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Manulife Financial Corporation reports record third quarter earnings of $975 million Total funds under management reach record of $381 billion Toronto – Manulife Financial Corporation today reported record shareholders’ net income of $975 million for the third quarter of 2006, and earnings per share of $0.62. Return on common shareholders’ equity was 16.6 per cent for the quarter. Shareholders’ earnings of $975 million were up 31 per cent over reported earnings last year and earnings per share increased by 32 per cent. In 2005, the net impact of Hurricane Katrina and a tax related gain in Japan reduced earnings by $133 million. Excluding these items, growth in earnings per share would have been 14 per cent and return on common shareholders’ equity would have improved by 170 basis points over the same quarter last year. “I am very pleased with our third quarter financial results, and in particular with the strong earnings and growth in assets across all of our operating divisions this quarter,” said Dominic D’Alessandro, President and Chief Executive Officer of Manulife Financial. “Our businesses also continue to develop and launch new and innovative products in the marketplace, building on our leading market positions.” Total funds under management were $381 billion as at September 30, 2006, an increase of six per cent or $21 billion from one year ago, and a record level for the Company. Excluding the $4.9 billion of scheduled maturities of John Hancock Fixed institutional products and the $13 billion negative impact of currency movements, growth in total funds under management would have been 11 per cent. “Third quarter earnings benefited from overall favourable claims, investment related gains and continued growth of our in-force business,” noted Peter Rubenovitch, Senior Executive Vice President and Chief Financial Officer. “The negative impact of currency movements over the year and a charge related to a pre-merger John Hancock tax assessment dampened growth to some extent.” Premiums and deposits for the third quarter totaled $15.3 billion, slightly below the levels reported one year ago. Excluding the impact of currency movements over the year, premiums and deposits would have been $16.2 billion, up three per cent from one year ago. OPERATING HIGHLIGHTS United States
Canada
Asia and Japan
MANAGEMENT’S DISCUSSION AND ANALYSIS Financial Highlights (unaudited)
Net Income Manulife Financial Corporation shareholders’ net income for the third quarter of 2006 was $975 million, up 31 per cent from $746 million reported a year earlier. The third quarter of 2005 included $198 million of Property and Casualty Reinsurance losses related to Hurricane Katrina and a $65 million gain on the recognition of future tax assets in Japan. The $60 million negative impact of the strengthened Canadian dollar and the unfavourable resolution of a John Hancock pre-merger tax assessment ($36 million) both reduced earnings for the quarter. However, these reductions were more than offset by investment related gains, higher fee income related to the growth in funds under management in the wealth management businesses and favourable claims experience in the life insurance businesses. Year-to-date shareholders’ net income was $2,891 million compared to $2,386 million in 2005. Diluted Earnings per Share and Return on Common Shareholders’ Equity Third quarter diluted earnings per common share of $0.62 grew by 35 per cent from $0.46 in 2005 and return on common shareholders’ equity for the three months ended September 30, 2006 was 16.6 per cent compared to 12.7 per cent in 2005. Premiums and Deposits Premiums and deposits for the quarter were $15.3 billion, down three per cent from $15.8 billion reported a year earlier. On a constant currency basis, premiums and deposits were higher than a year earlier. While premiums and deposits have grown substantially in most of our business lines, there has been a decline in certain wealth businesses in part due to the suspension of certain products. Funds under Management Funds under management grew by six per cent, or $21.3 billion, to $380.7 billion as at September 30, 2006 from $359.4 billion as at September 30, 2005, primarily due to sales in wealth management products and the impact of rising equity markets over the last twelve months. The increase was partially offset by the $12.8 billion negative impact of a strengthened Canadian dollar and the $4.9 billion of scheduled maturities of John Hancock Fixed institutional products. Capital Total capital was $28.5 billion as at September 30, 2006, up $0.6 billion from $27.9 billion as at September 30, 2005. Net income in the past twelve months, $300 million of preferred shares issued on January 3, 2006 and the net effect of debt redemptions and new issues in the first quarter were partially offset by shareholders’ dividends of $1,088 million, the repurchase of 48 million shares for $1,709 million and the $905 million negative impact of the strengthened Canadian dollar over the last twelve months. PERFORMANCE BY DIVISION U.S.Insurance 
U.S. Insurance shareholders’ net income for the third quarter of 2006 was $169 million compared to $144 million reported a year earlier. The increase in earnings was largely due to favourable investment results including the impact of stronger equity markets; improved new business margins and favourable mortality experience in the life business; and in-force growth in the long term care business. These increases were partially offset by unfavourable long term care claims experience and the impact of a stronger Canadian dollar. Year-to-date shareholders’ net income was $454 million, compared to $436 million in 2005. U.S. Wealth Management
