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Letter to shareholders from our President and Chief Executive Officer, Roy Gori

Roy Gori
President & Chief Executive Officer

Read more about Roy

Dear fellow shareholders,

At a recent online global town hall with our employees, I was asked, “what question should we be asking ourselves that we haven’t already?”

This is such an important question because in organizations of our size, the biggest obstacle to change is inertia and the pull to keep doing things the way they’ve always been done. This isn’t an easy obstacle to face. Many of our processes are designed to support the old way of doing things and are not yet geared for the future. To better serve our customers and drive growth, we have to encourage new solutions to old challenges. 

When I receive great questions like this, I know that our work to ignite an insurgent mindset in our more than 34,000 employees globally is starting to make an impact. It is this mindset that will be a key ingredient in our plan to transform Manulife into the most digital, customer-centric global company in our industry. 

At our Investor Day in June, we outlined clear targets against each of our five strategic priorities and immediately began making concrete headway. We’re confident if we execute and deliver on this plan, we will inspire our employees, turn our customers into advocates and create significant shareholder value.

So, what was my answer to that employee’s question? That we should always be challenging ourselves by asking if there is a better way to create value for our three key stakeholders: customers, employees, and shareholders.

Or, put differently, are we living up to our mission of making decisions easier and lives better?

We’re proud that we get to help almost 28 million customers globally make their decisions easier and lives better and I’m excited about the progress we made in 2018. We also know that we are on a journey that will take time, passion, and tenacity. We’re confident we’ve got the right plan to succeed and we are building the right culture to enable us to successfully drive our transformation.

A year of record results and encouraging progress

Our ongoing success is only possible thanks to the commitment and enthusiasm our employees show our customers. Their efforts are reflected in the strong earnings growth we delivered and the early momentum we are seeing in our transformation.

We delivered the highest net income and core earnings in our Company’s history in 2018. Our net income attributed to shareholders was $4.8 billion and core earnings rose 23%, to $5.6 billion, with double-digit core earnings growth across all operating segments. New business value was up 20% and we generated net flows of $1.6 billion in our Global Wealth and Asset Management segment in 2018, our ninth consecutive year of positive net flows. Our assets under management and administration ended the year at $1.1 trillion, despite a backdrop of market volatility.

At our Investor Day in June, we outlined clear targets against each of our five strategic priorities and immediately began making concrete headway. We’re confident if we execute and deliver on this plan, we will inspire our employees, turn our customers into advocates, and create significant shareholder value. While we continue to face challenges, from market volatility and trade uncertainty to low interest rates and strong competition, we’re extremely encouraged by our progress to date. Let me provide some highlights on our progress:

Portfolio optimization

We are actively managing our capital to ensure we can deliver the best returns and cash generation possible, while reducing risk and volatility.

Over the past year, we announced reinsurance agreements on legacy blocks of business, sold alternative long-duration assets, sold Signator Investors, our U.S.-based broker/dealer, and offered customers in some of our legacy segregated fund products in Canada an opportunity to convert to a less capital-intensive product. Once we complete the initiatives we have announced, we expect to free up about $3.7 billion of capital, representing almost three-quarters of our 2022 target.

Expense efficiency

We are getting our cost structure into fighting shape and simplifying and digitizing our processes to position us for efficient growth.

Early in the year we announced various expense management actions, including transforming our Canadian operations, real-estate consolidation, voluntary retirement programs, and a consolidation of legacy information technology vendors. In addition, we’re using technology to deliver savings and driving a more cost-focused culture through the organization. For example, our businesses in North America processed more than 2.5 million transactions using robotics.

Our efforts are already paying off and we expect our in-flight initiatives to provide $700 million in pre-tax annual savings once they’re fully implemented. And despite our significant earnings growth in 2018, we held the growth of expenses included in core earnings to 3% in 2018 – less than half of the historical average. We know this isn’t a one-and-done achievement; our focus is on sustaining and extending these improvements and ensuring we view expense efficiency as a way of life.

Accelerating growth

We are accelerating growth in our highest potential businesses, including Asia, Global WAM, global behavioural insurance, and group benefits in Canada. 

We have an excellent foundation from which to capture the very significant opportunity that these businesses represent, underpinned by two demographic megatrends: the rise of Asia’s middle class and the aging of the world’s population. We have a strong position in group insurance in Canada and continue to revitalize this business with new product and service offerings. We are also digitizing the claims process, which is already helping us drive significant customer satisfaction gains.

In the U.S., in line with our mission of making customers’ lives better, we made a full commitment to behavioural insurance in the fall, with all life insurance policies now featuring John Hancock Vitality, which allow customers to save money and earn rewards for making healthy choices they track using wearable devices. We’re proud to offer this product and we’re already seeing how it is resonating with our customers. And while they tell us the savings and rewards are great it’s the impact on their health that excites them most. One customer wrote to us to say that she’s lost 15 pounds since starting the program and has “become almost obsessed with a healthy lifestyle.” Another customer wrote, “I have become hyper-focused on my health, making myself a priority for a part of each and every day,” adding she’s also noticed an improvement in her mental health. 

