6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OFFOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2022

Commission File Number: 1-14942

MANULIFE FINANCIAL CORPORATION

(Translation of registrant’s name into English)

200 BloorStreet East

North Tower 10

Toronto, Ontario, Canada M4W 1E5

(416) 926-3000

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☐            Form 40-F  ☑

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

DOCUMENTS FILED AS PART OF THIS FORM 6-K

The following documents, filed as exhibits to this Form 6-K, are incorporated by reference as part of this Form 6-K:

Exhibit	Description of Exhibit
99.1	2021 Annual Report
99.2	Notice of Annual Meeting of Shareholders
99.3	Management Information Circular
99.4	Shareholder Proxy Form
99.5	Notice of Availability of Management Information Circular

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MANULIFE FINANCIAL CORPORATION
By:	/s/ James D. Gallagher
Name:	James D. Gallagher
Title:	General Counsel

Date: March 25, 2022

EXHIBIT INDEX

Exhibit	Description of Exhibit
99.1	2021 Annual Report
99.2	Notice of Annual Meeting of Shareholders
99.3	Management Information Circular
99.4	Shareholder Proxy Form
99.5	Notice of Availability of Management Information Circular

EX-99.1

Exhibit 99.1

Manulife Financial Corporation Annual Report

1

In 2021, we launched Elevate, a global program to encourage and nurture our colleagues’ well-being through healthy activities, mindfulness, and eating well. Decisions made easier. Lives made better. “Our ability to adapt and serve customers across the globe continues to drive our operating results, and we are well-positioned to continue helping them live better, happier, and healthier lives.” Roy Gori, President and Chief Executive Officer 2

Manulife by the numbers     7.1 Net Income Attributed to Shareholders     5.9 5.6     $7.1 billion     Net income attributed to shareholders     increased $1.2 billion from 2020.     2019    2020 2021 6.5 6.0     Core Earnings     5.5 $6.5 billion     Core earnings increased 26% versus 2020.     2019    2020 2021 New Business Value     2.2 2.0    1.8 $2.2 billion     New business value increased 31%     compared with 2020.    2019 20202021 Common Share Dividend     $1.12/sh $1.17/sh $1.17/share    $1.00/sh Common share dividend increased 4%     versus 2020, driven by an 18% increase     in the fourth quarter of 2021.    2019 20202021 Assets Under Management and Administration     $1.4 trillion     Total invested assets: $427 billion     Segregated funds net assets: $400 billion     Mutual funds: $291 billion     Institutional asset management: $106 billion     Other funds: $14 billion     Assets under administration: $188 billion     Note: Core earnings and assets under management and administration are non-GAAP financial measures and percentage change in core earnings on a constant exchange rate basis is a non-GAAP ratio. Percentage change in new business value is also on a constant exchange rate basis. For more information on non-GAAP and other specified financial measures used in this report, see the section “Non-GAAP and Other Financial Measures” in our 2021 Management’s Discussion and Analysis below. 1 3

John Cassaday Chairman of the Board Fellow shareholders, Last year, we reflected on Manulife’s response to COVID-19, highlighting the way in which our core value of sharing our humanity came to life across our company through an incredibly challenging time. This year, once again inspired by our dedicated global team, we’ll reflect on how Manulife continues to excel by embracing another of our core values: get it done together. Your Board is proud of Manulife’s many achievements this year and grateful for the thoughtful leadership of our President and CEO, Roy Gori, and the Executive Leadership Team (ELT). We truly appreciate the continued dedication, resilience, and energy demonstrated by the Manulife team around the world, who continue to keep our customers at the core of everything we do. Our teams and leaders continue to be guided by the understanding that we are all in this together and our care for each other is our most powerful point of connection. We know this has been a tremendously challenging time and we have been honoured to offer meaningful resources to support our colleagues’ physical and mental well-being, and to continue initiatives like our Act of Kindness program, offering our teams the opportunity to ‘pay forward’ a contribution to a cause of their choice. We believe these investments in developing our team and culture are incredibly important. We are gratified to hear so often from leaders that it is our unique culture that provides a competitive advantage in both the recruitment and retention of the top talent essential to our ongoing success. We’re also pleased to see so many examples of individuals and teams getting it done together, including a terrific partnership between Global Technology and Global Procurement, which has not only delivered cost savings, but more importantly, underscored the power of effective partnership both internally and with our strategic partners. Our U.S. Segment implemented continuous delivery, a new way of working focused on driving execution success and business 2    | 2021    Annual Report 4

outcomes tied to the customer experience. With this approach, cross-functional teams of subject matter experts are empowered to work in an agile way and use a constant feedback loop designed to help make decisions more quickly, accelerate growth, and enable digital transformation. In Asia, our digital transformation, customer focus, and high performing team have combined to deliver a significant uplift in insurance customer satisfaction, resulting in a record Relationship Net Promoter Score of 46 in 2021. We’ve also introduced more opportunities for meaningful interaction between members of the Board and your management team through small focus groups, where subject matter experts come together to tackle some of our highest priorities. Your Board’s activities in 2021 As we navigated the ongoing prevalence of COVID-19, your Board has remained focused on providing oversight and guidance to management, continuing to leverage technology to maintain a high level of interactivity and collaboration during our sessions. As we did in 2020, we’ve continued to gather feedback from all directors throughout the year to ensure everyone’s voice was being heard and to identify opportunities for improvement. We are proud of the robust and constructive dialogue that took place around our virtual table and are honoured to have been ranked in first place by the Globe and Mail’s Report on Business for best board governance in Canada. Looking to the future, we are implementing a hybrid meeting schedule that will include both in-person and virtual sessions, which we believe will not only enable optimal participation from all directors but also allow us to continue attracting talented directors from around the globe. While we look forward to the opportunity to meet in-person in the future, we are confident in the knowledge that we have maintained and even enhanced our connectedness in the virtual setting. Your Board brings a robust and diverse skill set, and we continued to deploy their expertise as we remained focused on the company’s strategic growth opportunities, both in the near- and long- term, in particular our growth engines of Global Wealth and Asset Management and our Asia segment. We are also excited about the opportunities presented by accelerating our digital transformation and optimizing our portfolio, and we’ve focused a number of learning sessions on related topics such as cybersecurity, disruptive business models, blockchain, and cryptocurrency. We were delighted to have May Tan, former Chief Executive Officer of Standard Chartered Bank (Hong Kong), join our Board in December 2021, bringing with her extensive leadership experience in financial services and deep knowledge of our industry in Asia. We were also pleased to announce that Vanessa Kanu, Chief Financial Officer of Telus International, Inc., recently joined our Board, bringing expertise in public company finance and extensive leadership experience. We are proud to have maintained our aspiration of gender parity in representation among independent directors, with seven women among the 13 independent directors nominated for election at our upcoming 2022 annual meeting. Thank you In closing, we would like to thank Sheila Fraser, who resigned as a director in June, and John Palmer, whose term will end as of the end of our 2022 annual meeting. We have valued their good advice and counsel to Manulife. We would also like to acknowledge Roy and the ELT for their tireless efforts in delivering another year of solid results in what has remained an unpredictable environment. We are particularly proud of the way they have continued to lead with our values, working together to engage and inspire the team, and to embed our winning culture. We send special thanks to each of our more than 38,000 Manulife team members around the world. We truly appreciate their commitment to our customers, and to each other, and we are inspired each day by the way they live our values, and by what they have achieved together. Finally, we would like to thank you, our fellow shareholders, for the trust you have placed in us, for your support, and your candid feedback. The past two years have been challenging, but we remain optimistic about the future, driven by our mission, and united by our shared values. Sincerely, John Cassaday Chairman of the Board Manulife3 5

Roy Gori President and Chief Executive Officer Dear fellow shareholders, Reflecting on the past year, I am tremendously proud of our team and of how we continued to deliver for our customers, our communities, and each other. 4    | 2021    Annual Report In my last letter to you, I expressed my optimism for the year ahead and my confidence in our ability to achieve the goals we’d set for ourselves because of our colleagues’ resilience, energy, and capabilities. While the pandemic has persisted, bringing sustained challenges and heartbreak around the world, I’m immensely grateful for the incredible dedication of caregivers and others, and deeply appreciative of the sacrifices they have continued to make. I’d also like to extend that same depth of gratitude to our global colleagues, many of whom have worked under very trying circumstances. The experience of the past two years has underscored the critical role that our products and services play for our customers around the world, and we can be proud of the way we have supported them and their families through the most challenging of times. In 2021, we welcomed approximately 1.6 million new customers, for a total of more than 33 million customers, and supported them with over $31 billion in claims paid. Our success over time depends on our ability to continue delivering for each of our key stakeholders: our customers, the communities where we live and work, the planet we all share, our colleagues, and you, our shareholders. I’m pleased to share some highlights of our progress with you. Commitment to our customers Our ambition is to be the most digital, customer-centric global company in our industry, and in 2018, we set an ambitious goal to improve our Net Promoter Score by 30 points. Since then, we’ve invested more than $850 million to enhance our digital capabilities and 6

have increased our Relationship Net Promoter Score by 20 points to 21, as of the end of 2021, as we continue to meet, and exceed, our customers’ expectations. Throughout the pandemic, our customers, agents, and partners have accelerated digital adoption and our investments in technology have enabled us to provide a seamless experience and drive higher customer satisfaction. We now process more than 90% of claims digitally and have achieved 82% straight-through-processing, a measure of customer interactions that are completely digital. In response to our customers’ desire to continue improving their well-being, we’ve evolved and expanded our behavioural insurance offerings to support them in achieving their goals. From offering Vitality Points™ to North American customers who have received their COVID-19 vaccination, to expanding our partnership offerings, Manulife Vitality and John Hancock Vitality continue to have a positive impact on our customers’ lives, while also driving higher rates of interaction, in turn leading to improved health outcomes. We’ve done the same in Asia through several enhancements to our ManulifeMOVE experience, including an updated app, access to exclusive programs, and 24/7 self-service functionality. We continue to invest in the creation and innovation of faster, simpler, and more relevant experiences to help our behavioural insurance customers live healthier, better lives. We’re also supporting our customers and clients with their investment needs and we’re proud of Global Wealth and Asset Management’s track record of positive net flows and strong investment performance. Investing for positive impact Driven by our mission, we understand that we can and should create value for—and be valued by—all of our stakeholders in order to be successful now and in the future. We’re particularly focused on the environment, health and well-being, and supporting the communities where we live and work. In 2021, we were proud to share the first phase of our Climate Action Plan, a robust and long-term commitment to reducing our environmental footprint, supporting the transition to a net zero future, and investing in climate change mitigation and resilience. Our substantial natural resource holdings have enabled us to realize net zero operations, meaning we remove more carbon from the atmosphere than our business operations emit. But we know we need to do more and we have additionally committed to reducing our absolute Scope 1 and 2 emissions by 35% by 2035. We have also committed to achieving net zero financed emissions by 2050. We have further embedded these commitments by adding goals linked to our Climate Action Plan into our executive performance and compensation, and by committing to the Science Based Targets initiative. We’re also bringing these commitments to life through our business, including through our acquisition of 89,800 acres of forested land as an impact-first investment, as well as the expansion of our sustainable investing products with the launch of investment strategies in Sustainable Asia Bond, Global Climate, and ESG Asian Multi-Asset Income. We continue to invest in the communities where we live and work to empower sustained health and well-being, drive inclusive economic opportunity, and create a sustainable future. Alongside our partners, we delivered on high-impact initiatives, including our second “MOVE for GOOD” challenge that motivated our customers collectively to walk 100 million steps to unlock a donation that encouraged underserved children in Hong Kong to be more active. The year also marked our 14th annual MLK Scholars program, an award-winning cross sector collaboration we lead in the U.S. Since its inception in 2008, we’ve invested over US $15 million to provide jobs and professional development opportunities to over 6,000 youth. “We know that our people are our most important asset and that our culture is one of the only truly sustainable long-term competitive advantages. We’re committed to investing in both.” Manulife 5 7

We remain committed to helping communities respond to COVID-19 with a contribution to Project HOPE, and to natural disaster relief efforts in the U.S., Canada, and Asia—including Typhoon Rai in the Philippines—with donations to the Red Cross. In Hong Kong, Japan, the Philippines, Indonesia, and Vietnam, we were honoured to facilitate access to COVID-19 vaccines for our colleagues and their immediate families, as well as our agents and financial advisors in collaboration with local governments and other third parties. We were pleased to be named one of Canada’s Best 50 Corporate Citizens by Corporate Knights and to have improved our ranking on the Dow Jones Sustainability Index for North America to the 81st percentile. As well, Manulife Investment Management was accepted as a signatory to the UK Stewardship Code, which is recognized globally as a best practice benchmark in investment stewardship. Developing our winning team We know that our people are our most important asset and that our culture is one of the only truly sustainable long-term competitive advantages. We’re committed to investing in both. Here, our ambition has always been to achieve top quartile engagement results, and despite a tremendously challenging year, our 2021 engagement scores again increased year over year, ranking Manulife in the top 15% of Gallup’s financial and insurance company benchmark. We’ve achieved this through our focus on driving inclusion, promoting well-being, and enhancing our culture of care. In 2021, we enhanced our learning and development offerings We remain committed to helping communities respond to COVID-19 with a contribution to Project HOPE, and to natural disaster relief efforts in the U.S., Canada, and Asia—including Typhoon Rai in the Philippines—with donations to the Red Cross. In Hong Kong, Japan, the Philippines, Indonesia, and Vietnam, we were honoured to facilitate access to COVID-19 vaccines for our colleagues and their immediate families, as well as our agents and financial advisors in collaboration with local governments and other third parties. We were pleased to be named one of Canada’s Best 50 Corporate Citizens by Corporate Knights and to have improved our ranking on the Dow Jones Sustainability Index for North America to the 81st percentile. As well, Manulife Investment Management was accepted as a signatory to the UK Stewardship Code, which is recognized globally as a best practice benchmark in investment stewardship. Developing our winning team We know that our people are our most important asset and that our culture is one of the only truly sustainable long-term competitive advantages. We’re committed to investing in both. Here, our ambition has always been to achieve top quartile engagement results, and despite a tremendously challenging year, our 2021 engagement scores again increased year over year, ranking Manulife in the top 15% of Gallup’s financial and insurance company benchmark. We’ve achieved this through our focus on driving inclusion, promoting well-being, and enhancing our culture of care. In 2021, we enhanced our learning and development offerings through our new AI-powered learning platform, bringing together a host of online and anytime learning resources. These resources allow our team to develop their capabilities and learn new skills that will be essential to accelerate our future growth. We’re also supporting our leaders to become even better at building high-performing teams through tailored learning sessions and more robust Diversity, Equity, and Inclusion training, that will help us continue deepening our focus on driving an inclusive environment. We are mindful of the importance of well-being, and we continue to make this a priority through a broad range of initiatives. We gave everyone five additional personal paid days off in 2021 and will do so again in 2022, and we launched a program called Fuel Up Friday, which provides our team with the opportunity to dedicate time on the second Friday of each month to advance their personal development by taking advantage of our learning programs. We’ve also welcomed speakers to share inspiration and provide our team with a range of well-being resources on mindfulness, nutrition, exercise, and more. We continue to make progress on our ambition to promote Diversity, Equity, and Inclusion through expanded hiring commitments, education, and community support for organizations helping Black, Indigenous, and People of Colour. In June, we brought our global colleagues together for our first Afternoon of Reflection and Learning, to allow all team members to explore the many dimensions of diversity through speaker sessions, guided discussions, and more. We’re honoured to be named as one of Canada’s Most Admired Corporate Cultures for 2021 by Waterstone Human Capital, and as one of Canada’s Top 100 Employers 2022 by Mediacorp Canada Inc. We were also pleased to be recognized as one of Forbes World’s Best Employers for 2021, and to be named to Bloomberg’s 2022 Gender-Equality Index for the fourth consecutive year. Our U.S. business, John Hancock, received a top score of 100 on the Human Rights Campaign’s 2022 Corporate Equality Index for the eighth year in a row, again earning the designation as a “Best Place to Work for LGBTQ+ Equality.” And we were proud to be acknowledged by the Equal Opportunities Commission of Hong Kong for efforts made on Gender Equality, Family Status Equality and Racial Equality & Inclusion. Accelerating growth in 2022 We have an unparalleled platform for growth that is global in nature and poised to capitalize on key global megatrends shaping the future, including the growth and emergence of the middle class in Asia, an aging global population, and the digitization of the consumer. More than one billion people in Asia are expected to join the middle class by 2030, and by 2032, they are expected to account for more than 50% of consumer spending. By 2030, one in six people globally will be 60 and over, and 60% of those over the age of 65 are expected to be in Asia. Manulife is uniquely positioned to succeed with our strong leadership position in 13 of the fastest growing, most profitable markets in Asia. Looking at our growth engines, Global Wealth and Asset Management drove performance, delivering net inflows of $27.9 billion in 2021. We improved our global money manager ranking from 32nd to 27th, as measured by Pensions & Investments, and demand 6    | 2021    Annual Report

“We have an unparalleled platform for growth that is global in nature and poised to capitalize on key global megatrends shaping the future.” for our products continues toincrease with the widening ofthe retirement gap and the expansionof household wealth inthe U.S.and Asia. In Asia, our coreearnings grew to $2.2 billion and net incomeattributed to shareholders grew to $1.8 billion, despite the headwinds we faced in some markets. Our new business value of $1.7 billionrepresenteda 27% increase over the prior year on a constant exchange rate basis Crucially, we gainedmarket sharein five geographies across Asia during the year and we continued to scale our business to grow across thediverse markets we servein Asia.We completedour acquisition of AvivaVietnam andbegan a16-year exclusive bancassurance partnership withVietinBank, allowing us the opportunitytoprovide an additional 14 million customers with a full suite of insurance, wealth, andretirement solutions in Vietnam. We also continuedto makesignificant progress on our portfolio optimization commitments, as evidencedby the announcement of our legacy U.S. variable annuity reinsurance transaction with Venerable Holdings Inc., which closed in February 2022. This transaction will unlock valueand meaningfully reduce our go-forward risk profile, while contributing to our goal ofshifting the earnings mix of ourfranchise to focus on our highest potential businesses. Our ability to adapt and serve our customers across the globe who are navigating a veryuncertain environment continues to drive our operating results and we are well-positioned tocontinue helping them live better,happier, and healthier lives. Thank you In closing, I would liketoacknowledge my Manulife colleagues around the world for what we have achieved together and how we’ve done it. remain in aweof your dedication, resilience, and care, without which we couldn’t have deliveredour2021 results.Thank you. On behalf of the entire team, I’dlike to thank our Chairman, John Cassaday, and our Board of Directors, for their supportand good counsel throughout the year I’dalso liketo thank you, my fellow shareholders and customers, for the trust you’ve placed inour team. We have been steadfast in pursuit of our five strategic priorities, and we are confident that our continuedstrong execution against those priorities will ultimately result in substantial rewards for you. Aswe look tothe year ahead, our mission—Decisions made easier Lives made better.—will continue to guide us in building our winning company and culture. Sincerely Roy Gori President and Chief Executive Officer 7

Caution regarding forward-looking statements From time to time, Manulife Financial Corporation (“MFC”) makes written and/ or oral forward-looking statements, including in this document. In addition, our representatives may make forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the “safe harbour” provisions of Canadian provincial securities laws and the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document include, but are not limited to, statements with respect to expected annual savings related to actions taken in 2021, the Company’s strategic priorities and 2022 targets and 2025 supplemental goals for net promoter score, straight-through-processing, employee engagement, its highest potential businesses, expense efficiency and portfolio optimization, possible share buybacks under our normal course issuer bid (“NCIB”), the impact related to the reinsurance of our legacy U.S. variable annuity block, and also relate to, among other things, our objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and can generally be identified by the use of words such as “may”, “will”, “could”, “should”, “would”, “likely”, “suspect”, “outlook”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, “forecast”, “objective”, “seek”, “aim”, “continue”, “goal”, “restore”, “embark” and “endeavour” (or the negative thereof) and words and expressions of similar import, and include statements concerning possible or assumed future results. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements and they should not be interpreted as confirming market or analysts’ expectations in any way. 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. Important factors that could cause actual results to differ materially from expectations include but are not limited to: general business and economic conditions (including but not limited to the performance, volatility and correlation of equity markets, interest rates, credit and swap spreads, currency rates, investment losses and defaults, market liquidity and creditworthiness of guarantors, reinsurers and counterparties); the ongoing prevalence of COVID-19, including any variants, as well as actions that have been, or may be taken by governmental authorities in response to COVID-19, including the impacts of any variants; changes in laws and regulations; changes in accounting standards applicable in any of the territories in which we operate; changes in regulatory capital requirements; our ability to execute strategic plans and changes to strategic plans; downgrades in our financial strength or credit ratings; our ability to maintain our reputation; impairments of goodwill or intangible assets or the establishment of provisions against future tax assets; the accuracy of estimates relating to morbidity, mortality and policyholder behaviour; the accuracy of other estimates used in applying accounting policies, actuarial methods and embedded value methods; our ability to implement effective hedging strategies and unforeseen consequences arising from such strategies; our ability to source appropriate assets to back our long-dated liabilities; level of competition and consolidation; our ability to market and distribute products through current and future distribution channels; unforeseen liabilities or asset impairments arising from acquisitions and dispositions of businesses; the realization of losses arising from the sale of investments classified as available-for-sale; our liquidity, including the availability of financing to satisfy existing financial liabilities on expected maturity dates when required; obligations to pledge additional collateral; the availability of letters of credit to provide capital management flexibility; accuracy of information received from counterparties and the ability of counterparties to meet their obligations; the availability, affordability and adequacy of reinsurance; legal and regulatory proceedings, including tax audits, tax litigation or similar proceedings; our ability to adapt products and services to the changing market; our ability to attract and retain key executives, employees and agents; the appropriate use and interpretation of complex models or deficiencies in models used; political, legal, operational and other risks associated with our non-North American operations; acquisitions and our ability to complete acquisitions including the availability of equity and debt financing for this purpose; the disruption of or changes to key elements of the Company’s or public infrastructure systems; environmental concerns; our ability to protect our intellectual property and exposure to claims of infringement; and our inability to withdraw cash from subsidiaries. Additional information about material risk factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in this document under “Risk Management and Risk Factors” and “Critical Actuarial and Accounting Policies” and in the “Risk Management” note to the Consolidated Financial Statements as well as elsewhere in our filings with Canadian and U.S. securities regulators. The forward-looking statements in this document are, unless otherwise indicated, stated as of the date hereof and are presented for the purpose of assisting investors and others in understanding our financial position and results of operations, our future operations, as well as our objectives and strategic priorities, and may not be appropriate for other purposes. We do not undertake to update any forward-looking statements, except as required by law. 8    | 2021    Annual Report 10

Table of contents 10 Management’s Discussion and Analysis 10 Manulife Financial Corporation 21 Asia 24 Canada 27 U.S. 30 Global Wealth and Asset Management 34 Corporate and Other 36 Investments 41 Fourth Quarter Financial Highlights 44 Risk Management and Risk Factors 84 Capital Management Framework 87 Critical Actuarial and Accounting Policies 99 Controls and Procedures 100 Non-GAAP and Other Financial Measures 126 Additional Disclosures 136 Consolidated Financial Statements 141 Notes to Consolidated Financial Statements 214 Additional Actuarial Disclosures 216 Board of Directors 217 Executive Leadership Team 218 Office Listing 220 Glossary of Terms 221 Shareholder Information 221 Dividend Information 9 11

Management’s Discussion and Analysis

This Management’s Discussion and Analysis (“MD&A”) is current as of February 9, 2022.

1. Manulife Financial Corporation

Manulife FinancialCorporation is a leading international financial services group that helps people make their decisions easier and lives better. With our global headquarters in Toronto, Canada, we operate as Manulife across our offices in Asia, Canada, and Europe,and primarily as John Hancock in the United States. We provide financial advice, insurance, and wealth and asset management solutions for individuals, groups and institutions. At the end of 2021, we had more than 38,000 employees, over 119,000agents, and thousands of distribution partners, serving over 33 million customers. At the end of 2021, we had $1.4 trillion (US$1.1 trillion) in assets under management and administration^1^,including total invested assets of $0.4 trillion (US $0.3 trillion), and segregated funds net assets of $0.4 trillion (US$0.3 trillion), and during 2021, we made $31.8 billion in payments to our customers. Our principal operations are in Asia,Canada and the United States where we have served customers for more than 155 years. We trade as ‘MFC’ on the Toronto, New York, and the Philippine stock exchanges, and under ‘945’ in Hong Kong.

Our reporting segments are:

•	Asia – providing insurance products and insurance-based wealth accumulation products in Asia.
•	Canada – providing insurance products, insurance-based wealth accumulation products, and banking services in Canada and<br>has an in-force variable annuity business.
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•	U.S. – providing life insurance products, insurance-based wealth accumulation products and has an in-force long-term<br>care insurance business and an in-force annuity business.
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•	Global Wealth and Asset Management (“Global WAM”) – providing investment advice and innovative solutions to<br>our retail, retirement and institutional clients around the world under the Manulife Investment Management (“MIM”) brand.
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•	Corporate and Other – comprised of investment performance on assets backing capital, net of amounts allocated to<br>operating segments; financing costs; costs incurred by the corporate office related to shareholder activities (not allocated to operating segments); our Property and Casualty (“P&C”) Reinsurance business; and run-off reinsurance<br>business lines.
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In this document, the terms “Company”, “Manulife”, “we” and “our” mean Manulife Financial Corporation (“MFC”) and its subsidiaries. The term “MLI” means The Manufacturers Life Insurance Company and its subsidiaries.

Profitability

Profitability

As at and for the years ended December 31,<br><br><br>($ millions, unless otherwise stated)	2021		2020
Net income attributed to shareholders	$	7,105	$	5,871
Core earnings^(1)^	$	6,536	$	5,516
Diluted earnings per common share ($)	$	3.54	$	2.93
Diluted core earnings per common share ($)^(2)^	$	3.25	$	2.75
Return on common shareholders’ equity (“ROE”)	****	14.2%		11.6%
Core ROE^(2)^	****	13.0%		10.9%
Expense efficiency ratio^(2)^	****	48.9%		52.9%
General expenses	$	7,828	$	7,510
^(1)^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more<br>information.
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^(2)^	This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.<br>
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Our net income attributed to shareholders was $7.1 billion in 2021 compared with $5.9 billion in 2020. Net income attributed to shareholders is comprised of core earnings (consisting of items we believe reflect the underlying earnings capacity of the business), which amounted to $6.5 billion in 2021 compared with $5.5 billion in 2020, and items excluded from core earnings of $0.6 billion of net gains in 2021 compared with $0.4 billion of net gains in 2020.

^1^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more<br>information.

10   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

The $1.2 billion increase in net income attributed to shareholders in 2021 compared with 2020 was driven by gains from investment-related experience compared with losses in 2020 and growth in core earnings. Investment-related experience gains reflected higher-than-expected returns (including fair value changes) on alternative long duration assets (“ALDA”) primarily driven by gains on private equity and infrastructure, strong credit experience and the favourable impact of fixed income reinvestment activities. Partially offsetting the gains was a net charge from the direct impacts of markets (compared with gains in 2020). The net charge was primarily driven by a $532 million charge relating to the impact of updated ultimate reinvestment rate (“URR”) assumptions issued by the Canadian Actuarial Standards Board (“ASB”).

The $1.0 billion or 26%^1^ increase in core earnings on a constant exchange rate basis compared with 2020 was driven by the recognition of core investment gains^2^ in 2021 (compared with nil core investment gains in 2020), higher new business gains in all segments, higher net fee income from higher average AUMA^3^ in Global WAM, which benefitted from the favourable impact of markets and net inflows, higher investment income in Corporate and Other which benefitted from higher net gains from available-for-sale (“AFS”) equities and seed money investments in 2021, and in-force business growth in all segments. These items were partially offset by unfavourable policyholder experience and a charge in our P&C Reinsurance business for losses related to Hurricane Ida and the European floods. In 2021, core earnings included a net charge of $110 million ($127 million pre-tax) related to policyholder insurance and annuity experience compared with a net gain of $83 million ($76 million pre-tax) in 2020.^4^ Actions to improve the capital efficiency of our legacy business resulted in $3 million lower core earnings in 2021 compared with 2020.

Core earnings by segment is presented in the following table. See Asia, Canada, U.S., and Global WAM sections below.

For the years ended December 31,<br>( millions)								% change^(1)^
			2020				2021 vs 2020
Core earnings by segment
Asia	2,176	****		$	2,110				10%
Canada	1,179	****			1,174				–
U.S.	1,936	****			1,995				4%
Global Wealth and Asset Management	1,406	****			1,100				33%
Corporate and Other (excluding core investment gains)	(561	)			(863	)			35%
Core investment<br>gains(2)	400	****			–				100%
Total core earnings	6,536	****		$	5,516				26%

All values are in US Dollars.

^(1)^	Percentage change in core earnings on a constant exchange rate basis is a non-GAAP ratio. See “Non-GAAP and Other<br>Financial Measures” below for more information.
^(2)^	See note (2) in the table below. This item is disclosed under the Office of the Superintendent of Financial<br>Institution’s (“OSFI’s”) Source of Earnings Disclosure (Life Insurance Companies) guideline.
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^1^	Percentage growth / declines in core earnings, core general expenses, pre-tax core earnings, assets under management and<br>administration, assets under management, core EBITDA, general expenses, Manulife Bank average net lending assets and Global Wealth and Asset Management revenue are stated on a constant exchange rate basis, a non-GAAP ratio. See “Non-GAAP and<br>Other Financial Measures” below for more information.
---	---
^2^	Core investment gains are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
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^3^	For more information on this metric, see “Non-GAAP and Other Financial Measures” below.
---	---
^4^	Policyholder experience includes gains of $29 million post-tax in 2021 (2020 – gains of $60 million post-tax) from<br>the release of margins on medical policies in Hong Kong that have lapsed for customers who have opted to change their existing policies to the new Voluntary Health Insurance Scheme (“VHIS”) products. These gains did not have a material<br>impact on core earnings as they were mostly offset by new business strain.
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11
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The table below presents 2021 and 2020 net income attributed to shareholders consisting of core earnings and items excluded from core earnings.

For the years ended December 31,<br><br><br>($ millions)	2021			2020
Core earnings	$	6,536	****	$	5,516
Items excluded from core earnings:^(1)^
Investment-related experience outside of core<br>earnings^(2)^	****	1,642	****		(792	)
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities	****	(817	)		932
Direct impact of equity markets and variable annuity guarantee liabilities^(3)^	****	289	****		(228	)
Fixed income reinvestment rates assumed in the valuation of policy liabilities^(4)^	****	(346	)		(1,015	)
Sale of AFS bonds and derivative positions in the Corporate and Othersegment	****	(228	)		2,175
Changes to the ultimate reinvestment rate^(5)^	****	(532	)		–
Change in actuarial methods and assumptions^(6)^	****	(41	)		(198	)
Restructuring charge^(7)^	****	(115	)		–
Reinsurance transactions, tax-related items and other^(8)^	****	(100	)		413
Total items excluded from core earnings	****	569	****		355
Net income attributed toshareholders	$	7,105	****	$	5,871
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
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^(2)^	In accordance with our definition of core earnings, we include up to $400 million of net favourable investment-related<br>experience reported in a single year, as core investment gains (see “Non-GAAP and Other Financial Measures” below). Items excluded from core earnings include net investment-related experience in excess of $400 million per annum or net<br>unfavourable investment-related experience on a year-to-date basis. In 2021, the investment-related experience net gain of $1,642 million reflected higher-than-expected returns (including fair value changes) on ALDA primarily driven by gains on<br>private equity and infrastructure, strong credit experience and the favourable impact of fixed income reinvestment activities. In 2020, the investment-related experience net charge of $792 million reflected lower-than-expected returns (including<br>fair value changes) on ALDA primarily driven by investments in oil & gas and real estate, partially offset by the favourable impact of fixed income reinvestment activities.
---	---
^(3)^	In 2021, the net gain related to equity markets of $289 million included a gain of $1,873 million from gross equity<br>exposure, partially offset by a loss of $1,581 million from dynamic hedge experience and a modest charge of $3 million from macro hedging experience. In 2020, the net charge of $228 million included a charge of $1,641 million from gross equity<br>exposure and a modest charge of $7 million from macro hedging experience, partially offset by a gain of $1,420 million from dynamic hedge experience.
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^(4)^	In 2021, the charge due to fixed income reinvestment rates of $346 million was primarily due to the increase in risk-free<br>interest rates and the overall steepening of the yield curve in U.S. and Canada. In 2020, the charge due to fixed income reinvestment rates of $1,015 million was primarily due to the reduction in risk-free rates and, to a much lesser extent, lower<br>corporate spreads, with spreads for some tenors and ratings being slightly below their respective 2019 levels.
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^(5)^	In June 2021, the Canadian Actuarial Standards Board issued a new promulgation with reductions to the URR and updates to<br>the calibration criteria for stochastic risk-free rates. The updated standard included a reduction of 15 basis points in the URR and a corresponding change to stochastic risk-free rate modeling and was effective October 15, 2021. The long-term<br>URR for risk-free rates in Canada is prescribed at 2.9% and we use the same assumption for the U.S. Our assumption for Japan is 1.5%.
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^(6)^	See “Critical Actuarial and Accounting Policies – Review of Actuarial Methods and Assumptions” section<br>below for further information on the 2021 and 2020 charges.
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^(7)^	In 2021, we reported a restructuring charge of $150 million pre-tax ($115 million post-tax) related to actions that are<br>expected to result in recurring annual expense savings of $250 million (pre-tax) by 2023; $100 million (pre-tax) of these savings have been realized in 2021, and $200 (pre-tax) million is expected to emerge in 2022.^1^
---	---
^(8)^	The 2021 net charge of $100 million included a $119 million charge relating to updating the impact of the 2017 U.S. Tax<br>Cuts and Jobs Act and a $37 million charge resulting from a reinsurance transaction in the U.S., partially offset by a $37 million gain related to affiliate reinsurance transactions in Asia and a $19 million gain related to the divestment of our<br>Thailand operation. In 2020, the $413 million gain included the impact of reinsurance transactions in the U.S., Asia and Canada which contributed gains of $262 million, $58 million and $21 million, respectively. In addition, we reported tax benefits<br>of $72 million in 2020 from the U.S. CARES Act, as a result of carrying back net operating losses to prior years, which had higher tax rates.
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Net income attributed to shareholders by segment is presented in the following table. See Asia, Canada, U.S., and Global WAM sections below.

For the years ended December 31,<br><br><br>($ millions)	2021			2020		% change^(1)^<br><br><br><br> <br>2021 vs 2020
Net income attributed to shareholders by segment
Asia	$	3,057	****	$	1,762		73%
Canada	****	1,354	****		195		594%
U.S.	****	2,080	****		1,269		64%
Global Wealth and Asset Management	****	1,406	****		1,100		28%
Corporate and Other	****	(792	)		1,545		–
Total net income attributed toshareholders	$	7,105	****	$	5,871		21%
^(1)^	Percentage change is on an actual exchange rate basis.
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Diluted earnings per common share was $3.54 in 2021, compared with $2.93 in 2020. Diluted core earnings per common share was $3.25 in 2021, compared with $2.75 in 2020. The changes in these measures were related to the increase in both net income and core earnings, respectively. The diluted weighted average common shares outstanding was 1,946 million in 2021 and 1,943 million in 2020.

Return on common shareholders’ equity (“ROE”) for 2021 was 14.2%, compared with 11.6% for 2020 and core return on shareholders’ equity (“core ROE”) was 13.0% in 2021 compared with 10.9% in 2020. The increase in 2021 ROE was primarily driven by an increase in common shareholders’ net income and the increase in 2021 core ROE was primarily driven by an increase in common shareholders’ core earnings.

^1^	See “Caution regarding forward-looking statements” above.

12   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Expense efficiency ratio was 48.9% for 2021, compared with 52.9% in 2020. The 4.0 percentage point improvement in the ratio compared with 2020 was driven by a 25% increase in pre-tax core earnings^1^ and a 5% increase in core general expenses^1^. The 5% increase in core general expenses on a constant exchange rate basis was due to temporary reductions in discretionary and distribution-related expenses in 2020 and the impact of stronger 2021 sales, substantially offset by 2021 efficiency programs.

Total general expenses increased 9% on a constant exchange rate basis due to the items noted above for core general expenses as well as a restructuring charge and the establishment of a legal provision. Total general expenses increased 4% on an actual exchange rate basis reflecting the previously-noted items partially offset by the favourable impact of the strengthening of the Canadian dollar compared with the U.S. dollar.

Business Performance

Business performance

As at and for the years ended December 31,<br>( millions, unless otherwise stated)		2020
Asia APE sales	4,050	$	3,869
Canada APE sales	1,227		1,148
U.S. APE sales	788		609
Total APE sales(1)	6,065		5,626
Asia new business value	1,666		1,387
Canada new business value	307		255
U.S. new business value	270		160
Total new business value(1)	2,243		1,802
Global Wealth and Asset Management gross flows (<br>billions)(1)	144.7		130.2
Global Wealth and Asset Management net flows (<br>billions)(1)	27.9		8.9
Global Wealth and Asset Management assets under management and administration ( billions)(2),(3)	855.9		753.6
Global Wealth and Asset Management total invested assets ( billions)(3)	4.5		4.8
Global Wealth and Asset Management segregated funds net assets ( billions)(3)	252.6		229.8
Total assets under management and administration ( billions)	1,425.8		1,297.4
Total invested assets ( billions)	427.1		411.0
Total net segregated funds net assets ( billions)	399.8		367.4

All values are in US Dollars.

^(1)^	For more information on this metric, see “Non-GAAP and Other Financial Measures” below.
^(2)^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more<br>information.
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^(3)^	The Global WAM portion of AUMA as at December 31, 2021 was $855.9 billion, an increase of 14%, compared with<br>December 31, 2020, driven by the favourable impact of markets, 2021 net inflows of $27.9 billion, and assets acquired of $1.6 billion. The Global WAM segregated funds net assets were $252.6 billion as at December 31, 2021, an increase of<br>10%, compared with December 31, 2020 on an actual exchange rate basis driven primarily by the favourable impact of markets partially offset by segregated funds net outflows.
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Annualized premium equivalent (“APE”) sales were $6.1 billion in 2021, an increase of 13%^2^ compared with 2020. In Asia, there continued to be varying degrees of adverse impacts on select markets across the region related to COVID-19. Asia APE sales increased 11% compared with 2020 primarily as a result of strong APE sales in Hong Kong, Singapore, mainland China and Other Emerging Markets^3^ partially offset by a decline in APE sales in Japan resulting from lower corporate-owned life insurance (“COLI”) product sales. In Hong Kong, APE sales increased 10% compared with 2020, reflecting strong growth in our bank channel, demand from mainland Chinese visitors through our Macau branch, and an expanded agency force. Singapore APE sales increased 51% compared with 2020, reflecting double-digit growth across agency, bank and broker channels. China APE sales increased 12% compared with 2020, primarily reflecting growth in our bank channel. Vietnam APE sales increased 7% compared with 2020, reflecting growth in agency and bank channels, partially offset by the impact of COVID-19 containment measures during the second half of the year. In Other Emerging Markets, APE sales increased 17% compared with 2020, despite the impact of COVID-19 containment measures in 2021. Japan APE sales decreased 26% compared with 2020, driven by lower COLI product sales. In Canada, APE sales increased 7% compared with 2020 primarily driven by increased customer demand for our lower risk segregated fund products and higher individual insurance sales in participating products, partially offset by variability in the large-case group insurance market. In the U.S., APE sales increased 38% compared with 2020, due to strong international sales, which is reported as a part of the U.S. segment results, and our differentiated domestic product offerings which include the John Hancock Vitality feature and higher customer demand for insurance protection in the current COVID-19 environment of greater consumer interest in improving baseline health. APE sales of products with the John Hancock Vitality PLUS feature in 2021 increased 34% compared with 2020.

New business value(“NBV”) was $2.2 billion in 2021, an increase of 31% compared with 2020. In Asia, NBV of $1.7 billion increased 27% compared with 2020 driven by higher sales volumes in Hong Kong, Singapore, mainland China, Vietnam and Other Emerging Markets, favourable product mix in Singapore and Vietnam and favourable interest rates and product management actions in Hong Kong; partially offset by a decline in Japan due to lower sales. In Canada, NBV of $307 million increased 20% compared with 2020 primarily due to higher margins in annuities and individual insurance. In the U.S., NBV of $270 million was up 80% compared with 2020 primarily driven by higher sales volumes and improved margins, notably due to higher international sales.

^1^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more<br>information.
^2^	Percentage growth / declines in APE sales, gross flows, net flows, and NBV are stated on a constant exchange rate basis.<br>
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^3^	Other Emerging Markets includes Indonesia, the Philippines, Malaysia, Thailand, Cambodia, and Myanmar.<br>
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13
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Global WAM gross flows of $144.7 billion increased $14.5 billion or 16% compared with 2020, driven by higher gross flows in Retirement and Retail partially offset by a decline in Institutional Asset Management. See “Global Wealth and Asset Management” section below for further details.

Global WAM net inflows were $27.9 billion in 2021, compared with net inflows of $8.9 billion in 2020. Net inflows in Retail were $29.2 billion in 2021 compared with net inflows of $3.5 billion in 2020, driven by double-digit growth in gross flows across all geographies amid increased investor demand and lower mutual fund redemption rates. Net outflows in Institutional Asset Management were $2.4 billion in 2021 compared with net inflows of $3.8 billion in 2020, driven by a $9.4 billion redemption in Asia in the first quarter of 2021 (“1Q21”), and the non-recurrence of a $6.9 billion sale in Canada in 2020. This was partially offset by the non-recurrence of a $5.0 billion redemption in Europe in 2020, lower redemptions in Asia and the U.S., and higher sales of infrastructure, timberland and real estate mandates. Net inflows in Retirement were $1.1 billion in 2021 compared with net inflows of $1.6 billion in 2020, reflecting the non-recurrence of a large-case plan sale in 2020 and higher member redemptions, partially offset by growth in member contributions.

Assets under Management and Administration (“AUMA”) ****

AUMA as at December 31, 2021 was $1.4 trillion, an increase of 11%, compared with December 31, 2020, primarily due to the net favourable impact of markets and net inflows. Total invested assets and segregated funds net assets increased 4% and 9%, respectively, on an actual exchange rate basis primarily due to the favourable impact of markets.

Assets under Management and Administration

As at December 31,<br><br><br>($ millions)	2021		2020
Total invested assets	$	427,098	$	410,977
Segregated funds net assets^(1)^	****	399,788		367,436
Mutual funds, institutional asset management and other^(1),(2)^	****	411,271		356,335
Total assets under management	****	1,238,157		1,134,748
Other assets under administration	****	187,631		162,688
Total assets under management andadministration	$	1,425,788	$	1,297,436
^(1)^	Segregated fund assets, mutual fund assets and other funds are not available to satisfy the liabilities of the<br>Company’s general fund.
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^(2)^	Other funds represent pension funds, pooled funds, endowment funds and other institutional funds managed by the Company on<br>behalf of others.
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Revenue

Revenue includes (i) premiums received on life and health insurance policies and fixed annuity products, net of premiums ceded to reinsurers; (ii) investment income comprised of income earned on general fund assets, credit experience and realized gains and losses on assets held in the Corporate and Other segment; (iii) fee and other income received for services provided; and (iv) realized and unrealized gains and losses on assets supporting insurance and investment contract liabilities and on our macro hedging program. Premium equivalents from administrative services only (“ASO”), as well as deposits received by the Company on investment contracts such as segregated funds, mutual funds and managed funds are not included in revenue; however, the Company does receive fee income from these products, which is included in revenue. Fees generated from deposits and ASO premium and deposit equivalents are an important part of our business and as a result, revenue does not fully represent sales and other activity taking place during the respective periods.

In 2021, revenue before realized and unrealized investment gains and losses was $65.8 billion compared with $59.9 billion in 2020. The increase was driven primarily by the non-recurrence of a large ceded premium from the reinsurance of a block of legacy U.S. Bank-Owned Life Insurance (“BOLI”) business in 2020 and higher premiums from in-force business growth.

In 2021, the net realized and unrealized investment losses on assets supporting insurance and investment contract liabilities and on the macro hedging program were $4.0 billion compared with gains of $19.0 billion for 2020. The 2021 losses were primarily due to the impact of interest rate increases partially offset by fair value gains in ALDA and higher equity markets. The 2020 gains were primarily due to the impact of interest rate declines and higher equity markets.

See “Impact of Fair Value Accounting” below. Also, see “Profitability” above for additional information on the impact on 2021 net income attributed to shareholders from the direct impact of equity markets and interest rates and variable annuity guarantee liabilities.

14   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Revenue

For the years ended December 31,<br><br><br>($ millions)	2021			2020
Gross premiums	$	44,344	****	$	41,408
Premiums ceded to reinsurers	****	(5,279	)		(8,491	)
Net premium income	****	39,065	****		32,917
Investment income	****	15,627	****		16,433
Other revenue	****	11,132	****		10,591
Revenue before realized and unrealized investment gains and losses	****	65,824	****		59,941
Realized and unrealized investment gains and losses on assets<br>supporting insurance and investment contract liabilities and on the macro hedge program^(1)^	****	(4,003	)		18,967
Total revenue	$	61,821	****	$	78,908
^(1)^	See “Impact of fair value accounting” section below. Also see “Profitability – Items excluded from<br>core earnings” section above for information on direct impact of equity markets and interest rates and variable annuity guarantee liabilities.
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Financial Strength

Financial strength metrics

As at and for the years ended December 31,<br><br><br>($ millions, unless otherwise stated)	2021		2020
MLI’s LICAT ratio^(1)^	****	142%		149%
Financial leverage ratio	****	25.8%		26.6%
Consolidated capital^(2)^	$	66,005	$	61,064
Book value per common share ($)	$	26.78	$	25.00
Book value per common share excluding accumulated other comprehensive<br>income ($)	$	24.12	$	21.74
^(1)^	This item is disclosed under OSFI’s Life Insurance Capital Adequacy Test Public Disclosure Requirements guideline.<br>
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^(2)^	This item is a capital management measure. For more information on this metric, see “Non-GAAP and Other Financial<br>Measures” below.
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The Life Insurance Capital Adequacy Test (“LICAT”) ratio for MLI was 142% as at December 31, 2021, compared with 149% as at December 31, 2020. The seven percentage point decrease from December 31, 2020 was driven by the impact of market movements primarily from an increase in risk-free interest rates and a narrowing of spreads.

MFC’s financial leverage ratio decreased to 25.8% as at December 31, 2021 from 26.6% as at December 31, 2020, driven by growth in retained earnings, partially offset by net issuance of securities^1^, a reduction in the carrying value of AFS debt securities, and the unfavourable impact of a stronger Canadian dollar.

Consolidated capital was $66.0 billion as at December 31, 2021 compared with $61.1 billion as at December 31, 2020, an increase of $4.9 billion. The increase was primarily driven by growth in total equity, partially offset by redemption of capital instruments. The increase in total equity is due to higher retained earnings and the net issuance of preferred shares and other equity instruments.

Remittances^2^ were $4.4 billion in 2021 compared with $1.6 billion in 2020, an increase of $2.8 billion. The increase was primarily due to capital injections made to our Asia operations in 2020 in response to the COVID-19 related decline in interest rates.

Cash and cash equivalents and marketable assets^3^ was $268.4 billion as at December 31, 2021 compared with $262.9 billion as at December 31, 2020. The increase of $5.5 billion was in line with the growth in value of total invested assets. Refer to “Liquidity Risk Management Strategy” below for more information.

Book value percommon share as at December 31, 2021 was $26.78, an increase of 7% compared with $25.00 as at December 31, 2020, and the book value per common share excluding accumulated other comprehensive income (“AOCI”) was $24.12 as at December 31, 2021, an increase of 11% compared with $21.74 as at December 31, 2020. The increase in the book value per common share was primarily driven by an increase in retained earnings and the issuance of other equity instruments, partially offset by a reduction in the carrying value of AFS debt securities. The number of common shares outstanding was 1,943 million as at December 31, 2021 and 1,940 million as at December 31, 2020.

^1^	Net issuance of securities consists of issuance of Limited Recourse Capital Notes (reported as other equity instruments)<br>of $3.2 billion, and redemption of preferred shares of $0.6 billion, long-term debt of $1.3 billion, and capital instruments of $0.8 billion.
^2^	For more information on this metric, see “Non-GAAP and Other Financial Measures” below.
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^3^	Includes cash & cash equivalents, comprised of cash on deposit, Canadian and U.S. Treasury Bills and high quality<br>short-term investments, and marketable assets, comprised of investment grade government and agency bonds, investment grade corporate bonds, investment grade securitized instruments, publicly traded common stocks and preferred shares.<br>
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15
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Impact of Fair Value Accounting

Fair value accounting policies affect the measurement of both our assets and our liabilities. The difference between the reported amounts of our assets and liabilities determined as of the balance sheet date and the immediately preceding balance sheet date in accordance with the applicable fair value accounting principles is reported as investment-related experience and the direct impact of equity markets and interest rates and variable annuity guarantees, each of which impacts net income.

We reported $4.0 billion of net realized and unrealized investment losses in investment income in 2021 (2020 – gains of $19.0 billion).

As outlined under “Critical Actuarial and Accounting Policies” below, net insurance contract liabilities under IFRS are determined using Canadian Asset Liability Method (“CALM”), as required by the Canadian Institute of Actuaries (“CIA”). The measurement of policy liabilities includes the estimated value of future policyholder benefits and settlement obligations to be paid over the term remaining on in-force policies, including the costs of servicing the policies, reduced by the future expected policy revenues and future expected investment income on assets supporting the policies. Investment returns are projected using the current asset portfolios and projected reinvestment strategies. Experience gains and losses are reported when current period activity differs from what was assumed in the policy liabilities at the beginning of the period. We classify gains and losses by assumption type. For example, current period investing activities that increase (decrease) the future expected investment income on assets supporting the policies will result in an investment-related experience gain (loss). See description of investment-related experience in “Non-GAAP and Other Financial Measures” below.

Public Equity Risk and Interest Rate Risk

At December 31, 2021, excluding impacts from asset-based fees earned on assets under management and policyholder account value, the impact of a 10% decline in equity markets was estimated to be a charge of $570 million and the impact of a 50 basis point decline in interest rates, across all durations and markets, on our earnings was estimated to be a charge of $200 million. See “Risk Management and Risk Factors” below.

Impact of Foreign Exchange Rates

We have worldwide operations, including in Canada, the United States and various markets in Asia, and generate revenues and incur expenses in local currencies in these jurisdictions, all of which are translated into Canadian dollars. The bulk of our exposure to foreign exchange rates is to movements in the U.S. dollar.

Items impacting our Consolidated Statements of Income are translated to Canadian dollars using average exchange rates for the respective quarterly period. For items impacting our Consolidated Statements of Financial Position, period end rates are used for currency translation purpose. The following table provides the most relevant foreign exchange rates for 2021 and 2020.

Exchange rate	Quarterly										Full Year
	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Average^(1)^
U.S. dollar	****	1.2601		1.2602		1.2282		1.2660		1.3030	****	1.2536		1.3414
Japanese yen	****	0.0111		0.0114		0.0112		0.0119		0.0125	****	0.0114		0.0126
Hong Kong dollar	****	0.1618		0.1620		0.1582		0.1632		0.1681	****	0.1613		0.1729
Period end
U.S. dollar	****	1.2678		1.2741		1.2394		1.2575		1.2732	****	1.2678		1.2732
Japanese yen	****	0.0110		0.0114		0.0112		0.0114		0.0124	****	0.0110		0.0124
Hong Kong dollar	****	0.1626		0.1637		0.1596		0.1618		0.1642	****	0.1626		0.1642
^(1)^	Average rates for the quarter are from Bank of Canada which are applied against Consolidated Statements of Income items<br>for each period. Average rate for the full year is a 4-point average of the quarterly average rates.
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Net income attributed to shareholders and core earnings from the Company’s foreign operations are translated to Canadian dollars, and in general, our net income attributed to shareholders and core earnings benefit from a weakening Canadian dollar and are adversely affected by a strengthening Canadian dollar. However, in a period of net losses in foreign operations, the weakening of the Canadian dollar has the effect of increasing the losses. The relative impact of foreign exchange in any given period is driven by the movement of currency rates as well as the proportion of earnings generated in our foreign operations.

Changes in foreign currency exchange rates from 2020 to 2021, primarily due to the strengthening of the Canadian dollar compared with the U.S. dollar, decreased core earnings by approximately $351 million in 2021. The impact of foreign currency exchange rates on items excluded from core earnings does not provide relevant information given the nature of these items.

Mosten Litigation Update

In our third quarter of 2018 MD&A, we disclosed developments in the litigation Mosten Investment LP (“Mosten”) brought against the Company in Saskatchewan. The basis of the claims by Mosten has been that life insurers can be compelled to accept unlimited premium payments into certain universal life policies and associated side accounts. In effect, Mosten was seeking to use insurance policies to invest sizeable sums that have no connection to the insurance coverage.

16   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

On October 4, 2018 Manulife issued a press release regarding certain short-selling activity relating to the Mosten litigation, stating that the short seller’s report was an attempt to profit at the expense of our shareholders. We further stated that we disagree with the conclusions of the report and that we continue to believe that Mosten’s position is legally unfounded as we firmly believe that the consumers purchasing universal life policies, and the insurers issuing these policies, never intended to have the policies function as deposit or securities contracts. On October 29, 2018, the Government of Saskatchewan published new regulations that limit the amount of premiums a life insurer may receive or accept for deposit in certain life insurance policies and associated side accounts. In his March 15, 2019 decision, the trial judge accepted Manulife’s position on the interpretation of the policies, namely that they do not permit making unlimited deposits for investment purposes unrelated to the payment of life insurance premiums. The trial judge also ruled that the 2018 regulations had prospective effect only with respect to new policies issued after the date of the regulation.

In its March 10, 2021 decision, the Saskatchewan Court of Appeal rejected the trial judge’s interpretation of the polices but, ruling in Manulife’s favour, held that the 2018 regulations (and subsequent 2020 regulations) operate prospectively in a manner that prohibits Saskatchewan-licensed insurers from accepting deposits that do not relate to the payment of life insurance premiums, thereby preventing Mosten from using existing or new insurance policies as an investment vehicle. Similar legislation has been enacted by the governments of Ontario, Prince Edward Island, Alberta, New Brunswick, Nova Scotia and Quebec.

On May 10, 2021 Manulife received notice that Mosten has sought leave to appeal the Saskatchewan Court of Appeal’s decision regarding the regulations to the Supreme Court of Canada. Manulife has opposed Mosten’s application for leave to appeal and has also sought conditional leave to cross-appeal the Saskatchewan Court of Appeal’s decision regarding interpretation of the policies to the Supreme Court of Canada. On November 4, 2021 the Supreme Court of Canada dismissed Mosten’s application for leave to appeal with costs, and therefore did not decide Manulife’s conditional application for leave to cross-appeal. With the Supreme Court’s dismissal of Mosten’s application for leave to appeal, we consider this matter closed.

Strategic priorities progress update

Strategy

Our ambition is to be the most digital, customer-centric global company in our industry. The goals for our stakeholders are:

Customers<br> <br>Improve Net Promoter Score (“NPS”) by<br>+30 points and delight customers^1^
Employees<br> <br>Engage our employees — achieve top quartile<br>engagement^2^
Shareholders<br> <br>Deliver top quartile returns^3^
^1^	As compared to a baseline of +1 in 2017, by 2022.
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^2^	Top quartile employee engagement compared to global financial services companies and insurance peers by 2022.<br>
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^3^	MFC’s Total Shareholder Return was 26th percentile compared with our performance peer group for the five-year period<br>ended December 31, 2021. Please refer to Manulife’s most recent Management Information Circular for more information on our performance peer group.
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17
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Our mission, strategic priorities and values are summarized below:

Strategic Priorities

Our strategy is underpinned by five strategic priorities. At Manulife’s Investor Day on June 29, 2021, we announced that we have entered a new phase of our strategy, with a greater focus on accelerating growth of our highest potential businesses and a commitment to meaningful metrics to measure our progress through to 2025. We are confident our five strategic priorities remain the right areas of focus to achieve our ambition of being the most digital, customer-centric global company in our industry.

Accelerate Growth – We remain committed to generating two-thirds of core earnings from our highest potential businesses^1^ by 2022 and will target a 75% contribution by 2025. We also aspire to generate one-half of core earnings from our Asia region (Asia segment and Asia wealth and asset management (“Asia WAM”)) by 2025. Focal areas within this pillar are to:

•	Execute on organic and inorganic growth opportunities in Asia
•	Execute on organic and inorganic growth opportunities in Global WAM
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•	Expand our behavioural insurance offering to provide innovative solutions and support positive health for customers<br>
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•	Drive new business growth and persistency in group insurance
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Digital, Customer Leader – We remain committed to a NPS of +31 by 2022 and will target NPS of +37 by 2025. We also introduced a new metric, straight-through-processing (“STP”)^2^, which represents customer interactions that are completely digital, and aim to achieve STP of 88% by 2025. Focal areas within this pillar are to:

•	Have brilliant basics and industrialize improvements by harnessing the voice of the customer
•	Build differentiated, market-leading priority customer experiences
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•	Extend customer relationships through value-added advice and new services by using open innovation
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•	Drive NPS through a globally consistent NPS system
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Expense Efficiency – We have already delivered on our original 2022 target of $1 billion in expense efficiencies and achieved an expense efficiency ratio of less than 50% in 2021. We remain focused on driving efficient growth and are committed to consistently achieving an expense efficiency ratio of less than 50% by 2022 and beyond while ensuring scalable growth, outstanding customer experience, and digital ways of working. Focal areas within this pillar are to:

•	Leverage our global scale and operating environment
•	Streamline business processes
---	---
•	Eliminate activity not valued by our end customers
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•	Continue to sustain a culture of expense efficiency and driving efficient growth
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^1^	Highest potential businesses include Asia, Global WAM, Canada group benefits, and behavioural insurance products.<br>
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^2^	Straight-through processing includes money movement.
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18   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Portfolio Optimization – We have surpassed our 2022 target to release $5 billion of capital by 2022. Together with a focus on increasing the core earnings from our highest potential businesses, we will continue to focus on optimizing our legacy businesses in the next phase of our strategy and plan to reduce the combined contributions from long-term care insurance (“LTC”) and variable annuities (“VA”) businesses to less than 15% of core earnings by 2025 through organic optimization. Focal areas within this pillar are to:

•	Deliver capital release from legacy businesses, including legacy annuity businesses, long-term care insurance and select<br>long-duration, guaranteed insurance products.
•	Optimize our portfolio in order to improve our risk profile
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•	Optimize our portfolio in order to improve our Return on Equity
---	---
•	Create tangible value through in-force management initiatives
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High Performing Team – We are committed to enabling a high performing team and maintaining our top quartile employee engagement compared to global financial services and insurance peers. Focal areas within this pillar are to:

•	Drive organizational effectiveness and speed of decision making
•	Deepen Manulife’s diversity, equity, and inclusion
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•	Develop our talent with differentiated capabilities
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•	Enable a culture of recognition through a global recognition program to reward excellence and promote company values<br>
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Our medium-term targets include: core EPS growth of 10% to 12% over the medium term, core ROE of 13% or more, a leverage ratio of 25%, and a common share dividend payout ratio of 30% to 40% of core earnings.

Progress Update

Manulife’s mission – Decisions made easier. Lives made better – guided our business throughout 2021. Our focused efforts produced solid results on our five strategic priorities as noted below.

Strategic priorities	2022 Targets and 2025<br><br><br><br> <br>Supplemental Goals^1^	2021 Performance	Highlights on our progress
1.  Accelerate Growth<br><br><br><br> <br><br> <br><br><br><br><br>	•   Generate two-thirds of core earnings from<br>highest potential businesses by 2022 and 75% by 2025<br> <br>•   Generate one-half of core earnings from Asia<br>region (Asia segment and Asia WAM) by 2025	•   63% of our core earnings in 2021 were<br>generated from highest potential businesses, compared with 62% in 2020^2^<br><br><br>•   39% of our core earnings in 2021 were generated from Asia region, compared with 41% in 2020^2^	•   Continued to expand the reach of our agency<br>in China as Manulife-Sinochem opened its 15^th^ provincial branch in Shaanxi province<br><br><br>•   Completed the acquisition of Aviva Vietnam and commenced a 16-year bancassurance partnership with<br>VietinBank to better meet the growing financial and insurance needs of the Vietnamese people<br><br><br>•   Surpassed $1 trillion in Global WAM-managed AUMA<br><br><br>•   Continued to show strong momentum in Manulife iFUNDS, Asia Retail’s online investment platform,<br>with a 39% increase in gross flows compared with 2020<br> <br>•   Secured Alternative Investment Fund Managers<br>license to offer European Union private market funds in our key European markets<br> <br>•   Continued our<br>expansion of behavioural-based wellness insurance products through our Manulife Vitality program in Canada, “Vitality for All” strategy in the U.S. and ManulifeMOVE in Asia
2.  Digital, Customer Leader<br><br><br><br> <br><br> <br><br><br><br><br>	•   Achieve NPS of +31 points by 2022 and +37<br>points by 2025, an improvement of +30 and +36 respectively, as compared to a baseline of +1 in 2017<br><br><br>•   Achieve straight-through-processing of 88% by 2025	•   rNPS^3^ score of +21, a 20 point improvement from the 2017 baseline and a 9 point improvement from 2020<br><br><br>•   STP of 82%, compared with 81% in 2020	•   Continued use of ePOS in Asia, enabling our<br>agents with faster, error free submissions<br> <br>•   Completed the iPipeline integration with the JH<br>brokerage eApp. This integration provides our regular distribution partners with access to next-generation sales tools and decreases the overall cycle time for applications submitted<br><br><br>•   Aided by the above initiatives, overall new business applications submitted digitally increased by 15<br>percentage points in 2021 to 71%<br> <br>•   Launched Singapore’s first flexible digital retirement plan<br>with DBS Bank<br> <br>•   Entered into a new digital collaboration with Rewardz to further incentivize<br>customers that are part of our ManulifeMOVE Program to be physically active<br> <br>•   Became the first<br>Canadian company to use artificial intelligence in underwriting mortgage creditor insurance in our individual insurance business, resulting in auto adjudication of more than $1 billion of face amount in 2021
^1^	See “Caution regarding forward-looking statements” above.
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^2^	To provide a consistent basis for year over year comparison, 2020 total company core earnings were normalized to include<br>$400 million of annual core investment gains.
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^3^	Relationship Net Promoter Score (“rNPS”). In 2021, we adjusted the weightings in our relationship NPS<br>methodology to more closely align with our focus on our highest potential businesses. This adjustment had no impact on the 2017 NPS baseline of +1 and would have modestly increased the score in 2018, 2019, and 2020.
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19
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Strategic priorities	2022 Targets and 2025Supplemental Goals	2021 Performance	Highlights on our progress
---	---	---	---
3.  Expense Efficiency<br><br><br><br> <br><br> <br><br><br><br><br>	•   Achieve a less than 50% expense efficiency<br>ratio<br> <br>•   Deliver $1 billion in expense efficiencies	•   Delivered expense efficiency ratio of 48.9%<br>and achieved the target of less than 50% in 2021. This compares with 52.9% in 2020<br> <br>•   Achieved<br>expense efficiencies target of $1 billion in 2020, 2 years ahead of schedule	•   Pre-tax core earnings increase of 25%<br>outpaced core general expense growth of 5%<br> <br>•   Continued to implement automation across the<br>organization to enable scalability of our operations both in terms of capacity and efficiency with lower cost per unit<br><br><br>•   Continued to invest in the consolidation and outsourcing of policy administration systems to make the<br>cost base more variable<br> <br>•   Achieved annual savings of $100 million in 2021 resulting from<br>restructuring in the first half of 2021
4.  Portfolio Optimization<br><br><br><br> <br><br> <br><br><br><br><br>	•   Release a total of $5 billion in<br>capital from legacy businesses<br> <br>•   Reduce core earnings contribution to less than 15% from long-term<br>care insurance and variable annuities businesses by 2025	•   Achieved release of capital target 3 years<br>ahead of schedule<br> <br>•   Delivered $6.3 billion of cumulative capital benefits, including $0.4 billion in<br>2021<br> <br>•   Core earnings contribution of 20% from<br>LTC and VA businesses, compared to 25% in 2020^1,^^2^	•   Entered into an agreement to reinsure over<br>75% of the U.S. Variable Annuity block, which is estimated to result in a capital release of approximately $2.0 billion^3^, reducing risk, and unlocking value from legacy.^4^ The transaction closed on February 1, 2022<br><br><br>•   Released $225 million of capital through our annuity guaranteed minimum withdrawal benefit offer<br>program in the U.S.
5.  High Performing Team<br><br><br><br> <br><br> <br><br><br><br><br>	•   Achieve top quartile employee engagement<br>compared to global financial services and insurance peers	•   Continued to rank in the top quartile<br>amongst our designated peer group on employee engagement in 2021	•   Ranked in the 86th percentile amongst global<br>financial services and insurance peers on our 2021 employee engagement survey<br> <br>•   Named a World’s<br>Best Employer by Forbes for the second year in a row<br> <br>•   Recognized as one of Canada’s Top 100<br>Employers 2022 by Mediacorp Canada Inc.
^1^	To provide a consistent basis for year over year comparison, 2020 total company core earnings were normalized to include<br>$400 million of annual core investment gains.
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^2^	2021 and 2020 total company and U.S. LTC core earnings were normalized to remove estimated gains on U.S. LTC policyholder<br>experience due to COVID-19.
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^3^	Projected capital release based on September 30, 2021.
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^4^	See “Caution regarding forward-looking statements” above.
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20   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

2. Asia

Our Asia segment is a leading provider of insurance products and insurance-based wealth accumulation products, driven by a customer-centric strategy, leveraging theasset management expertise and products managed by our Global Wealth and Asset Management segment. Present in many of Asia’s largest and fastest growing economies, we are well positioned to capitalize on the attractive underlying demographicsof the region, underpinned by a rigorous focus on creating value for our customers, employees and shareholders.

We have insurance operations in 11 markets^1^: Japan, Hong Kong, Macau, Singapore, mainland China, Vietnam, Indonesia, the Philippines, Malaysia, Cambodia, and Myanmar.

We have a diversified multi-channel distribution network, including over 117,000 contracted agents and over 100 bank partnerships. We also work with many independentagents, financial advisors, and brokers. Among our bancassurance partnerships we have exclusive partnerships, including a long-term partnership with DBS Bank across Singapore, Hong Kong, mainland China and Indonesia, and VietinBank in Vietnam, thatgive us access to over 30 million bank customers.

In 2021, Asia contributed 32%^2^ of the Company’s core earnings from operating segments and, as at December 31, 2021, accounted for 11%^2^ of the Company’s assets under management and administration. ****

Profitability

Asia reported net income attributed to shareholders of $3,057 million in 2021 compared with $1,762 million in 2020. Net income attributed to shareholders is comprised of core earnings, which were $2,176 million in 2021 compared with $2,110 million in 2020, and items excluded from core earnings, which amounted to a net gain of $881 million for 2021 compared with a net charge of $348 million in 2020.

Expressed in U.S. dollars, the presentation currency of the segment, net income attributed to shareholders was US$2,437 million in 2021 compared with US$1,322 million in 2020 and core earnings were US$1,736 million in 2021 compared with US$1,576 million in 2020. Items excluded from core earnings are outlined in the table below and amounted to a net gain of US$701 million in 2021 compared with a net charge of US$254 million in 2020.

Core earnings in 2021 increased 10% compared with 2020, after adjusting for the impact of changes in foreign currency exchange rates. Core earnings increased 17% in Hong Kong, 45% in Singapore and 24% in Vietnam, benefiting from higher new business volumes, favourable product mix, and in-force business growth. Core earnings increased 7% in Japan due to in-force business growth, partially offset by the impact of lower new business volumes. Core earnings decreased 36% in China and 24% in Other Emerging Markets reflecting unfavourable policyholder experience and, in China, unfavourable product mix. Asia was also impacted by lower investment income on allocated capital, which decreased by US$21 million compared with 2020 (see Corporate and Other Segment).

The table below presents net income attributed to shareholders for Asia for 2021 and 2020 consisting of core earnings and items excluded from core earnings.

For the years ended December 31,<br><br><br>($ millions)	Canadian				US
	2021	2020			2021	2020
Core earnings		$	2,110			$	1,576
Items excluded from core earnings:^(1)^
Investment-related experience related to fixed income trading, market value increases in excess of expected<br>alternative assets investment returns, asset mix changes and credit experience			218				167
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities^(2)^			(583	)			(433	)
Change in actuarial methods and assumptions			(41	)			(32	)
Reinsurance transactions, tax-related items and other			58				44
Total items excluded from core earnings			(348	)			(254	)
Net income attributed toshareholders		$	1,762			$	1,322

All values are in US Dollars.

