Robert Veloso - Donald A.

Guloien - Chief Executive Officer, President and Director Stephen Bernard Roder - Chief Financial Officer and Senior Executive Vice President Marianne Harrison - Senior Executive Vice President and General Manager of Canadian Division Craig Richard Bromley - Executive Vice President of Japan Operations and President of John Hancock Financial Services Warren Alfred Thomson - Chief Investment Officer and Senior Executive Vice President Cindy L.

Forbes - Chief Actuary, Executive Vice President and Chairman of Capital Committee Roy Gori - Chief Executive Officer of Manulife Asia and President of Manulife Asia Scott Sears Hartz - Executive Vice President of General Account Investments.

John Aiken - Barclays Capital, Research Division Gabriel Dechaine - Canaccord Genuity, Research Division Stephen Theriault - BofA Merrill Lynch, Research Division Meny Grauman - Cormark Securities Inc., Research Division Humphrey Lee - Dowling & Partners Securities, LLC Sumit Malhotra - Scotiabank Global Banking and Markets, Research Division Tom MacKinnon - BMO Capital Markets Equity Research Daniel Bergman - UBS Investment Bank, Research Division Doug Young - Desjardins Securities Inc., Research Division Mario Mendonca - TD Securities Equity Research Asim Imran - Macquarie Research.

Please be advised that this conference call is being recorded. Good afternoon, and welcome to the Manulife Financial First Quarter 2015 Financial Results Conference Call for Thursday, May 7, 2015. Your host for today will be Mr. Robert Veloso. Please go ahead, sir..

Thank you, and good afternoon. Welcome to Manulife's conference call to discuss our first quarter 2015 financial and operating results. Today's call will reference our earnings announcement, statistical package and webcast slides, which are available on the Investor Relations section of our website at manulife.com.

As in prior quarters, our executives will be making some remarks. We will then follow with a question-and-answer session. Today's speakers may make forward-looking statements within the meaning of securities legislation.

Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied.

For additional information about the material factors or assumptions applied and about the important factors that may cause actual results to differ, please consult the slide presentation for this conference call and the webcast available on our website, as well as the securities filings referred to in the slide entitled Caution Regarding Forward-Looking Statements.

We have also included a Note To Users slide that sets out the performance and non-GAAP measures used in today's presentation. [Operator Instructions] With that, I'd like to turn the call over to Donald Guloien, our President and Chief Executive Officer.

Donald?.

Thank you, Robert. Good afternoon, everyone, and thank you for joining us today. I'm joined on the call by several members of our senior management team including Roy Gori, our new Asia General Manager. Roy will also be joining us next week at Investor Day.

This morning, we announced our financial results for the first quarter of 2015, and we had a very good start to the year.

We completed 2 key acquisitions in North America, announced an exclusive 15-year regional distribution agreement with DBS in Asia, and in the United States, we launched Vitality, a forward-thinking solution that rewards customers for healthy living and differentiates us in the marketplace.

Our businesses generate strong net income, double-digit growth in core earnings, robust sales growth and record assets under management. And the Board of Directors approved a dividend increase of 10%, the second increase in less than a year, bringing the total dividend increase to 31% over the past 12 months.

On Slide 5, I will outline some of the performance and strategic highlights. In Asia, we delivered another quarter of very strong growth in insurance sales, with record volumes in Japan and Mainland China and high double-digit growth in Hong Kong and other Asia.

We achieved wealth sales that were nearly double the same period last year, reflecting a continuation of the momentum built in 2014. In April, we announced that Manulife had been selected by DBS as its exclusive provider of bancassurance solutions in Singapore, Hong Kong, Indonesia and Mainland China.

This partnership reflects the strength of Manulife's position in Asia and provides a platform for future long-term growth. In Canada, we've been making excellent early progress on the integration of Standard Life's Canadian operations. We welcome 2,000 employees and are focused on building relationships with our additional 1.4 million customers.

Our Mutual Fund business continues to grow strongly, achieving record levels in terms of gross and net sales as well as assets under management. We reported solid group retirement sales, and insurance sales were also strong, driven by our large-case Group Benefits segment where our competitive positioning improved.

In the United States, we generated solid life insurance sales as we continue to see momentum from the product enhancements we made last year. Growth from our Mutual Fund business continued to outpace the industry, and while we reported lower overall pension sales compared with last year, sales in the higher-margin small-case segment improved.

In April, we launched an exclusive partnership with Vitality to provide Americans with a forward-thinking life insurance solution that rewards customers for healthy living and essentially reinvents the entire proposition of life insurance.

In terms of our Global Wealth and Asset Management business, we achieved $821 billion of assets under management, our 26th conservative quarterly record. Manulife Asset Management commenced the year with strong momentum, securing significant new institutional mandates.

In aggregate, our Asset Management and group retirement businesses around the world generated $6.7 billion in net flows in the first quarter. And we delivered strong investment performance at Manulife Asset Management with the majority of our public asset classes outperforming their benchmarks on a 3- and 5-year basis.

Turning to Slide 6 and the financial highlights for the first quarter. On the bottom line, we delivered net income of $723 million despite the fact that we had negative investment-related experience. This was attributable to double-digit growth in core earnings to $797 million even though there was no contribution from investment experience.

And let me remind you that since 2007, the average gain from investment experience has been well over $100 million a quarter. In fact, it's closer to $150 million a quarter. So if we have achieved our average gain, only our average gain or capped it at $100, as we do with core earnings, they would have been $900 million.

On the top line, we had generated robust growth in both insurance and wealth sales. Insurance sales grew 39% from the prior year and wealth sales were up 15%. We are making significant headway with our strategy, delivering strong and sustainable earnings and maintaining strong levels of capital. The outlook for the company remains very positive.

All these factors made feel us confident proceeding with our second dividend increase in less than a year. With that, I'll turn it over to Steve Roder, who will review our financial highlights and then open the call to your questions. Thank you..

Thank you, Donald, and good afternoon, everyone. Let's start on Slide 8, where we summarize our financial performance for the first quarter of 2015. As you can see, our key performance indicators demonstrate positive trends.

We are delivering on our strategy with robust sales, growing in sustainable earnings, strong capital, reduced leverage and increasing dividends. We feel that retention of a strong capital base and reduced leverage is both prudent and desirable given continued economic uncertainty, and our desire to fund strategic investments.

