Manulife Financial Corp (MFC) 2005 Q4 法說會逐字稿

Good afternoon, and welcome to the Manulife Financial Q4 2005 financial results conference call for February 9, 2006. I would now like to turn the conference over to Patricia Kelly. Ms. Kelly, please go ahead.

Thank you, and good afternoon. I’d like to welcome everyone to Manulife Financial’s earnings conference call to discuss our fourth quarter 2005 financial and operating results. If anyone has not yet received our earnings announcement, statistical package and the slides for this conference call and webcast, these are available at the “Investor Relations” section of our website at www.manulife.com. As in prior quarters, our executives will be making some introductory comments. We will then follow with a question and answer session.

On behalf of the speakers that follow, I wish to caution investors that the presentation and responses to the questions may contain forward-looking statements within the meaning of the safe harbor provision of the Canadian provincial securities laws and the U.S. Private Securities Litigation Reform act of 1995. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about the material factors or assumptions underlying such statements and about the material factors that may cause actual results to vary from those expressed or implied in such statements, please consult the PowerPoint presentation for this conference call that is available on our website as well as the Company’s management discussion and analysis under the heading “Risk Management” in the most recent annual report. The Company does not undertake to update any forward-looking statements. Now, I’d like to turn the call over to Dominic D’Alessandro, our President and Chief Executive Officer.

Dominic D’Alessandro: Thank you, Patricia, and good afternoon, ladies and gentlemen. Thank you for joining us on this call to discuss our results for the fourth quarter and the year. Earlier today, we reported that shareholder earnings for 2005 were a record C$3.3 billion, and earnings per share were C$4.11. Top line results were also very strong, with record premiums and deposits of C$61.5 billion, up sharply over last year, driven by strong organic growth and a full year of contribution from John Hancock. 2005 represents our first full year of John Hancock earnings subsequent to our merger in April of 2004.

Slide 5 highlights our full year embedded value results, something I know many of you are keenly interested in. New business embedded value rose by 45% to C$1.6 billion. We can attribute this impressive growth to the full year of contribution from John Hancock and a very strong overall sales performance. As well, embedded value growth from operations was also very strong at 16%. In our supplementary information package, we have provided our historical new business embedded value by quarter, and we intend to disclose our total Company new business embedded value on a quarterly basis going forward.

Slide 6 highlights the earnings growth by division, and as you can see, except for the impact of hurricane losses on our Reinsurance operations, each of our major operating divisions contributed strongly to our excellent full-year results. In the United States, both our Protection and Wealth Management businesses are performing extremely well, with record results on both a top- and bottom line-basis. Our Canadian operations also had a very strong year and showed consistent growth throughout the year. In the Asia and Japan division, we continue to grow our businesses, diversifying our distribution channels through [inaudible] initiatives and by growing our captive sales force. Our Reinsurance division, however, had a disappointing year, as hurricane losses in the P&C segment resulted in an overall net loss for the division.

Before Peter begins his review of our fourth quarter financial results, I would like to comment on some of the operational highlights for the quarter. A notable achievement was the completion of the John Hancock integration. As we’ve said before, bringing together two sizeable and complex organizations is a significant undertaking. We have worked very hard to ensure that our service standards were maintained at a high level throughout the integration process.

Overall, sales growth was very strong across the Company, with a number of segments reporting record results in the fourth quarter. Of note are the record sales levels achieved in individual insurance in the U.S. and valuable annuities in the United States and valuable annuities in Japan. Fourth quarter sales for each of these key businesses rose by over 60% versus a year ago.

Our businesses in Asia continue to grow, particularly in mainland China, where we opened three new offices and received two additional city licenses. We are now authorized to operate in 12 cities, the most of any foreign life insurance company in China.

Recently, both Standard & Poor’s and Moody’s announced that they have changed their ratings outlook on Manulife to positive and indicated that subject to further review, they are prepared to consider the upgrade of Manulife’s already very strong financial ratings. Naturally, we welcome these endorsements and the confidence that they provide to our customers and investors, this further evidence that our diversified earnings platform and strong global franchises are recognized as best in class.

Finally, we also announced today that our board of directors approved a common share dividend increase of C$0.05 to C$0.35 per share. This marks the second increase this year and, again, is evidence of the quality of our earnings and of our commitment to returning capital to our shareholders.

In summary, we are very pleased with our performance in 2005, and we look forward to carrying this momentum into 2006. Now, with that, I’d like to ask Peter to take us through the numbers in more detail, with the usual question and answer period to follow. Peter?

Thank you, Dominic. As Dominic just noted, 2005 was an exceptional year for our Company, with record results by most measures. Included in slide 9 are some of our key financial metrics, all of which show solid year-over-year improvement. Top line growth continued to show strong momentum with premiums and deposits of C$16.3 billion for the quarter, an increase of 14% year over year and a record for the Company. Fourth quarter shareholders’ earnings increased 20% to C$908 million, and EPS increased 23% to C$1.14 per share. This strong growth was achieved despite the impact of currency movements over the year, which reduced fourth quarter earnings by C$42 million and full-year results by roughly C$200 million. We are very pleased to report that return on common shareholders’ equity was 15.5% in the fourth quarter. This is a significant 253 basis point improvement and moves us closer to our objective of a 16% ROE.

On slide 10, you can see the strong earnings growth reported in our major operating units. This chart summarizes the year-over-year fourth quarter results and highlights the unusual gains and losses included in Q4. I’d like to take a moment to cover these unusual items. The first item benefited earnings in our Japan segment by US$44 million. As you know, we acquired Daihyaku’s Mutual in-force business in 2001 and have been administering the business as a closed block since that time. This quarter we significantly reduced the risk profile of the assets supporting the block to better match existing liabilities. As a result of these changes, we were required by actuarial standards to release a portion of the reserves held against market risk on this block.

Secondly, this quarter we booked US$71 million of hurricane-related losses in the P&C segment of our Reinsurance division. The majority of these losses are related to a legacy multi-year second-loss cover which we would not write today. As the term suggests, this second-loss cover contract provided reinsurance coverage that pays only when there are two major claim events in the same year. Because it only pays on the second event, the attachment point is lower than our usual US$20 billion level. Given the frequency of large hurricanes, this contract has produced a claim.