^(1)^	For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the<br>total Company “Profitability” section above.
^(2)^	The direct impact of markets in 2021 was a gain of US$133 million and included a gain of US$98 million related to fixed<br>income reinvestment rates and a gain of US$35 million related to equity markets and variable annuity guarantee liabilities. The direct impact of markets in 2020 was a charge of US$433 million and included a charge of US$415 million related to fixed<br>income reinvestment rates and a charge of US$18 million related to equity markets and variable annuity guarantee liabilities.
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^1^	In 2019, we made the decision to exit Thailand, and we completed the transaction in the first half of 2021.<br>
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^2^	This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.<br>
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21
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Business Performance

(all percentages quoted are on a constant exchange rate basis)

APE sales in 2021 were US$3,229 million, representing an increase of 11% compared with 2020. APE sales increased in Hong Kong, Singapore, mainland China, Vietnam and Other Emerging Markets, and declined in Japan. There continued to be varying degrees of adverse impacts on select markets across the region related to COVID-19. In Hong Kong, APE sales in 2021 were US$850 million, a 10% increase compared with 2020, primarily reflecting strong growth in our bank channel, demand from mainland Chinese visitors through our Macau branch, and an expanded agency force. Singapore APE sales in 2021 were US$782 million, a 51% increase compared with 2020, reflecting double-digit growth across agency, bank and broker channels, as domestic demand rebounded from 2020 levels that were impacted by COVID-19 containment measures. China APE sales in 2021 were US$478 million, a 12% increase compared with 2020, reflecting growth in our bank channel. Vietnam APE sales in 2021 were US$375 million, a 7% increase compared with 2020, reflecting growth in agency and bank channels, partially offset by the impact of COVID-19 containment measures during the second half of the year. Other Emerging Markets APE sales in 2021 were US$311 million, a 17% increase compared with 2020, despite the impact of COVID-19 containment measures in 2021. Japan APE sales in 2021 were US$433 million, a decrease of 26% compared with 2020, reflecting lower COLI product sales.

New business value (“NBV”) was US$1,329 million in 2021, an increase of 27% compared with 2020. We experienced higher NBV in Hong Kong, Singapore, mainland China, Vietnam and Other Emerging Markets, partially offset by lower NBV in Japan. In Hong Kong, NBV in 2021 was US$612 million, a 32% increase compared with 2020, reflecting higher sales volumes, favourable interest rates and product management actions. NBV in 2021 was US$260 million in Singapore, and US$180 million in Vietnam, an increase of 75%, and 24%, respectively, compared with 2020. The increase reflects higher sales volumes and favourable product mix. NBV in China was US$122 million in 2021, a 14% increase compared with 2020 primarily due to higher sales volumes. NBV of Other Emerging Markets in 2021 was US$58 million, a 6% increase compared with 2020, reflecting higher sales volumes. Japan NBV in 2021 was US$97 million, a decrease of 25% compared with 2020, reflecting lower APE sales.

The new business value margin (“NBV margin”)^1^ was 44.9% in 2021, an increase of 6.1 percentage points compared with 2020.

APE Sales and NBV

For the years ended December 31,<br><br><br>($ millions)	Canadian			US
	2021	2020		2021	2020
Annualized premium equivalent sales		$	3,869		$	2,892
New business value			1,387			1,037

All values are in US Dollars.

Assets under Management^2^

Asia’s assets under management were US$122.0 billion as at December 31, 2021, an increase of US$13.4 billion or 16% compared with December 31, 2020, driven by higher total invested assets and segregated funds net assets due to net customer inflows of US$13.1 billion.

Assets under Management

As at December 31,<br><br><br>($ millions)	Canadian			US
	2021	2020		2021	2020
Total invested assets		$	115,430		$	90,639
Segregated funds net assets			22,948			18,016
Total assets under management		$	138,378		$	108,655

All values are in US Dollars.

^1^	For more information on this metric, see “Non-GAAP and Other Financial Measures” below.
^2^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below.<br>
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22   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Revenue

Total revenue of US$23.6 billion in 2021 increased US$2.4 billion compared with 2020. Revenue before net realized and unrealized investment gains and losses increased US$3.8 billion compared with 2020 due to an increase in net premium income. The net premium income increase was primarily driven by the growth of in-force business and new business sales.

Revenue

For the years ended December 31,<br><br><br>($ millions)	Canadian					US
	2021		2020			2021		2020
Gross premiums		****	$	21,592			****	$	16,129
Premiums ceded to reinsurers		)		(1,113	)		)		(834	)
Net premium income		****		20,479			****		15,295
Investment income		****		2,874			****		2,145
Other revenue		****		1,346			****		1,004
Revenue before net realized and unrealized investment gains and losses		****		24,699			****		18,444
Net realized and unrealized investment gains and losses^(1)^		****		3,756			****		2,783
Total revenue		****	$	28,455			****	$	21,227

All values are in US Dollars.

^(1)^	See “Financial Performance – Impact of Fair Value Accounting” above.

Strategic Highlights

Asia continues to be a core driver of growth for Manulife, supported by a clear strategy, a focus on execution, a strong team, and a diversified footprint in 11 markets. Our growth is underpinned by powerful economic secular trends including middle-class emergence, low insurance penetration and an estimated mortality protection gap of more than US$100 trillion by 2030 driving continued demand for financial solutions.

We continued to accelerate growth by expanding and digitizing distribution. In 2021 we:

•	Completed the acquisition of Aviva Vietnam Life Insurance Company Limited (“Aviva Vietnam”) and commenced a<br>16-year bancassurance partnership with VietinBank, which together provides a full suite of insurance, wealth and retirement solutions to VietinBank customers;
•	Increased the number of contracted agents to over 117,000 and our number of Million Dollar Round Table agents grew by 64%<br>compared with 2020;
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•	Continued to expand the reach of our agency force in China with the opening of our newest branch in Shaanxi province. We now<br>operate in 52 cities across 15 provinces, providing access to over 60% of China’s population and which represents over 70% of GDP; and
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•	Grew our customer base to approximately 13 million customers and achieved the highest rNPS score in Asia segment’s<br>history.
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We continued to enhance our digital capabilities and rolled out numerous key initiatives to advance our strategy to become a digital, customer leader. In 2021:

•	ePOS, our digital onboarding app, is enabling our agents in Asia with faster, error-free submissions with 82% of<br>applications digitally submitted, representing a 22% year-over-year increase. 79% of submitted cases are auto-underwritten;
•	Our enhanced digital claims experience is now live in six markets across Asia. This experience has resulted in faster<br>claims adjudication, automated payments, and significantly decreased turn-around times. 71% of customer claims are submitted digitally and 31% are auto adjudicated;
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•	We continued to strengthen our health engagement and behavioural insurance platform, ManulifeMOVE. As of December 31,<br>2021, we had more than 1.5 million MOVE eligible customers, up 24% compared with 2020; and
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•	Asia received two honourable mentions at the 2021 Design Management Institute Design Value Awards for:<br>
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•	the redesigned customer websites (the Philippines, Hong Kong and Vietnam); and
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•	development of a centralized repository for all digital design assets that has improved the consistency and quality of<br>Manulife’s digital experiences.
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3. Canada

Our Canada segment is a leading financial services provider, offering insurance products, insurance-based wealth accumulation products and banking services, has anin-force variable annuity business, and leverages the asset management expertise and products managed by our Global Wealth and Asset Management segment. The comprehensive solutions we offer target a broad range of customer needs and foster holisticlong-lasting relationships.

We offer financial protection solutions to individuals, families and business owners through a combination of competitiveproducts, professional advice and quality customer service. We provide group life, health and disability insurance solutions to Canadian employers, with approximately 25,000 Canadian businesses and organizations entrusting their employee benefitprograms to Manulife’s Group Insurance. We also provide life, health, disability and specialty products, such as mortgage creditor and travel insurance, through advisors, sponsor groups and associations, as well as direct-to-customer. Wecontinue to increase the proportion of products with behavioural insurance features.

Manulife Bank offers flexible debt and cash flow management solutions aspart of a customer’s overall financial plan. Products include savings and chequing accounts, guaranteed interest certificates, lines of credit, investment loans, mortgages and other specialized lending programs, offered through financialadvisors supported by a broad distribution network.

In 2021, Canada contributed 18% of the Company’s core earnings from operating segments and, as at December 31, 2021, accounted for 11% of the Company’s assets under management and administration.

Profitability

Canada’s full year 2021 net income attributed to shareholders was $1,354 million compared with $195 million in 2020. Net income attributed to shareholders is comprised of core earnings, which was $1,179 million in 2021 compared with $1,174 million in 2020, and items excluded from core earnings, which amounted to a net gain of $175 million for 2021 compared with a net charge of $979 million in 2020. Items excluded from core earnings are outlined in the table below.

The $5 million increase in core earnings was driven by higher in-force earnings across all businesses, non-recurrence of unfavourable travel related policyholder experience in 2020 and higher retail insurance product sales. These items were partially offset by less favourable policyholder experience in retail and group insurance. Canada was also impacted by lower investment income on allocated capital, which decreased by $95 million compared with 2020.

The table below presents net income attributed to shareholders for Canada for 2021 and 2020 consisting of core earnings and items excluded from core earnings.

For the years ended December 31,<br><br><br>($ millions)	2021			2020
Core earnings	$	1,179	****	$	1,174
Items excluded from core earnings:^(1)^
Investment-related experience related to fixed income trading, market value increases in excess of expected<br>alternative assets investment returns, asset mix changes and credit experience	****	329	****		(260	)
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities^(2)^	****	(89	)		(817	)
Change in actuarial methods and assumptions	****	(65	)		77
Reinsurance transactions, tax-related items and other	****	–	****		21
Total items excluded from core earnings	****	175	****		(979	)
Net income attributed toshareholders	$	1,354	****	$	195
^(1)^	For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the<br>total Company “Profitability” section above.
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^(2)^	The direct impact of markets in 2021 was a charge of $89 million and included a charge of $69 million related to fixed<br>income reinvestment rates and a charge of $321 million related to changes to the URR, partially offset by a gain of $301 million related to the direct impact of equity markets and variable annuity guarantee liabilities. The charge in 2020<br>related to fixed income reinvestment rates and the direct impact of equity markets and variable annuity guarantee liabilities.
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24   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Business Performance

APEsales were $1,227 million in 2021, an increase of $79 million or 7% compared with 2020. Individual insurance APE sales in 2021 of $425 million increased $16 million or 4% compared with 2020, driven by higher participating product sales, partially offset by higher large-case Affinity markets sales in 2020. Group insurance APE sales of $442 million in 2021 decreased $51 million or 10% compared with 2020 due to variability in the large-case group insurance market. Annuities APE sales in 2021 of $360 million increased $114 million or 46% compared with 2020 due to increased customer demand for our lower risk segregated funds. We are focused on growth in lower risk segregated fund products, which accounted for 88% of Annuities APE sales in 2021.

Sales

For the years ended December 31,<br><br><br>($ millions)	2021		2020
APE sales	$	1,227	$	1,148

Manulife Bank average net lending assets^1^ were $23.1 billion in 2021, up $0.6 billion or 3% compared with 2020, driven by growth in residential mortgages and bank loans.

Assets under Management

Assets under management of $162.0 billion as at December 31, 2021 increased by $2.7 billion or 2% from $159.3 billion at December 31, 2020, due to higher segregated funds net assets, driven by growth in equity markets, partially offset by lower total invested assets, primarily reflecting the unfavourable impact of higher interest rates.

Assets under Management

As at December 31,<br><br><br>($ millions)	2021		2020
Total invested assets	$	119,872	$	121,657
Segregated funds net assets	****	42,124		37,650
Total assets under management	$	161,996	$	159,307

Revenue

Total revenue of $12.4 billion in 2021 decreased $6.3 billion from $18.6 billion in 2020 primarily driven by year-to-date net realized and unrealized investment losses in 2021 compared with gains in the prior year. Revenue before net realized and unrealized investment gains and losses of $15.4 billion in 2021 increased $1.5 billion from $13.9 billion in 2020 due to investment income and growth in premiums.

Revenue

For the years ended December 31,<br><br><br>($ millions)	2021			2020
Gross premiums	$	11,251	****	$	10,756
Premiums ceded to reinsurers	****	(1,690	)		(1,589	)
Net premium income	****	9,561	****		9,167
Investment income	****	4,495	****		3,711
Other revenue	****	1,336	****		1,013
Revenue before net realized and unrealized investment gains and losses	****	15,392	****		13,891
Net realized and unrealized investment gains and losses^(1)^	****	(3,026	)		4,747
Total revenue	$	12,366	****	$	18,638
^(1)^	See “Financial Performance – Impact of Fair Value Accounting” above.
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^1^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below for more<br>information.
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25
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Strategic Highlights

In 2021, we added innovative customer-centric enhancements across our product shelf to help Canadians focus on improving their health and wellness. We also advanced our digital capabilities across our businesses to stay connected with our clients and strengthen their experience with us. We further executed on our expense reduction strategy to strengthen financial results and improve the risk-return profile. Our Canada segment remains focused on building and fostering holistic long-lasting relationships with our clients by expanding and integrating our insurance, insurance-based wealth accumulation and certain related banking solutions to meet customers’ needs and by leveraging the strength of our group franchise.

We further advanced digital solutions across our businesses. In 2021, we:

•	Became the first Canadian company to use artificial intelligence (“AI”) in underwriting mortgage creditor<br>insurance in our individual insurance business. Since its introduction, one-third of our applications have been approved using AI, resulting in auto adjudication of more than $1 billion of face amount in 2021;
•	Added new features to our website including live-chat and health & dental comparison tools for our prospective<br>affinity clients to better support them in finding the right plan for their needs; and
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•	Launched a new online advisor portal across our businesses to improve advisors’ experiences with us.<br>
---	---

We continued to offer a differentiated customer experience through our products. In 2021, we:

•	Introduced Personalized Medicine, which provides access to advanced pharmacogenetics to help group benefit members and their<br>health team find the most effective medication for their condition;
•	Expanded our Manulife Vitality program to reward customers who received their COVID-19 vaccine; and<br>
---	---
•	Launched the Manulife Vitality HealthyMind reward program to help our individual insurance customers improve their<br>mental and emotional wellbeing.
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26   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

4. U.S.

Our U.S. segment provides a range of life insurance products, insurance-based wealth accumulation products, and has an in-force long-term care insurance business andan in-force annuity business.

The insurance products we offer are designed to provide estate, business and income-protection solutions for high net worth,emerging affluent markets and the middle market, and to leverage the asset management expertise and products managed by our Global Wealth and Asset Management business. Behavioural insurance features are standard on all our new insurance productofferings. The primary distribution channel is licensed financial advisors. We aim to establish lifelong customer relationships that benefit from our holistic protection and wealth product offerings in the future.

Our in-force long-term care insurance policies provide coverage for the cost of long-term services and support.

Our in-force annuity business includes fixed deferred, variable deferred, and payout products.

In 2021, U.S. contributed 29% of the Company’s core earnings from operating segments and, as at December 31, 2021, accounted for 17% of the Company’s assets under management and administration.

Profitability

U.S. reported net income attributed to shareholders of $2,080 million in 2021 compared with $1,269 million in 2020. Net income attributed to shareholders is comprised of core earnings, which was $1,936 million in 2021 compared with $1,995 million in 2020, and items excluded from core earnings, which amounted to a net gain of $144 million in 2021 compared with a net charge of $726 million in 2020. The changes in net income attributed to shareholders and core earnings expressed in Canadian dollars were due to the factors described below and, in addition, the change in core earnings reflected a $136 million unfavourable impact from the weakening of the U.S. dollar compared with the Canadian dollar.

Expressed in U.S. dollars, the functional currency of the segment, 2021 net income attributed to shareholders was US$1,667 million compared with US$987 million in 2020 and core earnings were US$1,544 million in 2021 compared with US$1,485 million in 2020. Items excluded from core earnings are outlined in the table below and amounted to a net gain of US$123 million in 2021 compared with a net charge of US$498 million in 2020.

The US$59 million increase in core earnings was driven by higher new business gains as a result of higher sales and improved margins, lower effective tax rates, and higher Insurance in-force earnings. These items were partially offset by a US$119 million decrease in investment income on allocated capital (see Corporate and Other Segment) and unfavourable policyholder experience. Compared with 2020, unfavourable life insurance policyholder experience was partially offset by favourable annuities policyholder experience and favourable long-term care policyholder experience.

The table below presents net income attributed to shareholders for the U.S. for 2021 and 2020 consisting of core earnings and items excluded from core earnings.

For the years ended December 31,<br><br><br>($ millions)	Canadian					US
	2021		2020			2021		2020
Core earnings		****	$	1,995			****	$	1,485
Items excluded from core earnings:^(1)^
Investment-related experience related to fixed income trading, market value increases in excess of expected<br>alternative assets investment returns, asset mix changes and credit experience		****		(717	)		****		(515	)
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities^(2)^		)		30			)		46
Change in actuarial methods and assumptions		)		(301	)		)		(226	)
Reinsurance transactions, tax-related items and other		)		262			)		197
Total items excluded from core earnings		****		(726	)		****		(498	)
Net income (loss) attributed toshareholders		****	$	1,269			****	$	987

All values are in US Dollars.

^(1)^	For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the<br>total Company “Profitability” section above.
^(2)^	The direct impact of markets in 2021 was a charge of US$578 million and included a charge of US$493 million<br>related to fixed income reinvestment rates and a charge of US$85 million related to the direct impact of equity markets and variable annuity guarantee liabilities. The direct impact of markets in 2020 was a gain of US$46 million and included a<br>gain of US$113 million related to fixed income reinvestment rates, partially offset by a charge of US$67 million related to the direct impact of equity markets and variable annuity guarantee liabilities.
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27
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Business Performance

U.S. APE sales in 2021 of US$628 million increased 38% compared with 2020 across almost all product lines. The increase was due to strong international sales and our differentiated domestic product offerings which include the John Hancock Vitality feature and higher customer demand for insurance protection in the current COVID-19 environment of greater consumer interest in improving baseline health. APE sales of products with the John Hancock Vitality PLUS feature in 2021 were a record-setting US$295 million, an increase of 34% compared with 2020.

Sales

For the years ended December 31,<br><br><br>($ millions)	Canadian			US
	2021	2020		2021	2020
APE sales		$	609		$	455

All values are in US Dollars.

Assets under Management

U.S. assets under management of US$192.8 billion as at December 31, 2021 increased 2% from December 31, 2020. The increase in total invested assets and segregated funds net assets was due to the net favourable impact of markets, partially offset by the continued run-off of the annuity business.

Assets underManagement

As at December 31,<br><br><br>($ millions)	Canadian			US
	2021	2020		2021	2020
Total invested assets		$	162,508		$	127,638
Segregated funds net assets			77,053			60,519
Total assets under management		$	239,561		$	188,157

All values are in US Dollars.

Revenue

Total revenue in 2021 of US$10.7 billion decreased US$6.6 billion compared with 2020. Revenue before net realized and unrealized investment gains and losses was US$12.7 billion, an increase of US$3.1 billion compared with 2020, primarily due to the non-recurrence of the reinsurance of a block of our legacy U.S. BOLI business in 2020 and higher investment income.

Revenue

For the years ended December 31,<br><br><br>($ millions)	Canadian					US
	2021		2020			2021		2020
Gross premium income		****	$	8,952			****	$	6,678
Premiums ceded to reinsurers		)		(5,821	)		)		(4,355	)
Net premium income		****		3,131			****		2,323
Investment income		****		7,029			****		5,254
Other revenue		****		2,711			****		2,025
Revenue before net realized and unrealized investment gains and losses		****		12,871			****		9,602
Net realized and unrealized investment gains and losses^(1)^		)		10,490			)		7,701
Total revenue		****	$	23,361			****	$	17,303

All values are in US Dollars.

^(1)^	See “Financial Performance – Impact of Fair Value Accounting” above.

Strategic Highlights

At John Hancock, we are focused on building holistic and long-lasting customer relationships by offering innovative products and solutions and making it easier for customers to do business with us. We are focused on growing our insurance business by expanding our product offerings, modernizing the delivery process, and enhancing customer experience. In 2021, we:

•	Experienced sales momentum with sales ahead of the prior year in almost every major category and reported record sales in<br>our international business. We achieved record full year sales of US$295 million, an increase of 34% compared with 2020, from products with the John Hancock Vitality PLUS feature. We believe John Hancock’s Vitality feature is proving to be<br>the right solution for these times as there is a heightened awareness around wellbeing highlighted by COVID-19;
•	Launched a preferred partnership with Allstate, which provides insurance to approximately 15 million customers, to be<br>one of three carrier partners for its more than 11,000 agents and 1,000 life specialists. In time we expect this relationship, enabled by our digital submission capabilities, will drive significant life insurance sales^1^; and
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^1^	See “Caution regarding forward-looking statements” above.
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28   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

•	Expanded John Hancock’s Vitality Program to reward program members for: 1) receiving a COVID-19 vaccine, and 2)<br>achieving safe driver status through Allstate’s safe driving program Drivewise^®^. These rewards provide customers with meaningful and engaging experiences while also helping them<br>understand how their daily choices support their overall well-being and longevity.

We continued to enhance our digital capabilities and are seeing positive results. In 2021, we:

•	Completed the iPipeline integration with the JH brokerage eApp. This integration provides 66% of our regular<br>distribution partners with access to next-generation sales tools and decreases the overall cycle time for applications submitted via this preferred channel by 49% compared with 2020. It also enabled access to over 250 firms, including a new<br>partnership with Allstate and its more than 11,000 agents;
•	Advanced 10 spots to 8th place on J.D. Power’s 2021 U.S. Life Insurance Study for overall customer satisfaction and<br>were highlighted with “most improved website”;
---	---
•	Leveraged data analytics to execute a series of pilots to detect fraud in our LTC business; and
---	---
•	Continued to achieve operational efficiencies through implementation of enhanced digital capabilities, including:<br>
---	---
•	Rationalized our websites to improve our customer and producer experience and optimize for search engines, resulting in a<br>100% increase in weekly traffic to JohnHancock.com;
---	---
•	Provided annuities customers with access to chatbots 24/7, with 96% of chats resulting in successful outcomes and only 4% of<br>customers seamlessly being passed to a customer service representative;
---	---
•	Updated the Vitality login experience which reduced call volumes this year by 40%; and
---	---
•	Drove customer adoption of digital claims submissions to an increase of 41% compared with 2020.
---	---

We continued to make significant progress to optimize our portfolio through both organic and inorganic initiatives and create tangible shareholder value through various in-force management actions. In 2021, we:

•	Completed legacy optimization initiatives that contributed over $2.3 billion of cumulative capital benefits through<br>December 31, 2021;
•	Concluded our Annuity Guaranteed Minimum Withdrawal Benefit offer program which released approximately $225 million of<br>capital in 2021 and $425 million since the start of the program in the fourth quarter of 2019; and
---	---
•	Entered into an agreement to reinsure over 75% of the legacy variable annuity block, consisting primarily of policies with<br>guaranteed minimum withdrawal benefits riders. Upon closing, the transaction is estimated to release approximately $2.0 billion of additional capital^1^, reflecting approximately $1.3 billion<br>of net LICAT required capital^2^, and a one-time after-tax gain of approximately $750 million to net income attributed to shareholders.^3^ The<br>transaction closed on February 1, 2022 (see note 6 of the Consolidated Financial Statements).
---	---
^1^	Projected capital release based on September 30, 2021.
---	---
^2^	100% of the Life Insurance Capital Adequacy Test capital requirement multiplied by the OSFI scalar for the Base Solvency<br>Buffer of 1.05 and grossed up based by an operating range.
---	---
^3^	See “Caution regarding forward-looking statements” above.
---	---
29
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5. Global Wealth and Asset Management

Our Global Wealth and Asset Management segment, branded as Manulife Investment Management (“MIM”), provides investment advice and innovative solutions toretirement, retail, and institutional clients. Our leading capabilities in public and private markets are strengthened by an investment footprint that spans 18 geographies^1^, including 10 in Asiawith 120 years of on-the-ground experience.

In retirement, we provide financial guidance, advice, investment solutions and recordkeeping services to over8 million plan participants and rollover individuals in North America and Asia while they are in the accumulation phase with their employer, and increasingly as they prepare for their retirement outside their employer’s plan. In NorthAmerica, our Canadian retirement business focuses on providing retirement solutions through defined contribution plans, and also to group plan members when they retire or leave their plan; and in the United States, we provide employer sponsoredretirement plans as well as personal retirement accounts when individuals leave their plan. In Asia, we provide retirement offerings to employers and individuals, including Mandatory Provident Fund (“MPF”) schemes and administration inHong Kong. Additionally, we provide retirement solutions in several emerging retirement markets in Asia including Indonesia and Malaysia.

We distributeinvestment funds to retail clients through our own proprietary advice channels in Canada and Asia as well as through intermediaries and banks in North America, Europe and Asia, and offer investment strategies across the world, through affiliated andselect unaffiliated asset managers. In Canada, we also provide holistic personal advice to individual clients and investment management, private banking and wealth and estate solutions to high-net-worth clients. Our institutional asset managementbusiness provides comprehensive asset management solutions for pension plans, foundations, endowments, financial institutions and other institutional investors worldwide. Our solutions span all major asset classes including equities, fixed income,alternative assets (including real estate, timberland, farmland, private equity/debt, infrastructure, and liquid alternatives). In addition, we offer multi-asset investment solutions covering a broad range of clients’ investment needs.

We are committed to investing responsibly across our businesses. We continue to enhance and develop innovative global frameworks for sustainable investing, andmaintain a high standard of stewardship where we own and operate assets.

In 2021, Global WAM contributed 21% of the Company’s core earnings from operating segments and, as at December 31, 2021, represented 60% of the Company’s total assets under management and administration.

Profitability

Global WAM’s 2021 net income attributed to shareholders was $1,406 million compared with $1,100 million in 2020, and core earnings were $1,406 million in 2021 compared with $1,100 million in 2020. Items excluded from core earnings are outlined in the table below and amounted to nil in both 2021 and 2020.

Core earnings increased $306 million or 33% on a constant exchange rate basis reflecting growth in net fee income driven by higher average AUMA, from the favourable impact of markets and net inflows. This increase was partially offset by higher general expenses, mainly from growth in business volumes and other variable expenses. Net income attributed to shareholders increased $306 million in 2021 compared with 2020 driven by the same factors noted above for core earnings.

The table below presents net income attributed to shareholders for the Global WAM segment for 2021 and 2020 consisting of core earnings and items excluded from core earnings.

For the years ended December 31,<br><br><br>($ millions)	2021		2020
Core earnings
Retirement	$	819	$	641
Retail	****	551		435
Institutional	****	36		24
Core earnings	****	1,406		1,100
Items excluded from core earnings:
Reinsurance transactions, tax-related items and other	****	–		–
Net income attributed toshareholders	$	1,406	$	1,100
^1^	United States, Canada, Japan, Hong Kong, Singapore, Taiwan, Indonesia, Vietnam, Malaysia, India, the Philippines, England,<br>Ireland, Switzerland, and mainland China. In addition, we have timberland/farmland operations in Australia, New Zealand, and Chile.
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30   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

In 2021, core EBITDA^1^ for Global WAM was $2,062 million, $656 million higher than core earnings. In 2020, core EBITDA was $1,676 million, $576 million higher than core earnings. The increase in core EBITDA of $386 million or 28% on a constant exchange rate basis was driven by higher net fee income partially offset by higher general expenses as mentioned above. Core EBITDA margin^2^ was 31.5% in 2021 compared with 29.2% in 2020. The 230 basis points increase was driven by a combination of higher net fee income, operational benefits from increased scale, and disciplined expense management. Income before income taxes for Global WAM was $1,641 million in 2021, an increase of $369 million compared with 2020, driven by similar factors as noted above for core EBITDA.

Core EBITDA

For the years ended December 31,<br><br><br>($ millions)	2021		2020
Core earnings	$	1,406	$	1,100
Amortization of deferred acquisition costs and other depreciation	****	323		319
Amortization of deferred sales commissions	****	99		85
Core income tax expense (recovery)	****	234		172
Core EBITDA	$	2,062	$	1,676
Core EBITDA margin	****	31.5%		29.2%
Income before income taxes	$	1,641	$	1,272

Business Performance

Gross Flows and Net Flows

Gross Flows were $144.7 billion in 2021, an increase of 16% compared with 2020. By business line, the results were:

•	Retirement gross flows in 2021 were $50.6 billion, an increase of 8% compared with 2020, with positive contributions from<br>all geographies. The increase in gross flows was driven by growth in member contributions, partially offset by the non-recurrence of a large-case plan sale in 2020.
•	Retail gross flows in 2021 were $78.3 billion, an increase of 41% compared with 2020, reflecting double-digit growth in<br>gross flows across all geographies amid increased investor demand. In the U.S., the increase was driven by strong intermediary sales and higher institutional model allocations. In Asia, the increase was driven by higher gross flows in Japan, China,<br>and Indonesia. In Canada, the increase was driven by higher gross flows in equity and balanced fund products.
---	---
•	Institutional Asset Management gross flows in 2021 were $15.7 billion, a decrease of 27% compared with 2020, driven by the<br>non-recurrence of a $6.9 billion sale in Canada in 2020, partially offset by higher sales of infrastructure, timberland and real estate mandates.
---	---

Net Inflows were $27.9 billion in 2021, compared with net inflows of $8.9 billion in 2020. By business line, the results were:

•	Retirement net inflows were $1.1 billion in 2021 compared with net inflows of $1.6 billion in 2020, reflecting the<br>non-recurrence of a large-case plan sale in 2020 and higher member redemptions, partially offset by growth in member contributions.
•	Retail net inflows were $29.2 billion in 2021 compared with net inflows of $3.5 billion in 2020, driven by double-digit<br>growth in gross flows across all geographies amid increased investor demand and lower mutual fund redemption rates.
---	---
•	Institutional Asset Management net outflows were $2.4 billion in 2021 compared with net inflows of $3.8 billion in 2020,<br>driven by a $9.4 billion redemption in Asia in 1Q21, and the non-recurrence of a $6.9 billion sale in Canada in 2020. This was partially offset by the non-recurrence of a $5.0 billion redemption in Europe in 2020, lower redemptions in Asia and the<br>U.S., and higher sales of infrastructure, timberland, and real estate mandates.
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Gross Flows and Net Flows

For the years ended December 31,<br><br><br>($ millions)	2021		2020
Gross flows	$	144,681	$	130,212
Net flows	****	27,893		8,919
^1^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below.<br>
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^2^	This item is a non-GAAP ratio. See “Non-GAAP and Other Financial Measures” below for more information.<br>
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31
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Assets under Management and Administration

In 2021, AUMA for our wealth and asset management businesses were $855.9 billion, 14% higher compared with December 31, 2020 on a constant exchange rate basis driven by the favourable impact of markets, 2021 net inflows of $27.9 billion, and assets acquired of $1.6 billion. As of December 31, 2021, Global WAM also managed $246.8 billion in assets for the Company’s non-WAM reporting segments. Including those assets, AUMA managed by Global WAM^1^ was $1,102.7 billion compared with $984.4 billion^2^ as at December 31, 2020.

Segregated funds net assets were $252.6 billion for December 31, 2021, 10% higher compared with December 30, 2020 on an actual exchange rate basis, driven also by the favourable impact of markets, partially offset by year-to-date segregated fund net outflows. Total invested assets in our general fund form a small portion of Global WAM AUMA.

Changes in Assets under Management and Administration

For the years ended December 31,<br><br><br>($ billions)	2021		2020
Balance January 1,	$	754	$	681
Acquisitions/Dispositions	****	2		1
Net flows	****	28		9
Impact of markets and other	****	72		63
Balance December 31,	$	856	$	754
Average assets under management andadministration	$	798	$	698

Assets under Management and Administration

As at December 31,<br><br><br>($ billions)	2021		2020
Total invested assets	$	4	$	5
Segregated funds net assets^(1)^	****	253		230
Mutual funds, institutional asset management and other^(1),(2)^	****	411		356
Total assets under management	****	668		591
Other assets under administration	****	188		163
Total assets under management andadministration	$	856	$	754
^(1)^	Segregated funds net assets are comprised of Retirement AUM, consisting primarily of fee-based products with little or no<br>guarantees.
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^(2)^	Other funds represent pension funds, pooled funds, endowment funds and other institutional funds managed by the Company on<br>behalf of others.
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Revenue

Total revenue in 2021 of $6.5 billion increased 19% compared with 2020, driven by growth in fee income from higher average AUMA.

Revenue

As at December 31,<br><br><br>($ millions)	2021		2020
Fee income	$	6,513	$	5,710
Investment income	****	28		39
Total revenue	$	6,541	$	5,749

Strategic Highlights

Leveraging our integrated business model and global scale; we have a clear strategy to pursue high-growth opportunities in the most attractive markets globally through our three business lines: Retirement, Retail and Institutional Asset Management. Our strategy includes being a global retirement leader by supporting financial wellness; expanding our presence in retail distribution platforms across the globe; leveraging a multi-manager model; and providing differentiated institutional active asset management capabilities across high performing equity and fixed income strategies, outcome-oriented solutions and alternative assets.

^1^	This item is a non-GAAP financial measure. See “Non-GAAP and Other Financial Measures” below.<br>
^2^	Effective January 1, 2021, Manulife’s AUMA managed by Global WAM includes certain private equity, private credit<br>and infrastructure asset classes. Total AUMA managed by Global WAM as at December 31, 2020 has been restated for comparability.
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32   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

We executed on a number of initiatives to accelerate growth in our franchise. In 2021, we:

•	Achieved assets under management and administration of more than $1 trillion, reflecting our track record of positive net<br>flows and strong investment performance^1^, as well as growth in assets managed on behalf of the Company’s other segments;
•	Expanded our sustainable investing products with the launch of investment strategies in Sustainable Asia Bond, Global<br>Climate, and ESG Asian Multi-Asset Income. Additionally, Manulife Investment Management was accepted as a signatory to the UK Stewardship Code, which is recognized globally as a best practice benchmark in investment stewardship. Nearly 200 asset<br>managers, pension funds and others applied but only 123 were accepted after a rigorous review by the Financial Reporting Council^2^;
---	---
•	Secured an Alternative Investment Fund Managers (“AIFM”) license to offer European Union (“EU”) private<br>market funds in our key European markets, positioning us to drive the expansion and offering of our private market investment capabilities within the EU;
---	---
•	Broadened our Global Retirement financial wellness offering through increased access to managed accounts in the U.S.,<br>expansion of our PlanRight advice platform in Canada, and enhancement of our Hong Kong Worksite Marketing program to allow individual members to register for public virtual education sessions;
---	---
•	Continued to build out our Private Markets business with the successful fundraising of the Manulife Infrastructure Fund II,<br>L.P. of approximately $6 billion, and our second private equity co-investment fund, Manulife Co-Investment Partners II, L.P., of nearly $1 billion with commitments from both third-party investors and Manulife’s general account; and<br>
---	---
•	Expanded our retail product line-up beyond traditional mutual funds with new actively managed Exchange Traded Funds in both<br>Canada and the U.S. and furthered Separately Managed Accounts offerings in the U.S., with each category generating over $1 billion in net inflows in 2021.
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We continue to make progress on our digital customer leader strategy.

•	Cogent Syndicated Study recognized our U.S. Retirement defined contribution plan participant website for earning a 77%<br>customer satisfaction rating for online capabilities – the second-highest rating among 24 plan provider sites;
•	In U.S. Retirement, we launched a mobile app to encourage participants to sign up for plans, view account details, make<br>changes, access financial tools and receive personal financial guidance. Since the launch in July, we have surpassed 150,000 unique users;
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•	In Asia Retail, our online investment platform, Manulife iFUNDS, continues to show strong momentum in 2021 compared with<br>2020, with a 39% increase in sales and a 29% increase in new accounts opened, and a 198% increase in monthly investment plans;
---	---
•	In U.S. Retirement, 88% of plan enrollees adopted our new digital express enrollment capability, that delivers a simple,<br>fast, and seamless way to enroll in their plan and benefit from access to personalized guidance. This resulted in an 11% increase in participation and six times the managed accounts conversion rate when compared to the previous enrollment process;<br>and
---	---
•	We launched a new customized, digital dashboard globally for institutional clients and prospects. These enhancements<br>represent a leap forward in creating a better user experience.
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^1^	Investment performance for the 3- and 5-year period ending December 31, 2021 reflects 74% and 78%, respectively, of<br>assets outperforming their peers or their respective index, and is based on assets under management of $629 billion. The $629 billion represents Global WAM managed AUMA excluding 3rd party products, liability-driven invested assets, Private Markets<br>strategies, and passive strategies, as well as certain assets managed on behalf of the Company’s other segments and select Retirement assets in Canada.
---	---
^2^	The Financial Reporting Council regulates auditors, accountants and actuaries, and sets the UK’s Corporate Governance<br>and Stewardship Code. It promotes transparency and integrity in business.
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33
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6. Corporate and Other

Corporate and Other is comprised of investment performance on assets backing capital, net of amounts allocated to the operating segments; financing costs; costsincurred by the corporate office related to shareholder activities (not allocated to the operating segments); our P&C Reinsurance business; as well as our run-off reinsurance operation, including variable annuities and accident and health.

For segment reporting purposes, settlement costs for macro equity hedges and other non-operating items are included in Corporate and Other earnings. Thissegment is also where we reclassify favourable investment-related experience to core earnings from items excluded from core earnings, subject to certain limits (see “Non-GAAP and Other Financial Measures” below). In each of the operatingsegments, we report all investment-related experience in items excluded from core earnings.

Profitability

Corporate and Other reported a net loss attributed to shareholders of $792 million in 2021 compared with net income attributed to shareholders of $1,545 million in 2020. Net income (loss) attributed to shareholders was comprised of core loss and items excluded from core loss. Core loss was $161 million in 2021 compared with a core loss of $863 million in 2020. Items excluded from core loss amounted to a net loss of $631 million in 2021 compared with a net gain of $2,408 million in 2020.

The favourable variance in the year-to-date core loss of $702 million was primarily attributable to $400 million of core investment gains in 2021 compared with nil in the same period of 2020, lower interest on allocated capital to operating segments of $309 million in 2021, higher net gains from AFS equities and seed money investments in 2021 compared with prior year and lower interest on external debt. These gains were partially offset by P&C Reinsurance provisions and lower yields on fixed income investments.

Items excluded from the year-to-date core loss were a net loss of $631 million in 2021 compared with a net gain of $2,408 million in 2020. The unfavourable variance was primarily driven by large gains on the sale of AFS bonds in 2020 compared with losses in 2021.

The items excluded from core earnings are outlined below.

The table below presents net income (loss) attributed to shareholders for Corporate and Other for 2021 and 2020 consisting of core loss and items excluded from core loss.

For the years ended December 31,<br><br><br>($ millions)	2021			2020
Core loss excluding core investment gains	$	(561	)	$	(863	)
Core investment gains	****	400	****		–
Total core loss	****	(161	)		(863	)
Items excluded from core loss:^(1)^
Direct impact of equity markets and interest<br>rates^(2)^	****	(170	)		2,302
Changes in actuarial methods and assumptions	****	(5	)		67
Investment-related experience related to mark-to-market<br>items^(3)^	****	59	****		(33	)
Reclassification to core investment gains above	****	(400	)		–
Restructuring charge^(4)^	****	(115	)		–
Reinsurance transactions, tax-related items and<br>other^(5)^	****	–	****		72
Total items excluded from coreloss	****	(631	)		2,408
Net income (loss) attributed toshareholders	$	(792	)	$	1,545
^(1)^	For explanations of items excluded from core earnings, see “Items excluded from core earnings” table in the<br>total Company “Profitability” section above.
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^(2)^	The direct impact of markets in 2021 included losses of $228 million related to the sale of AFS bonds and losses on<br>derivatives, partially offset by gains in fixed income investments supporting a portion of the capital in Asia that are classified as fair value through profit and loss. The direct impact of markets in 2020 included gains of $2,175 million related<br>to the sale of AFS bonds. Other gains of $127 million in 2020 were mostly from fixed income investments supporting a portion of the capital in Asia that are classified as fair value through profit and loss.
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^(3)^	Investment-related experience includes mark-to-market gains or losses on ALDA other than gains on AFS equities and seed<br>money investments in new segregated or mutual funds.
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^(4)^	Please see “Manulife Financial Corporation – Profitability” above for explanation of the restructuring<br>charge.
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^(5)^	In 2020, we reported tax benefits from the U.S. CARES Act, as a result of carrying back net operating losses to prior<br>years, which had higher tax rates.
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Revenue

Revenue of $87 million in 2021 decreased $2,618 million compared with $2,705 million in 2020 largely due to realized losses on AFS bonds and losses on derivative positions in 2021 compared with gains in the same period of 2020, and lower yield on fixed income investments, partially offset by higher net gains from AFS equities and seed money investments in 2021 compared to prior year and lower interest on allocated capital.

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Revenue

For the years ended December 31,<br><br><br>($ millions)	2021			2020
Net premium income	$	147	****	$	140
Investment income (loss)	****	113	****		2,830
Other<br>revenue^(1)^	****	(237	)		(189	)
Revenue before net realized and unrealized investment gains and losses and on the macro hedge<br>program	****	23	****		2,781
Net realized and unrealized investment gains and losses^(2)^and on the macro hedge program	****	64	****		(76	)
Total revenue	$	87	****	$	2,705
^(1)^	Includes a consolidation adjustment related to asset management fees earned by Manulife Investment Management from<br>affiliated business (the offset to the consolidation adjustment is investment expense).
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^(2)^	See “Manulife Financial Corporation – Impact of Fair Value Accounting” above.
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Strategic Highlights

Our P&C Reinsurance business provides substantial retrocessional capacity for a very select clientele in the property and casualty reinsurance market. The business is largely non-correlated to Manulife’s other businesses and helps diversify our overall business mix. We manage the risk exposure of this business in relation to the total Company balance sheet risk and volatility as well as the prevailing market pricing conditions. The business is renewable annually, and we currently estimate our exposure limit in 2022 for a single event to be approximately US$300 million (net of reinstatement premiums) and for multiple events to be approximately US$600 million (net of all premiums).^1^

^1^	See “Caution regarding forward-looking statements” above.
35
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7. Investments

Our investment philosophy for the General Fund is to invest in an asset mix that optimizes our risk adjusted returns and matches the characteristics of our underlying liabilities. We follow a bottom-up approach which combines our strong asset management skills with an in-depth understanding of the characteristics of each investment. We invest in a diversified mix of assets, including a variety of alternative long-duration asset classes. Our diversification strategy has historically produced superior risk adjusted returns while reducing overall risk. We use a disciplined approach across all asset classes, and we do not chase yield in the riskier end of the fixed income or alternative asset market. Our risk management strategy is outlined in the “Risk Management and Risk Factors” section below.

General Fund Assets

As at December 31, 2021, our General Fund invested assets totaled $427.1 billion compared with $411.0 billion at the end of 2020. The following table shows the asset class composition as at December 31, 2021 and December 31, 2020.

	2021						2020
As at December 31,<br><br><br>($ billions)	Carrying value		% of total		Fair value		Carrying value		% of total		Fair value
Cash and short-term securities	$	22.6	****	5	$	22.6	$	26.2		6	$	26.2
Debt Securities and Private Placement Debt
Government bonds	****	79.7	****	19	****	79.7		80.8		20		80.8
Corporate bonds	****	141.6	****	33	****	141.6		134.8		33		134.8
Securitized/asset-backed securities	****	2.9	****	1	****	2.9		3.1		1		3.1
Private placement debt	****	42.8	****	10	****	47.3		40.8		10		47.9
Mortgages	****	52.0	****	12	****	54.1		50.2		12		54.2
Policy loans and loans to bank clients	****	8.9	****	2	****	8.9		8.4		2		8.4
Public equities^(1)^	****	28.1	****	7	****	28.1		23.7		6		23.7
Alternative Long-Duration Assets (“ALDA”)
Real Estate	****	13.2	****	3	****	14.4		12.8		3		14.0
Infrastructure	****	9.8	****	2	****	10.0		9.1		2		9.4
Timberland and Farmland	****	5.3	****	1	****	5.7		4.8		1		5.4
Private Equity	****	11.6	****	3	****	11.6		8.0		2		8.0
Oil & Gas	****	1.9	****	0	****	1.9		2.3		1		2.3
Other ALDA	****	2.6	****	1	****	2.6		2.0		0		2.0
Leveraged Leases and Other	****	4.1	****	1	****	4.1		4.0		1		4.0
Total general fund invested assets	$	427.1	****	100	$	435.5	$	411.0		100	$	424.2
^(1)^	Includes $5 million of public equities as of December 31, 2021 that are managed in conjunction with our alternative<br>long-duration asset strategy.
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The carrying values for invested assets are generally equal to their fair values, however, mortgages and private placement debt are carried at amortized cost; loans to bank clients are carried at unpaid principal balances less allowance for credit losses; real estate held for own use is carried at cost less accumulated depreciation and any accumulated impairment losses; and private equity investments, including power and infrastructure, oil and gas, and timber, are accounted for as associates using the equity method, or at fair value. Certain government and corporate bonds and public equities are classified as AFS, with the remaining classified as “fair value through profit or loss”.

As at December 31, 2021, the carrying value of renewable energy assets, including energy efficiency projects, was $13.1 billion (2020 – $13.7 billion).

Shareholders’ accumulated other comprehensive pre-tax income (loss) at December 31, 2021 consisted of a $873 million gain for bonds (2020 – gain of $2,056 million) and a $288 million gain for public equities (2020 – gain of $255 million). Included in the $873 million gain for bonds was a $293 million loss related to the fair value hedge basis adjustments on AFS bonds (2020 – loss of $317 million).

Debt Securities and Private Placement Debt

We manage our high-quality fixed income portfolio to optimize yield and quality while ensuring that asset portfolios remain diversified by sector, industry, issuer, and geography. As at December 31, 2021, our fixed income portfolio of $267.0 billion (2020 – $259.5 billion) was 97% investment grade (rated BBB or better) and 72% was rated A or higher (2020 – 97% and 73%, respectively). Our private placement debt holdings provide diversification benefits (issuer, industry, and geography) and, because they often have stronger protective covenants and collateral than debt securities, they typically provide better credit protection and potentially higher recoveries in the event of default. Geographically, 23% is invested in Canada (2020 – 25%), 49% is invested in the U.S. (2020 – 47%), 4% is invested in Europe (2020 – 4%) and the remaining 24% is invested in Asia and other geographic areas (2020 – 24%).

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Debt Securities and Private Placement Debt – by CreditQuality^(1)^

	2021								2020
As at December 31,<br><br><br>($ billions)	Debt<br>securities		Private<br>placement<br>debt		Total		% of<br>Total		Debt<br>securities		Private<br>placement<br>debt		Total		% of<br><br><br>Total
AAA	$	40.1	$	1.0	$	41.1	****	15	$	40.7	$	1.1	$	41.8		16
AA	****	39.6	****	5.7	****	45.3	****	17		37.1		4.8		41.9		16
A	****	90.0	****	16.2	****	106.2	****	40		89.4		15.6		105.0		41
BBB	****	49.4	****	16.2	****	65.6	****	25		47.2		15.8		63.0		24
BB	****	3.7	****	1.1	****	4.8	****	2		3.0		1.2		4.2		2
B & lower, and unrated	****	1.4	****	2.6	****	4.0	****	1		1.3		2.3		3.6		1
Total carrying value	$	224.2	$	42.8	$	267.0	****	100	$	218.7	$	40.8	$	259.5		100
^(1)^	Reflects credit quality ratings as assigned by Nationally Recognized Statistical Rating Organizations (“NRSRO”)<br>using the following priority sequence order: S&P Global Ratings (“S&P”), Moody’s Investors Services (“Moody’s”), DBRS Limited and its affiliated entities (“DBRS Morningstar”), Fitch Ratings Inc.<br>(“Fitch”), Rating and Investment information, and Japan Credit Rating. For those assets where ratings by NRSRO are not available, disclosures are based upon internal ratings as described in the “Risk Management and Risk Factors”<br>section below.
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Debt Securities and Private Placement Debt – by Sector

As at December 31,<br><br><br>(Per cent of<br>carrying value, unless otherwise stated)	2021						2020
	Debt<br>securities		Private<br>placement<br>debt		Total		Debt<br>securities		Private<br>placement<br>debt		Total
Government and agency	****	35	****	11	****	32		37		12		33
Utilities	****	14	****	38	****	18		15		39		18
Financial	****	15	****	10	****	15		15		8		14
Industrial	****	9	****	12	****	9		8		12		9
Consumer (non-cyclical)	****	8	****	14	****	9		7		14		8
Energy – Oil & Gas	****	8	****	5	****	7		8		5		8
Energy – Other	****	0	****	1	****	0		0		1		0
Consumer (cyclical)	****	3	****	6	****	3		3		6		3
Securitized (MBS/ABS)	****	1	****	1	****	1		1		1		1
Telecommunications	****	2	****	0	****	2		2		0		2
Basic materials	****	2	****	2	****	2		2		2		2
Technology	****	2	****	0	****	1		1		0		1
Media and internet and other	****	1	****	0	****	1		1		0		1
Total per cent	****	100	****	100	****	100		100		100		100
Total carrying value ($ billions)	$	224.2	$	42.8	$	267.0	$	218.7	$	40.8	$	259.5

As at December 31, 2021, gross unrealized losses on our fixed income holdings were $1.6 billion or 0.6% of the amortized cost of these holdings (2020 – $0.6 billion or 0.3%). Of this amount, $11 million (2020 – $16 million) related to debt securities trading below 80% of amortized cost for more than 6 months. Securitized assets represented $2 million of the gross unrealized losses and none of the amounts trade below amortized cost for more than 6 months (2020 – $10 million and none, respectively). After adjusting for debt securities supporting participating policyholder and pass-through products and the provisions for credit included in the insurance and investment contract liabilities, the potential impact to shareholders’ pre-tax earnings for debt securities trading at less than 80% of amortized cost for greater than 6 months was approximately $7 million as at December 31, 2021 (2020 – $14 million).

Mortgages

As at December 31, 2021, our mortgage portfolio of $52.0 billion represented 12% of invested assets (2020 – $50.2 billion and 12%, respectively). Geographically, 66% of the portfolio is invested in Canada (2020 – 65%) and 34% is invested in the U.S. (2020 – 35%). The overall portfolio is also diversified by geographic region, property type, and borrower. Of the total mortgage portfolio, 14% is insured (2020 – 14%), primarily by the Canada Mortgage and Housing Corporation (“CMHC”) – Canada’s AAA rated government-backed national housing agency, with 35% of residential mortgages insured (2020 – 31%) and 2% of commercial mortgages insured (2020 – 2%).

37
As at December 31,<br><br><br>($ billions)	2021				2020
---	---	---	---	---	---	---	---	---
	Carrying value		% of total		Carrying value		% of total
Commercial
Retail	$	8.8	****	17	$	8.6		17
Office	****	8.7	****	17		8.7		17
Multi-family residential	****	7.0	****	13		5.8		11
Industrial	****	3.6	****	7		2.9		6
Other commercial	****	3.0	****	6		3.5		7
	****	31.1	****	60		29.5		58
Other mortgages
Manulife Bank single-family residential	****	20.5	****	39		20.4		41
Agricultural	****	0.4	****	1		0.3		1
Total mortgages	$	52.0	****	100	$	50.2		100

Our commercial mortgage loans are originated with a hold-for-investment philosophy. They have low loan-to-value ratios, high debt-service coverage ratios, and as at December 31, 2021 there were no loans in arrears. Geographically, of the total commercial mortgage loans, 44% are in Canada and 56% are in the U.S. (2020 – 42% and 58%, respectively). We are diversified by property type and largely avoid risky market segments such as hotels, construction loans, and second liens.

Non-CMHC Insured Commercial Mortgages^(1)^

	2021				2020
As at December 31,	Canada		U.S.		Canada		U.S.
Loan-to-Value ratio^(2)^	****	61%	****	57%		62%		58%
Debt-Service Coverage ratio^(2)^	****	1.56x	****	1.87x		1.46x		1.83x
Average duration (years)	****	4.6	****	6.8		4.9		6.8
Average loan size ($ millions)	$	19.4	$	19.0	$	17.9	$	18.9
Loans in<br>arrears^(3)^	****	0.00%	****	0.00%		0.00%		0.00%
^(1)^	Excludes Manulife Bank commercial mortgage loans of $393 million (2020 – $407 million).
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^(2)^	Loan-to-Value and Debt-Service Coverage are based on re-underwritten cash flows.
---	---
^(3)^	Arrears defined as over 90 days past due in Canada and over 60 days past due in the U.S.
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Public Equities

As at December 31, 2021, public equity holdings of $28.1 billion represented 7% (2020 – $23.7 billion and 6%) of invested assets and, when excluding assets supporting participating policyholder and pass-through products, represented 1% (2020 – 1%) of invested assets. The portfolio is diversified by industry sector and issuer. Geographically, 28% (2020 – 27%) is held in Canada; 37% (2020 – 36%) is held in the U.S.; and the remaining 35% (2020 – 37%) is held in Asia, Europe, and other geographic areas.

Public Equities – classified by type of product-line supported

As at December 31,<br><br><br>($ billions)	2021				2020
	Carrying value		% of total		Carrying value		% of total
Participating Policyholders	$	14.7	****	52	$	12.3		52
Non-participating products and pass-through products	****	9.6	****	34		8.2		34
Corporate and Other segment^(1)^	****	3.8	****	14		3.2		14
Total public equities^(2)^	$	28.1	****	100	$	23.7		100
^(1)^	Includes $2.5 billion of AFS equities and $1.4 billion of seed money investments in new segregated and mutual funds.<br>
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^(2)^	Includes $5 million of public equities that are managed in conjunction with our alternative long-duration asset strategy.<br>
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Alternative Long-Duration Assets (“ALDA”)

Our ALDA portfolio is comprised of a diverse range of asset classes with varying degrees of correlations. The portfolio typically consists of private assets representing investments in varied sectors of the economy which act as a natural hedge against future inflation and serve as an alternative source of asset supply to long-term corporate bonds. In addition to being a suitable match for our long-duration liabilities, these assets provide enhanced long-term yields and diversification relative to traditional fixed income markets. The vast majority of our ALDA are managed in-house.

As at December 31, 2021, carrying value of ALDA of $44.4 billion represented 10% (2020 – $39.0 billion and 9%) of invested assets. The fair value of total ALDA was $46.3 billion at December 31, 2021 (2020 – $41.0 billion). The carrying value and corresponding fair value by sector and/or asset type are outlined above (see table in the section “General Fund Assets”).

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Real Estate

Our real estate portfolio is diversified by geographic region; of the total fair value of this portfolio, 42% is located in the U.S., 42% in Canada, and 16% in Asia as at December 31, 2021 (2020 – 40%, 43%, and 17%, respectively). This high-quality portfolio has virtually no leverage and is primarily invested in premium urban office towers, concentrated in cities with stable growth, and highly diverse economies, in North America and Asia. The portfolio is well positioned with an average occupancy rate of 90% (2020 – 92%) and an average lease term of 5.5 years (2020 – 6.2 years). During 2021, we executed 2 acquisitions representing $0.03 billion market value of commercial real estate assets (2020 – 5 acquisitions and $0.3 billion, respectively). As part of ongoing portfolio management initiatives, 4 commercial real estate assets totaling $0.4 billion were sold during 2021.

The composition of our real estate portfolio based on fair value is as follows:

As at December 31,<br><br><br>($ billions)	2021				2020
	Fair value		% of total		Fair value		% of total
Company Own-Use	$	3.0	****	21	$	3.0		21
Office – Downtown	****	4.8	****	33		5.3		38
Office – Suburban	****	1.4	****	10		1.5		11
Industrial	****	2.2	****	15		1.6		11
Residential	****	1.9	****	13		1.9		14
Retail	****	0.4	****	3		0.4		3
Other	****	0.7	****	5		0.3		2
Total real estate^(1)^	$	14.4	****	100	$	14.0		100
^(1)^	These figures represent the fair value of the real estate portfolio. The carrying value of the portfolio was $13.2 billion<br>and $12.8 billion at December 31, 2021 and December 31, 2020, respectively.
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Infrastructure

We invest both directly and through funds in a variety of industry specific asset classes, listed below. The portfolio is well-diversified with over 500 portfolio companies. The portfolio is predominately invested in the U.S. and Canada, but also in the United Kingdom, Western Europe, Latin America, and Australia. Our power and infrastructure holdings are as follows:

As at December 31,<br>($ billions)	2021				2020
	Carrying value		% of total		Carrying value		% of total
Power generation	$	3.9	****	40	$	4.1		45
Transportation (including roads, ports)	****	2.7	****	27		2.5		27
Electric and gas regulated utilities	****	0.4	****	5		0.4		5
Electricity transmission	****	0.1	****	1		0.1		1
Water distribution	****	0.2	****	2		0.1		1
Midstream gas infrastructure	****	0.7	****	7		0.6		7
Maintenance service, efficiency and social infrastructure	****	0.2	****	2		0.2		2
Telecommunications/Tower	****	1.5	****	15		1.0		11
Other infrastructure	****	0.1	****	1		0.1		1
Total infrastructure	$	9.8	****	100	$	9.1		100

Timberland & Farmland

Our timberland and farmland assets are managed by a proprietary entity, Manulife Investment Management Timberland and Agriculture (“MIM Timberland and Agriculture”). In addition to being the world’s largest timberland investment manager for institutional investors^1^, with timberland properties in the U.S., New Zealand, Australia, Chile, Brazil, and Canada, MIM Timberland and Agriculture also manages farmland properties in the U.S., Australia, Chile and Canada. The General Fund’s timberland portfolio comprised 22% of MIM Timberland and Agriculture’s total timberland assets under management (“AUM”) (2020 – 23%). The farmland portfolio includes annual (row) crops, fruit crops, wine grapes, and nut crops. The General Fund’s holdings comprised 41% of MIM Timberland and Agriculture’s total farmland AUM (2020 – 42%).

Private Equities

Our private equity portfolio of $11.6 billion (2020 – $8.0 billion) includes both directly held private equity and private equity funds. Both are diversified across vintage years and industry sectors.

^1^	Based on the global timber investment management organization ranking in the RISI International Timberland Ownershipand Investment Database.
39
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Oil & Gas

This category is comprised of $1.9 billion (2020 – $2.3 billion) in various oil and gas private equity interests which are a combination of both producing and mid-streaming assets. The $2.3 billion in 2020 included $0.6 billion in NAL Resources, a subsidiary, which was sold on January 4, 2021.

Investment Income

For the years ended December 31,<br><br><br>($ millions, unless otherwise stated)	2021			2020
Interest income	$	11,517	****	$	11,813
Dividend, rental and other income^(1)^	****	4,180	****		2,458
(Impairments)/Recoveries	****	15	****		(703	)
Other, including gains and losses on sale of AFS debt<br>securities	****	(85	)		2,865
Investment income before realized and unrealized gains on assets<br>supporting<br> <br>insurance and investment contract liabilities and on macro equity hedges	****	15,627	****		16,433
Realized and unrealized gains and losses on assets supporting insurance and<br><br><br>investment contract liabilities and on macro equity hedges
Debt securities	****	(5,585	)		10,748
Public equities	****	3,220	****		1,917
Mortgages and private placements	****	403	****		39
Alternative long-duration assets and other investments	****	3,772	****		(214	)
Derivatives, including macro equity hedging program	****	(5,813	)		6,477
	****	(4,003	)		18,967
Total investment income	$	11,624	****	$	35,400
^(1)^	Rental income from investment properties is net of direct operating expenses.
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In 2021, the $11.6 billion of investment income (2020 – $35.4 billion) consisted of:

•	$15.6 billion of investment income before net realized and unrealized gains on assets supporting insurance and investment<br>contract liabilities and on macro equity hedges (2020 – $16.4 billion); and
•	$4.0 billion of net realized and unrealized losses on assets supporting insurance and investment contract liabilities and on<br>macro equity hedges (2020 – gains of $19.0 billion).
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The $0.8 billion decrease in net investment income before unrealized and realized losses was due to losses of $0.1 billion, mainly from the sale of AFS bonds (compared with $2.9 billion gains in 2020); partially offset by an increase of $2.0 billion in other investments mainly due to higher income in private equities.

In 2021, net realized and unrealized losses on assets supporting insurance and investment contract liabilities and on the macro hedge program were $4.0 billion compared with gains of $19.0 billion for 2020. The 2021 losses were primarily due to the impact of interest rate increases partially offset by fair value gains in ALDA and higher equity markets. The 2020 gains were primarily due to the impact of interest rate declines and higher equity markets.

Fair value accounting policies affect the measurement of both our assets and our liabilities. Refer to “Financial Performance” above.

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8. Fourth Quarter Financial Highlights

Profitability

As at and for the quarters ended December 31,<br><br><br>($ millions, unless otherwise stated)	2021		2020
Profitability:
Net income attributed to shareholders	$	2,084	$	1,780
Core earnings^(1)^	$	1,708	$	1,474
Diluted earnings per common share ($)	$	1.03	$	0.89
Diluted core earnings per common share ($)	$	0.84	$	0.74
Return on common shareholders’ equity (“ROE”)	****	15.6%		14.1%
Core ROE	****	12.7%		11.6%
^(1)^	Impact of currency movement on the fourth quarter of 2021 (“4Q21”) core earnings compared with the fourth<br>quarter of 2020 (“4Q20”) was a $53 million unfavourable variance.
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Manulife ’ s 4Q21 net income attributed toshareholders was $2,084 million compared with $1,780 million in 4Q20. Net income attributed to shareholders is comprised of core earnings (consisting of items we believe reflect the underlying earnings capacity of the business), which amounted to $1,708 million in 4Q21 compared with $1,474 million in 4Q20, and items excluded from core earnings, which amounted to a net gain of $376 million in 4Q21 compared with a net gain of $306 million in 4Q20. Net income attributed to shareholders in 4Q21 increased compared with 4Q20 driven by growth in core earnings and gains from fixed income reinvestment rates assumed in the valuation of policy liabilities, a component of the direct impact of markets, compared with losses in 4Q20. Fixed income reinvestment rate gains were driven by the flattening of the yield curve in Canada and the U.S. and, to a lesser extent, widening corporate spreads in the U.S. These items were partially offset by lower investment-related experience gains in 4Q21. Investment-related experience in 4Q21 reflected higher-than-expected returns (including fair value changes) on ALDA primarily driven by gains on private equity and infrastructure as well as strong credit experience, partially offset by the unfavourable impact of the acquisition of treasuries, which is a component of fixed income reinvestment activities.

The $234 million or 20% increase in core earnings compared with 4Q20 was driven by the recognition of core investment gains in 2021 (compared with nil core investment gains in 4Q20), higher net fee income from higher average AUMA in Global WAM, which benefitted from the favourable impact of markets and net inflows, higher new business gains in the U.S. and Canada, and a decrease in Corporate and Other core losses which benefitted from a lower cost of debt and higher investment income partially offset by lower net gains on seed money investments in new segregated and mutual funds, and in-force business growth in Asia and Canada. These items were partially offset by unfavourable policyholder experience. 4Q21 core earnings included a net charge of $97 million ($120 million pre-tax) related to policyholder insurance and annuity experience compared with a net charge of $27 million ($40 million pre-tax) in 4Q20.^1^

Core earnings by segment is presented in the table below for the periods presented.

For the quarters ended December 31,<br><br><br>($ millions)	2021			2020
Core earnings
Asia	$	547	****	$	571
Canada	****	286	****		316
U.S.	****	467	****		479
Global Wealth and Asset Management	****	387	****		304
Corporate and Other (excluding core investment gains)	****	(79	)		(196	)
Core investment gains	****	100	****		–
Core earnings	$	1,708	****	$	1,474

In Asia, core earnings were $547 million in 4Q21 compared with $571 million in 4Q20, in line with 4Q20 after adjusting for the impact of changes in foreign currency exchange rates. The increase in core earnings driven by in-force business growth was offset by unfavourable policyholder experience, which included modest COVID-19 related claims losses, and lower new business gains. An increase in Hong Kong new business gains was more than offset by lower gains in Japan and Asia Other^2^. In Hong Kong, the increase was driven by higher sales and favourable product mix. Lower new business gains in Japan were driven by the impact of lower COLI sales. In Asia Other, we experienced a combination of unfavourable product mix and lower volumes in several emerging markets that were impacted by COVID-19 containment measures. Asia was also impacted by lower investment income on allocated capital, which decreased by US$6 million compared with 4Q20 (see Corporate and Other segment).

^1^	Policyholder experience includes gains of $5 million in 2021 from customers who have opted to change their existing<br>medical coverage to the VHIS products in Hong Kong (4Q20 – gains of $13 million). These gains did not have a material impact on core earnings as they were offset by new business strain.
^2^	Asia Other excludes Hong Kong and Japan.
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41
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In Canada, core earnings were $286 million in 4Q21 compared with $316 million in 4Q20. The 9% decrease primarily reflected less favourable policyholder experience in group insurance, lower investment income on allocated capital of $24 million and the non-recurrence of a release of provision in 4Q20 for an uncertain tax position of a prior year. These items were partially offset by higher expected earnings across all businesses and higher individual insurance sales.

In the U.S., core earnings were $467 million in 4Q21 compared with $479 million in 4Q20. The 1% increase on a constant exchange rate basis was primarily driven by higher new business gains from higher sales and improved margins, and other experience gains partially offset by less favourable long-term care policyholder experience and lower tax benefits. U.S. was also impacted by lower investment income on allocated capital, which decreased by US$30 million compared with 4Q20 (see Corporate and Other segment).

Global WAM core earnings were $387 million in 4Q21 compared with $304 million in 4Q20. The 30% increase reflected growth in net fee income driven by higher average AUMA, from the favourable impact of markets and net inflows, and favourable business mix, and higher tax benefits. This increase was partially offset by higher general expenses, mainly from growth in business volumes and other variable expenses.

Corporate and Other core loss excluding core investment gains was $79 million in 4Q21 compared with $196 million in 4Q20. The $117 million decrease in core loss was primarily driven by $74 million of lower interest on allocated capital to operating segments in 4Q21, nonrecurrence of impairment of capitalized IT assets in prior year, lower interest on external debt, higher investment income and higher gains on sale of AFS equities. These gains were partially offset by the unfavourable impact of markets on seed money investments in new segregated funds and mutual funds in 4Q21 compared with gains in the prior year.

The table below presents net income attributed to shareholders for the periods presented consisting of core earnings and the items excluded from core earnings.^^

For the quarters ended December 31,<br><br><br>($ millions)	2021			2020
Core earnings	$	1,708	****	$	1,474
Items excluded from core earnings:
Investment-related experience outside of core<br>earnings^(1)^	****	126	****		585
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities (see table<br>below)	****	398	****		(323	)
Direct impact of equity markets and variable annuity guarantee liabilities^(2)^	****	124	****		351
Fixed income reinvestment rates assumed in the valuation of policy liabilities^(3)^	****	454	****		(846	)
Sale of AFS bonds and derivative positions in the Corporate and Othersegment	****	(180	)		172
Reinsurance transactions,<br>tax-related items and other^(4)^	****	(148	)		44
Total items excluded from core earnings	****	376	****		306
Net income (loss) attributed toshareholders	$	2,084	****	$	1,780
^(1)^	Total investment-related experience in 4Q21 was a net gain of $226 million, compared with a net gain of<br>$585 million in 4Q20, and in accordance with our definition of core earnings, we included $100 million in investment-related experience gains in core earnings and a $126 million gain in items excluded from core earnings in 4Q21 (no<br>core investment gains and $585 million, respectively, in 4Q20). Investment-related experience gains in 4Q21 reflected higher-than-expected returns (including fair value changes) on ALDA primarily driven by gains on private equity and<br>infrastructure as well as strong credit experience, partially offset by the unfavourable impact of fixed income reinvestment activities primarily driven by the acquisition of US Treasury bills. Investment-related experience gains in 4Q20 reflected<br>the favourable impact of fixed income reinvestment activities, higher-than-expected returns (including fair value changes) on ALDA primarily driven by fair value gains on private equity and the estimated impact of the sale of NAL and strong credit<br>experience, partially offset by lower-than-expected returns on real estate.
---	---
^(2)^	In 4Q21, the net gain related to equity markets of $124 million included a gain of $207 million from gross<br>equity exposure, partially offset by a loss of $82 million from dynamic hedge experience and a modest charge of $1 million from macro hedging experience. In 4Q20, the net gains related to equity markets of $351 million included a gain<br>of $1,613 million from gross equity exposure partially offset by a charge of $1,253 million from dynamic hedging experience and a modest charge of $9 million from macro hedge experience.
---	---
^(3)^	The $454 million gain in 4Q21 was driven by flattening of the yield curve in Canada and the U.S. and, to a lesser<br>extent, widening corporate spreads in the U.S. The $846 million charge in 4Q20 was driven by narrowing corporate spreads, primarily in the U.S.
---	---
^(4)^	Consisting of a $119 million charge related to updating the impact of the 2017 U.S. Tax Cuts and Jobs Act and a $37<br>million charge from a reinsurance transaction in the U.S., partially offset by Asia reinsurance transaction gains of $8 million in 4Q21. In 4Q20, reinsurance transactions in Asia and Canada contributed gains of $29 million and<br>$15 million, respectively.
---	---

Net income attributed to shareholders by segment is presented in the following table.

