WEBVTT - Manulife's Roy Gori Talks Insurance Market

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<v Speaker 1>All right, Well, one stock we are watching is the

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<v Speaker 1>Canadian insurance Manulife Financial. The stock is off to a

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<v Speaker 1>hot start this year. It's outpacing the S and P

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<v Speaker 1>by a wide margin. And here and how to talk

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<v Speaker 1>about the landscape for the insurance market. I'm pleased to

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<v Speaker 1>say we have Roy Gory, he is Manual Life President

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<v Speaker 1>and CEO, joining us for an exclusive conversation. So I'm

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<v Speaker 1>looking through the notes, and you have been calling this

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<v Speaker 1>a transformation, twenty twenty three a transformational year. Your stock

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<v Speaker 1>is at the highest level since about two thousand and eight.

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<v Speaker 1>Is it still transformation?

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<v Speaker 2>It is still a transformation.

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<v Speaker 3>Firstly, it's great to be here with you, Katie, and

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<v Speaker 3>you know, for our company, we've been on a journey

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<v Speaker 3>of transformation since twenty seventeen.

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<v Speaker 2>We said we wanted to be.

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<v Speaker 3>The most digital customer century company in our industry, but

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<v Speaker 3>at the same time we knew we had to de

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<v Speaker 3>risk our business and improve our returns. Over the last

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<v Speaker 3>six years, we've increased our return on equery from about

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<v Speaker 3>eleven percent to sixteen percent. We've divested a lot of

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<v Speaker 3>low roe businesses, and we've also digitized our franchise. So

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<v Speaker 3>we're really pleased with the progress that we've made, and

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<v Speaker 3>twenty three was certainly a milestone year for US. We

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<v Speaker 3>achieved great operating results, Our core innings for share grew

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<v Speaker 3>by seventeen percent, double digit growth in our sales metrics,

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<v Speaker 3>and we delivered positive netflows from our wealth and.

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<v Speaker 2>Ass management franchise.

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<v Speaker 3>Q one was a nice momentum follow on from twenty

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<v Speaker 3>twenty three. But you're right, you know, I think organizations

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<v Speaker 3>like ours don't ever stop transforming. I think as I

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<v Speaker 3>look to the decade ahead, there's still a lot of

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<v Speaker 3>opportunity for us, and we need to continue to look

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<v Speaker 3>for ways to advance our agenda and deliver great value

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<v Speaker 3>for not just customers but also for shareholders.

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<v Speaker 1>Well, let's get into some of that, particularly in reinsurance.

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<v Speaker 1>So you've done several deals over the past couple of months,

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<v Speaker 1>But just to set the scene, the way I think

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<v Speaker 1>about reinsurance is basically insurance for insurance companies. Is that

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<v Speaker 1>a fair description.

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<v Speaker 2>I think that's right.

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<v Speaker 3>So insurance companies will reduce their risk by either reinsuring

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<v Speaker 3>them or divesting blocks.

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<v Speaker 2>And again for US, a big priority for.

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<v Speaker 3>US over the last six years has been reinsured ssurance

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<v Speaker 3>or divestitures. We freed up eleven billion dollars worth a capital,

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<v Speaker 3>which has been a key part of how we've actually

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<v Speaker 3>improved our return on equity and reduced our risk profile.

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<v Speaker 3>And we work with partners that either take the business

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<v Speaker 3>off our books or who reinsure the business and basically

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<v Speaker 3>take on the risk associated with it.

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<v Speaker 1>Well, you've been particularly active when it comes to long

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<v Speaker 1>term care. Actually, it looks like you've reduced your exposure

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<v Speaker 1>to long term care and variable annuities through reinsurance to

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<v Speaker 1>eleven percent from twenty four percent from twenty seventeen, which

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<v Speaker 1>is also the year that you took over as CEO.

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<v Speaker 2>Do you think that there's more deals there?

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<v Speaker 1>Are you going to pursue more long term care reinsurance

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<v Speaker 1>deals to further exit that business.

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<v Speaker 2>Yes, is the short answer.

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<v Speaker 3>In twenty three we did a milestone historic long term

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<v Speaker 3>care deal. There weren't many deals ever done before our transaction,

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<v Speaker 3>and it was the largest ever in history. So it

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<v Speaker 3>was an important signal to the market that long term

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<v Speaker 3>care is transactable and for us to be to have

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<v Speaker 3>been able to trade the book pretty close to our

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<v Speaker 3>book value sent a really positive message to the market

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<v Speaker 3>and as a result of that, there are now many

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<v Speaker 3>more interested parties who are coming to talk to us

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<v Speaker 3>about other parts of our long term care portfolio that

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<v Speaker 3>they may want to acquire or take on from us.

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<v Speaker 2>So we think it was a good first step.

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<v Speaker 3>We traded at a really very attractive price, but we

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<v Speaker 3>think that there's further opportunity.

