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2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver

Canadian Institute of Actuaries. L’Institut canadien des actuaires. 2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver. Topics For Discussion Changing Demographics Challenges in Retirement Customer Needs US Experience – GMWB Market Manulife’s Income Plus Product

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2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver

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  1. Canadian Institute of Actuaries L’Institut canadien des actuaires 2007 Annual Meeting ●Assemblée annuelle 2007 Vancouver

  2. Topics For Discussion Changing Demographics Challenges in Retirement Customer Needs US Experience – GMWB Market Manulife’s Income Plus Product Insurance Company Perspective 2007 Annual Meeting Assemblée annuelle 2007 Hot Topics in Segregated Funds

  3. Canadian population is aging # of consumers using retirement-related financial products will increase 23% over the next 10 years 'active mature' (age 65 - 74) will increase 38% over the next decade Life expectancy continues to increase Changing Demographics in Canada

  4. Consumer focus will shift from wealth accumulation to management and payout of accumulated wealth Savings must fund a longer retirement period Product allocation increasingly important as more baby boomers approach and enter retirement years Implications of Demographic Changes

  5. New Challenges in Retirement Manulife Investments asked Canadians: “What are the biggest concerns and challenges you have for retirement?” Several themes emerged: • Longevity • Interest Rates and Inflation • Market Volatility

  6. Challenge: Market Volatility Investors will face their greatest risks and challenges in the few years just before and after retirement Choosing the right investment products is critical Distribution Phase

  7. $100,000 Invested No Withdrawals Same Portfolio Order of Returns Reversed Sequence of Returns - Example

  8. Same average return Same results after 25 years Sequence of Returns – Before Retirement

  9. Same Portfolio at retirement Assume the same return assumptions for the next 25 years as in the previous 25 years Assume annual withdrawals starting at $34,000 and increasing 3% per year for inflation * Reversing the order of returns produces a very different result after retirement * Note: $34,000  5% of initial $684,000 Sequence of Returns – After Retirement

  10. Portfolio with early negative returns goes bankrupt after 16 years Portfolio with early positive returns remains robust Sequence of Returns – After Retirement

  11. Products with a hybrid of risk protection and upside potential are entrenched in the market demand for these products is projected to increase The introduction of GMWB products in the US has been the key driver of growth in the US Variable Annuity market in recent years Financial Product Changes

  12. The majority of Canadians prefer a monthly income stream in retirement Many are concerned that they may outlive their savings Canadians will have a strong preference for products that provide risk management income management tax efficiency What do Canadians want?

  13. The US Experience Why We Know That GMWB Products Have The Potential To Soar In Canada

  14. U.S. Variable Annuity Market The U.S. GMWB market, measured by sub account assets, exceeds $356 billion U.S. variable annuity assets (Q2 2006; $ Billions) GMWB VA $356 Non-GMWB VA $623 Source: Investor Economics

  15. U.S. Variable Annuity Market Net Flows U.S. variable annuity net flows (Q2 2006 YTD) • Over 80% of the growth in VAs since 2002 is accounted for by GMWB annuities • In first half of 2006, net flows to GMWB annuities have been $18.26 billion, relative to negative net flows for other types of variable annuities Non-GMWB VA GMWB VA Source: Investor Economics

  16. Canadian GMWB Market Projections Growth scenarios for the Canadian GMWB market Source: Investor Economics

  17. The Solution: IncomePlus Canada’s first Guaranteed Minimum Withdrawal Benefit Product

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

  19. IncomePlus – Guarantee Bonuses Guaranteed Withdrawal Balance Bonus It pays to wait: an extra 5% can really add up.

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

  21. IncomePlus – Resets and Bonuses Getting bonuses and resets working together IncomePlus Resets have the potential to increase the total Guaranteed Withdrawal Balance and the Death Benefit Guarantee. Guarantee Bonuses

  22. Who benefits from IncomePlus? Conservative investors Balanced Investors Growth-oriented investors Pension plan, defined contribution or group RRSP investors Late investors

  23. IncomePlus – Product Structure GIF Select Contract IncomePlus Series • 100% Withdrawal Benefit (3-year resets) • 100% Death Benefit (3-year resets) • 20 funds available (maximum 80% equity) 75 Series • 75% Maturity Benefit at age 100 (no resets) • 75% Death Benefit (no resets) • 39 funds available

  24. IncomePlus – Other Key Facts Initial deposit minimum of $50,000 IncomePlus funds can be purchased up to age 75 IncomePlus available for sale since October 23, 2006

  25. IncomePlus – Fund Choice Strong Partners • 20 funds to select from ranging from conservative to growth • Industry-leading asset managers

  26. IncomePlus…An Ideal Solution for Clients • Guaranteed monthly income / never lose the money invested • Potential for bonus income • Resets can lead to higher income or longer payout period or both • Tax efficiency • Protection in the “Retirement Risk Zone” …the right solution at the right time

  27. Insurance Company Perspective • IncomePlus is a complex product requiring significant investment in: • training (internal and external) • marketing support • administrative system enhancements • Strong stochastic modeling capabilities are critical to understand the risks and manage them effectively • Insurance company credit rating is an important factor in selling this product

  28. Marketing & Support Initiatives • Research • Wholesaling – Manulife / Fund Partners • Symposiums (Advisor) & Support Training • Advertising • Trade (print/online) • Consumer (print/TV/radio/online/outdoor) • Theme: “Turning Retirement Thinking On Its Head”

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