Finally, in our Corporate segment, we recorded C$19 million of after-tax integration expenses. As well, we do our traditional review of reserves in the fourth quarter and booked a net benefit to earnings of C$49 million due to a C$25 million release of reserves and the related impact of taxes and minority interest. To the extent that our [CADs] are not required due to shortfalls in expected reserves, they will either emerge as earnings over time or as a basis change release of reserves. I do not consider this quarter’s C$25 million reserve release amount to be unusual or material with respect to the total of C$120 billion of actuarial reserves in our balance sheet, including C$26 billion of CADs. Taken together, these items virtually were offsetting with only a nominal impact on our total reported results.

Slide 11 shows the growth in earnings over the last five quarters. Some of the growth drivers in the fourth quarter included good growth from in-force business, very strong new sales, higher fee income driven by good growth in assets under management, and favorable investment results. These were partially offset by unfavorable claims in lapse experience and the negative impact of currency movements. As well, expenses are typically higher in the fourth quarter due to timing and the seasonality of our business.

On slide 12, you can see that full-year expenses in 2005 were C$3.6 billion compared to C$3.1 billion in 2004. As you know, ’04 only included eight months of operations from John Hancock. If we normalize the ’04 expenses by adding four additional months of John Hancock expenses and adjust for integration costs, portus and the impact of currency, year-over-year expenses are actually down 1% over the previous year. This trend in expenses is very favorable for us, particularly when compared to the strong increase in our premiums and deposits. The rise in variable costs associated with our very strong business growth in ’05 has been more than offset by the synergies we’ve achieved as part of our integration efforts.

As Dominic noted, we completed the integration of John Hancock during the fourth quarter, and we are now pleased to report that total expense synergies are now at an annualized run rate of US$400 million, significantly above even our revised target of US$325 million. By other measures, the transaction has also been a success. Revenue synergies exceeded expectations, with record sales levels being achieved in our U.S. Protection and U.S. Wealth Management divisions. Further, our 2005 full-year ROE surpassed initial projects, despite not yet fully completing the C$3 billion in share buybacks originally contemplated. With integration behind us and the business of John Hancock and Manulife operating as one combined company, we will no longer report on expense synergies, as it becomes increasingly difficult to meaningfully track, as the two companies have fully blended much of their operations.

I’d now like to turn to our divisional performance. On slide 14, you can see our U.S. Protection division had a strong quarter, with earnings increasing 25% over last year’s U.S$152 million. Within the individual insurance segment, Q4 recorded earnings of US$111 million were up marginally compared to last year due to strong investment experience and also higher fixed cost coverage as a result of increased sales. Largely offsetting this year-over-year earnings growth was a less favorable equity market’s performance during the quarter. The long term care segment recorded earnings of US$41 million, up sharply compared to the fourth quarter of last year. Recent efforts to improve the operational efficiency of the business, the bolstering of product margins, favorable investment experience, and improved claims and persistency experience all have contributed to this strong earnings growth. Full-year earnings for the Protection division of US$508 million were 41% above 2004 levels.

On slide 15, you can see that the sales of our U.S. individual insurance segment were exceptional this quarter. Sales of US$229 million set records for the best year, the best quarter, and the best month ever. The strong growth in sales can be attributed to recent sales initiatives, the improved positioning of our UL product, and the continued strong contribution to sales by the John Hancock financial network. COLI sales also rose with several transactions closing during the fourth quarter. COLI sales volumes do tend to be somewhat unpredictable quarter to quarter. However, this quarter, total individual insurance sales were up 60% over last year, and excluding COLI sales, were still up a substantial 43%. Within long term care sales increased by 40% over last year the US$35 million. This growth is primarily due to increased success in the corporate segment; however, retail sales have also improved for the third consecutive quarter.

On slide 16, you can see our U.S. Wealth Management completed an exception year, with earnings of US$129 million in the fourth quarter, up from US$94 million a year ago. Strong sales that drove growth in assets under management contributed to higher fee income and favorable investment results, producing a solid fourth quarter and record full-year result. Annuity earnings, although excellent, were down somewhat from the very strong third quarter due to the very favorable equity market performance in Q3. For the full year 2005, earnings were US$484 million, 58% above the prior year.

On slide 17, you can see that net flows from the U.S. Wealth Management position, which reflects premiums and deposits less withdrawals, continued to increase and contributed US$2.4 billion to funds under management during the quarter. While virtually all lines of business within the division showed positive net flows, variable annuities continued to make the most substantial contribution with net flows of US$1.6 billion, almost double last year’s level. We continue to see a very positive response to our current VA product offering, with growth sales increasing 63% over last year to US$2.4 billion. This momentum has also resulted in market share gains with our third quarter ranking in the non-proprietary channel, improving to second place up from fifth at the end of ’04. Both our retirement plan savings and mutual fund segments also contributed positively to net flows during the quarter. Net flows would have been ever stronger but for institutional redemptions in the mutual funds segment. Fixed annuity net flows were modestly negative as sales returned to more normal levels. We are very pleased with the top line growth recorded across the U.S. Wealth Management businesses. In total, gross sales in the fourth quarter increased by 30% over last year to US$5.5 billion.

Turning now to slide 18, fourth quarter earnings in our Guaranteed & Structured Financial Products segment were US$55 million, a more typical quarter for this business. This is down from the result reported last year, as the segment had less favorable claims and investment experience. Earnings increased by US$25 million relative to the third quarter when losses on hybrid assets and negative impact of interest rate movements combined to depress earnings for the segment. In ’06, the GSFP and fixed annuities businesses will be managed together to enhance the focus on retail orientated products, streamlined product offerings, and expanded distribution capabilities.

As illustrated in slide 19, our Canadian division continued to deliver solid results, with earnings of C$199 million in the fourth quarter. Compared to last year, Q4 earnings increased by 14%, driven by growth from in-force earnings and the benefits of improved profitability on new business. Earnings in individual wealth were down from the record third quarter result, which benefited from very strong equity market performance. On a full-year basis, earnings for the division increased by 32%, or C$195 million, over 2004 to a total of C$809 million. Sales within our individual insurance segment were C$62 million, a 15% increase over the third quarter but down marginally from a year ago. Several product improvements were made late in the fourth quarter, including the addition of five new simplicity balanced investment account offerings in our flagship Universal Life product, the introduction of a new online sales tool, and improvement to our market-leading critical illness product, LifeCheck. Group savings and retirement solution sales increased by 58% over the fourth quarter of last year, contributing to a record year for this business. Make a significant contribution to the fourth quarter was the previously announced large [K] sale to Wal-Mart, the implementation of which has gone very well.