U.S. Wealth Management net income for the third quarter of 2006 was $280 million, up 41 per cent from $199 million reported in the prior year. The increase was principally due to favourable investment results in the current quarter compared to a decline in value of private equity holdings that arose a year ago and due to fee income on higher average assets in JH Variable Annuities (VA) and JH Retirement Plan Services (RPS). These increases were partially offset by the negative impact of a strengthened Canadian dollar. Year-to-date shareholders’ net income was $836 million compared to $652 million reported in 2005. Premiums and deposits were $8.8 billion, up six per cent or $0.5 billion from $8.3 billion reported in the third quarter of 2005. On a U.S. dollar basis, premiums and deposits were up 13 per cent. The growth was attributable to the impact of new sales and higher recurring deposits from the growing block of in-force participants in RPS and higher sales of open-end retail funds in the mutual fund business, reflecting sales success from both expanded distribution and the late 2005 launch of the Lifestyle Funds. Deposits include U.S.$0.6 billion related to the John Hancock staff 401(k) pension plan. Premiums and deposits were down in VA and in the JH Fixed business where there was a large sale in the third quarter of 2005. Funds under management were $179.8 billion as at September 30, 2006, an increase of six per cent over the $169.4 billion reported a year ago. This growth was the result of continued strong net policyholder cash flows in RPS and VA and the cumulative effect of favourable equity market performance over the last twelve months. These increases were partially offset by scheduled maturities exceeding new sales over the last twelve months in the JH Fixed business and by the negative impact of the stronger Canadian dollar. Canadian Division
Canadian Division shareholders’ net income for the third quarter of 2006 was $229 million, three per cent less than the $235 million reported in the third quarter of 2005. The decrease was primarily attributable to the impact of a lower increase in equity market returns on segregated fund guarantee reserves and poor claims experience in Group Benefits as compared to positive experience a year ago. Mostly offsetting these decreases were favourable claims experience in Individual Insurance and income earned from growth in segregated fund assets and Manulife Bank. Year-to-date shareholders’ net income was $734 million, up 20 per cent from $610 million reported for the same period last year. Premiums and deposits for the quarter were $3.1 billion, down eight per cent from $3.3 billion reported in the third quarter of 2005. Strong sales in Group Savings and Retirement Solutions were more than offset by declines in Individual Wealth Management’s segregated fund and mutual fund sales. Segregated funds sales were unusually high in 2005 reflecting the imminent withdrawal of a key product from Individual Wealth Management’s product portfolio. Sales have been lower in 2006 as the distribution force awaited the release of a new segregated fund product featuring a guaranteed minimum withdrawal benefit that was launched in October 2006. The division continues to review the competitiveness of its mutual fund offerings and four new funds were launched late in the third quarter. Funds under management grew by ten per cent or $6.5 billion to $73.2 billion as at September 30, 2006 from $66.7 billion as at September 30, 2005. The increase was driven by growth in segregated fund assets reflecting positive client cash flows and favourable investment returns over the past year, as well as strong growth in Manulife Bank’s lending and deposit products. Asia and Japan Division
Asia and Japan Division shareholders’ net income for the third quarter of 2006 was $182 million, down $31 million from $213 million reported a year earlier. Excluding the non-recurring $65 million release of tax provisions in Japan in the third quarter of 2005, earnings increased by $34 million. This increase was largely driven by fee income on the growth of funds under management in Japan variable annuities and Hong Kong pension and wealth management businesses; the impact of positive equity market performance on universal variable life results across Asia; as well as a shift in the mix of product sales in Hong Kong. These increases were partially offset by the impact of the stronger Canadian dollar. Year-to-date shareholders’ net income was $543 million compared to $504 million in 2005. Premiums and deposits were $1.6 billion, down 22 per cent from $2.1 billion in the third quarter of 2005. Growth in Hong Kong wealth management products and Singapore’s investment products were more than offset by the decreases from the temporary suspension of the sale of a variable annuity product in Japan pending clarification of its tax treatment and lower mutual fund deposits in Indonesia. Funds under management grew by 13 per cent, or $3.9 billion, to $33.9 billion as at September 30, 2006 from $30.0 billion as at September 30, 2005. Sales over the last twelve months in the Japan variable annuities, Hong Kong pension and wealth management businesses, as well as the positive impact of rising equity markets contributed to the year-over-year growth. These increases were partially offset by maturities and lapses in Japan’s Daihyaku block and the impact of the stronger Canadian dollar. Reinsurance Division
Reinsurance Division’s net income for the third quarter of 2006 was $86 million, up $237 million from a loss of $151 million reported a year earlier. The third quarter of 2005 included $198 million of Property and Casualty Reinsurance losses related to Hurricane Katrina. Excluding these losses, earnings increased by $39 million due to favourable claims experience, especially in Life Reinsurance. Year-to-date shareholders’ net income was $226 million compared to a loss of $79 million in 2005. Premiums for the quarter were $244 million, compared to $401 million reported in the third quarter of 2005. The decrease was primarily due to non-recurring reinstatement premiums in Property and Casualty Reinsurance on contracts impacted by Hurricane Katrina in the third quarter of 2005. Corporate and Other