But on the downside, it also makes it likely that we will not attain our 13% core ROE objective. We are among many financial institutions making this trade-off and feel that it's well justified by both the financial flexibility and downside risk protection.

In the following slides, I will spend some time discussing our financial and business performance. So turning to Slide 9. Core earnings continue to demonstrate progress, and this quarter included a highly satisfactory $19 million from the first 2 months post acquisition for the Canadian-based operations of Standard Life.

Core earnings also benefited from higher fee income from our growing Wealth and Asset Management businesses, improved policyholder experience, the impact of higher sales and favorable business mix in Asia on new business strain and the strengthening U.S. dollar.

And while lower interest rates reduced core earnings, this was partially offset by the impact of standardizing the methodology of attributing expected investment income on assets that support provisions for adverse deviation, which, in some cases, was previously reported in investment-related experience.

This quarter, we had adverse overall investment-related experience, which meant we were unable to take any investment-related experience into core earnings.

If we exclude the impact of core investment gains in the prior year and the $19 million contribution from Standard Life, we had a very healthy 16% increase in core earnings versus the first quarter of 2014. Turning to Slide 10. You can see that our reported net income was impacted by adverse investment-related experience charges of $77 million.

In the quarter, the impact of continued lower commodity prices on our oil and gas-related investments were more than offset by gains on our real estate and private equity investments.

However, updates to the cash flow projections required under the Canadian Asset Liabilities Method or CALM and related to future tax impacts, which occur in the normal course, pushed the overall investment-related experience to a charge, all other items falling outside of core earnings netted to a small positive. Slide 11 is our source of earnings.

Expected profit on in-force increased from the prior year period as the growth in fee income from higher assets under management and the benefit of standardizing the methodology for attributing expected earnings on assets to support our provisions for adverse deviation more than offset the impact of lower interest rates.

New business strain was largely in line with the prior year as higher acquisition costs in our wealth businesses were offset by the favorable impact of insurance sales volumes and business mix. Experience losses largely reflect our investment-related experience, which, as previously mentioned, was net negative.

Management actions and changes in assumptions this quarter reflect expected macro hedge costs, changes in actuarial methods and assumptions, the impact of reinsurance transactions and acquisition-related expenses. And earnings on surplus declined as higher core earnings on surplus were more than offset by increased mark-to-market charges.

Turning to Slide 12 and insurance sales. Insurance sales increased 39% from a year ago. This increase reflects very strong sales in Asia, driven by record volumes in Japan and Mainland China and double-digit growth in all other key markets.

Improved competitive positioning in large-case Group Benefits in Canada and solid life insurance sales in the U.S., driven by several product enhancements made last year that continue to generate strong sales momentum. On Slide 13, you can see that we continue to achieve strong wealth sales.

We've taken the opportunity this quarter to refine our definition of wealth sales to improve its relevance. Reflecting its growing scale and importance, we now include Manulife Asset Management external institutional deposits in wealth sales. We also are no longer reporting Manulife Bank new lending volumes in wealth sales.

In the first quarter, wealth sales of $19 billion were up 15% from the previous year. In Asia, record sales nearly doubled the prior year, reflecting double-digit growth in all key markets and record sales in Mainland China.

In Canada, wealth sales were very strong, driven by the contribution from Standard Life products and record mutual fund sales, which were a record even without the acquisition. In the U.S., wealth sales declined 8% due to the soft close of a popular fund and several large institutional allocations, which helped to boost sales in the prior year.

Finally, Manulife Asset Management secured significant institutional mandates, which drove a 40% increase in institutional deposits. We also achieved $6.7 billion in net flows into our Asset Management and group retirement businesses in the first quarter, showing good momentum from the second half of 2014. Turning to Slide 14.

Assets under management at the end of the first quarter were $821 billion, representing our 26th consecutive quarter of record assets under management. The inclusion of the Canadian-based operations of Standard Life contributed $63 billion to the increase. On Slide 15, you can see our capital position and leverage.

Our regulatory capital ratio of 245% decreased 3 percentage points from the prior year quarter, reflecting the acquisition of the Canadian-based operations of Standard Life, partly offset by the introduction of OSFI's 2015 MCCSR guidelines and capital-raising activities undertaken in the quarter.

We ended the quarter with a leverage ratio of 26.6%, down 120 basis points from the prior quarter and 420 basis points from the prior year. Our leverage ratio benefited from the equity issuance related to the acquisition, higher retained earnings and currency, partially offset by the sub-debt issuance. Turning to Slide 16.

Before I cover the performance of our operating divisions, I wanted to highlight the flagship bancassurance agreement with DBS that we signed in April, which Donald has already mentioned. This partnership accelerates our Asia growth strategy, deepens and diversifies our insurance business and gives us access to a wider range of customers.

With this agreement, we are deploying capital towards profitable growth and attractive shareholder returns. There is an initial USD 1.2 billion dollar payment to DBS, and it is our intention to fund this with internal resources. Other payments to DBS under the agreement are based on our success.

If things proceed in line with our expectations, then these success-based variable payments will significantly outweigh the initial payment. The initial payment to this regional distribution agreement could reduce Manulife's regulatory capital ratio by 10 points in January 2016.

The partnership is expected to become accretive to core earnings per share in 2017, the second year of the partnership. Turning to Slide 17. For those of you not familiar with DBS, DBS is a leading financial services group in Asia with a leading position in its home market of Singapore and a significant presence in Hong Kong.

The agreement covers these 2 markets plus Indonesia and Mainland China, where DBS has ambitions to grow. In these 4 markets, DBS has approximately 6 million customers. Roy Gori, CEO of Manulife Asia, will be talking more about the DBS partnership at our Investor Day next week.

Turning our focus to the operating highlights of our divisions, we begin with the Asia division on Slide 19. Asia core earnings increased 15% on a constant currency basis, driven by higher new business volumes and improved business mix, more favorable policyholder experience and increased fee income and growth in our in-force business.

Insurance sales of USD 338 million increased 42% from the prior year, reflecting record sales in Japan and Mainland China, recent product launches in Hong Kong and the expansion of our agency force in Hong Kong, the Philippines and Vietnam.

Record wealth sales of USD 2.8 dollars almost doubled the first quarter of 2014, reflecting double-digit growth in all key markets, record mutual fund sales in China and continued expansion of our bancassurance distribution reach for single premium product in Japan. Turning to our Canadian division's operating highlights.