Now to slide 21. Net flows of segregated funds within our individual wealth management segment in Canada remained strong but below the record level reported in the previous quarter. While our mutual fund business has performed very well over the past year, we did see lower positive net flows this quarter. Low interest rates and tight spreads continue to impact our fixed annuity and GIC net flows, where we elected to write lower new business volumes in the current level of maturities.

Now to slide 22. The Asia and Japan division reported strong earnings for the second consecutive quarter. Shareholders’ earnings were US$195 million, almost double the earnings reported one year ago. As noted earlier, earnings in Japan included US$44 million related to reducing our asset risk profile. Excluding this item, earnings increased by 53%, as strong growth in assets under management drove higher in-force earnings. In Hong Kong, sales growth, including volumes related to the launch of a new hospital benefit rider and higher in-force earnings, contributed to a record earnings of US$82 million for the quarter. In other Asia, improved investment results and a gain from the reduction in costs related to external fund management fees contributed to earnings growth. On a full-year basis, earnings for Asia and Japan division amounted to US$608 million, up 61% over ’04. Insurance sales in our Asia and Japan division improved in all segments, both year over year and quarter over quarter. In Japan, sales increased by 14% on a local currency basis, in part due to the introduction of ManuStep, a new universal life product launched in October. Hong Kong insurance sales also increased, rising by 14%, primarily due to improved success in agent recruitment. In Japan, variable annuity sales surpassed previous records, the sales at US$984 million during the quarter. The exceptional growth was primarily due to the launch of the “Two Surprises” product through the Bank Mitsubishi UFJ Financial Group. We also continued to see good wealth management growth in Hong Kong, where group and individual sales increased by 27% over last year and segregated funds under management surpassed the US$4 billion mark for the first time. The decline in wealth sales in other Asia reflect the impact of continued market turmoil in Indonesia in the mutual fund business in that market.

On slide 24, you’ll see our Reinsurance division had a disappointing quarter with a reported loss of US$24 million. As mentioned earlier, fourth quarter earnings included US$71 million of hurricane losses, with the majority of this related to a second-loss covered. I would also note that with industry loss estimates as high as US$15 billion, Wilma potentially ranks as one of the most costly hurricanes in history, perhaps surpassed only by Hurricanes Andrew and Katrina. As a result, we did have reports of some modest losses on our P&C contracts related to Hurricane Wilma. Normally, Manulife’s P&C contracts are structured to develop losses at attachment points above US$20 billion for U.S. events. But, some losses can attach at lower levels. We are reviewing all of the P&C claims advised this quarter but have taken a charge for the indicated claims amounts. Property catastrophe business written for 2006 was written at higher average premium rates and generally also included increases and expected attachment points for U.S. claims and other improvements in terms and conditions. On the life side, life reinsurance new business volumes increased by 42% for the full year, driven by several large in-force deals and by other new case volumes.

Turning now to slide 25. During the fourth quarter we complete our normal actuarial review of reserves for policy liabilities. The net impact of this review was a C$25 million release of reserves. The income from this release is reported in the Corporate line in segmented reporting and is comprised of items highlighted on slide 25. The first item is a C$338 million reserve strengthening related to the adoption of more conservative, long term interest rate assumptions in North America and Taiwan. The C$52 million of investment-related strengthening reflects updating our insurance business reserves for 2005 investment market movements, as well as investment strategy refinements in our John Hancock segments. Our regular review of non-economic assumptions resulted in a C$293 million reserve release. This consisted of releases from expense, mortality, and morbidity reserves, offset by policy persistency reserve increases. Changes to credit methods and assumptions led to a C$96 million reserve reduction. We released the remainder of our cyclical credit loss provisions while concurrently strengthening our long term credit loss assumptions for different fixed interest asset classes. Finally, we reduced reserves by C$26 million to reflect various other modeling refinements. Because the components of the basis changes that were attributable to the par business and minority interest were reserve increase, the actual impact of the basis changes on shareholders’ income after tax was a C$49 million increase in earnings.

I’m now, at slide 26. Our Source of Earnings presentation shows growth in expected earnings on in-force of C$7 million over Q3. Currency movements in the quarter dampened this growth to some extent. On a constant-currency basis, the growth over Q3 would have been C$38 million, or over 5%. Year-over-year expected earnings on in-force has grown by C$69 million, or 11%, and would have been up a very strong C$137 million, or 21%, on a constant-currency basis. The loss on new business origination fell to C$48 million in the quarter, as continued strong sales resulted in a substantial acquisition expense gain against our fixed expense levels. Fourth quarter experience gains returned to historical levels following a third quarter loss that included Katrina-related claims. P&C losses reduced claims gains across the Company to a net C$6 million unfavorable level; but, favorable investment results, including the gains in Japan particularly on fixed income and equities, caused the strong Q4 expense gain. Management actions in changes and assumptions amounted to a loss of C$29 million in the fourth quarter. Included in this amount is the positive impact of the basis changes previously described, offset by integration expenses, higher legal costs during the quarter, and other miscellaneous items. Segregated fund guarantees continued to be a positive contributor to earnings, as equity markets overall remained favorable. Earnings on surplus remained strong, although down from the third quarter, which included unusually good gains on hybrid assets.

Slide 27 shows that full year net income on a U.S. GAAP basis was C$3.45 billion, marginally higher by C$150 million than the CGAAP income of C$3.3 billion. This is similar to the result in 2004 when U.S. GAAP income was C$75 million higher than CGAAP income. While we do expect similar income levels over longer periods of time between the two GAAP bases, the results in recent years have been unusually close. Relative to 2004, ’05 saw a higher positive investment income variance for U.S. GAAP versus CGAAP, but this was offset by a negative variance on reserve-related items, due primarily to valuation basis change impact and investment- related reserve movements.

On slide 28, embedded value has shown the very strong growth in ’05 with operational embedded value up 16% during the year to C$32.3 billion. Close to 6% of this growth came from new business embedded value, 2% from experience items with the balance being the normal unwind of the discount rate. At C$1.6 billion, new business embedded value is up 45% from the C$1.1 billion reported for ’04. Total embedded value after currency and discount rate changes, dividends and capital movements grew 4% to C$29 billion. Currency continued to negatively impact embedded value when looked at from the C-dollar basis, reducing our embedded value by over 4%. The impact of shareholder dividends and share repurchases drove the bulk of the change. It should be noted that, as usual, the embedded value only reflects the value of current in-force business and tangible shareholder equity and does not include any value for future sales.