For the quarters ended December 31,<br><br><br>($ millions)	2021			2020
Net income attributed to shareholders by segment
Asia	$	645	****	$	639
Canada	****	616	****		628
U.S.	****	494	****		106
Global Wealth and Asset Management	****	387	****		304
Corporate and Other	****	(58	)		103
Total net income attributed to shareholders	$	2,084	****	$	1,780

42   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Business Performance

As at and for the quarters ended December 31,<br>( millions, unless otherwise stated)		2020
Asia APE sales	890	$	996
Canada APE sales	295		245
U.S. APE sales	244		178
Total APE sales	1,429		1,419
Asia new business value	391		368
Canada new business value	82		65
U.S. new business value	82		56
Total new business value	555		489
Global Wealth and Asset Management gross flows ( billions)	36.0		31.5
Global Wealth and Asset Management net flows ( billions)	8.1		2.8
Global Wealth and Asset Management assets under management and administration ( billions)	855.9		753.6
Global Wealth and Asset Management total invested assets ( billions)	4.5		4.8
Global Wealth and Asset Management segregated funds net assets ( billions)	252.6		229.8
Total assets under management and administration ( billions)	1,425.8		1,297.4
Total invested assets ( billions)	427.1		411.0
Total net segregated funds net assets ( billions)	399.8		365.5

All values are in US Dollars.

Sales

APE sales were $1.4 billion in 4Q21, an increase of 5% compared with 4Q20. In Asia, APE sales decreased 6% compared with 4Q20 as growth in Hong Kong was more than offset by lower COLI product sales in Japan. In Hong Kong, APE sales increased 11% compared with 4Q20 despite the dampening effect of COVID-19 containment measures constraining cross-border travel between Hong Kong and mainland China, reflecting strong growth in our bank channel, and demand from mainland Chinese visitors through our Macau branch. Asia Other APE sales were in-line with 4Q20, as higher sales in bancassurance were offset by lower agency sales, which were adversely impacted by COVID-19 containment measures in markets such as Vietnam and the Philippines. In Japan, APE sales declined 44% compared with 4Q20, primarily due to a decrease in COLI product sales. In Canada, APE sales increased 20% compared with 4Q20, primarily driven by increased customer demand for our lower risk segregated fund products and higher individual insurance sales. In the U.S., APE sales increased 41% compared with 4Q20, due to strong international sales, which is reported as a part of the U.S. segment results, and our differentiated domestic product offerings which include the John Hancock Vitality feature and higher customer demand for insurance protection in the current COVID-19 environment of greater consumer interest in improving baseline health.

New Business Value was $555 million in 4Q21, an increase of 17% compared with 4Q20. In Asia, NBV increased 11% to $391 million compared with 4Q20, reflecting higher sales volumes, favourable interest rates and expense management in Hong Kong, and favourable product mix in Asia Other, partially offset by lower sales in Japan and lower Critical Illness sales in mainland China. In Canada, NBV of $82 million was up 26% compared with 4Q20, primarily due to higher margins in annuities and higher volumes in individual insurance. In the U.S., NBV of $82 million was up 51% compared with 4Q20, primarily driven by higher sales volumes and favourable product mix, notably due to higher international sales.

Global Wealth and Asset Management net inflows were $8.1 billion in 4Q21 compared with net inflows of $2.8 billion in 4Q20. Net inflows in Retail were $7.5 billion in 4Q21 compared with net inflows of $3.6 billion in 4Q20, reflecting higher gross flows driven by strong intermediary sales and higher institutional model allocations in the U.S., as well as higher gross flows in Japan and China. Net inflows in Institutional Asset Management were $1.6 billion in 4Q21 compared with net inflows of $1.0 billion in 4Q20, driven by lower redemptions in timberland and real estate mandates, partially offset by lower gross flows in fixed income mandates. Net outflows in Retirement were $1.0 billion in 4Q21 compared with net outflows of $1.8 billion in 4Q20. The reduction in net outflows was driven by higher gross flows across all geographies, reflecting higher growth in new plan sales and member contributions, partially offset by higher plan redemptions.

Global Wealth and Asset Management gross flows were $36.0 billion in 4Q21 compared with $31.5 billion in 4Q20. Retirement gross flows in 4Q21 were $12.5 billion, an increase of 15% compared with 4Q20, with positive contributions from all geographies, reflecting growth in new plan sales and member contributions. Retail gross flows in 4Q21 were $19.3 billion, an increase of 25% compared with 4Q20, driven by strong intermediary sales and higher institutional model allocations in the U.S., as well as higher gross flows in Japan and China. In Canada, gross flows were in line with the prior year. Institutional Asset Management gross flows in 4Q21 were $4.2 billion, a decrease of 2% compared with 4Q20, primarily driven by lower sales in fixed income mandates.

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9. Risk Management and Risk Factors

This section provides an overview of our overall risk management approach along with detailed description of specific risks which may affect our results of operations or financial condition and the strategies used to manage those risks.

Enterprise Risk Management Framework

Delivering on our mission “Decisions made easier. Lives made better”, our ambition is to transform into the most digital, customer-centric global company in our industry, while delighting our customers, engaging our employees, and delivering superior returns for our shareholders. The activities required to achieve these results involve elements of risk taking.

Our approach to risk management is governed by our Enterprise Risk Management (“ERM”) Framework.

Our ERM Framework provides a structured approach to risk taking and risk management activities across the enterprise, supporting our long-term revenue, earnings, and capital growth strategy. It is communicated through risk policies and standards, which are intended to enable consistent design and execution of strategies across the organization. We have a common approach to managing all risks to which we are exposed, and to evaluating potential directly comparable risk-adjusted returns on contemplated business activities. Our risk policies and standards cover:

•	Risk roles and authorities – Assignment of accountability and delegation of authority for risk oversight and<br>risk management at various levels within the Company, as well as accountability principles;
•	Governance and strategy – The types and levels of risk the Company seeks given its strategic plan, the internal<br>and external environment, and risk appetite which drives risk limits and policies;
---	---
•	Execution – Risk identification, measurement, assessment, and mitigation which enable those accountable for<br>risks to manage and monitor their risk profile; and
---	---
•	Evaluation – Validation, back testing and independent oversight to confirm that the Company generated the risk<br>profile it intended, root cause analysis of any notable variation, and any action required to re-establish desired levels when exposures materially increase such that risk appetite is neared or exceeded.<br>
---	---

Our risk management practices are influenced and impacted by external and internal factors (such as economic conditions, political environments, technology and risk culture), which can significantly impact the levels and types of risks we might face in pursuit of strategically optimized risk taking and risk management. Our ERM Framework incorporates relevant impacts and mitigating actions as appropriate.

Three Lines of Defense Model

A strong risk culture and a common approach to risk management are integral to Manulife’s risk management practices. Management is responsible for managing risk within risk appetite and has established risk management strategies and monitoring practices. Our approach to risk management includes a “three lines of defense” governance model that segregates duties among risk taking activities, risk monitoring and risk oversight, and establishes appropriate accountability for those who assume risk versus those who oversee risk.

Our first line of defense includes the Chief Executive Officer (“CEO”), Segment and Business Unit General Managers and Global Function Heads. In our matrix reporting model, the Segment General Managers are ultimately accountable for their business results, the risks they assume to achieve those results, and for the day-to-day management of the risks and related controls, and the Global Function Heads are accountable for the management of the risks and related controls for their function.

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The second line of defense is comprised of the Company’s Chief Risk Officer (“CRO”), the Global Risk Management (“GRM”) function, the Company’s Chief Compliance Officer and the Global Compliance Office, and other global oversight functions. Collectively, this group provides independent oversight of risk taking and risk management activities across the enterprise. Risk oversight committees, through broad-based membership, also provide oversight of risk taking and risk management activities.

The third line of defense is Audit Services, which provides independent, objective assurance that controls are effective and appropriate relative to the risk inherent in the business and that risk mitigation programs and risk oversight functions are effective in managing risks.

Culture

To enable the achievement of our mission and strategic priorities, we are committed to a set of shared values, which reflect our culture, inform our behaviours, and help define how we work together:

•	Obsess about customers – Predict their needs and do everything in our power to satisfy them.
•	Do the right thing – Act with integrity and do what we say.
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•	Think big – Anything is possible. We can always find a better way.
---	---
•	Get it done together – We’re surrounded by an amazing team. Do it better by working together.<br>
---	---
•	Own it – Feel empowered to make decisions and take action to deliver our mission.
---	---
•	Share your humanity – Build a supportive, diverse and thriving workplace.
---	---

Risk Culture Vision – Within this context, we strive for a risk aware culture, where individuals and groups are encouraged, feel comfortable and are proactive in making transparent, balanced risk-return decisions that are in the long-term interests of the Company.

Risk Culture Framework – We have set a framework of desired behaviours to foster a strong risk aware culture. The framework is assessed against a set of qualitative and quantitative indicators and regularly reported to MFC’s board of directors (the “Board”) and executive leadership, with the intent to continuously identify opportunities to increase risk awareness across all geographies, businesses and layers of management and staff.

We believe that risk culture is strengthened once desired organizational behaviours and attitudes are reinforced through effective application of our corporate values. As such, we communicate key elements of our values through a risk lens to build a strong risk aware culture, including:

•	Transparency – Encourage an environment where we can get it done together by openly discussing the strengths,<br>weaknesses and potential range of outcomes of an issue, proposal or initiative and making informed decisions. Escalate issues before they become significant problems.
•	Risk appetite – Once we have identified a risk or situation, we establish a risk appetite and own that decision.<br>
---	---
•	Learn – Use mistakes and failures as learning moments and share what was learned; think big by sharing beyond<br>teams and business units. Seek out lessons learned from throughout the organization in order to continuously improve and grow our business the right way.
---	---
•	Incentives – Align personal incentives with our goals and how we want to execute our plan. When things go wrong,<br>share our humanity by maintaining a supportive environment to ensure appropriate incentives for continued transparency and lessons learned. ****
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Risk Governance

The Board oversees our culture of integrity and ethics, strategic planning, risk management, and corporate governance, among other things. The Board carries out its responsibilities directly and through its four standing committees:

•	Risk Committee – Oversees the management of our principal risks, and our programs, policies and procedures to<br>manage those risks.
•	Audit Committee – Oversees internal control over financial reporting and our finance, actuarial, internal audit<br>and global compliance functions, serves as the conduct review committee, reviews our compliance with legal and regulatory requirements and oversees the performance, qualifications and independence of our external auditors.
---	---
•	Management Resources and Compensation Committee – Oversees our global human resources strategy, policies,<br>programs, management succession, executive compensation, and pension plan governance.
---	---
•	Corporate Governance and Nominating Committee – Develops our governance policies and procedures, including<br>environmental, social and governance related matters, among other activities.
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The CEO is directly accountable to the Board for our results and operations and all risk taking activities and risk management practices required to achieve those results. The CEO is supported by the CRO as well as by the Executive Risk Committee (“ERC”). Together, they shape and promote our risk culture, guide risk taking throughout our global operations and strategically manage our overall risk profile. The ERC, along with other executive-level risk oversight committees, establishes risk policies, guides risk taking activity, monitors significant risk exposures and sponsors strategic risk management priorities throughout the organization.

Global Risk Management, under the direction of the CRO, establishes and maintains our ERM Framework and oversees the execution of individual risk management programs across the enterprise. Global Risk Management seeks to ensure a consistent enterprise-wide assessment of risk, risk based capital and risk-adjusted returns across all operations.

45

The ERC approves and oversees the execution of the Company’s enterprise risk management program. It establishes and presents for approval to the Board the Company’s risk appetite and enterprise-wide risk limits and monitors our overall risk profile, including key and emerging risks and risk management activities. As part of these activities, the ERC monitors material risk exposures, endorses and reviews strategic risk management priorities, and reviews and assesses the impact of business strategies, opportunities and initiatives on our overall risk position. The ERC is supported by a number of oversight sub-committees including:

•	Credit Committee – Establishes credit risk policies and risk management standards of practice and oversees the<br>credit risk management program. Also monitors the Company’s overall credit risk profile and approves large individual credits and investments.
•	Product Oversight Committee – Oversees insurance risk and reviews risks in new product and new business<br>reinsurance initiatives. Also monitors product design, new product pricing, and insurance risk exposures and trends.
---	---
•	Global Asset Liability Committee – Oversees market and liquidity risk for insurance products, hedging, and asset<br>liability management programs and strategies. Also monitors market risk profile, risk exposures, risk mitigation activities and compliance with related policies.
---	---
•	Operational Risk Committee – Oversees operational risk appetite, exposures and associated governance, risk<br>processes, risk management activities and compliance with related policies.
---	---

We also have segment risk committees, each with mandates similar to the ERC except with a focus at the segment as applicable.

Risk Appetite

The Company’s strategic direction drives overall risk appetite. All risk taking activities are managed within the Company’s overall risk appetite, which defines the amount and types of risks the Company is willing to assume in pursuit of its objectives. It is comprised of three components: overall risk taking philosophy, risk appetite statements, and risk limits and tolerances.

Risk Philosophy – Manulife is a global financial institution offering insurance, wealth and asset management products and other financial services. The activities required to achieve our mission of “Decisions made easier. Lives made better” are guided by our values and involve elements of risk taking. As such, when making decisions about risk taking and risk management, the Company places a priority on the following risk management objectives:

•	To safeguard the commitments and expectations established with our customers, creditors, shareholders and employees;<br>
•	To support the successful design and delivery of customer solutions;
---	---
•	To prudently and effectively deploy the capital invested in the Company by shareholders with appropriate risk/return<br>profiles;
---	---
•	To invest wealth and asset management’s customer assets consistent with their objectives;
---	---
•	To achieve and maintain a high level of operational resilience;
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•	To safeguard the well-being of our employees, and promote a diverse, equitable and inclusive business environment;<br>
---	---
•	To protect and/or enhance the Company’s reputation and brand; and
---	---
•	To maintain the Company’s targeted financial strength rating.
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While we only pursue risks, we can appropriately analyze and monitor, we also manage risks which arise outside of our direct influence. We recognize that risk exposures change over time. If exposures materially increase, we will activate management actions designed to bring exposures back to desired levels. As an integrated component of our business model, risk management assists the Company in achieving our objectives and in reaching higher levels of operational excellence, while encouraging transparency and organizational learning.

Risk Appetite Statements – At least annually, we establish and/or reaffirm that our risk appetite and the Company’s strategy are aligned. The risk appetite statements provide ‘guideposts’ on our appetite for identified risks, any conditions placed on associated risk taking and direction for where quantitative risk limits should be established. The Company’s risk appetite statements are as follows:

•	Manulife accepts a total level of risk that provides a very high level of confidence to meeting customer obligations while<br>targeting an appropriate overall return to shareholders over time;
•	Manulife targets a credit rating aligned with our growth aspirations and our objective of honoring all commitments to<br>policyholders and other stakeholders with a high degree of confidence;
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•	Manulife values innovation and encourages initiatives intended to advance the Company’s ambition to be a digital,<br>customer-centric market leader;
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•	Capital market risks are acceptable when they are managed within specific risk limits and tolerances;
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•	Manulife believes a diversified investment portfolio reduces overall risk and enhances returns; therefore, it accepts credit<br>and alternative long-duration asset related risks;
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•	Manulife pursues product risks that add customer and shareholder value where there is competence to assess and monitor them,<br>and for which appropriate compensation is received;
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•	Manulife accepts that operational risks are an inherent part of the business when managed within thresholds and tolerances<br>of key risk indicators and will protect its business and customers’ assets through cost-effective operational risk mitigation; and
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•	Manulife expects its officers and employees to act in accordance with the Company’s values, ethics and standards; and<br>to protect its brand and reputation.
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46   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Risk Limits and Tolerances – Risk limits and tolerances are established for risks within our risk classification framework that are inherent in our strategies in order to define the types and amount of risk the Company will assume. Risk tolerance levels are set for risks deemed to be most significant to the Company and are established in relation to economic capital, earnings-at-risk and regulatory capital required. The purpose of risk limits is to cascade the total Company risk appetite to a level that can be effectively managed. Manulife establishes standalone risk limits for risk categories to avoid excessive concentration in any individual risk category and to manage the overall risk profile of the organization.

Risk Identification, Measurement and Assessment

We have a common approach and process to identify, measure, and assess the risks that we assume. We evaluate all potential new business initiatives, acquisitions, product offerings, reinsurance arrangements, and investment and financing transactions on a comparable risk-adjusted basis. Segments and functional groups are responsible for identifying and assessing key and emerging risks on an ongoing basis. A standard inventory of risks is used in all aspects of risk identification, measurement and assessment, and monitoring and reporting.

Risk exposures are evaluated using a variety of measures focused on both short-term net income attributed to shareholders and long-term economic value, with certain measures used across all risk categories, while others are applied only to some risks or a single risk type. Measures include stress tests such as sensitivity tests, scenario impact analyses and stochastic scenario modeling. In addition, qualitative risk assessments are performed, including for those risk types that cannot be reliably quantified.

We perform a variety of stress tests on earnings, regulatory capital ratios, economic capital, earnings-at-risk and liquidity that consider significant, but plausible events. We also perform other integrated, complex scenario tests to assess key risks and the interaction of these risks.

Economic capital and earnings-at-risk provide measures of enterprise-wide risk that can be aggregated and compared across business activities and risk types. Economic capital measures the amount of capital required to meet obligations with a high and pre-defined confidence level. Our earnings-at-risk metric measures the potential variance from quarterly expected earnings at a particular confidence level. Economic capital and earnings-at-risk are both determined using internal models.

Risk Monitoring and Reporting

Under the direction of the CRO, GRM oversees a formal process for monitoring and reporting on all significant risks at the Company-wide level. Risk exposures are also discussed at various risk oversight committees, along with any exceptions or proposed remedial actions, as required.

On at least a quarterly basis, the ERC and the Board’s Risk Committee reviews risk reports that present an overview of our overall risk profile and exposures across our principal risks. The reports incorporate both quantitative risk exposure measures and sensitivities, and qualitative assessments. The reports also highlight key risk management activities and facilitate monitoring compliance with key risk policy limits.

The results of the Financial Condition Test (FCT) and Own Risk and Solvency Assessment (ORSA) are presented to the Board annually by our Chief Actuary and Chief Risk Officer, respectively. Our Chief Auditor reports the results of internal audits of risk controls and risk management programs to the Audit Committee and the Board’s Risk Committee annually. Management reviews the implementation of key risk management strategies, and their effectiveness, with the Board’s Risk Committee annually.

Risk Control and Mitigation

Risk control activities in place throughout the Company are designed to mitigate risks within established risk limits. We believe our controls, which include policies, procedures, systems and processes, are appropriate and commensurate with the key risks faced at all levels across the Company. Such controls are an integral part of day-to-day activity, business management and decision making.

GRM establishes and oversees formal review and approval processes for product offerings, insurance underwriting, reinsurance, investment activities and other material business activities, based on the nature, size and complexity of the risk taking activity involved. Authorities for assuming risk at the transaction level are delegated to specific individuals based on their skill, knowledge and experience.

Principal RiskCategories

Our insurance, wealth and asset management and other financial services businesses subject Manulife to a broad range of risks. Management has identified the following risks and uncertainties to which our businesses, operations and financial condition are subject grouped under five principal risk categories: strategic risk, market risk, credit risk, product risk and operational risk. The following sections also describe the risk management strategies for each of these risk categories.

The risks and uncertainties described below are not the only ones facing us. Additional risks not presently known to us or that are currently immaterial could also impair our businesses, operations and financial condition. If any of such risks should occur, the trading price of our securities, including common shares, preferred shares and debt securities, could decline, and investors may lose all or part of their investment.

47

Strategic Risk

Strategic risk is the risk of loss resulting from the inability to adequately plan or implement an appropriate business strategy that allows us to effectively compete in the markets in which we operate, or to adapt to change in the external business, political or regulatory environment.

We operate in highly competitive markets and compete for customers with both insurance and non-insurance financial services companies. Customer loyalty and retention, and access to distributors, are important to the Company’s success and are influenced by many factors, including our distribution practices and regulations, product features, service levels including digital capabilities, prices, investment performance, and our financial strength ratings and reputation. Our ability to effectively compete is highly dependent upon being quick to react and adapt to changes from the external environment while continuing to proactively drive internal innovation.

The following section describes strategies to manage strategic risk, as well as details on strategic risk factors:

Strategic Risk Management Strategy

The CEO and Executive Leadership Team establish and oversee execution of business strategies and have accountability to identify and manage the risks embedded in these strategies. They are supported by a number of processes:

•	Strategic business, risk and capital planning that is reviewed with the Board, Executive Leadership Team, and the ERC;<br>
•	Performance and risk reviews of all key businesses with the CEO and annual reviews with the Board;
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•	Risk based capital attribution and allocation designed to encourage a consistent decision-making framework across the<br>organization; and
---	---
•	Review and approval of significant acquisitions and divestitures by the CEO and, where appropriate, the Board.<br>
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Reputation risk is the risk that the Company’s corporate image may be eroded by adverse publicity, about real or perceived issues, as a result of business practices of Manulife or its representatives potentially causing long-term or even irreparable damage to the Company’s franchise value. Reputation risk arises from both internal and external environmental factors, and cannot be managed in isolation from other risks, but only as an integral part of the Company’s integrated risk management approach.

The Company’s Reputation Risk Policy requires that internal processes and controls, management decisions, and business decisions, include considerations for how the Company’s reputation and brand could be impacted. Any incident with the potential to harm our reputation is of high priority and senior management is to be alerted. An essential component of the Reputation Risk Policy requires that all employees should conduct themselves in accordance with our values, as well as the Company’s Code of Conduct and Business Ethics.

Environmental, Social and Governance Risks

Environmental, social and governance (“ESG”) risks may impact our investments, underwriting, or operations, and may create financial, operational, legal, reputational, or brand value risks for Manulife.

Please refer to our annual “Sustainability Report and Public Accountability Statement”, published in the second quarter of the following year, for information on our ESG priorities and performance.

Climate Risks

Matters related to climate change are a key component of the Environmental pillar of Manulife’s ESG framework. Manulife supports the recommendations of the Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures (“TCFD”). The application of these recommendations is articulated below and is expected to be further refined over the coming years.

•

Governance – The Board’s Corporate Governance and Nominating Committee (“CGNC”) oversees matters<br>related to climate change as part of its oversight of Manulife’s ESG framework. On a quarterly basis, CGNC monitors the progress against the goals and targets set out in Manulife’s Climate Action Plan articulated in the Strategy section<br>below. The Board’s Risk Committee also considers climate-related risks and opportunities through the ongoing monitoring and reporting of emerging risks.

Manulife’s Executive Sustainability Council, which consists of the Chief Sustainability Officer and members of the Executive Leadership Team including the Chief Executive Officer, is responsible for the climate strategy and disclosures. It meets monthly and is supported by the Manulife Climate Change Taskforce, a cross-functional team, that guides and monitors the implementation of the Climate Action Plan, assesses climate-related risks and opportunities, and manages climate-related performance and disclosures.

•	Risk Management – Consistent with TCFD, Manulife defines climate-related risk as the potential<br>negative impacts of climate change, which may be experienced directly (e.g., through financial loss) or indirectly (e.g., through reputational damage), as a result of the physical impacts of climate change or the transition to a low-carbon economy.

We view climate-related risks as transverse risks, since the broad range of actual or potential risks can impact any of our key risks, such as market, credit, product, operational, legal, or reputational risk, through the manifestation of the two dimensions of climate-related risks articulated by the TCFD – physical and transitional.

We continue to enhance the integration of climate-related risks into our enterprise risk management framework to ensure that they are managed in a manner consistent with our common approach to risk management (refer to “Risk Identification, Measurement and Assessment” above).

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We have also incorporated climate-related risks into our risk taxonomy and risk appetite framework. Refer to “Risk Appetite” above.

We identify climate-related risks using our Environmental Risk Policy, and business-specific guidelines. These include the ESG Guidelines for general account assets backing in-force liabilities and the ESG Engagement Policy of our third-party asset management arm MIM. We continue to develop our risk management practices for assessing the relative significance, size and scope, and materiality of the climate-related risks that we identify. For example:

^¡^	Our life and health insurance team is developing a framework to assess the impact of climate-related risks on mortality and<br>morbidity at a country level, and on the products we offer giving consideration to specific weather events and the ability of healthcare infrastructure to cope and adapt amongst other things.
^¡^	Our property and casualty retrocession team performs short-term horizon assessments of climate-related risks during annual<br>renewal that are based on the reinsurance clients’ in-house and third-party catastrophe risk models.
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^¡^	Our general account investment team conducts a climate scenario analysis, evaluates the total fund’s carbon emission<br>profile, and is developing decarbonization plans for certain high-carbon emitting sectors in which we invest, and developing processes to consider climate-related risks in our due diligence and investee engagement.
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^¡^	The MIM team deploys scenario analyses of how 1.5, 2, 3, and 4 degree Celsius temperature increases may impact certain asset<br>classes, and complements these analyses with qualitative assessments and the inclusion of carbon pricing into analytical models. MIM Public Markets’ team uses a variety of tools for these assessments, such as external and internal rating<br>systems, proxy voting strategies, and metrics such as portfolio temperature alignment, climate value at risk, carbon footprints, and exposure to green investments. To improve information availability for investment decision-making, MIM’s public<br>markets team directly engages some of the world’s largest emitters on climate-related risks and opportunities relevant to our business, as well as through the collaborative industry program Climate Action 100+.
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We monitor and influence existing and emerging climate regulation and policy affecting our business through working groups in industry associations, such as the Canadian Life and Health Insurance Association’s Climate Change and Sustainability Working Group.

•	Strategy – Manulife is a long-term oriented underwriter and investor. Therefore, climate-related risks and<br>opportunities, including changes in the physical environment and policy and technological changes associated with the transition to a low-carbon economy, are strategically relevant and, in some cases, may<br>become material to our business over time.

In 2021, we continued to consider climate-related risk and opportunities within our business strategy over a short (1-5 year), medium (5-15 year), and long (beyond 15 years) time horizons. The interim outcomes of this assessment are described below:

^¡^	Life and Health Insurance: starting in 2020, our product and insurance risk management teams laid the foundational<br>framework for research and analysis of the physical impacts of climate change on our business. This research and analysis considers the impact of climate change on vector-borne diseases (for example: malaria), extreme weather events, and increased<br>temperatures, on morbidity and/or mortality. The research along with experience data will help to inform decisions related to underwriting assumptions over the long-term.
^¡^	Property and Casualty Retrocession: we primarily reinsure property catastrophe risks from natural perils, including<br>hurricanes, typhoons, floods, and wildfires that may be influenced by climate change. Therefore, we may experience business risks associated with the increased frequency and severity of catastrophic weather events over time. This business forms a<br>small part of our global underwriting portfolio and is reviewed on an annual basis.
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^¡^	General Account: we performed climate change stress tests to gain insight into the impact of climate-related risks on<br>our investment portfolios and to inform capital management. In 2020, this included the Prudential Regulation Authority Scenario A climate stress test of the immediate and sudden impact of disorderly economic transition to constrain the rise in<br>temperature to less than +2°Celsius. Even when applying market value shocks ranging from +15% to -65% for certain industrial sub-sectors over a five-year time<br>horizon, the stress test showed our capital levels remained well above the minimum regulatory capital requirements. In addition, over the course of 2021, Manulife acted as a founding participant in the climate risk project of the Bank of Canada /<br>Office of the Superintendent of Financial Institutions. The pilot project used climate-change scenarios to understand the risks to the financial system that stem from the transition to a low-carbon economy and<br>has informed OSFI’s approach and tools for stress-testing Canadian financial institutions.
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^¡^	Manulife Investment Management: MIM sees an opportunity to be a leader in helping clients mitigate climate-related<br>risks and invest in decarbonization opportunities. For example, MIM has launched investment products that offer exposure to low-carbon investments and nature-based solutions, such as timberland and<br>agricultural activities that prioritize carbon sequestration.
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In May 2021, Manulife released its Climate Action Plan. The plan outlines our objectives across three pillars, our operations, our general account investments, and the products and services we offer to clients. It includes our commitment to achieve net zero financed emissions by 2050, and an operational (Scope 1 & 2) emission reduction target articulated in the Metrics and Targets section below. We continue growing the general account’s portfolio of green investments, and developing investment products and solutions for climate change mitigation and resilience.

We are taking a sector-based approach to establish near term emissions reduction targets of our financed emissions, focusing first on the heavy emitting industries, such as power generation. We have committed to the Science-Based Targets Initiative, the global standard for setting carbon emission reduction targets consistent with global decarbonization efforts.

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•	Metrics and Targets
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^¡^	Scope 1 and 2 Operational Emissions
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In May 2021, Manulife committed to a 35% reduction in all absolute Scope 1 & 2 emissions of our operations by 2035, relative to a 2019 baseline. This target will apply to the real estate, timberland, and agriculture businesses within our operational control.

Manulife’s operational emissions are calculated according to the Greenhouse Gas Protocol, have a third-party limited assurance, and are reported on an annual basis in our Annual Sustainability Report and CDP (“Carbon Disclosure Project” – a global database of corporate carbon emissions).

^¡^	Scope 3 Emissions from Investments

Manulife is committed to a net zero investment portfolio by 2050. Over the course of 2020-2021, Manulife established the carbon emission profile of the majority (86%) of the 2019 general account holdings^1^. In 2020, we also worked with a third-party provider, Trucost, to understand the carbon profile of our public bond, public equity, and sovereign bond portfolios, using carbon data for 2019 and 2018^2^. The weighted average carbon intensity^3^ was 2,120 tons of carbon dioxide equivalent per million Canadian dollars revenue (tCO2/$) for our holdings in the utilities sector, 930 tCO2/$ for the materials sector, and 430 tCO2/$ for the oil & gas sector. In 2021, we conducted carbon emission estimations based on the PCAF standard^4^ for the private portfolio holdings and the public holdings without investees’ disclosure of carbon emissions.

The total fund’s emission profile informed our decision to focus first on facilitating emission reductions in the most carbon intensive portion of the portfolio – the public bonds holdings of power utilities, oil & gas, and materials. We are currently developing interim carbon emission reduction targets and metrics that reflect our portfolio decarbonization approach.

^¡^	Exposure to High-Carbon Assets

Total exposure to the oil & gas sector across all asset classes held in the general account, public and private placement debt (including pipelines), and public and private equities, was $23.4 billion, or 5.7% of the total portfolio as of December 31, 2020. As part of the target setting process for the power, oil & gas, and materials sectors, we are assessing the emissions reduction commitments of our holdings in utilities and miners involved in coal-fired generation or production mix.

^¡^	Green Investments

To minimize exposure to high-carbon assets, we continue to grow the general account’s portfolio of green investments, and to develop investment products and solutions focused on climate change mitigation and resilience. General account’s assets that advance the low-carbon economic transition stood at $39.8 billion^5^, or 9.7% of the total portfolio as of December 31, 2020.

Strategic Risk Factors

We may not be successful in executing our business strategies or these strategies may not achieve our objectives.

The global macro-economic environment has a significant impact on our financial plans and ability to implement our business strategy. The macro-economic environment can be significantly impacted by the actions of both the government sector (including central banks) and the private sector. The macro-economic environment may also be affected by natural and human-made catastrophes.

Our business strategy and associated financial plans are developed by considering forecasts of economic growth, both globally and in the specific countries in which we operate. Actual economic growth can be significantly impacted by the macro-economic environment and can deviate significantly from forecasts, thus impacting our financial results and the ability to implement our business strategy.

Changes in the macro-economic environment can also have a significant impact on financial markets, including movements in interest rates, spreads on fixed income assets, and returns on public equity and ALDA assets. Our financial plan, including income projections, capital projections, and valuation of liabilities are based on certain assumptions with respect to future movements in interest rates and spreads on fixed income assets, and expected future returns from our public equity and ALDA investments. Actual experience is highly variable and can deviate significantly from our assumptions, thus impacting our financial results. In addition, actual experience that is significantly different from our assumptions and/or changes in the macro-economic environment may result in changes to the assumptions themselves which would also impact our financial results.

^1^	Asset classes excluded from the first carbon profile of the total $378.7 billion general fund as of December 31,<br>2019 were: cash (5% of holdings), residential mortgages (5%), policy loans (2%), loans to bank clients (1%), asset backed securities (1%), other ALDA (1%).
^2^	Time lag due to emission data availability and the 2019 baseline year considerations for target setting purposes.<br>
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^3^	Direct and 1^st^ tier indirect emission boundary, per Trucost’s<br>recommended approach to emission measurement, which is roughly equivalent to the Scope 1, 2 and upstream (suppliers’) Scope 3 emission boundary. Public bond portfolio coverage by Trucost was 74%.
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^4^	Partnership for Carbon Accounting Financials (PCAF), The Global GHG Accounting and Reporting Standard for the FinancialIndustry, 2020.
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^5^	Primarily private debt and equity investments, except for several publicly traded labelled green bonds. Asset classes<br>include green real estate and commercial mortgages (with certifications Leadership in Energy and Environmental Design (LEED), Buildings Owners and Managers Association (BOMA Best), or Energy Star); renewable energy (solar/wind/geothermal/waste<br>biomass/hydro energy), energy efficiency, sustainably-managed timberland (certified to Forest Stewardship Council (FSC) or Programme for the Endorsement of Forest Certification (PEFC) standards), agriculture (Leading Harvest Standard), and water<br>resources (recycling and purification), clean transportation (electrified transport and mass public transit), and labelled green bonds.
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50   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Specific changes in the macro-economic environment can have very different impacts across different parts of the business. For example, a rise in interest rates is generally beneficial to us in the long-term but can adversely affect valuations of some ALDA assets, especially those that have returns dependent on contractual cash flows, such as real estate.

The spending and savings patterns of our customers could be significantly influenced by the macro-economic environment and could have an impact on the products and services we offer to our customers.

Customer behaviour and emergence of claims on our liabilities can be significantly impacted by the macro-economic environment. For example, a prolonged period of economic weakness could impact the health and well-being of our customers and that could result in increased claims for certain insurance risks.

Adverse publicity, litigation or regulatory action resulting from our business practices or actions by our employees, representatives and/or business partners, coulderode our corporate image and damage our franchise value and/or create losses.

•	Manulife’s reputation is one of its most valuable assets. Harm to a company’s reputation is often a consequence of<br>risk control failure, whether associated with complex financial transactions or relatively routine operational activities. Manulife’s reputation could also be harmed by the actions of third parties with whom we do business. Our representatives<br>include affiliated broker-dealers, agents, wholesalers and independent distributors, such as broker-dealers and banks, whose services and representations our customers rely on. Business partners include, among others, joint venture partners and<br>third parties to whom we outsource certain functions and that we rely on to fulfill various obligations.
•	If any of these representatives or business partners fail to adequately perform their responsibilities, or monitor their own<br>risks, these failures could affect our business reputation and operations. While we seek to maintain adequate internal risk management policies and procedures and protect against performance failures, events may occur involving our representatives<br>or our business partners that could cause us to lose customers or cause us or our representatives or business partners to become subject to legal, regulatory, economic or trade sanctions, which could have a material adverse effect on our reputation,<br>our business, and our results of operations. For further discussion of government regulation and legal proceedings refer to “Government Regulation” in MFC’s Annual Information Form dated February 9, 2022 and note 18 of the<br>Consolidated Financial Statements.
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Our businesses are heavily regulated, and changes in regulation or laws, or in the interpretation orenforcement of regulation and laws, may reduce our profitability and limit our growth.

•	Our operations are subject to a wide variety of insurance and other laws and regulations including with respect to financial<br>crimes (which include, but are not limited to, money laundering, bribery and economic or trade sanctions), privacy, market conduct, consumer protection, business conduct, prudential and other generally applicable<br>non-financial requirements. Insurance and securities regulators in Canada, the United States, Asia and other jurisdictions regularly re-examine existing laws and<br>regulations applicable to insurance companies, investment advisors, brokers-dealers and their products. Compliance with applicable laws and regulations is time consuming and personnel-intensive, and changes in these laws and regulations or in the<br>interpretation or enforcement thereof, may materially increase our direct and indirect compliance costs and other expenses of doing business, thus having a material adverse effect on our results of operations and financial condition.<br>
•	Regulators review their capital requirements and implement changes aimed at strengthening risk management and capitalization<br>of financial institutions. Future regulatory capital, actuarial and accounting changes, including changes with a retroactive impact, could have a material adverse effect on the Company’s consolidated financial condition, results of operations<br>and regulatory capital both on transition and going forward. In addition, such changes could have a material adverse effect on the Company’s position relative to that of other Canadian and international financial institutions with which<br>Manulife competes for business and capital.
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•	In Canada, MFC and its principal operating subsidiary, MLI, are governed by the Insurance Companies Act (Canada)<br>(“ICA”). The ICA is administered, and the activities of the Company are supervised, by the Office of the Superintendent of Financial Institutions (“OSFI”). MLI is also subject to regulation and supervision under the insurance<br>laws of each of the provinces and territories of Canada. Regulatory oversight is vested in various governmental agencies having broad administrative power with respect to, among other things, dividend payments, capital adequacy and risk based<br>capital requirements, asset and reserve valuation requirements, permitted investments and the sale and marketing of insurance contracts. These regulations are intended to protect policyholders and beneficiaries rather than investors and may<br>adversely impact shareholder value.
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•	Some recent examples of regulatory and professional standard developments, in addition to the developments outlined in the<br>“Risk Management and Risk Factors – Strategic Risk” section, which could impact our net income attributed to shareholders and/or capital position are provided below.
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•	The International Association of Insurance Supervisors (“IAIS”) is still developing elements of its global<br>frameworks for supervision of internationally active insurance groups (“IAIGs”) and mitigation of systemic risk in the insurance sector. The elements under further development include:
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^¡^	A risk-based global Insurance Capital Standard (“ICS”) which is undergoing a five-year monitoring period through<br>2025 to inform its development. While broadly supportive of the goals of ICS, OSFI stated that they did not support the ICS design adopted by the IAIS in 2019 for use in the monitoring period, citing that it was ‘not fit for purpose for the<br>Canadian market’. The adoption of the international rules in specific markets or on a group-based basis will depend on the decision of each applicable regulator.
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^¡^	The Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector, which includes reviewing<br>activities of insurers, went into effect January 2020 but with many details remaining to be finalized between its effective date and November
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<br>2022. Concurrently, the Financial Standards Board (“FSB”) announced it has suspended designations of any IAIGs as Globally Systemically Important Insurers<br>(“G-SIIs”) until at least November 2022 when it will re-assess whether designations are necessary.
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Manulife is an IAIG but has never been designated as a G-SII. Despite COVID-19 related delays during the ICS monitoring period and during the development of details for the Holistic Framework, the IAIS timeline to complete ICS development remains 2025 and for the FSB to assess the development of the Holistic Framework remains 2022. The impact of the frameworks on capital and other regulatory requirements and Manulife’s competitive position remains unknown and is being monitored.

•	The National Association of Insurance Commissioners (“NAIC”) has been reviewing reserving and capital<br>methodologies as well as the overall risk management framework. These reviews will affect U.S. life insurers, including John Hancock, and could lead to increased reserving and/or capital requirements for our business in the U.S. In addition, in<br>December 2020 the NAIC adopted a group capital calculation (“GCC”) and amendments to the NAIC Insurance Holding Company System Regulatory Act which exempt certain insurance holding groups, including John Hancock and Manulife, from the<br>requirements relating to the GCC. States with U.S. Insurance groups operating in the EU or UK have been strongly encouraged to adopt the NAIC model law by November 2022 in order to ensure compliance with covered agreements with the UK and EU. In<br>order to maintain accreditation, all other states are required to come into compliance with the GCC by 2026. Additionally, in 2021, the NAIC exposed the draft process to be followed by those seeking exemptions from GCC for comment, and Manulife<br>continues to monitor progress.
•	The Canadian Actuarial Standards Board (“ASB”) promulgates certain assumptions referenced in the CIA Standards of<br>Practice for the valuation of insurance contract liabilities. These promulgations are updated periodically and, in the event that new promulgations are published, they will apply to the determination of actuarial liabilities and may lead to an<br>increase in actuarial liabilities and a reduction in net income attributed to shareholders.
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•	In the United States, state insurance laws regulate most aspects of our business, and our U.S. insurance subsidiaries are<br>regulated by the insurance departments of the states in which they are domiciled and the states in which they are licensed. State laws grant insurance regulatory authorities broad administrative powers with respect to, among other things: licensing<br>companies and agents to transact business; calculating the value of assets to determine compliance with statutory requirements; mandating certain insurance benefits; regulating certain premium rates; reviewing and approving policy forms; regulating<br>unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements; regulating advertising; protecting privacy; establishing statutory capital<br>and reserve requirements and solvency standards; fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts; approving changes in control of insurance<br>companies; restricting the payment of dividends and other transactions between affiliates; and regulating the types, amounts and valuation of investments. Changes in any such laws and regulations, or in the interpretation or enforcement thereof by<br>regulators, could significantly affect our business, results of operations and financial condition.
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•	Currently, the U.S. federal government does not directly regulate the business of insurance. However, federal legislation<br>and administrative policies in several areas can significantly and adversely affect state regulated insurance companies. These areas include financial services regulation, securities regulation, pension regulation, privacy, tort reform legislation,<br>and taxation. In addition, under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), the U.S. Board of Governors of the Federal Reserve has supervisory powers over non-bank<br>financial companies that are determined to be systemically important.
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•	Insurance guaranty associations in Canada and the United States have the right to assess insurance companies doing business<br>in their jurisdiction for funds to help pay the obligations of insolvent insurance companies to policyholders and claimants. Typically, an insurer is assessed an amount related to its proportionate share of the line of business written by all<br>insurers in the relevant jurisdiction. Because the amount and timing of an assessment is beyond our control, the liabilities that we have currently established for these potential liabilities may not be adequate, particularly if there is an increase<br>in the number of insolvent insurers or if the insolvent insurers operated in the same lines of business and in the same jurisdictions in which we operate.
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•	While many of the laws and regulations to which we are subject are intended to protect policyholders, beneficiaries,<br>depositors and investors in our products and services, others also set standards and requirements for the governance of our operations. Failure to comply with applicable laws or regulations could result in financial penalties or sanctions, and<br>damage our reputation.
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•	All aspects of Manulife’s Global WAM businesses are subject to various laws and regulations around the world. These<br>laws and regulations are primarily intended to protect investment advisory clients, investors in registered and unregistered funds, and clients of Manulife’s global retirement businesses. Agencies that regulate investment advisors, investment<br>funds and retirement plan products and services have broad administrative powers, including the power to limit, restrict or prohibit the regulated entity or person from carrying on business if it fails to comply with such laws and regulations.<br>Possible sanctions for significant compliance failures include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of investment advisor and other registrations and<br>censures and fines both for individuals and Manulife, along with the resulting damage to our reputation.
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•	From time to time, regulators raise issues during examinations or audits of Manulife that could have a material adverse<br>impact on us. We cannot predict whether or when regulatory actions may be taken that could adversely affect our operations. Our failure to comply with existing and evolving regulatory requirements could also result in regulatory sanctions and could<br>affect our relationships with regulatory authorities and our ability to execute our business strategies and plans. For further discussion of government regulation and legal proceedings refer to “Government Regulation” in MFC’s Annual<br>Information Form dated February 9, 2022 and note 18 of the 2021
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52   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

<br>Annual Consolidated Financial Statements. Refer to the risk factor “Our operations face political, legal, operational and other risks that could negatively affect those operations or our<br>results of operations and financial condition” for further discussion on the impact to our operations.

Changes to International FinancialReporting Standards could have a material impact on our financial results.

•

New standards or modifications to existing standards could have a material adverse impact on our financial results and<br>regulatory capital position (the regulatory capital framework in Canada uses IFRS as a base). Additionally, any mismatch between the underlying economics of our business and new accounting standards could have significant unintended negative<br>consequences on our business model; and potentially affect our customers, shareholders and our access to capital markets. Please refer to “Emerging Risks – IFRS 17 and IFRS 9” below.

Changes in tax laws, tax regulations, or interpretations of such laws or regulations could make some of our products less attractive to consumers, could increase ourcorporate taxes or cause us to change the value of our deferred tax assets and liabilities as well as our tax assumptions included in the valuation of our policy liabilities. This could have a material adverse effect on our business, results ofoperations and financial condition.

•	Many of the products that the Company sells benefit from one or more forms of preferred tax treatment under current income<br>tax regimes. For example, the Company sells life insurance policies that benefit from the deferral or elimination of taxation on earnings accrued under the policy, as well as permanent exclusion of certain death benefits that may be paid to<br>policyholders’ beneficiaries. We also sell annuity contracts that allow the policyholders to defer the recognition of taxable income earned within the contract. Other products that the Company sells, such as certain employer-paid health and<br>dental plans, also enjoy similar, as well as other, types of tax advantages. The Company also benefits from certain tax benefits, including tax-exempt interest, dividends-received deductions, tax credits (such<br>as foreign tax credits), and favourable tax rates and/or income measurement rules for tax purposes.
•	There is risk that tax legislation could be enacted that would lessen or eliminate some or all of the tax advantages<br>currently benefiting the Company or its policyholders or its other clients. This could occur in the context of deficit reduction or other tax reforms. The effects of any such changes could result in materially lower product sales, lapses of policies<br>currently held, and/or our incurrence of materially higher corporate taxes, any of which could have a material adverse effect on our business, results of operations and financial condition.
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•	Additionally, the Company may be required to change its provision for income taxes or carrying amount of deferred tax assets<br>or liabilities if the characterization of certain items is successfully challenged by taxing authorities or if future transactions or events, which could include changes in tax laws, tax regulations or interpretations of such laws or regulations,<br>occur. Any such changes could significantly affect the amounts reported in the Consolidated Financial Statements in the year these changes occur.
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•	On October 8, 2021, 136 of the 140 members of the Organization for Economic<br>Co-Operation and Development (“OECD”) / G20 Inclusive Framework agreed on a two-pillar solution to address tax challenges from the digital economy, and to<br>close the gaps in international tax systems. The two pillars include a new approach to allocating certain profits of multinational entities amongst countries and a global minimum income tax rate of 15%. Model rules for the global minimum tax were<br>released in December 2021, with commentary and implementation guidelines to follow in 2022. These rules are expected to be effective in 2023, pending enactment of domestic tax laws and amendment of bilateral tax treaties in 2022. The Company is<br>closely monitoring developments and potential impacts and, in particular, for issues unique to the insurance industry.
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•	The U.S. government enacted the Tax Cuts and Jobs Act effective January 1, 2018 (“U.S. Tax Reform”). The<br>legislation makes broad and complex changes to the U.S. tax code including reducing individual and corporate tax rates and permitting expensing of many capital expenditures, increasing and extending the amortization period on policy acquisition<br>costs, and further limiting the deductibility of policy reserves for U.S. federal income tax purposes. Regulations and further guidance from the Internal Revenue Service and other bodies continue to be developed and released, implementing and/or<br>clarifying the legislation. Any further changes or amendments to the law or its interpretation could result in material changes to our tax balances.^^
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•	In the long run, U.S. Tax Reform, all else being equal, could lead to a reduction in corporate borrowings and lower<br>borrowings could lead to tighter spreads.
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Access to capital may be negatively impacted by market conditions.

•

Disruptions, uncertainty or volatility in the financial markets may limit our access to the capital markets to raise capital<br>required to operate our business. Such market conditions may limit our ability to access the capital necessary to satisfy regulatory capital requirements to grow our business and meet our refinancing requirements. Under extreme conditions, we may be<br>forced, among other things, to delay raising capital, issue different types of capital than we would otherwise under normal conditions, less effectively deploy such capital, issue shorter term securities than we prefer, or issue securities that bear<br>an unattractive cost of capital which could decrease our financial flexibility, profitability, and/or dilute our existing shareholders.

As aholding company, MFC depends on the ability of its subsidiaries to transfer funds to it to meet MFC’s obligations and pay dividends. Subsidiaries’ remittance of capital depends on subsidiaries’ earnings, regulatory requirements andrestrictions, macroeconomic, and market conditions.

•	MFC is a holding company and relies on dividends and interest payments from our insurance and other subsidiaries as the<br>principal source of cash flow to meet MFC’s obligations and pay dividends. As a result, MFC’s cash flows and ability to service its obligations are dependent upon the earnings of its subsidiaries and the distribution of those earnings and<br>other funds by its subsidiaries to MFC. Substantially all of MFC’s business is currently conducted through its subsidiaries.
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•	The ability of our holding company to fund its cash requirements depends upon it receiving dividends, distributions and<br>other payments from our operating subsidiaries. The ability of MFC’s insurance subsidiaries to pay dividends to MFC in the future will depend on their earnings, macroeconomic and market conditions, and their respective local regulatory<br>requirements and restrictions, including capital adequacy and requirements, exchange controls and economic or trade sanctions.
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•	MFC’s insurance subsidiaries are subject to a variety of insurance and other laws and regulations that vary by<br>jurisdiction and are intended to protect policyholders and beneficiaries in that jurisdiction first and foremost, rather than investors. These subsidiaries are generally required to maintain solvency and capital standards as set by their local<br>regulators and may also be subject to other regulatory restrictions, all of which may limit the ability of subsidiary companies to pay dividends or make distributions to MFC.
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•	Potential changes to regulatory capital and actuarial and accounting standards could also limit the ability of the insurance<br>subsidiaries to pay dividends or make distributions and could have a material adverse effect on internal capital mobility. We may be required to raise additional capital, which could be dilutive to existing shareholders, or to limit the new business<br>we write, or to pursue actions that would support capital needs but adversely impact our subsequent earnings potential. In addition, the timing and outcome of these initiatives could have a significantly adverse impact on our competitive position<br>relative to that of other Canadian and international financial institutions with which we compete for business and capital. Please also refer to “Emerging Risks – IFRS 17 and IFRS 9” below.
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•	The Company seeks to maintain capital in its regulated subsidiaries in excess of the minimum required in all jurisdictions<br>in which the Company does business. The minimum requirements in each jurisdiction may increase due to regulatory changes and we may decide to maintain additional capital in our operating subsidiaries for competitive reasons, to fund expected growth<br>of the business or to deal with changes in the risk profile of such subsidiaries. Any such increases in the level of capital may reduce the ability of the operating companies to pay dividends.
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•	The payment of dividends to MFC by MLI is subject to restrictions set out in the ICA. The ICA prohibits the declaration or<br>payment of any dividend on shares of an insurance company if there are reasonable grounds for believing: (i) the company does not have adequate capital and adequate and appropriate forms of liquidity; or (ii) the declaration or the payment<br>of the dividend would cause the company to be in contravention of any regulation made under the ICA respecting the maintenance of adequate capital and adequate and appropriate forms of liquidity, or of any order made to the company by the<br>Superintendent. All of our U.S. and Asian operating life insurance companies are subsidiaries of MLI. Accordingly, a restriction on dividends from MLI would restrict MFC’s ability to obtain dividends from its U.S. and Asian businesses.<br>
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•	Certain of MFC’s U.S. insurance subsidiaries also are subject to insurance laws in Michigan, New York and<br>Massachusetts, the jurisdictions in which these subsidiaries are domiciled, which impose general limitations on the payment of dividends and other upstream distributions by these subsidiaries to MLI.
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•	Our Asian insurance subsidiaries are also subject to restrictions in the jurisdictions in which these subsidiaries are<br>domiciled which could affect their ability to pay dividends to MLI in certain circumstances.
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We may experience future downgrades in ourfinancial strength or credit ratings, which may materially adversely impact our financial condition and results of operations.

•	Credit rating agencies publish financial strength ratings on life insurance companies that are indicators of an insurance<br>company’s ability to meet contract holder and policyholder obligations. Credit rating agencies also assign credit ratings, which are indicators of an issuer’s ability to meet the terms of its obligations in a timely manner and are<br>important factors in a company’s overall funding profile and ability to access external capital. Ratings reflect the views held by each credit agency, which are subject to change based on various factors that may be within or beyond a<br>company’s control.
•	Ratings are important factors in establishing the competitive position of insurance companies, maintaining public confidence<br>in products being offered, and determining the cost of capital. A ratings downgrade, or the potential for such a downgrade could adversely affect our operations and financial condition. A downgrade could, among other things, increase our cost of<br>capital and limit our access to the capital and loan markets; cause some of our existing liabilities to be subject to acceleration, additional collateral support, changes in terms, or additional financial obligations; result in the termination of<br>our relationships with broker-dealers, banks, agents, wholesalers and other distributors of our products and services; increase our cost of hedging; unfavourably impact our ability to execute on our hedging strategies; materially increase the number<br>of surrenders, for all or a portion of the net cash values, by the owners of policies and contracts we have issued, impact our ability to obtain reinsurance at reasonable prices or at all, and materially increase the number of withdrawals by<br>policyholders of cash values from their policies; and reduce new sales.
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Competitive factors may adversely affect our market share andprofitability.

•

The insurance, wealth and asset management industries are highly competitive. Our competitors include other insurers,<br>securities firms, investment advisors, mutual funds, banks and other financial institutions. The rapid advancement of new technologies, such as blockchain, artificial intelligence and advanced analytics, may enable other non-traditional firms to compete directly in the industry space, or offer services to our traditional competitors to enhance their value propositions. The impact from technological disruption may result in our<br>competitors improving their customer experience, product offerings and business costs. Our competitors compete with us for customers, access to distribution channels such as brokers and independent agents, and for employees. In some cases,<br>competitors may be subject to less onerous regulatory requirements, have lower operating costs or have the ability to absorb greater risk while maintaining their financial strength ratings, thereby allowing them to price their products more<br>competitively or offer features that make their products more attractive. These competitive pressures could result in lower new business volumes and increased pricing pressures on a number of our products and services that may harm our ability to<br>maintain or increase our profitability. Due to

54   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

<br>the highly competitive nature of the financial services industry, there can be no assurance that we will continue to effectively compete with our traditional and<br>non-traditional industry rivals, and competitive pressure may have a material adverse effect on our business, results of operations and financial condition.

We may experience difficulty in marketing and distributing products through our current and future distribution channels.

•

We distribute our insurance and wealth management products through a variety of distribution channels, including brokers,<br>independent agents, broker-dealers, banks, wholesalers, affinity partners, other third-party organizations and our own sales force in Asia. We generate a significant portion of our business through individual third-party arrangements. We<br>periodically negotiate provisions and renewals of these relationships, and there can be no assurance that such terms will remain acceptable to us or relevant third parties. An interruption in our continuing relationship with certain of these third<br>parties could significantly affect our ability to market our products and could have a material adverse effect on our business, results of operations and financial condition.

Industry trends could adversely affect the profitability of our businesses.

•

Our business segments continue to be influenced by a variety of trends that affect our business and the financial services<br>industry in general. The impact of the volatility and instability of the financial markets on our business is difficult to predict and the results of operations and our financial condition may be significantly impacted by general business and<br>economic trends in the geographies in which we operate. These conditions include, but are not limited to, market factors, such as public equity, foreign currency, interest rate and other market risks, demographic shifts, consumer behaviours (e.g.<br>spending habits and debt levels), and governmental policies (e.g. fiscal, monetary, and global trade). The Company’s business plans, results of operations, and financial condition have been negatively impacted in the recent past and may also be<br>negatively affected in the future.

We may face unforeseen liabilities or asset impairments arising from possible acquisitions and dispositionsof businesses or difficulties integrating acquired businesses.

•	We have engaged in acquisitions and dispositions of businesses in the past and expect to continue to do so in the future as<br>we may deem appropriate. There could be unforeseen liabilities or asset impairments, including goodwill impairments that arise in connection with the businesses that we may sell, have acquired, or may acquire in the future. In addition, there may be<br>liabilities or asset impairments that we fail, or are unable, to discover in the course of performing due diligence investigations on acquisition targets. Furthermore, the use of our own funds as consideration in any acquisition would consume<br>capital resources that would no longer be available for other corporate purposes.
•	Our ability to achieve some or all of the benefits we anticipate from any acquisitions of businesses will depend in large<br>part upon our ability to successfully integrate the businesses in an efficient and effective manner. We may not be able to integrate the businesses smoothly or successfully, and the process may take longer than expected. The integration of<br>operations may require the dedication of significant management resources, which may distract management’s attention from our day-to-day business. Acquisitions of<br>operations outside of North America, especially any acquisition in a jurisdiction in which we do not currently operate, may be particularly challenging or costly to integrate. If we are unable to successfully integrate the operations of any acquired<br>businesses, we may be unable to realize the benefits we expect to achieve as a result of the acquisitions and the results of operations may be less than expected.
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If our businesses do not perform well, or if the outlook for our businesses is significantly lower than historical trends, we may be required to recognize animpairment of goodwill or intangible assets or to establish a valuation allowance against our deferred tax assets, which could have a material adverse effect on our results of operations and financial condition.

•	Goodwill represents the excess of the amounts we paid to acquire subsidiaries and other businesses over the fair value of<br>their net identifiable assets at the date of acquisition. Intangible assets represent assets that are separately identifiable at the time of an acquisition and provide future benefits such as the John Hancock brand.
•	As outlined below under “Critical Actuarial and Accounting Policies – Goodwill and Intangible Assets”,<br>goodwill and intangible assets with indefinite lives are tested at least annually for impairment at the cash generating unit (“CGU”) or group of CGUs level, representing the smallest group of assets that is capable of generating largely<br>independent cash flows. Going forward, as a result of the impact of economic conditions and changes in product mix and the granular level of goodwill testing under IFRS, additional impairment charges could occur in the future. Any impairment in<br>goodwill would not affect LICAT capital.
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•	If market conditions deteriorate in the future and, in particular, if MFC’s common share price is low relative to book<br>value per share, if the Company’s actions to limit risk associated with its products or investments cause a significant change in any one CGU’s recoverable amount, or if the outlook for a CGU’s results deteriorate, the Company may<br>need to reassess the value of goodwill and/or intangible assets which could result in impairments during 2022 or subsequent periods. Such impairments could have a material adverse effect on our results of operations and financial condition.<br>
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•	Deferred income tax balances represent the expected future tax effects of the differences between the book and tax basis of<br>assets and liabilities, loss carry forwards and tax credits. Deferred tax assets are recorded when the Company expects to claim deductions on tax returns in the future for expenses that have already been recorded in the financial statements.<br>
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•	The availability of those deductions is dependent on future taxable income against which the deductions can be made.<br>Deferred tax assets are assessed periodically by management to determine if they are realizable. Factors in management’s determination include the performance of the business including the ability to generate gains from a variety of sources and<br>tax planning strategies. If based on information available at the time of the assessment, it is determined that the deferred tax asset will not be realized, then the deferred tax asset is reduced to the extent that it is no longer probable that the<br>tax benefit will be realized.
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55
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We may not be able to protect our intellectual property and may be subject to infringement claims.

•	We rely on a combination of registrations, contractual rights and copyright, trademark, patent and trade secret laws to<br>establish and protect our intellectual property. In particular, we have invested considerable resources in promoting and protecting the brand names “Manulife” and “John Hancock” and expect to continue to do so. Although we use a<br>broad range of measures to protect our intellectual property rights, third parties may infringe or misappropriate our intellectual property. As the occurrence of potential infringements or misappropriations against our intellectual property<br>increases, we may have to litigate more often to enforce and protect our copyrights, trademarks, patents, trade secrets and know-how or to determine their scope, validity or enforceability, which represents a<br>diversion of resources that may be significant in amount and may not prove successful. The loss of intellectual property protection or the inability to secure or enforce the protection of our intellectual property assets could have a material<br>adverse effect on our business and our ability to compete.
•	We also may be subject to costly litigation in the event that another party alleges our operations or activities infringe<br>upon its intellectual property rights. Third parties may have, or may eventually be issued, patents that could be infringed by our products, methods, processes or services. Any party that holds such a patent could make a claim of infringement<br>against us. We may also be subject to claims by third parties for breach of copyright, trademark, trade secret or license usage rights. Any such claims and any resulting litigation could result in significant liability for damages. If we were found<br>to have infringed a third-party patent or other intellectual property rights, we could incur substantial liability, and in some circumstances could be enjoined from providing certain products or services to our customers or utilizing and benefiting<br>from certain methods, processes, copyrights, trademarks, trade secrets or licenses, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on our business,<br>results of operations and financial condition.
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Applicable laws may discourage takeovers and business combinations that common shareholders ofMFC might consider in their best interests.

•

The ICA contains restrictions on the purchase or other acquisition, issue, transfer and voting of the shares of an insurance<br>company. In addition, under applicable U.S. insurance laws and regulations in states where certain of our insurance company subsidiaries are domiciled, no person may acquire control of MFC without obtaining prior approval of those states’<br>insurance regulatory authorities. These restrictions may delay, defer, prevent, or render more difficult a takeover attempt that common shareholders of MFC might consider in their best interests. For instance, they may prevent shareholders of MFC<br>from receiving the benefit from any premium to the market price of MFC’s common shares offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing<br>market price of MFC’s common shares if they are viewed as discouraging takeover attempts in the future.

Entities within the MFC group areinterconnected which may make separation difficult.

•	MFC operates in local markets through subsidiaries and branches of subsidiaries. These local operations are financially and<br>operationally interconnected to lessen expenses, share and reduce risk, and efficiently utilize financial resources. In general, external capital required for companies in the Manulife group has been raised at the MFC level in recent years and then<br>transferred to other entities primarily as equity or debt capital as appropriate. Other linkages include policyholder and other creditor guarantees and other forms of internal support between various entities, loans, capital maintenance agreements,<br>derivatives, shared services and affiliate reinsurance treaties. Accordingly, the risks undertaken by a subsidiary may be transferred to or shared by affiliates through financial and operational linkages. Some of the consequences of this are:<br>
^¡^	Financial difficulties at a subsidiary may not be isolated and could cause material adverse effects on affiliates and the<br>group as a whole.
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^¡^	Linkages may make it difficult to dispose of or separate a subsidiary or business within the group by way of a spin-off or similar transaction and the disposition or separation of a subsidiary or business may not fully eliminate the liability of the Company and its remaining subsidiaries for shared risks. Issues raised by<br>such a transaction could include: (i) the Company cannot terminate, without policyholder consent and in certain jurisdictions regulator consent, parental guarantees on in-force policies and therefore<br>would continue to have residual risk under any such non-terminated guarantees; (ii) internal capital mobility and efficiency could be limited; (iii) significant potential tax consequences;<br>(iv) uncertainty about the accounting and regulatory outcomes of such a transaction; (v) obtaining any other required approvals; (vi) there may be a requirement for significant capital injections; and (vii) the transaction may<br>result in increased sensitivity of net income attributed to shareholders and capital of MFC and its remaining subsidiaries to market declines.
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We may not be able to meet or achieve our sustainability priorities and our priorities may not meet the expectations of stakeholdersor regulators.

•	We have adopted the sustainability-related priorities discussed above under “Environmental, Social and Governance<br>Risks” as well as other sustainability priorities that we communicate from time to time. Some of our stakeholders, including shareholders, customers and employees, will evaluate our business based on our progress towards these priorities. In<br>addition, stakeholders may also evaluate our business by their own ESG criteria which may be broader than, and not consistent with, our priorities or with the ESG criteria of other stakeholders. Finally, some regulators have adopted ESG-related disclosure requirements and other regulators may do so in the future.
•	We may be unable to achieve our sustainability priorities or meet the expectations of our stakeholders and regulators. In<br>addition, the policies and processes we adopt to evaluate and manage our ESG priorities, in coordination with our other business priorities, may not
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56   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

<br>satisfy stakeholders or regulators. As a result, we may face adverse regulatory, investor, media, or public scrutiny which may negatively impact our financial results and reputation.<br>

Market Risk

Market risk is the risk of loss resulting from market price volatility, interest rate change, credit and swap spread changes, and adverse foreign exchange rate movements. Market price volatility primarily relates to changes in prices of publicly traded equities and alternative long-duration assets. The profitability of our insurance and annuity products, as well as the fees we earn in our investment management business, are subject to market risk.

Please read below for details on factors that could impact our level of market risk and the strategies used to manage this risk:

IFRS 7 Disclosures

Text and tables in this and the following section (“Market Risk Sensitivities and Market Risk Exposure Measures”) include disclosures on market and liquidity risk in accordance with IFRS 7, “Financial Instruments – Disclosures”, and discussions on how we measure risk and our objectives, policies and methodologies for managing them. Disclosures in accordance with IFRS 7 are identified by a vertical line in the left margin of each page. The identified text and tables represent an integral part of our audited annual Consolidated Financial Statements for the years ended December 31, 2021 and December 31, 2020. The fact that certain text and tables are considered an integral part of the Consolidated Financial Statements does not imply that the disclosures are of any greater importance than the sections not part of the disclosure. Accordingly, the “Risk Management and Risk Factors” disclosure should be read in its entirety.

Market Risk Management Strategy

Market risk management strategy is governed by the Global Asset Liability Committee which oversees the overall market and liquidity risk<br>program. Our overall strategy to manage our market risks incorporates several component strategies, each targeted to manage one or more of the market risks arising from our businesses. At an enterprise level, these strategies are designed to manage<br>our aggregate exposures to market risks against limits associated with earnings and capital volatility.<br> <br><br><br><br>The following table outlines our key market risks and identifies the risk management strategies which contribute to managing these risks.
Risk Management Strategy	Key Market Risk
	Public<br><br><br>Equity Risk		Interest Rate<br>and Spread Risk		ALDA<br>Risk		Foreign<br>Exchange Risk		Liquidity Risk
Product design and pricing		✓		✓		✓		✓		✓
Variable annuity guarantee dynamic hedging		✓		✓				✓		✓
Macro equity risk hedging		✓						✓		✓
Asset liability management		✓		✓		✓		✓		✓
Foreign exchange management								✓		✓
Liquidity risk management										✓

Public Equity Risk – To manage public equity risk from our insurance and annuity businesses, we primarily use a variable annuity guarantee dynamic hedging strategy which is complemented by a general macro equity risk hedging strategy, in addition to asset liability management strategies. Our strategies employed for variable annuity guarantee dynamic hedging and macro equity risk hedging expose the Company to additional risks. See “Risk Factors” below.

Interest Rate and Spread Risk – To manage interest rate and spread risk, we primarily employ asset liability management strategies to manage the duration of our fixed income investments and execute interest rate hedges in our insurance segments and our Corporate and Other segments.

ALDA Risk – We seek to limit concentration risk associated with ALDA performance by investing in a diversified basket of assets including commercial real estate, timber, farmland, private equities, infrastructure, and oil and gas assets. We further diversify risk by managing investments against established investment and risk limits.

Foreign Exchange Risk – Our policy is to generally match the currency of our assets with the currency of the liabilities they support. Where assets and liabilities are not currency matched, we seek to hedge this exposure where appropriate to stabilize our capital positions and remain within our enterprise foreign exchange risk limits.

Liquidity Risk – We are exposed to liquidity risk, which is the risk of not having access to sufficient funds or liquid assets to meet both expected and unexpected cash outflows and collateral demands in our operating and holding companies. In the operating companies, cash and collateral demands arise day-to-day to fund policyholder benefits, withdrawals of customer deposit balances, reinsurance settlements, derivative instrument settlements/collateral pledging, expenses, and investment and hedging activities. Under stressed conditions, additional cash and collateral demands could arise primarily from changes to policyholder termination or policy renewal rates, withdrawals of customer deposit balances, borrowers renewing or extending their loans when they mature, derivative settlements or collateral demands, and reinsurance settlements.

Our liquidity risk management framework is designed to provide adequate liquidity to cover cash and collateral obligations as they come due, and to sustain and grow operations in both normal and stressed conditions. Refer to “Liquidity Risk Management Strategy” below for more information.

57

Product Design and Pricing Strategy

Our policies, standards, and guidelines with respect to product design and pricing are designed with the objective of aligning our product offerings<br>with our risk-taking philosophy and risk appetite, and in particular, ensuring that incremental risk generated from new sales aligns with our strategic risk objectives and risk limits. The specific design features of our product offerings, including<br>level of benefit guarantees, policyholder options, fund offerings and availability restrictions as well as our associated investment strategies, help to mitigate the level of underlying risk. We regularly review and modify key features within our<br>product offerings, including premiums and fee charges with a goal of meeting profit targets and staying within risk limits. Certain of our general fund adjustable benefit products have minimum rate guarantees. The rate guarantees for any particular<br>policy are set at the time the policy is issued and governed by insurance regulation in each jurisdiction where the products are sold. The contractual provisions allow crediting rates to be re-set at pre-established intervals subject to the established minimum crediting rate guarantees. The Company may partially mitigate the interest rate exposure by setting new rates on new business and by adjusting rates on in-force business where permitted. In addition, the Company partially mitigates this interest rate risk through its asset liability management process, product design elements, and crediting rate strategies. New<br>product initiatives, new reinsurance arrangements and material insurance underwriting initiatives must be reviewed and approved by the CRO or key individuals within risk management functions.