Core earnings increased 15% over the prior year, driven by the impact of the Canadian operations of Standard Life and higher fee income and business growth, partly offset by unfavorable policyholder experience and the impact of lower interest rates.

Insurance sales of $214 million were up significantly from the prior year, reflecting improved competitive positioning in the large-case group benefits market.

Wealth sales of $3.5 billion increased 27% versus the prior year and were up 6%, including contributions from Standard Life products, largely due to record mutual fund sales, which were a record before the contribution of Standard Life products and solid group retirement sales amidst normal variability in the large-case size market.

Moving on to Slide 21 and the highlights for the U.S. division.

Core earnings were USD 316 million, down 7% from the prior year, reflecting lower interest rates and less favorable tax-related items, partly offset by favorable policyholder experience including in long-term care and lower amortization of deferred acquisition costs on our variable annuity block.

Insurance sales in the quarter were USD 117 million, up 9% from the first quarter of 2014, reflecting several product enhancements made last year that continue to generate strong sales momentum. Wealth sales declined 8%, reflecting the non-recurrence of large institutional allocations and the soft close of a popular fund in 2014.

However, we achieved strong momentum in mutual fund sales, which outpaced the industry. Retirement plan services sales declined but with a favorable mix.

So in conclusion, in the first quarter of 2015, we delivered strong net income; generated double-digit growth in core earnings; achieved strong wealth sales and robust insurance sales growth; achieved record assets under management; announced an exclusive bancassurance partnership with DBS; and the Board of Directors approved an increase to the quarterly dividend for 10% to 17% -- sorry, $0.17 per common share.

Before we open the line for questions, I want to remind you that we will be hosting our 2015 Investor Day on Monday, May 11. At Investor Day, we will launch new embedded value disclosures and supplementary disclosures on our Wealth and Asset Management businesses.

This will help investors better understand and assess the performance and value of 2 of our drivers of growth, Asia and Wealth and Asset Management. And this concludes our prepared remarks. So operator, we'll now open the call to questions..

[Operator Instructions] Our first question is from John Aiken from Barclays..

Steve, I don't want to steal your thunder on Monday, but in terms of the contribution from the Standard Life Canada acquisition, was higher than what I was anticipating based on guidance.

Are we looking at a better-than-expected run rate level? Or was there something unusual that contributed to the earnings in the first quarter?.

Thanks, John. Look, I think it's very early days on the Standard Life acquisition. We've only been in the door, as it were, for 2 months as of end of the quarter.

The earnings for the quarter, the $19 million we quoted, was very much in line with our expectations and, in fact, slightly above our expectations, but I wouldn't read anything much into that. I would point out a couple of things, though.

That $19 million is after the amortization of intangibles, which is around $4 million and also the funding cost on the $1.8 billion of cash that we put into the business. That constitutes about another $5 million. So if you gross up for those 2 items, it would be around $28 million. So that's a relevant data point.

But I don't think at this stage, there's a huge amount of change in our expectations. But as you say, Marianne will be able to give a lot more flavor around the deal on Monday. But it is early days and I wouldn't expect a lot more in the way of new data points..

Great.

Are you willing to give us any sense in terms of the absolute or relative contribution to expenses for the Canadian segment in the quarter?.

No, I think at this stage, probably not. I don't think we're giving that at this stage. As we go forward, we can give better information. I think it's a little bit like the E&E program where as we go forward, we'll update The Street on our progress but we probably won't do it in granular detail every quarter..

The next question is from Gabriel Dechaine from Canaccord Genuity..

Just on the sort of the investment gains.

So negative $77 million, can you just help me with the reconciliation there? And is there a gross number of investment losses for the quarter? And does actuarial change impacted that as well? And because of that number being of a certain size, you couldn't recognize $100 million of core investment gains? Just kind of conceptually walk me through that, please..

Yes, sure, Gabriel. Thank you for the question. So within that investment experience number, there are various components. In the quarter, we, not surprising, had some adverse appraisal mark-to-market experience, if you like, in the oil and gas sector. That would have been in the region of $200 million.

That was, in fact, slightly more than offset by gains elsewhere in the investment portfolio. So we had strong gains, in fact, in relation to real estate appraisal gains and also some private equity gains. There are other components in there. So for example, credit continued to be positive.

Despite there being some bond downgrades in the quarter, it was still positive. And then, there was a negative item which you could describe and I think one of our analysts described it as actuarial noise, which is to do with the, if you like, the updating of assumptions made at the previous quarter end.

And that's something of a random walk from quarter-to-quarter. If you look back over the last 4 years in aggregate, it comes to virtually 0. In any particular quarter, that item can be positive or negative. $100 million is quite a large number, but it can go either way and the quarter happened to be negative.

So I think the actuarial noise is what it is. In terms of the investment performance, the underlying investment performance, I think we had a really good experience from our portfolio approach to investment activity..

So essentially, the $77 million is kind of like a hole you need to dig yourself out of.

And if things fall into place and Don gave the averages for the past several years of quarterly gain, we would expect to see something in excess of $100 million going through that core investment gain line over the next 3 quarters, right?.

Well, okay. So no, I don't want to give you guidance on where we'll end up for the year, but let's just go back to what we said when we allocated more into investment experience gains, starting in the third quarter of 2016.

So looking back over several years of experience, we have come to the conclusion that allocating $400 million of investment experience gains into core earnings per year, i.e. $100 million a quarter, was a reasonable thing to do. It was prudent, but reasonable.

And the mechanics of it of such that in any particular quarter, we can effectively catch up to a run rate of $100 million quarter. So next quarter, for example, if next quarter we had $110 million, then that $110 million would find its way into core.

If, however, we had $210 million, then $200 million would find its way into core and $10 million would fall outside core.

So we can't ever get ahead of -- I'm sorry, if we have $210 million, next quarter it would be $33 million that would fall outside core because we'd be catching up to the run rate, right? Are you still with me? We can't get ahead of $100 million a quarter. That sounds a bit of a challenge..

My doodles have got that. Okay. Then just....

I kind of asked myself why I picked $210 million, what a stupid number to pick..

Actually -- and then just a follow-up on Standard Life.

So if I take that $28 million of earnings, adding back the amortization of intangibles and then the financing costs and annualize that, I'm still at around $160 million, $170 million, and I'm just wondering, that number is quite a bit lower than what I would have assumed from having looked at the regulatory filings of Standard Life Canada and was that just a difference between core and reported earnings that we weren't -- or I wasn't aware of?.