Corporate and Other is comprised of the Investment Division’s external asset management business, earnings on excess capital (assets backing capital, net of amount allocated to operating divisions), the transfer of credit risk from operating divisions, changes in actuarial methods and assumptions and other non-operating events. Also included in Corporate and Other is the John Hancock Accident and Health operations, which primarily consists of contracts in dispute. Corporate and Other net income for the third quarter of 2006 was $29 million, down 73 per cent compared to $106 million reported a year earlier. The decrease was primarily due to lower investment income on assets backing capital compared to the unusually strong investment results in 2005, as well as the unfavourable resolution of a John Hancock pre-merger tax assessment in the amount of $36 million. Strong credit experience partially offset these items. Year-to-date shareholders’ net income was $98 million compared to $263 million in 2005. Normal Course Issuer Bid Subject to the final acceptance of its notice of intention by the Toronto Stock Exchange and receipt of insurance regulatory approval, Manulife Financial Corporation intends to make a normal course issuer bid permitting the purchase of up to 75 million common shares, representing approximately 4.9 per cent of the Company’s common shares. As at November 2, 2006, the Company has 1,545 million common shares outstanding. Purchases under the bid will be made through the facilities of the Toronto Stock Exchange at market prices prevailing at the time of purchase. The bid period will commence on November 9, 2006 and expire on November 8, 2007 or such earlier date as the Company completes purchases pursuant to the notice. Any common shares acquired by the Company will be cancelled. In addition, the Company may undertake repurchases of its common shares outside of Canada, but otherwise in compliance with applicable local securities laws. The Company may also enter into derivative-based programs in support of its repurchase activities, including the writing of put options and forward purchase agreements. These arrangements would allow the Company to better manage the cost of the repurchase of its common shares. If the Company does undertake these alternative arrangements and repurchases, the total number of common shares repurchased, including under the normal course issuer bid, will not exceed 75 million common shares. Under its current normal course issuer bid, which was initiated on November 9, 2005, the Company has purchased a total of 46,462,600 common shares at an average price of $36.14 per share. The number of common shares purchased and the average purchase price have been adjusted to reflect the two-for-one stock split by way of a common share dividend paid by the Company on June 2, 2006. The Company continues to believe that from time to time, the market price of its common shares may not fully reflect the value of its business and its future business prospects and accordingly, may represent an attractive investment and a desirable use of available funds. About Manulife Financial Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$381 billion (US$341 billion) as at September 30, 2006. Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com. – 30 – Attachments: Financial Highlights Consolidated Statements of Operations Consolidated Balance Sheets Divisional Information Notes: Manulife Financial Corporation will host a Third Quarter Earnings Results Conference Call at 2:00 p.m. ET November 2, 2006. For local and international locations, please call (416) 695-5261 and toll free in North America please call (877) 888-3855. Please call in ten minutes before the call starts. You will be required to provide your name and organization to the operator. A playback of this call will be available at 6:00 p.m. ET November 2, 2006 until midnight ET, November 9, 2006 by calling (416) 641-2135 (passcode #5045). The conference call will also be webcast through Manulife Financial’s website at 2:00 p.m. ET November 2, 2006. You may access the webcast at: www.manulife.com/QuarterlyReports. An archived version of the webcast will be available later on the website at the same URL as above. The Third Quarter 2006 Financial Statements and Statistical Information Package are also available on the Manulife website at: www.manulife.com/QuarterlyReports. Each of these documents may be downloaded before the webcast begins. Caution regarding Forward-Looking Statements This document contains forward-looking statements within the meaning of the “safe harbour” provisions of Canadian provincial securities laws and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, our objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and can generally be identified by the use of words such as “may”, “will”, “could”, “should”, “would”, “suspect”, “outlook”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, “forecast”, “objective” and “continue” (or the negative thereof) and words and expressions of similar import. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. Information about material factors or assumptions applied in making forward-looking statements, as well as important factors that could cause actual results to differ materially from expectations, may be found in the body of this document as well as under “Risk Factors” in our most recent Annual Information Form, under “Risk Management” and “Critical Accounting and Actuarial Policies” in the Management’s Discussion and Analysis in our most recent Annual Report, and elsewhere in our filings with Canadian and U.S. securities regulators. We do not undertake to update any forward-looking statements.
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