Hedging Strategies for Variable Annuity and Other Equity Risks

The Company’s exposure to movement in public equity market values primarily arises from insurance liabilities related to variable annuity<br>guarantees and general account public equity investments.<br> <br><br> <br>Dynamic hedging is the primary<br>hedging strategy for variable annuity market risks. Dynamic hedging is employed for new variable annuity guarantees business when written or as soon as practical thereafter.<br> <br><br><br><br>We seek to manage public equity risk arising from unhedged exposures in our insurance liabilities through our macro equity risk hedging strategy. We seek to manage<br>interest rate risk arising from variable annuity business not dynamically hedged through our asset liability management strategy.

Variable Annuity Dynamic Hedging Strategy

The variable annuity dynamic hedging strategy is designed to hedge the sensitivity of variable annuity guarantee policy liabilities to fund<br>performance (both public equity and bond funds) and interest rate movements. The objective of the variable annuity dynamic hedging strategy is to offset, as closely as possible, the change in the economic value of guarantees with the profit and loss<br>from our hedge asset portfolio. The economic value of guarantees moves in close tandem, but not exactly, with our variable annuity guarantee policy liabilities, as it reflects best estimate liabilities and does not include any liability provisions<br>for adverse deviations.<br> <br><br> <br>Our variable annuity hedging program uses a variety of exchange-traded<br>and over-the-counter (“OTC”) derivative contracts to offset the change in value of variable annuity guarantees. The main derivative instruments used are equity<br>index futures, government bond futures, currency futures, interest rate swaps, total return swaps, equity options and interest rate swaptions. The hedge instruments’ positions against policy liabilities are continuously monitored as market<br>conditions change. As necessary, the hedge asset positions will be dynamically rebalanced in order to stay within established limits. We may also utilize other derivatives with the objective to improve hedge effectiveness opportunistically.<br><br><br><br> <br>Our variable annuity guarantee dynamic hedging strategy is not designed to completely offset the<br>sensitivity of policy liabilities to all risks associated with the guarantees embedded in these products. The profit (loss) on the hedge instruments will not completely offset the underlying losses (gains) related to the guarantee liabilities hedged<br>because:<br> <br><br> <br>• Policyholder behaviour and<br>mortality experience are not hedged;<br> <br>• Provisions for adverse deviation in the policy liabilities are not<br>hedged;<br> <br>• A portion of interest rate risk is not hedged;<br><br><br>• Credit spreads may widen and actions might not be taken to adjust accordingly;<br><br><br>• Fund performance on a small portion of the underlying funds is not hedged due to lack of availability of effective<br>exchange-traded hedge instruments;<br> <br>• Performance of the underlying funds hedged may differ from the performance of<br>the corresponding hedge instruments;<br> <br>• Correlations between interest rates and equity markets could lead to<br>unfavourable material impacts;<br> <br>• Unfavourable hedge rebalancing costs can be incurred during periods of high<br>volatility from equity markets, bond markets and/or interest rates. The impact is magnified when these impacts occur concurrently; and<br><br><br>• Not all other risks are hedged.

58   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Macro Equity Risk Hedging Strategy

The objective of the macro equity risk hedging program is to maintain our overall earnings sensitivity to public equity market movements within our<br>Board approved risk appetite limits. The macro equity risk hedging program is designed to hedge earnings sensitivity due to movements in public equity markets arising from all sources (outside of dynamically hedged exposures). Sources of equity<br>market sensitivity addressed by the macro equity risk hedging program include:<br> <br><br><br><br>•   Residual equity and currency exposure from variable annuity guarantees not dynamically hedged;<br><br><br>•   General fund equity holdings backing guaranteed, adjustable liabilities and variable universal life;^^and<br> <br>•   Unhedged provisions for adverse deviation<br>related to variable annuity guarantees dynamically hedged.

Asset Liability Management Strategy

Our asset liability management strategy is designed to help ensure that the market risks embedded in our assets and liabilities held in the<br>Company’s general fund are effectively managed and that risk exposures arising from these assets and liabilities are maintained within risk limits. The embedded market risks include risks related to the level and movement of interest rates and<br>credit and swap spreads, public equity market performance, ALDA performance and foreign exchange rate movements.<br> <br><br><br><br>General fund product liabilities are categorized into groups with similar characteristics in order to support them with a specific asset strategy. We seek to align the<br>asset strategy for each group to the premium and benefit patterns, policyholder options and guarantees, and crediting rate strategies of the products they support. The strategies are set using portfolio analysis techniques intended to optimize<br>returns, subject to considerations related to regulatory and economic capital requirements, and risk tolerances. They are designed to achieve broad diversification across asset classes and individual investment risks while being suitably aligned<br>with the liabilities they support. The strategies encompass asset mix, quality rating, term profile, liquidity, currency and industry concentration targets.

Products which feature guaranteed liability cash flows (i.e. where the projected net flows are not materially dependent upon economic scenarios) are managed to a target return investment strategy. The products backed by this asset group include:

•	Accumulation annuities (other than annuities with pass-through features), which are primarily<br>short-to-medium-term obligations and offer interest rate guarantees for specified terms on single premiums. Withdrawals may or may not have market value adjustments;<br>
•	Payout annuities, which have no surrender options and include predictable and very long-dated obligations; and<br>
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•	Insurance products, with recurring premiums extending many years in the future, and which also include a significant<br>component of very long-dated obligations.
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We seek to manage the assets backing these long-dated benefits to achieve a target return sufficient to support the obligations over their lifetime, subject to established risk tolerances and the impact of regulatory and economic capital requirements. Fixed income assets are managed to a benchmark developed to minimize interest rate risk against the liability cash flows. Utilizing ALDA and public equity investments provides a suitable match for long-duration liabilities that also enhances long-term investment returns and reduces aggregate risk through diversification.

For insurance and annuity products where significant pass-through features exist, a total return strategy approach is used, generally combining fixed income with ALDA plus public equity investments. ALDA and public equity may be included to enhance long-term investment returns and reduce aggregate risk through diversification. Target investment strategies are established using portfolio analysis techniques that seek to optimize long-term investment returns while considering the risks related to embedded product guarantees and policyholder withdrawal options, the impact of regulatory and economic capital requirements and considering management tolerances with respect to short-term income volatility and long-term tail risk exposure. For these pass-through products such as participating insurance and universal life insurance, the investment performance of assets supporting the liabilities will be largely passed through to policyholders as changes in the amounts of dividends declared or rates of interest credited, subject to embedded minimum guarantees. Shorter duration liabilities such as fixed deferred annuities do not incorporate ALDA plus public equity investments into their target asset mixes. Authority to manage our investment portfolios is delegated to investment professionals who manage to benchmarks derived from the target investment strategies established for each group, including interest rate risk tolerances.

Our asset liability management strategy incorporates a wide variety of risk measurement, risk mitigation and risk management, and hedging processes. The liabilities and risks to which the Company is exposed, however, cannot be completely matched or hedged due to both limitations on instruments available in investment markets and uncertainty of impact on liability cash flows from policyholder experience/behaviour.

59

Foreign Exchange Risk Management Strategy

Our policy is to generally match the currency of our assets with the currency of the liabilities they support. Where assets and liabilities are not currency matched, we seek to hedge this exposure where appropriate to stabilize<br>our capital positions and remain within our enterprise foreign exchange risk limits.

Risk from small balance sheet mismatches is accepted if managed within set risk limits. Risk exposures are measured in terms of potential changes in capital ratios, due to foreign exchange rate movements, determined to represent a specified likelihood of occurrence based on internal models.

Liquidity Risk Management Strategy

Global liquidity management policies and procedures are designed to provide adequate liquidity to cover cash and collateral obligations as they come<br>due, and to sustain and grow operations in both normal and stressed conditions. They reflect legal, regulatory, tax, operational or economic impediments to inter-entity funding. The asset mix of our balance sheet takes into account the need to hold<br>adequate unencumbered and appropriate liquid assets to satisfy the requirements arising under stressed scenarios and to allow our liquidity ratios to remain strong. We manage liquidity centrally and closely monitor the liquidity positions of our<br>principal subsidiaries.<br> <br><br> <br>We seek to mitigate liquidity risk by diversifying our business across<br>different products, markets, geographical regions and policyholders. We design insurance products to encourage policyholders to maintain their policies in-force, to help generate a diversified and stable flow<br>of recurring premium income. We design the policyholder termination features of our wealth management products and related investment strategies with the goal of mitigating the financial exposure and liquidity risk related to unexpected policyholder<br>terminations. We establish and implement investment strategies intended to match the term profile of the assets to the liabilities they support, taking into account the potential for unexpected policyholder terminations and resulting liquidity<br>needs. Liquid assets represent a large portion of our total assets. We aim to reduce liquidity risk in our businesses by diversifying our funding sources and appropriately managing the term structure of our funding. We forecast and monitor daily<br>operating liquidity and cash movements in various individual entities and operations as well as centrally, aiming to ensure liquidity is available and cash is employed optimally.<br><br><br><br> <br>We also maintain centralized cash pools and access to other sources of liquidity and contingent<br>liquidity such as repurchase funding agreements. Our centralized cash pool consists of cash or near-cash, high quality short-term investments that are continually monitored for their credit quality and market liquidity.

As at December 31, 2021, the Company held $268.4 billion in cash and cash equivalents, comprised of cash on deposit, Canadian and U.S. Treasury Bills and high quality short-term investments, and marketable assets comprised of investment grade government and agency bonds, investment grade corporate bonds, investment grade securitized instruments, publicly traded common stocks and preferred shares, compared with $262.9 billion as at December 31, 2020 as noted in the table below.

As at December 31,<br><br><br>($ millions, unless otherwise stated)	2021		2020
Cash and cash equivalents	$	22,594	$	26,167
Marketable assets
Government bonds (investment grade)	****	77,743		79,511
Corporate bonds (investment grade)	****	138,479		131,930
Securitized — ABS, CMBS, RMBS (investment grade)	****	2,892		2,989
Public equities	****	26,706		22,294
Total marketable assets	****	245,820		236,724
Total cash and cash equivalents and marketable assets^(^^1^^)^	$	268,414	$	262,891
^(1)^	Including $6.6 billion encumbered cash and cash equivalents and marketable assets as at December 31, 2021 (2020<br>– $6.8 billion).
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We have established a variety of contingent liquidity sources. These include a $500 million committed unsecured revolving credit facility with certain Canadian chartered banks available for MFC, and a US$500 million<br>committed unsecured revolving credit facility with certain U.S. banks available for MFC and certain of its U.S. subsidiaries. There were no outstanding borrowings under these facilities as of December 31, 2021 (2020 – nil). In addition,<br>John Hancock Life Insurance Company (U.S.A.) (“JHUSA”) is a member of the Federal Home Loan Bank of Indianapolis (“FHLBI”), which enables the company to obtain loans from FHLBI as an alternative source of liquidity that is<br>collateralizable by qualifying mortgage loans, mortgage-backed securities and U.S. Treasury and Agency securities. As of December 31, 2021, JHUSA had an estimated maximum borrowing capacity of US$4.4 billion (2020 – US$4.8 billion) based<br>on regulatory limitations with an outstanding balance of US$500 million (2020 – US$500 million), under the FHLBI facility.
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The following table outlines the maturity of the Company’s significant financial liabilities.

Maturity of financial liabilities^(1)^

As at December 31, 2021<br>( millions)		1 to 3<br>years		3 to 5<br>years		Over 5<br>years		Total
Long-term debt	–	$	–	$	1,605	$	3,277	$	4,882
Capital instruments	–	****	579	****	–	****	6,401	****	6,980
Derivatives	294	****	387	****	379	****	8,978	****	10,038
Deposits from bank clients(2)	16,091	****	2,593	****	2,036	****	–	****	20,720
Lease liabilities	89	****	116	****	50	****	70	****	325
(1) The amounts shown above are net of<br>the related unamortized deferred issue costs. (2) Carrying value and fair value of deposits from Bank clients as at December 31, 2021 was 20,720 million and 20,746 million, respectively (2020 – 20,889 million and<br>21,085 million, respectively). Fair value is determined by discounting contractual cash flows, using market interest rates currently offered for deposits with similar terms and conditions. All deposits from Bank clients were categorized in<br>Level 2 of the fair value hierarchy (2020 – Level 2).

All values are in US Dollars.

Through the normal course of business, pledging of assets is required to comply with jurisdictional regulatory and<br>other requirements including collateral pledged to partially mitigate derivative counterparty credit risk, assets pledged to exchanges as initial margin and assets held as collateral for repurchase funding agreements. Total unencumbered assets were<br>$502.4 billion as at December 31, 2021 (2020 – $496.8 billion).

Market Risk Sensitivities and Market Risk Exposure Measures

Variable Annuity and Segregated Fund Guarantees Sensitivities and Risk Exposure Measures

Guarantees on variable annuity products and segregated funds may include one or more of death, maturity, income and withdrawal guarantees. Variable<br>annuity and segregated fund guarantees are contingent and only payable upon the occurrence of the relevant event, if fund values at that time are below guaranteed values. Depending on future equity market levels, liabilities on current in-force business would be due primarily in the period from 2022 to 2042.<br> <br><br><br><br>We seek to mitigate a portion of the risks embedded in our retained (i.e. net of reinsurance) variable annuity and segregated fund guarantee business through the<br>combination of our dynamic and macro hedging strategies (see “Publicly Traded Equity Performance Risk” below).<br> <br><br><br><br>The table below shows selected information regarding the Company’s variable annuity and segregated fund investment-related guarantees gross and net of<br>reinsurance.

Variable annuity and segregated fund guarantees, net of reinsurance^(1)^

As at December 31,( millions)						2020^(2)^
		Fund value		Net<br><br><br>amount at<br> <br>risk^(2),(3),(4)^		Guarantee<br>value^(2)^		Fund value		Net<br><br><br>amount at<br> <br>risk^(2),(3),(4)^
Guaranteed minimum income benefit	4,419	$	3,603	$	918	$	4,555	$	3,642	$	1,064
Guaranteed minimum withdrawal benefit	39,098	****	41,809	****	2,233		42,570		44,075		3,128
Guaranteed minimum accumulation benefit	19,820	****	20,226	****	12		18,463		18,945		8
Gross living benefits(5)	63,337	****	65,638	****	3,163		65,588		66,662		4,200
Gross death<br>benefits(6)	11,105	****	22,920	****	618		10,652		19,548		710
Total gross of reinsurance	74,442	****	88,558	****	3,781		76,240		86,210		4,910
Living benefits reinsured	3,788	****	3,102	****	771		3,917		3,157		895
Death benefits reinsured	639	****	547	****	253		685		534		282
Total reinsured	4,427	****	3,649	****	1,024		4,602		3,691		1,177
Total, net of reinsurance	70,015	$	84,909	$	2,757	$	71,638	$	82,519	$	3,733
(1) The table is not adjusted for the announced U.S. variable annuity reinsurance transaction.<br>(2) Guaranteed Value and Net Amount at Risk in respect of guaranteed<br>minimum withdrawal business in Canada and the U.S. have been updated in 2021 to reflect the time value of money of these claims. This methodology change also had a minor impact on the allocation of fund values between living benefits and death<br>benefits. See footnotes 5 and 6. Values at December 31, 2020 have been restated to reflect this revised methodology. (3) Amount at risk (in-the-money amount) is the excess of<br>guarantee values over fund values on all policies where the guarantee value exceeds the fund value. For guaranteed minimum death benefit, the amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account<br>balance and assumes that all claims are immediately payable. In practice, guaranteed death benefits are contingent and only payable upon the eventual death of policyholders if fund values remain below guarantee values. For guaranteed minimum<br>withdrawal benefit, the amount at risk assumes that the benefit is paid as a lifetime annuity commencing at the earliest contractual income start age. These benefits are also contingent and only payable at scheduled maturity/income start dates in<br>the future, if the policyholders are still living and have not terminated their policies and fund values remain below guarantee values. For all guarantees, the amount at risk is floored at zero at the single contract level.<br>(4) The amount at risk net of reinsurance at December 31, 2021<br>was 2,757 million (2020 – 3,733 million) of which: US1,336 million (2020 – US1,839 million) was on our U.S. business, 886 million (2020 – 1,159 million) was on our Canadian business, US53 million (2020 – US71 million) was<br>on our Japan business and US87 million (2020 – US111 million) was related to Asia (other than Japan) and our run-off reinsurance business.<br>(5) Where a policy includes both living and death benefits, the<br>guarantee in excess of the living benefit is included in the death benefit category as outlined in footnote 6. (6) Death benefits include standalone guarantees and guarantees in excess of living benefit guarantees where both death and living benefits are provided on a policy.

All values are in US Dollars.

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Investment categories for variable contracts with guarantees

Variable contracts with guarantees, including variable annuities and variable life, are invested, at the policyholder’s discretion subject to contract limitations, in various fund types within the segregated fund<br>accounts and other investments. The account balances by investment category are set out below.
As at December 31,<br><br><br>($ millions)<br> <br>Investment category	2021		2020
---	---	---	---	---
Equity funds	$	52,528	$	47,348
Balanced funds	****	43,783		42,414
Bond funds	****	10,965		11,944
Money market funds	****	1,844		2,113
Other fixed interest rate investments	****	1,917		1,992
Total	$	111,037	$	105,811

Caution Related to Sensitivities

In the sections that follow, we provide sensitivities and risk exposure measures for certain risks. These include sensitivities due to specific<br>changes in market prices and interest rate levels projected using internal models as at a specific date and are measured relative to a starting level reflecting the Company’s assets and liabilities at that date and the actuarial factors,<br>investment activity and investment returns assumed in the determination of policy liabilities. The risk exposures measure the impact of changing one factor at a time and assume that all other factors remain unchanged. Actual results can differ<br>significantly from these estimates for a variety of reasons including the interaction among these factors when more than one changes; changes in actuarial and investment return and future investment activity assumptions; actual experience differing<br>from the assumptions, changes in business mix, effective tax rates and other market factors; and the general limitations of our internal models. For these reasons, the sensitivities should only be viewed as directional estimates of the underlying<br>sensitivities for the respective factors based on the assumptions outlined below. Given the nature of these calculations, we cannot provide assurance that the actual impact on net income attributed to shareholders or on MLI’s LICAT ratio will<br>be as indicated. Market movements affect LICAT capital sensitivities both through income and other components of the regulatory capital framework. For example, LICAT is affected by changes to other comprehensive income.

Publicly Traded Equity Performance Risk Sensitivities and Exposure Measures

As outlined above, we have net exposure to equity risk through asset and liability mismatches; our variable annuity guarantee dynamic hedging strategy is not designed to completely offset the sensitivity of policy liabilities to all risks associated with the guarantees embedded in these products. The macro hedging strategy is designed to mitigate public equity risk arising from variable annuity guarantees not dynamically hedged and from other unhedged exposures in our insurance liabilities.

Changes in public equity prices may impact other items including, but not limited to, asset-based fees earned on assets under management and administration or policyholder account value, and estimated profits and amortization of deferred policy acquisition and other costs. These items are not hedged.

The table below shows the potential impact on net income attributed to shareholders resulting from an immediate 10%, 20% and 30% change in market<br>values of publicly traded equities followed by a return to the expected level of growth assumed in the valuation of policy liabilities. If market values were to remain flat for an entire year, the potential impact would be roughly equivalent to an<br>immediate decline in market values equal to the expected level of annual growth assumed in the valuation of policy liabilities. Further, if after market values dropped 10%, 20% or 30%, they continued to decline, remained flat, or grew more slowly<br>than assumed in the valuation the potential impact on net income attributed to shareholders could be considerably more than shown. Refer to “Sensitivity of Earnings to Changes in Assumptions” for more information on the level of growth<br>assumed and on the net income sensitivity to changes in these long-term assumptions. The potential impact is shown after taking into account the impact of the change in markets on the hedge assets. While we cannot reliably estimate the amount of the<br>change in dynamically hedged variable annuity guarantee liabilities that will not be offset by the profit or loss on the dynamic hedge assets, we make certain assumptions for the purposes of estimating the impact on net income attributed to<br>shareholders.<br> <br><br> <br>This estimate assumes that the performance of the dynamic hedging program would<br>not completely offset the gain/loss from the dynamically hedged variable annuity guarantee liabilities. It assumes that the hedge assets are based on the actual position at the period end, and that equity hedges in the dynamic program are rebalanced<br>at 5% intervals. In addition, we assume that the macro hedge assets are rebalanced in line with market changes.

It is also important to note that these estimates are illustrative, and that<br>the dynamic and macro hedging programs may underperform these estimates, particularly during periods of high realized volatility and/or periods where both interest rates and equity market movements are unfavourable.<br><br><br><br> <br>The Standards of Practice for the valuation of insurance contract liabilities and guidance<br>published by the CIA constrain the investment return assumptions for public equities and certain ALDA assets based on historical return benchmarks for public equities. The potential impact on net income attributed to shareholders does not take into<br>account possible changes to investment return assumptions resulting from the impact of declines in public equity market values on these historical return benchmarks.

62   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Potential immediate impact on net income attributed to shareholders arising from changes to public equity returns^(1),(2),(3)^

As at December 31, 2021<br><br><br>($ millions)	-30%			-20%			-10%			+10%			+20%			+30%
Underlying sensitivity to net income attributed to shareholders^(4)^
Variable annuity guarantees	$	(2,560	)	$	(1,480	)	$	(630	)	$	440	****	$	750	****	$	960	****
General fund equity investments^(5)^	****	(1,430	)	****	(890	)	****	(440	)	****	450	****	****	880	****	****	1,320	****
Total underlying sensitivity before hedging	****	(3,990	)	****	(2,370	)	****	(1,070	)	****	890	****	****	1,630	****	****	2,280	****
Impact of macro and dynamic hedge assets^(6)^	****	2,060	****	****	1,190	****	****	500	****	****	(470	)	****	(820	)	****	(1,110	)
Net potential impact on net income attributed toshareholders after impact of hedging	$	(1,930	)	$	(1,180	)	$	(570	)	$	420	****	$	810	****	$	1,170	****
As at December 31, 2020<br><br><br>($ millions)	-30%			-20%			-10%			+10%			+20%			+30%
Underlying sensitivity to net income attributed to shareholders^(4)^
Variable annuity guarantees	$	(3,150	)	$	(1,850	)	$	(800	)	$	600		$	1,040		$	1,350
General fund equity investments^(5)^		(1,350	)		(840	)		(410	)		380			760			1,130
Total underlying sensitivity before hedging		(4,500	)		(2,690	)		(1,210	)		980			1,800			2,480
Impact of macro and dynamic hedge assets^(6)^		2,420			1,410			600			(620)			(1,110)			(1,480)
Net potential impact on net income attributed toshareholders after impact of hedging	$	(2,080)		$	(1,280)		$	(610	)	$	360		$	690		$	1,000
^(1)^See “Caution Related to Sensitivities” above.<br> <br>^(2)^The tables above show the potential impact on net income attributed to shareholders resulting from an immediate 10%, 20% and 30% change in market values of publicly traded equities followed<br>by a return to the expected level of growth assumed in the valuation of policy liabilities, excluding impacts from asset-based fees earned on assets under management and policyholder account value.<br><br><br>^(3)^Please refer to “Sensitivity of Earnings to Changes in<br>Assumptions” section below for more information on the level of growth assumed and on the net income sensitivity to changes in these long-term assumptions.<br><br><br>^(4)^Defined as earnings sensitivity to a change in public equity<br>markets including settlements on reinsurance contracts, but before the offset of hedge assets or other risk mitigants.<br> <br>^(5)^This impact for general fund equity investments includes general fund investments supporting our policy liabilities, investment in seed money investments (in segregated and mutual funds made<br>by Corporate and Other segment) and the impact on policy liabilities related to the projected future fee income on variable universal life and other unit linked products. The impact does not include: (i) any potential impact on public equity<br>weightings; (ii) any gains or losses on AFS public equities held in the Corporate and Other segment; or (iii) any gains or losses on public equity investments held in Manulife Bank. The participating policy funds are largely<br>self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in equity markets.<br><br><br>^(6)^Includes the impact of rebalancing equity hedges in the macro and<br>dynamic hedging program. The impact of dynamic hedge rebalancing represents the impact of rebalancing equity hedges for dynamically hedged variable annuity guarantee best estimate liabilities at 5% intervals but does not include any impact in<br>respect of other sources of hedge ineffectiveness (e.g. fund tracking, realized volatility and equity, interest rate correlations different from expected among other factors).																		^^<br><br><br>^^<br><br><br>^^<br><br><br>^^<br><br><br>^^<br><br><br>^^

The following table shows the potential impact to MLI’s LICAT ratio resulting from changes in public equity market values.

Potential immediate impact on MLI’s LICAT ratio arising from public equity returns different than the expected returns assumed in the valuation of policyliabilities^(1),(2),(3)^

	Impact on MLI’s LICAT ratio
Percentage points	-30%			-20%			-10%			+10%		+20%		+30%
December 31, 2021	****	(1	)	****	–	****	****	–	****	****	–	****	1	****	–	****
December 31, 2020		(3	)		(1	)		(1	)		–		–		(1	)
^(1)^	See “Caution Related to Sensitivities” above. In addition, estimates exclude changes to the net actuarial<br>gains/losses with respect to the Company’s pension obligations as a result of changes in equity markets, as the impact on the quoted sensitivities is not considered to be material.
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^(2)^	The potential impact is shown assuming that the change in value of the hedge assets does not completely offset the change<br>in the dynamically hedged variable annuity guarantee liabilities. The estimated amount that would not be completely offset relates to our practices of not hedging the provisions for adverse deviation and of rebalancing equity hedges for dynamically<br>hedged variable annuity liabilities at 5% intervals.
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^(3)^	OSFI rules for segregated fund guarantees reflect full capital impacts of shocks over 20 quarters within a prescribed<br>range. As such, the deterioration in equity markets could lead to further increases in capital requirements after the initial shock.
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InterestRate and Spread Risk Sensitivities and Exposure Measures

At December 31, 2021, we estimated the sensitivity of our net income attributed to shareholders to a 50 basis point parallel decline in interest<br>rates to be a charge of $200 million, and to a 50 basis point parallel increase in interest rates to be neutral.<br> <br><br><br><br>The table below shows the potential impact on net income attributed to shareholders from a 50 basis point parallel move in interest rates. This includes a change of 50<br>basis points in current government, swap and corporate rates for all maturities across all markets with no change in credit spreads between government, swap and corporate rates, and with a floor of zero on government rates where government rates are<br>not currently negative (currently zero floor applies to all countries we operate in except Japan), relative to the rates assumed in the valuation of policy liabilities, including embedded derivatives. For variable annuity guarantee liabilities that<br>are dynamically hedged, it is assumed that interest rate hedges are rebalanced at 20 basis point intervals.
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As the sensitivity to a 50 basis point change in interest rates includes any<br>associated change in the applicable reinvestment scenarios, the impact of changes to interest rates for less than, or more than 50 basis points is unlikely to be linear. Furthermore, our sensitivities are not consistent across all regions in which<br>we operate, and the impact of yield curve changes will vary depending upon the geography where the change occurs. Reinvestment assumptions used in the valuation of policy liabilities tend to amplify the negative effects of a decrease in interest<br>rates and dampen the positive effects of interest rate increases. This is because the reinvestment assumptions used in the valuation of our insurance liabilities are based on interest rate scenarios and calibration criteria set by the ASB.<br>Therefore, in any particular quarter, changes to the reinvestment assumptions are not fully aligned to changes in current market interest rates especially when there is a significant change in the shape of the interest rate curve. As a result, the<br>impact from non-parallel movements may be materially different from the estimated impact of parallel movements. For example, if long-term interest rates increase more than short-term interest rates (sometimes<br>referred to as a steepening of the yield curve) in North America, the decrease in the value of our swaps may be greater than the decrease in the value of our insurance liabilities. This could result in a charge to net income attributed to<br>shareholders in the short-term even though the rising and steepening of the yield curve, if sustained, may have a positive long-term economic impact.<br> <br><br><br><br>The interest rate and spread risk sensitivities are determined in isolation of each other and therefore do not reflect the combined impact of changes in government rates<br>and credit spreads between government, swap and corporate rates occurring simultaneously. As a result, the impact of the summation of each individual sensitivity may be materially different from the impact of sensitivities to simultaneous changes in<br>interest rate and spread risk.<br> <br><br> <br>The potential impact on net income attributed to shareholders<br>does not take into account any future potential changes to our URR assumptions or calibration criteria for stochastic risk-free rates. In June 2021, the ASB issued a new promulgation with reductions to the URR and updates to the calibration criteria<br>for stochastic risk-free rates. The updated standard included a reduction of 15 basis points in the URR and a corresponding change to stochastic risk-free rate modeling and was effective October 15, 2021. At December 31, 2021, we estimated<br>the sensitivity of our net income attributed to shareholders to a 10 basis point reduction in the URR in all geographies, and a corresponding change to stochastic risk-free modeling, to be a charge of $350 million<br>(post-tax); and note that the impact of changes to the URR are not linear. The long-term URR for risk-free rates in Canada is prescribed at 2.9% and we use the same assumption for the U.S. Our assumption for<br>Japan is 1.5%.<br> <br><br> <br>The potential impact on net income attributable to shareholders does not take<br>into account other potential impacts of lower interest rate levels, for example, increased strain on the sale of new business or lower interest earned on our surplus assets. The impact on net income attributed to shareholders also does not reflect<br>any unrealized gains or losses on AFS fixed income assets held in our Corporate and Other segment. Changes in the market value of these assets may provide a natural economic offset to the interest rate risk arising from our product liabilities. In<br>order for there to also be an accounting offset, the Company would need to realize a portion of the AFS fixed income asset unrealized gains or losses. It is not certain we would realize any of the unrealized gains or losses available.
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The impact does not reflect any potential effect of changing interest rates to<br>the value of our ALDA assets. Rising interest rates could negatively impact the value of our ALDA assets (see “Critical Actuarial and Accounting Policies – Fair Value of Invested Assets”, below). More information on ALDA can be found<br>under the section “Alternative Long-Duration Asset Performance Risk Sensitivities and Exposure Measures”, below.

Under LICAT, changes in unrealized gains or losses in our AFS bond portfolio resulting from interest rate shocks tend to dominate capital sensitivities. As a result, the reduction in interest rates improves LICAT ratios and vice-versa.

The following table shows the potential impact on net income attributed to shareholders as well as the change in the market value of AFS fixed income assets held in our Corporate and Other segment, which could be realized through<br>the sale of these assets.

Potential impact on net income attributed to shareholders and MLI’s LICAT ratio of an immediate parallel change in interest ratesrelative to rates assumed in the valuation of policy liabilities^(1),(2),(3),(4)^

				2020
As at December 31,		+50bp		-50bp		+50bp
Net income attributed to shareholders ( millions)	(200)	$	nil	$	nil	$	(100	)
Changes in other comprehensive income from fair value changes in AFS fixed income assets held in the<br>Corporate and Other segment ( millions)	2,100	****	(1,900)		2,100		(1,900	)
MLI’s LICAT ratio (change in percentage points)(5)	5	****	(4)		8		(7	)
(1) See “Caution Related to Sensitivities” above. In addition, estimates exclude changes to the net actuarial gains/losses with respect to the Company’s pension obligations as a<br>result of changes in interest rates, as the impact on the quoted sensitivities is not considered to be material. (2) Includes guaranteed insurance and annuity products, including variable annuity contracts as well as adjustable benefit products where benefits are generally adjusted as interest rates and<br>investment returns change, a portion of which have minimum credited rate guarantees. For adjustable benefit products subject to minimum rate guarantees, the sensitivities are based on the assumption that credited rates will be floored at the<br>minimum. (3) The amount of gain or loss that can be realized on<br>AFS fixed income assets held in the Corporate and Other segment will depend on the aggregate amount of unrealized gain or loss.<br>(4) Sensitivities are based on projected asset and liability cash<br>flows and the impact of realizing fair value changes in AFS fixed income is based on the holdings at the end of the period.
(5) LICAT impacts include realized and<br>unrealized fair value changes in AFS fixed income assets. LICAT impacts do not reflect the impact of the scenario switch discussed below.

All values are in US Dollars.

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The following tables show the potential impact on net income attributed to shareholders resulting from a change in corporate spreads and swap spreads over government bond rates for all maturities across all markets with a floor<br>of zero on the total interest rate, relative to the spreads assumed in the valuation of policy liabilities.

Potential impact on net income attributed to shareholders and MLI’s LICAT ratio arising from changes to corporate spreads andswap spreads relative to spreads assumed in the valuation of policy liabilities^(1),(2),(3)^

Corporate spreads^(4),(5)^	2021					2020
As at December 31,	-50bp			+50bp		-50bp			+50bp
Net income attributed to shareholders ($<br>millions)^(6)^	$	(600	)	$	500	$	(1,000	)	$	900
MLI’s LICAT ratio (change in percentage points)^(7)^	****	(3	)	****	4		(4	)		4
Swap spreads	2021					2020
As at December 31,	-20bp			+20bp		-20bp			+20bp
Net income attributed to shareholders ($ millions)	$	nil	****	$	nil	$	nil		$	nil
MLI’s LICAT ratio (change in percentage points)^(7)^	****	nil	****	****	nil		nil			nil
^(1)^See “Caution Related to<br>Sensitivities” above.<br> <br>^(2)^The impact on net income attributed<br>to shareholders assumes no gains or losses are realized on our AFS fixed income assets held in the Corporate and Other segment and excludes the impact of changes in segregated fund bond values due to changes in credit spreads. The participating<br>policy funds are largely self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in corporate and swap spreads.<br><br><br>^(3)^Sensitivities are based on projected asset and liability cash<br>flows.<br> <br>^(4)^Corporate spreads are assumed to grade to the long-term<br>average over five years.<br> <br>^(5)^As the sensitivity to a 50 basis<br>point decline in corporate spreads includes the impact of a change in deterministic reinvestment scenarios where applicable, the impact of changes to corporate spreads for less than, or more than, the amounts indicated are unlikely to be linear.<br><br><br>^(6)^The sensitivity on net income attributed to shareholders due to<br>changes in corporate spreads decreased significantly as at December 31, 2021 compared with December 31, 2020, as the rise in risk-free interest rates reduced projected reinvestments in the actuarial valuation models.
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^(7)^LICAT impacts include realized and unrealized<br>fair value change in AFS fixed income assets. Under LICAT, spread movements are determined from a selection of investment grade bond indices with BBB and better bonds for each jurisdiction. For LICAT, we use the following indices: FTSE TMX Canada<br>All Corporate Bond Index, Barclays USD Liquid Investment Grade Corporate Index, and Nomura-BPI (Japan). LICAT impacts presented for corporate spreads do not reflect the impact of the scenario switch discussed<br>below.

Swap spreads remain at low levels, and if they were to rise, this could generate material charges to net income attributed to shareholders.

LICAT Scenario Switch

Typically, a reduction in interest rates improves LICAT ratios and vice-versa. However, when interest rates decline past a certain threshold, reflecting the combined movement in risk-free rates and corporate spreads, a different prescribed interest rate stress scenario needs to be taken into account in the LICAT ratio calculation in accordance with OSFI guidelines for LICAT.

The LICAT guideline specifies four stress scenarios for interest rates and prescribes the methodology to determine the most adverse scenario to apply for each LICAT geographic region^1^ based on current market inputs and the Company’s balance sheet.

We estimate the potential impact of a switch in the scenarios would be approximately a one-time seven percentage point decrease in MLI’s LICAT ratio. Should a scenario switch be triggered in a LICAT geographic region, the full impact would be reflected immediately for non-participating products while the impact for participating products would be reflected over six quarters using a rolling average of interest rate risk capital, in line with the smoothing approach prescribed in the OSFI Advisory effective January 1, 2021.

The potential negative impact of a switch in scenarios is not reflected in the stated risk-free rate and corporate spread sensitivities, as it is a one-time impact. After this one-time event, further decreases in risk-free interest rates would continue to improve the LICAT capital position, similar to the sensitivity above.

The level of interest rates and corporate spreads that would trigger a switch in the scenarios is dependent on market conditions and movements in the Company’s asset and liability position. The scenario switch, if triggered, could reverse in response to subsequent increases in interest rates and/or corporate spreads.

Alternative Long-Duration Asset Performance Risk Sensitivities and Exposure Measures

The following table shows the potential impact on net income attributed to shareholders resulting from an immediate 10% change in market values of<br>ALDA followed by a return to the expected level of growth assumed in the valuation of policy liabilities. If market values were to remain flat for an entire year, the potential impact would be roughly equivalent to an immediate decline in market<br>values equal to the expected level of annual growth assumed in the valuation of policy liabilities. Further, if after market values dropped 10% they continued to decline, remained flat, or grew more slowly than assumed in the valuation of policy<br>liabilities, the potential impact on net income attributed to shareholders could be considerably more than shown. Refer to “Sensitivity of Earnings to Changes in Assumptions” below, for more information on the level of growth assumed and<br>on the net income sensitivity to changes in these long-term assumptions.
ALDA includes commercial real estate, timber and farmland real estate, infrastructure, and private equities, some of which relate to oil and gas.
^1^	LICAT geographic locations include North America, the United Kingdom, Europe, Japan, and Other Region.<br>
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Potential impact on net income attributed to shareholders and MLI LICAT ratio arising from changes in ALDA returnsrelative to returns assumed in the valuation of policy liabilities^(1),(2),(3),(4),(5),(6)^

As at December 31,<br><br><br>($ millions)	2021					2020
		-10%			+10%		-10%			+10%
Net income attributed to shareholders
Real estate, agriculture and timber assets	$	(1,400	)	$	1,400		$  (1,600	)	$	1,400
Private equities and other ALDA	****	(1,900	)	****	1,800		(2,000	)		1,900
Total	$	(3,300	)	$	3,200		$  (3,600	)	$	3,300
MLI’s LICAT ratio (change in percentagepoints)	****	(4	)	****	3		(5	)		4
^(1)^See “Caution Related to<br>Sensitivities” above.<br> <br>^(2)^This impact is calculated as at a point-in-time impact and does not include: (i) any potential impact on ALDA weightings or (ii) any gains or losses on ALDA held in the Corporate and Other<br>segment.<br> <br>^(3)^The participating policy funds are largely<br>self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in ALDA returns. For some classes of ALDA, where there is not an appropriate long-term benchmark available, the return assumptions used<br>in valuation are not permitted by the Standards of Practice and CIA guidance to result in a lower reserve than an assumption based on a historical return benchmark for public equities in the same jurisdiction.<br><br><br>^(4)^Net income impact does not consider any impact of the market<br>correction on assumed future return assumptions.<br> <br>^(5)^Please refer<br>to “Sensitivity of Earnings to Changes in Assumptions” section below for more information on the level of growth assumed and on the net income sensitivity to changes in these long-term assumptions.<br><br><br>^(6)^The impact of changes to the portfolio asset mix supporting our<br>North American legacy businesses are reflected in the sensitivities when the changes take place.
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Foreign Exchange Risk Sensitivities and Exposure Measures

We generally match the currency of our assets with the currency of the insurance and investment contract liabilities they support, with the objective of mitigating risk of loss arising from foreign exchange rate changes. As at<br>December 31, 2021, we did not have a material unmatched currency exposure.

The following table shows the potential impact on core earnings of a 10% change in the value of the Canadian dollar relative to our other key operating currencies.

Potential impact on core earnings of changes in foreign exchange rates^(1),(2)^

	2021					2020
As at December 31,<br><br><br>($ millions)	+10%<br>strengthening			-10%<br>weakening		+10%<br>strengthening			-10%<br>weakening
10% change in the Canadian dollar relative to the U.S. dollar and the Hong Kong dollar	****	$  (400	)	$	400		$  (390	)	$	390
10% change in the Canadian dollar relative to the Japanese<br>yen	****	(40	)	****	40		(40	)		40
^(1)^	This item is a non-GAAP financial measure. See<br>“Non-GAAP and Other Measures” below for more information.
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^(2)^	See “Caution Related to Sensitivities” above.
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LICAT regulatory ratios are also sensitive to the fluctuations in the Canadian dollar relative to our other key operating currencies. The direction and materiality of this sensitivity varies across various capital metrics.

Liquidity Risk Exposure Strategy

We manage liquidity levels of the consolidated group and key subsidiaries against established thresholds. These thresholds are based on liquidity<br>stress scenarios over different time horizons.<br> <br><br> <br>Increased use of derivatives for hedging<br>purposes has necessitated greater emphasis on measurement and management of contingent liquidity risk related to these instruments, in particular the movement of<br>“over-the-counter” derivatives to central clearing in the U.S. and Japan places an emphasis on cash as the primary source of liquidity as opposed to security<br>holdings. The market value of our derivative portfolio is therefore regularly stress tested to assess the potential collateral and cash settlement requirements under various market conditions.

Manulife Bank (the “Bank”) has a standalone liquidity risk management framework. The framework includes stress testing, cash flow modeling, a funding plan and a contingency plan. The Bank has an established securitization infrastructure which enables the Bank to access a range of funding and liquidity sources. The Bank models extreme but plausible stress scenarios that demonstrate that the Bank has a sufficient pool of highly liquid money market securities and holdings of sovereign bonds, near-sovereign bonds and other liquid marketable securities, which when combined with the Bank’s capacity to securitize residential mortgage assets provides sufficient liquidity to meet potential requirements under these stress scenarios.

Similarly, Global WAM has a standalone liquidity risk management framework for the business managing assets or manufacturing investment products for third-party clients. We maintain fiduciary standards to ensure that client and regulatory expectations are met in relation to the liquidity risks taken within each investment. Additionally, we regularly monitor and review the liquidity of our investment products as part of our ongoing risk management practices.

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Market Risk Factors

Our most significant source of publicly traded equity risk arises from equity-linked products with guarantees, where the guarantees are linked to the performance ofthe underlying funds.

•	Publicly traded equity performance risk arises from a variety of sources, including guarantees associated with equity-linked<br>investments such as variable annuity and segregated fund products, general fund investments in publicly traded equities and mutual funds backing general fund product liabilities.
•	Market conditions resulting in reductions in the asset value we manage has an adverse effect on the revenues and<br>profitability of our investment management business, which depends on fees related primarily to the values of assets under management and administration.
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•	Guaranteed benefits of variable annuity and segregated funds are contingent and payable upon death, maturity, permitted<br>withdrawal or annuitization. If equity markets decline or even if they increase by an amount lower than that assumed in our actuarial valuation, additional liabilities may need to be established to cover the contingent liabilities, resulting in a<br>reduction in net income attributed to shareholders and regulatory capital ratios. Further, if equity markets do not recover to the amount of the guarantees, by the dates the liabilities are due, the accrued liabilities will need to be paid out in<br>cash. In addition, sustained flat or declining public equity markets would likely reduce asset-based fee revenues related to variable annuities and segregated funds with guarantees and related to other wealth and insurance products.<br>
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•	Where publicly traded equity investments are used to support general fund product liabilities, the policy valuation<br>incorporates projected investment returns on these assets. If actual returns are lower than the expected returns, the investment losses will reduce net income attributed to shareholders.
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•	For products where the investment strategy applied to future cash flows in the policy valuation includes investing a<br>specified portion of future cash flows in publicly traded equities, a decline in the value of publicly traded equities relative to other assets could require us to change the investment mix assumed for future cash flows, which may increase policy<br>liabilities and reduce net income attributed to shareholders. A reduction in the outlook for expected future returns for publicly traded equities, which could result from a fundamental change in future expected economic growth, would increase policy<br>liabilities and reduce net income attributed to shareholders. Furthermore, to the extent publicly traded equities are held as AFS, other than temporary impairments that arise will reduce income.
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•	Expected long-term annual market growth assumptions for public equities for key markets are based on long-term historical<br>observed experience. See “Critical Actuarial and Accounting Policies” below for the rates used in the stochastic valuation of our segregated fund guarantee business. The calibration of the economic scenario generators that are used to<br>value segregated fund guarantee business complies with current CIA Standards of Practice for the valuation of these products. Implicit margins, determined through stochastic valuation processes, lower net yields used to establish policy liabilities.<br>Assumptions used for public equities backing liabilities are also developed based on historical experience but are constrained by different CIA Standards of Practice and differ slightly from those used in stochastic valuation. Alternative asset<br>return assumptions vary based on asset class but are largely consistent, after application of valuation margins and differences in taxation, with returns assumed for public equities.
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We experience interest rate and spread risk within the general fund primarily due to the uncertainty of future returns on investments.

•	Interest rate and spread risk arises from general fund guaranteed benefit products, general fund adjustable benefit products<br>with minimum rate guarantees, general fund products with guaranteed surrender values, segregated fund products with minimum benefit guarantees and from surplus fixed income investments. The risk arises within the general fund primarily due to the<br>uncertainty of future returns on investments to be made as assets mature and as recurring premiums are received and invested or reinvested to support longer dated liabilities. Interest rate risk also arises due to minimum rate guarantees and<br>guaranteed surrender values on products where investment returns are generally passed through to policyholders. A rapid rise in interest rates may also result in losses attributable to early liquidation of fixed income instruments supporting<br>contractual surrender benefits, if customers surrender to take advantage of higher interest rates on offer elsewhere. In contrast, in a lower interest rate environment, borrowers may prepay or redeem fixed income securities, mortgages and loans with<br>greater frequency in order to borrow at lower market rates, potentially reducing the returns on our investment portfolio, if there are no make whole conditions. Substantially all our fixed income securities, mortgages and loans portfolio include<br>make whole conditions.
•	The valuation of policy liabilities reflects assumptions for the yield on future investments and the projected cash flows<br>associated with interest rate hedges. A general decline in interest rates, without a change in corporate bond spreads and swap spreads, will reduce the assumed yield on future investments but favourably impact the value of lengthening interest rate<br>hedges. Conversely, a general increase in interest rates, without a change in corporate bond spreads and swap spreads, will increase the assumed yield on future investments, but unfavourably impact the value of lengthening interest rate hedges. The<br>Company’s disclosed estimated impact from interest rate movements reflects a parallel increase and decrease in interest rates of specific amounts. The impact from non-parallel movements may be different<br>from the estimated impact of parallel movements. For further information on interest rate scenarios refer to “Interest Rate and Spread Risk Sensitivities and Exposure Measures”. In addition, decreases in corporate bond spreads or increases<br>in swap spreads should generally result in an increase in policy liabilities and a reduction in net income attributed to shareholders, while an increase in corporate bond spreads or a decrease in swap spreads should generally have the opposite<br>impact. The impact of changes in interest rates and in spreads may be partially offset by changes to credited rates on adjustable products that pass-through investment returns to policyholders.
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•	For segregated fund and variable annuity products that contain investment guarantees in the form of benefit guarantees, a<br>sustained increase in interest rate volatility or a decline in interest rates would increase the costs of hedging the benefit guarantees provided. The impact of changes in interest rates are managed within the variable annuity dynamic hedging<br>program.
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We experience ALDA performance risk when actual returns are lower than expected returns.

•	ALDA performance risk arises from general fund investments in directly-owned real estate, timber properties, farmland<br>properties, infrastructure, oil and gas assets, and private equities.
•	Where these assets are used to support policy liabilities, the policy valuation incorporates projected investment returns on<br>these assets. ALDA assumptions vary by asset class and generally have a similar impact on policy liabilities as public equities would. If actual returns are lower than the expected returns, there will be a negative impact to the net income<br>attributed to shareholders. A reduction in the outlook for expected future returns for ALDA, which could result from a variety of factors such as a fundamental change in future expected economic growth or declining risk premiums due to increased<br>competition for such assets, would increase policy liabilities and reduce net income attributed to shareholders. Further, if returns on certain external asset benchmarks used to determine permissible assumed returns under the CIA Standards of<br>Practice are lower than expected, expected future returns will be adjusted accordingly and the Company’s policy liabilities will increase, reducing net income attributed to shareholders.
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•	The value of oil and gas assets could be adversely affected by declines in energy prices as well as by a number of other<br>factors including production declines, uncertainties associated with estimating oil and natural gas reserves, difficult economic conditions, changes in consumer preferences to transition to a low-carbon<br>economy, competition from renewable energy providers and geopolitical events. Changes in government regulation of the oil and gas industry, including environmental regulation, carbon taxes and changes in the royalty rates resulting from provincial<br>royalty reviews, could also adversely affect the value of our oil and gas investments.
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•	Difficult economic conditions could result in higher vacancy, lower rental rates and lower demand for real estate<br>investments, all of which would adversely impact the value of our real estate investments. Difficult economic conditions could also prevent companies in which we have made private equity investments from achieving their business plans and could<br>cause the value of these investments to fall, or even cause the companies to fail. Our commercial real estate investments may be negatively impacted by the trends solidified by COVID-19, including the<br>digitization of work and the transformation of physical retail. Declining valuation multiples in the public equity market would also likely cause values to decline in our private equity portfolio. The timing and amount of investment income from<br>private equity investments is difficult to predict, and investment income from these investments can vary from quarter to quarter.
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•	Our timberland and farmland holdings are exposed to natural risks, such as prolonged drought, wildfires, insects,<br>windstorms, flooding, and climate change. We are generally not insured for these types of risks but seek to mitigate their impact through portfolio diversification and prudent operating practices.
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•	More broadly, a rising interest rate environment could result in the value of some of our ALDA investments declining,<br>particularly those with fixed contractual cash flows such as real estate.
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•	The negative impact of changes in these factors can take time to be fully reflected in the valuations of private<br>investments, including ALDA, especially if the change is large and rapid, as market participants adjust their forecasts and better understand the potential medium to long-term impact of such changes. As a result, valuation changes in any given<br>period may reflect the delayed impact of events that occurred in prior periods.
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•	We rely on a diversified portfolio of ALDA to generate relatively stable investment returns. Diversification benefits may be<br>reduced at times, especially during a period of economic stress, which would adversely affect portfolio returns.
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•	The Company determines investment return assumptions for ALDA in accordance with the Standards of Practice for the valuation<br>of insurance contract liabilities and guidance published by the CIA. The guidance requires that the investment return assumption for these assets should not be higher than the historical long-term average returns of an appropriate broad-based index.<br>Where such experience is not available, the investment return assumption for these assets should not result in a lower reserve than an assumption based on a historical-return benchmark for public equities in the same jurisdiction. As a result, the<br>impact of changes in the historical returns for public equity benchmarks may result in an update to our investment return assumptions for ALDA.
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Our liabilities are valued based on an assumed asset investment strategy over the long-term.

•	We develop an investment strategy for the assets that back our liabilities. The strategy involves making assumptions on the<br>kind of assets in which we will invest and the returns such assets will generate.
•	We may not be able to implement our investment strategy as intended due to a lack of assets available at the returns we<br>assume. This may result in a change in investment strategy and/or assumed future returns, thus adversely impacting our financial results.
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•	From time to time we may decide to adjust our portfolio asset mix which may result in adverse impacts to our financial<br>results for one or more periods.
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We experience foreign exchange risk as a substantial portion of our business is transacted in currencies otherthan Canadian dollars.

•

Our financial results are reported in Canadian dollars. A substantial portion of our business is transacted in currencies<br>other than Canadian dollars, mainly U.S. dollars, Hong Kong dollars and Japanese yen. If the Canadian dollar strengthens relative to these currencies, net income attributed to shareholders would decline and our reported shareholders’ equity<br>would decline. A weakening of the Canadian dollar against the foreign currencies in which we do business would have the opposite effect and would increase net income attributed to shareholders and shareholders’ equity.

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The Company’s hedging strategies will not fully reduce the market risks related to the product guarantees andfees being hedged, hedging costs may increase and the hedging strategies expose the Company to additional risks.

•	Our hedging strategies rely on the execution of derivative transactions in a timely manner. Market conditions can limit<br>availability of hedging instruments, requiring us to post additional collateral, and can further increase the costs of executing derivative transactions. Therefore, hedging costs and the effectiveness of the strategy may be negatively impacted if<br>markets for these instruments become illiquid. The Company is subject to the risk of increased funding and collateral demands which may become significant as equity markets increase.
•	The Company is also subject to counterparty risks arising from the derivative instruments and to the risk of increased<br>funding and collateral demands which may become significant as equity markets and interest rates increase. The strategies are highly dependent on complex systems and mathematical models that are subject to error and rely on forward-looking long-term<br>assumptions that may prove inaccurate, and which rely on sophisticated infrastructure and personnel which may fail or be unavailable at critical times. Due to the complexity of the strategies, there may be additional unidentified risks that may<br>negatively impact our business and future financial results. In addition, rising equity markets and interest rates that would otherwise result in profits on variable annuities will be offset by losses from our hedging positions. For further<br>information pertaining to counterparty risks, refer to the risk factor “If a counterparty fails to fulfill its obligations, we may be exposed to risks we had sought to mitigate”.
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•	Under certain market conditions, which include a sustained increase in realized equity and interest rate volatilities, a<br>decline in interest rates, or an increase in the correlation between equity returns and interest rate declines, the costs of hedging the benefit guarantees provided in variable annuities may increase or become uneconomic. In addition, there can be<br>no assurance that our dynamic hedging strategy will fully offset the risks arising from the variable annuities being hedged.
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•	Policy liabilities for variable annuity guarantees are determined using long-term forward-looking estimates of volatilities.<br>These long-term forward-looking volatilities assumed for policy liabilities meet the CIA calibration standards. To the extent that realized equity or interest rate volatilities in any quarter exceed the assumed long-term volatilities, or<br>correlations between interest rate changes and equity returns are higher, there is a risk that rebalancing will be greater and more frequent, resulting in higher hedging costs.
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•	The level of guarantee claims returns or other benefits ultimately paid will be impacted by policyholder longevity and<br>policyholder behaviour including the timing and amount of withdrawals, lapses, fund transfers and contributions. The sensitivity of liability values to equity market and interest rate movements that we hedge are based on long-term expectations for<br>longevity and policyholder behaviour since the impact of actual policyholder longevity and policyholder behaviour variances cannot be hedged using capital markets instruments. The efficiency of our market risk hedging is directly affected by<br>accuracy of the assumptions related to policyholder longevity and policyholder behaviour.
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Changes in market interest rates may impact our netincome attributed to shareholders and capital ratios.

•	A prolonged low or negative (nominal or real) interest rate environment may result in charges related to lower fixed income<br>reinvestment assumptions and an increase in new business strain until products are repositioned for the lower rate environment. Other potential consequences of low interest rates include:
^¡^	Low interest rates could negatively impact sales;
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^¡^	Lower risk-free rates tend to increase the cost of hedging, and as a result the offering of guarantees could become<br>uneconomic;
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^¡^	The reinvestment of cash flows into low yielding bonds could result in lower future earnings due to lower returns on surplus<br>and general account assets supporting in-force liabilities, and due to guarantees embedded in products including minimum guaranteed rates in participating and adjustable products;
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^¡^	A lower interest rate environment could be correlated with other macro-economic factors including unfavourable economic<br>growth and lower returns on other asset classes;
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^¡^	Lower interest rates could contribute to potential impairments of goodwill;
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^¡^	Lower interest rates could lead to lower mean bond parameters used for the stochastic valuation of segregated fund<br>guarantees, resulting in higher policy liabilities;
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^¡^	Lower interest rates would also reduce expected earnings on in-force policies;<br>
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^¡^	A prolonged low or negative interest rate environment may also result in the ASB lowering the promulgated URR and require us<br>to increase our provisions;
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^¡^	Lower interest rates could also trigger a switch to a more adverse prescribed interest stress scenario, increasing LICAT<br>capital. See “LICAT Scenario Switch” above;
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^¡^	The difference between the current investable returns and the returns used in pricing new business are generally capitalized<br>when new business is written. Lower interest rates result in higher new business strain until products are re-priced or interest rates increase; and
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^¡^	Fixed income reinvestment rates other than the URR are based on current market rates. The net income sensitivity to changes<br>in current rates is outlined in the section “Interest Rate and Spread Risk Sensitivities and Exposure Measures” above.
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•	A rapid rise in interest rates could lead to customers surrendering policies and we may incur losses attributable to early<br>liquidation of fixed income instruments supporting contractual surrender benefits.
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The global interest rate benchmark reform, leading to the transition away from LIBOR / IBOR to alternative referencerates based on risk-free rates, may impact the value of our IBOR-based financial instruments.

•	Manulife holds different types of instruments, including derivatives, bonds, loans and other floating rate instruments that<br>reference LIBOR (London Interbank Offered Rate) or other Interbank Offered Rates (IBORs). As previously announced by the U.K. Financial Conduct Authority (FCA) in July 2017, the FCA will no longer compel panel banks to submit rate information used<br>to determine LIBOR post 2021. On March 5, 2021, the Intercontinental Exchange Benchmark Administration, the administrator of LIBOR, announced that it will cease the publication of one-week and two-month USD LIBOR and all non-USD (GBP, EUR, CHF and JPY) LIBOR settings at the end of December 2021, but will extend the publication of the remaining USD LIBOR tenors<br>(overnight and one, three, six and 12 month USD LIBOR) until the end of June 2023. In addition, on June 22, 2021, OSFI published a letter setting out their expectation that Federally Regulated Financial Institutions (FRFIs) will stop using USD<br>LIBOR as a reference rate as soon as possible and will not enter into transactions referencing these rates after December 31, 2021. On December 16, 2021, the Canadian Alternative Reference Rate (CARR) working group recommended that<br>Refinitiv Benchmark Services (UK) Limited (RBSL), the administrator of Canadian Dollar Offered Rate (CDOR), cease publication of all of CDOR’s remaining tenors after June 30, 2024. The decision to ultimately cease CDOR lies solely with<br>RBSL.
•	Any changes to or discontinuation of LIBOR / IBOR or change to an alternative reference rate may adversely affect the<br>valuation of our existing interest-rate linked and derivatives securities we hold, the effectiveness of those derivatives in mitigating our risks, securities we have issued, or other assets, liabilities and other contractual rights and obligations<br>whose value is tied to LIBOR / IBOR or to a LIBOR / IBOR alternative. Furthermore, depending on the nature of the alternative reference rate, we may become exposed to additional risks such as legal settlement risk associated with<br>instruments having inadequate fallback language.
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•	To ensure a timely transition to alternative reference rates, Manulife has established an enterprise-wide program and<br>governance structure across functions to identify, measure, monitor and manage financial and non-financial risks of transition. Manulife’s enterprise-wide program focuses on quantifying our exposures to<br>various IBORs, evaluating contract fallback language, contract remediation, risk management, assessing accounting and tax implications, and ensuring operational readiness for IT systems, models, processes and controls. We continue to monitor market<br>developments, changes and guidance from regulators, and adjust our project plan to align with updated timelines. We have successfully transitioned our exposures to LIBOR rates that decommissioned on December 31, 2021 and we are on track with<br>our transition activities for upcoming USD LIBOR and other IBORs cessation dates.
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Liquidity risk is impacted by various factors, including butnot limited to, capital and credit market conditions, re-pricing risk on letters of credit, collateral pledging obligations, and reliance on confidence sensitive deposits.

•	Adverse market conditions may significantly affect our liquidity risk.
^¡^	Reduced asset liquidity may restrict our ability to sell certain types of assets for cash without taking significant losses.<br>If providers of credit preserve their capital, our access to borrowing from banks and others or access to other types of credit such as letters of credit, may be reduced. If investors have a negative perception of our creditworthiness, this may<br>reduce access to wholesale borrowing in the debt capital markets or increase borrowing costs.
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^¡^	Liquid assets are required to pledge as collateral to support activities such as the use of derivatives for hedging purposes<br>and to cover cash settlement associated with such derivatives.
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^¡^	The principal sources of our liquidity are cash, insurance and annuity premiums, fee income earned on AUM, cash flow from<br>our investment portfolios, and our assets that are readily convertible into cash, including money market securities. The issuance of long-term debt, common and preferred shares and other capital securities may also increase our available liquid<br>assets or be required to replace certain maturing or callable liabilities. In the event we seek additional financing, the availability and terms of such financing will depend on a variety of factors including market conditions, the availability of<br>credit to the financial services industry, our credit ratings and credit capacity, as well as the possibility that customers, lenders or investors could develop a negative perception of our long-term or short-term financial prospects if we incur<br>large financial losses or if the level of our business activity decreases due to a significant market downturn.
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•	Increased cleared derivative transactions coupled with margin rules on non-cleared<br>derivatives could adversely impact our liquidity risk.^^
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^¡^	Over time our existing over-the-counter derivatives will migrate to clearing houses, or the Company and its counterparties<br>may have the right to cancel derivative contracts after specific dates or in certain situations such as a ratings downgrade, which could accelerate the transition to clearing houses. Cleared derivatives are subject to both initial and variation<br>margin requirements, and a more restrictive set of eligible collateral than non-cleared derivatives.^^
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^¡^	In addition, initial margin rules for new non-cleared derivatives have been<br>implemented since September 1, 2021, which may further increase our liquidity needs over time.
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•	We are exposed to re-pricing risk on letters of credit.
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^¡^	In the normal course of business, third-party banks issue letters of credit on our behalf. In lieu of posting collateral,<br>our businesses utilize letters of credit for which third parties are the beneficiaries, as well as for affiliate reinsurance transactions between subsidiaries of MFC. Letters of credit and letters of credit facilities must be renewed periodically.<br>At time of renewal, the Company is exposed to re-pricing risk and under adverse conditions increases in costs may be realized. In the most extreme scenarios, letters of credit capacity could become constrained<br>due to non-renewals which would restrict our flexibility to manage capital. This could negatively impact our ability to meet local capital requirements or our sales of products in jurisdictions in which our<br>operating companies have been affected. As at December 31, 2021, letters of credit for which third parties are
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<br>beneficiaries, in the amount of $99 million, were outstanding. There were no assets pledged against these outstanding letters of credit as at December 31, 2021.
•	Our obligations to pledge collateral or make payments related to declines in value of specified assets may adversely affect<br>our liquidity.
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^¡^	In the normal course of business, we are obligated to pledge assets to comply with jurisdictional regulatory and other<br>requirements including collateral pledged in relation to derivative contracts and assets held as collateral for repurchase funding agreements. The amount of collateral we may be required to post under these agreements, and the amount of payments we<br>are required to make to our counterparties, may increase under certain circumstances, including a sustained or continued decline in the value of our derivative contracts. Such additional collateral requirements and payments could have an adverse<br>effect on our liquidity. As at December 31, 2021, total pledged assets were $9,896 million, compared with $10,362 million as of December 31, 2020.
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•	Our bank subsidiary relies on confidence sensitive deposits.
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^¡^	Manulife Bank is a wholly owned subsidiary of our Canadian life insurance operating company, MLI. The Bank is principally<br>funded by retail deposits. A real or perceived problem with the Bank or its parent companies could result in a loss of confidence in the Bank’s ability to meet its obligations, which in turn may trigger a significant withdrawal of deposit<br>funds. A substantial portion of the Bank’s deposits are demand deposits that can be withdrawn at any time, while the majority of the Bank’s assets are first residential mortgages in the form of home equity lines of credit, which represent<br>long-term funding obligations. If deposit withdrawal speeds exceed our extreme stress test assumptions, the Bank may be forced to sell assets at a loss to third parties or call the home equity lines of credit.
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The declaration and payment of dividends and the amount thereof is subject to change.

•	The holders of common shares are entitled to receive dividends as and when declared by the Board, subject to the preference<br>of the holders of Class A Shares, Class 1 Shares, Class B Shares (collectively, the “Preferred Shares”) and any other shares ranking senior to the common shares with respect to priority in payment of dividends. The<br>declaration and payment of dividends and the amount thereof is subject to the discretion of the Board of MFC and is dependent upon the results of operations, financial condition, cash requirements and future prospects of, and regulatory and<br>contractual restrictions on the payment of dividends by MFC and other factors deemed relevant by the Board of MFC. Although MFC has historically declared quarterly cash dividends on the common shares, MFC is not required to do so and the Board of<br>MFC may reduce, defer or eliminate MFC’s common share dividend in the future.
•	The foregoing risk disclosure in respect of the declaration and payment of dividends on the common shares applies equally in<br>respect of the declaration and payment of dividends on the Preferred Shares, notwithstanding that the Preferred Shares have a fixed rate of dividend.
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•	See “Government Regulation” and “Dividends” in MFC’s Annual Information Form dated February 9,<br>2022 for a summary of additional statutory and contractual restrictions concerning the declaration of dividends by MFC.
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Credit Risk

Credit risk is the risk of loss due to the inability or unwillingness of a borrower or counterparty to fulfill its payment obligations.

Please read below for details on factors that could impact our level of credit risk and the strategies used to manage this risk:

Credit Risk Management Strategy

Credit risk is governed by the Credit Committee which oversees the overall credit risk management program. The Company has established objectives for overall quality and diversification of our general fund investment portfolio and criteria for the selection of counterparties, including derivative counterparties, reinsurers and insurance providers. Our policies establish exposure limits by borrower, corporate connection, quality rating, industry, and geographic region, and govern the usage of credit derivatives. Corporate connection limits vary according to risk rating. Our general fund fixed income investments are primarily public and private investment grade bonds and commercial mortgages. We have a program for selling Credit Default Swaps (“CDS”) that employs a highly selective, diversified and conservative approach. CDS decisions follow the same underwriting standards as our cash bond portfolio. Our credit granting units follow a defined evaluation process that provides an objective assessment of credit proposals. We assign a risk rating, based on a standardized 22-point scale consistent with those of external rating agencies, following a detailed examination of the borrower that includes a review of business strategy, market competitiveness, industry trends, financial strength, access to funds, and other risks facing the counterparty. We assess and update risk ratings regularly. For additional input to the process, we also assess credit risks using a variety of industry standard market-based tools and metrics. We map our risk ratings to pre-established probabilities of default and loss given defaults, based on historical industry and Company experience, and to resulting default costs.

We establish delegated credit approval authorities and make credit decisions on a case-by-case basis at a management level appropriate to the size and risk level of the transaction, based on the delegated authorities that vary according to risk rating. Major credit decisions are approved by the Credit Committee and the largest decisions are approved by the CEO and, in certain cases, by the Board.

We limit the types of authorized derivatives and applications and require pre-approval of all derivative application strategies and regular monitoring of the effectiveness of derivative strategies. Derivative counterparty exposure limits are established based on a minimum acceptable counterparty credit rating (generally A- from internationally recognized rating agencies). We measure both bilateral and

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exchange-traded derivative counterparty exposure as net potential credit exposure, which takes into consideration mark-to-market values of all transactions with each counterparty, net of any collateral held, and an allowance to reflect future potential exposure. Reinsurance counterparty exposure is measured reflecting the level of ceded liabilities net of collateral held. The creditworthiness of all reinsurance counterparties is reviewed internally on a regular basis.

Regular reviews of the credits within the various portfolios are undertaken with the goal of identifying changes to credit quality and, where appropriate, taking corrective action. Prompt identification of problem credits is a key objective.

We establish an allowance for losses on a loan when it becomes impaired as a result of deterioration in credit quality, to the extent there is no longer assurance of timely realization of the carrying value of the loan and related investment income. We reduce the carrying value of an impaired loan to its estimated net realizable value when we establish the allowance. We establish an allowance for losses on reinsurance contracts when a reinsurance counterparty becomes unable or unwilling to fulfill its contractual obligations. We base the allowance for loss on current recoverables and ceded policy liabilities. There is no assurance that the allowance for losses will be adequate to cover future potential losses or that additional allowances or asset write-downs will not be required.

Policy liabilities include general provisions for credit losses from future asset impairments.

Our credit policies, procedures and investment strategies are established under a strong governance framework and are designed to ensure that risks are identified, measured and monitored consistent with our risk appetite. We seek to actively manage credit exposure in our investment portfolio to reduce risk and minimize losses, and derivative counterparty exposure is managed proactively. However, we could experience volatility on a quarterly basis and losses could potentially rise above long-term expected and historical levels.

Credit RiskExposure Measures

Allowances for losses on loans are established taking into consideration normal historical credit loss levels and future expectations, with an allowance for adverse deviations. Additionally, we make general provisions for credit losses from future asset impairments in the determination of policy liabilities. The amount of the provision for credit losses included in policy liabilities is established through regular monitoring of all credit related exposures, considering such information as general market conditions, industry and borrower specific credit events and any other relevant trends or conditions. To the extent that an asset is written off, or disposed of, any allowance and general provisions for credit losses are released.

Our general provision for credit losses included in policyholder liabilities as at December 31, 2021 was $4,109 million compared with $4,387 million as at December 31, 2020. This provision represents 1.5% of our fixed income assets^1^ supporting policy liabilities reported on our Consolidated Statements of Financial Position as at December 31, 2021.

As at December 31, 2021 and December 31, 2020, the impact of a 50% increase in fixed income credit default rates over the next year in excess of the rates assumed in policy liabilities, would reduce net income attributed to shareholders by $70 million and $80 million, respectively.

Credit downgrades of fixed income investments would adversely impact our regulatory capital, as required capital levels for these investments are based on the credit quality of each instrument. In addition, credit downgrades could also lead to a higher general provision for credit losses than had been assumed in policy liabilities, resulting in an increase in policy liabilities and a reduction in net income attributed to shareholders. The estimated impact of a one-notch^2^ ratings downgrade across 25% of fixed income assets would result in an increase to policy liabilities and a decrease to our net income attributed to shareholders of $300 million post-tax. This ratings downgrade would result in a one percentage point reduction to our LICAT ratio.