Okay. So I think there are 2 or 3 comments that need to be made. First of all, Standard Life did not have a definition or a usage of core earnings. So that does make a difference.

Secondly, if you pick up the regulatory returns of Standard Life within there and its related, but within there, there would be potentially one-off items that would be within core earnings when it came to our appraisal of this opportunity we'll have taken into consideration.

So it's quite difficult to read across from the regulatory filing and try and kind of reverse engineer to the earnings numbers we're giving you here.

With the other thing to bear in mind is when we made the acquisition, we did say that we expected to get some pretty significant synergystic benefits out of the acquisition, but they would take some time to come out.

So you can pretty much expect that not very much has came out in the first 2 months, and in fact, we've be very careful not to do anything that would undermine our ability to preserve the business and indeed keep up the very high persistency that we've experienced in the first 2 months of activity..

Should we expect that number maybe to go down as, I don't know, attrition and the group pensions book takes place that you may have assumed and then, over time, it's replaced and then exceeded by some of the revenue and expense synergies? Is that kind of the trajectory you have in mind?.

Okay. But I'm going to pass you to Marianne on that one..

It's Marianne Harrison. So there is a possibility that may go down a little bit because of some of the activity around our group business and being able to hold onto it. And we have taken that into account as we price the deal as well. But you will start to see those-- the synergies starting to come through over the next few months.

We sort of figured that it's going to take us over the next 18 months to really get through that, but you will start to see some of that. As of right now, you haven't seen anything because it's only 2 months..

Your next question is from Steve Theriault from Bank of America..

Maybe starting with a question on the U.S. for Craig Bromley. Craig, sorry, I picked on one of the few areas where sales haven't been as robust, but wanted to ask about, and Steve mentioned it briefly in his remarks, ask about the 8% decline in John Hancock Investments. He mentioned the soft close of a popular fund last year.

So I guess, questions would be the timing wasn't clear to me on when the soft close was.

Does that have an impact now through this year or that just be isolated to Q1? And then I was also wondering, are there other funds in your arsenal there getting close to a size where you might need to consider either a soft or a hard close for them?.

Sure, Steve, thanks. We're quite pleased with the sales picture and earnings picture overall for the U.S., so we don't really view it as soft. But just to answer your direct question on JH Investments, the closing occurred in first quarter of last year, but probably dribbled into second quarter as well.

And additionally, as Steve Roder pointed out, the institutional mandates that we get are often a little bit lumpy. So we had a pretty good first couple of quarters in that respect.

The closing has occurred so that has impacted both third quarter of last year, fourth quarter of last year and first quarter of this year, but what we are seeing is renewed momentum. So you're actually seeing growth off of that lowered base in that we can't sell that fund anymore. So we're actually quite encouraged there.

And we have made quite a few investments to actually try and take our sales level to up significantly in the latter half of the year and going into next year. If you recall, we've had some big jumps in our sales over the last few years and we have been able to sustain those jumps generally.

But we want to go to the next level, so we made some investments there. In terms of other funds that are getting close to being capped out, I mean, there's always -- we welcome huge sales that would drive income, but at this point there's nothing on the horizon that is, in any way, imminent. So we expect to just continue with our momentum.

We've enjoyed this quarter and get another boost from some of the investments we're making..

Okay. And while I have you, the long-term care offering, you mentioned a new offering that seems pretty flexible. What are your expectations here? Sales have been pretty nominal in long-term care for a little bit now.

Is this a meaningful push you except to result in a reacceleration of sales? Or is it something smaller?.

Yes, I guess, this is a product that we have launched that we are much less concerned about risk. So we are hoping that it will actually drive sales up. We're not hoping to keep at this low level. There is no meaningful impact at this point from that new product launch. It was launched late in the first quarter, so it's not impacting our sales result.

But we hope it will. We hope it will impact positively going forward and, we're quite comfortable with the risk profile of that product that we're offering..

Okay. And then lastly, I understand the flattening of the forward curve for the oil price was a driver of those -- some of the investment losses this quarter.

Am I correct in suggesting if the curve steepens as it has quarter-to-date, there would be some recapture coming back through investment experience in relatively short order?.

Yes, that's broadly correct.

Warren may -- why don't you just add some color?.

Sure, I think the front end clearly is going to be helpful. The long end of the curve though obviously is taking a longer time to actually come down. So the 2 may somewhat offset. I mean, again, it could be that we'd see the long end dropping off a little bit as prices stay lower longer, but the front end clearly is going to be backing -- back up.

And in this present value of discounted cash flow, the higher prices on the front end will clearly help in the discounted valuation..

The next question is from Meny Grauman from Cormark Securities..

First question is on expected profit, the impact of lower rates. I'm wondering if you can quantify the impact there..

We'll ask Cindy to take that one..

Sure. Meny, it's Cindy Forbes. Yes, interest rates were down in, actually, in Q4. Earnings on in-force are -- is impacted by the change in rates over the prior quarter versus the current quarter.

So that impact declined about 30 points -- basis points in the fourth quarter in interest rates, had about a $10 million -- little less than $10 million impact on earnings on in-force this quarter..

And then I just wanted to ask a question about Manulife Bank. You changed the reporting there and I'm just wondering where are your views on this business going forward. I assume not terribly pleased. I'm wondering what are the options there and sort of how do you sort of analyze some of the difficulties that have impacted that unit..

Right. So I'll start and then I'll pass to Marianne. So we changed the reporting because, historically, we reported Manulife Bank in a category that didn't make a hell of a lot of a sense. So it'll become clearer, I think, with some of the supplementary disclosures that we'll give at Investor Day next week.

But that presentational change is really just reflective of trying to be more transparent about the business and place it logically. But then I'll pass to Marianne to talk about the bank itself..

Yes, I wouldn't -- I would say that -- I wouldn't say that we're disappointed with the bank.

The bank is facing some pretty fierce competition these days, and we've been spending a lot of time on the regulatory front in terms of trying to make sure that the policies and procedures were where they needed to be with some of the changes that have come down.

And we really have gotten through all that and we're actually pretty excited about growth opportunities as we move forward. So I would not say -- we're not saying we've written this business off for sure. We're still quite excited about it..

We're very pleased with the bank..

Yes..

The next question is from Humphrey Lee from Dowling & Partners..

A question for Marianne. Just about the unfavorable policyholder behavior experienced in Canada. My understanding is some of it is related to group disability and some of it's related to the higher prescription drug costs related to the group plans.

