00:00Colin, I have to start with all of the comments and market turbulence that they have engendered over recent weeks to do with auto loans, some private credit write-downs, of course, Jamie Dimon's comments.
00:12What have you been seeing over the last quarter in all of your businesses? Have you been looking more closely at your books?
00:19Yeah, Bonnie, it's great to be here. And it's a really interesting question on private credit. Private credit has grown quite a lot.
00:26The important piece to note with private credit, it is often below investment grade and floating rate notes.
00:32And so that tends to be a little bit more volatile than public credit.
00:37And so it shouldn't be surprising that you get some headlines from time to time.
00:42Now, as it pertains to a life insurance business, we don't use much private credit to back our insurance liabilities.
00:48But actually, we bought a private credit business last quarter because our customers are demanding that type of asset.
00:53So, you know, we're not concerned by the headlines that have come up.
00:57Does this mean, you know, anything like the end of the private credit industry?
01:00Absolutely not. You know, it's here for the long term.
01:03And we're glad to be involved in it for many cycles to come.
01:08Colin, one of the growth areas in your business has been Asia, specifically in wealth and asset management.
01:15How do you see that developing from here?
01:17Asia is so exciting for us, Nina.
01:20You know, we're in 11 markets from an insurance perspective and 14 when you think about our asset management business.
01:26But what's so exciting with life insurance in Asia is the demographic powers that are behind it.
01:31You know, we're selling products to people who haven't bought a financial services product before.
01:35And so that's really exciting.
01:36And so we get a level of growth that you just don't get in developed markets.
01:41And as a top three insurer in Asia, I think that sets us up really well for the next 10 years.
01:45Just wondering about your business in Hong Kong.
01:48Of course, that's an important market for you as well.
01:50There's been some regulatory changes there with regards to mandatory pension plans.
01:55How will that impact your business?
01:57Yes. So, you know, regulation and regulation change is just part and parcel of being a large financial services company.
02:03We saw some changes in the pension market in Hong Kong.
02:06We're the number one provider of the mandatory pension fund.
02:09And actually, what we're seeing is going to provide, you know, a different value set for the customer.
02:14The administration is going to be done centrally.
02:17So that will impact our earnings.
02:18We announced that last quarter, 25 million U.S. dollars a quarter will be the reduction in our earnings.
02:25But we're still very much committed to the market.
02:27We're number one in the market.
02:28And we see strong growth in the Hong Kong pension market.
02:32Hmm. Just wondering, actually, in terms of your your plans for the future as CFO, I know that you're targeting a return to equity ratio of 18 percent by 2027.
02:43How will you get there and how close are you at this point?
02:46Sure. You know, you know, we announced an 18 percent plus ROE targets last year on yesterday, actually in Hong Kong.
02:52And we're well on the way towards achieving that.
02:55Now, on the last quarter, we had a little bit more excess mortality, a little bit.
02:59A few people died, a few more people died than we expected.
03:02And, you know, but when you normalize for that, you know, our ROE is closer to 16 and a half percent.
03:09So we're close to 18 percent at the same time as our growth.
03:12And, you know, Asia is going to contribute a lot of growth.
03:14We're growing our asset management business quite attractively.
03:17And we also have a buyback program.
03:19Last year, we bought back five percent of our stock and this year we're buying back three percent of our stock.
03:24And that does help the ROE position as we go into 2027.
03:28You know, you mentioned some data that were different perhaps than you were anticipating, Colin, and how that affected you.
03:33You're obviously a data heavy business models just, you know, primed for AI, if you like.
03:39Draw the line for us between your AI investments and your bottom line.
03:43You're so right, Vonnie.
03:46You know, when you think of what can impact a life insurance company, you know, we've got factors that are all over the world.
03:53We're a global company and we're affected by markets everywhere.
03:56We're affected by demographic trends.
03:58We're affected by trends that are in the organization.
04:01So when you think of the power of AI and what that can actually do on a real time basis, there's huge opportunity for us to use AI to make our business better.
04:12And that's, you know, to price mortality better.
04:15It is to anticipate the markets and it's also to do real time reporting and real time forecasting.
04:21So both as an organization and for me as the CFO, as in charge of a finance function, it's really exciting to think about how AI can augment what we do on a day to day basis as a life insurance company.
04:34So it's great just to follow up actually on the something that you said earlier, you mentioned the acquisition of the private credit manager earlier this year.
04:42I'm wondering how you're thinking about dealmaking and your appetite for that for the year and years to come.
04:48Yeah. So, Nina, we're in a really fortunate position that we've got lots of capital on our balance sheet and we maintain a really strong balance sheet.
04:54We've got debt capacity, so we can certainly afford to grow inorganically.
04:58But the great thing about Manulife is with business in Asia and North America and an asset management presence in Europe, you know, we don't see big gaps in our portfolio.
05:07So, you know, inorganic expansion is something we will do on a, you know, on a needs basis.
05:12And so, you know, what we did in private credit, we bought a private credit manager because we saw that level of expertise in the market that we don't necessarily have ourselves.
05:22And so it was a great opportunity to use a fairly modest amount of our capital.
05:26We spent just under a billion dollars for 75 percent of Convest.
05:30And so that was a good opportunity to buy expertise that we can add to our own and improve our returns.
05:37But as far as dealmaking goes, I think we've got so many more opportunities organically than inorganically.
05:42Colin, you mentioned your wealth management business.
05:45What do you make of the market appreciation that we've seen, you know, whether we can continue to see that and your outlook for interest rates?
05:52It's so funny. I mean, you know, market outlook has become even harder than when I worked in capital markets.
06:01So, you know, I don't have a strong view on where the markets go from here.
06:05What's really important for us at Manulife is we maintain diversification.
06:09So we're not overweight any particular, you know, theme or trend.
06:14Certainly public credit is something that we hold a lot of, and that's because it really suits our liabilities quite well.
06:21So in terms of spreads, they're really tight and that reflects, you know, just buoyant markets.
06:27But we're never complacent when it comes to the market outlook.
06:32Interest rates is an interesting one.
06:33You know, interest rates are really important to the life insurance sector, but we're more focused on the long end of the curve.
06:40So when I, you know, and talking about the U.S. here, we had an interest rate cut in September, and we're probably going to get another cut next week when the decision comes out.
06:50Actually, when the short end of the curve goes down and the long end stays up, the long end right now is about four and a half percent.
06:56That's actually quite attractive for life insurance, because when people buy one of our products, they're buying a long term savings vehicle and then they'll compare that to what they earn in the bank.
07:07And if what they earn in the bank is going down because the short end of the curve is coming down, then our products will look more attractive.
07:13So it can be a good proposition for our customers if we see short end of the curve go down.
07:19But in reality, it's very hard to predict markets, so we don't take much interest rate risk at all.
07:26All right.
07:26Colin, sounds wise to me.
07:27That is Colin Simpson, CFO of Manulife and Bloomberg's Nina Trentman.
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