Catherine LaroucheProduct Manager, Whole LifeMarch 2013

Performax Gold

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Agenda

Whole Life 101 Base guarantees

Base model & luxury edition

Dividends and Performance Credits

Same objective – Different risk

Does current matter?

Going forward

Illustration software changes

Product vs illustration rate

Cost for 15 years

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Whole Life – base guarantees

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

Leverage

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Premium: level and guaranteed

Death Benefit vs Cash Value

Client gets one or the other, but not both

Whole Life 101

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

Leverage

YEARS

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Some whole life plans have a level death benefit

(base model)

Don’t have to be

participating to

be Whole Life

Whole Life 101

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

Leverage

YEARS

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Others have a death benefit that increases over time

(luxury edition)

Non-guaranteed Death Benefit

These plans are

typically

participating

How do values grow beyond the guarantees?

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

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It all starts with a dollar amount credited back to the policy annually

Dividends (Par)

Performance Credit (PGold)

This is the key to any

growth in values, in excess

of the guarantees

Whole Life – increase in values

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

Leverage

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Paid-up insurance purchased with dividends/PC credit

Total Cash Value

This dollar amount is used to purchase Paid-up insurance.

PUI increases the Death Benefit and the amount that was used to purchase the

insurance becomes cash value.

Participating Whole Life - dividends

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

Leverage

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If there is more money in the Par Fund than what’s required to satisfy the guarantees, “surplus” becomes available and dividends may be distributed to policies.

Dividends – not guaranteed 100% variable

Factors that impact surplus - Par products

Mortality – experience is better or worse than assumed in product pricing

Lapses – experience is better or worse than assumed in product pricing

Expenses – higher or lower cost to administer the product that what was expected

Taxes, inflation, …

Investment returns

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Factors that impact surplus - Performax Gold

Surplus does not apply to Performax Gold

Mortality – Experience is better or worse than assumed in product pricing

Lapses – Experience is better or worse than assumed in product pricing

Expenses – Higher or lower cost to administer the product that what was expected

Taxes, inflation, …

Investment returns

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The risks associated to mortality, lapses, expenses, and other factors

are taken on by Manulife (shareholders) not the policyholders.

Just like UL and Term.

Factors that impact surplus - Performax Gold

Surplus does not apply to Performax Gold

Mortality – Experience is better or worse than assumed in product pricing

Lapses – Experience is better or worse than assumed in product pricing

Expenses – Higher or lower cost to administer the product that what was expected

Taxes, inflation, …

Investment returns

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But clients are still getting some value for it. It’s contractually guaranteed and

part of the Performance Credit the policy receives annually.

Investment returns - it’s the only variable factor left in the equation, and the contract

shows how it will impact policy values.

Performax Gold – Performance Credit

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

Leverage

YEARS

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Minimum guaranteed PC

Policies will always receive a Performance Credit.

Performax Gold – Performance Credit

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Guaranteed Death Benefit

Guaranteed Cash Value

ClaimCancellation

Leverage

YEARS

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Minimum guaranteed PCVariable PC based on investment return

And another amount based on investment performance

PGold vs others: same objective – increase values

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Guaranteed Death benefit Guaranteed Death Benefit

Death Benefit Death Benefit

Par Whole Life Performax Gold

Paid-Up insurance

Paid-Up insurance

Different ways to get there – risk level

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Dividends Performance Credits

Par Whole Life Performax Gold

More risk Less risk

What does this mean for your clients?

With Performax Gold, just like with a UL, it’s an investment risk discussion

The investment risk is borne by policyholders but in a deferred fashion

The investment conversation is a unique one: A forward looking question

What will returns be, on average, over the lifetime of your policy

Investment return will have more impact in the later policy years than in the earlier policy years

It’s a perfect opportunity to showcase what Performax Gold can do for them

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PGold is well positioned to tackle today’s economic uncertainty

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$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100AGE

Male 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586

Total Death Benefit

Strong long-term values and IRR

All @ 6%3.5% for 10 years

3.5% for 15 years

3.5% for 20 years

DB $1.25M $1.22M $1.16M $1.06M

DB IRR 5.26% 5.19% 5.02% 4.72%

CV $903K $882K $834K $752K

CV IRR 4.19% 4.12% 3.93% 3.59%

Values at age 83

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Male 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586

So does “current” really matter?

It doesn’t

It’s not an estimate or a guarantee of what the future holds

It’s more a reflection of what happened in the past Because of smoothing of returns

Because of surplus (par products)

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Lessons learned from the (not so distant) past

With Performax Par If you were “conservatively” illustrating at current less 2% 10 years

ago, your dividends are now being calculated using a rate that is 15 bps lower than your original illustration

If you were “conservatively” illustrating at current less 1% 6 years ago, your dividends are now being calculated using a rate that is 50bps lower than your original illustration

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Lessons learned from the (not so distant) past

With one of the main par competitors If you were “conservatively” illustrating at current less 2% 10 years

ago, your dividends are now being calculated using a rate that is 11bps lower than your original illustration

If you were “conservatively” illustrating at current less 1% 5 years ago, your dividends are now being calculated using a rate that is 21bps lower than your original illustration

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Gov of Canada – long term bonds benchmark

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Jan 2010

Mar 2013

Fund mix

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65.3% Fixed Income

81% Fixed Income67% Fixed Income

Observations

In their Dividend Scale announcements, companies are alluding to future decreases due to the sustained low interest rates environment.

