Performax Gold

1. Performax Gold Catherine Larouche Product Manager, Whole Life March 2013

2. Important information We've provided written material with this oral presentation to make it easier for you to take notes. Do not rely on the written material on its own because it may be incomplete or inaccurate without the additional context and information provided by the oral presentation. Because of this, and also because the presentation is of a technical nature designed for insurance professionals, the written material should not be redistributed. We have provided client-friendly material about many of our products and concepts on our advisor website at www.manulife.com/repsource. This presentation is for educational purposes only. It should not be construed as legal, tax or accounting advice. This presentation doesn't bind Manulife to provide, or to continue to provide, any of the concepts or products described in the presentation. It also doesn't limit Manulife's ability to change any of the procedures that may be described in the presentation. If this presentation contains competitive information, we've made every effort to ensure its accuracy as of the date of the original oral presentation. We can't, however, guarantee the accuracy and, if you have any questions regarding this information, you should contact the competitor directly.

3. Agenda • Whole Life 101 • Base guarantees • Base model & luxury edition • Dividends and Performance Credits • Same objective – Different risk • Does current matter? • Going forward • Illustration software changes • Product vs illustration rate • Cost for 15 years

4. Whole Life – base guarantees Cancellation Leverage Claim Premium: level and guaranteed Death Benefit vs Cash Value Client gets one or the other, but not both Death Benefit Cash Surrender Value Guaranteed Death Benefit Guaranteed Cash Value YEARS

5. Whole Life 101 Cancellation Leverage Claim Some whole life plans have a level death benefit (base model) Don’t have to be participating to be Whole Life Death Benefit Cash Surrender Value Guaranteed Death Benefit Guaranteed Cash Value YEARS

6. Whole Life 101 Others have a death benefit that increases over time (luxury edition) Cancellation Leverage Claim These plans are typically participating Non-guaranteed Death Benefit Death Benefit Cash Surrender Value Guaranteed Death Benefit Guaranteed Cash Value YEARS

7. How do values grow beyond the guarantees? Cancellation Leverage Claim It all starts with a dollar amount credited back to the policy annually This is the key to any growth in values, in excess of the guarantees Dividends (Par) Performance Credit (PGold) Death Benefit Cash Surrender Value Guaranteed Death Benefit Guaranteed Cash Value YEARS

8. Whole Life – increase in values Cancellation Leverage This dollar amount is used to purchase Paid-up insurance. PUI increases the Death Benefit and the amount that was used to purchase the insurance becomes cash value. Claim Paid-up insurance purchased with dividends/PC credit Death Benefit Cash Surrender Value Total Cash Value Guaranteed Death Benefit Guaranteed Cash Value YEARS

9. Participating Whole Life - dividends Cancellation Leverage Claim If there is more money in the Par Fund than what’s required to satisfy the guarantees, “surplus” becomes available and dividends may be distributed to policies. Dividends – not guaranteed 100% variable Death Benefit Cash Surrender Value Guaranteed Death Benefit Guaranteed Cash Value YEARS

10. Factors that impact surplus - Par products • Mortality – experience is better or worse than assumed in product pricing • Lapses – experience is better or worse than assumed in product pricing • Expenses – higher or lower cost to administer the product that what was expected • Taxes, inflation, … • Investment returns

11. Factors that impact surplus - Performax Gold • Surplus does not apply to Performax Gold • Mortality – Experience is better or worse than assumed in product pricing • Lapses – Experience is better or worse than assumed in product pricing • Expenses – Higher or lower cost to administer the product that what was expected • Taxes, inflation, … • Investment returns The risks associated to mortality, lapses, expenses, and other factors are taken on by Manulife (shareholders) not the policyholders. Just like UL and Term.

12. Factors that impact surplus - Performax Gold • Surplus does not apply to Performax Gold • Mortality – Experience is better or worse than assumed in product pricing • Lapses – Experience is better or worse than assumed in product pricing • Expenses – Higher or lower cost to administer the product that what was expected • Taxes, inflation, … • Investment returns But clients are still getting some value for it. It’s contractually guaranteed and part of the Performance Credit the policy receives annually. Investment returns - it’s the only variable factor left in the equation, and the contract shows how it will impact policy values.

13. Performax Gold – Performance Credit Cancellation Leverage Claim Policies will always receive a Performance Credit. Death Benefit Minimum guaranteed PC Cash Surrender Value Guaranteed Death Benefit Guaranteed Cash Value YEARS

14. Performax Gold – Performance Credit Cancellation Leverage Claim And another amount based on investment performance Variable PC based on investment return Death Benefit Cash Surrender Value Minimum guaranteed PC Guaranteed Death Benefit Guaranteed Cash Value YEARS

15. PGold vs others: same objective – increase values Death Benefit Death Benefit Paid-Up insurance Paid-Up insurance Guaranteed Death benefit Guaranteed Death Benefit Performax Gold Par Whole Life

16. Different ways to get there – risk level Dividends Performance Credits More risk Less risk Performax Gold Par Whole Life

17. What does this mean for your clients? • With Performax Gold, just like with a UL, it’s an investment risk discussion • The investment risk is borne by policyholders but in a deferred fashion • The investment conversation is a unique one: • A forward looking question • What will returns be, on average, over the lifetime of your policy • Investment return will have more impact in the later policy years than in the earlier policy years • It’s a perfect opportunity to showcase what Performax Gold can do for them

18. PGold is well positioned to tackle today’s economic uncertainty Total Death Benefit $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100 AGE Male 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586