Can you give us some color in terms of how much impact were there in the current quarter?.

Yes. So in terms of the -- you're absolutely right. We did see poor policyholder experience, pretty consistent with what we saw in the fourth quarter of last year. And the cost of the specialty drugs has been an issue for us as well as the industry.

I think all of us have been facing the high-cost specialty drugs, which has been a component of it, and that was probably about under half of the policyholder experience that we had.

We also saw some experience on the long-term disability, which was less than our expectations, and part of that is driven by the low interest rate environment and part of that was just incidence. Some of that is based on timing as well..

Okay.

And then with the strong sales that you had this quarter, have you changed your pricing to account for some of the specialty drug challenges that you are seeing?.

No, we haven't done any pricing with respect to that because we just started to see that trend for the first time in the fourth quarter, and it does take some time to get through the pricing. It usually takes about a year to 18 months to reprice.

Really, the sales side of it, as I would say, that last year was pretty competitive on the sales front and we weren't comfortable making any decisions from a margin perspective in terms of lowering our pricing on some of the deals. And so we didn't necessarily win some. So it really is still a large-case market. There's a lot of variability in them.

And I would say that the market is starting to get a bit more rational again this year and we're starting to see the pricing cost more in line with where it probably should be..

Okay. And then one question for Craig, about the new U.S. Department of Labor proposal on fiduciary duty.

What would be the potential impacts on your business in the U.S., particularly in the retirement plan services?.

Yes, well, these drafts come out fairly recently and they're pretty lengthy. So we have people going through this in conjunction with the ACLI. I think there are -- we don't expect big impacts. We don't know how these things will actually be implemented or if they'll be implemented in their current form.

But from what I've seen so far, it is going to make it more complicated, more difficult to sell products for a whole range of advisers. It's not really specific to us. We think that we've maintained great transparency and customer value, but it could have an impact on customers getting new products efficiently and cost effectively.

But that's just a preliminary view. We continue to do our analysis and make our comments to the ACLI..

Okay. Do you have a sense of what percentage of your earnings coming out from U.S.

could be affected?.

We don't know whether the impacts would be positive or negative. I mean, any change would provide potential issues or potential opportunities. And we think we're fairly well positioned, but it's really hard to speculate on draft guidelines that haven't been approved and haven't been accepted. And so I don't think we could really speculate on that..

The next question is from Sumit Malhotra from Scotia Capital..

First question is in regards to the distribution agreement with DBS. You've mentioned both when it was announced and on the call today that you expect it to be accretive to the company in 2017. But of course, this thing gets going to start 2016.

So I was hoping you could give us some flavor on what you're thinking in regards to DBS and how it affects the company's earnings power and targets, anything like that, to start next year..

Yes, it's Steve here. I'll start off and then I'll pass to Roy. He will enjoy the opportunity to add up to this, I'm sure. So we're already in the mode of preparing in a major way for the start of the DBS project in 2016. But this is a 15-year deal and we'd expect the volumes to go up significantly over time.

We'll have some costs in 2015, which would be -- would probably come out. Most of it will fall outside core earnings. And then in 2016, it will take time for the thing to ramp up. So based on our analysis, we would call 2017 for accretion to commence.

We do think that this will become a major driver of growth in core earnings and core earnings per share. But I think in terms of when does that start to become meaningful, it's probably sort of 2 to 3 years out that I think it will start to be visible.

Why don't I pause there and pass over to Roy?.

Yes. Thanks, Steve. Look, I think you hit the key points. Obviously, we're going to spend a little bit more time on this at Investor Day on Monday, but the impact to core earnings in 2016 is going to be quite minor.

The focus for us in the next 9, 10 months is going to be around executing against that agreement and getting ready for the Singapore launch. We already do have agreements in both Hong Kong and Indonesia, and we'll be working to see how we can ramp those up so that we hit the ground running come January..

So if I paraphrase your respective comments from a core basis, maybe it cost you a couple of pennies in 2016, maybe it adds a couple of pennies in 2017, but the bigger picture here is what it does for the brand and the distribution of Manulife products going forward past just the next couple of years..

Yes. I mean, this is a long-term game. And if you look at the history of major bancassurance transactions in Asia, it takes time for them to get momentum. You can't just flick a switch. You got to work with your partner.

It's almost like a sort of joint venture, if you like, to grow the size of the cake by looking at how you position products, educate your distribution folks, et cetera, et cetera. So our expectations will be that this will become a major contributor as we go forward, but it will be in a step at a time.

So I wouldn't expect a huge amount of impact in the first couple of years..

It is probably worthy of noting that we will get significant uplift in sales in the first year. Obviously, the financial benefits from that will materialize over time..

Right. You'll have a strain that comes with it, maybe some setup marketing costs at the beginning..

Right, exactly..

We'll talk more about that on Monday. And my final question for Steve or maybe Donald around capital. So you closed Standard Life this quarter and your capital position, your MCCSR ended higher than you had initially targeted. I think at least one part of New York Life has closed.

There's not much of an impact there and you've told us that it's about 10% or 10 percentage points on the DBS. So if I call it 235% pro forma, I think that's a reasonable way to think about it.

With the acquisition activity that Manulife has had over the past year, few different transactions, couple of dividend hikes as well, at a 235% pro forma level, do you feel that Manulife is overcapitalized at that mark, number one? And number two, with acquisitions having been more active, do you think that the deployment may turn more inward as far as investments in the business or maybe even considering share repurchases going forward?.

So why don't I start off and I'm sure Donald will have some things to add. So the first thing to point out in that analysis is you're actually correct to point to the DBS bancassurance deal and impact of that. So first thing to say is we flagged a potential 10-point hit, if you like, to MCCSR, which will take place in January 2016.

We think that's the worst case. There's still some uncertainty about how this will be accounted for and treated and that's because the big 4 firms are all sort of getting their heads around how to deal with these large bancassurance agreements.

It's possible we may have a more favorable outcome than that, but we are assuming that we'll have a 10-point deterioration in MCCSR in that respect. But the thing you missed in the analysis was the prefinancing that we've undertaken.

So we've had a couple of issues which are effectively prefinancing maturities taking place in the middle part of this year, and we can conjecture how much of that was true prefinancing. But it will be fair to say it's probably $1 billion-plus. So that constitutes about another 6 points, maybe a bit more than that.