Approximately 11% of the impact from the one-notch ratings downgrade on our policy liabilities and net income attributed to shareholders noted above relates to fixed income assets rated below investment grade. Approximately 1% of our fixed income assets as of December 31, 2021 is rated below investment grade. The table below shows net impaired assets and allowances for loan losses.

NetImpaired Assets and Loan Losses

As at December 31,<br><br><br>($ millions, unless otherwise stated)	2021		2020
Net impaired fixed income assets	$	228	$	296
Net impaired fixed income assets as a % of total invested assets	****	0.053%		0.072%
Allowance for loan losses	$	44	$	107

Credit Risk Factors

Borrower or counterparty defaults or downgrades could adversely impact our earnings.

Worsening regional and global economic conditions could result in borrower or counterparty defaults or downgrades and could lead to increased provisions or impairments related to our general fund invested assets and off-balance sheet derivative financial instruments, and an increase in provisions for future credit impairments to be included in our policy liabilities. Any of our reinsurance providers being unable or unwilling to fulfill their contractual obligations related to the liabilities we cede to them could lead to an increase in policy liabilities.

^1^	Includes debt securities, private placements and mortgages.
^2^	A one-notch downgrade is equivalent to a ratings downgrade from A to A- or BBB- to BB+.
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Our invested assets primarily include investment grade bonds, private placements, commercial mortgages, asset-backed securities, and consumer loans. These assets are generally carried at fair value, but changes in value that arise from a credit-related impairment are recorded as a charge against income. The return assumptions incorporated in actuarial liabilities include an expected level of future asset impairments. There is a risk that actual impairments will exceed the assumed level of impairments in the future and earnings could be adversely impacted.

Volatility may arise from defaults and downgrade charges on our invested assets and as a result, losses could potentially rise above long-term expected levels. Net impaired fixed income assets were $228 million, representing 0.05% of total general fund invested assets as at December 31, 2021, compared with $295 million, representing 0.07% of total general fund invested assets as at December 31, 2020.

If a counterparty fails to fulfill its obligations, we may be exposed to risks we had sought to mitigate.

•	The Company uses derivative financial instruments to mitigate exposures to public equity, foreign currency, interest rate<br>and other market risks arising from on-balance sheet financial instruments, guarantees related to variable annuity products, selected anticipated transactions and certain other guarantees. The Company may be<br>exposed to counterparty risk if a counterparty fails to pay amounts owed to us or otherwise perform its obligations to us. Counterparty risk increases during economic downturns because the probability of default increases for most counterparties. If<br>any of these counterparties default, we may not be able to recover the amounts due from that counterparty. As at December 31, 2021, the largest single counterparty exposure, without taking into account the impact of master netting agreements or<br>the benefit of collateral held, was $2,132 million (2020 – $4,110 million). The net exposure to this counterparty, after taking into account master netting agreements and the fair value of collateral held, was nil (2020 – nil). As at<br>December 31, 2021, the total maximum credit exposure related to derivatives across all counterparties, without taking into account the impact of master netting agreements and the benefit of collateral held, was $18,226 million (2020 –<br>$28,685 million) compared with $294 million after taking into account master netting agreements and the benefit of fair value of collateral held (2020 – $119 million). The exposure to any counterparty would grow if, upon the<br>counterparty’s default, markets moved such that our derivatives with that counterparty gain in value. Until we are able to replace that derivative with another counterparty, the gain on the derivatives subsequent to the counterparty’s<br>default would not be backed by collateral.
•	The Company reinsures a portion of the business we enter into; however, we remain legally liable for contracts that we had<br>reinsured. In the event that any of our reinsurance providers were unable or unwilling to fulfill their contractual obligations related to the liabilities we cede to them, we would need to increase actuarial reserves, adversely impacting our net<br>income attributed to shareholders and capital position. In addition, the Company has over time sold certain blocks of business to third-party purchasers using reinsurance. To the extent that the reinsured contracts are not subsequently novated to<br>the purchasers, we remain legally liable to the insureds. Should the purchasers be unable or unwilling to fulfill their contractual obligations under the reinsurance agreement, we would need to increase policy liabilities resulting in a charge to<br>net income attributed to shareholders. To reduce credit risk, the Company may require purchasers to provide collateral for their reinsurance liabilities.
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•	We participate in a securities lending program whereby blocks of securities are loaned to third parties, primarily major<br>brokerage firms and commercial banks. Collateral, which exceeds the market value of the loaned securities, is retained by the Company until the underlying security has been returned. If any of our securities lending counterparties default and the<br>value of the collateral is insufficient, we would incur losses. As at December 31, 2021, the Company had loaned securities (which are included in invested assets) valued at approximately $564 million, compared with $889 million as at<br>December 31, 2020.
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The determination of allowances and impairments on our investments is subjective and changes could materially impact ourresults of operations or financial position.

•	The determination of allowances and impairments is based upon a periodic evaluation of known and inherent risks associated<br>with the respective security. Management considers a wide range of factors about the security and uses its best judgment in evaluating the cause of the decline, in estimating the appropriate value for the security and in assessing the prospects for<br>near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations in the impairment evaluation process include:<br>(i) the severity of the impairment; (ii) the length of time and the extent to which the market value of a security has been below its carrying value; (iii) the financial condition of the issuer; (iv) the potential for impairments<br>in an entire industry sector or sub-sector; (v) the potential for impairments in certain economically depressed geographic locations; (vi) the potential for impairments of securities where the<br>issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vii) our ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an<br>amount equal to or greater than cost or amortized cost; (viii) unfavourable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and (ix) other subjective factors, including concentrations and information<br>obtained from regulators and rating agencies.
•	Such evaluations and assessments are revised as conditions change and new information becomes available. We update our<br>evaluations regularly and reflect changes in allowances and impairments as such evaluations warrant. The evaluations are inherently subjective and incorporate only those risk factors known to us at the time the evaluation is made. There can be no<br>assurance that management has accurately assessed the level of impairments that have occurred. Additional impairments will likely need to be taken or allowances provided for in the future as conditions evolve. Historical trends may not be indicative<br>of future impairments or allowances.
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Product Risk

We make a variety of assumptions related to the expected future level of claims, policyholder behaviour, expenses, reinsurance costs and sales levels when we design and price products, and when we establish policy liabilities. Product risk is the risk of failure to design, implement and maintain a product or service to achieve these expected outcomes and the risk of loss due to actual experience emerging differently than assumed when a product was designed and priced. Assumptions for future claims are generally based on both Company and industry experience, and assumptions for future policyholder behaviour and expenses are generally based on Company experience. Assumptions for future policyholder behaviour include assumptions related to the retention rates for insurance and wealth products. Assumptions for expenses include assumptions related to future maintenance expense levels and volume of the business.

Please read below for details on factors that could impact our level of product risk and the strategies used to manage this risk:

Product Risk Management Strategy

Product risk is governed by the Product Oversight Committee for the insurance business and by the Global WAM Risk Committee for Global WAM business.

Product Oversight Committee

The Product Oversight Committee oversees the overall insurance risk management program. The Product Oversight Committee has established a broad framework for managing insurance risk under a set of policies, standards and guidelines, to ensure that our product offerings align with our risk-taking philosophy and risk limits, and achieve acceptable profit margins. These cover:

•	product design features
•	use of reinsurance
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•	pricing models and software
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•	internal risk based capital allocations
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•	target profit objectives
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•	pricing methods and assumption setting
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•	stochastic and stress scenario testing
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•	required documentation
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•	review and approval processes
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•	experience monitoring programs
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In each business unit that sells insurance, we designate individual pricing officers who are accountable for pricing activities, chief underwriters who are accountable for underwriting activities and chief claims risk managers who are accountable for claims activities. Both the pricing officer and the general manager of each business unit approve the design and pricing of each product, including key claims, policyholder behaviour, investment return and expense assumptions, in accordance with global policies and standards. Risk management functions provide additional oversight, review and approval of material product and pricing initiatives, as well as material underwriting initiatives. Actuarial functions provide oversight review and approval of policy liability valuation methods and assumptions. In addition, both risk and actuarial functions review and approve new reinsurance arrangements. We perform annual risk and compliance self-assessments of the product development, pricing, underwriting and claims activities of all insurance businesses. To leverage best practices, we facilitate knowledge transfer between staff working with similar businesses in different geographies.

We utilize a global underwriting manual intended to ensure insurance underwriting practices for direct written life business are consistent across the organization while reflecting local conditions. Each business unit establishes underwriting policies and procedures, including criteria for approval of risks and claims adjudication policies and procedures.

We apply retention limits per insured life that are intended to reduce our exposure to individual large claims which are monitored in each business unit. These retention limits vary by market and jurisdiction. We reinsure exposure in excess of these limits with other companies (see “Risk Management and Risk Factors – Product Risk Factors – External market conditions determine the availability, terms and cost of reinsurance protection”, below). Our current global life retention limit is US$30 million for individual policies (US$35 million for survivorship life policies) and is shared across businesses. We apply lower limits in some markets and jurisdictions. We aim to further reduce exposure to claims concentrations by applying geographical aggregate retention limits for certain covers. Enterprise-wide, we aim to reduce the likelihood of high aggregate claims by operating globally, insuring a wide range of unrelated risk events, and reinsuring some risks. We seek to actively manage the Company’s aggregate exposure to each of policyholder behaviour risk and claims risk against enterprise-wide economic capital limits. Policyholder behaviour risk limits cover the combined risk arising from policy lapses and surrenders, withdrawals and other policyholder driven activity. The claims risk limits cover the combined risk arising from mortality, longevity and morbidity.

Internal experience studies, as well as trends in our experience and that of the industry, are monitored to update current and projected claims and policyholder behaviour assumptions, resulting in updates to policy liabilities as appropriate.

Global WAM Product Risk Management Committee

Global WAM product risk is governed by the Global WAM Risk Management Committee, which reviews and approves notable new products prior to launch. This committee has established a framework for managing risk under a set of policies, standards and guidelines to ensure that notable product offerings align with Global WAM risk-taking philosophy and risk appetite.

The Global WAM Risk Management Committee also provides oversight of notable changes to existing products/solutions on the various Global WAM platforms.

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Product Risk Factors

Losses may result should actual experience be materially different than that assumed in the valuation of policy liabilities.

•

Such losses could have a significant adverse effect on our results of operations and financial condition. In addition, we<br>periodically review the assumptions we make in determining our policy liabilities and the review may result in an increase in policy liabilities and a decrease in net income attributed to shareholders. Such assumptions require significant<br>professional judgment, and actual experience may be materially different than the assumptions we make. (See “Critical Actuarial and Accounting Policies” below).

We may be unable to implement necessary price increases on our in-force businesses or may face delays in implementation.

•

We continue to seek state regulatory approvals for price increases on existing long-term care business in the United States.<br>We cannot be certain whether or when each approval will be granted. For some in-force business regulatory approval for price increases may not be required. However, regulators or policyholders may nonetheless<br>seek to challenge our authority to implement such increases. Our policy liabilities reflect our estimates of the impact of these price increases, but should we be less successful than anticipated in obtaining them, then policy liabilities could<br>increase accordingly and reduce net income attributed to shareholders.

Evolving legislation related to genetic testing could adversely impactour underwriting abilities.

•

Current or future legislation in jurisdictions where Manulife operates may restrict its right to underwrite based on access<br>to genetic test results. Without the obligation of disclosure, the asymmetry of information shared between applicant and insurer could increase anti-selection in both new business and in-force policyholder<br>behaviour. The impact of restricting insurers’ access to this information and the associated problems of anti-selection becomes more acute where genetic technology leads to advancements in diagnosis of life-threatening conditions that are not<br>matched by improvements in treatment. We cannot predict the potential financial impact that this would have on the Company or the industry as a whole. In addition, there may be further unforeseen implications as genetic testing continues to evolve<br>and becomes more established in mainstream medical practice.

Life and health insurance claims may be impacted unexpectedly by changes in theprevalence of diseases or illnesses, medical and technology advances, widespread lifestyle changes, natural disasters, large-scale human-made disasters and acts of terrorism.

•	Claims resulting from catastrophic events could cause substantial volatility in our financial results in any period and<br>could materially reduce our profitability or harm our financial condition. Large-scale catastrophic events may also reduce the overall level of economic activity, which could hurt our business and our ability to write new business. It is possible<br>that geographic concentration of insured individuals could increase the severity of claims we receive from future catastrophic events. The effectiveness of external parties, including governmental and nongovernmental organizations, in combating the<br>severity of such an event is outside of our control and could have a material impact on the losses we experience.
•	The cost of health insurance benefits may be impacted by unforeseen trends in the incidence, termination and severity rates<br>of claims. The ultimate level of lifetime benefits paid to policyholders may be increased by an unexpected increase in life expectancy. For example, advances in technology could lead to longer lives through better medical treatment or better disease<br>prevention. Policyholder behaviour including premium payment patterns, policy renewals, lapse rates and withdrawal and surrender activity are influenced by many factors including market and general economic conditions, and the availability and<br>relative attractiveness of other products in the marketplace. For example, a weak or declining economic environment could increase the value of guarantees associated with variable annuities or other embedded guarantees and contribute to adverse<br>policyholder behaviour experience, or a rapid rise in interest rates could increase the attractiveness of alternatives for customers holding products that offer contractual surrender benefits that are not market value adjusted, which could also<br>contribute to adverse policyholder behaviour experience. As well, adverse claims experience could result from systematic anti-selection, which could arise from the development of investor owned and secondary markets for life insurance policies,<br>anti-selective lapse behaviour, underwriting process failures, anti-selective policyholder behaviour due to greater consumer accessibility to home-based medical screening, or other factors.
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•	For information on the implications of COVID-19 on our product risk, please refer to<br>“Pandemic risk and potential implications of COVID-19” below.
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External market conditionsdetermine the availability, terms and cost of reinsurance protection which could impact our financial position and our ability to write new policies.

•	As part of our overall risk and capital management strategy, we purchase reinsurance protection on certain risks<br>underwritten or assumed by our various insurance businesses. As the global reinsurance industry continues to review and optimize their business models, certain of our reinsurers have attempted to increase rates on our existing reinsurance contracts.<br>The ability of our reinsurers to increase rates depends upon the terms of each reinsurance contract. Typically, the reinsurer’s ability to raise rates is restricted by a number of terms in our reinsurance contracts, which we seek to enforce. We<br>believe our reinsurance provisions are appropriate; however, there can be no assurance regarding the impact of future rate increase actions taken by our reinsurers. Accordingly, future rate increase actions by our reinsurers could result in<br>accounting charges, an increase in the cost of reinsurance and the assumption of more risk on business already reinsured.
•	In addition, an increase in the cost of reinsurance could also adversely affect our ability to write future business or<br>result in the assumption of more risk with respect to policies we issue. Premium rates charged on new policies we write are based, in part, on the assumption that reinsurance will be available at a certain cost. Certain reinsurers may attempt to<br>increase the rates they charge us for new policies we write, and for competitive reasons, we may not be able to raise the premium rates we charge for newly written policies to offset the increase in reinsurance rates. If the cost of reinsurance were<br>to increase, if reinsurance were to become unavailable and if
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<br>alternatives to reinsurance were not available, our ability to write new policies at competitive premium rates could be adversely affected.
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Operational Risk

Operational risk is naturally present in all of our business activities and encompasses a broad range of risks, including regulatory compliance failures, legal disputes, technology failures, business interruption, information security and privacy breaches, human resource management failures, processing errors, modelling errors, business integration, theft and fraud, and damage to physical assets. Exposures can take the form of financial losses, regulatory sanctions, loss of competitive positioning, or damage to our reputation. Operational risk is also embedded in all the practices we use to manage other risks; therefore, if not managed effectively, operational risk can impact our ability to manage other key risks such as credit risk, market risk, liquidity risk and insurance risk.

Please read below for details on factors that could impact our level of operational risk and the strategies used to manage this risk:

Operational Risk Management Strategy

Our corporate governance practices, corporate values, and integrated enterprise-wide approach to managing risk set the foundation for mitigating operational risks. This base is further strengthened by internal controls and systems, compensation programs, and seeking to hire and retain trained and competent people throughout the organization. We align compensation programs with business strategy, long-term shareholder value and good governance practices, and we benchmark these compensation practices against peer companies.

We have an enterprise operational risk management framework that sets out the processes we use to identify, assess, manage, mitigate and report on significant operational risk exposures. Execution of our operational risk management strategy supports the drive towards a focus on the effective management of our key global operational risks. We have an Operational Risk Committee, which is the main decision-making committee for all operational risk matters and which has oversight responsibility for operational risk strategy, management and governance. We have enterprise-wide risk management programs for specific operational risks that could materially impact our ability to do business or impact our reputation.

Legal and Regulatory Risk ManagementStrategy

Global Compliance oversees our regulatory compliance program and function, supported by designated Chief Compliance Officers in every segment. The program is designed to promote compliance with regulatory obligations worldwide and to assist in making the Company’s employees aware of the laws and regulations that affect it, and the risks associated with failing to comply. Segment Compliance groups monitor emerging legal and regulatory issues and changes and prepare us to address new requirements. Global Compliance also independently assesses and monitors the effectiveness of a broad range of regulatory compliance processes and business practices against potential legal, regulatory, fraud and reputation risks, and allows significant issues to be escalated and proactively mitigated. Among these processes and business practices are: privacy (i.e. handling of personal and other confidential information), sales and marketing practices, sales compensation practices, asset management practices, fiduciary responsibilities, employment practices, underwriting and claims processing, product design, the Ethics Hotline, and regulatory filings. In addition, we have policies, processes and controls in place to help protect the Company, our customers and other related third parties from acts of fraud and from risks associated with money laundering and terrorist financing. Audit Services, Global Compliance and Segment Compliance personnel periodically assess the effectiveness of the system of internal controls. For further discussion of government regulation and legal proceedings, refer to “Government Regulation” in MFC’s Annual Information Form dated February 9, 2022 and note 18 of the 2021 Annual Consolidated Financial Statements.

Business Continuity Risk Management Strategy

We have an enterprise-wide business continuity and disaster recovery program. This includes policies, plans and procedures that seek to minimize the impact of natural or human-made disasters, and is designed to ensure that key business functions can continue normal operations in the event of a major disruption. Each business unit is accountable for preparing and maintaining detailed business continuity plans and processes. The global program incorporates periodic scenario analysis designed to validate the assessment of both critical and non-critical units, as well as the establishment and testing of appropriate business continuity plans for all critical functions. The business continuity team establishes and regularly tests crisis management plans and global crisis communications protocols. We maintain off-site data backup facilities and/or failover capabilities as required to manage the risk of downtime and to accelerate system recovery when needed.

Technology & Information Security Risk Management Strategy

Our Technology Risk Management function provides strategy, direction, and oversight and facilitates governance for all technology risk domain activities across the Company. The scope of this function includes: reducing information risk exposures by introducing a robust enterprise information risk management framework and supporting infrastructure for proactively identifying, managing, monitoring and reporting on critical information risk exposures; promoting transparency and informed decision-making by building and maintaining information risk profiles and risk dashboards for Enterprise Technology & Services and segments aligned with enterprise and operational risk reporting; providing advisory services to Global Technology and the segments around current and emerging technology risks and their impact to the Company’s information risk profile; and reducing vendor information risk exposures by incorporating sound information risk management practices into sourcing, outsourcing and offshoring initiatives and programs.

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The enterprise-wide information security program, which is overseen by the Chief Information Risk Officer, seeks to mitigate information security risks. This program establishes the information and cyber security framework for the Company, including governance, policies and standards, and appropriate controls to protect information and computer systems. We also have ongoing security awareness training sessions for all employees.

Many jurisdictions in which we operate are implementing more stringent privacy legislation. Our global privacy program, overseen by our Chief Privacy Officer, seeks to manage the risk of privacy breaches. It includes policies and standards, ongoing monitoring of emerging privacy legislation, and a network of privacy officers. Processes have been established to provide guidance on handling personal information and for reporting privacy incidents and issues to appropriate management for response and resolution.

In addition, the Chief Information Risk Officer, the Chief Privacy Officer, and their teams work closely on information security and privacy matters.

Human Resource Risk Management Strategy

We have a number of human resource policies, practices and programs in place that seek to manage the risks associated with attracting and retaining top talent. These include recruiting programs at every level of the organization, training and development programs for our individual contributors and people leaders, initiatives to help increase diversity, equity and inclusion, employee engagement surveys, and competitive compensation programs that are designed to attract, motivate and retain high-performing and high-potential employees.

Model Risk Management Strategy

We have designated model risk management teams working closely with model owners and users that seek to manage model risk. Our model risk oversight program includes processes intended to ensure that our critical business models are conceptually sound and used as intended, and to assess the appropriateness of the calculations and outputs.

Third-Party Risk Management Strategy

Our governance framework to address third-party risk includes appropriate policies (such as our Global Outsourcing, Global Risk Management and Vendor Management policies), standards and procedures, and monitoring of ongoing results and contractual compliance of third-party arrangements.

Initiative Risk Management Strategy

To seek to ensure that key initiatives are successfully implemented and monitored by management, we have a Global Strategy and Transformation Office, which is responsible for establishing policies and standards for initiative management. Our policies, standards and practices are benchmarked against leading practices.

The following section describes details on potential Operational Risk factors:

Operational Risk Factors

If we are not able to attract, motivate and retain agency leaders and individual agents, our competitive position, growth and profitability will suffer.

•

We must attract and retain sales representatives to sell our products. Strong competition exists among financial services<br>companies for efficient and effective sales representatives. We compete with other financial services companies for sales representatives primarily on the basis of our financial position, brand, support services and compensation and product<br>features. Any of these factors could change either because we change the Company or our products, or because our competitors change theirs and we are unable or unwilling to adapt. If we are unable to attract and retain sufficient sales<br>representatives to sell our products, our ability to compete would suffer, which could have a material adverse effect on our business, results of operations and financial condition.

Competition for the best people is intense and an inability to recruit qualified individuals may negatively impact our ability to execute on business strategies or toconduct our operations.

•	We compete with other insurance companies and financial institutions for qualified executives, employees and agents. We must<br>attract and retain top talent to maintain our competitive advantage. Failure to attract and retain the best people could adversely impact our business.

If we are unable to complete key projects on time, on budget, and capture planned benefits, our business strategies and plans, and operations may be impaired.

•	We must successfully deliver a number of key projects in order to implement our business strategies and plans. If we are<br>unable to complete these projects in accordance with planned schedules, and to capture projected benefits, there could be a material adverse effect on our business and financial condition.

Key business processes may fail, causing material loss events and impacting our customers and reputation.

•	A large number of complex transactions are performed by the organization, and there is risk that errors may have significant<br>impact on our customers or result in a loss to the organization. Controls are in place that seek to ensure processing accuracy for our most significant business processes, and escalation and reporting processes have been established for when errors<br>do occur.
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The interconnectedness of our operations and risk management strategies could expose us to risk if all factors arenot appropriately considered and communicated.

•

Our business operations, including strategies and operations related to risk management, asset liability management and<br>liquidity management, are interconnected and complex. Changes in one area may have a secondary impact in another area of our operations. For example, risk management actions, such as the increased use of interest rate swaps, could have implications<br>for the Company’s Global WAM segment or its Treasury function, as this strategy could result in the need to post additional amounts of collateral. Failure to appropriately consider these inter-relationships, or effectively communicate changes<br>in strategies or activities across our operations, could have a negative impact on the strategic objectives or operations of another group. Further, failure to consider these inter-relationships in our modeling and financial and strategic<br>decision-making processes could have a negative impact on our operations.

Our risk management policies, procedures and strategies may leave usexposed to unidentified or unanticipated risks, which could negatively affect our business, results of operations and financial condition.

•

We have devoted significant resources to develop our risk management policies, procedures and strategies and expect to<br>continue to do so in the future. Nonetheless, there is a risk that our policies, procedures and strategies may not be comprehensive. Many of our methods for measuring and managing risk and exposures are based upon the use of observed historical<br>market behaviour or statistics based on historical models. Future behaviour may be very different from past behaviour, especially if there are some fundamental changes that affect future behaviour. As an example, the increased occurrence of negative<br>interest rates can make it difficult to model future interest rates as interest rate models have been generally developed for an environment of positive interest rates. As a result, these methods may not fully predict future exposures, which can be<br>significantly greater than our historical measures indicate. Other risk management methods depend upon the evaluation and/or reporting of information regarding markets, clients, client transactions, catastrophe occurrence or other matters publicly<br>available or otherwise accessible to us. This information may not always be accurate, complete, up-to-date or properly evaluated or reported.

We are subject to tax audits, tax litigation or similar proceedings, and as a result we may owe additional taxes, interest and penalties in amounts that may bematerial.

•

We are subject to income and other taxes in the jurisdictions in which we do business. In determining our provisions for<br>income taxes and our accounting for tax related matters in general, we are required to exercise judgment. We regularly make estimates where the ultimate tax determination is uncertain. There can be no assurance that the final determination of any<br>tax audit, appeal of the decision of a taxing authority, tax litigation or similar proceedings will not be materially different from that reflected in our historical financial statements. The assessment of additional taxes, interest and penalties<br>could be materially adverse to our current and future results of operations and financial condition.

Our operations face political, legal,operational and other risks that could negatively affect those operations or our results of operations and financial condition.^^

•	Our operations face the risk of discriminatory regulation, political and economic instability, the imposition of economic or<br>trade sanctions, civil unrest or disobedience, market volatility and significant inflation, limited protection for, or increased costs to protect intellectual property rights, inability to protect and/or enforce contractual or legal rights,<br>nationalization or expropriation of assets, price controls and exchange controls or other restrictions that prevent us from transferring funds out of the countries in which we operate.
•	A substantial portion of our revenue and net income attributed to shareholders is derived from our operations outside of<br>North America, primarily in key Asian markets. Some of these key geographical markets are developing and are rapidly growing countries and markets where these risks may be heightened. Failure to manage these risks could have a significant negative<br>impact on our operations and profitability globally.
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•	Any plans to expand our global operations in markets where we operate and potentially in new markets may require<br>considerable management time, as well as start-up expenses for market development before any significant revenues and earnings are generated. Operations in new foreign markets may achieve low margins or may be<br>unprofitable, and expansion in existing markets may be affected by local economic and market conditions.
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We are regularly involved inlitigation.

•	We are regularly involved in litigation, either as a plaintiff or defendant. These cases could result in an unfavourable<br>resolution and could have a material adverse effect on our results of operations and financial condition. For further discussion of legal proceedings refer to note 18 of the 2021 Annual Consolidated Financial Statements.

We are exposed to investors trying to profit from short positions in our stock.

•	Short-sellers seek to profit from a decline in the price of our common shares. Through their actions and public statements,<br>they may encourage the decline in price from which they profit and may encourage others to take short positions in our shares. The existence of such short positions and the related publicity may lead to continued volatility in our common share<br>price.

System failures or events that impact our facilities may disrupt business operations.

•	Technology is used in virtually all aspects of our business and operations; in addition, part of our strategy involves the<br>expansion of technology to directly serve our customers. An interruption in the service of our technology resulting from system failure, cyber-attack,

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<br>human error, natural disaster, human-made disaster, pandemic, or other unpredictable events beyond reasonable control could prevent us from effectively operating our business.<br>
•	While our facilities and operations are distributed across the globe, we can experience extreme weather, natural disasters,<br>civil unrest, human-made disasters, power outages, pandemic, and other events which can prevent access to, and operations within, the facilities for our employees, partners, and other parties that support our business operations.<br>
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•	We take measures to plan, structure and protect against routine events that may impact our operations, and maintain plans to<br>recover from unpredictable events. The experience learned from COVID-19 has stress tested these plans and has resulted in strengthening our continuity plans. For further information, see “Pandemic risk<br>and potential implications of COVID-19” below. An interruption to our operations may subject us to regulatory sanctions and legal claims, lead to a loss of customers, assets and revenues, or otherwise<br>adversely affect us from a financial, operational and reputational perspective.
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An information security or privacy breach of our operations orof a related third party could adversely impact our business, results of operations, financial condition, and reputation.

•	It is possible that the Company may not be able to anticipate or to implement effective preventive measures against all<br>disruptions or privacy and security breaches, especially because the techniques used change frequently, generally increase in sophistication, often are not recognized until launched, and because cyber-attacks can originate from a wide variety of<br>sources, including organized crime, hackers, terrorists, activists, and other external parties, including parties sponsored by hostile foreign governments. Those parties may also attempt to fraudulently induce employees, customers, and other users<br>of the Company’s systems or third-party service providers to disclose sensitive information in order to gain access to the Company’s data or that of its customers or clients. We, our customers, regulators and other third parties have been<br>subject to, and are likely to continue to be the target of, cyber-attacks, including computer viruses, malicious or destructive code, phishing attacks, denial of service and other security incidents, that could result in the unauthorized release,<br>gathering, monitoring, misuse, loss or destruction of personal, confidential, proprietary and other information of the Company, our employees, our customers or of third parties, or otherwise materially disrupt our or our customers’ or other<br>third parties’ network access or business operations. These attacks could adversely impact us from a financial, operational and reputational perspective.
•	The Company maintains an Information Risk Management Program, which includes information and cyber security defenses, to<br>protect our networks and systems from attacks; however, there can be no assurance that these counter measures will be successful in every instance in protecting our networks against advanced attacks. In addition to protection, detection and response<br>mechanisms, the Company maintains cyber risk insurance, but this insurance may not cover all costs associated with the financial, operational and reputational consequences of personal, confidential or proprietary information being compromised.<br>
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Model risk may arise from the inappropriate use or interpretation of models or their output, or the use of deficient models, data orassumptions.

•	We are relying on some highly complex models for pricing, valuation and risk measurement, and for input to decision making.<br>Consequently, the risk of inappropriate use or interpretation of our models or their output, or the use of deficient models, could have a material adverse effect on our business.

Fraud risks may arise from incidents related to identity theft and account takeovers.

•	Fraud incidents could adversely impact our business, results of operations, financial condition and reputation. Policies and<br>procedures are in place and seek to protect against ever-evolving fraud threats. However, we may nevertheless not be able to prevent and detect all fraud incidents.

Contracted third parties may fail to deliver against contracted activities.

•

We rely on third parties to perform a variety of activities on our behalf, and failure of our most significant third parties<br>to meet their contracted obligations may impact our ability to meet our strategic objectives or may directly impact our customers. Vendor governance processes are in place that seek to ensure that appropriate due diligence is conducted at time of<br>vendor contracting, and ongoing vendor monitoring activities are in place that seek to ensure that the contracted services are being fulfilled to satisfaction, but we may nevertheless not be able to mitigate all possible failures.<br>

Environmental risk may arise related to our commercial mortgage loan portfolio and owned property or from our business operations.

•	Environmental risk may originate from investment properties that are subject to natural or human-made environmental risk.<br>Real estate assets may be owned, leased and/or managed, as well as mortgaged by Manulife and we might enter into the chain of liability due to foreclosure ownership when in default.
•	Liability under environmental protection laws resulting from our commercial mortgage loan portfolio and owned property<br>(including commercial real estate, oil and gas, timberland and farmland properties) may adversely impact our reputation, results of operations and financial condition. Under applicable laws, contamination of a property with hazardous materials or<br>substances may give rise to a lien on the property to secure recovery of the costs of cleanup. In some instances, this lien has priority over the lien of an existing mortgage encumbering the property. The environmental risk may result from on-site or off-site (adjacent) due to migration of regulated pollutants or contaminants with financial or reputational environmental risk and liability consequences by virtue<br>of strict liability. Environmental risk could also arise from natural disasters (e.g., climate change, weather, fire, earthquake, floods, and pests) or human activities (use of chemicals, pesticides) conducted within the site or when impacted from<br>adjacent sites.
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•	Additionally, as lender, we may incur environmental liability (including without limitation liability for clean-up, remediation and damages incurred by third parties) similar to that of an owner or operator of the property, if we or our agents exercise sufficient control over the operations at the property. We may also<br>have liability as the owner and/or operator of real estate for environmental conditions or contamination that exist or occur on the property or affecting other property.
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•	In addition, failure to adequately prepare for the potential impacts of climate change may have a negative impact on our<br>financial position or our ability to operate. Potential impacts may be direct or indirect and may include: business losses or disruption resulting from extreme weather conditions; the impact of changes in legal or regulatory framework made to<br>address climate change; the impact to fixed income asset values for portfolio investments in fossil-fuel related industries; or increased mortality or morbidity resulting from environmental damage or climate change. For further information, see<br>“Strategic Risk Management Strategy, Environmental, Social and Governance Risks”.
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Pandemic risk and potential implications of COVID-19

The ongoing prevalence of COVID-19, actions taken globally in response to it, and the ensuing economic uncertainty have caused significant disruption to global supply chains, business activities and economies. While the measures taken to combat the spread of the virus have enabled many economies to begin to recover, the depth, breadth and duration of economic disruptions continue to persist and remain highly uncertain. In addition, while governments and businesses in certain markets in which we operate have begun to ease some COVID-19 related restrictions, governments and businesses in other markets, in particular in Asia and Canada, have implemented or reimposed restrictions in response to increases in infection rates. As a result, it is difficult to predict how significant the longer-term impact of COVID-19 including any responses to it and any variants, will be on the global economy and our business, particularly as COVID-19 becomes endemic in the markets in which we operate. The unprecedented circumstances related to COVID-19 may result in future legal, regulatory, tax, and other responses that could have a significant adverse impact on our global businesses and operations and on our financial results.

Implications onstrategic risk factors

•	The ongoing prevalence of COVID-19 could continue to adversely impact our financial<br>results in future periods as a result of reduced new business, reduced asset-based fee revenue, and net unfavourable policyholder experience including claims experience and premium persistency. The uncertainty around the ongoing spread of COVID-19, including any variants, and the expected duration of measures put in place by governments to respond to COVID-19 could further depress business activity and<br>financial markets, which could lead to lower net income attributed to shareholders.
•	As COVID-19 becomes endemic, there may be unexpected changes to the business and<br>operating environment which may present new headwinds to our business strategy or new opportunities to pursue. We recognize that the pace of recovery will likely differ across geographies in which we operate, which could impact the execution of our<br>business strategies. While in recent years we have taken significant actions to diversify and bolster the resilience of our Company, further management actions may be required, including, but not limited to, changes to business and product mix,<br>pricing structures on in-force and new business, investment mix, hedging programs, and the use of reinsurance.
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•	Collaborative activities required to advance our strategic initiatives could also be impeded if emergency measures to combat<br>the virus continue to significantly restrict direct human interactions and movement in certain markets. Although we expect that our digital capabilities and tools should enable us to reasonably conduct business, there can be no assurance these or<br>other strategies taken to address adverse impacts related to COVID-19 will be successful.
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•	We have experienced ongoing disruptions to our underwriting processes in certain markets as a result of government measures<br>taken to stop the spread of the virus, including the temporary closure of paramedical services in some markets, as well as consumer fears over in-person services which have led to lower sales volumes. To help<br>mitigate the impacts of these disruptions, and to continue to support our customers with their insurance needs, we have been temporarily adjusting our underwriting processes to allow us to accept certain low risk applications. We continue to monitor<br>the situation and adjust underwriting practices where necessary (for example, continued use of digital applications and further potential modifications to underwriting requirements for lower risk applications).
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Implications on product risk factors

•	We have a diversified business and during pandemic-related events, we expect charges from increased mortality in some<br>businesses with offsets in policies with longevity risk. Claims and lower lapses on certain products resulting from pandemic-related events could cause substantial volatility in our financial results in any period and could materially reduce our<br>profitability or impair our financial condition. Further, large-scale events such as COVID-19 reduce the overall level of economic activity as well as activity through our distribution channels, which could<br>continue to adversely impact our ability to write new business. It is also possible that geographic concentration of insured individuals could increase the severity of claims experience. The effectiveness of external parties, including governmental<br>and non-governmental organizations, in combating COVID-19 is outside of our control but could also have a material and adverse impact on our results of operations.<br>
•	Increased economic uncertainty and increased unemployment resulting from the economic impacts of COVID-19 in certain markets may also result in policyholders seeking sources of liquidity and withdrawing at rates greater than we previously expected. If premium persistency is less than anticipated or if<br>policyholder lapse rates significantly exceed our expectations, it could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
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•	We purchase reinsurance protection on certain risks underwritten or assumed by our various insurance businesses. As a result<br>of COVID-19 we may find reinsurance more difficult or costly to obtain. In addition, reinsurers may dispute, or seek to reduce or eliminate, coverage on policies as a result of any changes to policies or<br>practices we make as a result of COVID-19.

Implications on operational riskfactors

•	COVID-19 has resulted in the imposition of government measures in various<br>jurisdictions to restrict the movement of people, including travel bans and physical distancing requirements and other containment measures. These restrictions are being lifted in certain markets in which we operate but have been introduced or<br>reimposed in other markets, particularly in Asia and Canada, that have experienced elevated infection rates. These measures have been and may in the future be disruptive to business operations across our global offices. While our business continuity<br>plans have been executed across the organization with the vast majority of employees initially shifting to remote work arrangements and our networks and systems have generally remained stable in supporting this large-scale effort, there can be no<br>assurance that our ability to continue to operate our business will not be adversely impacted if our networks and systems, including those aspects of our operations which rely on services provided by third parties, fail to operate as expected.****The successful execution of business continuity strategies by third parties is outside our control. If one or more of the third parties to whom we outsource certain critical business activities fails to perform as a result of the impacts from<br>the spread of COVID-19, it may have a material adverse effect on our business and operations.
•	While the capacity of our global processing centres was restored following the initial disruptions during the first half of<br>2020, there can be no assurance that strategies taken to mitigate COVID-19 related impacts will continue to be successful if operating conditions deteriorate further in the future, either due to additional<br>restrictions imposed by authorities or because of any other adverse development.
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•	The implementation of widespread remote work arrangements also increased other operational risks, including, but not limited<br>to, fraud, money-laundering, information security, privacy, and third-party risks. We are relying on our risk management strategies to monitor and mitigate these and other operational risks during this period of heightened uncertainty.<br>
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•	We may incur increased administrative expenses as a result of process and other changes we implemented in response to COVID-19. In addition, we may face increased workplace safety costs and risks and employee-relations challenges and claims, when more of our employees begin to return in person to our offices.
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Implications on market risk factors

•	COVID-19 and the resulting economic downturn contributed to significant volatility<br>and declines in financial and commodity markets. Central banks announced emergency interest rate cuts, while governments implemented and continue to assess additional and unprecedented fiscal stimulus packages to support economic stability. This has<br>resulted in a global recessionary environment with continued market volatility and low or negative interest rates, which may continue to impact our net income attributed to shareholders. Our investment portfolio has been, and may continue to be,<br>adversely affected as a result of market developments from COVID-19 and related uncertainty.
•	Inflation expectations have continued to rise caused by supply chain disruptions and other<br>COVID-19 related factors. Inflation is expected to remain elevated in 2022. Inflation spikes may result in central banks raising interest rates faster than expected. Our investment portfolio has been, and may<br>continue to be, adversely affected as a result of market developments from COVID-19 and related uncertainty.
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•	We have hedging programs, supported by a comprehensive collateral management program in place to help mitigate the risk of<br>interest rate and public equity market volatility. Our interest rate and public equity variable annuity hedging programs have performed with a high level of effectiveness during this period of volatility to date.
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•	Extreme market volatility may leave us unable to react to market events in a manner consistent with our historical<br>investment practices in dealing with more orderly markets. Market dislocations, decreases in observable market activity or unavailability of information arising from the spread of COVID-19, may restrict our<br>access to key inputs used to derive certain estimates and assumptions made in connection with financial reporting or otherwise, including estimates and changes in long-term macro-economic assumptions relating to accounting for future credit losses.<br>Restricted access to such inputs may make our financial statement balances and estimates and assumptions used to run our business subject to greater variability.
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•	The global recessionary environment could continue to put downward pressure on asset valuations and increase the risk of<br>potential impairments of investments, in particular, for more exposed sectors such as transportation, services, and consumer cyclical industries. COVID-19 has contributed to supply and demand shocks that have<br>created historic dislocation in the energy markets and could continue to adversely impact our oil and gas and other energy-related investments. Furthermore, delays in general<br>return-to-office policies and practices and/or reduced demand for office space could continue to have a negative impact on our commercial real estate portfolio.<br>
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Implications on liquidity risk and capital management

•	Extreme market volatility and stressed conditions resulting from future waves of<br>COVID-19, including any variants, could result in additional cash and collateral demands primarily from changes to policyholder termination or renewal rates, withdrawals of customer deposit balances, borrowers<br>renewing or extending their loans when they mature, derivative settlements or collateral demands, reinsurance settlements or collateral demands and our willingness to support the local solvency position of our subsidiaries. Such an environment could<br>also limit our access to capital markets. We maintain strong financial strength ratings from our credit rating agencies. However, sustained global economic uncertainty could result in adverse credit ratings changes which in turn could result in more<br>costly or limited access to funding sources. In addition, while we currently have a variety of sources of liquidity including cash
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<br>balances, short-term investments, government and highly rated corporate bonds, and access to contingent liquidity facilities, there can be no assurance that these sources will provide us with<br>sufficient liquidity on commercially reasonable terms in the future.
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Implications on credit risk factors

•	A prolonged economic slowdown or recession could continue to impact a wide range of industries to which we are exposed.<br>Further, borrower or counterparty downgrades or defaults would cause increased provisions or impairments related to our general fund invested assets and derivative financial instruments, and an increase in provisions for future credit impairments to<br>be included in our policy liabilities. This could result in losses potentially above our long-term expected levels.
•	We have experienced downgrades across some industries in our portfolio which may continue in subsequent quarters. The<br>general fund portfolio is constructed through credit selection criteria and is diversified with the majority of the portfolio rated investment grade which helps to mitigate risks associated with the current economic uncertainty. Our approach<br>includes seeking investments which perform more favourably in the longer term, throughout economic and business cycles, but there can be no assurance these or other strategies taken to address adverse impacts related to COVID-19 will be successful.
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Emerging Risks

The identification and assessment of our external environment for emerging risks is an important aspect of our ERM Framework, as these risks, although yet to materialize, could have the potential to have a material adverse impact on our operations and/or business strategies. We also consider taking advantage of opportunities identified to improve our competitiveness and ultimately our financial results.

Our Emerging Risk Framework facilitates the ongoing identification, assessment and monitoring of emerging risks, and includes: maintaining a process that facilitates the ongoing discussion and evaluation of potential emerging risks with senior business and functional management; reviewing and validating emerging risks with the ERC; creating and executing on responses to each emerging risk based on prioritization; and monitoring and reporting on emerging risks on a regular basis to the Board’s Risk Committee.

Regulatory Capital

OSFI’s LICAT capital regime applies to our business globally on a group consolidated basis. We continue to meet OSFI’s requirements and maintain capital in excess of regulatory expectations.

No material changes in LICAT requirements are currently anticipated to be made effective in 2022, as OSFI is focusing its efforts on aligning the regulatory capital framework with the IFRS 17 accounting changes effective January 2023, followed by updating the capital rules for Segregated Fund Guarantees, expected to be effective in January 2025.

At its annual meeting in November 2019, the IAIS adopted a risk based global ICS, that is expected to be further developed over a five-year monitoring period that commenced in 2020. While broadly supportive of the goals of ICS, OSFI stated that it did not support the current ICS design, adopted by the IAIS in November 2019, citing that it was ‘not fit for purpose for the Canadian market’. Without OSFI’s consent, the IAIS rules will not apply in Canada or to Canadian companies on a group-wide basis, while other regulators may use the ICS framework for calculating capital in their specific markets. Limited changes have been made to ICS since the beginning of the five-year monitoring period. We will continue to monitor developments as the ICS methodology and its applicability evolve.

The IAIS has also been developing a holistic framework to assess and mitigate insurance sector systemic risk. It is not yet known how these proposals will affect capital or other regulatory requirements given that several key items of the framework remain under development.

Regulators in various jurisdictions in which we operate have embarked on reforming their respective capital regulations. The impact of these changes remains uncertain.

IFRS 17 and IFRS 9

IFRS 17 “Insurance Contracts” and IFRS 9 “Financial Instruments” are effective for insurance companies in 2023.

IFRS 17 will replace IFRS 4 “Insurance Contracts” and will materially change the timing of the recognition of earnings from our insurance business and therefore, our shareholders’ equity. Furthermore, the requirements of the new standard are complex and will necessitate significant enhancements to finance infrastructure and processes and could impact our business strategy. IFRS 9 will impact the measurement and timing of investment income.

A summary of some of the key differences between IFRS 17 and IFRS 4 is outlined in the “Future Accounting and Reporting Changes” section below. Risks related to the new standards include:

•	The impact on regulatory capital. In addition to the impact on timing of recognition of earnings and equity, the<br>regulatory capital framework in Canada is currently aligned with IFRS. OSFI has stated that, to the extent possible, it intends to maintain capital frameworks consistent with current capital policies and to minimize potential industry-wide capital<br>impacts that might arise from the accounting change. OSFI is in the process of consulting directly with affected stakeholders and has stated that it will finalize the amendments to the LICAT guideline in<br>mid-2022.
•	The impact on our business strategy as a result of temporary volatility. The Company’s capital position and<br>income for accounting purposes could be influenced by prevailing market conditions, resulting in volatility of reported results, which may require changes to
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<br>business strategies and the introduction of new non-GAAP financial measures to explain our results. The impact to business strategy could include changes<br>to hedging and investment strategy, product strategy and the use of reinsurance and, as a result, could impact our exposures to other risks such as counterparty risk and liquidity risk.
•	The impact of accounting mismatches from derivatives used for economic hedging purposes. Under CALM, both changes in<br>insurance contract liabilities and changes in the fair value of derivatives used to economically hedge these liabilities are recognized in income, which results in a natural offset in net income. Under IFRS 17, an insurer may elect to present the<br>impact of changes in discount rates on insurance contract liabilities in other comprehensive income (the “OCI option”). If the OCI option is elected and derivatives used for economic hedging purposes do not qualify for hedge accounting, a<br>mismatch in accounting net income may occur, as changes in the fair value of these derivatives would be recorded in net income, while the impact of changes in discount rates on insurance contract liabilities would be recorded in other comprehensive<br>income. In addition, if derivatives used for economic hedging purposes qualify for hedge accounting, IFRS 9 requires that the difference, if any, between the impact of changes in discount rates on the hedged portion of insurance contract liabilities<br>and the change in the fair value of the hedging derivatives be reported in net income as hedge ineffectiveness.
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•	The impact on tax. In certain jurisdictions, including Canada, the implementation of IFRS 17 could have a material<br>effect on tax positions and other financial metrics that are dependent upon IFRS accounting values.
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•	The impact on operational readiness. The adoption of IFRS 17 poses significant operational challenges for the<br>insurance industry in the development and implementation of necessary technology systems solutions. The standard introduces complex estimation techniques, computational requirements and disclosures which necessitate a major transformation to the<br>Company’s systems along with actuarial and financial reporting processes. Once a system solution is available, significant efforts are required to integrate it into the financial reporting environment, perform impact studies, and educate and<br>socialize the potential impacts with stakeholders.
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•	The impact of inconsistencies in timing of adoption among various jurisdictions.^^As a global insurer with subsidiaries in Asia and other jurisdictions, regional differences in effective dates will require us to maintain more than one set of financial records to support both<br>consolidated financial statements and for local subsidiary reporting requirements.
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Our extensive enterprise-wide implementation program includes the necessary resources to implement appropriate changes to policies and processes, education to internal and external stakeholders, sourcing appropriate data and deploying system solutions. Our governance model and active engagement with industry working groups helps to manage the risks noted above.

Additional Risk Factors That May Affect Future Results

Other factors that may affect future results include changes in government trade policy, monetary policy or fiscal policy; including interest rates policy from central banks; political conditions and developments in or affecting the countries in which we operate; technological changes; public infrastructure disruptions; changes in consumer spending and saving habits; the possible impact on local, national or global economies from public health emergencies, and international conflicts and other developments including those relating to terrorist activities. Although we take steps to anticipate and minimize risks in general, unforeseen future events may have a negative impact on our business, financial condition and results of operations.

We caution that the preceding discussion of risks that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to our Company, investors and others should carefully consider the foregoing risks, as well as other uncertainties and potential events, and other external and Company specific risks that may adversely affect the future business, financial condition or results of operations of our Company.

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10. Capital Management Framework

Manulife seeks to manage its capital with the objectives of:

•	Operating with sufficient capital to be able to honour all commitments to its policyholders and creditors with a high degree<br>of confidence;
•	Retaining the ongoing confidence of regulators, policyholders, rating agencies, investors and other creditors in order to<br>ensure access to capital markets; and
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•	Optimizing return on capital to meet shareholders’ expectations subject to constraints and considerations of adequate<br>levels of capital established to meet the first two objectives.
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Capital is managed and monitored in accordance with the Capital Management Policy. The Policy is reviewed and approved by the Board annually and is integrated with the Company’s risk and financial management frameworks. It establishes guidelines regarding the quantity and quality of capital, internal capital mobility, and proactive management of ongoing and future capital requirements.

Our capital management framework takes into account the requirements of the Company as a whole as well as the needs of each of our subsidiaries. Internal capital targets are set above regulatory requirements, and consider a number of factors, including results of sensitivity and stress testing and our own risk assessments, as well as business needs. We monitor against these internal targets and initiate actions appropriate to achieving our business objectives.

We periodically assess the strength of our capital position under various stress scenarios. The annual Financial Condition Testing (“FCT”, formerly Dynamic Capital Adequacy Testing) typically quantifies the financial impact of economic events arising from shocks in public equity and other markets, interest rates and credit, amongst others. Our 2021 FCT results demonstrate that we would have sufficient assets, under the various adverse scenarios tested, to discharge our policy liabilities. This conclusion was also supported by a variety of other stress tests conducted by the Company.

We use an Economic Capital (“EC”) framework to inform our internal view of the level of required capital and available capital. The EC framework is a key component of the ORSA process, which ties together our risk management, strategic planning and capital management practices to confirm that our capital levels continue to be adequate from an economic perspective.

Capital management is also integrated into our product planning and performance management practices.

The composition of capital between equity and other capital instruments impacts the financial leverage ratio which is an important consideration in determining the Company’s financial strength and credit ratings. The Company monitors and rebalances its capital mix through capital issuances and redemptions.

FinancingActivities

Securities transactions

During 2021, we raised a total of $3.2 billion of equity instruments in Canada; and $2.7 billion of securities were redeemed at par.

($ millions)	Par value		Issued^(1)^		Redeemed/<br><br><br>Matured^(1)^
3.375 % MFC Limited recourse capital notes Series 1, issued on Feb 19, 2021	$	2,000	$	1,982	$	–
4.10 % MFC Limited recourse capital notes Series 2, issued on Nov 12, 2021	$	1,200	****	1,189	****	–
2.389% MLI Subordinated debentures, redeemed on Jan 5, 2021	$	350	****	–	****	350
3.85% MFC Subordinated debentures, redeemed on May 25, 2021	S$	500	****	–	****	481
4.70% MFC US Senior notes, redeemed on Jun 23, 2021	US$	1,000	****	–	****	1,265
5.60% MFC Class 1 preferred shares Series 21, redeemed on Jun 19, 2021	$	425	****	–	****	417
3.891% MFC Class 1 preferred shares Series<br>5, redeemed on Dec 19, 2021	$	200	****	–	****	195
Total			$	3,171	$	2,708
^(1)^	Represents carrying value, net of issuance costs.
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On January 24, 2022, we announced our intention to redeem the Class 1 Series 7 and Class 1 Series 23 preferred shares at par, on March 19, 2022, the earliest par redemption date.

Normal Course Issuer Bid

On March 13, 2020, OSFI announced measures to support the resilience of financial institutions. Consistent with these measures, OSFI set the expectation for all federally regulated financial institutions that dividend increases and share buybacks should be halted for the time being. On November 4, 2021, OSFI announced that this expectation is no longer in place.

We announced on February 1, 2022 the launch of a normal course issuer bid (“NCIB”) permitting the purchase for cancellation of up to 97 million common shares, representing approximately 5% of our issued and outstanding common shares. Purchases under the NCIB may commence through the TSX on February 3, 2022 and continue until February 2, 2023, when the NCIB expires, or such earlier date as we complete our purchases.

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Consolidated capital

As at December 31,<br><br><br>($ millions)	2021			2020
Non-controlling interests	$	1,694	****	$	1,455
Participating policyholders’ equity	****	(1,233	)		(784	)
Preferred shares and other equity	****	6,381	****		3,822
Common shareholders’<br>equity^(1)^	****	52,027	****		48,513
Total equity	****	58,869	****		53,006
Exclude the accumulated other comprehensive<br>gain/(loss) on cash flow hedges	****	(156	)		(229	)
Total equity excluding accumulated other comprehensive gain/(loss) on cash flow<br>hedges	****	59,025	****		53,235
Qualifying capital instruments	****	6,980	****		7,829
Consolidated capital^(2)^	$	66,005	****	$	61,064
^(1)^	Common shareholders’ equity is equal to total shareholders’ equity less preferred shares and other equity.<br>
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^(2)^	Consolidated capital does not include $4.9 billion (2020 – $6.2 billion) of MFC senior debt as this form of<br>financing does not meet OSFI’s definition of regulatory capital at the MFC level. The Company has down-streamed the proceeds from this financing into operating entities in a form that qualifies as regulatory capital at the subsidiary level.<br>
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MFC’s consolidated capital was $66.0 billion as at December 31, 2021, an increase of $4.9 billion compared with $61.1 billion as at December 31, 2020, primarily driven by growth in total equity, partially offset by redemption of capital instruments. The increase in total equity is due to growth in retained earnings and net issuance of preferred shares and other equity instruments.

Remittance of Capital

As part of its capital management, Manulife promotes internal capital mobility so that Manulife’s parent company, MFC, has access to funds to meet its obligations and to optimize capital deployment. Remittances is defined as the cash remitted or made available for distribution to the Manulife Group from operating subsidiaries and excess capital generated by standalone Canadian operations. It is one of the key metrics used by management to evaluate our financial flexibility. In 2021, MFC subsidiaries delivered $4.4 billion in remittances compared with $1.6 billion in 2020, an increase of $2.8 billion. The increase was primarily due to capital injections made to our Asia operations in 2020 in response to the COVID-19 related decline in interest rates.

Financial Leverage Ratio

MFC’s financial leverage ratio decreased to 25.8% as at December 31, 2021 from 26.6% as at December 31, 2020, driven by growth in retained earnings, partially offset by net issuances of debt, a reduction in the value of AFS debt securities, and the unfavourable impact of a stronger Canadian dollar.

CommonShareholder Dividends

The declaration and payment of shareholder dividends and the amount thereof are at the discretion of the Board and depend upon various factors, including the results of operations, financial conditions, future prospects of the Company, dividend payout ratio and taking into account regulatory restrictions on the payment of shareholder dividends. On March 13, 2020, OSFI announced measures to support the resilience of financial institutions and set the expectation for all federally regulated financial institutions that dividend increases and share buybacks should be halted. On November 4, 2021, OSFI announced that this expectation is no longer in place.

Common Shareholder Dividends Paid

Following OSFI’s November 4, 2021 announcement lifting restrictions on dividend increases, the Company increased the quarterly dividend paid on its common shares beginning with the dividend paid in the fourth quarter of 2021^1^, from $0.28 per common share to $0.33 per common share, bringing total common shareholder dividends to $1.17 in 2021, an increase of 4% from 2020.

For the years ended December 31,<br><br><br>$ per share	2021		2020
Dividends<br>paid	$	1.17	$	1.12

The Company offers a Dividend Reinvestment Program (“DRIP”) whereby shareholders may elect to automatically reinvest dividends in the form of MFC common shares instead of receiving cash. The offering of the program and its terms of execution are subject to the Board’s discretion.

During 2021, the required common shares in connection with the DRIP were purchased on the open market with no applicable discount.

^1^	Declared on November 5, 2021.
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Regulatory Capital Position^1^

MFC and MLI are regulated by OSFI and are subject to consolidated risk-based capital requirements. Manulife monitors and manages its consolidated capital in compliance with the OSFI LICAT guideline. Under this regime, our available capital and other eligible capital resources are measured against a required amount of risk capital determined in accordance with the guideline. For regulatory reporting purposes under the LICAT framework, consolidated capital is adjusted for various additions or deductions to capital as mandated by the guidelines defined by OSFI.

Manulife’s operating activities are conducted within MLI and its subsidiaries. MLI‘s LICAT ratio was 142% as at December 31, 2021, compared with 149% as at December 31, 2020. The seven percentage point decrease from December 31, 2020 was driven by unfavourable market movements, primarily from an increase in risk-free interest rates and a narrowing of spreads.

MFC’s LICAT ratio was 132% as at December 31, 2021 compared with 135% as at December 31, 2020, with the decrease driven by similar factors that impacted the movement in MLI’s LICAT ratio. The difference between the MLI and MFC ratios is largely due to the $4.9 billion (2020 – $6.2 billion) of MFC senior debt outstanding that does not qualify as available capital at the MFC level but, based on the form it was down-streamed to MLI, it qualifies as regulatory capital at the MLI level.

The LICAT ratios as at December 31, 2021 resulted in excess capital of $27.1 billion over OSFI’s supervisory target ratio of 100% for MLI, and $27.2 billion over OSFI’s regulatory minimum target ratio of 90% for MFC (no supervisory target is applicable to MFC). As at December 31, 2021, all MLI’s subsidiaries maintained capital levels in excess of local requirements.

Credit Ratings

Manulife’s operating companies have strong financial strength ratings from credit rating agencies. These ratings are important factors in establishing the competitive position of insurance companies and maintaining public confidence in products being offered. Maintaining strong ratings on debt and capital instruments issued by MFC and its subsidiaries allows us to access capital markets at competitive pricing levels. Should these credit ratings decrease materially, our cost of financing may increase and our access to funding and capital through capital markets could be reduced.

During 2021, S&P, Moody’s, DBRS Morningstar, Fitch and AM Best Company (“AM Best”) maintained their assigned ratings of MFC and its primary insurance operating companies.

The following table summarizes the financial strength ratings of MLI and certain of its subsidiaries as at January 31, 2022.

Financial Strength Ratings

Subsidiary	Jurisdiction	S&P	Moody’s	DBRS Morningstar	Fitch	AM<br>Best
The Manufacturers Life Insurance Company	Canada	AA-	A1	AA	AA-	A+ (Superior)
John Hancock Life Insurance Company (U.S.A.)	United States	AA-	A1	Not Rated	AA-	A+ (Superior)
Manulife (International) Limited	Hong Kong	AA-	Not Rated	Not Rated	Not Rated	Not Rated
Manulife Life Insurance Company	Japan	A+	Not Rated	Not Rated	Not Rated	Not Rated
Manulife (Singapore) Pte. Ltd.	Singapore	AA-	Not Rated	Not Rated	Not Rated	Not Rated

As of January 31, 2022, S&P, Moody’s, DBRS Morningstar, Fitch, and AM Best had a stable outlook on these ratings. The S&P rating and related outlook for Manulife Life Insurance Company are constrained by the sovereign rating on Japan (A+/Stable).

^1^	The “Risk Management and Risk Factors” section of the MD&A outlines a number of regulatory capital risks.<br>

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11. Critical Actuarial and Accounting Policies

The preparation of Consolidated Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as at the date of the Consolidated Financial Statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from these estimates. The most significant estimation processes relate to assumptions used in measuring insurance and investment contract liabilities, assessing assets for impairment, determining of pension and other post-employment benefit obligation and expense assumptions, determining income taxes and uncertain tax positions and fair valuation of certain invested assets. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future years affected. Although some variability is inherent in these estimates, management believes that the amounts recorded are appropriate. The significant accounting policies used and the most significant judgments made by management in applying these accounting policies in the preparation of the 2021 Annual Consolidated Financial Statements are described in note 1 to the Consolidated Financial Statements.

Critical Actuarial Policies – Policy Liabilities (Insurance and Investment Contract Liabilities)

Policy liabilities for IFRS are valued in Canada under standards established by the ASB. These standards are designed to ensure we establish an appropriate liability on the Consolidated Statements of Financial Position to cover future obligations to all our policyholders. The assumptions underlying the valuation of policy liabilities are required to be reviewed and updated on an ongoing basis to reflect recent and emerging trends in experience and changes in risk profile of the business. In conjunction with prudent business practices to manage both product and asset related risks, the selection and monitoring of appropriate valuation assumptions is designed to minimize our exposure to measurement uncertainty related to policy liabilities.

Policy liabilities have two major components: a best estimate amount and a provision for adverse deviation. The best estimate amount represents the estimated value of future policyholder benefits and settlement obligations to be paid over the term remaining on in-force policies, including the costs of servicing the policies. The best estimate amount is reduced by the future expected policy revenues and future expected investment income on assets supporting the policies, before any consideration for reinsurance ceded. To determine the best estimate amount, assumptions must be made for a number of key factors, including future mortality and morbidity rates, investment returns, rates of policy termination and premium persistency, operating expenses, certain taxes (other than income taxes and includes temporary tax timing and permanent tax rate differences on the cash flows available to satisfy policy obligations) and foreign currency. Reinsurance is used to transfer part or all of a policy liability to another insurance company at terms negotiated with that insurance company. A separate asset for reinsurance ceded is calculated based on the terms of the reinsurance treaties that are in-force, with deductions taken for the credit standing of the reinsurance counterparties where appropriate.

To recognize the uncertainty involved in determining the best estimate actuarial liability assumptions, a provision for adverse deviation (“PfAD”) is established. The PfAD is determined by including a margin of conservatism for each assumption to allow for possible mis-estimation of, or deterioration in, future experience in order to provide greater comfort that the policy liabilities will be sufficient to pay future benefits. The CIA establishes suggested ranges for the level of margins for adverse deviation based on the risk profile of the business. Our margins are set taking into account the risk profile of our business. The effect of these margins is to increase policy liabilities over the best estimate assumptions. The margins for adverse deviation decrease the income that is recognized at the time a new policy is sold and increase the income recognized in later periods as the margins release as the remaining policy risks reduce.

Best Estimate Assumptions

We follow established processes to determine the assumptions used in the valuation of our policy liabilities. The nature of each risk factor and the process for setting the assumptions used in the valuation are discussed below.

Mortality

Mortality relates to the occurrence of death. Mortality assumptions are based on our internal as well as industry past and emerging experience and are differentiated by sex, underwriting class, policy type and geographic market. We make assumptions about future mortality improvements using historical experience derived from population data. Reinsurance is used to offset some of our direct mortality exposure on in-force life insurance policies with the impact of the reinsurance directly reflected in our policy valuation for the determination of policy liabilities net of reinsurance. Actual mortality experience is monitored against these assumptions separately for each business. The results are favourable where mortality rates are lower than assumed for life insurance and where mortality rates are higher than assumed for payout annuities. Overall 2021 experience was unfavourable (2020 – unfavourable) when compared with our assumptions.

Morbidity

Morbidity relates to the occurrence of accidents and sickness for the insured risks. Morbidity assumptions are based on our internal as well as industry past and emerging experience and are established for each type of morbidity risk and geographic market. For our JH Long Term Care business we make assumptions about future morbidity changes. Actual morbidity experience is monitored against these

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assumptions separately for each business. Our morbidity risk exposure relates to future expected claims costs for long-term care insurance, as well as for group benefits and certain individual health insurance products we offer. Overall 2021 experience was favourable (2020 – favourable) when compared with our assumptions.

Policy Termination and Premium Persistency

Policy termination includes lapses and surrenders, where lapses represent the termination of policies due to non-payment of premiums and surrenders represent the voluntary termination of policies by policyholders. Premium persistency represents the level of ongoing deposits on contracts where there is policyholder discretion as to the amount and timing of deposits. Policy termination and premium persistency assumptions are primarily based on our recent experience adjusted for expected future conditions. Assumptions reflect differences by type of contract within each geographic market and actual experience is monitored against these assumptions separately for each business. Overall 2021 experience was unfavourable (2020 – unfavourable) when compared with our assumptions.

Expenses and Taxes

Operating expense assumptions reflect the projected costs of maintaining and servicing in-force policies, including associated overhead expenses. The expenses are derived from internal cost studies and are projected into the future with an allowance for inflation. For some developing businesses, there is an expectation that unit costs will decline as these businesses mature. Actual expenses are monitored against assumptions separately for each business. Overall maintenance expenses for 2021 were unfavourable (2020 – unfavourable) when compared with our assumptions. Taxes reflect assumptions for future premium taxes and other non-income related taxes. For income taxes, policy liabilities are adjusted only for temporary tax timing and permanent tax rate differences on the cash flows available to satisfy policy obligations.

Investment Returns

As noted in the “Risk Management and Risk Factors – Market Risk – Asset Liability Management Strategy” section above, our general fund product liabilities are categorized into groups with similar characteristics in order to support them with a specific asset strategy. We seek to align the asset strategy for each group to the premium and benefit pattern, policyholder options and guarantees, and crediting rate strategies of the products they support. The projected cash flows from the assets are combined with projected cash flows from future asset purchases/sales to determine expected rates of return for future years. The investment strategies for future asset purchases and sales are based on our target investment policies for each segment and the reinvestment returns are derived from current and projected market rates for fixed interest investments and our projected outlook for non-fixed interest assets. Credit losses are projected based on our own and industry experience, as well as specific reviews of the current investment portfolio. Investment return assumptions for each asset class also incorporate expected investment management expenses that are derived from internal cost studies. In 2021, actual investment returns were favourable (2020 – unfavourable) when compared with our assumptions. Investment-related experience and the direct impact of interest rates and equity markets are discussed in the “Financial Performance” section above.

Segregated Funds

We offer segregated funds to policyholders that offer certain guarantees, including guaranteed returns of principal on maturity or death, as well as guarantees of minimum withdrawal amounts or income benefits. The on-balance sheet liability for these benefits is the expected cost of these guarantees including appropriate valuation margins for the various contingencies including mortality and lapse. The dominant driver of the cost of guarantees is the return on the underlying funds in which the policyholders invest. See “Risk Management and Risk Factors – Market Risk – Hedging Strategies for Variable Annuity and Other Equity Risks”^^and the “Financial Performance – Analysis of Net Income” sections above.

Foreign Currency

Foreign currency risk results from a mismatch of the currency of the policy liabilities and the currency of the assets designated to support these obligations. We generally match the currency of our assets with the currency of the liabilities they support, with the objective of mitigating the risk of economic loss arising from movements in currency exchange rates. Where a currency mismatch exists, the assumed rate of return on the assets supporting the liabilities is reduced to reflect the potential for adverse movements in exchange rates.

Experience Adjusted Products

Where policies have features that allow the impact of changes in experience to be passed on to policyholders through policy dividends, experience rating refunds, credited rates or other adjustable features, the projected policyholder benefits are adjusted to reflect the projected experience. Minimum contractual guarantees and other market considerations are taken into account in determining the policy adjustments.

Provision for Adverse Deviation

The total provision for adverse deviation is the sum of the provisions for adverse deviation for each risk factor. Margins for adverse deviation are established by product type and geographic market for each assumption or factor used in the determination of the best estimate actuarial liability. The margins are established based on the risk characteristics of the business being valued.

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Margins for interest rate risk are included by testing a number of scenarios of future interest rates. The margin can be established by testing a limited number of scenarios, some of which are prescribed by Canadian Actuarial Standards of Practice, and determining the liability based on the worst outcome. Alternatively, the margin can be set by testing many scenarios which are developed according to actuarial guidance. Under this approach the liability would be the average of the outcomes above a percentile in the range prescribed by the Canadian Actuarial Standards of Practice.

In addition to the explicit margin for adverse deviation, the valuation basis for segregated fund liabilities explicitly limits the future revenue recognition in the valuation basis to the amount necessary to offset acquisition expenses after allowing for the cost of any guarantee features. The fees that are in excess of this limitation are reported as an additional margin and are shown in segregated fund non-capitalized margins.

The provision for adverse deviation and the future revenue deferred in the valuation due to the limitations on recognition of future revenue in the valuation of segregated fund liabilities are shown in the table below.