We believe the potential is just as compelling in Canada, where we recently announced we would expand Manulife Vitality to our group benefits customers. The story is similar in Asia, where we’ve continued to expand ManulifeMOVE, the behavioural insurance platform which we developed in-house. 

Digital customer leader

We are putting customers first and improving how our customers interact with us to ensure we exceed their expectations and we are using digitization and innovation to do so. 

Throughout 2018, we rolled out numerous initiatives to ensure we maintain strong momentum on this front. We’re focused on delivering solutions that are simple, intuitive, and fast. For example, we continued to digitize claims in several Asian markets. In Hong Kong, about half of eligible claims are now being submitted through our new, simpler, and better eClaims platform.

In Canada, we were the first life insurer to underwrite a policy using artificial intelligence, which shortens our response time and frees up our underwriters to work on more complex cases. In the U.S., our innovative saving and investing app, Twine, continues to attract great customer interest and has been featured several times as an App Store App of the Day in the U.S.

And as you will notice from reading this annual report, we recently refreshed and updated our brand, with a clear, modern, and uncluttered look, symbolizing our commitment to simplifying the complex for our customers.

High-performing team

Fostering a culture that is inclusive, engages every employee, and makes our company a compelling place for talented people to join and build their careers is foundational to the success of our transformation. 

So, last year, we revisited our values and asked our employees to tell us what aspects were important to keep and what needed to change to enable us to deliver on our mission. The feedback told us that being obsessed about our customers was a given. And it was clear that being encouraged to think big and challenge the status quo was critical. Our teams reinforced the significance of teamwork, confirming that getting work done together is what makes our company a special place, one where people care about each other and the communities we serve. As a result, we rolled out a set of refreshed values that are simple, authentic, and serve to powerfully align everyone to our mission.  

We’re now focused on bringing our values to life, looking at everything from the redesign of our workplace, to the way we work, to how we develop our employees, and recognize and reward accomplishments. Our re-skilling initiative is an excellent example. Throughout 2018, we trained thousands of employees in agile ways of working, positioning ourselves to more rapidly capture new opportunities and drive change.

What’s been especially gratifying is seeing how our employees are embracing our values. For example, knowing that sometimes we are working with our customers at difficult and heartbreaking moments in their lives like the loss of a loved one, a group of our customer service employees proposed the creation of a new approach to how we could support customers at this life moment.

Since the implementation of this approach, we’ve received many heartfelt letters from customers about what it’s meant to them — underscoring that our values are not just words hanging in a frame on an office wall, they are becoming part of our transformation DNA.

I am proud of all we have accomplished together in 2018. Importantly, we laid out our plan, committed to drive actions designed to make our company stronger, more competitive and successful long-term, and held ourselves accountable for delivering on those commitments.

One of our customers wrote to tell us about her experience when she was acting as an estate executor for a close friend. She was dealing with the grief of losing someone special and, at the same time, navigating through all of the administrative work required to settle a life insurance claim. Our customer was so impressed with how Chelsey, our customer service associate, handled the process that she wrote a letter about her kindness, empathy, and efficiency: “Chelsey always showed professionalism, but also the human side of her caring personality, expressing her condolences and always ending conversations with a ‘please reach out if you have any questions or concerns – we are here for you.’”

While we are working with urgency, we know organizational change can’t be completed overnight. In fact, it can sometimes feel like asking someone who has played right-handed tennis their entire life to start playing with their left hand; it’s not intuitive, the first few games aren’t very pretty, and it’s easy to simply go back to what seemed to work in the past. Our team is embracing the fact that to transform our Company we will have to be passionate, think big, and have grit. I’m excited by the level of commitment our team is showing to our plan and how eager they have been to embrace the change before us.

Giving back to the communities that we serve continues to be a priority for Manulife. Corporate donations, as well as donations and fundraising generated by our employees and through our community investment programs, totaled over $40 million globally in 2018.

Thank you

I am proud of all we have accomplished together in 2018. Importantly, we laid out our plan, committed to drive actions designed to make our company stronger, more competitive and successful long-term, and held ourselves accountable for delivering on those commitments. We still have work to do, but building on our team’s spirit, I am excited about what can be accomplished in the year to come. 

I want to thank John Cassaday, our new Chairman of the Board, and our Board of Directors for their support and counsel, as well as you, my fellow shareholders and customers, for placing your ongoing trust and confidence in Manulife and our team.

Looking ahead to 2019, we will remain focused on executing on our strategy. We have a great global franchise with a tremendous foundation and we are confident that if we continue to make a positive impact on our customers’ lives, deliver against the plan that we have set out for ourselves, offer our employees rewarding work and career opportunities, and face inertia with an insurgent mindset by continuing to ask ourselves “is there a better way?,” we will unlock significant and long-term value for all of our stakeholders.


Roy Gori
President and Chief Executive Officer, Manulife

Download Manulife Financial Corporation’s 2018 Annual Report

A year of record results and encouraging progress

Download Manulife Financial Corporation’s 2018 Annual Report

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