2012 mfc_ar__english

M a n u l i f e F i n a n c i a l C o r p o r a t i o n

2 0 1 2 A n n u a l R e p o r t

A n n u a l M e e t i n g M a y 2 n d , 2 0 1 3

Growth with Discipline

IR3823E

Our Vision

To be the most professional

financial services organization

in the world, providing strong,

reliable, trustworthy and

forward-thinking solutions

for our clients’ most significant

financial decisions.

Growth Strategy

Develop our Asian opportunity to the fullest.

Grow our wealth and asset management businesses in the U.S., Canada and Asia.

Continue to build our balanced Canadian franchise.

Continue to grow higher-ROE, lower risk U.S. businesses.

Enterprise Priorities

Become a global leader in retirement solutions and maintain a leadership position in our protection businesses.

Significantly extend our customer reach by growing and diversifying our distribution channels.

Build meaningful competitive advantage by leveraging our global scale, our global capabilities, and our local market focus to achieve operational excellence.

Leverage technology to enable competitive differentiation in attracting, servicing and retaining customers.

Attain leading brand rankings across protection and wealth in key markets.

Build and leverage our status as an employer of choice to attract and retain industry leading talent.

Maintain capital above our targets and manage risks within our appetite at all times.

Table of Contents

2 Chair of the Board’s Message

4 CEO’s Message to Shareholders

9 Management’s Discussion and Analysis

81 Consolidated Financial Statements

89 Notes to Consolidated Financial Statements

172 Board of Directors

173 Company Officers

175 Glossary of Terms

Our Values

P rofessionalism

R eal Value to our Customers I ntegrity

D emonstrated Financial Strength

E mployer of Choice

MA

NU

LIFE FINA

NC

IAL C

OR

POR

ATIO

N 2012 A

nnual Report

MANULIFE_AR2012_COVER_Mar13.indd 1 13-03-13 4:13 PM

M a n u l i f e F i n a n c i a l C o r p o r a t i o n

2 0 1 2 A n n u a l R e p o r t

A n n u a l M e e t i n g M a y 2 n d , 2 0 1 3

Growth with Discipline

IR3823E

Our Vision

To be the most professional

financial services organization

in the world, providing strong,

reliable, trustworthy and

forward-thinking solutions

for our clients’ most significant

financial decisions.

Growth Strategy

Develop our Asian opportunity to the fullest.

Grow our wealth and asset management businesses in the U.S., Canada and Asia.

Continue to build our balanced Canadian franchise.

Continue to grow higher-ROE, lower risk U.S. businesses.

Enterprise Priorities

Become a global leader in retirement solutions and maintain a leadership position in our protection businesses.

Significantly extend our customer reach by growing and diversifying our distribution channels.

Build meaningful competitive advantage by leveraging our global scale, our global capabilities, and our local market focus to achieve operational excellence.

Leverage technology to enable competitive differentiation in attracting, servicing and retaining customers.

Attain leading brand rankings across protection and wealth in key markets.

Build and leverage our status as an employer of choice to attract and retain industry leading talent.

Maintain capital above our targets and manage risks within our appetite at all times.

Table of Contents

2 Chair of the Board’s Message

4 CEO’s Message to Shareholders

9 Management’s Discussion and Analysis

81 Consolidated Financial Statements

89 Notes to Consolidated Financial Statements

172 Board of Directors

173 Company Officers

175 Glossary of Terms

Our Values

P rofessionalism

R eal Value to our Customers I ntegrity

D emonstrated Financial Strength

E mployer of Choice

MA

NU

LIFE FINA

NC

IAL C

OR

POR

ATIO

N 2012 A

nnual Report


2012 ANNUAL REPORT 1

Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Clients look to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions.

Manulife Financial has a significant global presence operating in the world’s largest economies, with internationally recognized brands which have stood for financial strength and integrity for more than a century.

With market-leading positions in Asia, Canada and the United States, we leverage a diverse business platform that offers a range of financial products in both developed and developing markets around the world.

Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers.