As at December 31,<br><br><br>($ millions)	2021		2020
Best estimate actuarial liability	$	275,552	$	268,147
Provision for adverse deviation (“PfAD”)
Insurance risks (mortality/morbidity)	$	18,888	$	19,549
Policyholder behaviour (lapse/surrender/premium persistency)	****	6,541		6,757
Expenses	****	1,834		1,950
Investment risks (non-credit)	****	34,396		33,531
Investment risks (credit)	****	1,020		1,121
Segregated funds guarantees	****	1,679		2,178
Total PfAD^(1)^	****	64,358		65,086
Segregated funds – additional margins	****	17,099		16,388
Total of PfAD and additional segregated fundmargins	$	81,457	$	81,474
^(1)^	Reported net actuarial liabilities (excluding the $4,474 million (2020 – $4,720 million) reinsurance asset<br>related to the Company’s in-force participating life insurance closed block that is retained on a funds withheld basis as part of the New York Life transaction) as at December 31, 2021 of<br>$339,910 million (2020 – $333,233 million) are comprised of $275,552 million (2020 – $268,147 million) of best estimate actuarial liabilities and $64,358 million (2020 – $65,086 million) of PfAD.
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The change in the PfAD from period to period is impacted by changes in liability and asset composition, by currency and interest rate movements and by material changes in valuation assumptions. The overall decrease in PfADs for insurance risks was primarily due to the impact of higher interest rates in the U.S. and Canada, the annual review of actuarial valuation methods and assumptions, and the appreciation of the Canadian dollar relative to the Japanese yen, U.S. dollar and Hong Kong dollar, partially offset by the expected PfAD growth from in-force and new business. The overall decrease in PfADs for policyholder behaviour and expense was driven by the impact of higher interest rates in the U.S. and Canada and the appreciation of the Canadian dollar, partially offset by the expected PfAD growth from in-force and new business. The overall increase in PfADs for non-credit investment risks was driven by the expected PfAD growth from in-force and new business, the annual review of actuarial valuation methods and assumptions, partially offset by the appreciation of the Canadian dollar and higher interest rates in the U.S. and Canada. The increase in the additional segregated fund margins was primarily due to increase in equity markets, partially offset by increase in interest rates in the U.S. and Canada.

Sensitivity of Earnings to Changes in Assumptions

When the assumptions underlying our determination of policy liabilities are updated to reflect recent and emerging experience or change in outlook, the result is a change in the value of policy liabilities which in turn affects net income attributed to shareholders. The sensitivity of net income attributed to shareholders to changes in non-economic and certain asset related assumptions underlying policy liabilities is shown below and assumes that there is a simultaneous change in the assumptions across all business units. The sensitivity of net income attributed to shareholders to a deterioration or improvement in non-economic assumptions underlying long-term care policy liabilities as at December 31, 2021 is also shown below.

For changes in asset related assumptions, the sensitivity is shown net of the corresponding impact on income of the change in the value of the assets supporting policy liabilities. In practice, experience for each assumption will frequently vary by geographic market and business, and assumption updates are made on a business/geographic specific basis. Actual results can differ materially from these estimates for a variety of reasons including the interaction among these factors when more than one changes, changes in actuarial and investment return and future investment activity assumptions, actual experience differing from the assumptions, changes in business mix, effective tax rates and other market factors, and the general limitations of our internal models.

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Potential impact on net income attributed to shareholders arising from changes tonon-economic assumptions^(1)^

As at December 31,<br>($ millions)	Decrease in after-tax net income<br>attributed to shareholders
	2021			2020
Policy related assumptions
2% adverse change in future mortality<br>rates^(2),(4)^
Products where an increase in rates increases insurance contract liabilities	$	(500	)	$	(500	)
Products where a decrease in rates increases insurance contract liabilities	****	(500	)		(600	)
5% adverse change in future morbidity rates (incidence and termination)^(3),(4),(5)^	****	(5,500	)		(5,700	)
10% adverse change in future policy termination<br>rates^(4)^	****	(2,400	)		(2,600	)
5% increase in future expense levels	****	(600	)		(600	)
^(1)^	The participating policy funds are largely self-supporting and generate no material impact on net income attributed to<br>shareholders as a result of changes in non-economic assumptions. Experience gains or losses would generally result in changes to future dividends, with no direct impact to shareholders.
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^(2)^	An increase in mortality rates will generally increase policy liabilities for life insurance contracts whereas a decrease<br>in mortality rates will generally increase policy liabilities for policies with longevity risk such as payout annuities.
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^(3)^	No amounts related to morbidity risk are included for policies where the policy liability provides only for claims costs<br>expected over a short period, generally less than one year, such as Group Life and Health.
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^(4)^	The impacts of the sensitivities on LTC for morbidity, mortality and lapse do not assume any offsets from the<br>Company’s ability to contractually raise premium rates in such events, subject to state regulatory approval. In practice, we would plan to file for rate increases equal to the amount of deterioration resulting from the sensitivity.<br>
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^(5)^	This includes a 5% deterioration in incidence rates and 5% deterioration in claim termination rates.<br>
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Potential impact on net income attributed to shareholders arising from changes to non-economicassumptions for Long Term Care^(1)^

As at December 31,<br><br><br>($ millions)	Decrease in after-tax net income<br>attributed to shareholders
	2021			2020
Policy related assumptions
2% adverse change in future mortality<br>rates^(2),(3)^	$	(300	)	$	(300	)
5% adverse change in future morbidity incidence<br>rates^(2),(3)^	****	(2,000	)		(2,100	)
5% adverse change in future morbidity claims termination<br>rates^(2),(3)^	****	(3,100	)		(3,100	)
10% adverse change in future policy termination<br>rates^(2),(3)^	****	(400	)		(400	)
5% increase in future expense levels^(3)^	****	(100	)		(100	)
^(1)^	Translated from US$ at 1.2678 for 2021.
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^(2)^	The impacts of the sensitivities on LTC for morbidity, mortality and lapse do not assume any offsets from the<br>Company’s ability to contractually raise premium rates in such events, subject to state regulatory approval. In practice, we would plan to file for rate increases equal to the amount of deterioration resulting from the sensitivities.<br>
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^(3)^	The impact of favourable changes to all the sensitivities is relatively symmetrical.
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Potential impact on net income attributed to shareholders arising from changes to asset related assumptions supporting actuarial liabilities^(1)^

As at December 31,<br>($ millions)	Increase (decrease) in after-tax net income<br>attributed to shareholders
	2021						2020
	Increase			Decrease			Increase			Decrease
Asset related assumptions updated periodically in valuation basis changes
100 basis point change in future annual returns for public equities^(1)^	$	500	****	$	(500	)	$	500			$     (500	)
100 basis point change in future annual returns for<br>ALDA^(2)^	****	3,900	****	****	(4,700	)		4,200			(5,200	)
100 basis point change in equity volatility assumption for stochastic<br>segregated fund modelling^(3)^	****	(200	)	****	200	****		(200	)		200
^(1)^	The sensitivity to public equity returns above includes the impact on both segregated fund guarantee reserves and on other<br>policy liabilities. Expected long-term annual market growth assumptions for public equities are based on long-term historical observed experience and compliance with actuarial standards. As at December 31, 2021 and December 31, 2020, unless<br>otherwise noted, the growth rates inclusive of dividends in the major markets used in the stochastic valuation models for valuing segregated fund guarantees are 9.0% (9.2% as at December 31, 2020) per annum in Canada, 9.6% per annum in the U.S. and<br>6.2% per annum in Japan. Growth assumptions for European equity funds are market-specific and vary between 8.3% and 9.9%.
---	---
^(2)^	ALDA include commercial real estate, timber, farmland, infrastructure and private equities, some of which relate to oil<br>and gas. Expected long-term return assumptions for ALDA and public equity are set in accordance with the Standards of Practice for the valuation of insurance contract liabilities and guidance published by the CIA. Annual best estimate return<br>assumptions for ALDA and public equity include market growth rates and annual income, such as rent, production proceeds and dividends, and will vary based on our holding period. Over a 20-year horizon, our<br>best estimate return assumptions range between 5.25% and 11.5% (5.25% and 11.65% as at December 31, 2020), with an average of 9.2% (9.3% as at December 31, 2020) based on the current asset mix backing our guaranteed insurance and annuity business as<br>of December 31, 2021. Our return assumptions including the margins for adverse deviations in our valuation, which take into account the uncertainty of achieving the returns, range between 2.5% and 7.5%, with an average of 6.0% (6.1% as at<br>December 31, 2020) based on the asset mix backing our guaranteed insurance and annuity business as of December 31, 2021.
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^(3)^	Volatility assumptions for public equities are based on long-term historical observed experience and compliance with<br>actuarial standards. As of December 31, 2021 and December 31, 2020, unless otherwise stated, the resulting volatility assumptions are 16.5% per annum in Canada and 17.1% per annum in the U.S. for large cap public equities, and 19.1% per annum in<br>Japan. For European equity funds, the volatility varies between 16.3% and 17.7%.
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Review of Actuarial Methods and Assumptions

A comprehensive review of actuarial methods and assumptions is performed annually. The review is designed to reduce the Company’s exposure to uncertainty by ensuring assumptions for both asset related and liability related risks remain appropriate. This is accomplished by monitoring experience and selecting assumptions which represent a current best estimate view of expected future experience, and margins for adverse deviations that are appropriate for the risks assumed. While the assumptions selected represent the Company’s current best estimates and assessment of risk, the ongoing monitoring of experience and changes in the economic environment are likely to result in future changes to the actuarial assumptions, which could materially impact the measurement of insurance contract liabilities.

2021 Review of Actuarial Methods and Assumptions

This year’s review of actuarial methods and assumptions did not reflect COVID-19 experience as it is too soon to assess the impact of COVID-19 on long-term assumptions. Experience related to COVID-19 will continue to be closely monitored, as well as emerging research on the long-term implications of COVID-19 on mortality and other assumptions.

The completion of the 2021 annual review of actuarial methods and assumptions resulted in an increase in insurance contract liabilities of $287 million, net of reinsurance, and a decrease in net income attributed to shareholders of $41 million post-tax.

	Change in insurance contract liabilities, net of reinsurance
For the year ended December 31, 2021<br><br><br>($ millions)	Total			Attributed to<br>participating<br>policyholders’<br>account^(1)^			Attributed to<br>shareholders’<br>account			Change in net<br>income attributed<br>to shareholders<br>(post-tax)
U.S. variable annuity product review	$	51	****	$	–	****	$	51	****	$	(40	)
Mortality and morbidity updates	****	350	****	****	–	****	****	350	****	****	(257	)
Lapses and policyholder behaviour updates	****	686	****	****	18	****	****	668	****	****	(534	)
Expense updates	****	(653	)	****	(25	)	****	(628	)	****	503	****
Investment-related updates	****	(257	)	****	(2	)	****	(255	)	****	168	****
Other updates	****	110	****	****	231	****	****	(121	)	****	119	****
Net impact	$	287	****	$	222	****	$	65	****	$	(41	)
^(1)^	The change in insurance contract liabilities, net of reinsurance, attributable to the participating policyholders’<br>account was primarily driven by a reduction in the expected long-term interest rates within the valuation models to reflect the low interest rate environment.
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U.S. variable annuity product review

The review of our variable annuity products in the U.S. resulted in a $40 million post-tax charge to net income attributed to shareholders.

The charge was primarily driven by updates to lapse assumptions to reflect emerging experience, partially offset by refinements to our segregated fund guaranteed minimum withdrawal benefit valuation models.

Updates to mortality and morbidity

Mortality and morbidity updates resulted in a $257 million post-tax charge to net income attributed to shareholders.

The charge was driven by updates to older age mortality on certain products in our U.S. life insurance business, mortality assumption updates in Indonesia to reflect recent experience, as well as from refining assumptions on several reinsurance arrangements in Canada.

Updates to lapses and policyholder behaviour

Updates to lapses and policyholder behaviour assumptions resulted in a $534 million post-tax charge to net income attributed to shareholders.

We completed a detailed review of lapse assumptions for non-participating policies within our U.S. life insurance business including those for universal life, variable universal life, and term products. We observed a trend of low lapse rates on our protection-focused universal life insurance products as consumers continue to value the product guarantees in the prolonged low interest rate environment. We lowered the overall lapse assumptions for these products to reflect actual experience, which resulted in a post-tax charge to net income attributed to shareholders.

Other updates to lapse and policyholder behaviour assumptions were made across several products in Canada and Japan to reflect recent experience, resulting in a modest post-tax charge to net income attributed to shareholders.

Expense updates

Updates to expense assumptions resulted in a $503 million post-tax gain to net income attributed to shareholders.

We completed a detailed review of our investment expense assumptions across the Company. This resulted in a $263 million post-tax gain to net income attributed to shareholders, primarily driven by scale benefits.

We also completed a global expense study, which resulted in a $256 million post-tax gain to net income attributed to shareholders. The favourable result primarily reflects a reallocation of expenses across certain business lines to align with actual experience, as well as from expense savings related to various expense efficiency initiatives.

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Investment-related updates

Updates to investment return assumptions resulted in a $168 million post-tax gain to net income attributed to shareholders.

The primary driver of the gain was an update to our corporate bond default rates to reflect recent experience; we reduced default assumptions for certain credit ratings in Canada, the U.S., and Japan. This was partially offset by a reduction to our Canadian real estate investment return assumptions.

Other updates

Other updates resulted in a $119 million post-tax gain to net income attributed to shareholders.

This was primarily driven by Japan, whereby investment fees for certain mandates in the general account provided by affiliate investment managers were reviewed and updated to align with broader market levels.

Impact of changes in actuarial methods and assumptions by segment

The impact of changes in actuarial methods and assumptions in Canada resulted in a $65 million post-tax charge to net income attributed to shareholders. The charge was primarily driven by a reduction to our real estate investment return assumptions, as well as from refining assumptions on several reinsurance arrangements in individual insurance, largely offset by positive updates related to our company-wide expense review and corporate bond default study.

The impact of changes in actuarial methods and assumptions in the U.S. resulted in a $314 million post-tax charge to net income attributed to shareholders. The charge was primarily driven by updates to lapse and mortality assumptions in our U.S. life insurance business to reflect emerging experience, partially offset by positive updates related to our company-wide expense review and corporate bond default study.

The impact of changes in actuarial methods and assumptions in Asia resulted in a $343 million post-tax gain to net income attributed to shareholders. The gain was primarily driven by Japan, whereby investment fees for certain mandates in the general account provided by affiliate investment managers were reviewed and updated to align with broader market levels, as well as from the positive updates related to our corporate bond default study. This was partially offset by updates to the mortality assumptions in Indonesia to reflect recent experience.

The impact of changes in actuarial methods and assumptions in Corporate and Other (which includes our Reinsurance business) resulted in a $5 million post-tax charge to net income attributed to shareholders.

2020 Review of Actuarial Methods and Assumptions

The 2020 full year review of actuarial methods and assumptions resulted in an increase in insurance contract liabilities of $563 million, net of reinsurance, and a decrease in net income attributed to shareholders of $198 million post-tax.

	Change in insurance contract liabilities, net of reinsurance
For the year ended December 31, 2020<br><br><br>($ millions)	Total			Attributed to<br>participating<br>policyholders’<br>account^(1)^			Attributed to<br>shareholders’<br>account			Change in net<br>income attributed<br>to shareholders<br>(post-tax)
Canada variable annuity product review	$	(42	)	$	–		$	(42	)	$	31
Mortality and morbidity updates		(304	)		(1	)		(303	)		232
Lapses and policyholder behaviour		893			–			893			(682	)
Investment return assumptions		(212	)		(153	)		(59	)		31
Other updates		228			455			(227	)		190
Net impact	$	563		$	301		$	262		$	(198	)
^(1)^	The change in insurance contract liabilities, net of reinsurance, attributable to the participating policyholders’<br>account was driven by refinements to our valuation models, primarily due to annual updates to reflect market movements in the first half of 2020.
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Canada variable annuity product review

The review of our variable annuity product in Canada resulted in a $31 million post-tax gain to net income attributed to shareholders.

The gain was driven by refinements to our segregated fund guaranteed minimum withdrawal benefit valuation models, partially offset by updates to lapse assumptions to reflect emerging experience.

Updates to mortality and morbidity

Mortality and morbidity updates resulted in a $232 million post-tax gain to net income attributed to shareholders.

The gain was primarily driven by a review of our reinsurance arrangements and mortality margins for preferred risk classes in our Canada Individual Insurance business, as well as updates to the morbidity assumptions on certain products in Japan. This was partially offset by a charge from the review of mortality assumptions in our U.S. Insurance business, where emerging experience showed higher mortality at older attained ages.

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Other updates to mortality and morbidity assumptions were made across several products, largely in Canada, to reflect recent experience resulting in a net post-tax gain to net income attributable to shareholders.

Updates to lapses andpolicyholder behaviour

Updates to lapses and policyholder behaviour assumptions resulted in a $682 million post-tax charge to net income attributed to shareholders.

We completed a detailed review of the lapse assumptions for universal life policies in Canada, including both yearly renewable term, and level cost of insurance products. We lowered the ultimate lapse assumptions due to the emergence of more recent data, which resulted in a post-tax charge of $504 million to net income attributed to shareholders, primarily driven by adverse experience on large policies.

Other updates to lapse and policyholder behaviour assumptions were made across several products to reflect recent experience resulting in a net post-tax charge to net income attributable to shareholders. The primary driver of the charge was adverse lapse experience from retail policies in Japan.

Investment-related updates

Updates to investment return assumptions resulted in a $31 million post-tax gain to net income attributed to shareholders.

Other updates

Other updates resulted in a $190 million post-tax gain to net income attributed to shareholders. This incorporated several positive items including updates to our U.S. segregated fund guaranteed minimum withdrawal benefit valuation models, as well as updates to the projection of our tax and liability cash flows in the U.S. to align with updated U.S. tax and statutory reporting standard changes, partially offset by refinements to our valuation models, primarily driven by annual updates to reflect market movements in the first half of 2020.

Impact of changes in actuarial methods and assumptions by segment

The impact of changes in actuarial methods and assumptions in Canada resulted in a $77 million post-tax gain to net income attributed to shareholders. The gain was driven by updates to certain Individual Insurance reinsurance arrangements and mortality margins for preferred risk classes, as well as refinements to our valuation models, primarily driven by annual updates to reflect market movements in the first half of 2020, largely offset by updated lapse assumptions on our universal life products.

In the U.S., the impact of changes in actuarial methods and assumptions resulted in a $301 million post-tax charge to net income attributed to shareholders. The charge was driven by updates to our life mortality assumptions to reflect emerging experience, as well as refinements to our valuation models, primarily driven by annual updates to reflect market movements in the first half of 2020, partially offset by updates to our U.S. segregated fund guaranteed minimum withdrawal benefit valuation models, as well as updates to the projection of our tax and liability cash flows to align with updated U.S. tax and statutory reporting standards.

The impact of changes in actuarial methods and assumptions in Asia resulted in a $41 million post-tax charge to net income attributed to shareholders. The charge was primarily driven by Japan, whereby lapse and morbidity updates on certain products to reflect emerging experience were partially offsetting.

The impact of changes in actuarial methods and assumptions in Corporate and Other (which includes our Reinsurance business) resulted in a $67 million post-tax gain to net income attributed to shareholders.

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Change in net insurance contract liabilities

The change in net insurance contract liabilities can be attributed to several sources: new business, acquisitions, in-force movement and currency impact. Changes in net insurance contract liabilities are substantially offset in the financial statements by premiums, investment income, policy benefits and other policy related cash flows. The changes in net insurance contract liabilities by business segment are shown below:

2021 Net Insurance Contract Liability Movement Analysis

For the year ended December 31, 2021<br><br><br>($ millions)	Asia			Canada			U.S.			Corporate<br>and Other			Total
Balance, January 1	$	102,958	****	$	90,346	****	$	146,939	****	$	(458	)	$	339,785	****
New business^(1),(2)^	****	5,748	****	****	(211	)	****	410	****	****	–	****	****	5,947	****
In-force<br>movement^(1),(3)^	****	6,402	****	****	(939	)	****	348	****	****	161	****	****	5,972	****
Changes in methods and assumptions^(1)^	****	(335	)	****	177	****	****	439	****	****	6	****	****	287	****
Reinsurance transactions^(1)^	****	–	****	****	–	****	****	–	****	****	–	****	****	–	****
Currency<br>impact^(4)^	****	(3,341	)	****	–	****	****	(906	)	****	–	****	****	(4,247	)
Balance, December 31	$	111,432	****	$	89,373	****	$	147,230	****	$	(291)	****	$	347,744	****
^(1)^	The $11,473 million increase reported as the change in insurance contract liabilities and change in reinsurance<br>assets on the 2021 Consolidated Statements of Income primarily consists of changes due to the changes in methods and assumptions, normal in-force movement, new policies and associated embedded derivatives. The<br>net impact of these items resulted in an increase of $12,206 million, of which $10,923 million is included in the Consolidated Statements of Income as an increase in insurance contract liabilities and change in reinsurance assets, with the<br>remaining $1,283 million increase included in net claims and benefits. The change in insurance contract liabilities amount on the Consolidated Statements of Income also includes the change in embedded derivatives associated with insurance<br>contracts, however these embedded derivatives are included in other liabilities on the Consolidated Statements of Financial Position.
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^(2)^	New business policy liability impact is positive/(negative) when estimated future premiums, together with future<br>investment income, are expected to be more/(less) than sufficient to pay estimated future benefits, policyholder dividends and refunds, taxes (excluding income taxes) and expenses on new policies issued.
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^(3)^	The net in-force movement over the year was an increase of $5,972 million,<br>primarily reflecting the expected growth in insurance contract liabilities in all three geographic segments, partially offset by the impact of interest rate increases.
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^(4)^	The decrease in policy liabilities from currency impact reflects the appreciation of the Canadian dollar relative to the<br>Japanese yen and U.S. dollar. To the extent assets are currency matched to liabilities, the decrease in insurance contract liabilities due to currency impact is offset by a corresponding decrease from currency impact in the value of assets<br>supporting those liabilities.
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2020 Net Insurance Contract Liability Movement Analysis

For the year ended December 31, 2020<br><br><br>($ millions)	Asia		Canada			U.S.			Corporate<br>and Other			Total
Balance, January 1	$	87,937	$	83,297		$	138,859		$	(285	)	$	309,808
New business^(1),(2)^		3,014		(229	)		381			–			3,166
In-force<br>movement^(1),(3)^		11,516		7,897			14,370			(131	)		33,652
Changes in methods and assumptions^(1)^		393		(619	)		840			(51	)		563
Reinsurance transactions^(1),(4)^		–		–			(3,360	)		–			(3,360	)
Currency<br>impact^(5)^		98		–			(4,151	)		9			(4,044	)
Balance, December 31	$	102,958	$	90,346		$	146,939		$	(458	)	$	339,785
^(1)^	The $31,719 million increase reported as the change in insurance contract liabilities and change in reinsurance<br>assets on the 2020 Consolidated Statements of Income primarily consists of changes due to the changes in methods and assumptions, normal in-force movement, new policies and associated embedded derivatives,<br>partially offset by reinsurance transactions. The net impact of these items result in an increase of $34,021 million, of which $32,709 million is included in the Consolidated Statements of Income as an increase in insurance contract<br>liabilities and change in reinsurance assets, with the remaining $1,312 million increase included in net claims and benefits. The change in insurance contract liabilities amount on the Consolidated Statements of Income also includes the change<br>in embedded derivatives associated with insurance contracts, however these embedded derivatives are included in other liabilities on the Consolidated Statements of Financial Position.
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^(2)^	New business policy liability impact is positive/(negative) when estimated future premiums, together with future<br>investment income, are expected to be more/(less) than sufficient to pay estimated future benefits, policyholder dividends and refunds, taxes (excluding income taxes) and expenses on new policies issued.
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^(3)^	The net in-force movement over the year was an increase of $33,652 million,<br>primarily reflecting the impact of interest rate declines and expected growth in insurance contract liabilities in all three geographic segments.
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^(4)^	On September 30, 2020, the Company, through its subsidiary John Hancock Life Insurance Company (U.S.A.), entered into<br>a reinsurance agreement with Global Atlantic Financial Group Ltd to reinsure a block of legacy U.S. bank owned life insurance (“BOLI”). Under the terms of the transaction, the Company will maintain responsibility for servicing the policies<br>with no expected impact to the BOLI policyholders. The transaction was structured such that the Company ceded policyholder contract liabilities and transferred invested assets backing these liabilities.
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^(5)^	The decrease in policy liabilities from currency impact reflects the appreciation of the Canadian dollar relative to the<br>U.S. dollar, Hong Kong dollar, slightly offset by the depreciation of the Canadian dollar relative to the Japanese yen. To the extent assets are currency matched to liabilities, the decrease in insurance contract liabilities due to currency impact<br>is offset by a corresponding decrease from currency impact in the value of assets supporting those liabilities.
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Critical Accounting Policies

Consolidation

The Company is required to consolidate the financial position and results of entities it controls. Control exists when the Company:

•	Has the power to govern the financial and operating policies of the entity;
•	Is exposed to a significant portion of the entity’s variable returns; and
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•	Is able to use its power to influence variable returns from the entity.

The Company uses the same principles to assess control over any entity it is involved with. In evaluating control, potential factors assessed include the effects of:

•	Substantive potential voting rights that are currently exercisable or convertible;
•	Contractual management relationships with the entity;
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•	Rights and obligations resulting from policyholders to manage investments on their behalf; and
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•	The effect of any legal or contractual restraints on the Company from using its power to affect its variable returns from<br>the entity.
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An assessment of control is based on arrangements in place and the assessed risk exposures at inception. Initial evaluations are reconsidered at a later date if:

•	The Company acquires additional interests in the entity or its interests in an entity are diluted;
•	The contractual arrangements of the entity are amended such that the Company’s involvement with the entity changes; or<br>
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•	The Company’s ability to use its power to affect its variable returns from the entity changes.
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Subsidiaries are consolidated from the date on which control is obtained by the Company and cease to be consolidated from the date that control ceases.

Fair Value of Invested Assets

A large portion of the Company’s invested assets are recorded at fair value. Refer to note 1 of the 2021 Annual Consolidated Financial Statements for a description of the methods used in determining fair values. When quoted prices in active markets are not available for a particular investment, significant judgment is required to determine an estimated fair value based on market standard valuation methodologies including discounted cash flow methodologies, matrix pricing, consensus pricing services, or other similar techniques. The inputs to these market standard valuation methodologies include: current interest rates or yields for similar instruments, credit rating of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, tenor (or expected tenor) of the instrument, management’s assumptions regarding liquidity, volatilities and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management’s judgments about the key market factors impacting these financial instruments. Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company’s ability to sell assets, or the price ultimately realized for these assets, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain assets.

Evaluation of Invested Asset Impairment

AFS fixed income and equity securities are carried at fair market value, with changes in fair value recorded in other comprehensive income (“OCI”) with the exception of unrealized gains and losses on foreign currency translation of AFS fixed income securities which are included in net income attributed to shareholders. Securities are reviewed on a regular basis and any fair value decrement is transferred out of AOCI and recorded in net income attributed to shareholders when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of a fixed income security or when fair value of an equity security has declined significantly below cost or for a prolonged period of time.

Provisions for impairments of mortgage loans and private placement loans are recorded with losses reported in earnings when there is no longer reasonable assurance as to the timely collection of the full amount of the principal and interest.

Significant judgment is required in assessing whether an impairment has occurred and in assessing fair values and recoverable values. Key matters considered include economic factors, Company and industry specific developments, and specific issues with respect to single issuers and borrowers.

Changes in circumstances may cause future assessments of asset impairment to be materially different from current assessments, which could require additional provisions for impairment. Additional information on the process and methodology for determining the allowance for credit losses is included in the discussion of credit risk in note 8 to the 2021 Consolidated Financial Statements.

Derivative Financial Instruments

The Company uses derivative financial instruments (“derivatives”) including swaps, forwards and futures agreements, and options to help manage current and anticipated exposures to changes in interest rates, foreign exchange rates, commodity prices and equity market prices, and to replicate permissible investments. Refer to note 4 to the 2021 Consolidated Financial Statements for a description of the methods used to determine the fair value of derivatives.

The accounting for derivatives is complex and interpretations of the primary accounting guidance continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under such accounting guidance. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the Consolidated Financial Statements of the Company from that previously reported. Assessments of hedge effectiveness and measurements of ineffectiveness of hedging relationships are also subject to interpretations and estimations. If it was determined that hedge accounting designations were not appropriately applied, reported net income attributed to shareholders could be materially affected.

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Employee Future Benefits

The Company maintains defined contribution and defined benefit pension plans and other post-employment plans for employees and agents, including registered (tax qualified) pension plans that are typically funded, as well as supplemental non-registered (non-qualified) pension plans for executives, retiree welfare plans and disability welfare plans that are typically not funded. The largest defined benefit pension and retiree welfare plans in the U.S. and Canada are the material plans that are discussed herein and in note 15 to the 2021 Annual Consolidated Financial Statements.

Due to the long-term nature of defined benefit pension and retiree welfare plans, the calculation of the defined benefit obligation and net benefit cost depends on various assumptions such as discount rates, salary increase rates, cash balance interest crediting rates, health care cost trend rates and rates of mortality. These assumptions are determined by management and are reviewed annually. The key assumptions, as well as the sensitivity of the defined benefit obligation to changes in these assumptions, are presented in note 15 to the 2021 Annual Consolidated Financial Statements.

Changes in assumptions and differences between actual and expected experience give rise to actuarial gains and losses that affect the amount of the defined benefit obligation and OCI. For 2021, the amount recorded in OCI was a gain of $217 million (2020 – gain of $47 million) for the defined benefit pension plans and a gain of $27 million (2020 – gain of $10 million) for the retiree welfare plans.

Contributions to the registered (tax qualified) defined benefit pension plans are made in accordance with the applicable U.S. and Canadian regulations. During 2021, the Company contributed $2 million (2020 – $6 million) to these plans. As at December 31, 2021, the difference between the fair value of assets and the defined benefit obligation for these plans was a surplus of $600 million (2020 – surplus of $446 million). For 2022, the contributions to the plans are expected to be approximately $7 million.^1^

The Company’s supplemental pension plans for executives are not funded; benefits under these plans are paid as they become due. During 2021, the Company paid benefits of $59 million (2020 – $65 million) under these plans. As at December 31, 2021, the defined benefit obligation for these plans, which is reflected as a liability in the balance sheet, amounted to $687 million (2020 – $752 million).

The Company’s retiree welfare plans are partially funded, although there are no regulations or laws governing or requiring the funding of these plans. As at December 31, 2021, the difference between the fair value of plan assets and the defined benefit obligation for these plans was a surplus of $3 million (2020 – deficit of $32 million).

Income Taxes

The Company is subject to income tax laws in various jurisdictions. Tax laws are complex and potentially subject to different interpretations by the taxpayer and the relevant tax authority. The provision for income taxes represents management’s interpretation of the relevant tax laws and its estimate of current and future income tax implications of the transactions and events during the period. A deferred tax asset or liability results from temporary differences between carrying values of the assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are recorded based on expected future tax rates and management’s assumptions regarding the expected timing of the reversal of such temporary differences. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. A deferred tax asset is recognized to the extent that future realization of the tax benefit is probable. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the tax benefit will be realized. At December 31, 2021, we had $5,254 million of deferred tax assets (December 31, 2020 – $4,842 million). Factors in management’s determination include, among other things, the following:

•	Future taxable income exclusive of reversing temporary differences and carryforwards;
•	Future reversals of existing taxable temporary differences;
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•	Taxable income in prior carryback years; and
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•	Tax planning strategies.
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The Company may be required to change its provision for income taxes if the ultimate deductibility of certain items is successfully challenged by taxing authorities or if estimates used in determining the amount of deferred tax assets to recognize change significantly, or when receipt of new information indicates the need for adjustment in the recognition of deferred tax assets. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax, deferred tax balances, actuarial liabilities (see Critical Actuarial and Accounting Policies – Expenses and Taxes above) and the effective tax rate. Any such changes could significantly affect the amounts reported in the Consolidated Financial Statements in the year these changes occur.

Goodwill and Intangible Assets

At December 31, 2021, under IFRS we had $5,651 million of goodwill and $4,264 million of intangible assets ($1,549 million of which are intangible assets with indefinite lives). Goodwill and intangible assets with indefinite lives are tested at the cash generating unit level (“CGU”) or group of CGUs level. A CGU comprises the smallest group of assets that are capable of generating largely independent cash flows and is either a business segment or a level below. The tests performed in 2021 demonstrated that there was no impairment of goodwill or intangible assets with indefinite lives. Changes in discount rates and cash flow projections used in the determination of embedded values or reductions in market-based earnings multiples may result in impairment charges in the future, which could be material.

^1^	See “Caution regarding forward-looking statements” above.<br>

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Impairment charges could occur in the future as a result of changes in economic conditions. The goodwill testing for 2022 will be updated based on the conditions that exist in 2022 and may result in impairment charges, which could be material.

Future Accounting and ReportingChanges

There are several new accounting and reporting changes issued under IFRS including those still under development by the IASB. We have summarized below key recently issued accounting standards that are anticipated to have a significant impact on the Company. Accounting and reporting changes are discussed in note 2 of the 2021 Consolidated Financial Statements.

IFRS 9 “Financial Instruments”

IFRS 9 “Financial Instruments” was issued in November 2009 and amended in October 2010, November 2013 and July 2014, and is effective for years beginning on or after January 1, 2018, to be applied retrospectively, or on a modified retrospective basis. Additionally, the IASB issued amendments in October 2017 that are effective for annual periods beginning on or after January 1, 2019. In conjunction with the amendments to IFRS 17 issued in June 2020, the IASB amended IFRS 4 “Insurance Contracts” to permit eligible insurers to apply IFRS 9 effective January 1, 2023, alongside IFRS 17. The standard is intended to replace IAS 39 “Financial Instruments: Recognition and Measurement”.

The project has been divided into three phases: classification and measurement, impairment of financial assets, and hedge accounting. IFRS 9’s current classification and measurement methodology provides that financial assets are measured at either amortized cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The classification and measurement for financial liabilities remains generally unchanged; however, for a financial liability designated as at fair value through profit or loss, revisions have been made in the accounting for changes in fair value attributable to changes in the credit risk of that liability. Gains or losses caused by changes in an entity’s own credit risk on such liabilities are no longer recognized in profit or loss but instead are reflected in OCI.

Revisions to hedge accounting were issued in November 2013 as part of the overall IFRS 9 project. The amendment introduces a new hedge accounting model, together with corresponding disclosures about risk management activity for those applying hedge accounting. The new model represents a substantial overhaul of hedge accounting that will enable entities to better reflect their risk management activities in their financial statements.

Revisions issued in July 2014 replace the existing incurred loss model used for measuring the allowance for credit losses with an expected loss model. Changes were also made to the existing classification and measurement model designed primarily to address specific application issues raised by early adopters of the standard. They also address the income statement accounting mismatches and short-term volatility issues which have been identified as a result of the insurance contracts project.

The Company elected to defer IFRS 9 until January 1, 2023 as permitted under the June 2020 amendments to IFRS 4 “Insurance Contracts”. The Company is assessing the impact of this standard on the Company’s Consolidated Financial Statements.

IFRS 17 “Insurance Contracts”

IFRS 17 “Insurance Contracts” was issued in May 2017 to be effective for years beginning on January 1, 2021. Amendments to IFRS 17 “Insurance Contracts” were issued in June 2020 and include a two-year deferral of the effective date. IFRS 17 as amended, is effective for years beginning on January 1, 2023, to be applied retrospectively. If full retrospective application to a group of contracts is impractical, the modified retrospective or fair value methods may be used. The standard will replace IFRS 4 “Insurance Contracts” and will materially change the recognition and measurement of insurance contracts and the corresponding presentation and disclosures in the Company’s Financial Statements.

Narrow-scope amendments to IFRS 17 “Insurance Contracts” were issued in December 2021 and are effective on initial application of IFRS 17 and IFRS 9 “Financial Instruments” which the Company will adopt on January 1, 2023. The amendments remove accounting mismatches between insurance contract liabilities and financial assets in scope of IFRS 9 within comparative prior periods when initially applying IFRS 17 and IFRS 9. The amendments allow insurers to present comparative information on financial assets as if IFRS 9 were fully applicable during the comparative period. The amendments do not permit application of IFRS 9 hedge accounting principles to the comparative period. The Company is considering the effect of these amendments on its IFRS 9 transition disclosures.

The principles underlying IFRS 17 differ from CALM as permitted by IFRS 4. While there are many differences, the following outlines some of the key differences:

•	Under IFRS 17 the discount rate used to estimate the present value of insurance contract liabilities is based on the<br>characteristics of the liability, whereas under CALM, the Company uses the rates of returns for current and projected assets supporting insurance contract liabilities to value the liabilities. The difference in the discount rate approach also<br>impacts the timing of investment-related experience earnings emergence. Under CALM, investment-related experience includes the impact of investing activities. The impact of investing activities is directly related to the CALM methodology. Under IFRS<br>17, the impact of investing activities will emerge over the life of the asset and is independent of the liability measurement.
•	Under IFRS 17 the discount rate is not related to the expected return on our ALDA and public equity assets, and, as a<br>result, the earnings sensitivity of a change in return assumptions for ALDA and public equity **** will be significantly reduced.
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•	Under IFRS 17 the discount rate used to present value future cashflows is disconnected from the assets we hold to support<br>our insurance contract liabilities. As a result, we are considering electing the other comprehensive income option under IFRS 17 for our insurance contract liabilities and the fair value through other comprehensive income option under IFRS 9 for our<br>fixed income assets.
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•	Under IFRS 17 new business gains are recorded on the Consolidated Statements of Financial Position (in the Contractual<br>Service Margin component of the insurance contract liability) and amortized into income as services are provided. New business losses are recorded into income immediately. Under CALM, both new business gains and new business losses are recognized in<br>income immediately. We reported $1,274 million post-tax of new business gains in net income attributed to shareholders in 2021 (2020 – $909 million).
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•	The change in timing of recognition of earnings under IFRS 17 does not impact the cash flows generated by the business, and,<br>hence, IFRS 17 does not change the economics of our business. The value of new business will be recorded in the Contractual Service Margin on the Consolidated Statements of Financial Position. An increase in the Contractual Service Margin is<br>indicative of growth in future earnings, all else being equal.
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A summary of some of the key risks are outlined in the “Risk Factors and Risk Management – Emerging Risks” section above.

The Company continues its assessment of the implications of this standard and expects that it will have a significant impact on the Company’s Consolidated Financial Statements. The establishment of a Contractual Service Margin on our in-force business is expected to lead to an increase in insurance contract liabilities and a corresponding decrease in equity upon transition. The Contractual Service Margin represents unearned profits that are expected to amortize into income as services are provided. We continue to evaluate the potential impacts of all other changes including available accounting policy choices under IFRS 17 on the measurement of our insurance contract liabilities.

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12. Controls and Procedures

Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us is recorded, processed, summarized, and reported accurately and completely and within the time periods specified under Canadian and U.S. securities laws. Our process includes controls and procedures that are designed to ensure that information is accumulated and communicated to management, including the CEO and CFO, to allow timely decisions regarding required disclosure.

As of December 31, 2021, management evaluated the effectiveness of its disclosure controls and procedures as defined under the rules adopted by the U.S. Securities and Exchange Commission and the Canadian securities regulatory authorities. This evaluation was performed under the supervision of the Audit Committee, the CEO and CFO. Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as at December 31, 2021.

MFC’s Audit Committee has reviewed this MD&A and the 2021 Consolidated Financial Statements and MFC’s Board approved these reports prior to their release.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to management and the Board regarding the preparation and fair presentation of published financial statements in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management maintains a comprehensive system of controls intended to ensure that transactions are executed in accordance with management’s authorization, assets are safeguarded, and financial records are reliable. Management also takes steps to ensure that information and communication flows are effective and to monitor performance, including performance of internal control procedures.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework in Internal Control – Integrated Framework. Based on this assessment, management believes that, as of December 31, 2021, the Company’s internal control over financial reporting is effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, the Company’s independent registered public accounting firm that also audited the Consolidated Financial Statements of the Company for the year ended December 31, 2021. Their report expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

Changes in InternalControl over Financial Reporting

No changes were made in our internal control over financial reporting during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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13. Non-GAAP and Other Financial Measures

The Company prepares its Consolidated Financial Statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. We use a number of non-GAAP and other financial measures to evaluate overall performance and to assess each of our businesses. This section includes information required by National Instrument 52-112 – Non -GAAP and Other Financial Measures Disclosure in respect of “specified financial measures” (as defined therein).

Non-GAAP financial measures include core earnings (loss); pre-tax core earnings; core earnings available to common shareholders; core earnings before income taxes, depreciation and amortization (“core EBITDA”); core general expenses; Manulife Bank net lending assets; Manulife Bank average net lending assets; assets under management (“AUM”); assets under management and administration (“AUMA”); Global WAM managed AUMA; and net annualized fee income. In addition, non-GAAP financial measures include the following stated on a constant exchange rate (“CER”) basis: any of the foregoing non-GAAP financial measures; Global WAM revenue; net income attributed to shareholders; and common shareholders’ net income.

Non-GAAP ratios include core ROE; diluted core earnings per common share (“core EPS”); common share core dividend payout ratio; expense efficiency ratio; core EBITDA margin; effective tax rate on core earnings and net annualized fee income yield on average AUMA. In addition, non-GAAP ratios include the percentage growth/decline on a CER basis in any of the above non-GAAP financial measures; Global WAM revenue; net income attributed to shareholders; common shareholders’ net income; pre-tax net income attributed to shareholders; general expenses; basic earnings per common share; and diluted earnings per common share.

Other specified financial measures include assets under administration (“AUA”); consolidated capital; embedded value; new business value (“NBV”); new business value margin (“NBV margin”); sales; annualized premium equivalent (“APE”) sales; gross flows; net flows; market value to book value ratio; average assets under management and administration (“average AUMA”), Global WAM average managed AUMA; average assets under administration; remittances; any of the foregoing specified financial measures stated on a CER basis; and percentage growth/decline in any of the foregoing specified financial measures on a CER basis.

Non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under GAAP and, therefore, might not be comparable to similar financial measures disclosed by other issuers. Therefore, they should not be considered in isolation or as a substitute for any other financial information prepared in accordance with GAAP.

Core earnings (loss) is a financial measure which we believe aids investors in better understanding the long-term earnings capacity and valuation of the business. Core earnings allows investors to focus on the Company’s operating performance by excluding the direct impact of changes in equity markets and interest rates, changes in actuarial methods and assumptions as well as a number of other items, outlined below, that we believe are material, but do not reflect the underlying earnings capacity of the business. For example, due to the long-term nature of our business, the mark-to-market movements of equity markets, interest rates, foreign currency exchange rates and commodity prices from period-to-period can, and frequently do, have a substantial impact on the reported amounts of our assets, liabilities and net income attributed to shareholders. These reported amounts are not actually realized at the time and may never be realized if the markets move in the opposite direction in a subsequent period. This makes it very difficult for investors to evaluate how our businesses are performing from period-to-period and to compare our performance with other issuers.

We believe that core earnings better reflect the underlying earnings capacity and valuation of our business. We use core earnings as the basis for management planning and reporting and, along with net income attributed to shareholders, as a key metric used in our short and mid-term incentive plans at the total Company and operating segment level. We also base our mid and long-term strategic priorities on core earnings.

While core earnings is relevant to how we manage our business and offers a consistent methodology, it is not insulated from macro-economic factors which can have a significant impact. See below for reconciliation of core earnings to net income attributed to shareholders and income before income taxes. Net income attributed to shareholders excludes net income attributed to participating policyholders and non-controlling interests.

The items included in core earnings and items excluded from core earnings are determined in accordance with the methodology under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline and are listed below.

Any future changes to the core earnings definition referred to below, will be disclosed.

Items included in core earnings:

1.	Expected earnings on in-force policies, including expected release of provisions<br>for adverse deviation, fee income, margins on group business and spread business such as Manulife Bank and asset fund management.
2.	Macro hedging costs based on expected market returns.
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3.	New business strain and gains.
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4.	Policyholder experience gains or losses.
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5.	Acquisition and operating expenses compared with expense assumptions used in the measurement of policy liabilities.<br>
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6.	Up to $400 million of net favourable investment-related experience reported in a single year, which are referred to<br>as “core investment gains”. This means up to $100 million in the first quarter, up to $200 million on a year-to-date basis in the second<br>
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quarter, up to $300 million on a year-to-date basis in the third quarter and up to $400 million on a full<br>year basis in the fourth quarter. Any investment-related experience losses reported in a quarter will be offset against the net year-to-date investment-related<br>experience gains with the difference being included in core earnings subject to a maximum of the year-to-date core investment gains and a minimum of zero, which reflects<br>our expectation that investment-related experience will be positive through-the-business cycle. To the extent any investment-related experience losses cannot be fully<br>offset in a quarter, they will be carried forward to be offset against investment-related experience gains in subsequent quarters in the same year, for purposes of determining core investment gains. Investment-related experience relates to fixed<br>income investing, ALDA returns, credit experience and asset mix changes other than those related to a strategic change. An example of a strategic asset mix change is outlined below.
^¡^	This favourable and unfavourable investment-related experience is a combination of reported investment experience as well as<br>the impact of investing activities on the measurement of our policy liabilities. We do not attribute specific components of investment-related experience to amounts included or excluded from core earnings.
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^¡^	The $400 million threshold represents the estimated average annualized amount of net favourable investment-related<br>experience that the Company reasonably expects to achieve through-the-business cycle based on historical experience. It is not a forecast of expected net favourable<br>investment-related experience for any given fiscal year.
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^¡^	Our average net annualized investment-related experience, including core investment gains, calculated from the introduction<br>of core earnings in 2012 to the end of 2021 was $546 million (2012 to the end of 2020 was $380 million).
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^¡^	The decision announced on December 22, 2017 to reduce the allocation to ALDA in the portfolio asset mix supporting our<br>legacy businesses was the first strategic asset mix change since we introduced the core earnings metric in 2012. We refined our description of investment-related experience in 2017 to note that asset mix changes other than those related to a<br>strategic change are taken into consideration in the investment-related experience component of core investment gains.
---	---
^¡^	While historical investment return time horizons may vary in length based on underlying asset classes generally exceeding 20<br>years, for purposes of establishing the threshold, we look at a business cycle that is five or more years and includes a recession. We monitor the appropriateness of the threshold as part of our annual five-year planning process and would adjust it,<br>either to a higher or lower amount, in the future if we believed that our threshold was no longer appropriate.
---	---
^¡^	Specific criteria used for evaluating a potential adjustment to the threshold may include, but are not limited to, the<br>extent to which actual investment-related experience differs materially from actuarial assumptions used in measuring insurance contract liabilities, material market events, material dispositions or acquisitions of assets, and regulatory or<br>accounting changes.
---	---

Core investment gains are reported in the Corporate and Other segment, with an offsetting adjustment to investment-related experience gains and losses in items excluded from core earnings.

7.	Earnings on surplus other than<br>mark-to-market items. Gains on available-for-sale (“AFS”) equities and seed<br>money investments in segregated and mutual funds are included in core earnings.
8.	Routine or non-material legal settlements.
---	---
9.	All other items not specifically excluded.
---	---
10.	Tax on the above items.
---	---
11.	All tax related items except the impact of enacted or substantively enacted income tax rate changes.<br>
---	---

Items excluded from core earnings:

1.	The direct impact of equity markets and interest rates and variable annuity guarantee liabilities includes the items<br>listed below.
^¡^	The earnings impact of the difference between the net increase (decrease) in variable annuity liabilities that are<br>dynamically hedged and the performance of the related hedge assets. Our variable annuity dynamic hedging strategy is not designed to completely offset the sensitivity of insurance and investment contract liabilities to all risks or measurements<br>associated with the guarantees embedded in these products for a number of reasons, including: provisions for adverse deviation, fund performance, the portion of the interest rate risk that is not dynamically hedged, realized equity and interest rate<br>volatilities and changes to policyholder behaviour.
---	---
^¡^	Gains (charges) on variable annuity guarantee liabilities not dynamically hedged.
---	---
^¡^	Gains (charges) on general fund equity investments supporting policy liabilities and on fee income.
---	---
^¡^	Gains (charges) on macro equity hedges relative to expected costs. The expected cost of macro hedges is calculated using the<br>equity assumptions used in the valuation of insurance and investment contract liabilities.
---	---
^¡^	Gains (charges) on higher (lower) fixed income reinvestment rates assumed in the valuation of insurance and investment<br>contract liabilities.
---	---
^¡^	Gains (charges) on sale of AFS bonds and open derivatives not in hedging relationships in the Corporate and Other segment.<br>
---	---
2.	Net favourable investment-related experience in excess of $400 million per annum or net unfavourable<br>investment-related experience on a year-to-date basis.
---	---
3.	Mark-to-market gains or losses on assets<br>held in the Corporate and Other segment other than gains on AFS equities and seed money investments in new segregated or mutual funds.
---	---
4.	Changes in actuarial methods and assumptions. As noted in the “Critical Actuarial and Accounting Policies”<br>section above, policy liabilities for IFRS are valued in Canada under standards established by the Actuarial Standards Board. The standards require a comprehensive review of actuarial methods and assumptions to be performed annually. The review is<br>designed to reduce the Company’s exposure to uncertainty by ensuring assumptions for both asset related and liability related risks remain appropriate and is accomplished by monitoring experience and selecting assumptions which represent a<br>current best estimate view of expected
---	---
101
---
future experience, and margins that are appropriate for the risks assumed. Changes related to ultimate reinvestment rates (“URR”) are included in the direct impact of equity markets and<br>interest rates and variable annuity guarantee liabilities. By excluding the results of the annual reviews, core earnings assist investors in evaluating our operational performance and comparing our operational performance from period to period with<br>other global insurance companies because the associated gain or loss is not reflective of current year performance and not reported in net income in most actuarial standards outside of Canada.
---
5.	The impact on the measurement of policy liabilities of changes in product features or new reinsurance transactions, if<br>material.
---	---
6.	Goodwill impairment charges.
---	---
7.	Gains or losses on disposition of a business.
---	---
8.	Material one-time only adjustments, including highly unusual/extraordinary and<br>material legal settlements or other items that are material and exceptional in nature.
---	---
9.	Tax on the above items.
---	---
10.	Net income (loss) attributed to participating policyholders and non-controlling<br>interests.
---	---
11.	Impact of enacted or substantially enacted income tax rate changes.
---	---

102   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Reconciliation of core earnings to net income attributed to shareholders

	2021
($ in millions, post-tax and based on actual foreign exchange<br>rates<br> <br>in effect in the applicable reporting period, unless otherwise stated)	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Income (loss) before income taxes	$	3,188	****	$	1,791	****	$	2,484	****	$	1,641	****	$	(979	)	$	8,125	****
Income tax (expense) recovery
Core earnings	****	(322	)	****	(413	)	****	(418	)	****	(234	)	****	27	****	****	(1,360	)
Items excluded from core earnings	****	(120	)	****	77	****	****	32	****	****	(1	)	****	159	****	****	147	****
Income tax (expense) recovery	****	(442	)	****	(336	)	****	(386	)	****	(235	)	****	186	****	****	(1,213	)
Net income (post-tax)	****	2,746	****	****	1,455	****	****	2,098	****	****	1,406	****	****	(793	)	****	6,912	****
Less: Net income (post-tax) attributed to
Non-controlling interests	****	256	****	****	–	****	****	–	****	****	–	****	****	(1	)	****	255	****
Participating policyholders	****	(567	)	****	101	****	****	18	****	****	–	****	****	–	****	****	(448	)
Net income (loss) attributed to shareholders(post-tax)	****	3,057	****	****	1,354	****	****	2,080	****	****	1,406	****	****	(792	)	****	7,105	****
Less: Items excluded from core earnings^(1^^)^
Investment-related experience outside of core earnings	****	313	****	****	329	****	****	1,341	****	****	–	****	****	(341	)	****	1,642	****
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities	****	169	****	****	(89	)	****	(727	)	****	–	****	****	(170	)	****	(817	)
Change in actuarial methods and assumptions	****	343	****	****	(65	)	****	(314	)	****	–	****	****	(5	)	****	(41	)
Restructuring charge	****	–	****	****	–	****	****	–	****	****	–	****	****	(115	)	****	(115	)
Reinsurance transactions, tax related items and other	****	56	****	****	–	****	****	(156	)	****	–	****	****	–	****	****	(100	)
Core earnings (post-tax)	$	2,176	****	$	1,179	****	$	1,936	****	$	1,406	****	$	(161	)	$	6,536	****
Income tax on core earnings (see above)	****	322	****	****	413	****	****	418	****	****	234	****	****	(27	)	****	1,360	****
Core earnings(pre-tax)	$	2,498	****	$	1,592	****	$	2,354	****	$	1,640	****	$	(188	)	$	7,896	****
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
---	---

Core earnings, CER basis and U.S. dollars

(Canadian in millions, post-tax and based on actual foreign<br>exchange rates in effect in the applicable reporting period, unless otherwise stated)			Canada		U.S.		Global WAM		Corporate<br>and Other			Total<br>Company
Core earnings (post-tax)	2,176	****	$	1,179	$	1,936	$	1,406	$	(161	)	$	6,536
CER<br>adjustment(1)	(1	)	****	–	****	9	****	4	****	1	****	****	13
Core earnings, CER basis (post-tax)	2,175	****	$	1,179	$	1,945	$	1,410	$	(160	)	$	6,549
Income tax on core earnings, CER basis(2)	321	****	****	413	****	421	****	234	****	(26	)	****	1,363
Core earnings, CER basis (pre-tax)	2,496	****	$	1,592	$	2,366	$	1,644	$	(186	)	$	7,912
Core earnings (U.S. dollars) –<br>Asia and U.S. segments(1)
Core earnings (post-tax)(3), US	1,736	****			US$	1,544
CER adjustment US<br>(1)	(8	)			****	–
Core earnings, CER basis (post-tax), US	1,728	****			US$	1,544

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(3)^	Core earnings (post-tax) in Canadian $ is translated to US $ using the US $<br>Statement of Income exchange rates for the 4 respective quarters that make up 2021 core earnings.
---	---
103
---

Reconciliation of core earnings to net income attributed to shareholders

	2020																		2019
($ in millions, post-tax and based on actual foreign exchange<br>rates<br> <br>in effect in the applicable reporting period, unless otherwise stated)	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total<br>Company			Total<br>Company
Income (loss) before income taxes	$	1,635		$	390		$	1,564		$	1,272		$	1,910		$	6,771		$	6,220
Income tax (expense) recovery
Core earnings		(336	)		(378	)		(481	)		(172	)		199			(1,168	)		(1,083	)
Items excluded from core earnings		104			247			186			–			(564	)		(27	)		365
Income tax (expense) recovery		(232	)		(131	)		(295	)		(172	)		(365	)		(1,195	)		(718	)
Net income (post-tax)		1,403			259			1,269			1,100			1,545			5,576			5,502
Less: Net income (post-tax) attributed to
Non-controlling interests		250			–			–			–			–			250			233
Participating policyholders		(609	)		64			–			–			–			(545	)		(333	)
Net income (loss) attributed to shareholders(post-tax)		1,762			195			1,269			1,100			1,545			5,871			5,602
Less: Items excluded from core earnings^(1)^
Investment-related experience outside of core earnings		218			(260	)		(717	)		–			(33	)		(792	)		366
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities		(583	)		(817	)		30			–			2,302			932			(778	)
Change in actuarial methods and assumptions		(41	)		77			(301	)		–			67			(198	)		(21	)
Restructuring charge		–			–			–			–			–			–			–
Reinsurance transactions, tax related items and other		58			21			262			–			72			413			31
Core earnings (post-tax)	$	2,110		$	1,174		$	1,995		$	1,100		$	(863	)	$	5,516		$	6,004
Income tax on core earnings (see above)		336			378			481			172			(199	)		1,168
Core earnings(pre-tax)	$	2,446		$	1,552		$	2,476		$	1,272		$	(1,062	)	$	6,684
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
---	---

Core earnings, CER basis and U.S. dollars

(Canadian in millions, post-tax and based on actual foreign<br>exchange rates in effect in the applicable reporting period, unless otherwise stated)			Canada		U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Core earnings (post-tax)	2,110		$	1,174	$	1,995		$	1,100		$	(863	)	$	5,516
CER<br>adjustment(1)	(128	)		–		(124	)		(42	)		(9	)		(303	)
Core earnings, CER basis (post-tax)	1,982		$	1,174	$	1,871		$	1,058		$	(872	)	$	5,213
Income tax on core earnings, CER basis(2)	323			378		450			169			(199	)		1,121
Core earnings, CER basis (pre-tax)	2,305		$	1,552	$	2,321		$	1,227		$	(1,071	)	$	6,334
Core earnings (U.S. dollars) –<br>Asia and U.S. segments(1)
Core earnings (post-tax)(3), US	1,576				US$	1,485
CER adjustment US<br>(1)	(1	)				–
Core earnings, CER basis (post-tax), US	1,575				US$	1,485

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(3)^	Core earnings (post-tax) in Canadian $ is translated to US $ using the US $<br>Statement of Income exchange rates for 4 respective quarters that make up 2020 core earnings.
---	---

104   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Reconciliation of core earnings to net income attributed to shareholders

	4Q21
($ in millions, post-tax and based on actual foreign exchange<br>rates<br> <br>in effect in the applicable reporting period, unless otherwise stated)	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Income (loss) before income taxes	$	684	****	$	806	****	$	614	****	$	438	****	$	(61	)	$	2,481	****
Income tax (expense) recovery
Core earnings	****	(68	)	****	(101	)	****	(117	)	****	(52	)	****	(8	)	****	(346	)
Items excluded from core earnings	****	(13	)	****	(77	)	****	(4	)	****	–	****	****	10	****	****	(84	)
Income tax (expense) recovery	****	(81	)	****	(178	)	****	(121	)	****	(52	)	****	2	****	****	(430	)
Net income (post-tax)	****	603	****	****	628	****	****	493	****	****	386	****	****	(59	)	****	2,051	****
Less: Net income (post-tax) attributed to
Non-controlling interests	****	34	****	****	–	****	****	–	****	****	(1	)	****	(1	)	****	32	****
Participating policyholders	****	(76	)	****	12	****	****	(1	)	****	–	****	****	–	****	****	(65	)
Net income (loss) attributed to shareholders(post-tax)	****	645	****	****	616	****	****	494	****	****	387	****	****	(58	)	****	2,084	****
Less: Items excluded from core earnings^(1)^
Investment-related experience outside of core earnings	****	58	****	****	90	****	****	58	****	****	–	****	****	(80	)	****	126	****
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities	****	32	****	****	240	****	****	125	****	****	–	****	****	1	****	****	398	****
Change in actuarial methods and assumptions	****	–	****	****	–	****	****	–	****	****	–	****	****	–	****	****	–	****
Restructuring charge	****	–	****	****	–	****	****	–	****	****	–	****	****	–	****	****	–	****
Reinsurance transactions, tax related items and other	****	8	****	****	–	****	****	(156	)	****	–	****	****	–	****	****	(148	)
Core earnings (post-tax)	$	547	****	$	286	****	$	467	****	$	387	****	$	21	****	$	1,708	****
Income tax on core earnings (see above)	****	68	****	****	101	****	****	117	****	****	52	****	****	8	****	****	346	****
Core earnings(pre-tax)	$	615	****	$	387	****	$	584	****	$	439	****	$	29	****	$	2,054	****
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
---	---

Core earnings, CER basis and U.S. dollars

(Canadian in millions, post-tax and based on actual foreign<br>exchange rates in effect in the applicable reporting period, unless otherwise stated)		Canada		U.S.		Global WAM		Corporate<br>and Other		Total<br>Company
Core earnings (post-tax)	547	$	286	$	467	$	387	$	21	$	1,708
CER<br>adjustment(1)	–	****	–	****	–	****	–	****	–	****	–
Core earnings, CER basis (post-tax)	547	$	286	$	467	$	387	$	21	$	1,708
Income tax on core earnings, CER basis(2)	68	****	101	****	117	****	52	****	8	****	346
Core earnings, CER basis (pre-tax)	615	$	387	$	584	$	439	$	29	$	2,054
Core earnings (U.S. dollars) –<br>Asia and U.S. segments(1)
Core earnings (post-tax)(3), US	435			US$	370
CER adjustment US<br>(1)	–			****	–
Core earnings, CER basis (post-tax), US	435			US$	370

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(3)^	Core earnings (post-tax) in Canadian $ is translated to US $ using the US $<br>Statement of Income exchange rate for 4Q21.
---	---
105
---

Reconciliation of core earnings to net income attributed to shareholders

	3Q21
($ in millions, post-tax and based on actual foreign exchange<br>rates<br> <br>in effect in the applicable reporting period, unless otherwise stated)	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Income (loss) before income taxes	$	650		$	(101	)	$	800		$	418		$	(287	)	$	1,480
Income tax (expense) recovery
Core earnings		(52	)		(109	)		(79	)		(66	)		12			(294	)
Items excluded from core earnings		(31	)		153			(16	)		(1	)		23			128
Income tax (expense) recovery		(83	)		44			(95	)		(67	)		35			(166	)
Net income (post-tax)		567			(57	)		705			351			(252	)		1,314
Less: Net income (post-tax) attributed to
Non-controlling interests		48			–			–			–			–			48
Participating policyholders		(303	)		(31	)		8			–			–			(326	)
Net income (loss) attributed to shareholders(post-tax)		822			(26	)		697			351			(252	)		1,592
Less: Items excluded from core earnings^(1)^
Investment-related experience outside of core earnings		62			97			617			–			(76	)		700
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities		(129	)		(369	)		(96	)		–			(3	)		(597	)
Change in actuarial methods and assumptions		343			(65	)		(314	)		–			(5	)		(41	)
Restructuring charge		–			–			–			–			–			–
Reinsurance transactions, tax related items and other		13			–			–			–			–			13
Core earnings (post-tax)	$	533		$	311		$	490		$	351		$	(168	)	$	1,517
Income tax on core earnings (see above)		52			109			79			66			(12	)		294
Core earnings(pre-tax)	$	585		$	420		$	569		$	417		$	(180	)	$	1,811
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
---	---

Core earnings, CER basis and U.S. dollars

(Canadian in millions, post-tax and based on actual foreign<br>exchange rates in effect in the applicable reporting period, unless otherwise stated)			Canada		U.S.		Global WAM			Corporate<br>and Other			Total<br>Company
Core earnings (post-tax)	533		$	311	$	490	$	351		$	(168	)	$	1,517
CER<br>adjustment(1)	(2	)		–		–		(1	)		–			(3	)
Core earnings, CER basis (post-tax)	531		$	311	$	490	$	350		$	(168	)	$	1,514
Income tax on core earnings, CER basis(2)	51			109		80		66			(12	)		294
Core earnings, CER basis (pre-tax)	582		$	420	$	570	$	416		$	(180	)	$	1,808
Core earnings (U.S. dollars) –<br>Asia and U.S. segments(1)
Core earnings (post-tax)(3), US	424				US$	389
CER adjustment US<br>(1)	(3	)				–
Core earnings, CER basis (post-tax), US	421				US$	389

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(3)^	Core earnings (post-tax) in Canadian $ is translated to US $ using the US $<br>Statement of Income exchange rate for 3Q21.
---	---

106   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Reconciliation of core earnings to net income attributed to shareholders

	2Q21
($ in millions, post-tax and based on actual foreign exchange<br>rates<br> <br>in effect in the applicable reporting period, unless otherwise stated)	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Income (loss) before income taxes	$	736		$	1,031		$	986		$	419		$	120		$	3,292
Income tax (expense) recovery
Core earnings		(78	)		(112	)		(106	)		(64	)		6			(354	)
Items excluded from core earnings		(22	)		(107	)		(83	)		1			(45	)		(256	)
Income tax (expense) recovery		(100	)		(219	)		(189	)		(63	)		(39	)		(610	)
Net income (post-tax)		636			812			797			356			81			2,682
Less: Net income (post-tax) attributed to
Non-controlling interests		84			–			–			–			–			84
Participating policyholders		(81	)		29			4			–			–			(48	)
Net income (loss) attributed to shareholders(post-tax)		633			783			793			356			81			2,646
Less: Items excluded from core earnings^(1)^
Investment-related experience outside of core earnings		121			207			506			–			(95	)		739
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities		(22	)		258			(191	)		–			172			217
Change in actuarial methods and assumptions		–			–			–			–			–			–
Restructuring charge		–			–			–			–			–			–
Reinsurance transactions, tax related items and other		8			–			–			–			–			8
Core earnings (post-tax)	$	526		$	318		$	478		$	356		$	4		$	1,682
Income tax on core earnings (see above)		78			112			106			64			(6	)		354
Core earnings(pre-tax)	$	604		$	430		$	584		$	420		$	(2	)	$	2,036
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
---	---

Core earnings, CER basis and U.S. dollars

(Canadian in millions, post-tax and based on actual foreign<br>exchange rates in effect in the applicable reporting period, unless otherwise stated)			Canada		U.S.		Global WAM		Corporate<br>and Other			Total<br>Company
Core earnings (post-tax)	526		$	318	$	478	$	356	$	4		$	1,682
CER<br>adjustment(1)	10			–		12		6		1			29
Core earnings, CER basis (post-tax)	536		$	318	$	490	$	362	$	5		$	1,711
Income tax on core earnings, CER basis(2)	80			112		108		64		(5	)		359
Core earnings, CER basis (pre-tax)	616		$	430	$	598	$	426	$	–		$	2,070
Core earnings (U.S. dollars) –<br>Asia and U.S. segments(1)
Core earnings (post-tax)(3), US	427				US$	389
CER adjustment US<br>(1)	(1	)				–
Core earnings, CER basis (post-tax), US	426				US$	389

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(3)^	Core earnings (post-tax) in Canadian $ is translated to US $ using the US $<br>Statement of Income exchange rate for 2Q21.
---	---
107
---

Reconciliation of core earnings to net income attributed to shareholders

	1Q21
($ in millions, post-tax and based on actual foreign exchange<br>rates<br> <br>in effect in the applicable reporting period, unless otherwise stated)	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Income (loss) before income taxes	$	1,118		$	55		$	84		$	366		$	(751	)	$	872
Income tax (expense) recovery
Core earnings		(124	)		(91	)		(116	)		(52	)		17			(366	)
Items excluded from core earnings		(54	)		108			135			(1	)		171			359
Income tax (expense) recovery		(178	)		17			19			(53	)		188			(7	)
Net income (post-tax)		940			72			103			313			(563	)		865
Less: Net income (post-tax) attributed to
Non-controlling interests		90			–			–			1			–			91
Participating policyholders		(107	)		91			7			–			–			(9	)
Net income (loss) attributed to shareholders(post-tax)		957			(19	)		96			312			(563	)		783
Less: Items excluded from core earnings^(1)^
Investment-related experience outside of core earnings		72			(65	)		160			–			(90	)		77
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities		288			(218	)		(565	)		–			(340	)		(835	)
Change in actuarial methods and assumptions		–			–			–			–			–			–
Restructuring charge		–			–			–			–			(115	)		(115	)
Reinsurance transactions, tax related items and other		27			–			–			–			–			27
Core earnings (post-tax)	$	570		$	264		$	501		$	312		$	(18	)	$	1,629
Income tax on core earnings (see above)		124			91			116			52			(17	)		366
Core earnings(pre-tax)	$	694		$	355		$	617		$	364		$	(35	)	$	1,995
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
---	---

Core earnings, CER basis and U.S. dollars

(Canadian in millions, post-tax and based on actual foreign<br>exchange rates in effect in the applicable reporting period, unless otherwise stated)			Canada		U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Core earnings (post-tax)	570		$	264	$	501		$	312		$	(18	)	$	1,629
CER<br>adjustment(1)	(9	)		–		(3	)		(1	)		–			(13	)
Core earnings, CER basis (post-tax)	561		$	264	$	498		$	311		$	(18	)	$	1,616
Income tax on core earnings, CER basis(2)	122			91		116			52			(17	)		364
Core earnings, CER basis (pre-tax)	683		$	355	$	614		$	363		$	(35	)	$	1,980
Core earnings (U.S. dollars) –<br>Asia and U.S. segments(1)
Core earnings (post-tax)(3), US	450				US$	396
CER adjustment US<br>(1)	(4	)				–
Core earnings, CER basis (post-tax), US	446				US$	396

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(3)^	Core earnings (post-tax) in Canadian $ is translated to US $ using the US $<br>Statement of Income exchange rate for 1Q21.
---	---

108   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Reconciliation of core earnings to net income attributed to shareholders

	4Q20
($ in millions, post-tax and based on actual foreign exchange rates<br><br><br>in effect in the applicable reporting period, unless otherwise stated)	Asia			Canada			U.S.			Global WAM			Corporate<br><br><br>and Other			Total<br><br><br>Company
Income (loss) before income taxes	$	755		$	707		$	108		$	361		$	134		$	2,065
Income tax (expense) recovery
Core earnings		(89	)		(86	)		(110	)		(57	)		49			(293	)
Items excluded from core earnings		1			40			108			–			(80	)		69
Income tax (expense) recovery		(88	)		(46	)		(2	)		(57	)		(31	)		(224	)
Net income (post-tax)		667			661			106			304			103			1,841
Less: Net income (post-tax) attributed to
Non-controlling interests		57			–			–			–			–			57
Participating policyholders		(29	)		33			–			–			–			4
Net income (loss) attributed to shareholders (post-tax)		639			628			106			304			103			1,780
Less: Items excluded from core earnings^(1)^
Investment-related experience outside of core earnings		127			332			110			–			16			585
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities		(88	)		(35	)		(483	)		–			283			(323	)
Change in actuarial methods and assumptions		–			–			–			–			–			–
Restructuring charge		–			–			–			–			–			–
Reinsurance transactions, tax related items and other		29			15			–			–			–			44
Core earnings (post-tax)	$	571		$	316		$	479		$	304		$	(196	)	$	1,474
Income tax on core earnings (see above)		89			86			110			57			(49	)		293
Core earnings(pre-tax)	$	660		$	402		$	589		$	361		$	(245	)	$	1,767
^(1)^	These items are disclosed under OSFI’s Source of Earnings Disclosure (Life Insurance Companies) guideline.<br>
---	---

Core earnings, CER basis and U.S. dollars

(Canadian in millions, post-tax and based on actual foreign exchange rates<br>in effect in the applicable reporting period, unless otherwise stated)			Canada		U.S.			Global WAM			Corporate<br>and Other			Total<br>Company
Core earnings (post-tax)	571		$	316	$	479		$	304		$	(196	)	$	1,474
CER<br>adjustment(1)	(24	)		–		(16	)		(6	)		(1	)		(47	)
Core earnings, CER basis (post-tax)	547	****	$	316	$	463		$	298	****	$	(197	) ****	$	1,427
Income tax on core earnings, CER basis(2)	87			86		106			56			(49	)		286
Core earnings, CER basis (pre-tax)	634		$	402	$	569		$	354		$	(246	)	$	1,713
Core earnings (U.S. dollars) –<br>Asia and U.S. segments(1)
Core earnings (post-tax)(3),<br>US	438				US$	367
CER adjustment US<br>(1)	(3	)				–
Core earnings, CER basis (post-tax), US	435				US$	367

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Income tax on core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(3)^	Core earnings (post-tax) in Canadian $ is translated to US $ using the US $ Statement of Income exchange rate for 4Q20.<br>
---	---
109
---

Segment core earnings by business line or geographic source

($ millions, post-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)

Asia

(US $ in millions)	Quarterly															Full Year
	4Q21			3Q21			2Q21			1Q21			4Q20			2021			2020
Hong Kong	$	270	****	$	248		$	214		$	217		$	229		$	949	****	$	813
Japan	****	77	****		86			78			82			78		****	323	****		310
Asia Other^(1)^	****	132	****		125			169			193			157		****	619	****		572
China																	96			139
Singapore																	162			110
Vietnam																	290			233
Other EmergingMarkets^(2)^																	71			90
Regional Office	****	(44	)		(35	)		(34	)		(42	)		(26	)	****	(155	)		(119	)
Total Asia core earnings	$	435	****	$	424		$	427		$	450		$	438		$	1,736	****	$	1,576
^(1)^	Core earnings for Asia Other is reported by country annually, on a full year basis.
---	---
^(2)^	Other Emerging Markets includes Indonesia, the Philippines, Malaysia, Thailand, Cambodia and Myanmar.<br>
---	---
(US $ in millions), CER basis^(1)^	Quarterly															Full Year
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	4Q21			3Q21			2Q21			1Q21			4Q20			2021			2020
Hong Kong	$	270	****	$	248		$	214		$	217		$	230		$	949	****	$	813
Japan	****	77	****		83			75			77			71		****	312	****		291
Asia Other^(2)^	****	132	****		125			170			195			161		****	622	****		590
China																	97			150
Singapore																	161			111
Vietnam																	294			238
Other EmergingMarkets^(3)^																	70			91
Regional Office	****	(44	)		(35	)		(33	)		(43	)		(27	)	****	(155	)		(119	)
Total Asia core earnings, CER basis	$	435	****	$	421		$	426		$	446		$	435		$	1,728	****	$	1,575
^(1)^	Core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---
^(2)^	Core earnings for Asia Other is reported by country annually, on a full year basis.
---	---
^(3)^	Other Emerging Markets includes Indonesia, the Philippines, Malaysia, Thailand, Cambodia and Myanmar.<br>
---	---

Canada

(Canadian $ in millions)	Quarterly										Full Year
	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Insurance	$	184	$	211	$	210	$	165	$	204	$	770	$	765
Annuities	****	62		56		64		52		64	****	234		252
Manulife Bank	****	40		44		44		47		48	****	175		157
Total Canada core earnings	$	286	$	311	$	318	$	264	$	316	$	1,179	$	1,174

U.S.

