Please stand-by your meeting is ready to begin. Please be advised that this conference call is being recorded. Good morning and welcome to the Manulife Financial Fourth Quarter 2018 Financial Results Conference Call for Thursday, February 14, 2019. Your host for today will be Ms. Adrienne O’Neill. Please go ahead, Ms. O’Neill. Adrienne O’Neill: Thank you and good morning. Welcome to Manulife’s earnings conference call to discuss our fourth quarter and year-end 2018 results. Our earnings release, financial statements and related MD&A, statistical package and webcast live 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 fourth quarter and year-end highlights 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. After the prepared remarks, we will move to the 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 2 for a caution on forward-looking statements and Slide 37 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. This slide also indicates where to find more information on these topics and the factors that could cause actual results to differ materially from those stated. With that, I’d like to turn the call over to Roy Gori, our President and Chief Executive Officer. Roy?

Thank you, Adrienne. Good morning, everyone and thank you for joining us today. Turning to Slide 5 yesterday, we announced our fourth quarter and full year 2018 financial results. Macroeconomic conditions were very challenging in the fourth quarter, with double-digit declines in equity markets and lower crude oil prices, especially in Canada. I’m pleased with the results we delivered in light of this spectrum and we ended the quarter in a position of strength with strong capital and increased financial flexibility. Our business fundamentals remained strong and our hedging strategies functioned as designed. It’s worth noting that we significantly reduced our exposure since the financial crisis. Our sensitivity to a 10% decline in equity markets is less than half of what was in 2009, and similarly our sensitivity to a 50 basis points parallel shift in interest rates is approximately 1/10th of what it was in 2009. This together with a strong capital position of the company provides a robust foundation to deliver long term sustainable value. Turning to slide 6, we continued to deliver strong growth on both a full year basis and five year time horizon. In 2018, we reported the highest quarter earnings in net income in the company’s history. We delivered core earnings of $5.6 billion, an increase of 23% from the prior year and once again we exceeded our medium term, core EPS growth target of 10% to 12% and net income of $4.8 billion increased $2.7 billion compared to the prior year, due to the non-recurrence of the prior charge related to US tax reform and our decision to change the portfolio asset mix supporting our legacy businesses. New business value generation increased 20% compared to the prior year to $1.7 billion, driven by continued growth in Asia and solid progress in the United…

Thank you Roy and good morning everyone. Turning to slide 14 and our financial performance for the fourth quarter and full year, as Ray mentioned, in 2018 we delivered the highest core earnings and net income in our company’s history, and our fourth quarter metrics were generally positive. I will highlight the key drivers of our fourth quarter and full year performance with reference to the next few slides. Turning to slide 15, we generated core earnings in the quarter of $1.3 billion, up 8% from the prior year on a constant exchange rate basis. The increase in core earnings was primarily driven by new business growth in Asia, the impact of lower US tax rates, improved policy holder experience, and greater expense efficiency. This was partially offset by the impact of lower equity markets on seed money investments and fee income and our actions to optimize our portfolio such as reinsurance agreements and the sale of alternative long duration assets. While most of the equity market impact flows through non-core earnings, the portion relating to fee income mark-to-market on seed money investments and realized gains on available for sale equities flows through core earnings. The decline in equity markets slowed fee income by roughly $35 million in the fourth quarter and impacted seed money investments by roughly $115 million. Therefore the total impact of equity markets on core earnings is approximately $150 million. Of note, this does not include approximately $50 million of realized gains on available for sale equities, which is within the range of what we have typically delivered. For increased transparency, we have expanded the sensitivity slide in the appendix of this presentation that highlight nuance between the impacts of equity markets on the core and non-core earnings. Net income attributed to shareholders was $593 million…

[Operator Instructions] The first question is from Paul Holden from CIBC. Please go ahead. Your line is open.

So wanted to ask you a follow-up question on your comments regarding the LICAT ratio, because there was a big swing quarter-over-quarter, and my math suggests roughly three points of that came from portfolio optimization and the other six points from other factors including change in AOCI. So, what’s the conclusion because I would expect LICAT to be a little bit more stable ratio than it showed? And as you pointed out, it could reverse in the future as well. How do you view the overall capital today and the movements in the LICAT ratio?

This is Phil, so your observation is correct the 9 points improvement in the LICAT ratio to a 143% at the end of year, it’s a strong capital position, we’re already pleased with that. There are really three categories of items that are driving that improvement, but first I’ll highlight is the impact of the portfolio optimization initiatives, the benefit of that has delivered is in the order 3 percentage points on the LICAT ratio in the fourth quarter. The second point I’ll highlight is the impact of markets in particular the widening spreads. So in aggregate the impact of markets in the fourth quarter has had a positive 3 percentage point impact on the ratio, and the remaining 3 percentage points is really a collection of what I would call normal course organic items that have found a favorable impact to the ratio. I’ll hand it over to Steve Finch to see if there’s anything else he would like to add.