On slide 29, we show a new disclosure. We’re introducing in more detail quarterly analysis of new business embedded value. As the chart shows, quarterly new business embedded value has doubled from pre-merger levels. The Q4’05 new business embedded value of C$484 million is up sharply from the C$243 million value at Q1’04, the last pre-Hancock quarter. The C$484 million of new business embedded value in the quarter is composed of C$186 million on insurance businesses and C$298 million on wealth management businesses. Recent growth has been particularly strong in the wealth management lines.

Early in January, we closed our previously announced C$300 million preferred share offering. Also, through C$1.3 billion of share repurchases and some C$900 million common share dividends, we have returned C$2.2 billion to shareholders during 2005. Despite this, excess capital remains above C$3 billion. Finally, as Dominic noted, our board of directors today approved an increase in our quarterly common shareholder dividends to C$0.35 per share.

So, in conclusion, we are very pleased with the results reported in the fourth quarter. In almost every segment, we continued to see strong sales growth, which led to record levels of premiums and deposits. We also continued to deliver strong growth in shareholders’ earnings with yet another record quarter. EPS and ROE both rose strongly. And, finally, we are pleased to say that the significant effort to integrate John Hancock is now behind us. The process went extremely well with revenue and expense synergies exceeding targets. As a result, I am confident that we are well positioned to realize profitable growth for our shareholders in 2006. Thank you, and I’ll turn the call back over to Dominic.

Dominic D’Alessandro: Thank you, Peter. You can catch your breath now. Operator, we’re ready for the question and answer portion of our call.

Thank you. We will now begin the question and answer session. [OPERATOR INSTRUCTIONS]. The first question is from Steve Cawley from TD Newcrest. Please go ahead.

Hey, Peter. With the strain-- You said quickly there, I think in a response that related to scale, the reason why strain is down despite sales being up so much. Can you go into that a little bit for me, please?

Sure, Steve. The sales have been very strong in some lines. A component of our costs are fixed, and therefore our expense efficiencies, if you will, turn up as gains that reduce the amount of strain on new business.

So, that doesn’t go through experience gains.

No; it does not.

Okay. It goes through-- Okay. Question two. On page 25 of the sub-pack, the expected profit from in-force business in Asia - C$116 million versus C$77 million, a 51% increase. Is the majority of that 51% related to the variable annuity business, or could you give some sort of breakdown? Basically, also-- What I’m looking for here is what is other Asia doing in terms of contributing to that C$116?

Dominic D’Alessandro: Simon, you want to speak to that one?

Yes. A lot of the growth is related to the Japan business and the variable annuities. Also, in Hong Kong, we’ve actually seen some pretty [inaudible] in-force growth this year as the volumes have gone up and the profit margins on the business they’ve written this year have been quite strong. The other Asian component of that-- I’m just looking for them. I don’t believe it’s that significant of a component of the increase. It is primarily Asia and Hong Kong.

And, that’s a reflection that you’re still in build-out mode and that your China business, specifically, is still-- Is it still like a break-even business there because of the amount of infrastructure build that’s going on?

Dominic D’Alessandro: Yes. That’s right.

Okay. One last one. Your MCCSR is down in quarter. Is there a way for you to give us a sense of what your excess capital position is?

We continue to describe it as beyond C$3 billion. The change in MCCSR is just due to an upstream dividend that we did during the year from MLI to MFC. There’s no operational deterioration at all. The Company continues to have quite a bit of excess capital. Depending on your assumptions, you can come up with different calculations, but it’s in excess of C$3 billion.

Okay. Thank you.

Thank you. Your next question comes from Jamie Keating, RBC Capital Markets. Please go ahead.

Thank you. Maybe I can just start with Dominic, if I may. One of my favorite quotes of yours, Dominic, is the comment about bordering on irresponsible to make another large acquisition so soon after the Hancock. Now that we’ve finished integrating the Hancock, which, by the way, looks like it’s been great-- congratulations on that-- I was hoping you might comment on your appetite for acquisitions going forward and what you see out there. You’ve got lots of extra capital, and the market seems to be asking the question.

Dominic D’Alessandro: Well, there’s a lot of speculation. I read the same reviews and commentary that you do, Jamie. I guess I would repeat to you that our preferred method of growth is to grow organically. I think that we’re demonstrating that we can do that at an accelerated pace. As you know, we’re building out, I think, quite a platform in Asia. I’m not in any eager mood to consummate another large transaction. I think that our attitude is that if a great opportunity does come along, we’ll look at it; but we’re not aggressively pursuing that avenue of growth at this time. Our focus is, again, on building the existing business, which we think offers us very substantial opportunities.

Terrific. Thank you. I have a quick question as well on the reserve release in Japan. I apologize if you already addressed this, Peter. Just specifically, was that related to the VA or the insurance block - those assets that were shifted?

That was on the insurance block, Jamie. We more closely matched the assets and liabilities, and that’s resulted in the release of reserves.

Does it relate to any changes in sort of rules prospectively or anything?

No. No. it’s an action we’ve taken to match the book more closely.

Dominic D’Alessandro: What happened was very simple. We were backing some insurance liabilities with some equities. The equity market ran up, interest rates have gone up; so we decided to crystallize some equity gains and replace the investment in equities with an investment in fixed income securities. As a result of the greater certainty related to the fixed income securities, the reserve levels that you need are much less. That led to the release of the C$44 million.

Makes sense. It’s ongoing partly, I suppose. I wonder if I could also-- Product mix in Canadian--

Dominic D’Alessandro: Did you say a Don Guloien move?

No; I shouldn’t say that.

Dominic D’Alessandro: He’s here.

He’s happy to be complimented.

Dominic D’Alessandro: He’s blushing. He’s not used to being showered with praise.

I wanted to ask two other quickies. One is product mix in Canada - Canadian individual insurance. I wonder if you could just give a little color. There seemed to be some shifts around UL and whole. I wonder what you’re seeing. Does it relate to the margins at all?

Dominic D’Alessandro: We have Bruce Gordon with us. The question, Bruce, is the shift in product mix and what impact on margins, if any?

Jamie, the shift is to a bit more critical illness and away from UL not because of any change in margins but because of the question I got asked last quarter. There is some competition in the market that we think is uneconomic, and we have chosen as management not to follow that. So, that just caused a slight change in mix, but it is not because of margins. The margins are fine.

In fact, it sounds like your margins are going up a little bit on a broad basis. Is that true, Bruce?

A little bit, but part of it is the gains we made from the maritime integration and greater scale on the [sweat] of the fixed expenses. So, yes; marginally, they would be up.