Even with participating whole life, investment returns have the largest impact on surplus, and as a result, dividends.

Par funds allow previously accumulated surplus to be taken into account when determining the Dividend Interest Rate for the year.

It’s just another form of smoothing. It doesn’t mean that Par funds get better investment returns than other funds, or that they are immune to low interest rates and market downturns.

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What does this mean going forward?

Significant downward pressure on fund yields Consider the asset mix

What percentage of fixed income assets? 60%? 80%? 90%?

Smoothing creates a lag Fund yield: Smoothed returns will be slower to decrease but slower

to increase

Dividend Interest Rates: Previously accumulated surplus may help slow down the decrease, but are we depleting faster than we’re replenishing?

Everyone is going in the same direction

For your clients: Set the right expectations, illustrate under different interest rate assumptions

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Changes to our illustration software

Changes to the “Rates” tab for Performax Gold

In January 2012, we changed the software to allow users to specify an illustration rate and gave them the ability to customize using the spreadsheet (like UL)

With this new release, we’ve completely removed the “current” terminology, users will have to specify a rate

The default setting will now be 0%

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Changes to the Rates tab in Diamond View

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The “Current” terminology has been removed.

The PC rate is now defaulted to 0%. Max is rate currently in effect

Can specify a rate up to 8%

There is no magic

Illustrating whole life should be about long term projections

Illustrate Performax Gold and the competitors at a rate that, on average, could be reasonably expected over the next 30-40 years

We’re all moving in the same direction, par or non-par, it doesn’t matter, investment performance has the greatest impact on values

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Death Benefit based on guaranteed values

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$400,000

$450,000

$500,000

$550,000

$600,000

$650,000

$700,000

41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99

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Age

Estate Achiever Sun Par Protector Performax Gold

Annual payment: Performax Gold $11,341 Estate Achiever $11,330 Par Protector $11,595

CL = 0.12%

PGold = 1.42%

Sun = 0.01%

$675,000

Male 40 HS3 (NS), $500,000base coverage, Costs -to -100, Accum Account, Pay for life, illustrated at 0%

IRR at LE

Don’t be afraid to show the worst case scenario

Consider the product’s performance under different interest rate scenarios

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Death Benefit, M45 NS, PUI, $500K base, 10 payments of $28K

Performax Gold Custom illustration rate: Years 1-5: 4.5%Years 6-12: Increasing by 25bps every yearYears 13 thereafter: 6.5%

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Death Benefit, M45 NS, PUI, $500K base, 10 payments of $25.6K

Performax Gold Custom illustration rate: Years 1-5: 5.15%Years 6-12: Increasing by 25bps every yearYears 13 thereafter: 7.15%

Unique Cost for 15 years duration Unique in the marketplace – our main competitors offer a

20 pay duration

Offers competitive value, in no more than 15 payments, guaranteed

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Male 45 NSValues at LE (83)

Performax Gold 15-pay

Estate Achiever20-pay

Sun Par Protector 20-pay

Annual payment $11.7K $11.7K $11.7K

Number of payments 15 20 20

Base coverage $350K $378K $337K

Death benefit @ 6.5 / 7.15 $994K $1.1M $1.3M

IRR 5.66% 5.50% 5.99%

Death benefit @ 5 / 5.15 $679K $769K $725K

IRR 4.41% 4.17% 3.97%65bps illustration

rate difference

for Sun

A different kind of Gold Product design that’s minimally impacted by returns in the

early policy years

Performance and value in good and bad times

Most flexible illustration – Allows you to set the right client expectations

Minimum Guaranteed Performance Credit paid every year that will contribute to Death Benefit and Cash Value growth

Full disclosure, no unknowns, more contractual guarantees than par products

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Manulife Segregated Fund RESP details

Manulife introduces a Segregated Fund RESP!

A new option to help your clients prepare for their children’s post-secondary education and achieve their financial goals

No additional licensing will be required if already life licensed

A new means of appealing to a broader market, including younger clients

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Manulife Segregated Fund RESP – Product features

1. Selection of 7 segregated funds invested in underlying Manulife Mutual Funds

2. 75% Death Benefit Guarantee*

3. 75% Maturity Guarantee*

4. Contract Maturity Date is Dec 31st of the 35th year (40th year for a Specified Plan) after the RESP Inception Date

5. Individual or Family Plan

6. Client name only

7. Life license is the only requirement to sell the product

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*Reduced proportionally by withdrawals

Contract & deposit minimums and maximums

Deposit minimums: No deposit is required if applying for the Canada

Learning Bond and / or the Alberta Centennial Education Savings (ACES) Grant

Fund minimum = $100 per fund, per sales charge option

Pre-authorized Credit (PAC) deposit minimum = $25/month, per fund

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Thank you