Just one supplement, Paul you had mentioned the AOCI; we do see currency crossing up both the available capital and the denominator the base solvency buffer. It was a very modest benefit to the overall ratio in the quarter, but that’s where you see it show up.

And then a follow-up I have on that then is, how do you view deployable capital given that large excess number you’ve highlighted?

Paul, this is Phil again. We are very happy that we’ve further improved the balance sheet strength of the company. In terms of looking at how we deploy the capital that we have and any further capital that we’re able to generate. As we’ve said before, our priority is to further strengthen the balance sheet position including reducing the leverage ratio. So whilst the current leverage ratio is not considered a constraint for us, we have made the commitment to achieve our medium term target of 25%. And you’ll note that we had redeemed $250 million of debt in the fourth quarter. We’ve announced the redemption of $500 million later in February, we don’t intend to refinance that $500 million redemption. And now as we go through the course of 2019, we will carefully market conditions and our capital position when considering actions taken with respect to remaining $1 billion of issuances that mature later in the year and in fact both of those issuances are in the fourth quarter. I’ll also that from a capital deployment perspective; we are focused on funding organic growth. We’re pleased that both through capital generation and remittances we have sufficient resources to fund the organic opportunities that we have. Final point I’ll make is that we have this quarter announced that we will expense subject to regulatory approvals, the NCIB from 2% of our issued capital to 5% of our issued capital. And that’s something that provides us with additional flexibility in determining how to manage our capital base.

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

Just Phil a quick numbers clarification on your leverage commentary, you mentioned those redemptions last quarter as well, the 250 million in Q4 and another 500 in Q1. When I look at your balance sheet it looks like the long term was actually higher sequentially in Q4. Was there some refinancing or reassurance that was done or is this FX for a change volatility, if you could just help me understand whether long term debt was actually higher quarter-over-quarter?

We didn’t have any issuances in the fourth quarter. It was net redemptions of $250 million, so the movement that you see in the balance sheet is a function of currency reflecting the fact that some of our debt is denominated in US dollars and some of it is Singapore dollars.

So the more important thing for us you redeem 250 in Q4 or 500 in Q1 and then as you say there’s 1 billion that scheduled later in the year?

Correct, and we’ll look at market conditions and the capital position in the company in determining whether or not to refinance any portion of that $1 billion maturing in the fourth quarter.

Now on to actuarial questions, this is probably going to be for Roy. Roy in regards to the capital optimization target that was first communicated to us last June, the 5 billion number that was provided, you had already made some progress on that at the time you shared that with us via the older sale and now we sit here with a few years to go until 2022 and you’re already two-thirds of the way there. So in establishing that 5 billion, was that a forecast on what you expected could reasonably be accomplished in terms of reinsurance of divestiture opportunities. And maybe more to the point, what would you have to see in order for the target to be increased by the company?

I think the first thing I’d say is when we established the target and the priority of focus at investor day, the real intent there was to really give the market a better understanding of where we’re going to be focusing our attention and where the priorities of the company were. So when we went through the five priorities we started with portfolio optimization and it wasn’t a fluke that that was the first, because we acknowledged and realized that we needed to do a lot to free up capital and especially capital that’s associated with our legacy businesses. We set a target of five, because we felt that we had a clear line of sight to that. But you can be assured that the target that we’re setting ourselves internally are obviously in excess of the targets that we’re sharing more publicly with the street. We’re really delighted with the progress that we’ve made. As Phil said earlier, the initiatives that have been announced that already relates to 3 billion and once we fully executed against the initiatives that we’ve already announced, we will deliver 3.7, and we’re not going to stop at the 5. This is the priority and an important area of focus for our franchise and we’re going to continue to drive that agenda.

Does the capital being allocated to share repurchases and I’ll stop here and requeue. Does the capital being allocated to the share repurchases which is another $1.5 billion via the increase you announced relative to what you’ve already bought. I’ve had some conversations in the past about how perhaps buybacks weren’t the best use of capital given all the opportunities the company had presented to it both in terms of divestitures and potentially investing in the business as well. Is the buyback in any way a restricting factor to sum of the potential opportunities you have to free up some capital and then if any kind of shareholder equity hits or is required, does the buyback restrain you from doing anything that you wanted to in terms of that capital liberation if I can use that term?

I’d say no, Sumit. The way I look at the buybacks is really as a tactical strategy. Again we’re delighted with the progress we’re making to create excess capital. The priority for us from a capital perspective is the strength in our balance sheet as Phil mentioned earlier. And we’ve got very clearly in our line of sight reducing our leverage ratio. We’re happy with the progress we’ve made on leverage in 2018, and we’re really progressing very ambitiously in 2019 on that focus area as well. But equally important is to fund our organic growth. We’ve got an incredible franchise globally with incredible opportunities, and the organic growth opportunities that we have within our franchise will provide real stronger run rate to deliver the earnings growth and vision that we’ve set for the company. So priority one, is to strengthen the balance sheet, reduce leverage and fund organic growth and tactically, we’re going to continue to look at the share buyback and repurchasing shares as the way to drive value for our shareholders, especially when we see that our shares are significantly undervalued.