Dominic D’Alessandro: You’re getting a flowing through the accounts now of a greater percentage of those expense synergies.

Got you. Okay. Thank you very much, everyone.

Thank you. Your next question comes from Mario Mendonca, Genuity Capital Markets. Please go ahead.

Good afternoon, everyone. A couple of quick questions, one sort of specific. On this-- In Japan you talk about moving the equities to the fixed income. I understand the concept there well. Is there more room? At one point you were still backing some of the obligations with cash. Is there room to push that higher?

Dominic D’Alessandro: There is. We can do some more terming out for a portion of the obligations we have. We did term out some back when rates were, what, 165 or something. We’ve now got another target. There’s more room. Yes, to answer your question.

And, the fact that you reflected this C$52 or so million in earnings now - I understand why that works that way. What I’m interested in is what are the ongoing benefits of having matched the obligation - the term of the obligation to the assets a little closer? Shouldn’t there be an ongoing benefit as well, or is it all front-ended-- not front-ended; that’s the inappropriate word. But, do you bring it all in now, and that’s it?

Dominic D’Alessandro: Well, I guess that there would be the normal experiences going forward on that block. It’s just that we’ve eliminated some uncertainty with respect to a portion of the assets that are supporting those liabilities. So, we haven’t up-fronted, I believe. Simon, maybe you can explain this. I mean, I gather that this is an absolute requirement that we didn’t have any choice. Given the actions that we took, we had to-- those gains were crystallized, and they had to be reflected through a movement in the reserve level.

That’s absolutely right. Under Canadian GAAP, you have to hold a reserve against investment mismatch. That reserve would have been held as long as we were holding equity to back the portfolio. So, as Dominic was mentioning, when we decided to crystallize the strong gains we had, we had to also release that component of the reserve. It doesn’t economically change the outlook on that business at all going forward.

I understand that. One quick thing. On U.S. GAAP-- I guess this is the first quarter. I suppose I’ve been waiting for this at some point to ask this question. This is the first quarter where U.S. GAAP earnings would actually have been a little lower than Canadian GAAP. I know that’s not been the case at all. Peter, it sounds to me like this relates specifically to what you were showing us on page 25, where you show the reserve releases and how those don’t necessarily fall into U.S. GAAP. Is that an appropriate way to look at it?

That’s correct. There are other differences. But, the actuarial side on both the U.S. and the Canadian side diverged in the fourth quarter. I’ve always urged you to look over multiple periods because both investment accounting and reserve accounting can diverge sharply quarter to quarter. But, over time, we’ve generally found the Canadian presentation to be the more conservative. But, you’re quite right in the observation you made.

So, as long as equity markets in the environment look strong, it’s conceivable that the U.S. GAAP earnings could very well be higher than Canadian GAAP earnings. But, when things soften a little bit, is it also conceivable that U.S. GAAP could trend higher than Canadian for an extended period of time?

Well, it’s quite driven by what you crystallize in terms of the investments and not necessarily whether the value goes up or down; it’s whether you’ve elected to retain or sell an appreciated or depreciated asset in respect to the investments. Then, the actuarial methodologies are quite different. If you recall from our last investor day, we did an extensive review of the many, many differences. What tends to happen, though, is a lot of these items wash out absent either very active trading, which is treated differently for CGAAP and U.S. GAAP or some other strong divergent trend. What we’ve seen, though, in the last few years is unusually close in my view. I wouldn’t have expected the two metrics to track quite as closely as they have. I wouldn’t describe this quarter as unusual. The total year is quite average in terms of the similarities, but the quarters can diverge for those items.

Perhaps just a final, more general question. You disclose your embedded value about C$29 billion. Suggest that the Company’s close to two times embedded value, which is-- that’s healthy. I think we can all acknowledge that. You can do some simple math, and the Company’s sort of trading at about 14 to 15 times its embedded value added, if you wanted to just sort of run through the math, which implies that new business has to remain pretty strong for the next little while to support that, if you sort of compare it to where the Europeans trade. Your outlook on premium deposit growth has been incredible in the last little while. Do you remain very bullish on this? Is this really unusual?

Dominic D’Alessandro: Well, I guess I’ll take a shot at answering your question, Mario. I think what you’re seeing is the unfolding of a plan. We’ve consistently over the last dozen years focused on improving our distribution and keeping our products refreshed. I think we’re executing in those two facets of our business exceptionally well. In the United States now, we have a brand. That’s a very powerful asset that we never had before. I think that the marriage of John Hancock brand name and the recognition it has in the marketplace together with the distribution capabilities that we have-- Had to have very sharp, very acute distribution capabilities in the past, given the absence of a brand recognition. And the quality of the products is all coming together to produce, I think, this very nice situation. We don’t-- As I said in my remarks, we expect this momentum to remain positive. There are pieces of the business in the United States which continue to require attention. We’re not happy with the growth that we’re experiencing in our mutual fund business, for example. We think that’s a terrific line of business to be in, and we’re not yet at levels that we’re satisfied with. When I look at our Asian businesses, we’re investing mightily in expanding the businesses everywhere. We’re seeing organic growth virtually everywhere. You’re not seeing a commensurate flow of net income yet because many of those businesses are still at a scale level where the earnings benefits are not as apparent or they will emerge as quickly. In Canada, we continue to grow our business here. Across the board, I think that we’re a clear leader. Our group benefits business I think is-- It’s exemplary what we’ve done with that business. Manulife was not really a significant player. Today, I think we’re number one in the marketplace. There’s stability in that earnings stream. We’re growing a very, very nice savings business here in Canada. We have not made a lot of noise about it. We’ve got a little bank here within the Company that surpassed C$6 billion in assets over the last-- It’s a very, very rapid rate of growth. We don’t see that there’s necessarily a limit to how quickly or at what levels that bank could grow. It’s very nicely profitable. It earns a very, very return on its capital. So, there’s a whole bunch of things that-- a whole bunch of businesses. It takes us 30 minutes to go through a summary of the different businesses in our Company. All of them have great prospects; otherwise, we wouldn’t be in them. We’ve been very ruthless about only staying in those businesses where we have prospects of growth. So, I think that the embedded value that you’re seeing is a reflection of all those things. We certainly look for it to continue to grow. I don’t think that-- Again, when you do rough comparisons and say this guy is trading at this multiple, and that guy’s at that multiple and so on and so forth, I think you have to look at the underlying quality of the organization and the opportunities it has available to it to draw judgment as to whether or not relative values properly reflect the worth of those entities.