2nd largest North American Insurer3 11th largest Global Insurer3

Operating in 3 Key Geographies Founded in 1887

C$ millions, unless stated and per share data 2012 2011 % change5

Funds under Management1 (billion) $531.9 $499.7 9%

Insurance Sales1 $3,349 $2,507 33%

Wealth Management Sales1 $35,940 $34,299 4%

Core Earnings1 $2,187 $2,169 1%

Common Shareholders’ net income $1,624 $44 –

Basic Earnings per common share1 $0.90 $0.02 –

Return on Common Shareholders’ Equity 7.1% 0.2% –

Book Value per Common Share1 $12.56 $12.44 1%

C$ millions, unless stated 2012 2011 % change5




Core Earnings1 $963 $938 3%



Insurance Sales1 $1,310 $658 99%

Wealth Management Sales1 $10,057 $10,784 (7%)

Core Earnings1 $835 $849 (2%)



Insurance Sales1 $599 $619 (4%)


Core Earnings1 $1,085 $1,005 8%

Manulife Financial An International, Diversified Business In Asia In Canada In The United States

2012 CORE EARNINGS1,2

ASIA 33% CANADA 29%

U.S. 38%

C$2,883 million (excludes Corporate and Other (loss of $696 million))

1 Non-GAAP measure. The Chair of the Board’s Message and the Message to Shareholders from the CEO also include non-GAAP measures. See “Performance and Non-GAAP Measures” on page 75. 2 For more information on core earnings, see page 11. 3 Market Capitalization as of December 31, 2012. 4 Sales rank from most recently available data. See “Manulife Financial – Financial Strength Fact Sheet” and “John Hancock Fact Sheet” for further disclosures, both available at manulife.com. 5 Percent change for Funds Under Management and sales of insurance and wealth management are presented on a constant currency basis. 6 Net sales market rank per Strategic Insight. 7 Source: Pensions and Investments’ “Top Money Managers” survey, based on worldwide institutional assets at December 31, 2011.

CANADA 16%

U.S. 62%

ASIA 21%

EUROPE AND OTHER 1%

TOTAL C$238 BILLION

Our U.S. Insurance operation operates under the John Hancock brand and provides life and long-term care insurance products and services to select markets. John Hancock in the U.S. also offers a broad range of personal and family oriented wealth management products and services focused on individuals and business markets, as well as institutional ori-ented products for employee benefit plan funding solutions.

We distribute our products through a multi-channel network, including brokerage general agents, producer groups, banks, wirehouses and broker dealers as well as John Hancock Financial Network (“JHFN”), a national network of independent career agencies across the U.S.

Products and Services Individual life insurance Long-term care Mutual funds 529 College Savings plans 401(k) Retirement Savings plans

Manulife started U.S. operations in 1903 John Hancock was founded in 1862, and merged with Manulife in 2004

Sales Rank Data4

#1 Small Case (<$10M) 401(k) plans #5 Individual Life Insurance #6 Retail Long-Term Care Insurance #7 Structured Settlements #9 Mutual Funds6

Asset ManagementAs the asset management arm of the Company, Manulife Asset Management offers a comprehensive array of investment products and solutions to meet the needs of affiliated and non-affiliated fund companies, pension plans, foundations, endowments and financial institutions. We empower our investment professionals to deliver superior long-term performance based on proprietary fundamental research in a deeply resourced, team-based, highly disciplined and service-oriented operation. Manulife Asset Manage-ment has developed significantly since 2001, emerging as a Top 40 global asset manager7 and rising.

Investment CapabilitiesManulife Asset Management has more than 325 Investment Professionals with offices in 17 countries and territories addressing the needs of our clients around the world. We are on the ground in all the countries in which we operate, extracting value through our local knowledge and sharing information throughout our global network. Our high-performing investment teams provide our clients with a full spectrum of products and solutions organized into three major asset class groupings:

Public Markets Equity Fixed Income

Real Assets Hancock Timber Hancock Agricultural Hancock Renewable Energy Manulife Real Estate

Asset Allocation Solutions

Strategic & Tactical Multi-asset Funds Customized Solutions

Assets Under ManagementWe manage a wide range of assets diversified by geography, product and asset class.