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

Just wanted to go back to the LICAT sale, the sensitivity to interest rates that you show in the MD&A has increased materially quarter-over-quarter, and I think in last quarter 50 basis points increase in rates had no impact on the LICAT, now it’s got a negative I think three point impact on LICAT, I mean not huge, but just want to understand the moving pieces as to why did that sensitivity move so much sequentially?

Doug, its Steve, I’ll take that one, and remember we’ve got rounding, rounding on the LICAT ratio, although 500 million of available capital is about one point. So the interest rate sensitivity can bounce around a bit, its largely attributed to basis changes, but it’s within the range of what we’re happy with in terms of that interest rate sensitivity. Also point out that we did enhance our disclosures to show the sensitivity to corporate spreads which Phil mentioned was a positive impact on this quarter’s LICAT ratio, but corporate spreads may come in again, so we’re viewing that as more temporary. But overall very, very happy with the strength of the capital position.

And it had nothing, Steve it had nothing to do with the older repositioning or anything like that or is this just kind of you broke out the corporate spread, so sensitivities kind of look different because it would have been embedded in there before?

We look to disclosed sensitivity, originally we were disclosing the same sensitivities that we did under the MCCSR regime, and as we looked at those sensitivities and we looked at the impact of corporate spreads we decided to enhance our disclosures and put that in there. The older program it does result in some more fixed income in our guaranteed segments, but it’s not driving material changes in our sensitivity.

And then second, I guess while I have you Steve, these long term care insurance, the experienced trend was neutral. Can you talk a little bit more about the underlying moving parts maybe around frequencies to their morbidity trend, was there some moving parts in there, maybe you can kind of flush out what happened in the quarter?

Sure. On long term care, so for the quarter it was neutral. We tend to look at the longer term, we don’t get too excited about any one quarter where there are losses or gains, look more at the long term trends. And this quarter consistent with what we’ve seen and said in the past, we saw higher claims than expected than in the valuation assumptions but also offset by higher lapses or partial surrender. So that’s been a continuing theme that we have seen.

And how are the buyback programs going, I don’t know if there’s any way you can quantify or talk about the buyout programs and how that’s been progressing relative to what you’ve expected?

Doug, its Naveed Irshad here. So on LTC we don’t really have a buyout program yet. We have what we call landing spots where we offer customers an option to take lower benefits in exchange for not having premium rate increases. So where we’ve implemented those and we continue to implement those as we ask for rate increases and we’ve had good success and so that’s been continuing. The buyout program we did offer was on the seg fund in Canada where we offered an opportunity for customers to transfer from the higher risk GMWB, Guaranteed Minimum Withdrawal Benefit income plus to a lower risk product investment plus, and as you saw in the capital release numbers that Phil and Roy shared, the results were quite good.

The next question is from Tom MacKinnon from BMO Capital Markets. Please go ahead.

Two quick questions here, one just with respect to LICAT again, I think under the old regime, you used to sort of talk about a target ratio. I don’t know if you’re actually shared with us a target under the new regime. Other companies have, I wonder if you do have a target that you’d be willing to share. And then I have a follow-up question.

This is Phil. We are not publicly sharing LICAT target ratio, but upon adoption of LICAT in the first quarter of 2018, we did give a comparison point, an indicative comparison to the MCCSR regime. So, at that point we said that 200% MCCSR ratio was consistent with 115 LICAT ratio. So I think that’s a good benchmark to look at.

If that’s the case at 143 you’re probably well more than 10 billion above that if not more. Am I to read that 115 as a target or was that more to that or just don’t have one?

It’s Steve here. The comments that we made around the 200 versus 115, I think many in the industry viewed 200 as sort of , you got to be well above that benchmark. And as you know we operated significantly higher than the 200 and consistent with that we’ll operate significantly higher than the 115.

But your point Tom is, we’re obviously very comfortable with that LICAT position and again I would sort of just remind everyone that again three points of the 143 does come from the corporate spread movement which we’re banking on that, that could move around a little bit. But regardless, it’s still a position and again is a function of the very delivered actions on capital, which we’re looking at ways to again ensure that we optimize.

And what was the thinking behind increase in the NCIB and does the bump up in the LICAT ratio has anything to do with that?

It certainly is a factor, but for us the NCIB form is just about making sure that we’ve got tactical strategies that can help us repurchase shares and again deal with the significant and am I under value of our share price. But I’d look at it as another tool in our tool kit to ensure that we can optimize the capital for our shareholders.

And then a quick one here on seed capital; I was wondering as your funds grow here do you intend to harvest some of the gains that you’ve put in terms of seed investments here or will we expect the seed investments that you have to remain constant or increase going forward?

This is Phil. You’re absolutely right that the approach to seed capital is that we do see new funds to get in to critical mass as part of the new fund launch process, but we also repatriate that seed capital once the fund can stand on its own with third party funding. So we see a cycle of new funding and repatriation. The current level of seed capital is well within our risk appetite, it’s in the order of $1.5 billion.

As AUM grows, would you expect that to remain at 1.5 billion?