(US $ in millions)	Quarterly										Full Year
	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
U.S. Insurance	$	274	$	279	$	298	$	277	$	247	$	1,128	$	1,045
U.S. Annuities	****	96		110		91		119		120	****	416		440
Total U.S. core earnings	$	370	$	389	$	389	$	396	$	367	$	1,544	$	1,485

110   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Global WAM by business line

	Quarterly										Full Year
(Canadian $ in millions)	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Retirement	$	218	$	206	$	206	$	189	$	182	$	819	$	641
Retail	****	160		136		137		118		116	****	551		435
Institutional asset management	****	9		9		13		5		6	****	36		24
Total Global WAM core earnings	$	387	$	351	$	356	$	312	$	304	$	1,406	$	1,100
	Quarterly										Full Year
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Canadian $ in millions), CER basis^(1)^	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Retirement	$	218	$	206	$	210	$	188	$	178	$	822	$	612
Retail	****	160		136		139		118		114	****	553		423
Institutional asset management	****	9		8		13		5		6	****	35		23
Total Global WAM core earnings, CERbasis	$	387	$	350	$	362	$	311	$	298	$	1,410	$	1,058
^(1)^	Core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---

Global WAM by geographic source

	Quarterly										Full Year
(Canadian $ in millions)	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Asia	$	88	$	103	$	103	$	103	$	84	$	397	$	344
Canada	****	119		106		108		96		102	****	429		363
U.S.	****	180		142		145		113		118	****	580		393
Total Global WAM core earnings	$	387	$	351	$	356	$	312	$	304	$	1,406	$	1,100
	Quarterly										Full Year
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(Canadian $ in millions), CER basis^(1)^	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Asia	$	88	$	102	$	106	$	102	$	82	$	398	$	324
Canada	****	119		106		108		96		102	****	429		363
U.S.	****	180		142		148		113		114	****	583		371
Total Global WAM core earnings, CERbasis	$	387	$	350	$	362	$	311	$	298	$	1,410	$	1,058
^(1)^	Core earnings adjusted to reflect the foreign exchange rates for the Statement of Income in effect for 4Q21.<br>
---	---

Corporate and Other

	Quarterly															Full Year
(Canadian $ in millions)	4Q21			3Q21			2Q21			1Q21			4Q20			2021			2020
Corporate and Other excluding core investment gains	$	(79	)	$	(268	)	$	(96	)	$	(118	)	$	(196	)	$	(561	)	$	(863	)
Core investment gains	****	100	****		100			100			100			–		****	400	****		–
Total Corporate and Other coreearnings	$	21	****	$	(168	)	$	4		$	(18	)	$	(196	)	$	(161	)	$	(863	)

Core earnings available to common shareholders is a financial measure that is used in the calculation of core ROE and core EPS. It is calculated as core earnings (post-tax) less preferred share dividends.

($ millions, post-tax and based on actual foreign exchange rates<br><br><br>in effect in the applicable reporting period, unless otherwise stated)	Quarterly															Full Year
	4Q21			3Q21			2Q21			1Q21			4Q20			2021			2020
Core earnings (post-tax)	$	1,708	****	$	1,517		$	1,682		$	1,629		$	1,474		$	6,536	****	$	5,516
Less: Preferred share dividends	****	(71	)		(37	)		(64	)		(43	)		(43	)	****	(215	)		(171	)
Core earnings available to commonshareholders	****	1,637	****		1,480			1,618			1,586			1,431		****	6,321	****		5,345
CER<br>adjustment^(1)^	****	–	****		(3	)		29			(13	)		(47	)	****	13	****		(303	)
Core earnings available to common shareholders, CERbasis	$	1,637	****	$	1,477		$	1,647		$	1,573		$	1,384		$	6,334	****	$	5,042
^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
---	---

Core ROE measures profitability using core earnings available to common shareholders as a percentage of the capital deployed to earn the core earnings. The Company calculates core ROE using average common shareholders’ equity quarterly, as the average of common shareholders’ equity at the start and end of the quarter, and annually, as the average of the quarterly average common shareholders’ equity for the year.

111
($ millions and based on actual foreign exchange rates<br><br><br>in effect in the applicable reporting period)	Quarterly															Full Year
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	4Q21			3Q21			2Q21			1Q21			4Q20			2021			2020
Core earnings available to common shareholders (post-tax)	$	1,637	****	$	1,480		$	1,618		$	1,586		$	1,431		$	6,321	****	$	5,345
Annualized core earnings available to commonshareholders (post-tax)	$	6,483	****	$	5,874		$	6,485		$	6,435		$	5,697		$	6,321	****	$	5,345
Average common shareholders’ equity (seebelow)	$	51,049	****	$	49,075		$	46,757		$	46,974		$	48,984		$	48,463	****	$	49,145
Core ROE	****	12.7%	****		12.0%			13.9%			13.7%			11.6%		****	13.0%	****		10.9%
Average common shareholders’ equity
Total shareholders’ and other equity	$	58,408	****	$	55,457		$	53,466		$	51,238		$	52,335		$	58,408	****	$	52,335
Less: Preferred shares and other equity	****	(6,381	)		(5,387	)		(5,387	)		(5,804	)		(3,822	)	****	(6,381	)		(3,822	)
Common shareholders’ equity	$	52,027	****	$	50,070		$	48,079		$	45,434		$	48,513		$	52,027	****	$	48,513
Average common shareholders’equity	$	51,049	****	$	49,075		$	46,757		$	46,974		$	48,984		$	48,463	****	$	49,145

Core EPS is equal to core earnings available to common shareholders divided by diluted weighted average common shares outstanding.

($ millions and based on actual foreign exchange rates<br><br><br>in effect in the applicable reporting period, unless otherwise stated)	Quarterly										Full Year
	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Core EPS
Core earnings available to common shareholders (post-tax)	$	1,637	$	1,480	$	1,618	$	1,586	$	1,431	$	6,321	$	5,345
Diluted weighted average common shares outstanding (millions)	****	1,946		1,946		1,946		1,945		1,943	****	1,946		1,943
Core earnings per share	****	0.84		0.76		0.83		0.82		0.74	****	3.25		2.75
Core EPS, CER basis
Core earnings available to common shareholders (post-tax), CER basis	$	1,637	$	1,477	$	1,647	$	1,573	$	1,384	$	6,334	$	5,042
Diluted weighted average common shares outstanding (millions)	****	1,946		1,946		1,946		1,945		1,943	****	1,946		1,943
Core earnings per share, CER basis	****	0.84		0.76		0.85		0.81		0.71	****	3.26		2.59

Core earnings related to strategic priorities

The Company measures its progress on certain strategic priorities using core earnings. These strategic priorities include core earnings from highest potential businesses, core earnings from Asia region, and core earnings from long-term care insurance (“LTC”) and variable annuities (“VA”) businesses. The core earnings for these businesses is calculated consistent with our definition of core earnings.

Highest potential businesses
For the years ended December 31,	2021			2020
($ millions, post-tax and based on actual foreign exchange rates in<br>effect in the applicable reporting period)	Reported	Adjustments	Normalized	Reported	Adjustments(2)	Normalized
Core earnings highest potential businesses^(1)^
Core earnings – All other businesses excl. core investment gains
Core investment gains	400	–	400	–	400	400
Core earnings (post-tax)	6,536	–	6,536	5,516	400	5,916
Items excluded from core earnings	569	–	569	355	–	355
Net income (loss) attributed to shareholders (post-tax)	7,105	–	7,105	5,871	400	6,271
Highest Potential Businesses Core Earnings contribution	63%		63%	66%		62%

All values are in US Dollars.

^(1)^	Includes core earnings from Asia and Global WAM segments, Canada Group Benefits, and behavioural insurance products.<br>
^(2)^	To provide a consistent basis for year over year comparison, 2020 total company core earnings were normalized to include<br>$400 million of annual core investment gains.
---	---

112   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Asia region
For the years ended December 31,	2021						2020
($ millions, post-tax and based on actual foreign exchange rates in<br>effect in the applicable reporting period)	Reported		Adjustments		Normalized		Reported		Adjustments^(2)^		Normalized
Core earnings of Asia region^(1)^	$	2,573	$	–	$	2,573	$	2,454	$	–	$	2,454
Core earnings – All other businesses excl. core investment gains	****	3,563	****	–	****	3,563		3,062		–		3,062
Core investment gains	****	400	****	–	****	400		–		400		400
Core earnings (post-tax)	****	6,536	****	–	****	6,536		5,516		400		5,916
Items excluded from core earnings	****	569	****	–	****	569		355		–		355
Net income (loss) attributed to shareholders(post-tax)	$	7,105	$	–	$	7,105	$	5,871	$	400	$	6,271
Asia Region Core Earningscontribution	****	39%			****	39%		44%				41%
^(1)^	Includes core earnings from Asia segment and Global WAM’s business in Asia.
---	---
^(2)^	To provide a consistent basis for year over year comparison, 2020 total company core earnings were normalized to include<br>$400 million of annual core investment gains.
---	---
LTC & VA businesses
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
For the years ended December 31,	2021							2020
($ millions, post-tax and based on actual foreign exchange rates in<br>effect in the applicable reporting period)	Reported		Adjustments^(3)^			Normalized		Reported		Adjustments^(2),(3)^			Normalized
Core earnings of LTC and VA businesses^(1)^	$	1,426	$	(152	)	$	1,274	$	1,611	$	(170	)	$	1,441
Core earnings – All other businesses excl. core investment gains	****	4,710	****	–	****	****	4,710		3,905		–			3,905
Core investment gains	****	400	****	–	****	****	400		–		400			400
Core earnings (post-tax)	****	6,536	****	(152	)	****	6,384		5,516		230			5,746
Items excluded from core earnings	****	569	****	–	****	****	569		355		–			355
Net income (loss) attributed to shareholders(post-tax)	$	7,105	$	(152	)	$	6,953	$	5,871	$	230		$	6,101
LTC & VA Core Earningscontribution	****	22%				****	20%		29%					25%
^(1)^	Includes core earnings from U.S. long-term care and Asia, Canada and U.S. variable annuities businesses.<br>
---	---
^(2)^	To provide a consistent basis for year over year comparison, 2020 total company core earnings were normalized to include<br>$400 million of annual core investment gains.
---	---
^(3)^	2021 and 2020 total company and U.S. LTC core earnings were normalized to remove estimated gains on U.S. LTC policyholder<br>experience due to COVID-19.
---	---

The effective tax rate on core earnings is equal to income tax on core earnings divided by pre-tax core earnings.

The Company also uses financial performance measures that are prepared on a constant exchange rate basis, which exclude the impact of currency fluctuations (from local currency to Canadian dollars at a total Company level and from local currency to U.S. dollars in Asia). Such financial measures may be stated on a constant exchange rate basis or the percentage growth/decline in the financial measure on a constant exchange rate basis, using the income statement and balance sheet exchange rates effective for the fourth quarter of 2021.

Information supporting constant exchange rate basis for GAAP and non-GAAP financial measures is presented below and throughout the rest of this section.

113

Net income financial measures on a CER basis

( millions, post-tax and based on actual foreign exchange rates in effectin the applicable reporting period, unless otherwise stated)															Full Year
			3Q21			2Q21			1Q21			4Q20			2021			2020
Net income (loss) attributed to shareholders:
Asia	645	****	$	822		$	633		$	957		$	639		$	3,057	****	$	1,762
Canada	616	****		(26	)		783			(19	)		628		****	1,354	****		195
U.S.	494	****		697			793			96			106		****	2,080	****		1,269
Global WAM	387	****		351			356			312			304		****	1,406	****		1,100
Corporate and Other	(58	)		(252	)		81			(563	)		103		****	(792	)		1,545
Total net income (loss) attributed to shareholders	2,084	****		1,592			2,646			783			1,780		****	7,105	****		5,871
Preferred share dividends and other equity distributions	(71	)		(37	)		(64	)		(43	)		(43	)	****	(215	)		(171	)
Common shareholders net income<br>(loss)	2,013	****	$	1,555		$	2,582		$	740		$	1,737		$	6,890	****	$	5,700
CER adjustment(1)
Asia	–	****	$	–		$	12		$	16		$	(25	)	$	28	****	$	(112	)
Canada	–	****		–			–			–			–		****	–	****		–
U.S.	–	****		1			22			2			1		****	25	****		(19	)
Global WAM	–	****		1			5			(1	)		(7	)	****	5	****		(46	)
Corporate and Other	–	****		–			4			2			(4	)	****	6	****		(91	)
Total net income (loss) attributed to shareholders	–	****		2			43			19			(35	)	****	64	****		(268	)
Preferred share dividends and other equity distributions	–	****		–			–			–			–		****	–	****		–
Common shareholders net income<br>(loss)	–	****	$	2		$	43		$	19		$	(35	)	$	64	****	$	(268	)
Net income (loss) attributed to shareholders, CER basis
Asia	645	****	$	822		$	645		$	973		$	614		$	3,085	****	$	1,650
Canada	616	****		(26	)		783			(19	)		628		****	1,354	****		195
U.S.	494	****		698			815			98			107		****	2,105	****		1,250
Global WAM	387	****		352			361			311			297		****	1,411	****		1,054
Corporate and Other	(58	)		(252	)		85			(561	)		99		****	(786	)		1,454
Total net income (loss) attributed to shareholders, CER basis	2,084	****		1,594			2,689			802			1,745		****	7,169	****		5,603
Preferred share dividends and other equity distributions, CER<br>basis	(71	)		(37	)		(64	)		(43	)		(43	)	****	(215	)		(171	)
Common shareholders net income (loss), CER basis	2,013	****	$	1,557		$	2,625		$	759		$	1,702		$	6,954	****	$	5,432
Asia U.S. dollar net income attributed to shareholders
Asia net income attributed to shareholders, US<br>(2)	513	****	$	654		$	515		$	755		$	490		$	2,437	****	$	1,322
CER adjustment, US<br>(1)	–	****		–			(3	)		20			(1	)	****	17	****		(11	)
Asia net income (loss) attributed to<br>shareholders, U.S. dollars, CER basis(1)	513	****	$	654		$	512		$	775		$	489		$	2,454	****	$	1,311
Net income (loss) attributed to shareholders (pre-tax)
Net income (loss) attributed to shareholders (post-tax)	2,084	****	$	1,592		$	2,646		$	783		$	1,780		$	7,105	****	$	5,871
Tax on net income attributed to shareholders	440	****		171			605			(31	)		189		****	1,185	****		1,146
Net income (loss) attributed to shareholders (pre-tax)	2,524	****		1,763			3,251			752			1,969		****	8,290	****		7,017
CER<br>adjustment(1)	–	****		(2	)		46			(40	)		(37	)	****	4	****		(164	)
Net income (loss) attributed to shareholders<br>(pre-tax), CER basis	2,524	****	$	1,761		$	3,297		$	712		$	1,932		$	8,294	****	$	6,853

All values are in US Dollars.

^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
^(2)^	Asia net income attributed to shareholders (post-tax) in Canadian dollars is translated to U.S. dollars using the U.S.<br>dollar Statement of Income rate for the reporting period.
---	---

114   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Basic and diluted earnings per share on a CER basis

( millions, post-tax and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)	Quarterly									****	Full Year
		3Q21		2Q21		1Q21		4Q20		2021		2020
Common shareholders net income (post-tax), CER basis	2,013	$	1,557	$	2,625	$	759	$	1,702	$	6,954	$	5,432
Weighted average common shares outstanding (millions)	1,943		1,942		1,942		1,941		1,940	****	1,942		1,941
Basic EPS, CER basis	1.04	$	0.80	$	1.35	$	0.39	$	0.88	$	3.58	$	2.80
Common shareholders net income (post-tax), CER basis	2,013	$	1,557	$	2,625	$	759	$	1,702	$	6,954	$	5,432
Diluted weighted average common shares outstanding (millions)	1,946		1,946		1,946		1,945		1,943	****	1,946		1,943
Quarterly diluted EPS, CER basis	1.03	$	0.80	$	1.35	$	0.39	$	0.88	$	3.57	$	2.80

All values are in US Dollars.

General expenses, CER basis

($ millions, pre-tax and based on actual foreign exchange rates in effect<br>in the applicable reporting period, unless otherwise stated)	Quarterly													Full Year
	4Q21		3Q21			2Q21		1Q21			4Q20			2021		2020
General expenses	$	2,000	$	1,904		$	1,892	$	2,032		$	1,968		$	7,828	$	7,510
CER<br>adjustment^(1)^	****	–		(3	)		26		(20	)		(54	)	****	3		(312	)
General expenses, CER basis	$	2,000	$	1,901		$	1,918	$	2,012		$	1,914		$	7,831	$	7,198
^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
---	---

Global WAM revenue, CER basis

($ millions, pre-tax and based on actual foreign exchange rates in<br>effect in the applicable reporting period, unless otherwise stated)	Quarterly												Full Year
	4Q21		3Q21		2Q21		1Q21			4Q20			2021		2020
Total Revenue	$	21,611	$	15,983	$	25,824	$	(1,597	)	$	17,869		$	61,821	$	78,908
Less: Revenue for segments other than Global WAM	****	19,884		14,303		24,217		(3,124	)		16,372		****	55,280		73,159
Global WAM revenue	****	1,727		1,680		1,607		1,527			1,497		****	6,541		5,749
CER<br>adjustment^(1)^	****	–		1		26		(8	)		(36	)	****	19		(237	)
Global WAM revenue, CER basis	$	1,727	$	1,681	$	1,633	$	1,519		$	1,461		$	6,560	$	5,512
^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
---	---

Common share core dividend payout ratio is a ratio that measures the percentage of core earnings paid to common shareholders as dividends. It is calculated as dividends per common share divided by core EPS.

	Quarterly										Full Year
	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Per share dividend	****	0.33		0.28		0.28		0.28		0.28	****	1.17		1.12
Core EPS	****	0.84		0.76		0.83		0.82		0.74	****	3.25		2.75
Common share core dividend payoutratio	****	39%		37%		34%		34%		38%	****	36%		41%

AUMA is a financial measure of the size of the Company. It is comprised of AUM and AUA. AUM includes assets of general account, consisting of total invested assets and segregated funds net assets, and external client assets for which we provide investment management services, consisting of mutual fund, institutional asset management and other fund net assets. AUA are assets for which we provide administrative services only. Assets under management and administration is a common industry metric for wealth and asset management businesses.

Our Global WAM business also manages assets on behalf of other segments of the Company. Global WAM-managed AUMA is a financial measure equal to the sum of Global WAM’s AUMA and assets managed by Global WAM on behalf of other segments. It is an important measure of the assets managed by Global WAM.

115

AUM and AUMA reconciliations

(Canadian $ in millions, and based on actual foreign exchange rates in effect in the applicable reporting period, unless otherwise stated)

														US (5)
														December 31, 2021
As at		Canada		U.S.		Global<br><br><br>WAM		Corporate<br>and Other			Total<br>Company			Asia	U.S.
Total Invested Assets
Manulife Bank net lending assets	–	$	23,447	$	–	$	–	$	–	****	$	23,447	****	US	US$	–
Derivative reclassification(1)	–	****	–	****	–	****	–	****	(7,475	)	****	(7,475	)		****	–
Invested assets excluding above items	129,207	****	96,425	****	164,830	****	4,458	****	16,206	****	****	411,126	****		****	130,013
Total	129,207	****	119,872	****	164,830	****	4,458	****	8,731	****	****	427,098	****		****	130,013
Segregated funds net assets
Segregated funds net assets – Institutional	–	****	–	****	–	****	4,470	****	–	****	****	4,470	****		****	–
Segregated funds net assets – Other(2)	25,505	****	42,124	****	79,620	****	248,097	****	(28	)	****	395,318	****		****	62,801
Total	25,505	****	42,124	****	79,620	****	252,567	****	(28	)	****	399,788	****		****	62,801
AUM per financial statements	154,712	****	161,996	****	244,450	****	257,025	****	8,703	****	****	826,886	****		****	192,814
Mutual funds	–	****	–	****	–	****	290,863	****	–	****	****	290,863	****		****	–
Institutional asset management(3)	–	****	–	****	–	****	106,407	****	–	****	****	106,407	****		****	–
Other funds	–	****	–	****	–	****	14,001	****	–	****	****	14,001	****		****	–
Total AUM	154,712	****	161,996	****	244,450	****	668,296	****	8,703	****	****	1,238,157	****		****	192,814
Assets under administration	–	****	–	****	–	****	187,631	****	–	****	****	187,631	****		****	–
Total AUMA	154,712	$	161,996	$	244,450	$	855,927	$	8,703	****	$	1,425,788	****	US	US$	192,814
Total AUMA	154,712	$	161,996	$	244,450	$	855,927	$	8,703	****	$	1,425,788	****
CER<br>adjustment(4)	–	****	–	****	–	****	–	****	–	****	****	–	****
Total AUMA, CER basis	154,712	$	161,996	$	244,450	$	855,927	$	8,703	****	$	1,425,788	****
Global WAM Managed AUMA
Global WAM AUMA						$	855,927
AUM managed by Global WAM for Manulife’s other segments						****	246,773
Total						$	1,102,700
AUMA in US (5)	122,005			US$	192,814						US$	1,124,616	****
Global WAM Managed AUMA in US (5)						US$	869,774

All values are in US Dollars.

^(1)^	Corporate and Other consolidation adjustment related to net derivative assets reclassified from total invested assets to<br>other lines on the Statement of Financial Position.
^(2)^	Corporate and Other segregated funds net asset represents elimination of amounts held by the Company.<br>
---	---
^(3)^	Institutional asset management excludes Institutional segregated funds net assets.
---	---
^(4)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
---	---
^(5)^	US $ AUMA is calculated as total AUMA in Canadian $ divided by the US $ exchange rate in effect at the end of the quarter.<br>
---	---

116   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

																	US (5)
																	September 30, 2021
As at			Canada		U.S.			Global<br><br><br>WAM			Corporate<br>and Other			Total<br>Company			Asia	U.S.
Total Invested Assets
Manulife Bank net lending assets	–		$	23,139	$	–		$	–		$	–		$	23,139		US	US$	–
Derivative reclassification(1)	–			–		–			–			(6,226	)		(6,226	)			–
Invested assets excluding above items	124,880			94,510		162,720			4,333			15,731			402,174				127,714
Total	124,880			117,649		162,720			4,333			9,505			419,087				127,714
Segregated funds net assets
Segregated funds net assets – Institutional	–			–		–			4,400			–			4,400				–
Segregated funds net assets – Other(2)	24,892			40,178		78,223			240,151			(45	)		383,399				61,395
Total	24,892			40,178		78,223			244,551			(45	)		387,799				61,395
AUM per financial statements	149,772			157,827		240,943			248,884			9,460			806,886				189,109
Mutual funds	–			–		–			277,421			–			277,421				–
Institutional asset management(3)	–			–		–			103,732			–			103,732				–
Other funds	–			–		–			12,562			–			12,562				–
Total AUM	149,772			157,827		240,943			642,599			9,460			1,200,601				189,109
Assets under administration	–			–		–			181,013			–			181,013				–
Total AUMA	149,772		$	157,827	$	240,943		$	823,612		$	9,460		$	1,381,614		US	US$	189,109
Total AUMA	149,772		$	157,827	$	240,943		$	823,612		$	9,460		$	1,381,614
CER<br>adjustment(4)	(1,193	)		–		(1,188	)		(3,191	)		–			(5,572	)
Total AUMA, CER basis	148,579		$	157,827	$	239,755		$	820,421		$	9,460		$	1,376,042
Global WAM Managed AUMA
Global WAM AUMA								$	823,612
AUM managed by Global WAM for Manulife’s other segments									240,798
Total								$	1,064,410
AUMA in US (5)	117,562				US$	189,109								US$	1,084,384
Global WAM Managed AUMA in US (5)								US$	835,421

All values are in US Dollars.

Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2021 above.

117
														US (5)
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
														June 30, 2021
As at		Canada		U.S.		Global<br><br><br>WAM		Corporate<br>and Other			Total<br>Company			Asia	U.S.
Total Invested Assets
Manulife Bank net lending assets	–	$	22,884	$	–	$	–	$	–		$	22,884		US	US$	–
Derivative reclassification(1)	–		–		–		–		(6,907	)		(6,907	)			–
Invested assets excluding above items	117,808		94,950		156,171		4,211		16,092			389,232				126,005
Total	117,808		117,834		156,171		4,211		9,185			405,209				126,005
Segregated funds net assets
Segregated funds net assets – Institutional	–		–		–		4,229		–			4,229				–
Segregated funds net assets – Other(2)	24,117		39,666		77,488		238,389		(44	)		379,616				62,521
Total	24,117		39,666		77,488		242,618		(44	)		383,845				62,521
AUM per financial statements	141,925		157,500		233,659		246,829		9,141			789,054				188,526
Mutual funds	–		–		–		265,110		–			265,110				–
Institutional asset management(3)	–		–		–		99,983		–			99,983				–
Other funds	–		–		–		12,232		–			12,232				–
Total AUM	141,925		157,500		233,659		624,154		9,141			1,166,379				188,526
Assets under administration	–		–		–		174,376		–			174,376				–
Total AUMA	141,925	$	157,500	$	233,659	$	798,530	$	9,141		$	1,340,755		US	US$	188,526
Total AUMA	141,925	$	157,500	$	233,659	$	798,530	$	9,141		$	1,340,755
CER adjustment<br>basis(4)	2,018		–		5,341		12,587		–			19,946
Total AUMA, CER basis	143,943	$	157,500	$	239,000	$	811,117	$	9,141		$	1,360,701
Global WAM Managed AUMA
Global WAM AUMA						$	798,530
AUM managed by Global WAM for Manulife’s other segments							235,234
Total						$	1,033,764
AUMA in US (5)	114,555			US$	188,526						US$	1,081,777
Global WAM Managed AUMA in US (5)						US$	834,084

All values are in US Dollars.

Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2021 above.

118   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

															US (5)
															March 31, 2021
As at			Canada		U.S.		Global<br><br><br>WAM		Corporate<br>and Other			Total<br>Company			Asia	U.S.
Total Invested Assets
Manulife Bank net lending assets	–		$	22,770	$	–	$	–	$	–		$	22,770		US	US$	–
Derivative reclassification(1)	–			–		–		–		(3,685	)		(3,685	)			–
Invested assets excluding above items	113,925			91,680		151,892		4,325		17,041			378,863				120,789
Total	113,925			114,450		151,892		4,325		13,356			397,948				120,789
Segregated funds net assets
Segregated funds net assets –Institutional	–			–		–		4,157		–			4,157				–
Segregated funds net assets– Other(2)	23,046			37,937		76,280		230,305		(43	)		367,525				60,661
Total	23,046			37,937		76,280		234,462		(43	)		371,682				60,661
AUM per financial statements	136,971			152,387		228,172		238,787		13,313			769,630				181,450
Mutual funds	–			–		–		249,137		–			249,137				–
Institutional asset management(3)	–			–		–		96,989		–			96,989				–
Other funds	–			–		–		11,611		–			11,611				–
Total AUM	136,971			152,387		228,172		596,524		13,313			1,127,367				181,450
Assets under administration	–			–		–		167,558		–			167,558				–
Total AUMA	136,971		$	152,387	$	228,172	$	764,082	$	13,313		$	1,294,925		US	US$	181,450
Total AUMA	136,971		$	152,387	$	228,172	$	764,082	$	13,313		$	1,294,925
CER<br>adjustment(4)	(174	)		–		1,854		4,244		–			5,924
Total AUMA, CER basis	136,797		$	152,387	$	230,026	$	768,326	$	13,313		$	1,300,849
Global WAM Managed AUMA
Global WAM AUMA							$	764,082
AUM managed by Global WAM for Manulife’s other segments								229,265
Total							$	993,347
AUMA in US (5)	108,935				US$	181,450						US$	1,029,761
Global WAM Managed AUMA in US (5)							US$	789,938

All values are in US Dollars.

Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2021 above.

119
																	US (5)
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
																	December 31, 2020
As at			Canada		U.S.			Global<br><br><br>WAM			Corporate<br>and Other			Total<br>Company			Asia	U.S.
Total Invested Assets
Manulife Bank net lending assets	–		$	22,763	$	–		$	–		$	–		$	22,763		US	US$	–
Derivative reclassification(1)	–			–		–			–			(12,861	)		(12,861	)			–
Invested assets excluding above items	115,430			98,894		162,508			4,760			19,483			401,075				127,638
Total	115,430			121,657		162,508			4,760			6,622			410,977				127,638
Segregated funds net assets
Segregated funds net assets – Institutional	–			–		–			1,886			–			1,886				–
Segregated funds net assets – Other(2)	22,948			37,650		77,053			227,941			(42	)		365,550				60,519
Total	22,948			37,650		77,053			229,827			(42	)		367,436				60,519
AUM per financial statements	138,378			159,307		239,561			234,587			6,580			778,413				188,157
Mutual funds	–			–		–			238,068			–			238,068				–
Institutional asset management(3)	–			–		–			107,387			–			107,387				–
Other funds	–			–		–			10,880			–			10,880				–
Total AUM	138,378			159,307		239,561			590,922			6,580			1,134,748				188,157
Assets under administration	–			–		–			162,688			–			162,688				–
Total AUMA	138,378		$	159,307	$	239,561		$	753,610		$	6,580		$	1,297,436		US	US$	188,157
Total AUMA	138,378		$	159,307	$	239,561		$	753,610		$	6,580		$	1,297,436
CER<br>adjustment(4)	(4,617	)		–		(1,044	)		(5,003	)		–			(10,664	)
Total AUMA, CER basis	133,761		$	159,307	$	238,517		$	748,607		$	6,580		$	1,286,772
Global WAM Managed AUMA
Global WAM AUMA								$	753,610
AUM managed by Global WAM for Manulife’s other segments									230,775
Total								$	984,385
AUMA in US (5)	108,655				US$	188,157								US$	1,019,036
Global WAM Managed AUMA in US (5)								US$	773,158

All values are in US Dollars.

Note: For footnotes (1) to (5), refer to the “AUM and AUMA reconciliation” table as at December 31, 2021 above.

120   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Global WAM AUMA and Managed AUMA by business line and geographic source

As at<br><br><br>($ millions, and based on actual foreign exchange rates in effect<br> <br>in the applicable<br>reporting period, unless otherwise stated)	Dec 31,<br><br><br>2021		Sept 30,<br><br><br>2021		Jun 30,<br><br><br>2021		Mar 31,<br><br><br>2021		Dec 31,<br><br><br>2020
Global WAM AUMA by business line
Retirement	$	440,831	$	426,742	$	418,907	$	403,576	$	397,423
Retail	****	303,232		287,717		274,661		258,560		246,140
Institutional asset management	****	111,864		109,153		104,962		101,946		110,047
Total	$	855,927	$	823,612	$	798,530	$	764,082	$	753,610
Global WAM AUMA by business line, CERbasis^(1)^
Retirement	$	440,831	$	425,058	$	426,263	$	406,179	$	395,997
Retail	****	303,232		286,796		278,735		259,989		245,215
Institutional asset management	****	111,864		108,567		106,119		102,158		107,395
Total	$	855,927	$	820,421	$	811,117	$	768,326	$	748,607
Global WAM AUMA by geographic source
Asia	$	104,584	$	100,899	$	95,510	$	91,551	$	100,996
Canada	****	238,798		228,347		224,693		212,441		206,637
U.S.	****	512,545		494,366		478,327		460,090		445,977
Total	$	855,927	$	823,612	$	798,530	$	764,082	$	753,610
Global WAM AUMA by geographic source, CERbasis^(1)^
Asia	$	104,584	$	100,151	$	97,365	$	92,031	$	97,886
Canada	****	238,798		228,347		224,693		212,441		206,637
U.S.	****	512,545		491,923		489,059		463,854		444,084
Total	$	855,927	$	820,421	$	811,117	$	768,326	$	748,607
Global WAM Managed AUMA by business line
Retirement	$	440,831	$	426,742	$	418,907	$	403,576	$	397,423
Retail	****	391,911		373,685		359,520		340,330		327,916
Institutional asset management	****	269,958		263,983		255,337		249,441		259,046
Total	$	1,102,700	$	1,064,410	$	1,033,764	$	993,347	$	984,385
Global WAM Managed AUMA by business line, CERbasis^(1)^
Retirement	$	440,831	$	425,058	$	426,263	$	406,179	$	395,997
Retail	****	391,911		372,499		364,843		342,189		326,757
Institutional asset management	****	269,958		262,737		259,415		250,686		255,847
Total	$	1,102,700	$	1,060,294	$	1,050,521	$	999,054	$	978,601
Global WAM Managed AUMA by geographic source
Asia	$	207,827	$	200,976	$	191,704	$	186,657	$	198,716
Canada	****	293,902		281,523		278,309		262,960		255,374
U.S.	****	600,971		581,911		563,751		543,730		530,295
Total	$	1,102,700	$	1,064,410	$	1,033,764	$	993,347	$	984,385
Global WAM Managed AUMA by geographic source, CERbasis^(1)^
Asia	$	207,827	$	199,736	$	195,772	$	187,914	$	195,183
Canada	****	293,902		281,523		278,309		262,960		255,374
U.S.	****	600,971		579,035		576,440		548,180		528,044
Total	$	1,102,700	$	1,060,294	$	1,050,521	$	999,054	$	978,601
^(1)^	AUMA adjusted to reflect the foreign exchange rates for the Statement of Financial Position in effect for 4Q21.<br>
---	---

Average assets under management and administration (“average AUMA”) is the average of Global WAM’s AUMA during the reporting period. It is a measure used in analyzing and explaining fee income and earnings of our Global WAM segment. It is calculated as the average of the opening balance of AUMA and the ending balance of AUMA using daily balances where available and month-end or quarter-end averages when daily averages are unavailable. Similarly, Global WAM average managed AUMA and average AUA are the average of Global WAM’s managed AUMA and AUA, respectively, and are calculated in a manner consistent with average AUMA.

Manulife Bank net lending assets is a financial measure equal to the sum of Manulife Bank’s loans and mortgages, net of allowances. Manulife Bank average net lending assets is a financial measure which is calculated as the quarter-end average of the opening and the ending balance of net lending assets. Both of these financial measures are a measure of the size of Manulife Bank’s portfolio of loans and mortgages and are used to analyze and explain its earnings.

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As at		Sept 30,<br><br><br>2021		Jun 30,<br><br><br>2021		Mar 31,<br><br><br>2021		Dec 31,<br><br><br>2020
---	---	---	---	---	---	---	---	---	---
( millions, and based on actual foreign exchange ratesin effect in the applicable reporting period)
Mortgages	52,014	$	51,001	$	50,309	$	50,134	$	50,207
Less mortgages not held by Manulife Bank	31,073		30,202		29,643		29,469		29,420
Total mortgages held by Manulife Bank	20,941		20,799		20,666		20,665		20,787
Loans to bank clients	2,506		2,340		2,218		2,105		1,976
Manulife Bank net lending assets	23,447	$	23,139	$	22,884	$	22,770	$	22,763
Manulife Bank average net lending assets
Beginning of period	23,139	$	22,884	$	22,770	$	22,763	$	22,827
End of period	23,447		23,139		22,884		22,770		22,763
Manulife Bank average net lending assets by quarter	23,293	$	23,012	$	22,827	$	22,767	$	22,795
Manulife Bank average net lending assets – full<br>year	23,105							$	22,471

All values are in US Dollars.

Consolidated capital serves as a foundation of our capital management activities at the MFC level. Consolidated capital is calculated as the sum of: (i) total equity excluding accumulated other comprehensive income (“AOCI”) on cash flow hedges; and (ii) certain other capital instruments that qualify as regulatory capital. For regulatory reporting purposes under the LICAT framework, the numbers are further adjusted for various additions or deductions to capital as mandated by the guidelines defined by OSFI.

As at			Sept 30,<br><br><br>2021			Jun 30,<br><br><br>2021			Mar 31,<br><br><br>2021			Dec 31,<br><br><br>2020
( millions, and based on actual foreign exchange rates in effect<br>in the applicable reporting period, unless otherwise stated)
Total Equity	58,869	****	$	55,951		$	54,254		$	51,992		$	53,006
Exclude AOCI gain/(loss) on cash flow hedges	(156	)		(159	)		(166	)		(117	)		(229	)
Total equity excluding AOCI on cash flow hedges	59,025	****		56,110			54,420			52,109			53,235
Qualifying capital instruments	6,980	****		6,986			6,936			7,432			7,829
Consolidated capital	66,005	****	$	63,096		$	61,356		$	59,541		$	61,064

All values are in US Dollars.

Core EBITDA is a financial measure which Manulife uses to better understand the long-term earnings capacity and valuation of our Global WAM business on a basis more comparable to how the profitability of global asset managers is generally measured. Core EBITDA presents core earnings before the impact of interest, taxes, depreciation, and amortization. Core EBITDA excludes certain acquisition expenses related to insurance contracts in our retirement businesses which are deferred and amortized over the expected lifetime of the customer relationship under the CALM. Core EBITDA was selected as a key performance indicator for our Global WAM business, as EBITDA is widely used among asset management peers, and core earnings is a primary profitability metric for the Company overall.

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Reconciliation of Global WAM core earnings to core EBITDA and Global WAM core EBITDA by business line and geographicsource

($ millions, pre-tax and based on actual foreign exchange rates in<br><br><br>effect in the applicable reporting period, unless otherwise stated)	Quarterly												Full Year
	4Q21		3Q21		2Q21		1Q21			4Q20			2021			2020
Global WAM core earnings (post-tax)	$	387	$	351	$	356	$	312		$	304		$	1,406	****	$	1,100
Addback taxes, acquisition, other expenses and deferred sales commissions
Core income tax (expense) recovery (see above)	****	52		66		64		52			57		****	234	****		172
Acquisition costs, other expenses	****	79		86		79		79			78		****	323	****		319
Deferred sales commissions	****	25		26		22		26			20		****	99	****		85
Core EBITDA	$	543	$	529	$	521	$	469		$	459		$	2,062	****	$	1,676
CER<br>adjustment^(1)^	****	–		–		2		(8	)		(13	)	****	(6	)		(73	)
Core EBITDA, CER basis	$	543	$	529	$	523	$	461		$	446		$	2,056	****	$	1,603
Core EBITDA by business line
Retirement	$	306	$	313	$	305	$	286		$	284		$	1,210	****	$	1,009
Retail	****	220		199		196		175			166		****	790	****		622
Institutional asset management	****	17		17		20		8			9		****	62	****		45
Total	$	543	$	529	$	521	$	469		$	459		$	2,062	****	$	1,676
Core EBITDA by geographic source
Asia	$	115	$	134	$	131	$	131		$	107		$	511	****	$	428
Canada	****	185		172		169		156			159		****	682	****		584
U.S.	****	243		223		221		182			193		****	869	****		664
Total	$	543	$	529	$	521	$	469		$	459		$	2,062	****	$	1,676
Core EBITDA by business line, CER basis
Retirement	$	306	$	313	$	311	$	285		$	276		$	1,215	****	$	962
Retail	****	220		199		193		168			160		****	780	****		599
Institutional asset management	****	17		17		19		8			10		****	61	****		42
Total, CER basis	$	543	$	529	$	523	$	461		$	446		$	2,056	****	$	1,603
Core EBITDA by geographic source, CER basis
Asia	$	115	$	135	$	127	$	124		$	100		$	501	****	$	393
Canada	****	185		171		169		156			159		****	681	****		584
U.S.	****	243		223		227		181			187		****	874	****		626
Total, CER basis	$	543	$	529	$	523	$	461		$	446		$	2,056	****	$	1,603
^(1)^	The impact of updating foreign exchange rates to that which was used in 4Q21.
---	---

Core EBITDA margin is a financial measure which Manulife uses to better understand the long-term profitability of our Global WAM business on a more comparable basis to how profitability of global asset managers are measured. Core EBITDA margin presents core earnings before the impact of interest, taxes, depreciation, and amortization divided by total revenue from these businesses. Core EBITDA margin was selected as a key performance indicator for our Global WAM business, as EBITDA margin is widely used among asset management peers, and core earnings is a primary profitability metric for the Company overall.

	Quarterly										Full Year
	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Core EBITDA margin
Core EBITDA	$	543	$	529	$	521	$	469	$	459	$	2,062	$	1,676
Global WAM revenue	$	1,727	$	1,680	$	1,607	$	1,527	$	1,497	$	6,541	$	5,749
Core EBITDA margin	****	31.4%		31.5%		32.4%		30.7%		30.7%	****	31.5%		29.2%

Expense efficiency ratio is a financial measure which Manulife uses to measure progress towards our target to be more efficient. It is defined as core general expenses divided by the sum of core earnings before income taxes (“pre-tax core earnings”) and core general expenses. Core general expenses is used to calculate our expense efficiency ratio and is equal to pre-tax general expenses included in core earnings and excludes such items as material legal provisions for settlements, restructuring charges and expenses related to integration and acquisitions.

123
($ millions, pre-tax and based on actual foreign exchange rates in<br>effect in the applicable reporting period, unless otherwise stated)	Quarterly													Full Year
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	4Q21		3Q21			2Q21		1Q21			4Q20			2021		2020
Expense Efficiency Ratio
Core general expenses	$	1,973	$	1,904		$	1,794	$	1,882		$	1,968		$	7,553	$	7,501
Core earnings (pre-tax)	****	2,054		1,811			2,036		1,995			1,767		****	7,896		6,684
Total – Core earnings (pre-tax) and Core general<br>expenses	$	4,027	$	3,715		$	3,830	$	3,877		$	3,735		$	15,449	$	14,185
Expense Efficiency Ratio	****	49.0%		51.3%			46.8%		48.5%			52.7%		****	48.9%		52.9%
Core general expenses
General expenses – Financial Statements	$	2,000	$	1,904		$	1,892	$	2,032		$	1,968		$	7,828	$	7,510
Less: General expenses included in items excluded from core earnings
Restructuring charge	****	–		–			–		150			–		****	150		–
Legal provisions and Other expenses	****	27		–			98		–			–		****	125		9
Total	$	27	$	–		$	98	$	150		$	–		$	275	$	9
Core general expenses	$	1,973	$	1,904		$	1,794	$	1,882		$	1,968		$	7,553	$	7,501
Core general expenses	$	1,973	$	1,904		$	1,794	$	1,882		$	1,968		$	7,553	$	7,501
CER adjustment	****	–		(3	)		24		(18	)		(54	)	****	3		(312	)
Core general expenses, CER basis	$	1,973	$	1,901		$	1,818	$	1,864		$	1,914		$	7,556	$	7,189

Embedded value (“EV”) is a measure of the present value of shareholders’ interests in the expected future distributable earnings on in-force business reflected in the Consolidated Statements of Financial Position of Manulife, excluding any value associated with future new business. EV is calculated as the sum of the adjusted net worth and the value of in-force business. The adjusted net worth is the IFRS shareholders’ equity adjusted for goodwill and intangibles, fair value of surplus assets, the carrying value of debt and preferred shares, and local statutory balance sheet, regulatory reserve, and capital for Manulife’s Asian business. The value of in-force business in Canada and the U.S. is the present value of expected future IFRS earnings on in-force business less the present value of the cost of holding capital to support the in-force business under the LICAT framework. The value of in-force business in Asia reflects local statutory earnings and capital requirements. The value of in-force business excludes our Global WAM, Manulife Bank and Property and Casualty Reinsurance businesses.

Net annualized fee income yield on average AUMA (“Net fee income yield”) is a financial measure that represents the net annualized fee income from Global WAM channels over average AUMA. This measure provides information on Global WAM’s adjusted return generated from managing AUMA.

Net annualized fee income is a financial measure that represents Global WAM income before income taxes, adjusted to exclude items unrelated to net fee income, including general expenses, investment income, non-AUMA related net benefits and claims, and net premium taxes. It also excludes the components of Global WAM net fee income from managing assets on behalf of other segments. This measure is annualized based on the number of days in the year divided the number of days in the reporting period.

Reconciliation of Income before income taxes to Net fee income yield
($ millions, pre-tax and based on actual foreign<br>exchange rates in effect in the applicable reporting<br>period)	Quarterly										Full Year
	4Q21		3Q21		2Q21		1Q21		4Q20		2021		2020
Income before income taxes	$	2,481	$	1,480	$	3,292	$	872	$	2,065	$	8,125	$	6,771
Less: Income before income taxes for segments other than Global<br>WAM	****	2,043		1,062		2,873		506		1,704	****	6,484		5,499
Global WAM income before income taxes	****	438		418		419		366		361	****	1,641		1,272
Items unrelated to net fee income	****	616		599		548		561		560	****	2,324		2,225
Global WAM net fee income	****	1,054		1,017		967		927		921	****	3,965		3,497
Less: Net fee income from other segments	****	122		118		109		109		109	****	458		421
Global WAM net fee income excluding net fee income from other<br>segments	****	932		899		858		818		812	****	3,507		3,076
Net annualized fee income	$	3,698	$	3,565	$	3,441	$	3,318	$	3,232	$	3,507	$	3,076
Average Assets under Management and Administration	$	835,494	$	815,927	$	775,849	$	765,033	$	732,710	$	798,022	$	698,147
Net fee income yield (bps)	****	44.3		43.7		44.4		43.4		44.1	****	43.9		44.1

New business value (“NBV”) is the change in embedded value as a result of sales in the reporting period. NBV is calculated as the present value of shareholders’ interests in expected future distributable earnings, after the cost of capital, on actual new business sold in the period using assumptions that are consistent with the assumptions used in the calculation of embedded value. NBV excludes businesses with immaterial insurance risks, such as the Company’s Global WAM, Manulife Bank and the P&C Reinsurance businesses. NBV is a useful metric to evaluate the value created by the Company’s new business franchise.

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New business value margin (“NBV margin”) is calculated as NBV divided by APE excluding non-controlling interests. APE is calculated as 100% of annualized first year premiums for recurring premium products, and as 10% of single premiums for single premium products. Both NBV and APE used in the NBV margin calculation are after non-controlling interests and exclude our Global WAM, Manulife Bank and P&C Reinsurance businesses. NBV margin is a useful metric to help understand the profitability of our new business.

Sales are measured according to product type:

For individual insurance, sales include 100% of new annualized premiums and 10% of both excess and single premiums. For individual insurance, new annualized premiums reflect the annualized premium expected in the first year of a policy that requires premium payments for more than one year. Single premium is the lump sum premium from the sale of a single premium product, e.g. travel insurance. Sales are reported gross before the impact of reinsurance.

For group insurance, sales include new annualized premiums and administrative services only premium equivalents on new cases, as well as the addition of new coverages and amendments to contracts, excluding rate increases.

Insurance-based wealth accumulation product sales include all new deposits into variable and fixed annuity contracts. As we discontinued sales of new variable annuity contracts in the U.S. in 1Q13, subsequent deposits into existing U.S. variable annuity contracts are not reported as sales. Asia variable annuity deposits are included in APE sales.

APE sales are comprised of 100% of regular premiums/deposits and 10% of excess and single premiums/deposits for both insurance and insurance-based wealth accumulation products.

Gross flows is a new business measure presented for our Global WAM business and includes all deposits into mutual funds, group pension/retirement savings products, private wealth and institutional asset management products. Gross flows is a common industry metric for WAM businesses as it provides a measure of how successful the businesses are at attracting assets.

Net flows is presented for our Global WAM business and includes gross flows less redemptions for mutual funds, group pension/retirement savings products, private wealth and institutional asset management products. In addition, net flows include the net flows of exchange traded funds and non-proprietary product sold by Manulife Securities. Net flows is a common industry metric for WAM businesses as it provides a measure of how successful the businesses are at attracting and retaining assets. When net flows are positive, they are referred to as net inflows. Conversely, negative net flows are referred to as net outflows.

Market value to book value ratio is calculated as the market value of one common share of the Company divided by the book value of a common share. It is a key valuation measure used by the market for our common shares.

Remittances is defined as the cash remitted or available for distribution to the Manulife Group from operating subsidiaries and excess capital generated by standalone Canadian operations. It is one of the key metrics used by management to evaluate our financial flexibility.

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14. Additional Disclosures

Contractual Obligations

In the normal course of business, the Company enters into contracts that give rise to obligations fixed by agreement as to the timing and dollar amount of payment.

As at December 31, 2021, the Company’s contractual obligations and commitments were as follows:

Payments due by period<br><br><br>($ millions)	Total		Less than 1<br>year		1 to 3 years		3 to 5 years		After 5 years
Long-term debt^(1)^	$	8,324	$	182	$	365	$	1,948	$	5,829
Liabilities for capital instruments^(1)^	****	8,538	****	228	****	968	****	294	****	7,048
Investment commitments	****	12,234	****	4,163	****	4,195	****	3,246	****	630
Lease liabilities	****	325	****	89	****	116	****	50	****	70
Insurance contract liabilities^(2)^	****	909,610	****	12,793	****	10,977	****	17,091	****	868,749
Investment contract liabilities^(1)^	****	4,809	****	292	****	486	****	489	****	3,542
Deposits from bank clients	****	20,720	****	16,091	****	2,593	****	2,036	****	–
Other	****	3,204	****	985	****	1,202	****	798	****	219
Total contractual obligations	$	967,764	$	34,823	$	20,902	$	25,952	$	886,087
^(1)^	The contractual payments include principal, interest and distributions; and reflect the amounts payable up to and<br>including the final contractual maturity date. The contractual payments reflect the amounts payable from January 1, 2022 up to and including the final contractual maturity date. In the case of floating rate obligations, the floating rate index<br>is based on the interest rates as at December 31, 2021 and is assumed to remain constant to the final contractual maturity date. The Company may have the contractual right to redeem or repay obligations prior to maturity and if such right is<br>exercised, total contractual obligations paid and the timing of payment could vary significantly from the amounts and timing included in the table.
---	---
^(2)^	Insurance contract liabilities cash flows include estimates related to the timing and payment of death and disability<br>claims, policy surrenders, policy maturities, annuity payments, minimum guarantees on segregated fund products, policyholder dividends, commissions and premium taxes offset by contractual future premiums on in-force contracts. These estimated cash<br>flows are based on the best estimate assumptions used in the determination of insurance contract liabilities. These amounts are undiscounted and reflect recoveries from reinsurance agreements. Due to the use of assumptions, actual cash flows may<br>differ from these estimates (see “Policy Liabilities”). Cash flows include embedded derivatives measured separately at fair value.
---	---

Legal and Regulatory Proceedings

We are regularly involved in legal actions, both as a defendant and as a plaintiff. Information on legal and regulatory proceedings can be found in note 18 of the 2021 Annual Consolidated Financial Statements.

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Quarterly Financial Information

The following table provides summary information related to our eight most recently completed quarters:

As at and for the three months ended<br>( millions, except per share amounts or otherwisestated)			Sept 30,<br><br><br>2021			Jun 30,<br><br><br>2021			Mar 31,<br><br><br>2021			Dec 31,<br><br><br>2020			Sept 30,<br><br><br>2020			Jun 30,<br><br><br>2020		Mar 31,<br><br><br>2020
Revenue
Premium income
Life and health insurance(1)	9,159	****	$	9,269		$	8,716		$	8,986		$	8,651		$	5,302		$	7,560	$	8,454
Annuities and pensions	901	****		714			698			622			672			704			673		901
Net premium income	10,060	****		9,983			9,414			9,608			9,323			6,006			8,233		9,355
Investment income	4,350	****		3,964			4,099			3,214			4,366			3,521			5,262		3,284
Realized and unrealized gains and losses on assets supporting insurance and investment contract liabilities(2)	4,460	****		(958	)		9,551			(17,056	)		1,683			1,100			11,626		4,558
Other revenue	2,741	****		2,994			2,760			2,637			2,497			2,749			2,365		2,980
Total revenue	21,611	****	$	15,983		$	25,824		$	(1,597	)	$	17,869		$	13,376		$	27,486	$	20,177
Income (loss) before income taxes	2,481	****	$	1,480		$	3,292		$	872		$	2,065		$	2,170		$	832	$	1,704
Income tax (expense) recovery	(430	)		(166	)		(610	)		(7	)		(224	)		(381	)		7		(597	)
Net income (loss)	2,051	****	$	1,314		$	2,682		$	865		$	1,841		$	1,789		$	839	$	1,107
Net income (loss) attributed to<br>shareholders	2,084	****	$	1,592		$	2,646		$	783		$	1,780		$	2,068		$	727	$	1,296
Basic earnings (loss) per common<br>share	1.04	****	$	0.80		$	1.33		$	0.38		$	0.90		$	1.04		$	0.35	$	0.64
Diluted earnings (loss) per common<br>share	1.03	****	$	0.80		$	1.33		$	0.38		$	0.89		$	1.04		$	0.35	$	0.64
Segregated funds deposits	10,920	****	$	10,929		$	10,301		$	12,395		$	9,741		$	9,158		$	8,784	$	11,215
Total assets (in billions)	918	****	$	898		$	879		$	859		$	880		$	876		$	866	$	831
Weighted average common shares<br>(in millions)	1,943	****		1,942			1,942			1,941			1,940			1,940			1,939		1,943
Diluted weighted average common shares<br>(in millions)	1,946	****		1,946			1,946			1,945			1,943			1,942			1,941		1,947
Dividends per common share	0.330	****	$	0.280		$	0.280		$	0.280		$	0.280		$	0.280		$	0.280	$	0.280
CDN to US1 – Statement of Financial<br>Position	1.2678	****		1.2741			1.2394			1.2575			1.2732			1.3339			1.3628		1.4187
CDN to US1 – Statement of<br>Income	1.2601	****		1.2602			1.2282			1.2660			1.3030			1.3321			1.3854		1.3449

All values are in US Dollars.

^(1)^	Includes ceded premiums related to the reinsurance of a block of our legacy U.S. Bank-Owned Life Insurance of US$2.4<br>billion in 3Q20.
^(2)^	For fixed income assets supporting insurance and investment contract liabilities and for equities supporting pass-through<br>products and derivatives related to variable hedging programs, the impact of realized and unrealized gains (losses) on the assets is largely offset in the change in insurance and investment contract liabilities.
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127
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Selected Annual Financial Information

As at and for the years ended December 31,<br><br><br>($ millions, except per share amounts)	2021		2020		2019
Revenue
Asia	$	29,571	$	28,455	$	28,673
Canada	****	12,366		18,638		19,609
U.S.	****	13,256		23,361		24,594
Global Wealth and Asset Management	****	6,541		5,749		5,595
Corporate and Other	****	87		2,705		1,099
Total revenue	$	61,821	$	78,908	$	79,570
Total assets	$	917,643	$	880,349	$	809,130
Long-term financial liabilities
Long-term debt	$	4,882	$	6,164	$	4,543
Capital instruments	****	6,980		7,829		7,120
Total financial liabilities	$	11,862	$	13,993	$	11,663
Dividend per common share	$	1.17	$	1.12	$	1.00
Cash dividend per Class A Share, Series 2	****	1.1625		1.1625		1.1625
Cash dividend per Class A Share, Series 3	****	1.125		1.125		1.125
Cash dividend per Class 1 Share, Series 3	****	0.5658		0.5445		0.5445
Cash dividend per Class 1 Share, Series 4	****	0.3814		0.587		0.7713
Cash dividend per Class 1 Share, Series 5^(1)^	****	0.9728		0.9728		0.9728
Cash dividend per Class 1 Share, Series 7	****	1.078		1.078		1.078
Cash dividend per Class 1 Share, Series 9	****	1.0878		1.0878		1.0878
Cash dividend per Class 1 Share, Series 11	****	1.1828		1.1828		1.1828
Cash dividend per Class 1 Share, Series 13	****	1.1035		1.1035		1.1035
Cash dividend per Class 1 Share, Series 15	****	0.9465		0.9465		0.9608
Cash dividend per Class 1 Share, Series 17	****	0.950		0.950		0.975
Cash dividend per Class 1 Share, Series 19	****	0.9188		0.9266		0.95
Cash dividend per Class 1 Share, Series 21^(2)^	****	0.70		1.40		1.40
Cash dividend per Class 1 Share, Series 23	****	1.2125		1.2125		1.2125
Cash dividend per Class 1 Share, Series 25	****	1.175		1.175		1.175
^(1)^	MFC redeemed in full the Class 1 Series 5 preferred shares at par, on December 19, 2021, the earliest<br>redemption date.
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^(2)^	MFC redeemed in full the Class 1 Series 21 preferred shares at par, on June 19, 2021, the earliest<br>redemption date.
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Differences between IFRS and Hong Kong Financial Reporting Standards

Manulife’s Consolidated Financial Statements are presented in accordance with IFRS. IFRS differs in certain respects from Hong Kong Financial Reporting Standards (“HKFRS”). Until IFRS 17 “Insurance Contracts” becomes effective, IFRS 4 “Insurance Contracts” permits the use of the insurance standard in effect at the time an issuer adopts IFRS. IFRS insurance contract liabilities are valued in Canada under standards established by the Canadian Actuarial Standards Board. In certain interest rate environments, insurance contract liabilities determined in accordance with HKFRS may be higher than those computed in accordance with current IFRS.

IFRS and Hong Kong Regulatory Requirements

Insurers in Hong Kong are required by the Insurance Authority to meet minimum solvency requirements. As at December 31, 2021, the Company’s business that falls within the scope of these requirements has sufficient assets to meet the minimum solvency requirements under both Hong Kong regulatory requirements and IFRS.

Outstanding Common Shares

As at January 31, 2022, MFC had 1,942,706,408 common shares outstanding.

Additional Information Available

Additional information relating to Manulife, including MFC’s Annual Information Form, is available on the Company’s website at www.manulife.com and on SEDAR at www.sedar.com.

128   |  2021 Annual Report  |  Management’s Discussion and Analysis ****

Responsibility for Financial Reporting

The accompanying consolidated financial statements of Manulife Financial Corporation are the responsibility of management and have been approved by the Board of Directors. It is also the responsibility of management to ensure that all information in the annual report to shareholders is consistent with these consolidated financial statements.

The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards and the accounting requirements of the Office of the Superintendent of Financial Institutions, Canada. When alternative accounting methods exist, or when estimates and judgment are required, management has selected those amounts that present the Company’s financial position and results of operations in a manner most appropriate to the circumstances.

Appropriate systems of internal control, policies and procedures have been maintained to ensure that financial information is both relevant and reliable. The systems of internal control are assessed on an ongoing basis by management and the Company’s internal audit department.

The actuary appointed by the Board of Directors (the “Appointed Actuary”) is responsible for ensuring that assumptions and methods used in the determination of policy liabilities are appropriate to the circumstances and that reserves will be adequate to meet the Company’s future obligations under insurance and annuity contracts.

The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. These responsibilities are carried out primarily through an Audit Committee of unrelated and independent directors appointed by the Board of Directors.

The Audit Committee meets periodically with management, the internal auditors, the peer reviewers, the external auditors and the Appointed Actuary to discuss internal control over the financial reporting process, auditing matters and financial reporting issues. The Audit Committee reviews the consolidated financial statements prepared by management and then recommends them to the Board of Directors for approval. The Audit Committee also recommends to the Board of Directors and shareholders the appointment of external auditors and approval of their fees.

The consolidated financial statements have been audited by the Company’s external auditors, Ernst & Young LLP, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Ernst & Young LLP has full and free access to management and the Audit Committee.

Roy Gori<br> <br>President and Chief Executive Officer	Philip Witherington<br> <br>Chief Financial Officer

Toronto, Canada

February 9, 2022

Appointed Actuary’s Report to the Shareholders

I have valued the policy liabilities and reinsurance recoverables of Manulife Financial Corporation for its Consolidated Statements of Financial Position as at December 31, 2021 and 2020 and their change in the Consolidated Statements of Income for the years then ended in accordance with actuarial practice generally accepted in Canada, including selection of appropriate assumptions and methods.

In my opinion, the amount of policy liabilities net of reinsurance recoverables makes appropriate provision for all policyholder obligations and the consolidated financial statements fairly present the results of the valuation.

Steven Finch

Appointed Actuary

Toronto, Canada

February 9, 2022

129

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Manulife Financial Corporation

Opinion on the Consolidated Financial Statements

We have audited the consolidated financial statements of Manulife Financial Corporation (the “Company”), which comprise the Consolidated Statements of Financial Position as at December 31, 2021 and 2020, and the Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’sResponsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

Valuation of Insurance Contract Liabilities

Key AuditMatter

The Company recorded insurance contract liabilities of $392.3 billion at December 31, 2021 on its consolidated statement of financial position. Insurance<br>contract liabilities are reported gross of reinsurance ceded and represent management’s estimate of the amount which, together with estimated future premiums and net investment income, will be sufficient to pay estimated future benefits,<br>policyholder dividends and refunds, taxes (other than income taxes) and expenses on insurance policies in-force. Insurance contract liabilities are determined using the Canadian Asset Liability Method (CALM),<br>as required by the Canadian Institute of Actuaries (CIA). The valuation of insurance contract liabilities is based on an explicit projection of cash flows using current assumptions for each material cash flow item. Cash flows related to insurance<br>contract liabilities have two major components: a best estimate assumption and a provision for adverse deviation. Best estimates are made with respect to key assumptions including mortality, morbidity, investment returns, policy termination rates,<br>premium persistency, expenses, and taxes. A provision for adverse deviation is recorded to reflect the inherent uncertainty related to the timing and amount of the best estimate assumptions and is determined by including a margin of conservatism for<br>each assumption. Disclosures on this matter are found in Note 1 ‘Nature of Operations and Significant Accounting Policies’ and Note 6 ‘Insurance Contract Liabilities and Reinsurance Assets’ of the consolidated financial<br>statements.<br> <br><br> <br>Auditing the valuation of insurance contract liabilities was complex and required<br>the application of significant auditor judgement due to the complexity of the cash flow models, the selection and use of assumptions, and the interrelationship of these variables in measuring insurance contract liabilities. The audit effort involved<br>professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.

130   |  2021 Annual Report  |  Consolidated Financial Statements ****

	Valuation of Insurance Contract Liabilities
How Our Audit Addressed the Key Audit Matter	We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over the valuation of insurance contract<br>liabilities. The controls we tested related to, among other areas, actuarial methodology, integrity of data used, controls over relevant information technology, and the assumption setting and implementation processes used by management.<br><br><br><br> <br>To test the valuation of insurance contract liabilities, our audit procedures included, among other<br>procedures, involving our actuarial specialists to assess the methodology and assumptions with respect to compliance with the Company’s policies. We performed audit procedures over key assumptions, including the implementation of those<br>assumptions into the models. These procedures included testing underlying support and documentation, including reviewing a sample of experience studies supporting specific assumptions, challenging the nature, timing, and completeness of changes<br>recorded, assessing whether individual changes were errors or refinements of estimates, and comparing the level of margins for adverse deviation to suggested ranges established by the CIA. We also performed independent recalculation procedures on a<br>sample of insurance policies to evaluate management’s recorded reserves. In addition, we assessed the adequacy of the disclosures provided in the notes to the consolidated financial statements.
	Valuation of Invested Assets with Significant Non-Observable MarketInputs
Key AuditMatter	The Company recorded invested assets of $17.8 billion at December 31, 2021 on its consolidated statement of financial position which are both (a) measured<br>at fair value and (b) subject to a valuation estimate that includes significant non-observable market inputs. These invested assets are classified as level 3 within the Company’s hierarchy of fair<br>value measurements and include real estate, timber and agriculture, high estimation uncertainty bonds, and private equities which are valued using internal models. There is increased measurement uncertainty in determining the fair value of these<br>invested assets due to the impact of COVID-19 and the associated economic environment. These assets are valued based on internal models or third-party pricing sources that incorporate assumptions with a<br>high-level of subjectivity. Examples of such assumptions include interest rates, yield curves, credit ratings and related spreads, expected future cash flows and transaction prices of comparable assets. Disclosures on this matter are found in Note 1<br>‘Nature of Operations and Significant Accounting Policies’ and Note 3 ‘Invested Assets and Investment Income’ of the consolidated financial statements.<br> <br><br><br><br>Auditing the valuation of these invested assets was complex and required the application of significant auditor judgment in assessing the valuation methodologies and non-observable inputs used. The valuation of these assets is sensitive to the significant non-observable market inputs described above, which are inherently forward-looking<br>and could be affected by future economic and market conditions. The audit effort involved professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.
How Our Audit Addressed the Key Audit Matter	We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over the investment valuation process. The<br>controls we tested related to, among other areas, management’s determination and approval of assumptions and methodologies used in model-based valuations and management’s review of valuations provided by third-party pricing sources.<br><br><br><br> <br>To test the valuation of these invested assets, our audit procedures included, among other<br>procedures, involving our valuation specialists to assess the methodologies and significant assumptions used by management. These procedures included assessing the valuation methodologies used with respect to the Company’s policies, valuation<br>guidelines, and industry practice and comparing a sample of valuation assumptions used against benchmarks, including comparable transactions and independent pricing sources where available. We also performed independent investment valuations on a<br>sample of investments with high estimation uncertainty to evaluate management’s recorded values. In addition, we assessed the adequacy of the disclosures provided in the notes to the consolidated financial statements.

Other Information

Management is responsible for the other information. The other information comprises:

•	Management’s Discussion and Analysis; and
•	The information, other than the consolidated financial statements and our auditor’s report thereon, in the 2021 Annual<br>Report.
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Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

The 2021 Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we will perform on this other information, we conclude there is a material misstatement of other information, we are required to report that fact to those charged with governance.