33%$963 million

29%$835 million

38%$1, 085 million

Manulife Financial has operated in Asia since 1897, beginning in Hong Kong. Today, as a pan-Asian financial services company, we have insurance and asset management operations in 11 countries and territories, including Hong Kong, the Philippines, Singapore, Indonesia, Taiwan, China, Japan, Vietnam, Malaysia, Thailand, and Cambodia. In 2012, we expanded into the 11th territory and became the first wholly-owned foreign life insurer to commence operations in Cambo-dia. We offer a diverse portfolio of protection, savings and wealth management products and services to meet the needs of individuals and corporate customers. We distribute our products through a multi-channel platform across the region, including more than fifty-three thousand tied agents, bank partners, independent agents, and financial advisors.

Products and Services Individual life insurance Group life and health Hospital coverage Mutual funds Variable & fixed annuities Group retirement

Operating in 11 countries and territoriesExpanded into Cambodia, during 2012Started Asia Operations in 1897

Sales Rank Data4

#2 Hong Kong Pension #2 China Insurance #3 Vietnam Insurance #5 Philippines Insurance #8 Singapore Insurance #8 Hong Kong Insurance #9 Indonesia Insurance

Serving one in five Canadians, we are a leading financial services organiza-tion offering a diverse range of protection, estate planning, investment and banking solutions through a diversified multi-channel distribution network.

We provide retail solutions to individuals and business owners, sold mainly through independent advisors. Group life, health, disability and retire-ment solutions are marketed to Canadian employers through consultants, brokers and independent advisors. We also provide international employee benefits management to multinational corporations. Life, health and specialty products, such as travel insurance, are also offered through alternative distribution channels.

Products and Services Individual life insurance Living benefits insurance Mutual funds Private wealth management Variable & fixed annuities Guaranteed interest contracts High interest savings accounts Mortgages & investment loans Group life, health, disability & retirement Travel insurance Creditor insurance International employee benefits management

Founded in 1887

Sales Rank Data4

#1 Defined Contribution Group Pensions #1 Group Benefits #2 Individual Segregated Funds #2 Individual Life and Living Benefits













Core Earnings1 $2,187 $2,169 1%



















Core Earnings1 $1,085 $1,005 8%



ASIA 33% CANADA 29%

U.S. 38%



CANADA 16%

U.S. 62%

ASIA 21%

EUROPE AND OTHER 1%

TOTAL C$238 BILLION





Sales Rank Data4









33%$963 million

29%$835 million

38%$1, 085 million




Sales Rank Data4





Founded in 1887

Sales Rank Data4














Core Earnings1 $2,187 $2,169 1%



















Core Earnings1 $1,085 $1,005 8%



ASIA 33% CANADA 29%

U.S. 38%



CANADA 16%

U.S. 62%

ASIA 21%

EUROPE AND OTHER 1%

TOTAL C$238 BILLION





Sales Rank Data4









33%$963 million

29%$835 million

38%$1, 085 million




Sales Rank Data4





Founded in 1887

Sales Rank Data4



Chair of the Board’s Message

2 Manulife Financial Corporation 2012 Annual Report

GAIL COOK-BENNETT CHAIR OF THE BOARD

The result is a Board with deep and relevant expertise spread across a diverse

group of individuals.

The successes of 2012 are due to the astute and active leadership of our President and CEO, Donald Guloien, and his senior executive team, as well as the dedication of thousands of Manulife em-ployees and agents across Asia, and in Canada and the U.S. The Board was delighted to see Donald’s contributions recognized when he was named the 2012 International Business Executive of the Year by the Canadian Chamber of Commerce. In a year that marked the 125th anniversary of Manulife and the 150th anniversary of John Hancock, Donald gener-ously and fittingly accepted this honour on behalf of Manulife employees, both past and present.

Board TransformationThe changes in our Board have been designed

to ensure its activities and knowledge base are aligned with Manulife’s strategy and our oversight duties. Since 2008, we have appointed ten new directors, most with extensive professional and business experience in (and one is a resident of) Asia. Their combined expertise includes insurance, wealth and investment management, risk manage-ment, financial regulation, international accounting policy, and investment banking. Several were senior executives in large organizations, and five of these directors, as it happens, are women. The result is a Board with deep and relevant expertise spread across a diverse group of individuals. This diversity is a natural outcome of our strategic and disciplined search for outstanding talent.