It may increase, it may decrease, but I wouldn’t say materially above the 1.5 billion.

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

Question on flows in WAM, just wondering if you could give us an update on what flows look like quarter to date?

Meny, its Paul Lorentz here. May be just to find some context of the flow that [ain’t] filling, Roy talked to the strength of our franchise over the full year and some of the strength even within the fourth quarter with the volatility. What we saw in the US retail was really due to a number of factors; one is a general slowdown because of the volatility, but we did see funds move to safety in the US and that favored ultra-short duration bond funds of which we don’t have a solution lined up to capture that short term money movement. And then we also saw some significant model allocations where some of our large retail clients reduced our credit exposure because of where we are in the economic and because of our strength in fixed income, that had a negative impact on us over the short term as they decided to reduce credit, both of which we would expect over the long term to benefit from as money starts moving back in the long term investments. In terms of the first quarter, it’s too early to really predict what it’s going to look like. What I can say is that some of that model allocation is strictly in to Q1, but to a much lesser extent than what we saw in Q4. But we’ve also seen investor confidence improve in the retail space in North America and growth flows in January have improved from what we saw in December. So we’re feeling quite optimistic and because of the diversification of our franchise we were well positioned to capitalize that as money moves back in to the markets.

I suppose a follow-up question would be, how confident are you that 2019 will be 10th consecutive year of positive flow --?

While I wish I could be confident, but it’s too early in the year to make that judgement and markets are so unpredictable particularly space. And I think what you saw particularly in the fourth quarter as well, there was some pressure on retail because of market volatility. I think you saw the strength of the diversification that we bring because of our Asian footprint which was up in the fourth quarter despite that volatility. Our institutional business was up in the fourth quarter despite that volatility. Phil mentioned we finished the year quite stronger (inaudible) based on our size in Canada and our record keeping platforms in Hong Kong and in Canada that were number one in market share based on the latest market share reports we have available. So we’re feeling really good about the platform we’ve got and the diversification and I think that gives us an opportunity to withstand some of these short term fluctuations.

And just a final follow-up, you mentioned one product cap, are you making any changes as a result of the expanse in Q4?

Yes, we’re going to look at, I mean you have to keep in mind the ultra-short preparation bond, just very little margin on it. So it’s not really an earning question for us, just to question it whether having that allows us to capture that money when it moves back in to the market or whether the strength of our lineup as it stands will capture that anyways without having that, and that’s a decision that the US team is looking at.

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

First of all the buyback, its’ great risk for you taking a more aggressive stance there, makes the capital positon more tangible. But just wondering why then also chose or go with maybe a smaller increase and eliminate that drift discount because the way I see it you’re issuing under the drip that’s below 19 bucks and change during the quarter and then you bought back at around 20, but you’re issuing below where you are buying it, why didn’t you get rid of that?

This is Phil. We spoke a little bit about this during the Q3 process. The combination of the drift and the buyback does give us increased flexibility in terms of tools with which to manage our capital position. Our priority has been executing on the MCIB that we had announced just before our third quarter results. Combined if we look at what we had executed in the fourth quarter, combined with what we have now executed from the MCIB in the first quarter, grew about 75% of the way through that program. It makes sense for us to extend the program to the maximum amount that we’re permitted to under a normal course of arrangement. So that was to go for the full 5%, and we’ll practically execute against that based on various factors including the capital position of the company and market conditions. We do believe that the current valuation of the company’s stock is below the intrinsic value. So that’s why it makes sense for us to execute to the maximum extent.

I’m not quite sure, I got the answer to it, but why have the drift part?

For the drift, retaining the drift is really is part of an ongoing capital management process. So it provides us with a tool alongside the MCIB and will balance the drift and the MCIB over the course of the next few quarters and potentially years.

Okay, just a couple of quick numerical questions here. In the non-core investment experience what were the growth and I guess the moving pieces, oil and gas, how much was that a factor? And then the remittances $4 billion in 2018, I recall a number about half of that (inaudible) in prior years that really reflects from all the portfolio optimization and a little bit on (inaudible) high.

Gabriel this is Phil. I’ll cover the remittances question and hand it over to Scott to talk about investment experience in to oil and gas. So remittance, yes very strong in 2018 $4 billion, almost double the amount that we had received by way of remittances from subsidiaries in 2017. The number will bounce around from year-to-year reflecting market conditions and reinvestment decisions. But we’re very pleased with the outcome this year, and we’re confident that looking forward the level of remittances we’re able to achieve from our subsidiaries are at least sufficient to cover our dividend and net interest expense obligation. So we’re feeling good about the capital remittances and the progress on the leverage.

Hi Gabriel, its Scott Hartz. To answer your question on investment experience, so the total investment experience has been described as a $30 million loss for the quarter. And our perspective is in the quarter where we had public equity markets down double digits globally spot oil prices down nearly 40% it was really quite a good result. To give you a little more detail on the 30 million, there was a little over $300 million loss on our older portfolio, largely offset by strong fixed income results. So looking at the alternative portfolio, it was still, we consider it a very good result given those market conditions. Total returns on the alternatives portfolio was positive for the quarter. It was just below our long term assumptions which you would expect in a challenging quarter. And of that about two-thirds of that was due to the oil and gas.

