2007 Annual Meeting ● Assemblée annuelle 2007

Vancouver

2007 Annual Meeting ● Assemblée annuelle 2007

Vancouver

Canadian Institute

of Actuaries

Canadian Institute

of Actuaries

L’Institut canadien desactuaires

L’Institut canadien desactuaires

Hot Topics in Segregated Funds

Topics For Discussion• Changing Demographics

• Challenges in Retirement

• Customer Needs

• US Experience – GMWB Market

• Manulife’s Income Plus Product

• Insurance Company Perspective

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Changing Demographics in Canada

• Canadian population is aging

• # of consumers using retirement-related financial products will increase 23% over the next 10 years

• 'active mature' (age 65 - 74) will increase 38% over the next decade

• Life expectancy continues to increase

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Implications of Demographic Changes

•

Consumer focus will shift from wealth accumulation to management and payout of accumulated wealth

Savings must fund a longer retirement period

Product allocation increasingly important as more baby boomers approach and enter retirement years

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“What are the biggest concerns and challenges you have for retirement?”

Several themes emerged:

Longevity

Interest Rates and Inflation

Market Volatility

New Challenges in Retirement

Manulife Investments asked Canadians:

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Investors will face their greatest risks and challenges in the few years just before and after retirement

Choosing the right investment products is critical

Challenge: Market Volatility

Distribution Phase

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Sequence of Returns - Example

• $100,000 Invested

• No Withdrawals

• Same Portfolio

• Order of Returns Reversed20

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Sequence of Returns – Before Retirement

• Same average return

• Same results after 25 years

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Sequence of Returns – After Retirement

• Same Portfolio at retirement

• Assume the same return assumptions for the next 25 years as in the previous 25 years

• Assume annual withdrawals starting at $34,000 and increasing 3% per year for inflation *

• Reversing the order of returns produces a very different result after retirement

* Note: $34,000 5% of initial $684,000

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Sequence of Returns – After Retirement

• Portfolio with early negative returns goes bankrupt after 16 years

• Portfolio with early positive returns remains robust

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Financial Product Changes

• Products with a hybrid of risk protection and upside potential are entrenched in the market

demand for these products is projected to increase

• The introduction of GMWB products in the US has been the key driver of growth in the US Variable Annuity market in recent years

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What do Canadians want?

• The majority of Canadians prefer a monthly income stream in retirement

• Many are concerned that they may outlive their savings

• Canadians will have a strong preference for products that provide

• risk management

• income management

• tax efficiency

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Why We Know That GMWB Products Have The Potential

To Soar In Canada

The US Experience20

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The U.S. GMWB market, measured by sub account assets, exceeds $356 billion

U.S. variable annuity assets(Q2 2006; $ Billions)

GMWB VA $356

Non-GMWB VA $623

Source: Investor Economics

GMWB VA

$356

Non-GMWB VA

$623

U.S. variable annuity assets

(Q2 2006; $ Billions)

U.S. Variable Annuity Market20

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Over 80% of the growth in VAs since 2002 is accounted for by GMWB annuities

In first half of 2006, net flows to GMWB annuities have been $18.26 billion, relative to negative net flows for other types of variable annuities

U.S. variable annuity net flows(Q2 2006 YTD)

$(0.98)

$18.26

-$5

$-

$5

$10

$15

$20

Non-GMWB VA GMWB VA

Billions

Source: Investor Economics

U.S. variable annuity net flows

(Q2 2006 YTD)

GMWB VANon-GMWB VA

U.S. Variable Annuity Market Net Flows

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Growth scenarios for the Canadian GMWB market

$11.1

$16.6

$22.5

$28.5

$8.4

$18.1

$27.7

$39.8

$53.6

$5.5$-

$10

$20

$30

$40

$50

$60

2007(P) 2008(P) 2009(P) 2010(P) 2011(P)

Projection

BillionsConservative Case Aggressive Case

Source: Investor Economics

Growth scenarios for the Canadian GMWB market

Canadian GMWB Market Projections20

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Canada’s first Guaranteed Minimum Withdrawal Benefit

Product

The Solution: IncomePlus20

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IncomePlus offers investors the opportunity to take advantage of additional guarantees that provide predictable, sustainable and potentially increasing income that are a necessary and highly desirable part of a secure retirement plan

GIF Select IncomePlus

Guarantees Return of principal guarantee A guarantee bonus for years in which withdrawals are not taken Automatic resets to lock-in market gains and potentially increase guarantees 100% (of deposit value) Death Benefit Guarantee

Investment options Choose from money market, bond, balanced, and asset allocation portfolios

Fees MERs competitive with most mutual funds Separate annual guarantee fee based on the risk level of the funds and outstanding return of principal guarantee

IncomePlus offers:20

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Guaranteed Withdrawal Balance Bonus

It pays to wait: an extra 5% can really add up.

IncomePlus – Guarantee Bonuses20

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Guarantees offer protection for retirement income

The Guaranteed Withdrawal Balance (GWB) resets automatically every three years for thirty years. These resets can create new, higher GWBs and higher annual withdrawals.This chart is hypothetical and for illustrative purposes only. It is not intended to predict or project investment results.

IncomePlus - Guarantees20

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Getting bonuses and resets working together

IncomePlus Resets have the potential to increase the total Guaranteed Withdrawal Balance and the Death Benefit Guarantee.

Guarantee Bonuses

IncomePlus – Resets and Bonuses20

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Conservative investors

Balanced Investors

Growth-oriented investors

Pension plan, defined contribution or group RRSP investors

Late investors

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Who benefits from IncomePlus?Who benefits from IncomePlus?

75 Series

75% Maturity Benefit at age 100 (no resets)

75% Death Benefit (no resets)

39 funds available

GIF Select Contract

IncomePlus Series

100% Withdrawal Benefit (3-year resets)

100% Death Benefit (3-year resets)

20 funds available (maximum 80% equity)

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IncomePlus – Product StructureIncomePlus – Product Structure

Initial deposit minimum of $50,000

IncomePlus funds can be purchased up to age 75

IncomePlus available for sale since October 23, 2006

IncomePlus – Other Key FactsIncomePlus – Other Key Facts20

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20 funds to select from ranging from conservative to growth

Industry-leading asset managers

IncomePlus – Fund ChoiceStrong Partners

IncomePlus – Fund ChoiceStrong Partners

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Guaranteed monthly income / never lose the money invested

Potential for bonus income

Resets can lead to higher income or longer payout period or both

Tax efficiency

Protection in the “Retirement Risk Zone”

…the right solution at the right time

IncomePlus…An Ideal Solution for Clients

IncomePlus…An Ideal Solution for Clients

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IncomePlus is a complex product requiring significant investment in:

training (internal and external)

marketing support

administrative system enhancements

Strong stochastic modeling capabilities are critical to understand the risks and manage them effectively

Insurance company credit rating is an important factor in selling this product

Insurance Company PerspectiveInsurance Company Perspective20

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Research

Wholesaling – Manulife / Fund Partners

Symposiums (Advisor) & Support Training

Advertising Trade (print/online)

Consumer (print/TV/radio/online/outdoor)

Theme: “Turning Retirement Thinking On Its Head”

Marketing & Support InitiativesMarketing & Support Initiatives20

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