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<v Speaker 1>So inbound offers you're receiving, you're not just soliciting bid

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<v Speaker 1>sort of sphere.

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<v Speaker 3>Yeah, So there are people that are or companies that

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<v Speaker 3>are interested in talking to us about our long term

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<v Speaker 3>care portfolio, and we're certainly engaging in conversations with them.

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<v Speaker 1>So if your exposure is about eleven percent right now,

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<v Speaker 1>do you have a specific target in mind for where

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<v Speaker 1>you'd like to get to.

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<v Speaker 3>We wanted to get our long term care and variable annuity,

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<v Speaker 3>which were the more problematic parts of our portfolio, significantly

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<v Speaker 3>reduce and as you rightly point out, they represented about

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<v Speaker 3>twenty four percent of our earnings in twenty seventeen and

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<v Speaker 3>now down to approximately eleven percent. We think a as

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<v Speaker 3>we naturally grow our business, that percentage will continue to decrease,

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<v Speaker 3>but if we can transact, then that will be a

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<v Speaker 3>quicker way for us to actually get down to certainly

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<v Speaker 3>less than ten percent.

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<v Speaker 1>So that's the state of reinsurance and long term care.

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<v Speaker 1>Let's also talk about Asia, because you think about your

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<v Speaker 1>recent earnings report, I think a lot of the street

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<v Speaker 1>was pleasantly surprised by the growth in Asia. Bloomberg Intelligence

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<v Speaker 1>actually expects that the region's profit contribution could be fifty

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<v Speaker 1>percent by twenty twenty seven. How do you expand distribution

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<v Speaker 1>in Asia? What does that look like?

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<v Speaker 3>Yeah, well, we're really proud of our Asia franchise. It's

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<v Speaker 3>one of the things that really differentiates us from our peers.

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<v Speaker 3>We've got such a strong presence in Asia that complements

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<v Speaker 3>our North America capabilities, both.

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<v Speaker 2>In Canada and in the US. And again, having a

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<v Speaker 2>diversified business.

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<v Speaker 3>Across three broad geographies is a significant advantage, certainly in

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<v Speaker 3>an environment where we're seeing GDP growth in North America

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<v Speaker 3>slow a little bit and Asia continue to grow at

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<v Speaker 3>four to five percent.

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<v Speaker 2>We were the.

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<v Speaker 3>Sixth largest Pan Asian player many years ago, and now

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<v Speaker 3>we're a top three player, and you need to be

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<v Speaker 3>a top three player to grow and to have credibility

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<v Speaker 3>in that part of the world. Now we've been in

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<v Speaker 3>Asia for more than one hundred and twenty five years,

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<v Speaker 3>so we've got a strong brand and presence there.

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<v Speaker 2>We've got a strong.

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<v Speaker 3>Distribution capability with about one hundred thousand agents, but also

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<v Speaker 3>ten bank assurance partners that we work with to sell

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<v Speaker 3>our insurance products. So for us, distribution is really key.

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<v Speaker 3>Presence and a brand also matters, but we're very optimistic

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<v Speaker 3>about the outlook for our business in Asia.

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<v Speaker 1>I have to say bank assurance was a new vocal

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<v Speaker 1>word for me as I was preparing for this interview.

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<v Speaker 1>But before I let you go, I do want to

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<v Speaker 1>talk about wealth and asset management, obviously an area of

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<v Speaker 1>focus for you. I know you were recently closed a

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<v Speaker 1>deal to acquire CQS and I'm wondering when you think

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<v Speaker 1>about growing that side of the business, are you're trying

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<v Speaker 1>to do that through more acquisitions or through organic growth.

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<v Speaker 2>Yeah, that's a great question.

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<v Speaker 3>Our wealth and asset management business has been a really

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<v Speaker 3>big priority and focus for us. Again, we're quite unique

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<v Speaker 3>in that we're geographically diverse, but we're also business diverse

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<v Speaker 3>in that we're not just a retail shop.

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<v Speaker 2>We have an institutional.

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<v Speaker 3>Capability, but we also have a retirement capability and with

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<v Speaker 3>a world where the population is constantly aging and there

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<v Speaker 3>is a huge retirement gap that really positions us really

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<v Speaker 3>very well to capture business growth and momentum. So for us,

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<v Speaker 3>growth will happen organically because we're in parts of the

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<v Speaker 3>world where our products are in huge demand and need.

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<v Speaker 2>But there's also an opportunity to put.

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<v Speaker 3>Our capital to work, and we're very well capitalized. So

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<v Speaker 3>the investing in businesses like CQS that add to our

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<v Speaker 3>capabilities is another way that we're going to grow beyond

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<v Speaker 3>the organic opportunity that we've got.

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<v Speaker 1>Well, given the share performance, it seems like you certainly

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<v Speaker 1>have some money to spend, but Roy, unfortunately we have

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<v Speaker 1>to leave it there. Hope to see you again soon.

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<v Speaker 1>Our thanks, of course to Ry of Manulife.