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

Just real quickly first on the universal life loss, I understand that there’s activity there I think today and perhaps yesterday. Is there any update you can offer us there?

I think the big update I’d provide is that this is obviously something that’s going to be in the calls for some time we expect. The Saskatchewan court is currently hearing submission from us and other parties regarding the impact of the new regulations that were announced, both as it relates to the Mosten litigation and the other cases. We’re not sure when the decision is going to be rendered, but again as we’ve said in the past we remain confident in our position.

This is just my paranoia kicking and I have no special knowledge, but is there possibility here that we could get bad news in the near term?

Well I’m not going to speculate on what the judges are going to say Mario. Again, what I’d tell you is that we’ve said all along that we’re highly confident about the position that we have and that we’ll ultimately get it prevailed in this matter. So there’s nothing more for us to say other than that and we’re very much prepared to take it through.

Quickly on Japanese COLI sales, that has been a good contributor recently to the new business gains. Could just talk a little bit about why that product is so popular? Like what is it about it and could you expect this sales momentum to continue?

This is Anil. So, if you look at the Japan AP sales, its’ currently 34% year-on-year at Q4 end. We established the new COLI term product in quarter three. We got some perfect response in quarter three and we saw the momentum pretty much continue in quarter four. In Japan, as you’d know, we are a significant player when it kind of comes to the COLI market, though we have a broad range of product suite to offer in Japan, and the new COLI termed product basically is going to roll on the COLI capabilities that we have in that market. We make certain adjustments in terms of the feature and benefits to be able kind of prioritize in line with the customer needs, and we’ve got some very strong response to that. In addition to that we also simplify the onboarding as well as the underwriting process has made it a lot easier for our distributors to be able to kind of offer these products to customers. So, that’s really the kind of the driver or the source of the momentum that we saw in quarter four. Now we also understand that we work in a very dynamic market and obviously we’ve got a kind of face competitive pressure as well as there could be other environmental reasons that could impact COLI and that’s something that we are working towards. We already have crafted a product suite for 2019 and pretty kind of doing the utmost to be able to ensure that we continue the momentum that we haven’t done.

Do you see any potential that the tax changes in Japan could lead to an erosion of popularity of that COLI product or is it not a tax driven product?

There is some discussion and that doesn’t come as a surprise because we already had some advance notice, but it’s a little premature for us to kind of determine what that impact is because we don’t know the nature and the timing of that but we’re pretty much astutely aware. I do want to make the point that COLI contributes to roughly about 50% of our sales, so we do have some other value proposition in Japan. And I also wanted to kind of underscore the point of the fact that if you look at Asia broadly the strength of our business just a diversified nature of the portfolio that we have and we’ve illustrated that in 2018 where from time to time you will face headwind in the market or two, but we’ve been resilient and we’ve been able to kind pick up the momentum on account of the diversification strength that we have in Asia.

The next question is from Steve Theriault from Eight Capital. please go ahead.

A couple of things from me, maybe just a clarification to sure on expenses. You’ve given us an additional piece of the puzzle with the visibility up to 700 million of cost savings by 2020. Just want to make sure that extra 325 were sort of delineating last time today. Are you expecting to need to take a restructuring charge, maybe next year as we get closer to or as we gather up to that billion, I think there may be at a prior discussion around that first set of restructuring, maybe doing the trick for the entire program. So maybe just to refresh on that.

This is Phil. So you’re correct in your hypothesis there that the – and in order to deliver the additional 325 that we’ve laid out, we don’t expect to incur a further restructuring charge in 2019 or beyond. Very often its cost associated with taking expenses out of the organization that’s the extent that arises outside of the programs that we had announced last year. We will self-fund those costs through further expense reductions. So you won’t’ see another non-core restructuring charge.

And probably for Anil, I want to turn to Asia, a couple of quick items. But first expected profit, when you look at core earnings growth it was obviously very strong this year, your new business gains remained strong, but the expected profit’s been pretty flat the last five quarters and a big delta has been those new business gains and we worry about those from time to time. But just trying to expect a profit, is there any visibility 2019 or going forward to see if that growth start to ramp. It’s been pretty much unchanged the last five quarters.

I just wanted to kind of compliment and supplement the comments that Phil made on what was really kind of driving our APIF. So if you were to kind of normalize for some of the noise on account of the VA hedging. On a full year basis the API approach is a range of about 8% to 9% which is pretty on expected lines. As you know that Asia is the growing part of our franchise and you would expect that the contribution of new business gains in percentage terms would obviously be higher to the earnings growth that we’re expecting or anticipating in our Asian markets. So on a normalized basis, as I said, it’s pretty much on expected lines. And just kind of given the fact that we are growth mode, we’re investing in both our distribution as well as in our digital capabilities, we are obviously kind of consciously working on driving a better product mix, you would expect the new business momentum to be a strong contributor going forward. But I can’t get up as I said make any forward comments, but we feel reasonably comfortable with the mix that we have. I would like to ask Steven if he wants to add to the comment.