19. Strong long-term values and IRR Values at age 83 Male 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586

20. So does “current” really matter? • It doesn’t • It’s not an estimate or a guarantee of what the future holds • It’s more a reflection of what happened in the past • Because of smoothing of returns • Because of surplus (par products)

21. Lessons learned from the (not so distant) past • With Performax Par • If you were “conservatively” illustrating at current less 2% 10 years ago, your dividends are now being calculated using a rate that is 15 bps lower than your original illustration • If you were “conservatively” illustrating at current less 1%6 years ago, your dividends are now being calculated using a rate that is 50bps lower than your original illustration

22. Lessons learned from the (not so distant) past • With one of the main par competitors • If you were “conservatively” illustrating at current less 2% 10 years ago, your dividends are now being calculated using a rate that is 11bps lower than your original illustration • If you were “conservatively” illustrating at current less 1%5 years ago, your dividends are now being calculated using a rate that is 21bps lower than your original illustration

23. Gov of Canada – long term bonds benchmark Jan 2010 Mar 2013

24. Fund mix 67% Fixed Income 81% Fixed Income 65.3% Fixed Income

25. Observations • In their Dividend Scale announcements, companies are alluding to future decreases due to the sustained low interest rates environment. • Even with participating whole life, investment returns have the largest impact on surplus, and as a result, dividends. • Par funds allow previously accumulated surplus to be taken into account when determining the Dividend Interest Rate for the year. • It’s just another form of smoothing. It doesn’t mean that Par funds get better investment returns than other funds, or that they are immune to low interest rates and market downturns.

26. What does this mean going forward? • Significant downward pressure on fund yields • Consider the asset mix • What percentage of fixed income assets? 60%? 80%? 90%? • Smoothing creates a lag • Fund yield: Smoothed returns will be slower to decrease but slower to increase • Dividend Interest Rates: Previously accumulated surplus may help slow down the decrease, but are we depleting faster than we’re replenishing? • Everyone is going in the same direction • For your clients: Set the right expectations, illustrate under different interest rate assumptions

27. Changes to our illustration software • Changes to the “Rates” tab for Performax Gold • In January 2012, we changed the software to allow users to specify an illustration rate and gave them the ability to customize using the spreadsheet (like UL) • With this new release, we’ve completely removed the “current” terminology, users will have to specify a rate • The default setting will now be 0%

28. Changes to the Rates tab in Diamond View The PC rate is now defaulted to 0%. Max is rate currently in effect The “Current” terminology has been removed. Can specify a rate up to 8%

29. There is no magic • Illustrating whole life should be about long term projections • Illustrate Performax Gold and the competitors at a rate that, on average, could be reasonably expected over the next 30-40 years • We’re all moving in the same direction, par or non-par, it doesn’t matter, investment performance has the greatest impact on values

30. Don’t be afraid to show the worst case scenario Death Benefit based on guaranteed values Estate Achiever Sun Par Protector Performax Gold $700,000 $675,000 $650,000 PGold = 1.42% $600,000 IRR at LE Total Death Benefit $550,000 $500,000 CL = 0.12% $450,000 Sun = 0.01% $400,000 83 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 85 87 89 91 93 95 97 99 Age Annual payment: Performax Gold $11,341 Estate Achiever $11,330 Par Protector $11,595 Male 40 HS3 (NS), $500,000base coverage, Costs -to -100, Accum Account, Pay for life, illustrated at 0%

31. Consider the product’s performance under different interest rate scenarios Death Benefit, M45 NS, PUI, $500K base, 10 payments of $28K Performax Gold Custom illustration rate: Years 1-5: 4.5% Years 6-12: Increasing by 25bps every year Years 13 thereafter: 6.5%

32. Death Benefit, M45 NS, PUI, $500K base, 10 payments of $25.6K Performax Gold Custom illustration rate: Years 1-5: 5.15% Years 6-12: Increasing by 25bps every year Years 13 thereafter: 7.15%

33. Unique Cost for 15 years duration • Unique in the marketplace – our main competitors offer a 20 pay duration • Offers competitive value, in no more than 15 payments, guaranteed 65bps illustration rate difference for Sun

34. A different kind of Gold • Product design that’s minimally impacted by returns in the early policy years • Performance and value in good and bad times • Most flexible illustration – Allows you to set the right client expectations • Minimum Guaranteed Performance Credit paid every year that will contribute to Death Benefit and Cash Value growth • Full disclosure, no unknowns, more contractual guarantees than par products

35. Manulife Segregated Fund RESP details

36. Manulife introduces a Segregated Fund RESP! • A new option to help your clients prepare for their children’s post-secondary education and achieve their financial goals • No additional licensing will be required if already life licensed • A new means of appealing to a broader market, including younger clients

37. Manulife Segregated Fund RESP – Product features • Selection of 7 segregated funds invested in underlying Manulife Mutual Funds • 75% Death Benefit Guarantee* • 75% Maturity Guarantee* • Contract Maturity Date is Dec 31st of the 35th year (40th year for a Specified Plan) after the RESP Inception Date • Individual or Family Plan • Client name only • Life license is the only requirement to sell the product *Reduced proportionally by withdrawals

38. Contract & deposit minimums and maximums Deposit minimums: • No deposit is required if applying for the Canada Learning Bond and / or the Alberta Centennial Education Savings (ACES) Grant • Fund minimum = $100 per fund, per sales charge option • Pre-authorized Credit (PAC) deposit minimum = $25/month, per fund

39. Thank you