That’s, I guess, what I’m grappling with. I appreciate your comments. Thank you.

Dominic D’Alessandro: Well, I’m trying to help you reach a conclusion that it’s a great bargain, Manulife.

Thanks for your help.

Thank you. Your next question comes from Timothy Lazaris, GMP Securities. Please go ahead.

Thanks. I have three questions. Two are just data points that I can’t seem to find, so maybe, Peter, if you could knock these ones off first-- what was the impact of foreign exchange in the quarter and for the year in terms of earnings?

The full year I think was C$200 million and the quarter C$42 million. I think I mentioned it somewhere in-- Here it is. Yes-- in my opening comments. C$42 million for the quarter and C$200 for the year over the respective periods.

Okay. And, then, the buy back. What did you buy back in the fourth quarter and in the year - the total number of shares and the average cost?

I’m going to have to dig for that. I know we spent C$1.2 billion. The recent quarter was fairly modest. We’ll get back to you in a minute with--

21 million shares.

21 million shares.

Dominic D’Alessandro: -- related to the full year, but what did we--? He’s asking what did we buy--

The quarter is a small number. I don’t know if we have it convenient. Do we?

You could call me offline. That’s fine. Then, my third question is about--

We purchased 2.1 million shares during the fourth quarter. Someone found it for you. And, the cost was C$132 million. And that’s just been recently filed, so it’s in the public domain.

Okay. Then, my last question, maybe for Dominic. I noticed that your net impaireds actually improved this quarter. When we had our last discussion, you talked about the impaireds. We should expect them to increase because of the fact that you had to re-price everything at the transaction. Is this the beginning of a trend that net impaireds are on their way down, or was there some action taken in Q4 to get that improvement?

Dominic D’Alessandro: We have-- Yes; let me introduce the great Don. We have the Don Guloien with us. He’s chomping at the bit to answer that question.

I don’t think this is a break in the trend. We had the resolution of some accounts in the fourth quarter that improved that number. The effect that we described earlier is still there for-- The arithmetic trending will be up in terms of the ratio, but it will slow down. This was a good quarter for us, so it caused it to go the other direction.

Okay. And, if I could just get that number of shares that was bought for the fiscal year offline, that would be great.

21 million.

Okay. Thank you very much.

Thank you. Your next question comes from Tom MacKinnon, Scotia Capital Markets. Please go ahead.

Thank you. Good afternoon. A couple of questions, first on the dividends. A couple of the other Canadian companies now are moving to the frequency of their dividend increase to every six months and have actually moved their target payout ratios up. I know you guys are-- I believe it’s a 25 to 35 target payout ratio, and you are sitting down towards the bottom end of that range. What can we look forward to in terms of dividend increases, and would you expect those to be greater than the expected earnings or EPS growth rate of the Company? And, I’ve got two follow ups.

Well, we just increased the dividend by $0.05. I believe that puts us at 31% payout ratio. Three-quarters of the previous change. We don’t announce a particular frequency or time table. We try and reflect times of change. We’ve just completed integration and thought it was an appropriate moment to reflect with the year-end results a change in dividend. We’re satisfied. We’ve just recently changed our target payout ratio up to the 25% to 35% payout ratio. We were 5% below that previously. It’s something we constantly review, of course, Tom.

Okay. You talked about price increases in the property cat market for reinsurance for 2006 renewals. I wonder if you can share with us some of the price increases you had. And, then one other follow up.

Dominic D’Alessandro: Well, I think Steve Mannik is here, and we’ll let him tell you about what’s happened in the renewal season that just completed, I think.

Yes. We’ve basically filled the quota we had. It was a difficult renewal because of the sticker shock that a lot of clients were going through. The reports are the retro market hardened more than the reinsurance market, and that’s where we play on the retro side. What we were able to achieve, roughly speaking, is a 25% increase in the premium rate we get and, in addition, the estimated attachment points went up about 25%. So, whereas we anticipated to attach at $20 billion events in the past, we’re now structured our contracts so that they would attach around a $25 billion event. And, then, on top of that, we were also able to get some better terms and conditions that lower the risk profile in the contracts.

Okay. And, then, with respect to the better matching of the Daihyaku block and replacing equity with some fixed income, is there any--? Have you looked at doing that with some other blocks of business in North America, perhaps? I think some of the long term care block might have a large proportion of equity backing that. Would there be a move you could play with that one as well?

Dominic D’Alessandro: That’s a very interesting question, Tom. It’s a very good question, and it’s very appropriate. So, Simon-- We are looking at that, and I’ll let Simon answer your specific question.

Tom, one of the reasons we had the beneficial impact in Japan is because when we were reviewing the block of liabilities that it was backing, which is the acquired by Daihyaku block, the duration on some of those contracts is not that long. There’s some imbalance coming up. So, therefore, the equities were backing a portfolio that didn’t have the same long duration profile that you’d see on the long term care. That’s one of our primary reasons that we did see the risk reserve go down - because we were having equities backing a portfolio with a shorter time horizon to maturity. So, you probably would not see that same dynamic if you were working with a block with a much longer average holding period or lifetime.

So, it’s just more a function of the duration. If there’s more availability of 30-year bonds, would you be able to replace it with some 30-year bonds then?

If we’ve looked at that as part of the asset mix, certainly.

The other thing on this Japan situation is you’ve got to take in account the extraordinary runup in the value of Japanese equities. The equity purported within the liability accounts was getting to a level that was going to be difficult to explain. We’re still very bullish on Japanese equities, but when you look at it on a segment-by-segment basis, it was a very, very high proportion.

Okay. Thanks for that.

Thank you. Your next question comes from Michael Goldberg of Desjardins Securities. Please go ahead.

Thanks very much. I’ve got three questions. First of all--

Dominic D’Alessandro: Michael, you have to start by complementing us on the embedded value disclosure. This is all done in response to your appetite for this information. I’m just kidding.

Thank you very much. It’s nice to see the discussion level higher plane we can be talking about something that’s very meaningful. So, congratulations. I do have three questions. First of all, in the embedded value itself, how much of the C$591 million experience gain and assumption changes is related to equity investment experience?

Dominic D’Alessandro: Well, we have that information somewhere.

Well, we decided in putting together the disclosure because we were seeing so much work on the new business embedded value that in terms of doing in-force embedded value, we went back to the more standard disclosure of just showing a single experience variance number to reduce the numbers that we have to sort of scrub. What I could say is that the majority of that C$591 gain is definitely driven by the equity markets, but I don’t actually have the exact number.