Thanks Anil, some additional context on the total company. So Anil I think focused on the full year growth excluding that geography of the VA hedging so 8% to 9%, we do expect the highest growth in earnings on in-force in the company in our insurance and annuities businesses to come from Asia. The growth in North America will be somewhat lower and you also see the growth, the value-generation in Asia coming from the value of new business and we see that coming through the new business gains as well as the earnings on in-force. For overall context, new business gains has stayed consistent as a percentage of pre-tax core earnings total company at roughly 13%, that was consistent for full year 2018 and full year 2017, and new business gains for the full year were a consistent percentage within Asia as well as a percentage of pre-tax core earnings.

If I could just finish with, I noticed that for now just the detail, I didn’t hear about the Hong Kong agency force is up around 900 after being pretty stable. We’re used to seeing those big fluctuations in Asia other across all the strings of countries, but what drove that this quarter?

The Hong Kong sales just to clarify?

The Hong Kong agents went to --.

Oh! Hong Kong agents. We have been focused in terms of kind of growing our distribution and we have been pivoting very strongly not only in Hong Kong, but if you look at even in some of our other Asia market to be able to kind of ramp up the growth on our agency. We are very conscious on the fact that if we have to demonstrated foreseeable growth and the future agency is going to be a big part of it and we have significant strength in our agency distribution business in Hong Kong and kind of simply building on it. And honestly if you look at the Hong Kong franchise and as Paul mentioned here the number one player in NPS business, we’ve kind of now have a demonstrated track record of growing the business year-on-year, and we’re kind of slowly climbing up the lead table. So that all makes a compelling reason for more agents to join Manulife and that’s why you’re kind of seeing he double digit growth on the agency force in Hong Kong.

This is Phil. Just to go back to your previous question when we’re talking about sources of earnings growth, we cover that the earnings from expected profit from in force business and new business growth in Asia, just like to highlight that we are confident and standby the 10% to 12% earnings growth, medium term operating target that we’ve highlighted and that wealth and asset management is a key source of that growth, as is the bottom line impact of our expense initiatives. But as we’ve said before, we are committed to seeing those flow through to the bottom line.

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

I had a series of questions that all relate to your wealth and asset management business and I’m looking at your supplemental pack. So hopefully you have a copy in front of you and we can just talk about a couple things that I’m noticing here. The first is, in terms of just thinking about this on annual basis, one of the thing that is rather notable in this business is the growth in the EBITDA of Asia using the annual number of 22% far exceeds the growth in the assets growth in Asia. So wondering if you can just talk to what is driving that EBITDA growth in Asia. And then similarly why do they drop off in the fourth quarter given AUM did not drop off in the fourth quarter?

It’s Paul here, thanks for your question Darko. I’ll start with the second part. The reason it dropped off in the fourth quarter is the mix of business. Even though AUM went up, it was more institutional sales versus other and that does have a lower margin and still really get business from ROE perspective, but it would pull that down and relative to the third quarter we do have some seasonal spend in our retirement business in Hong Kong in Q4 and you tend to see that every year. So that’s the primary driver of why it came down from that perspective. In terms of the overall growth relative to AUM, I mean our goal is to really to trying to get leverage out of our operating model on a global basis. And as we grow, we’re trying to do that as efficiently as possible. And our goal as we look forward is to continue to improve margins, EBITDA margins despite some of the pressure on fees by leveraging our scale and continuing interactive business.

And one of the things that we don’t get here in the supplemental is the fee. So, one of the things that I look at, is I look at the EBITDA as a percentage of AUM and in Asia its doubled than in the US. And so presumably may be because fees are much higher in Asia versus the US. But I wonder if A, you would be willing to share the fee for AUM in Asia, Canada and the US, and if not, give me a sort of directionally the difference. And more importantly for modelling for my purposes how should I think of the overall fee per AUM for 2019 and 2020? I mean the pressure on this business is pretty intense, the feeling is that in the US fees are going lower and lower for active management every day. So wondered if you can just speak, I would love it if you can give me individual fee numbers, but if not just speak directionally to what you think is happening there.

I think we typically don’t disclose the individual feed numbers, I would say, you’re going to get some volatility in this metric from quarter-to-quarter, but we do feel (inaudible) long term in terms of our ability to improve this margin because of the diversification of our business, because of the leverage we expect to get out of the global business and frankly how we prioritize and spend to make sure that we’re capitalizing on the biggest opportunities by geography and by product line which is really one of the attempts to pull this business together is to make sure we do that. So we’re constantly looking at fee compression, we assume that’s going to happen and trying to build that in to our action plans as we look forward.

