on our through the cycle view.

Okay. A related question. Perhaps for Cindy or maybe Steve. Could you go through the policyholder-related experience losses in the quarter? I think there's some disclosure here where it says it's about 97 million and it relates mostly to is it mortality in the U.S.? There's just a lot of paper in front of me, can you help me think through that again?

So it just a high level. In this quarter we had negative experience in the U.S. offset by positive experience in Canada and Asia. And then maybe Cindy wants to take you through those.

Right, so Mario I’ll have to apologies because I have got post-tax numbers in mind and you have got pre-tax number, so the post-tax impact the policy impact to policy holder experience was 50 million in the quarter. As Steve said we had positive results from Asia and from Canada and that was offset by losses on LTC due to -- as I said earlier utilization, mortality and lapse. As well as some lapse loses on our U.S. Life block related to some universal Life products. This quarter our mortality experience on the U.S. Life business was neutral. So that was a change from the prior two quarters when we had some losses due to larger claims, as you’re well aware we focus on the influence segment in the U.S. and so we have large size policy, so we see quarter-to-quarter volatility on our U.S. life experience.

Okay and the tax rate on these types of policyholder gains and losses, would you expect them to be sort of normal? Normal tax rate?

Yes, but keeping in mind that you have different tax rates by the jurisdiction in your positive results in Asia which we generally have a lower tax rates. And in Canada that would usually have a lower tax rate, and then losses in the U.S. which has a higher tax rate. So then the average tax rate is difficult to -- maybe non-intuitive.

And how about the tax rate on all the items of note, all those adjustments you make, would that be a normal tax rate or would that be an unusually high tax rate?

Well, I don’t know for each item, but it was impacted by the same phenomena where you can have gains in lower high tax jurisdictions offset by losses in lower high and tax jurisdictions you end up with have a very unintuitive results for the tax-rate.

[Multiple speaker]. The tax rate on core earnings this quarter was 18% but we had an overall -- we had a tax credit if you get down to the net income level. And that would be a results of clearly some investment incomes is not taxed, other reduction have low tax rates. And that sort of slightly counterintuitive result arises from deferred tax accounting. So if you look at the year as a whole you will end up with more -- sort of more logical outcome. But maybe that’s helpful.

Well I guess where I'm going with this is you guys spend a lot of time talking about core, but you can't really -- look I don't understand core anymore because there just isn't enough disclosure. So like Steve when you say this is something you're going to look at when you're going to look at providing this disclosure, I mean clearly it's available to you or you couldn't do your tax returns. So given the importance of core to this Company why wouldn't you disclose it?

We will -- we plan to disclose, we will disclose the core of tax rate and we just need to look at what level of granularity we want to give and the various items in our financial statement. And there are potentially some -- there are pros and cons to that and as I said we’re looking at it Mario and we understand your ask and we will get back to you in fact and talk to you about what would do the trick for you. So we have that on our list of things to do for 2016.

So what its worth, core is becoming unusable for me and I expect for a lot of people. Appreciate your efforts in that regard.

Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead.

I will try to keep this relatively quick. The MCCSR, just going back to that it was 223% at the end of the year. Correct me if I'm wrong and maybe I'm wrong in this, I still think you have 3 points coming through from DBS and then you quite clearly give us the sensitivities and declines in equity markets and interest rates. So you could be -- if I do all the math there, and again correct me if I'm wrong you can get to a 210% to 215% MCCSR, what am I missing I guess in this kind of thought process? What's the level you're comfortable letting that go down to? And maybe I will leave it there.

Well, you are correct we have to do with DBS, but as we say we have -- as we said we have confidence in the outlook for our core earnings now. But sure we have sensitivity to investment experience. On the other hand we have a very strong leverage position right now. So we have a lot of financial flexibility. And we want to manage our position as Don said and appropriately conservatively in the current environment and that’s all we seek to do.

And what would --.

We kept the capital ratio strong right, it is for times like this. I mean it wasn’t too long ago that people were focused and said, you had too much excess capital and that’s what it’s for. Market volatility hasn’t disappeared.

So what would you let that, I mean I guess two questions, what would you let the MCCSR go down to? And then how much leverage are you comfortable putting in because you obviously have room to raise debt and I think I always think of it between 25% and 30%. But I'm just trying to think of how comfortable are you -- what level are you comfortable putting that down -- letting that go down to?

Well you know capital management is a very carefully managed things we don’t talk about the ranges it depends on the whole bunch of factors, but in terms of leverage we have tons of capacity. At the peak we had 35% or something like that and there is lot of capacity there. We’ve got a lot of options.

And I mean if it was 215% or 210% on one particular quarter that would be fine?

Well you would not expect the stop rate at too lean a range of ratio. I am going to avoid specific numbers but when bad things happen you expect the capital ratio to go down. I mean that’s what the capital is therefore, to be drawn on. So again prudently conservative, but if something happened tomorrow, yes obviously that would drop the capital ratio. I don't think anybody would panic about that. You know the question is do you plan to rebuilt it or keep it low and what we like to do and you’ve seen us act consistently with that going right back to 2008 and 2009 is if the capital ratio gets too low, we rebuild it to a higher level overtime. It doesn’t need to be done immediately, but that’s what our practice has been.

And then just second, you know obviously you've had great sales results in Asia and good core results there. I'm just wondering so far, maybe Roy, so far what you've seen in 2016 given the market volatility. Have the wealth management net flows and insurance sales have they abated at all or have they continued to be relatively strong?

Thanks. I guess I think someone made the comment earlier and that is that we haven't really seen equity or currency market movements affect our insurance sales. A very solid Q4 that really topped up a good year for us. That’s obviously very true for insurance, but it’s also true for other wealth sales. And our WAM flows are a little bit more impacted by market volatility, but even there I feel pretty good about the year that we just had our gross flows are about 56% up on prior year and our net flow is actually which is probably the more important indicator for us is it was very positive, 142% up on prior year. So generally I feel that we’ve got some momentum a big part of our core earnings growth over the course of '15 was the function of strong sales momentum and we expanded distribution both in terms of the banker partnership as well as agency, but also we had some good product launches. We've been focused on our mix and the mix is being -- while we tried to really shift our attention much more towards protection as a need which gives us much stronger margin. And then finally on the margin front we’ve also put a lot of action into improving our margin and that includes looking at our product and re-pricing where appropriate as well as our distribution expenses. So, look generally, I guess I’d say that I feel pretty good with the foundation we put in place in 2015 and momentum that we have in closing year the good. I think we’ve got some good tailwinds with DBS, Standard Chartered and some of the other banks partnerships that we've launched as well as launches that we’ve made more recently that really puts us in good shape for the year ahead.

Great you.

Thank you. This will conclude the question and answer session I would like to turn the meeting back over to Mr. Veloso.

Thank you, operator. We will be available after the call if there is any follow-up questions. So have a good afternoon everyone. Thank you