I can be in touch with you, Simon. Second, Wealth VNB more than doubling in the fourth quarter is quite an achievement. Can you elaborate just on what accounts for the strength in both the third and fourth quarters?

Dominic D’Alessandro: Simon, can you--? The question is why is the Wealth value of new business up so sharply?

I think it’s directly related to the very, very strong sales growth in both the variable annuity line in the U.S. and the variable annuities in Japan. Actually, that’s directly what’s driving it. The sales also up in Canada, but particularly the U.S. and Japan growth.

Finally, can you give us some idea of the geographic distribution of VNB and how it compares with the geographic distribution of earnings?

That’s not an item that we disclose at this time, Michael. I knew we’d end up with some question we hadn’t fully answered. Our view is that we’re not prepared at this point to be supporting that level of detail.

Well, I guess the question that I really have is the Asian businesses, as much as they’ve contributing to earnings, have often, especially in the developing markets-- have often been described as developing businesses so that they may not yet be contributing as much to earnings as they are to new business value. Is that something--?

That’s absolutely right, Michael. There’s no question that the younger businesses start producing new business embedded value more quickly than they generate accounting income.

Okay. Thanks a lot, and congratulations again.

Thank you. Your next question comes from Jukka Lipponen of Keefe, Bruyette & Woods. Please go ahead.

Good afternoon, a couple of questions. First of all, the buyback activity in the quarter. Was it for some particular reason a little lighter than what you’ve been having over the last few quarters?

I’ll speak to that. The price run up was so quick that we didn’t generally hit our bogies. We were looking at buybacks, and the market kept moving off the target price. So, I wouldn’t describe it as an indication that we’re not going to continue with our program, but it was a lighter buyback period for us. I don’t know if you want to add anything to this?

Dominic D’Alessandro: No.

Long term care in the U.S. - what drove the improvement in the margin in the lower loss ratio?

This is Bob Cook. We’ve been getting gradually improving margins all year long as we’ve been improving sales volumes, getting expense efficiencies. As well, as we’ve talked to you for several quarters of the re-engineering of the claims process has improved margins both on the in-force block of business as well as the new business. The earnings increase in the quarter also benefited from some one-time investment gains, which are probably not sustainable.

Lastly, can you give us an update on your--? Last quarter, you discussed a little bit about looking at the pandemic exposure and how you’re managing that risk.

Well, our focus with regard to that has been on developing a contingency plan to keep our doors open. It’s more a nature of how can we continue to service our clients and so forth than it is trying to develop a response to the possible claims that may result from-- The studies on this are all over the lot. Of course, we’ve done our own estimates internally, but I’m not sure they’re worth anything. Who knows? We’re in uncharted territory here.

Thank you.

Thank you. Your next question comes from John Reucassel of BMO Nesbitt Burns. Please go ahead.

Thank you. Just a question back to you, Dominic, on the-- If I look at-- You’re not eager to do a big deal, I guess you said. You have excess capital - C$3 billion-- at least C$3 billion. You probably add, arguably, C$2 billion again this year after dividends. When does it start impacting ROE?

Dominic D’Alessandro: I know it’s a terrible problem to have.

It’s just a wealthy person’s problem. But, does it start impacting ROE, and should we just get used to Manulife having C$4, C$5 or C$6 billion in excess capital?

Dominic D’Alessandro: Well, you know, we’ve carried excess capital from the day we became a public company, as a matter of fact. We’ve managed and found ways to operate so as to service that capital. Now, will be able to do that into the future? We’re constantly evaluating that. You’re seeing the actions, like buybacks and dividend increases and so forth. I think having the flexibility that we’ve maintained has served us well and served our shareholders well, if you look at the growth in the history of the Company. We’ve been able to undertake things in the manner that we’ve undertaken them because of our comfortable capital position. I don’t see that we should change that. Now, clearly, you can’t continue accumulating C$2 or C$3 billion of additional excess capital every year and be indifferent to it. As I say, it’s a nice problem to have, and we’ll deal with that problem as it arises so as to generate-- We have no interest in keeping capital here at substandard returns. If there is no other use for it, we will return it to our shareholders.

Okay. I guess just a question-- there are some new investment accounting rules that come January 1, 2007. Is this--? I guess the biggest issue was in our earnings on surplus. Is this, in your view, a non-event, or is there lots more work that--?

Dominic D’Alessandro: No. This is a very big event. It’s regrettable the direction that these changes are going. As I understand it, the changes in 2007 may in fact be meted in 2009 by changes to the international accounting standards. We have I guess a lot of discomfort with all of the practical implications of implementing interim rule changes. These are quite profound rule changes. So, we’re in dialog with the authorities and with our colleagues in the business to see if there is some way that the accounting impacts can be somehow mitigated so as to avoid the contortions that I’ve just described.

Okay. So, we should stay tuned on that?

Dominic D’Alessandro: I think so. I think it’s a developing file.

Okay. I guess the last question is just on the sales in the U.S. I’m always interested to see how much is-- where you’re getting the growth from. Which channel? Is it coming from the Hancock group or the M group or assets? I don’t know if John is there.

Dominic D’Alessandro: No. John isn’t here, but we’ve got Bob and Jim Boyle are both here that run the big pieces in the U.S. I’ll let them answer that question. Where’s your growth coming from, Jim, in the savings businesses?

On the annuity side, we obviously had a very good year. That new sales growth was broad based across all channels. We’re very proud of the fact that 30% of our sales this year were from new producers. So, we’re expanding our base within the existing channels. I would not particularly we had excellent success in the bank channel, which we attribute to the ethics group that we acquired through Hancock. In the variable annuity space, that group last year ranked about 15th in sales n the bank channel. As we ended the year, they were up to number five in the bank channel. As we look forward, we still feel very confident with our positioning. We expect to continue to bring new producers into all channels, and we also hope to continue to grow in the banks with the kind of success we had this year.

Dominic D’Alessandro: JHFN is itself a big distributor of VAs.

And, John Hancock Financial Network has been very good for us. We view them much like we view any of the big distributors. They are certainly one of our top-three firms and will be consistently, I believe.

On the insurance side, all of our major channels had good years last year. The biggest piece, the brokerage side, was up substantially. The M group had an excellent year. But, most notably, John Hancock Financial Network had an outstanding year. Their life sales last year were up over 30%. Their annuity sales were up over 40%. I would hazard a guess that I don’t think there’s any other career system in the industry that had as good a sales year as they did last year.