(inaudible) let me just add, I’d say that one of the things that we will significantly benefit from and one area that we’re very keenly focused on is leveraging our global footprint. We see big drivers coming from the fact that household wealth in Asia is going to grow, in fact going to more than double over the next five years. We’re seeing an ageing population that’s true globally, but certainly its true in Asia. And we’re seeing a much stronger focus on retirement. So the fact that we have established ourselves and have a brand and presence in Asia it really puts us in good stead in those markets as you rightly point out do have higher returns, higher margin, higher fees and while there will be pressure actually for those fees to compress somewhat the tailwind that we have is some real big driving forces towards greater wealth management and a much stronger focus around pension and retirement planning. So I think we’re really well positioned to take advantage of that.

This is Anil. So just kind of one other supplemental point is that, if you look at the Asia flow mix, we control 75% of the flows directly, given the fact that only 25% comes from intermediated channel. So that allows us to control the client experience a lot more closely whether it is institutional sales or for that matter retirement. And just kind of given the strength of the business that we have and Roy and Paul mentioned our strength in Hong Kong. That obviously kind of adds to the strength of our agent franchise.

And if I can just end in one last question, if I may, just with respect to new business value-add you noticed its up quite a bit in the US, still a relatively small 98 million, a significant number that you have. My question is how much of that NBV comes from the international segment?

Hi Darko, its Marianne Harrison here. Actually the NBV - biggest driver of the increase in NBV for 2018 was actually around our brokerage business. International sales were actually a little weaker than what we had expected in 2018 and that really was a result of the increase in the interest because it’s mostly premium finance. So we did see a little bit of weaker on the international side. We laid out our strategic plan just about a year ago and one of the big focuses in that plan was to really focus on the brokerage business and improve the profitability. So we undertook a number of management actions during 2018 that really helped to drive up the NBV. Some of it was pricing action, some of it was acquisition expenses in terms of becoming more efficient and then we also saw a favorable product and business mix, again all on the brokerage side of the business. So I would say that that has been pretty much primarily driven by the brokerage side.

The next question is from Scott Chan from Canaccord Genuity. Please go ahead.

I’ll be very brief due to time. Just following upon WAM in Asia, throughout the call you talked about like the tailwinds in Asia wealth. But if I look at the growth flow, its materially declined sequentially and kind of flattish over the last three quarters. Can you talk about strength in institutional, what kind of on a negative side that is kind of impacting the flows trend in Asia?

Scott, its Paul here. What you’re seeing is the general slow-down in retail which was across the board because of the markets in Asia. You remember markets were down for pretty much the full year last year and that pretty much left a lot of money on the sidelines in the retail space. So that’s what you’re seeing, that’s not unique to us, it’s across the board and in fact we fair quite well relative to peers when we look at that, but we feel we’re well positioned when the markets stabilize and we start to see come back. That’s the primary driver you’re seeing there and you’ll see it in our growth those number, particularly in China.

And then lastly Paul just on the institutional side which is probably the one bright spot in WAM in the quarter in terms of net flows. Can you may be talk about kind of what drove the flows in the quarter and kind of the outlook in the segment in ’19.

I think what we’re starting to see on the institutional side is the ability to sell the strategies that we have in all the countries in multiple jurisdictions, not just in the country that are out. So we are starting to see some interest in some of our agent strategy, some European investors as an example, we are starting to see some interest in our Asia institutional clients for US strategies and that’s really helping us leverage what we think to bear more broadly than the strategies that are more domestic in nature.

The next question is from Dave Motemaden from Evercore. Please go ahead.

Just a question for Steve on long term care, the Society of Actuaries just released their morbidity improvement study. Just wondering your view of the results of that and whether that impacts your view at all and the morbidity improvement that you have embedded in your long term care reserves?

Yes, we saw that study and the study what it really attempted to do was lay out four practicing actuaries in the field methodologies that would be appropriate for looking at trends in morbidity. The paper did not draw any conclusions on whether there are improvements or not. As I stated in the last call, we’ve been looking at additional data, the way that we analyze is consistent with the methods I talked about in the SOA study, and as I said before we’ve seen nothing that will change our point of view on morbidity improvement.

And then maybe just a question on the COLI business in Japan, just wondering whether really the profit drivers in that Japan is it more spread based or is it more underwriting, mortality based if you could just provide some color on what’s really driving the underlying earnings there?

This is Anil and I’m going to start and then probably Steve to supplement. But if you look at the COLI, the product and the construct of it, it has elements of both savings and protection. So the source of earnings or the source of profit kind of comes from your novel insurance margin as well as some of the gains that we get on investments. So it’s really the combination of the two things that really drives the source of earnings for us in COLI.

Got it. And then that’s a Yen-based product, so are you guys investing in Yen-based securities or are you using more of a global approach to investing in the assets and hedging that back to Yen, just in terms of the assets back in that business?

Hi Dave, its Scott. And yes, you’re exactly right, we try to take advantage of our global sourcing ability, but we absolutely will not take currency risk so we do swap it all back to Yen.

The next question is from Humphrey Lee from Dowling Partners. Please go ahead.