So I think you have to factor that in as well. So I think on your pro-forma basis, you probably want to be looking at, on the pro forma basis, probably something like 228%. But -- and I'd say we regard that as a comfortable capital position, which we are very happy with. And then maybe I'll pass to Donald and see how he -- if he wants to add anything..

Yes. I think we're not like unlike a lot of financial institutions around the world that are running with more capital than we probably think is necessary for a couple of reasons. Number one, there still is a fair amount of uncertainty.

I mean, those of us who follow what's going on in Europe or not, always comforted by the developments there, and that's going to seem to kind of stretch over a long period of time.

And if the wheels do fall off the bus and whether it's Grexit or some other things, the implications are probably underestimated by markets right now and so we're very cautious of that.

Second thing is global capital standards are still being formulated and refined, and I think everybody is going to err on the right side and regulators are erring on the high side there. So that's another thing. And we're not a global SIFI, but that is reviewed every year in some states. Somebody could decide to make us one.

So we have to be conscious of that, too. I think you're right that we'll be deploying -- number one, generating a lot of excess capital, that is clear. That will fund organic growth. But with some of the shifts in our business to more self-sustaining businesses, that will be still generating excess capital.

There's also funding of acquisitions internally, which we've done a fair bit of, as you noted, and also increasing dividends. And we would hope that this dividend increase would certainly not be the last for the next little while for our company. You mentioned stock buybacks. I think that's pretty well down our list. I mean, I would never say never.

We have no plans. We discussed that at the board. We're not in favor. We think periodic increases in the dividend scale are a much better way of distributing cash to shareholders. But there could come a time, and when we look long enough at our really long-term capital plans that you generate so much excess capital, that you can't deal with it that way.

And so I would never say never, but it's certainly nothing on the near medium-term horizon as far as we're concerned. And again, we think we'll probably have lots of opportunity to deploy the excess capital through acquisitions as well as a regular increase in the dividend..

Yes, I'll pass the baton here, but that's really what I was thinking. Once upon a time, this company was a significant repurchaser of its stock and that hasn't been very high on your pecking order. I think, candidly, it's only been recently that we've been able to have that conversation. So it still doesn't sound like it's high up the food chain..

The next question is from Tom MacKinnon from BMO Capital..

I just want to continue that thread a little. And Donald, I would assume that one of the reasons you're not able to hit this 13% ROE would be because you're probably carrying too much capital.

And when you have discussions with the board surrounding both the dividend increase, I assume that involves some discussions about what an optimal level of capital would be. And then if we look at the payout ratio in the 30% to 40% range, it looks like the dividend increase kind of puts you more towards the higher end of that payout ratio range.

And would we expect that you'd be comfortable running at the higher end of that range, especially given the fact that you got probably more capital than you need? So there's some thoughts for you to elaborate on for us, please..

I think your analysis is right. Your arithmetic is right.

But as you know, the -- sure, what's at the high end of the range this year presumes a certain level of earnings, right? And we look at a multiyear basis, right? We also do a sensitivity analysis of what happens if earnings went down due to certain factors that are outside our control or what if they went up and so on.

And any way of looking at it, we feel pretty comfortable with the dividend increase that we had. And again, if I was not to bet the farm, but I'm sure it's not going to be the last one. We feel very comfortable that we're -- the prospects for this company are going and the dividend increase reflects that.

And when you look at the range, people often ask us, is it based on core? Is it based on net? The reality is it's based on both of them in terms of a forward forecast of where core and net are going to go.

And over the longer term, the 2 actually look quite similar, right, because we can't predict investment gains other than they reflect the kind of analysis that we have in the past. So they tend to attenuate when you look out 3 or 4 years.

And so I guess all I can say is, yes, it might look to be at the high end of the range, but we're extremely comfortable with it because we have a sense of what the earnings trajectory of this company is. And your next question is going to be, can we share that with you? And the answer is no, we're not going to give earnings guidance.

So I'm just guessing that might be the next question of you or another analyst, Tom..

No, but I wouldn't mind you sharing what you think the optimal level of capital would be though. I mean, The Street has one expectation. It's probably not as economical as would need to be in terms of trying to hit an optimal ROE..

Yes, I think we're holding excess capital.

But would we operate at what I think the optimal level of capital is right now given the economic uncertainty, regulatory posture, all the other stuff, working here on the conservative side, and frankly, I don't think that's any different than any other large financial institution anywhere in the world, right.

So yes, it is more than -- and I guess, the other thing is, we have to demonstrate to -- I guess, everybody has to get comfortable that the earnings trajectory, the fan of outcomes have been reduced as much as we believe it has been, right? But I think with every quarter, whether you're regulators or rating agencies or other investors, you get more comfortable that Manulife has attenuated an awful lot of its risks and that we're producing as pretty regular steady earnings..

Okay. And then one quick follow-up for Steve. On the Standard Life acquisition, you had flagged transition costs, and I think these transition costs were going to be a function of your $100 million after-tax cost save target. I didn't find anything that mentioned transition costs associated with the Standard Life deal in the press release.

Are these going to be flagged going forward? Are they or are they not going to be in core? Any thoughts on that?.

Okay. So the -- there's no -- I can say there's no real change to our perception of transition costs although we're managing, as I said earlier on, to ensure that we don't transition in a way that prejudices our ability to preserve the high level of persistence in the business.

The transition costs will actually be within core because they actually -- effectively, they constitute cost that we believe we can eliminate but are core by nature, and therefore, we have to account for them within core.

But I think as we go forward, Tom, as I mentioned earlier on, we're trying to be transparent in terms of explaining that component of core so that you can understand how we're doing against what we said at the time of the acquisition.

And I'm not promising we'll do that every quarter, but we'll do it as and when it seems sensible and we have something sensible to say to you..

So that would help us get a run rate post the complete integration of Standard Life?.

Yes, that's right. And we said we thought it would take 2 to 3 years to getting these costs out, so it's very early days at the moment..

The next question is from Daniel Bergman from UBS..

It looked like you had lower U.S. retirement plan sales in the quarter, and I was just hoping you could provide some updated thoughts on the competitive environment in the business. There have been some recent news reports of a low-cost provider making a push into the smaller case RPS market.

So I just wanted to see if you'd expect any material impact from that, or in general, expect increased pricing pressure in this business..

Yes, thanks, I'll address each item separately. So I guess that was a disappointing part of our results. We're down, I think, 3% year-over-year on our sales. And that's -- we've been down quite a number of quarters now.