And this channel was about 2,000 when you took it over. Where does it stand today?

Dominic D’Alessandro: It was about 1,500. It had modest growth. I think the focus is-- You want to answer that question?

JHFN has got about 1,400 agents right now. So, we are still trying to build it. I think the good news story is that in 2005 they had their first net gain in manpower since 1998. So, our strategy is just taking hold, but that’s a good first data point. And, then, we look forward to continuing gains in ’06.

Dominic D’Alessandro: I think as well the JHFN is clustered around the east coast. There’s big pieces of the U.S. marketplace where it’s not represented. Part of our strategy is, of course, to get a bigger footprint in the U.S., and that will bring about an increase in manpower as well.

Right. Thank you very much.

Thank you. Your next question comes from Eric Berg of Lehman Brothers. Please go ahead.

Pardon me. Good afternoon to everyone. A few questions regarding your U.S. business. First of all, yesterday in a separate conference call-- I believe it was the Chairman of Protective-- gave a fairly long description of what he described as a very troubling development in the U.S. life insurance business, namely the tendency for older Americans to buy life insurance at greatly-- not that the prices are greatly reduced, but the cost to them is greatly reduced because the premiums are being financed by other hedge funds or third parties. He went on to describe it as a very concerning development, saying that policies were being sold with an assumption about lapse rates that were unrealistically low. It sounds like you’re aware of this. What’s your view on all this, and--? Go ahead; I’m sorry.

Dominic D’Alessandro: Thanks, Eric. Sorry. We are very, very aware and very concerned with that development. We call it stranger [inaudible] to invest your own life insurance. We think that it’s, frankly, an abuse of the inside build up rules and the tax privileges that life insurance contracts enjoy. We’ve been very, within the channels available to us, aggressive in trying to discourage that activity for the industry. We think it’s not good for the industry overall. As I understand it, within our own company we have disclosure requirements where we ask the question whether someone is financing the premiums. We try to discourage any such sales with all the means available to us. Our growth is not coming, at least to my knowledge, from that type of activity.

Okay. I have actually just one more question. I wanted to return to the issue of profitability in long term care, something that seems to be strikingly favorable at Manulife relative to its competitors. Could Bob or another member of the team there give just an example or two of just the specific-- a concrete example of the types of things that you are doing. You mentioned claims. I certainly understand that there was some non-recurring investment income. One can see that clearly in the income statement. But you also mentioned that you’re doing things to improve the quality of the claims effort. Could you give me an example?

Well, the specific thing we’re doing to improve the quality of the claims is that when a person files for a claim, we offer-- we don’t require, but we offer an immediate consulting service to help people figure out how best to receive the kind of benefits that they need to receive at the most efficient cost. That tends to work to both our advantage in minimizing the cash outflow, but it works for the advantage of the customer as well at preserving their benefits for a longer period of time. I think any time you get an alignment of the insurance company’s interest and the policyholder’s interest, the experience factors are going to work out very favorable over the long run.

Great. Actually, I did remember; I did have one question regarding your annuity business in the United States. That is, can you remind us, in shorthand form, how your guarantee works-- your capital markets guarantee and what you are dong to hedge that exposure?

Dominic D’Alessandro: Jim, the nature of our PP life.

Eric, we predominantly sell living benefits. Our benefit, as you know, is called Principal Plus for Life. It’s a 5% withdraw benefit for 20 years. At age 65, you can get that 5% for life. We also incent clients who choose not to withdraw the monies immediately by giving them a bonus feature, where instead of getting 100% of your monies back, you can get up to 150% of your monies back if you wait for ten years. So, we try to hedge these risks effectively through product design. Our product requires that you invest in balanced portfolios with at least a 20% component in equities. For us, that’s been our Lifestyle funds, which we’ve had now for over nine years.

20% bonds.

20% bonds. Excuse me. So, we’ve really been managing this risk now through product design but are actively looking at hedging techniques throughout the Company. Probably more to follow on that in future calls.

Thank you.

Thank you. Your last question comes from Jim Bantis of Credit Suisse First Boston. Please go ahead.

Hi. I won’t hold things up. Most of my questions have been answered. But, just maybe focusing back on the John Hancock banking captive sales force, to what extent or to what percentage do they account for VA sales in the quarter?

I’ll answer that. The John Hancock Financial Network for us for the whole year has been very consistent. They represent about 8% or 9% of our sales in the fourth quarter and for the whole year.

And, where do we think we can get that percentage by the end of ’06? I know there’s been a lot of effort with respect to improving the channel and making it-- getting closer to break even. I just want to get a sense of how high that percentage could go to and how soon could we get to break even?

Dominic D’Alessandro: Well, do you know, Bob? I think that the channels did break even in the fourth quarter, or pretty close.

Yes. Again, I complemented them on their sales earlier. We’re running that system now on a much more financially sound basis than at the time of the merger. They had a good quarter financial, and they’re very, very close to break even. They don’t need that many more agents on board to get to a break-even point.

Dominic D’Alessandro: I think with respect, then, to the other question about what proportion they could possibly ultimately represent, it really is a function of how quickly the rest of the system is growing. I think Jim Boyle was mentioning how many new producers generated business for you.

30% of our business this year was from new producers across all channels.

The bank sector’s growing. It’s kind of everybody competing for a piece of the pie, and the pie’s growing quite quickly.

It’s a good story. With respect to the Principal for Life, it’s been out for almost eight months now. Are you seeing a little competition with respect to competitors duplicating the product and getting penetration with the wholesalers on that?

No question, and that’s sort of a good news/bad news story. Virtually every competitor by the time May rolls around, which is product filing season, will have a product that in many ways mirror our products. So, on the positive side, that does validate the product that we brought to the marketplace, which in turn will make it a more competitive space. Having said that though, we’re quite bullish about where we are in the market. We certainly expect to maintain the market share gains we’ve received and continue to be very positive because of our ability to continue to increase wholesalers, expand in the bank channel. The Lifestyle funds we have will be a competitive differentiator for us because there’s nine years of track records and Morningstar ratings. We’re just beginning to leverage the brand - the Hancock. So, certainly there will be greater competition that will translate into a more difficult sale. But, we’re quite bullish on all the other aspects that ’06 will continue to be a good story.

Thanks very much, and well done this quarter.

Dominic D’Alessandro: Thank you very much, everybody, for joining us on the call. We look forward to our next call. Thank you.

Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.