Just a follow-up question to Anil about the agency comps in Hong Kong. I just want to get a sense, is it a result of new (inaudible) more anxiously (inaudible) from your competitors or it’s because there’s the market changes. Like my understanding is a few of the players there they are sub-scaled and agents are being unhappy and wanting to leave. So given the success of Manulife in Hong Kong in recent year’s kind of being an attractive landing spot for them. So just kind of if you can color in terms of dynamics.

The family focus Humphrey on the agency growth is to be able to kind of attract some of the more younger talent and that’s something that we’ve been making a conscious attempt towards. So the success that we’ve kind of seeing in the recent times, or in the recent quarters and recent years in Hong Kong, all this as I said earlier makes it very compelling for the folks who want to kind of build career in Hong Kong to choose Manulife. And added to that the fact that we have a relationship through our MPF business with one out of three customers are now customers in Hong Kong really kind of provides a huge opportunity for us to kind of deepen and build relationships with our customers. In addition to that we have also been making significant investments in digital, which does a few things, one is it makes life simpler for our agents and our customers and that has a knock-on impact on productivity, and we make life simpler for our agents and customers that of course kind of is a very motivating opportunity for the agents to build on.

And then maybe a question for Naveed, I understand your discussion is for potential counter parties on legacy transactions is (inaudible) but I guess from a sentiment perspective given the macro environment has changed a billion and then the EBITDA assurance for credit cycle and all that. Has that kind of the discussion with any potential kind of parties different say from early in 2018 versus now?

Hi, Humphrey, Naveed here. Thanks for the question. I would say actually throughout 2018 we saw more interest in these blocks and that’s partly why we felt over too early on the capital release target. I haven’t really seen any pullback from counter parties. We continue to be engaged actively on a lot of the remaining blocks and again just to your question haven’t seen any pullback at all.

The next question is from Tianjiao Yu from Sanford Bernstein. Please go ahead.

This is Tianjiao Yu from Bernstein, congratulations on the result. I have two questions, the first one is a follow-up question on the NBV growth in the US. You mentioned about the 300% NBV growth is driven by margin expansion, and you mentioned the improvement on product mix, can you further elaborate on that? I was just wondering is there any help from the (inaudible) products that you launched.

It’s Marianne Harrison here. In terms of the NBV net margin we do see some favorable impact from the product and business mix and it was primarily more on the universal life and less on the term. One of the areas where we’re improving margins actually was on the term products, so we had increased pricing on that. So we did see more of a shift on the US side. We’re also seeing significant uptick on the vitality offering, and as Roy had mentioned we are offering that across all of our insurance product, the behavioral insurance and those sales in the first quarter alone were up 75% versus a year ago and for the full year it was up 52%, so we are seeing quite a favorable pickup from the vitality offering as well.

And the second question is regarding the core earnings. You previously mentioned the target of (inaudible) core earnings from the high potential business which include the Asia One group , Canada group and the US behavioral insurance. We are just wondering what is the targeted contribution from each segments broadly.

Thanks Tianjiao, this is Phil. We absolutely do stand by this target of two-thirds of our core earnings coming from high-potential businesses. We’ve also laid out a medium term operating target of 13% plus ROE and we stand by that 13% plus in aggregate. We absolutely expect the higher ROEs will come from the highest potential businesses, but overall I think that 13% is a good number to go with for now and we’ll evaluate once we have consistently achieved 13%.

If I can also just clarify, you mentioned that the categorization of our high potential businesses correctly, but you said behavioral insurance in the US, its actually global behavioral insurance which includes our efforts on vitality in the US, but also in Canada, as well as our MOVE program in Asia.

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

For Steve, just on the long term care, we’ve talked a lot about the potential changes you may or may not have to make to morbidity. One of the things you did mention to us in the past was you’ve been conservative on the assumption of price increases. One of your competitors did know that they’ve been able to successfully embed some new price increases on policies and force. Just kind of going back to the numbers that you gave us Steve, I think it was something like your reserves only included 800 million for price increases not yet approved. As you think about the 2019 review, can you give us an update on how your pricing increase actions have trended and what that may mean for the back and forth end reserves that you conducted in 2019.

Sure Sumit, and that’s correct. At the time investor day we had disclosed that there were 0.8 billion that were embedded in our reserves for filings that we had made but not yet achieved and that was a very conservative portion of the overall ask. So this will be one of the assumptions and we’ll update all the assumption and this is one of the assumptions that we’re reviewing for the Q3 basis change. Since that time we have made considerable progress, we have achieve another 500 million out of 800 million in increases and we still have many billion above that that we are continuing to pursue and expect to get over time. Our progress has been consistent with our expectations so we’re very pleased with this result, and as I said it will factor in to our Q3 review.

So a potential offset to what we’ve talked a lot about morbidity maybe being a headwind, you may not agree with that, but I think your comment (inaudible) any reserve there are a few things in the other direction as well.

We believe we will continue to have success with the rate increases. Yes, and we all consider how to factor that in to the reserves.

With no further questions registered at this time. I would now like to turn the meeting back to Ms. O’Neill. Adrienne O’Neill: Thank you, Operator. We will be available after the call if there are any follow-up questions. Have a nice morning, everyone.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.