And we had actually done a lot of things to try and turn that picture around and we expected that it would show up in terms of dollar sales in the first quarter. Instead, we had a slight contraction, continued contraction. The good news is, I guess, that we see a lot of momentum here and a lot of pipeline, particularly in planned sales.

So we, I think, had more plans -- sold more plans in the first quarter than we ever have. They have tended to be very small plans, which is good for profitability, as you know. The margins are reasonably good in the small-case market.

And -- but I guess, looking forward, we see further momentum and the second quarter is unfolding pretty much as we had hoped. So I guess, looking at the sales picture, a little disappointment in the first quarter, but really the story is turning around.

In terms of the overall market in the competitive environment, I think there are -- it's a competitive market. There's folks coming down into the small-case market all the time. Some of them succeed, some do not. We expect it to continue to be competitive.

And we will have to manage our cost structure and offer some differentiated features if we would like to hold our margins, and that's what we intend to do..

That's great. Switching gears a little bit. I was hoping you could also provide some additional comments on your partnership with Vitality for new U.S. life insurance product. And just any help in terms of how we should think about the market opportunity for this product and how long you expect before it might make a material impact on sales..

Yes, we're obviously very excited about this partnership. I mean, it's pretty amazing, the reception that we received by the media, by consumers, people just calling in to our call center saying, how do I get this thing? Very unusual for a life insurance product launch as you can imagine. Doesn't usually garner this type of attention.

So we're off to a really good start here. Our partnership with Vitality, which is a subsidiary of Discovery, a South African company, is, I think, a great partnership. They bring a lot to the table in terms of wellness. We bring a lot in terms of our brand, in terms of distribution. And we expect that this will be a real revolutionary step in U.S.

life insurance. In terms of when all that shows up in terms of results, sales results, it's going to take a little bit of time. We're not licensed in all states yet. That's a commercial to those folks who haven't approved our product yet.

And the distribution will take a little bit of time to get accustomed to a slightly different type of sale, a slightly different type of pitch and a slightly different type of core audience that they might be pitching to. So we think it's going to do great, but it might take a little bit of time to sink in.

That having been said, we have sold some product already even though we only launched, I guess, about a month ago today. And so there clearly is legs here and we just look forward to finding different ways to incorporate what we think is a very forward-thinking sort of approach into a whole number of our products and a whole number of our markets..

The next question is from Doug Young from Desjardins Capital..

I first just wanted to touch on the methodology change on interest on assets backing PfAD. I kind I get the mechanics, but I just want to confirm. Essentially, this is moving your earnings from experience gains up into the expected profit line. Just wanted to confirm that I have that thought process right.

And how does this impact your ability to generate or the history of investment gains? Because, I guess, that would kind of tie in here as well, unless I got that wrong, correct me if I'm wrong. I'm just wondering what -- if you can quantify what the impact was from that methodology change in the current quarter..

Okay, let me start off and then see if Cindy wants to add anything, Doug. So we're only really talking about a very small amount here.

It was really just a tidying up, I would say, of our methodology where it became clear to us that we were, in a very sort of immaterial way, inconsistent between various parts of our business and the way we allocated the investment income attached to the assets. As you say, backing PfAD.

So it is geography between investment experience and expected earnings. So on the IFRS income statement, core earnings and the benefit this quarter to core is in the region of $20 million..

Okay.

So not overly -- I mean, this wasn't a real big material change then?.

No, not a real material change, and we think that's broadly a sustainable change, if you like, going forward. Now you could take the view that, that makes it more difficult for us to dig our way out of the hole that was referred to earlier on in terms of investment experience.

But when we originally decided that $400 million was a good number there, you can expect that we had some tolerance for these sorts of items and we're still comfortable that $400 million is a good number..

And just wanted to clarify, Steve. The $75 million -- $77 million, you got to dig yourself out of that first before you put in investment gains in core, just to kind of tie in, I think, Gabriel's the thought process.

But that's -- you have to dig out first in the $77 million, is that correct?.

That's correct..

Okay. And then just lastly....

I got to jump in here. I hate this expression dig out of a hole. I mean, that is really true when you do a Sodoku puzzle about what goes in or not. But just remember, right through the financial crisis, right through the teeth of the financial crisis, the last 8 years, we've averaged investment gains of $150 million a quarter.

So what we've put in our estimate is $100 million, which is a pretty conservative view on that.

And whether it comes back this year or not, what you guys are trying to judge, if I'm not mistaken, is the earnings potential of this company, right? So the information content of that one quarter is irrelevant, the earnings potential, whether it comes back this year or not.

But if we get $100 million to $150 million a quarter, shareholders are going to be happy. So that one quarter gives no indication. And we said the same thing on the other side, right? If you roll this call back to the quarters where we had, what, $500 million of investment gains, we also said the same thing.

Don't read that into that it's going to be $500 million a quarter, guys. We're being very open and transparent. The average for the last 8 years, which includes the financial crisis, has been $150 million.

If you take a shorter period of time, it's closer to $250 million, but we think that would be misleading because it doesn't include the financial crisis and there's no guarantee the financial crisis would occur. So what we've done in terms of our interpretation of core is we've assumed $100 million.

And I think that's probably what you guys should assume when you're modeling us and you know that's reasonably conservative.

Whether it comes back this year or not and we get $100 million a quarter for the next 3 quarters or get a little bit more than that, that refills the bucket, shall we say, on the first quarter, is irrelevant to the earnings potential of the company. Anyway, sorry for having giving that speech, but....

No, color is appreciated. You feel passionately, I see that..

I'm spiced up for living. So I -- anyway, yes..

And then just lastly on the DBS, because it has been discussed and I do fully get that it's going to take time to ramp up to get scale.

I'm just trying to think about the -- how long does it take you to get up to a return on this? Like, I guess, what is the total return you're expecting to get on this investment in terms of ROEs? I think Asia has always been thought of as a 20% ROE business.

Does this fit within that? And how long does it take you to get there? And I'm just trying to conceptualize that question..

Well, I think, Doug, the way we look at this transaction is very similar to the way we look at any M&A transaction.

So we would have looked at this in terms of the IRR that we thought we could generate on this transaction and then adjust it in accordance with all the parameters we previously laid out in terms of how we assess whether something is in the interest of our shareholders or it isn't, and there's no difference on this transaction.