An innovative element has been our expanded approach to director education. Asia is a key geog-raphy for Manulife; our Asia Division represented approximately one third of our core earnings in 2012. It is vital for our directors to have a deep understanding of the region and our operations there. To facilitate this, we host annual working trips during which a small group of directors meets with local management and employees to gain a better understanding of Manulife’s global businesses, the markets in which we operate and to build relationships with our leaders and partners in these territories. The 2012 Asia program included visits to Singapore, Indonesia and Hong Kong.

To enhance our ability to articulate and guide long-term strategy, manage enterprise risk, and hold management accountable, we worked to deepen our knowledge of the changes affecting the global financial services industry and of Manulife’s global operations. We fostered a Board culture defined by active director engagement and one with open and productive debate.

We also focused on human resources and talent development. The importance of ensuring a com-prehensive strategy to attract, retain and develop top talent remains a key priority, critical to attaining our goals. Equally important is the need to align our people and our compensation structures with Manulife’s risk appetite, strategic objectives and pay for performance philosophy. We first introduced the balanced scorecard in 2009 and update it annually to ensure it reflects our current environ-ment and priorities.

Since 2008, the Board has been particularly focused on matters of risk and its impact on the Company’s policies and procedures. We sepa-rated the Risk and Audit Committee into two new Committees – one for Risk and one for Audit – to increase focus on risk oversight, and have continued to build capabilities in this area.

To further increase the productivity of Board time and resources, we have been working with management to develop a new and streamlined Board reporting approach. The new approach will allow management to report high-level information to the Board in a format designed to enhance our discussion and monitoring of the Company’s businesses.

Good governance is critical to our ability to safeguard the long-term interests of shareholders, and earn the continued trust and confidence of our clients and policyholders. We believe that the measure of good governance is the quality of the decisions made and the results obtained. In this regard, the Board was honoured that Manulife was recognized for Best Overall Corporate Governance in the International category at the 2012 Corporate Governance Awards sponsored by Corporate Secretary, a leading U.S. governance and compliance publication.

Looking AheadThis marks my last letter as Chair as I and three

other directors, Tom d’Aquino, Robert Dineen and Hugh Sloan have reached the Board’s mandatory retirement age and will be stepping down this year. Each of these Directors has brought his own brand of wisdom, insight and tenacity to Manulife. I thank them on behalf of the Board, and our shareholders, for their contributions.

Manulife welcomes Sue Dabarno, Jim Prieur and Lesley Daniels Webster to the Board. Respectively, they bring deep expertise in wealth management, insurance and risk management. From among our directors, Dick DeWolfe was nominated as our next Board Chair, after an inclusive and careful process that ensures our Board will experience a seamless transition to new leadership in May 2013.

It has been a privilege to be Chair of the Board of Manulife at an extraordinary time in its history. I wish to gratefully acknowledge the talent and dedication of my fellow directors and in particular, to express my utmost respect for Donald Guloien’s leadership. Through the upheaval of the financial crisis and subsequent repositioning of this Company, he made extraordinarily difficult decisions, was open in his communications and demonstrated a deep commitment to our Company.

I leave Manulife confident that, despite the challenging economic headwinds of the past few years, our people, financial strength and position in international markets provide a solid foundation for continued earnings growth.

Gail Cook-Bennett Chair Of The Board

To My Fellow ShareholdersThe global financial crisis that began in 2008 dramatically changed the financial services industry. While the crisis was still unfolding, Manulife responded by transforming its business and adapting our Board for this new and challenging environment.

We have made significant progress in this regard. Management has stayed focused on the needs of our clients and policyholders. We have reduced risk and positioned the Company for a prolonged period of low interest rates and volatile equity markets. At the same time, the Company has continued to deliver strong performance across product lines, divisions and geographies. As a result, in 2012 we saw renewed confidence from the market in the Company’s value and potential. Today, management is focusing on growth with discipline and a new set of financial and business objectives for 2016.

Manulife Financial Corporation 2012 Annual Report 3

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