If you look at the expectations, then you can see a gradual increase in the sales and earnings coming from this transaction over 15 years. And frankly, it's all about execution. And Roy will be able to talk a lot more about it on Monday, but I don't think I'd add a lot more..

No, look, I think -- Steve, I think you hit the key points. This is obviously a deal that we're very excited about. I think it does a lot for our business and talks to our growth opportunity in Asia. It diversifies our distribution quite significantly.

We've got a very strong agency business and brokerage business, but this enhances our bancassurance capability. It creates a more balanced portfolio for us in Asia. It puts Singapore on the path to being our third largest business in Asia, and that's, I think, obviously something that's very significant. It gives us significant scale.

And then, it also gives us great brands and market presence. And then, on the commercial side, we think that this is going to be a significant play. The returns will take a little bit of time. We get significant uplift in sales in year 1. And then, obviously, through the economics of new business, that will come and pay dividends over time..

And maybe the last thing I'd add, because I think this is really important to understand, is that the mechanics of the transaction of such that -- and as I mentioned in my notes but it's really important, the mechanics of the transaction are designed to ensure that the 2 parties, i.e. DBS and Manulife, that our interests are very much in line.

So this is all about growing the pie and that we -- both sets of shareholders benefit from growing the pie. And therefore, if we succeed jointly together, then our payments to DBS will be significant, and those success payments, if you want to term it them that way, will dwarf any fixed payments.

That's really important because if you don't have that alignment, then you don't necessarily have the 2 parties pulling in the same direction to ensure the success of the partnership. That's a very, very important aspect of this deal..

The next question is from Mario Mendonca from TD Securities..

One just quick question about DBS.

Is there -- are there any payments coming to other side? If in fact, this were a dud and the expectations that both sides had for the sales growth didn't pan out, are there any payments, any clawback of the USD 1.2 billion?.

No, look, what I -- we're, obviously, not going to get into the commercial terms, but what I would say is, I guess, a reiteration of Steve's earlier point and that is a very significant component of financial value in this transaction is around the alignment of interest and success sharing.

So if we achieve the targets that we set, there's significant payments that will be made, and obviously, DBS is very motivated towards that outcome..

No, I understand that part. I understand about the payments for Manulife to DBS. I'm asking the other way, if in fact the agreement argument doesn't work out well..

Yes. So we're obviously not going to get into the specific commercial arrangements..

Mario, to give you a little bit of comfort though. We have a relationship with DBS, have dealt with them in other jurisdictions and have a lot of confidence in their ability to execute and our ability to execute with them.

Secondly, we have come to a very good meeting of the minds as to the direction we want this business to go for our collective benefit. The third is DBS could have extracted from us or other people more money upfront in all likelihood.

But what they chose is a package that we work with them on that would give them greater value over the fullness of time and would have them directly incented to help us get the outcome that benefits us both. In other words, they left money on the table in order to have a deal that is structured with a risk sharing to the benefit of both parties.

That says a heck of a lot about their approach to partnership. And again, we weren't meeting them for the first time in this deal.

We've had extensive dealings with them and feel very, very comfortable not only at the most senior level but right on through with the quality of the organization and the dedication with them to approach this on a partnership basis. So I would not see, quite honestly, a lot of risk here..

Another sort of broad -- more broad question. So the reference to Vitality, that's the U.S. product, right? The new one, the very innovative new insurance product.

Is that right? Is that what you're calling it, Vitality?.

John Hancock with Vitality..

Okay. There have been a number of times -- I mean, I think anybody who's been around insurance for a long time has heard of a number of new products introduced with a lot of excitement around them only to find the insurance company apologizing 5 years later for having mispriced it, and there's plenty of examples of that.

And maybe this question is for Cindy Forbes.

How do you get comfortable around a product this different, knowing that you're pricing it properly and that this isn't going to end up with some significant reserve build down the road?.

Well, I guess, I'll take a crack at this and maybe Cindy will want to add to it. This is Craig Bromley. We're working with Vitality and they have a depth of experience that goes back 18 years in terms of looking at assumptions.

That's what makes them very different than any partner that we could have chosen to partner with in that there are other companies that understand wellness, other companies who can figure out Fitbit and things like that, but there are really no companies that have that kind of experience, actuarial experience.

This is an insurance company that offers this type of wellness benefit. That's probably number one as to how we initially got comfortable. Then, of course, we had to go through our own studies, our own mortality experience and looking at the different factors that drive mortality in our own very extensive mortality book.

And that was ultimately how we priced our products, but took a lot of comfort from their experience in South Africa and the U.K., et cetera.

And then, I guess, finally, because we -- they have this long-term experience, there are reinsurance companies who are willing to support us, should we choose to use them, to actually put their money where their mouth is around the mortality experience and how wellness and Vitality impacts that.

So I mean, we're very confident that the pricing is sustainable and that if people will follow the program that is being outlined, that they will live a longer and healthier life and at the end of the day, that's the most important thing, is that our customers benefit from this product as well..

The next question is from Asim Imran from Macquarie Capital Markets..

Just a numbers question to start off with.

Would it be possible to provide some color on the trends surrounding dynamic hedging costs related to the Asian business and the other geographies?.

Yes. I mean, I think we've previously shown some of this but, well, 2 things have happened. First of all, we've seen over the last year or so quite a significant movement from macro to dynamic. And so the mix has changed. And then in aggregate, the total hedge cost has come down somewhat, if you add the macro and dynamic together.

That's the group as a whole. Maybe Cindy might want to comment on the Asian piece or Scott.

You want to have that?.

In terms of the cost of it? I don't think they've changed materially, and I don't, at my fingertips, have the cost numbers there..

There really hasn't been a material change in the cost..

Okay. And just heading back to the DBS transaction for a little bit.

Would it be fair to assume that Aviva gets to keep its back book and continue marketing towards existing customers? And if that's the case, does that limit the market for any specific kind of products that Aviva was strong in?.

Well, firstly, you're right. Aviva does get to keep their back book and there is a marketing right to that, that actually correlate to that..

But you wouldn't see any issues with respect to growth in any specific kind of product?.

No, not a thing..

Well, in fact, we plan to move the product mix to something different than what Aviva sold..

We have no further questions at this time. I'd like to return the meeting back to Mr. Veloso..

Thank you, operator. We will be available after the call if there's any additional questions. Please feel free to call me. Thank you, and good afternoon, everyone..

Thank you. The conference call has now ended. Please disconnect your lines at this time, and we thank all who participated..