131

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

•	Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or<br>error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher<br>than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate<br>in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
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•	Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related<br>disclosures made by management.
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•	Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit<br>evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required<br>to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date<br>of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
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•	Evaluate the overall presentation, structure and content of the consolidated financial statements, including the<br>disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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•	Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities<br>within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our report of independent registered public accounting firm unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this report of independent registered public accounting firm is Sean Musselman.

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Canada

February 9, 2022

132   |  2021 Annual Report  |  Consolidated Financial Statements ****

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Manulife Financial Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying Consolidated Statements of Financial Position of Manulife Financial Corporation (the “Company”) as of December 31, 2021 and 2020, the related Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Report on Internal Control over Financial Reporting

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 9, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

	Valuation of Insurance Contract Liabilities
Description of the Matter	The Company recorded insurance contract liabilities of<br>$392.3 billion at December 31, 2021 on its consolidated statement of financial position. Insurance contract liabilities are reported gross of reinsurance ceded and represent management’s estimate of the amount which, together with<br>estimated future premiums and net investment income, will be sufficient to pay estimated future benefits, policyholder dividends and refunds, taxes (other than income taxes) and expenses on insurance policies<br>in-force. Insurance contract liabilities are determined using the Canadian Asset Liability Method (CALM), as required by the Canadian Institute of Actuaries (CIA). The valuation of insurance contract<br>liabilities is based on an explicit projection of cash flows using current assumptions for each material cash flow item. Cash flows related to insurance contract liabilities have two major components: a best estimate assumption and a provision for<br>adverse deviation. Best estimates are made with respect to key assumptions including mortality, morbidity, investment returns, policy termination rates, premium persistency, expenses, and taxes. A provision for adverse deviation is recorded to<br>reflect the inherent uncertainty related to the timing and amount of the best estimate assumptions and is determined by including a margin of conservatism for each assumption. Disclosures on this matter are found in Note 1 ‘Nature of Operations<br>and Significant Accounting Policies’ and Note 6 ‘Insurance Contract Liabilities and Reinsurance Assets’ of the consolidated financial statements.<br> <br><br><br><br>Auditing the valuation of insurance contract liabilities was complex and required the application of significant auditor judgement due to the complexity of the cash flow<br>models, the selection and use of assumptions, and the interrelationship of these variables in measuring insurance contract liabilities. The audit effort involved professionals with specialized skill and knowledge to assist in evaluating the audit<br>evidence obtained.
133
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	Valuation of Insurance Contract Liabilities
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How We Addressed the Matter in OurAudit	We obtained an understanding, evaluated the design, and<br>tested the operating effectiveness of management’s controls over the valuation of insurance contract liabilities. The controls we tested related to, among other areas, actuarial methodology, integrity of data used, controls over relevant<br>information technology, and the assumption setting and implementation processes used by management.<br> <br><br><br><br>To test the valuation of insurance contract liabilities, our audit procedures included, among other procedures, involving our actuarial specialists to assess the<br>methodology and assumptions with respect to compliance with the Company’s policies. We performed audit procedures over key assumptions, including the implementation of those assumptions into the models. These procedures included testing<br>underlying support and documentation, including reviewing a sample of experience studies supporting specific assumptions, challenging the nature, timing, and completeness of changes recorded, assessing whether individual changes were errors or<br>refinements of estimates, and comparing the level of margins for adverse deviation to suggested ranges established by the CIA. We also performed independent recalculation procedures on a sample of insurance policies to evaluate management’s<br>recorded reserves. In addition, we assessed the adequacy of the disclosures provided in the notes to the consolidated financial statements.
	Valuation of Invested Assets with Significant Non-Observable Market Inputs
Description of the Matter	The Company recorded invested assets of $17.8 billion<br>at December 31, 2021 on its consolidated statement of financial position which are both (a) measured at fair value and (b) subject to a valuation estimate that includes significant<br>non-observable market inputs. These invested assets are classified as level 3 within the Company’s hierarchy of fair value measurements and include real estate, timber and agriculture, high estimation<br>uncertainty bonds, and private equities which are valued using internal models. There is increased measurement uncertainty in determining the fair value of these invested assets due to the impact of COVID-19<br>and the associated economic environment. These assets are valued based on internal models or third-party pricing sources that incorporate assumptions with a high-level of subjectivity. Examples of such assumptions include interest rates, yield<br>curves, credit ratings and related spreads, expected future cash flows and transaction prices of comparable assets. Disclosures on this matter are found in Note 1 ‘Nature of Operations and Significant Accounting Policies’ and Note 3<br>‘Invested Assets and Investment Income’ of the consolidated financial statements.<br> <br><br><br><br>Auditing the valuation of these invested assets was complex and required the application of significant auditor judgment in assessing the valuation methodologies and non-observable inputs used. The valuation of these assets is sensitive to the significant non-observable market inputs described above, which are inherently forward-looking<br>and could be affected by future economic and market conditions. The audit effort involved professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.
How We Addressed the Matter in OurAudit	We obtained an understanding, evaluated the design, and<br>tested the operating effectiveness of management’s controls over the investment valuation process. The controls we tested related to, among other areas, management’s determination and approval of assumptions and methodologies used in<br>model-based valuations and management’s review of valuations provided by third-party pricing sources.<br> <br><br><br><br>To test the valuation of these invested assets, our audit procedures included, among other procedures, involving our valuation specialists to assess the methodologies and<br>significant assumptions used by management. These procedures included assessing the valuation methodologies used with respect to the Company’s policies, valuation guidelines, and industry practice and comparing a sample of valuation assumptions<br>used against benchmarks, including comparable transactions and independent pricing sources where available. We also performed independent investment valuations on a sample of investments with high estimation uncertainty to evaluate management’s<br>recorded values. In addition, we assessed the adequacy of the disclosures provided in the notes to the consolidated financial statements.

Chartered Professional Accountants

Licensed Public Accountants

We have served as Manulife Financial Corporation’s auditors since 1905.

Toronto, Canada

February 9, 2022

134   |  2021 Annual Report  |  Consolidated Financial Statements ****

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Manulife Financial Corporation

Opinion on Internal Control over Financial Reporting

We have audited Manulife Financial Corporation’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, Manulife Financial Corporation (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Consolidated Statements of Financial Position of the Company as of December 31, 2021 and 2020, and the related Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows for the years then ended, and the related notes and our report dated February 9, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Report on Internal Control Over Financial Reporting contained in the Management’s Discussion and Analysis. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control overFinancial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Canada

February 9, 2022

135

Consolidated Statements of Financial Position

As at December 31,<br><br><br>(Canadian $ in millions)	2021			2020
Assets
Cash and short-term securities	$	22,594	****	$	26,167
Debt securities	****	224,139	****		218,724
Public equities	****	28,067	****		23,722
Mortgages	****	52,014	****		50,207
Private placements	****	42,842	****		40,756
Policy loans	****	6,397	****		6,398
Loans to bank clients	****	2,506	****		1,976
Real estate	****	13,233	****		12,832
Other invested assets	****	35,306	****		30,195
Total invested assets (note 3)	****	427,098	****		410,977
Other assets
Accrued investment income	****	2,641	****		2,523
Outstanding premiums	****	1,294	****		1,444
Derivatives (note 4)	****	17,503	****		27,793
Reinsurance assets (notes 6 and 7)	****	44,579	****		45,836
Deferred tax assets (note 16)	****	5,254	****		4,842
Goodwill and intangible assets (note 5)	****	9,915	****		9,929
Miscellaneous	****	9,571	****		9,569
Total other assets	****	90,757	****		101,936
Segregated funds net assets (note22)	****	399,788	****		367,436
Total assets	$	917,643	****	$	880,349
Liabilities and Equity
Liabilities
Insurance contract liabilities (note 6)	$	392,275	****	$	385,554
Investment contract liabilities (note 7)	****	3,117	****		3,288
Deposits from bank clients	****	20,720	****		20,889
Derivatives (note 4)	****	10,038	****		14,962
Deferred tax liabilities (note 16)	****	2,769	****		2,614
Other liabilities	****	18,205	****		18,607
	****	447,124	****		445,914
Long-term debt (note 9)	****	4,882	****		6,164
Capital instruments (note 10)	****	6,980	****		7,829
Segregated funds net liabilities (note22)	****	399,788	****		367,436
Total liabilities	****	858,774	****		827,343
Equity
Preferred shares and other equity (note 11)	****	6,381	****		3,822
Common shares (note 11)	****	23,093	****		23,042
Contributed surplus	****	262	****		261
Shareholders’ and other equity holders’ retained earnings	****	23,492	****		18,887
Shareholders’ accumulated other comprehensive income (loss):
Pension and other post-employment plans	****	(114	)		(313	)
Available-for-sale securities	****	848	****		1,838
Cash flow hedges	****	(156	)		(229	)
Real estate revaluation reserve	****	23	****		34
Translation of foreign operations	****	4,579	****		4,993
Total shareholders’ and other equity	****	58,408	****		52,335
Participating policyholders’ equity	****	(1,233	)		(784	)
Non-controlling interests	****	1,694	****		1,455
Total equity	****	58,869	****		53,006
Total liabilities andequity	$	917,643	****	$	880,349
The accompanying notes are an integral part of these Consolidated Financial Statements.
---
Roy Gori<br><br><br>President and Chief Executive Officer	John Cassaday<br><br><br>Chairman of the Board of Directors
---	---

136   |  2021 Annual Report  |  Consolidated Financial Statements ****

Consolidated Statements of Income

For the years ended December 31,<br><br><br>(Canadian $ in millions except per share amounts)	2021			2020
Revenue
Premium income
Gross premiums	$	44,344	****	$	41,408
Premiums ceded to reinsurers	****	(5,279	)		(8,491	)
Net premiums	****	39,065	****		32,917
Investment income (note 3)
Investment income	****	15,627	****		16,433
Realized and unrealized gains (losses) on assets<br>supporting insurance and investment contract liabilities and on the macro hedge program	****	(4,003	)		18,967
Net investment income	****	11,624	****		35,400
Other revenue (note 13)	****	11,132	****		10,591
Total revenue	****	61,821	****		78,908
Contract benefits and expenses
To contract holders and beneficiaries
Gross claims and benefits (note 6)	****	31,110	****		30,133
Increase (decrease) in insurance contract liabilities (note 6)	****	10,719	****		36,982
Increase (decrease) in investment contract liabilities (note 7)	****	44	****		178
Benefits and expenses ceded to reinsurers	****	(6,805	)		(6,795	)
(Increase) decrease in reinsurance assets (note<br>6)	****	754	****		(5,263	)
Net benefits and claims	****	35,822	****		55,235
General expenses	****	7,828	****		7,510
Investment expenses (note 3)	****	1,980	****		1,787
Commissions	****	6,638	****		6,043
Interest expense	****	1,011	****		1,181
Net premium taxes	****	417	****		381
Total contract benefits andexpenses	****	53,696	****		72,137
Income before income taxes	****	8,125	****		6,771
Income tax expense (note 16)	****	(1,213	)		(1,195	)
Net income	$	6,912	****	$	5,576
Net income (loss) attributed to:
Non-controlling interests	$	255	****	$	250
Participating policyholders	****	(448	)		(545	)
Shareholders and other equity holders	****	7,105	****		5,871
	$	6,912	****	$	5,576
Net income attributed to shareholders	****	7,105	****		5,871
Preferred share dividends and other equity<br>distributions	****	(215	)		(171	)
Common shareholders’net income	$	6,890	****	$	5,700
Earnings per share
Basic earnings per common share (note 11)	$	3.55	****	$	2.94
Diluted earnings per common share (note 11)	****	3.54	****		2.93
Dividends per common share	****	1.17	****		1.12

The accompanying notes are an integral part of these Consolidated Financial Statements.

137

Consolidated Statements of Comprehensive Income

For the years ended December 31,<br><br><br>(Canadian $ in millions)	2021			2020
Net income	$	6,912	****	$	5,576
Other comprehensive income (loss) (“OCI”), net of tax:
Items that may be subsequently reclassified to net income:
Foreign exchange gains (losses) on:
Translation of foreign operations	****	(514	)		(505	)
Net investment hedges	****	100	****		100
Available-for-sale financial<br>securities:
Unrealized gains (losses) arising during the year	****	(980	)		2,506
Reclassification of net realized (gains) losses and impairments to net<br>income	****	(13	)		(2,175	)
Cash flow hedges:
Unrealized gains (losses) arising during the year	****	77	****		(81	)
Reclassification of realized gains (losses) to net income	****	(4	)		(5	)
Share of other comprehensive income (losses) of<br>associates	****	(1	)		2
Total items that may be subsequentlyreclassified to net income	****	(1,335	)		(158	)
Items that will not be reclassified to net income:
Change in pension and other post-employment plans	****	199	****		37
Real estate revaluation reserve	****	(11	)		5
Total items that will not be reclassified tonet income	****	188	****		42
Other comprehensive income (loss), net oftax	****	(1,147	)		(116	)
Total comprehensive income(loss), net of tax	$	5,765	****	$	5,460
Total comprehensive income (loss) attributed to:
Non-controlling interests	$	252	****	$	254
Participating policyholders	****	(449	)		(541	)
Shareholders and other equity holders	****	5,962	****		5,747

Income Taxes included in Other Comprehensive Income

For the years ended December 31,<br><br><br>(Canadian $ in millions)	2021			2020
Income tax expense (recovery) on:
Unrealized gains/losses on available-for-sale financial securities	$	(181	)	$	574
Reclassification of realized gains/losses and recoveries/impairments to net<br>income on available-for-sale financial securities	****	21	****		(576	)
Unrealized gains/losses on cash flow hedges	****	15	****		(19	)
Reclassification of realized gains/losses to net income on cash flow<br>hedges	****	(1	)		(2	)
Unrealized foreign exchange gains/losses on net investment hedges	****	21	****		8
Share of other comprehensive income (loss) of associates	****	–	****		(1	)
Change in pension and other post-employment plans	****	61	****		9
Real estate revaluation reserve	****	–	****		2
Total income tax expense(recovery)	$	(64	)	$	(5	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

138   |  2021 Annual Report  |  Consolidated Financial Statements ****

Consolidated Statements of Changes in Equity

For the years ended December 31,<br><br><br>(Canadian $ in millions)	2021			2020
Preferred shares and other equity
Balance, beginning of year	$	3,822	****	$	3,822
Issued (note 11)	****	3,200	****		–
Redeemed (note 11)	****	(612	)		–
Issuance costs, net of tax	****	(29	)		–
Balance, end of year	****	6,381	****		3,822
Common shares
Balance, beginning of year	****	23,042	****		23,127
Repurchased (note 11)	****	–	****		(121	)
Issued on exercise of stock options and deferred<br>share units	****	51	****		36
Balance, end of year	****	23,093	****		23,042
Contributed surplus
Balance, beginning of year	****	261	****		254
Exercise of stock options and deferred share units	****	(8	)		(7	)
Stock option expense	****	9	****		14
Balance, end of year	****	262	****		261
Shareholders’ and other equity holders’ retainedearnings
Balance, beginning of year	****	18,887	****		15,488
Net income attributed to shareholders	****	7,105	****		5,871
Common shares repurchased (note 11)	****	–	****		(132	)
Preferred share dividends and other equity distributions	****	(215	)		(171	)
Preferred shares redeemed (note 11)	****	(13	)		–
Common share dividends	****	(2,272	)		(2,169	)
Balance, end of year	****	23,492	****		18,887
Shareholders’ accumulated other comprehensive income (loss)(“AOCI”)
Balance, beginning of year	****	6,323	****		6,447
Change in unrealized foreign exchange gains (losses) of net foreign<br>operations	****	(414	)		(405	)
Change in actuarial gains (losses) on pension and other post-employment<br>plans	****	199	****		37
Change in unrealized gains (losses) on available-for-sale financial securities	****	(989	)		325
Change in unrealized gains (losses) on derivative instruments designated as cash<br>flow hedges	****	73	****		(86	)
Change in real estate revaluation reserve	****	(11	)		3
Share of other comprehensive income (losses) of<br>associates	****	(1	)		2
Balance, end of year	****	5,180	****		6,323
Total shareholders’ equity, end ofyear	****	58,408	****		52,335
Participating policyholders’ equity
Balance, beginning of year	****	(784	)		(243	)
Net income (loss) attributed to participating policyholders	****	(448	)		(545	)
Other comprehensive income (loss) attributed to<br>policyholders	****	(1	)		4
Balance, end of year	****	(1,233	)		(784	)
Non-controllinginterests
Balance, beginning of year	****	1,455	****		1,211
Net income attributed to non-controlling<br>interests	****	255	****		250
Other comprehensive income (loss) attributed to<br>non-controlling interests	****	(3	)		4
Contributions (distributions/disposal),<br>net	****	(13	)		(10	)
Balance, end of year	****	1,694	****		1,455
Total equity, end ofyear	$	58,869	****	$	53,006

The accompanying notes are an integral part of these Consolidated Financial Statements.

139

Consolidated Statements of Cash Flows

For the years ended December 31,<br><br><br>(Canadian $ in millions)	2021			2020
Operating activities
Net income	$	6,912	****	$	5,576
Adjustments:
Increase in insurance contract liabilities	****	10,719	****		36,982
Increase in investment contract liabilities	****	44	****		178
(Increase) decrease in reinsurance assets excluding coinsurance transactions<br>(note 6)	****	754	****		(2,374	)
Amortization of (premium) discount on invested assets	****	181	****		154
Other amortization	****	529	****		656
Net realized and unrealized (gains) losses and impairment on assets	****	4,824	****		(22,521	)
Deferred income tax expense (recovery)	****	(127	)		280
Stock option expense	****	9	****		14
Cash provided by operating activities before undernoted items	****	23,845	****		18,945
Changes in policy related and operating<br>receivables and payables	****	(690	)		1,103
Cash provided by (used in) operatingactivities	****	23,155	****		20,048
Investing activities
Purchases and mortgage advances	****	(120,965	)		(111,981	)
Disposals and repayments	****	96,728	****		98,850
Change in investment broker net receivables and payables	****	(186	)		(1,017	)
Net cash flows from acquisition and disposal of<br>subsidiaries and businesses	****	(19	)		–
Cash provided by (used in) investingactivities	****	(24,442	)		(14,148	)
Financing activities
Issue of long-term debt, net (note 9)	****	–	****		2,455
Redemption of long-term debt (note 9)	****	(1,250	)		(652	)
Issue of capital instruments, net (note 10)	****	–	****		1,990
Redemption of capital instruments (note 10)	****	(818	)		(1,250	)
Secured borrowings (note 3(f))	****	26	****		1,376
Change in repurchase agreements and securities sold but not yet<br>purchased	****	186	****		24
Changes in deposits from Bank clients, net	****	(164	)		(579	)
Lease payments	****	(124	)		(134	)
Shareholders’ dividends and other equity distributions	****	(2,500	)		(2,340	)
Common shares repurchased (note 11)	****	–	****		(253	)
Common shares issued, net (note 11)	****	51	****		36
Preferred shares and other equity issued, net (note 11)	****	3,171	****		–
Preferred shares redeemed, net (note 11)	****	(612	)		–
Contributions from (distributions to) non-controlling interests, net	****	(13	)		(10	)
Cash provided by (used in) financingactivities	****	(2,047	)		663
Cash and short-term securities
Increase (decrease) during the year	****	(3,334	)		6,563
Effect of foreign exchange rate changes on cash and short-term<br>securities	****	(319	)		(528	)
Balance, beginning of year	****	25,583	****		19,548
Balance, December 31	****	21,930	****		25,583
Cash and short-term securities
Beginning of year
Gross cash and short-term securities	****	26,167	****		20,300
Net payments in transit, included in other<br>liabilities	****	(584	)		(752	)
Net cash and short-term securities,January 1	****	25,583	****		19,548
End of year
Gross cash and short-term securities	****	22,594	****		26,167
Net payments in transit, included in other<br>liabilities	****	(664	)		(584	)
Net cash and short-termsecurities, December 31	$	21,930	****	$	25,583
Supplemental disclosures on cash flow information
Interest received	$	11,376	****	$	11,736
Interest paid	****	981	****		1,188
Income taxes paid	****	571	****		1,358

The accompanying notes are an integral part of these Consolidated Financial Statements.

140   |  2021 Annual Report  |  Consolidated Financial Statements ****

Notes to Consolidated Financial Statements

Page Number	Note
142	Note 1	Nature of Operations and Significant Accounting Policies
150	Note 2	Accounting and Reporting Changes
152	Note 3	Invested Assets and Investment Income
160	Note 4	Derivative and Hedging Instruments
166	Note 5	Goodwill and Intangible Assets
168	Note 6	Insurance Contract Liabilities and Reinsurance Assets
177	Note 7	Investment Contract Liabilities
178	Note 8	Risk Management
185	Note 9	Long-Term Debt
186	Note 10	Capital Instruments
187	Note 11	Equity Capital and Earnings Per Share
189	Note 12	Capital Management
190	Note 13	Revenue from Service Contracts
190	Note 14	Stock-Based Compensation
192	Note 15	Employee Future Benefits
196	Note 16	Income Taxes
198	Note 17	Interests in Structured Entities
200	Note 18	Commitments and Contingencies
202	Note 19	Segmented Information
204	Note 20	Related Parties
204	Note 21	Subsidiaries
206	Note 22	Segregated Funds
207	Note 23	Information Provided in Connection with Investments in Deferred Annuity Contracts and SignatureNotes Issued or Assumed by John Hancock Life Insurance Company (U.S.A.)
213	Note 24	Comparatives
141
---

Notes to Consolidated Financial Statements

(Canadian $ in millions except per share amounts or unless otherwise stated)

Note 1    Nature of Operations and Significant Accounting Policies

(a) Reporting entity

Manulife Financial Corporation (“MFC”) is a publicly traded company and the holding company of The Manufacturers Life Insurance Company (“MLI”), a Canadian life insurance company. MFC and its subsidiaries (collectively, “Manulife” or the “Company”) is a leading financial services group with principal operations in Asia, Canada and the United States. Manulife’s international network of employees, agents and distribution partners offers financial protection and wealth management products and services to personal and business clients as well as asset management services to institutional customers. The Company operates as Manulife in Canada and Asia and as John Hancock in the United States.

MFC is domiciled in Canada and incorporated under the Insurance Companies Act (Canada) (“ICA”). These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These Consolidated Financial Statements should be read in conjunction with “Risk Management and Risk Factors” in the 2021 Management’s Discussion and Analysis (“MD&A”) dealing with IFRS 7 “Financial Instruments: Disclosures” as the discussion on market risk and liquidity risk includes certain disclosures that are considered an integral part of these Consolidated Financial Statements.

These Consolidated Financial Statements as at and for the year ended December 31, 2021 were authorized for issue by MFC’s Board of Directors on February 9, 2022.

(b) Basis of preparation

The preparation of Consolidated Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as at the date of the Consolidated Financial Statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from these estimates. The most significant estimation processes relate to evaluating assumptions used in measuring insurance and investment contract liabilities, assessing assets for impairment, determining pension and other post-employment benefit obligation and expense assumptions, determining income taxes and uncertain tax positions, and estimating fair values of certain invested assets. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future years affected. Although some variability is inherent in these estimates, management believes that the amounts recorded are appropriate. The significant accounting policies used and the most significant judgments made by management in applying these accounting policies in the preparation of these Consolidated Financial Statements are summarized below.

The Company’s results and operations have been and may continue to be adversely impacted by COVID-19 and the economic environment. The adverse effects include but are not limited to significant market volatility, low interest rates, increase in credit risk, strain on commodity markets and alternative long-duration asset prices, foreign currency exchange rate volatility, increases in insurance claims, persistency and redemptions, and disruption of business operations. The breadth and depth of these events and their duration contribute additional uncertainty around estimates used in determining the carrying value of certain assets and liabilities included in these Consolidated Financial Statements.

The uncertainty regarding key inputs used in establishing the carrying amounts of certain invested assets are outlined in note 3. The Company has applied appropriate measurement techniques using reasonable judgment and estimates from the perspective of a market participant to reflect current economic conditions. The impact of these techniques has been reflected in these Financial Statements. Changes in the inputs used could materially impact the respective carrying values.

(c) Fair value measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (not a forced liquidation or distress sale) between market participants at the measurement date; fair value is an exit value.

When available, quoted market prices are used to determine fair value. If quoted market prices are not available, fair value is typically based upon alternative valuation techniques such as discounted cash flows, matrix pricing, consensus pricing services and other techniques. Broker quotes are generally used when external public vendor prices are not available.

The Company has a valuation process in place that includes a review of price movements relative to the market, a comparison of prices between vendors, and a comparison to internal matrix pricing which uses predominately external observable data. Judgment is applied in adjusting external observable data for items including liquidity and credit factors.

142   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

The Company categorizes its fair value measurement results according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company’s valuation techniques based on their reliability. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

Level 1 – Fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Company can access at the measurement date, reflecting market transactions.

Level 2 – Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices (such as interest rates, credit risks, etc.) and inputs that are derived from or corroborated by observable market data. Most debt securities are classified within Level 2. Also, included in the Level 2 category are derivative instruments that are priced using models with observable market inputs, including interest rate swaps, equity swaps, credit default swaps and foreign currency forward contracts.

Level 3 – Fair value measurements using significant non-market observable inputs. These include valuations for assets and liabilities that are derived using data, some or all of which is not market observable, including assumptions about risk. Level 3 security valuations include less liquid securities such as real estate investment property, other invested assets, timber investments held within segregated funds, certain long-duration bonds and other securities that have little or no price transparency. Certain derivative financial instrument valuations are also included in Level 3.

(d) Basis of consolidation

MFC consolidates the financial statements of all entities it controls, including certain structured entities. Subsidiaries are entities controlled by the Company. The Company has control over an entity when the Company has the power to govern the financial and operating policies of the entity and is exposed to variable returns from its activities which are significant in relation to the total variable returns of the entity and the Company is able to use its power over the entity to affect the Company’s share of variable returns of the entity. In assessing control, significant judgment is applied while considering all relevant facts and circumstances. When assessing decision making power over an entity, the Company considers the extent of its rights relative to the management of the entity, the level of voting rights held over the entity which are potentially or presently exercisable, the existence of any contractual management agreements which may provide the Company with power over the entity’s financial and operating policies, and to the extent of other parties’ ownership in the entity, if any, the possibility for de facto control being present. When assessing variable returns from an entity, the Company considers the significance of direct and indirect financial and non-financial variable returns to the Company from the entity’s activities in addition to the proportionate significance of such returns to the total variability of the entity. The Company also considers the degree to which its interests are aligned with those of other parties investing in the entity and the degree to which the Company may act in its own interest while interacting with the entity.

The financial statements of subsidiaries are included in MFC’s consolidated results from the date control is established and are excluded from consolidation from the date control ceases. The initial control assessment is performed at inception of the Company’s involvement with the entity and is reconsidered if the Company acquires or loses power over key operating and financial policies of the entity; acquires additional interests or disposes of interests in the entity; the contractual arrangements of the entity are amended such that the Company’s proportionate exposure to variable returns changes; or if the Company’s ability to use its power to affect its variable returns from the entity changes.

The Company’s Consolidated Financial Statements have been prepared using uniform accounting policies for like transactions and events in similar circumstances. Intercompany balances, and revenue and expenses arising from intercompany transactions, have been eliminated in preparing the Consolidated Financial Statements.

Non-controlling interests are interests of other parties in the equity of MFC’s subsidiaries and are presented within total equity, separate from the equity of MFC’s participating policyholders and shareholders. Non-controlling interests in the net income and other comprehensive income (“OCI”) of MFC’s subsidiaries are included in total net income and total OCI, respectively. An exception to this occurs where the subsidiary’s shares are either puttable by the other parties or are redeemable for cash on a fixed or determinable date, in which case other parties’ interests in the subsidiary’s capital are presented as liabilities of the Company and other parties’ interests in the subsidiary’s net income and OCI are recorded as expenses of the Company.

The equity method of accounting is used to account for entities over which the Company has significant influence or joint control (“associates” or “joint ventures”), whereby the Company records its share of the associate’s or joint venture’s net assets and financial results using uniform accounting policies for similar transactions and events. Significant judgment is used to determine whether voting rights, contractual management rights and other relationships with the entity, if any, provide the Company with significant influence or joint control over the entity. Gains and losses on the sale of associates or joint ventures are included in income when realized, while impairment losses are recognized immediately when there is objective evidence of impairment. Gains and losses on commercial transactions with associates or joint ventures are eliminated to the extent of the Company’s interest in the equity of the associate or joint venture. Investments in associates and joint ventures are included in other invested assets on the Company’s Consolidated Statements of Financial Position.

143

(e) Invested assets

Invested assets that are considered financial instruments are classified as fair value through profit or loss (“FVTPL”), loans and receivables, or as available-for-sale (“AFS”) financial assets. The Company determines the classification of its financial assets at initial recognition. Invested assets are recognized initially at fair value plus, in the case of investments not at FVTPL, directly attributable transaction costs. Invested assets are classified as financial instruments at FVTPL if they are held for trading, if they are designated by management under the fair value option, or if they are designated by management when they include one or more embedded derivatives. Invested assets classified as AFS are non-derivative financial assets that do not fall into any of the other categories described above.

Valuation methods for the Company’s invested assets are described above. All fair value valuations are performed in accordance with IFRS 13 “Fair Value Measurement”. Disclosure of fair value valuations within the three levels of the fair value hierarchy for invested assets carried at fair value or not carried at fair value on the Consolidated Statements of Financial Position are presented in note 3. Fair value valuations are performed by the Company and by third-party service providers. When third-party service providers are engaged, the Company performs a variety of procedures to corroborate pricing information. These procedures may include, but are not limited to, inquiry and review of valuation techniques, inputs to the valuation and vendor controls reports.

Cash and short-term securities comprise of cash, current operating accounts, overnight bank and term deposits, and debt securities held for meeting short-term cash commitments. Short-term securities are comprised of investments due to mature within one year of the date of purchase. Short-term securities are carried at fair value. Commercial paper and discount notes are classified as Level 2 for fair value disclosure purposes because these securities are typically not actively traded. Net payments in transit and overdraft bank balances are included in other liabilities.

Debt securities are carried at fair value or amortized cost. Debt securities are generally valued by independent pricing vendors using proprietary pricing models incorporating current market inputs for similar instruments with comparable terms and credit quality (matrix pricing). The significant inputs include, but are not limited to, yield curves, credit risks and spreads, prepayment rates and volatility of these inputs. These debt securities are classified as Level 2 for fair value disclosure purposes but can be Level 3 if significant inputs are market unobservable. Realized gains and losses on sale of debt securities and unrealized gains and losses on debt securities designated as FVTPL are recognized in investment income immediately. Unrealized gains and losses on AFS debt securities are recorded in OCI, except for unrealized gains and losses on foreign currency translation which are included in income. Impairment losses on AFS debt securities are recognized in income on an individual security basis when there is objective evidence of impairment. Impairment is considered to have occurred, based on management’s judgment, when it is deemed probable that the Company will not be able to collect all amounts due according to the debt security’s contractual terms. Debt securities which are classified as held-to-maturity are carried at amortized cost. This includes debt securities with fixed or determinable payments and fixed maturities, for which the Company has both positive intention and ability to hold to maturity, and which the Company has not designated at initial recognition as FVTPL or AFS.

Public equities are comprised of common and preferred equities and mutual fund shares and are carried at fair value. Public equities are generally classified as Level 1 for fair value disclosure purposes, as fair values are normally based on quoted market prices. Realized gains and losses on sale of equities and unrealized gains and losses on equities designated as FVTPL are recognized in investment income immediately. Unrealized gains and losses on AFS equities are recorded in OCI. Impairment losses on AFS equities are recognized in income on an individual security basis when there is objective evidence of impairment. Impairment is considered to have occurred when fair value has declined below cost by a significant amount or for a prolonged period. Significant judgment is applied in determining whether the decline is significant or prolonged.

Mortgages are carried at amortized cost and are classified as Level 3 for fair value disclosure purposes due to the lack of market observability of certain significant valuation inputs. Realized gains and losses are recorded in investment income immediately. Impairment losses are recorded on mortgages when there is no longer reasonable assurance as to the timely collection of the full amount of principal and interest and are measured based on the discounted value of expected future cash flows at the original effective interest rates inherent in the mortgage. Expected future cash flows of impaired mortgages are typically determined with reference to the fair value of collateral security underlying the mortgage, net of expected costs of realization and including any applicable insurance recoveries. Significant judgment is applied in the determination of impairment including the timing and amount of future collections.

The Company accounts for insured and uninsured mortgage securitizations as secured financing transactions since the criteria for sale accounting are not met. For these transactions, the Company continues to recognize the mortgages and records liabilities within other liabilities for the amounts owed at maturity. Interest income from these mortgages and interest expense on the borrowings are recorded using the effective interest rate method.

Private placements, which include corporate loans for which there is no active market, are carried at amortized cost and are generally classified as Level 2 for fair value disclosure purposes or Level 3 if significant inputs are market unobservable. Realized gains and losses are recorded in income immediately. Impairment losses are recorded on private placements when there is no longer assurance as to the timely collection of the full amount of principal and interest. Impairment is measured based on the discounted value of expected future cash flows at the original effective interest rate inherent in the loan. Significant judgment is applied in the determination of impairment including the timing and amount of future collections.

Policy loans are carried at an amount equal to their unpaid balances and are classified as Level 2 for fair value disclosure purposes. Policy loans are fully collateralized by the cash surrender value of the underlying policies.

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Loans to Manulife Bank of Canada (“Manulife Bank” or “Bank”) clients are carried at amortized cost and are classified as Level 2 for fair value disclosure purposes. A loan to a Bank client is considered impaired when there is objective evidence of impairment because of one or more loss events that have occurred after initial recognition, with a negative impact on the estimated future cash flows of the loan.

Once established, allowances for impairment of mortgages, private placements and loans to Bank clients are reversed only if the conditions that caused the impairment no longer exist. Reversals of impairment charges on AFS debt securities are only recognized in income to the extent that subsequent increases in fair value can be attributed to events after the impairment loss being recorded. Impairment losses for AFS equity instruments are not reversed through income. On disposition of an impaired asset, any allowance for impairment is released.

In addition to impairments and provisions for loan losses (recoveries) reported in investment income, the measurement of insurance contract liabilities, via investment return assumptions, includes expected future credit losses on fixed income investments. Refer to note 6(d).

Interest income is recognized on debt securities, mortgages, private placements, policy loans, loans to Bank clients and certain other invested assets as it accrues and is calculated using the effective interest rate method. Premiums, discounts and transaction costs are amortized over the life of the underlying investment using the effective yield method for all debt securities as well as mortgages and private placements.

The Company records purchases and sales of invested assets on a trade date basis. Loans originated by the Company are recognized on a settlement date basis.

Real estate consists of both own use property and investment property. Own use property, held for use for the Company’s operations, is carried at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated based on the cost of an asset less its residual value and is recognized in income on a straight-line basis over the estimated useful life ranging from 30 to 60 years. Impairment losses are recorded in income to the extent the recoverable amount is less than the carrying amount. Where own use property is included in assets backing insurance contract liabilities, the fair value of the property is used in the valuation of insurance contract liabilities. Own use property is classified as Level 3 for fair value disclosure purposes.

An investment property is a property held to earn rental income, for capital appreciation, or both. Investment properties are measured at fair value, with changes in fair value recognized in income. Fair value is determined using external appraisals that are based on the highest and best use of the property. The valuation techniques include discounted cash flows, the direct capitalization method as well as comparable sales analysis and include both observable and unobservable inputs. Inputs include existing and assumed tenancies, market data from recent comparable transactions, future economic outlook and market risk assumptions, capitalization rates and internal rates of return. Investment properties are classified as Level 3 for fair value disclosure purposes.

When a property changes from own use to investment property, any gain or loss arising on the remeasurement of the property to fair value at the date of transfer is recognized in OCI, to the extent that it is not reversing a previous impairment loss. Reversals of impairment losses are recognized in income.

Other invested assets include private equity and property investments held in infrastructure and timber, as well as in agriculture and oil and gas sectors. Private equity investments are accounted for as associates or joint ventures using the equity method (as described in note 1(d) above) or are classified as FVTPL or AFS and carried at fair value. Investments in oil and gas exploration and evaluation activities are measured on the cost basis using the “successful efforts” method. Timber and agriculture properties are measured at fair value with changes in fair value recognized in income, except for buildings, equipment and bearer plants which are measured at amortized cost. The fair value of other invested assets is determined using a variety of valuation techniques as described in note 3. Other invested assets that are measured or disclosed at fair value are primarily classified as Level 3.

Other invested assets also include investments in leveraged leases, which are accounted for using the equity method. The carrying value under the equity method reflects the amortized cost of the lease receivable and related non-recourse debt using the effective yield method.

(f) Goodwill and intangible assets

Goodwill represents the difference between the fair value of purchase consideration of an acquired business and the Company’s proportionate share of the net identifiable assets acquired. It is initially recorded at cost and subsequently measured at cost less any accumulated impairment.

Goodwill is tested for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable at the cash generating unit (“CGU”) or group of CGUs level. The Company allocates goodwill to CGUs or group of CGUs for impairment testing at the lowest level within the entity where the goodwill is monitored for internal management purposes. The allocation is made to those CGUs or group of CGUs that are expected to benefit from the business combination in which the goodwill arose. Any potential impairment of goodwill is identified by comparing the recoverable amount with the carrying value of a CGU or group of CGUs. Goodwill is reduced by the amount of deficiency, if any. If the deficiency exceeds the carrying amount of goodwill, the carrying values of the remaining assets in the CGU or group of CGUs are subject to being reduced by the remaining deficiency on a pro-rata basis.

The recoverable amount of a CGU or group of CGUs is the higher of the estimated fair value less costs to sell or the value-in-use of the CGU or group of CGUs. In assessing value-in-use, estimated future cash flows are discounted using a pre-tax discount rate that reflects current

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market assessments of the time value of money and the risks specific to the CGU or group of CGUs. In some cases, the most recent detailed calculation made in a prior period of a recoverable amount is used in the current period impairment testing. This is the case only if there are no significant changes to the CGU or group of CGUs, the likelihood of impairment is remote based on the analysis of current events and circumstances, and the most recently calculated recoverable amount substantially exceeded the current carrying amount of the CGU or group of CGUs.

Intangible assets with indefinite useful lives include the John Hancock brand name, certain investment management contracts and certain agricultural water rights. The indefinite useful life assessment for the John Hancock brand name is based on the brand name being protected by indefinitely renewable trademarks in markets where branded products are sold, and for certain investment management contracts based on the ability to renew these contracts indefinitely. In addition, there are no legal, regulatory or contractual provisions that limit the useful lives of these intangible assets. Certain agricultural water rights are held in perpetuity. An intangible asset with an indefinite useful life is not amortized but is subject to an annual impairment test which is performed more frequently if an indication that it is not recoverable arises.

Intangible assets with finite useful lives include acquired distribution networks, customer relationships, capitalized software, and certain investment management contracts and other contractual rights. Distribution networks, customer relationships, and other finite life intangible assets are amortized over their estimated useful lives, six to 68 years, either based on straight-line or in relation to other asset consumption metrics. Software intangible assets are amortized on a straight-line basis over their estimated useful lives of three to 10 years. Finite life intangible assets are assessed for indicators of impairment at each reporting period. If indications of impairment arises, these assets are tested for impairment.

(g) Miscellaneous assets

Miscellaneous assets include assets held in a rabbi trust with respect to unfunded defined benefit obligations, defined benefit assets, if any, deferred acquisition costs and capital assets. Rabbi trust assets are carried at fair value. Defined benefit assets carrying value is explained in note 1(o). Deferred acquisition costs are carried at cost less accumulated amortization and are amortized over the period redemption fees may be charged or over the period revenue is earned. Capital assets are carried at cost less accumulated amortization computed on a straight-line basis over their estimated useful lives, which vary from two to 10 years.

(h) Segregated funds

The Company manages segregated funds on behalf of policyholders, which are presented as segregated fund net assets with offsetting segregated funds net liabilities to policyholders in the amount of their account balances. Amounts invested by the Company in segregated funds for seed purposes are presented within invested asset categories based on the nature of the underlying investments. The investment returns on these funds are passed directly to policyholders. In some cases, the Company has provided guarantees associated with these funds.

Segregated funds net assets are measured at fair value and include investments in mutual funds, debt securities, equities, cash, short-term investments and other investments. With respect to the consolidation requirement of IFRS, in assessing the Company’s degree of control over the underlying investments, the Company considers the scope of its decision-making rights, the rights held by other parties, its remuneration as an investment manager and its exposure to variability of returns from the investments. The Company has determined that it does not have control over the underlying investments as it acts as an agent on behalf of segregated fund policyholders.

The methodology applied to determine the fair value of investments held in segregated funds is consistent with that applied to invested assets held by the general fund, as described above in note 1(e). Segregated funds liabilities are measured based on the value of the segregated funds net assets. Investment returns on segregated funds assets belong to policyholders and the Company does not bear the risk associated with these assets outside of guarantees offered on certain variable life and annuity products, for which the underlying investments are held within segregated funds. Accordingly, investment income earned by segregated funds and expenses incurred by segregated funds are offset and are not separately presented in the Consolidated Statements of Income. Fee income earned by the Company for managing and administering the segregated funds is included in other revenue.

Liabilities related to guarantees associated with certain segregated funds, as a result of certain variable life and annuity contracts, are recorded within the Company’s insurance contract liabilities. The Company holds assets supporting these guarantees in the general fund, which are included in invested assets according to their investment type.

(i) Insurance and investment contract liabilities

Most contracts issued by the Company are considered insurance, investment or service contracts. Contracts under which the Company accepts significant insurance risk from a policyholder are classified as insurance contracts in the Consolidated Financial Statements. A contract is considered to have significant insurance risk if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, excluding scenarios that lack commercial substance at the inception of the contract. Contracts under which the Company does not accept significant insurance risk are either classified as investment contracts or considered service contracts and are accounted for in accordance with IAS 39 “Financial Instruments: Recognition and Measurement” or IFRS 15 “Revenue from Contracts with Customers”, respectively.

Once a contract has been classified as an insurance contract it remains an insurance contract even if the insurance risk reduces significantly. Investment contracts can be reclassified as insurance contracts if insurance risk subsequently becomes significant.

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Insurance contract liabilities, net of reinsurance assets, represent the amount which, together with estimated future premiums and net investment income, will be sufficient to pay estimated future benefits, policyholder dividends and refunds, taxes (other than income taxes) and expenses on policies in-force. Insurance contract liabilities are presented gross of reinsurance assets on the Consolidated Statements of Financial Position. The Company’s Appointed Actuary is responsible for determining the amount of insurance contract liabilities in accordance with standards established by the Canadian Institute of Actuaries. Insurance contract liabilities, net of reinsurance assets, have been determined using the Canadian Asset Liability Method (“CALM”) as permitted by IFRS 4 “Insurance Contracts”. Refer to note 6.

Investment contract liabilities include contracts issued to retail and institutional investors that do not contain significant insurance risk. Investment contract liabilities and deposits are measured at amortized cost or at FVTPL by election. The election reduces accounting mismatches between FVTPL assets supporting these contracts and the related contract liabilities. Investment contract liabilities are derecognized when the contract expires, is discharged or is cancelled.

Derivatives embedded within insurance contracts are separately accounted for as derivatives if they are not considered to be closely related to the host insurance contract and do not meet the definition of an insurance contract. These embedded derivatives are presented separately in other assets or other liabilities and are measured at FVTPL.

(j) Reinsurance assets

The Company uses reinsurance in the normal course of business to manage its risk exposure. Insurance ceded to a reinsurer does not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet its obligations for reinsurance ceded to it under a reinsurance agreement.

Reinsurance assets represent the benefit derived from reinsurance agreements in-force at the reporting date, considering the financial condition of the reinsurer. Amounts recoverable from reinsurers are estimated in accordance with the terms of the relevant reinsurance contract.

Gains or losses on reinsurance transactions are recognized in income immediately on the transaction date and are not amortized. Premiums ceded and claims reimbursed are presented on a gross basis on the Consolidated Statements of Income. Reinsurance assets are not offset against the related insurance contract liabilities and are presented separately on the Consolidated Statements of Financial Position. Refer to note 6(a).

(k) Other financial instruments accounted for as liabilities

The Company issues a variety of other financial instruments classified as liabilities, including notes payable, term notes, senior notes, senior debentures, subordinated notes, surplus notes and preferred shares. These financial liabilities are measured at amortized cost, with issuance costs deferred and amortized using the effective interest rate method.

(l) Income taxes

The provision for income taxes is calculated based on income tax laws and income tax rates substantively enacted as at the date of the Consolidated Statements of Financial Position. The income tax provision is comprised of current income taxes and deferred income taxes. Current and deferred income taxes relating to items recognized in OCI and directly in equity are similarly recognized in OCI and directly in equity, respectively.

Current income taxes are amounts expected to be payable or recoverable for the current year and any adjustments to taxes payable in respect of previous years.

Deferred income taxes are provided for using the liability method and result from temporary differences between the carrying values of assets and liabilities and their respective tax bases. Deferred income taxes are measured at the substantively enacted tax rates that are expected to be applied to temporary differences when they reverse.

A deferred tax asset is recognized to the extent that future realization of the tax benefit is probable. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the tax benefit will be realized. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied by the same tax authority on the same taxable entity.

Deferred tax liabilities are recognized for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

The Company records liabilities for uncertain tax positions if it is probable that the Company will make a payment on tax positions due to examinations by tax authorities. These provisions are measured at the Company’s best estimate of the amount expected to be paid. Provisions are reversed to income in the period in which management assesses they are no longer required or determined by statute.

The Company is subject to income tax laws in various jurisdictions. Tax laws are complex and potentially subject to different interpretations by the taxpayer and the relevant tax authority. The provision for current income taxes and deferred income taxes represents management’s interpretation of the relevant tax laws and its estimate of current and future income tax implications of the transactions and

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events during the year. The Company may be required to change its provision for income taxes or deferred income tax balances when the ultimate deductibility of certain items is successfully challenged by taxing authorities, or if estimates used in determining the amount of deferred tax balances to recognize change significantly, or when receipt of new information indicates the need for adjustment in the amount of deferred income taxes to be recognized. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income taxes, deferred tax balances and the effective tax rate. Any such changes could materially affect the amounts reported in the Consolidated Financial Statements in the period these changes occur.

(m) Foreign currency translation

Items included in the financial statements of each of the Company’s subsidiaries, joint ventures and associates are measured by each entity using the currency of the primary economic environment in which the entity operates (the “functional currency”). If their functional currency is other than Canadian dollar, these entities are foreign operations of the Company.

Transactions in a foreign currency are translated to the functional currency at the exchange rate prevailing at the date of the transaction. Assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate in effect at the reporting date. Revenue and expenses denominated in foreign currencies are translated at the average exchange rate prevailing during the quarter reported. Exchange gains and losses are recognized in income except for translation of net investments in foreign operations and the results of hedging these positions, and for non-monetary items designated as AFS. These foreign exchange gains and losses are recognized in OCI until such time that the foreign operation or non-monetary item is disposed of or control or significant influence over it is lost.

The Consolidated Financial Statements are presented in Canadian dollars. The financial statements of the Company’s foreign operations are translated from their functional currencies to Canadian dollars; assets and liabilities are translated at the exchange rate at the reporting date, and revenue and expenses are translated using the average exchange rates for the period. Foreign exchange gains and losses on these translations are recognized in OCI, subject to reclassification to income upon disposal of a foreign operation.

(n) Stock-based compensation

The Company provides stock-based compensation to certain employees and directors as described in note 14. Compensation expense of equity instruments granted is accrued based on the best estimate of the number of instruments expected to vest, with revisions made to that estimate if subsequent information indicates that actual forfeitures are likely to differ from initial forfeiture estimates, unless forfeitures are due to market-based conditions.

Stock options are expensed with a corresponding increase in contributed surplus. Restricted share units and deferred share units are expensed with a corresponding liability accrued based on the market value of MFC’s common shares at the end of each quarter. Performance share units are expensed with a corresponding liability accrued based on specific performance conditions and the market value of MFC’s common shares at the end of each quarter. The change in the value of the awards resulting from changes in the market value of MFC’s common shares or changes in the specific performance conditions and credited dividends is recognized in income, offset by the impact of total return swaps used to manage the variability of the related liabilities.

Stock-based compensation cost is recognized over the applicable vesting period, unless the employee is eligible to retire at the time of grant or will be eligible to retire during the vesting period. Compensation costs attributable to stock options, restricted share units, and performance share units granted to employees who are eligible to retire on the grant date or who will become eligible to retire during the vesting period, are recognized at the grant date or over the period from the grant date to the date of retirement eligibility, respectively.

The Company’s contributions to the Global Share Ownership Plan (“GSOP”) (refer to note 14(d)), are expensed as incurred. Under the GSOP, subject to certain conditions, the Company will match a percentage of an employee’s eligible contributions to certain maximums. All contributions are used by the plan’s trustee to purchase MFC common shares in the open market on behalf of participating employees.

(o) Employee future benefits

The Company maintains defined contribution and defined benefit pension plans and other post-employment plans for employees and agents including registered (tax qualified) pension plans that are typically funded as well as supplemental non-registered (non-qualified) pension plans for executives, retiree and disability welfare plans that are typically not funded.

The Company’s obligation in respect of defined benefit pension and other post-employment benefits is calculated for each plan as the estimated present value of future benefits that eligible employees have earned in return for their service up to the reporting date using the projected benefit method. The discount rate used is based on the yield, as at the reporting date, of high-quality corporate debt securities that have approximately the same term as the benefit obligations and that are denominated in the same currency in which the benefits are expected to be paid.

To determine the Company’s net defined benefit asset or liability, the fair value of plan assets is deducted from the defined benefit obligations. When this calculation results in a surplus, the asset that can be recognized is limited to the present value of future economic benefit available in the form of future refunds from the plan or reductions in future contributions to the plan (the asset limit). Defined benefit assets are included in other assets and defined benefit liabilities are included in other liabilities.

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Changes in the net defined benefit asset or liability due to re-measurement of pension and retiree welfare plans are recorded in OCI in the period in which they occur and are not reclassified to income in subsequent periods. They consist of actuarial gains and losses, the impact of the asset limit, if any, and the return on plan assets, excluding amounts included in net interest income or expense. Changes in the net defined benefit asset or liability due to re-measurement of disability welfare plans are recorded in income in the period in which they occur.

The cost of defined benefit pension plans is recognized over the employee’s years of service to retirement while the cost of retiree welfare plans is recognized over the employee’s years of service to their date of full eligibility. The net benefit cost for the year is recorded in income and is calculated as the sum of the service cost in respect of the fiscal year, the net interest income or expense and any applicable administration expenses, plus past service costs or credits resulting from plan amendments or curtailments. The net interest income or expense is determined by applying the discount rate to the net defined benefit asset or liability. The current year cost of disability welfare plans is the year-over-year change in the defined benefit obligation, including any actuarial gains or losses.

The cost of defined contribution plans is the contribution provided by the Company and is recorded in income in the periods during which services are rendered by employees.

(p) Derivative and hedging instruments

The Company uses derivative financial instruments (“derivatives”) including swaps, forward and futures agreements, and options to manage current and anticipated exposures to changes in interest rates, foreign exchange rates, commodity prices and equity market prices, and to replicate permissible investments. Derivatives embedded in other financial instruments are separately recorded as derivatives when their economic characteristics and risks are not closely related to those of the host instrument, the terms of the embedded derivative are the same as those of a standalone derivative and the host instrument itself is not recorded at FVTPL. Derivatives which are separate financial instruments are recorded at fair value, and those with unrealized gains reported as derivative assets and those with unrealized losses reported as derivative liabilities.

A determination is made for each derivative as to whether to apply hedge accounting. Where hedge accounting is not applied, changes in the fair value of derivatives are recorded in investment income. Refer to note 3(c).

Where the Company has elected to apply hedge accounting, a hedging relationship is designated and documented at inception. Hedge effectiveness is evaluated at inception and throughout the term of the hedge. Hedge accounting is only applied when the Company expects that the hedging relationship will be highly effective in achieving offsetting changes in fair value or changes in cash flows attributable to the risk being hedged. The assessment of hedge effectiveness is performed at the end of each reporting period both prospectively and retrospectively. When it is determined that a hedging relationship is no longer effective, or the hedging instrument or the hedged item has been sold or terminated, the Company discontinues hedge accounting prospectively. In such cases, if the derivatives are not sold or terminated, any subsequent changes in fair value of the derivatives are recognized in investment income.

For derivatives that are designated as hedging instruments, changes in fair value are recorded according to the nature of the risks being hedged, as discussed below.

In a fair value hedging relationship, changes in fair value of the hedging instruments are recorded in investment income, offsetting changes in fair value of the hedged items, which would otherwise not be carried at fair value. Hedge ineffectiveness is recognized in investment income and arises from differences between changes in the fair values of hedging instruments and hedged items. When hedge accounting is discontinued, the carrying value of the hedged item is no longer adjusted and the cumulative fair value adjustments are amortized to investment income over the remaining term of the hedged item unless the hedged item is sold, at which time the balance is recognized immediately in investment income.

In a cash flow hedging relationship, the effective portion of the change in the fair value of the hedging instrument is recorded in OCI while the ineffective portion is recognized in investment income. Gains and losses in accumulated other comprehensive income (“AOCI”) are recognized in income during the same periods that the variability in the hedged cash flows or the hedged forecasted transactions are recognized in income. The reclassifications from AOCI are made to investment income, except for total return swaps that hedge stock-based compensation awards, which are reclassified to general expenses.

Gains and losses on cash flow hedges in AOCI are reclassified immediately to investment income when the hedged item is sold or the forecasted transaction is no longer expected to occur. When a hedge is discontinued, but the hedged forecasted transaction is expected to occur, the amounts in AOCI are reclassified to investment income in the periods during which variability in the cash flows hedged or the hedged forecasted transaction is recognized in income.

In a net investment in foreign operations hedging relationship, gains and losses relating to the effective portion of the hedge are recorded in OCI. Gains and losses in AOCI are recognized in income during the periods when gains or losses on the underlying hedged net investment in foreign operations are recognized in income upon disposal of the foreign operation.

(q) Premium income and related expenses

Gross premiums for all types of insurance contracts, and contracts with limited mortality or morbidity risk, are generally recognized as revenue when due. Premiums are reported gross of reinsurance ceded (refer to note 6).

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(r) Revenue from service contracts

The Company recognizes revenue from service contracts in accordance with IFRS 15. The Company’s service contracts generally impose single performance obligations, each consisting of a series of similar related services for each customer. Revenue is recorded as performance obligations are satisfied over time because the customers simultaneously receive and consume the benefits of the services rendered, measured using an output method. Revenue for variable consideration is recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. Refer to note 13.

Note 2    Accounting and Reporting Changes

(a) Changes in accounting and reporting policy

Interest Rate Benchmark Reform Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 were issued in August 2020, are related to interest rate benchmark reform and are effective retrospectively for annual periods beginning January 1, 2021. The amendments provide relief from modification of financial assets and liabilities, and discontinuation of hedge relationships, when changing risk free interest rate benchmarks due to interest rate benchmark reform. The amendments include a practical expedient to treat changes in risk free rates as a change to a floating interest rate with an update to the effective rate of interest, rather than as a change in future cash flows which might require adjustments to carrying values through recording a modification gain or loss. The Company’s exposure to these changes through invested assets, derivatives and subordinate debt is not significant and has not resulted in significant changes to the Company’s risk management strategies.

(b) Future accounting and reporting changes

(i) IFRS 9 “Financial Instruments”

IFRS 9 “Financial Instruments” was issued in November 2009 and amended in October 2010, November 2013 and July 2014, and is effective for years beginning on or after January 1, 2018, to be applied retrospectively, or on a modified retrospective basis. Additionally, the IASB issued amendments in October 2017 that are effective for annual periods beginning on or after January 1, 2019. In conjunction with the amendments to IFRS 17 “Insurance Contracts” issued in June 2020, the IASB amended IFRS 4 “Insurance Contracts” to permit eligible insurers to apply IFRS 9 effective January 1, 2023, alongside IFRS 17. The standard is intended to replace IAS 39 “Financial Instruments: Recognition and Measurement”.

The project has been divided into three phases: classification and measurement, impairment of financial assets, and hedge accounting. IFRS 9’s current classification and measurement methodology provides that financial assets are measured at either amortized cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The classification and measurement for financial liabilities remains generally unchanged; however, for a financial liability designated as at fair value through profit or loss, revisions have been made in the accounting for changes in fair value attributable to changes in the credit risk of that liability. Gains or losses caused by changes in an entity’s own credit risk on such liabilities are no longer recognized in profit or loss but instead are reflected in OCI.

Revisions to hedge accounting were issued in November 2013 as part of the overall IFRS 9 project. The amendment introduces a new hedge accounting model, together with corresponding disclosures about risk management activity for those applying hedge accounting. The new model represents a substantial overhaul of hedge accounting that will enable entities to better reflect their risk management activities in their financial statements.

Revisions issued in July 2014 replace the existing incurred loss model used for measuring the allowance for credit losses with an expected loss model. Changes were also made to the existing classification and measurement model designed primarily to address specific application issues raised by early adopters of the standard. They also address the income statement accounting mismatches and short-term volatility issues which have been identified as a result of the insurance contracts project.

The Company elected to defer IFRS 9 until January 1, 2023 as permitted under the June 2020 amendments to IFRS 4 “Insurance Contracts”. The Company is assessing the impact of this standard on the Company’s Consolidated Financial Statements.

(ii) IFRS 17 “Insurance Contracts”

IFRS 17 “Insurance Contracts” was issued in May 2017 to be effective for years beginning on January 1, 2021. Amendments to IFRS 17 “Insurance Contracts” were issued in June 2020 and include a two-year deferral of the effective date. IFRS 17 as amended, is effective for years beginning on January 1, 2023, to be applied retrospectively. If full retrospective application to a group of contracts is impractical, the modified retrospective or fair value methods may be used. The standard will replace IFRS 4 “Insurance Contracts” and will materially change the recognition and measurement of insurance contracts and the corresponding presentation and disclosures in the Company’s Financial Statements.

Narrow-scope amendments to IFRS 17 “Insurance Contracts” were issued in December 2021 and are effective on initial application of IFRS 17 and IFRS 9 “Financial Instruments” which the Company will adopt on January 1, 2023. The amendments remove accounting mismatches between insurance contract liabilities and financial assets in scope of IFRS 9 within comparative prior periods when initially

150   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

applying IFRS 17 and IFRS 9. The amendments allow insurers to present comparative information on financial assets as if IFRS 9 were fully applicable during the comparative period. The amendments do not permit application of IFRS 9 hedge accounting principles to the comparative period. The Company is considering the effect of these amendments on its IFRS 9 transition disclosures.

The principles underlying IFRS 17 differ from CALM as permitted by IFRS 4. While there are many differences, the following outlines some of the key differences:

•	Under IFRS 17 the discount rate used to estimate the present value of insurance contract liabilities is based on the<br>characteristics of the liability, whereas under CALM, the Company uses the rates of returns for current and projected assets supporting insurance contract liabilities to value the liabilities. The difference in the discount rate approach also<br>impacts the timing of investment-related experience earnings emergence. Under CALM, investment-related experience includes the impact of investing activities. The impact of investing activities is directly related to the CALM methodology. Under IFRS<br>17, the impact of investing activities will emerge over the life of the asset and is independent of the liability measurement.
•	Under IFRS 17 the discount rate is not related to the expected return on ALDA and public equity assets, and as a result, the<br>earnings sensitivity of a change in return assumptions for ALDA and public equity will be significantly reduced.
---	---
•	Under IFRS 17 the discount rate used to present value future cashflows is disconnected from the assets the Company holds to<br>support its insurance contract liabilities. As a result, the Company is considering electing the other comprehensive income option under IFRS 17 for insurance contract liabilities and the fair value through other comprehensive income option under<br>IFRS 9 for fixed income assets.
---	---
•	Under IFRS 17 new business gains are recorded on the Consolidated Statements of Financial Position (in the Contractual<br>Service Margin component of the insurance contract liability) and amortized into income as services are provided. New business losses are recorded into income immediately. Under CALM, both new business gains and new business losses are recognized in<br>income immediately.
---	---
•	The change in timing of recognition of earnings under IFRS 17 does not impact the cash flows generated by the business, and,<br>hence, IFRS 17 does not impact the economics of the Company’s business. The value of new business will be recorded in the Contractual Service Margin on the Consolidated Statements of Financial Position. An increase in the Contractual Service<br>Margin is indicative of growth in future earnings, all else being equal.
---	---

The Company continues its assessment of the implications of this standard and expects that it will have a significant impact on the Company’s Consolidated Financial Statements. The establishment of a Contractual Service Margin on in-force business is expected to lead to an increase in insurance contract liabilities and a corresponding decrease in equity upon transition. The Contractual Service Margin represents unearned profits that are expected to amortize into income as services are provided. The Company continues to evaluate the potential impacts of all other changes including available accounting policy choices under IFRS 17 on the measurement of its insurance contract liabilities.

(iii) Annual Improvements2018 – 2020 Cycle

Annual Improvements 2018 – 2020 Cycle was issued in May 2020 and is effective on or after January 1, 2022. The IASB issued four minor amendments to different standards as part of the Annual Improvements process, to be applied prospectively. Adoption of these amendments is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

(iv) Amendments to IFRS 3 “Business Combinations”

Amendments to IFRS 3 “Business Combinations” were issued in May 2020, and are effective on or after January 1, 2022, with earlier application permitted. The amendments update references within IFRS 3 to the 2018 Conceptual Framework and require that the principles in IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” be used to identify liabilities and contingent assets arising from a business combination. Adoption of these amendments is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

(v) Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”

Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” were issued in May 2020, and are effective on or after January 1, 2022, with earlier application permitted. The amendments address identifying onerous contracts and specify the cost of fulfilling a contract which includes all costs directly related to the contract. These include incremental direct costs and allocations of other costs that relate directly to fulfilling the contract. Adoption of these amendments is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

(vi) Amendments to IAS 1 “Presentation of Financial Statements”

Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” were issued in February 2021 and are effective prospectively on or after January 1, 2023 with earlier application permitted. The amendments address the process of selecting accounting policy disclosures, which will be based on assessments of the materiality of the accounting policies to the entity’s financial statements. Adoption of these amendments is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

151

(vii) Amendments to IAS 8 “Accounting Policies, Changes to Accounting Estimates and Errors”

Amendments to IAS 8 “Accounting Policies, Changes to Accounting Estimates and Errors” were issued in February 2021, and are effective prospectively on or after January 1, 2023, with earlier application permitted. The amendments include new definitions of estimate and change in accounting estimate, intended to help clarify the distinction among changes in accounting estimates, changes in accounting policies, and corrections of errors. Adoption of these amendments is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Note 3    Invested Assets and Investment Income

(a) Carrying values and fair values of invested assets

As at December 31, 2021	FVTPL^(1)^		AFS^(2)^		Other^(3)^		Total carrying<br>value^(4)^		Total fair<br>value^(5)^
Cash and short-term securities^(6)^	$	2,214	$	14,339	$	6,041	$	22,594	$	22,594
Debt securities^(3),(7),(8)^
Canadian government and agency	****	18,706	****	3,964	****	–	****	22,670	****	22,670
U.S. government and agency	****	12,607	****	18,792	****	852	****	32,251	****	32,254
Other government and agency	****	21,888	****	2,871	****	–	****	24,759	****	24,759
Corporate	****	133,763	****	7,332	****	468	****	141,563	****	141,560
Mortgage/asset-backed securities	****	2,758	****	138	****	–	****	2,896	****	2,896
Public equities^(9)^	****	25,716	****	2,351	****	–	****	28,067	****	28,067
Mortgages	****	–	****	–	****	52,014	****	52,014	****	54,089
Private placements^(8)^	****	–	****	–	****	42,842	****	42,842	****	47,276
Policy loans	****	–	****	–	****	6,397	****	6,397	****	6,397
Loans to Bank clients	****	–	****	–	****	2,506	****	2,506	****	2,503
Real estate
Own use property^(10)^	****	–	****	–	****	1,812	****	1,812	****	3,024
Investment property	****	–	****	–	****	11,421	****	11,421	****	11,421
Other invested assets
Alternative long-duration assets^(11)^	****	21,022	****	89	****	10,093	****	31,204	****	31,863
Various other^(12)^	****	135	****	–	****	3,967	****	4,102	****	4,102
Total invested assets	$	238,809	$	49,876	$	138,413	$	427,098	$	435,475
As at December 31, 2020	FVTPL^(1)^		AFS^(2)^		Other^(3)^		Total carrying<br>value^(4)^		Total fair<br>value^(5)^
Cash and short-term securities^(6)^	$	2,079	$	18,314	$	5,774	$	26,167	$	26,167
Debt securities^(7),(8)^
Canadian government and agency		20,667		4,548		–		25,215		25,215
U.S. government and agency		11,449		19,787		–		31,236		31,236
Other government and agency		19,732		4,613		–		24,345		24,345
Corporate		128,297		6,566		–		134,863		134,863
Mortgage/asset-backed securities		2,916		149		–		3,065		3,065
Public equities^(9)^		22,071		1,651		–		23,722		23,722
Mortgages		–		–		50,207		50,207		54,230
Private placements^(8)^		–		–		40,756		40,756		47,890
Policy loans		–		–		6,398		6,398		6,398
Loans to Bank clients		–		–		1,976		1,976		1,982
Real estate
Own use property^(10)^		–		–		1,850		1,850		3,017
Investment property		–		–		10,982		10,982		10,982
Other invested assets
Alternative long-duration assets^(11)^		16,183		88		9,901		26,172		27,029
Various other^(12)^		145		–		3,878		4,023		4,023
Total invested assets	$	223,539	$	55,716	$	131,722	$	410,977	$	424,164
^(1)^	FVTPL classification was elected for securities backing insurance contract liabilities to substantially reduce any<br>accounting mismatch arising from changes in the fair value of these assets and changes in the value of the related insurance contract liabilities. If this election had not been made and instead the available-for-sale (“AFS”) classification was selected, there would be an accounting mismatch because changes in insurance contract liabilities are recognized in net income rather than in OCI.<br>
---	---
^(2)^	Securities that are designated as AFS are not actively traded by the Company but sales do occur as circumstances warrant.<br>Such sales result in a reclassification of any accumulated unrealized gain (loss) in AOCI to net income as a realized gain (loss).
---	---
^(3)^	Primarily includes assets classified as loans and carried at amortized cost, own use properties, investment properties,<br>equity method accounted investments, and leveraged leases. Also includes debt securities classified as held-to-maturity which are accounted for at amortized cost. Refer<br>to note 1(e).
---	---
^(4)^	Invested assets above include debt securities, mortgages, private placements and approximately $323 (2020 – $246) of<br>other invested assets, which primarily have contractual cash flows that qualify as Solely Payment of Principal and Interest (“SPPI”). Invested assets which do not have SPPI qualifying cash flows as at December 31, 2021 include debt<br>securities, private placements and other invested assets with fair values of $nil, $181 and $518, respectively (2020 – $94, $211 and $380, respectively). The change in the fair value of these invested assets during the year was $15 (2020 –<br>$44).
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152   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

^(5)^	The methodologies used in determining fair values of invested assets are described in note 1(c) and note 3(g).<br>
^(6)^	Includes short-term securities with maturities of less than one year at acquisition amounting to $7,314 (2020 –<br>$7,062) cash equivalents with maturities of less than 90 days at acquisition amounting to $9,239 (2020 – $13,331) and cash of $6,041 (2020 – $5,774).
---	---
^(7)^	Debt securities include securities which were acquired with maturities of less than one year and less than 90 days of<br>$2,196 and $347, respectively (2020 – $1,971 and $129, respectively).
---	---
^(8)^	Floating rate invested assets above which are subject to interest rate benchmark reform, but have not yet transitioned to<br>replacement reference rates, include debt securities benchmarked to CDOR and USD LIBOR of $176 and $1,002 (2020 – $109 and $842, respectively), and private placements benchmarked to USD LIBOR, AUD BBSW and NZD BKBM of $1,984, $166 and $43 (2020<br>– $1,710, $180 and $46, respectively). Exposures indexed to USD LIBOR represent floating rate invested assets with a maturity date beyond June 30, 2023 while all other exposures represent floating rate invested assets with a maturity date<br>beyond December 31, 2021. The interest rate benchmark reform is expected to have an impact on the valuation of invested assets whose value is tied to the affected interest rate benchmarks. The Company has assessed its exposure at the contract<br>level, by benchmark and instrument type. The Company is monitoring market developments with respect to alternative reference rates and the time horizon during which they will evolve. As at December 31, 2021, the interest rate benchmark reform<br>has not resulted in significant changes in the Company’s risk management strategy.
---	---
^(9)^	Includes $5 (2020 – $229) of public equities that are managed in conjunction with the Company’s alternative<br>long-duration asset (“ALDA”) strategy.
---	---
^(10)^	Includes accumulated depreciation of $407 (2020 – $376).
---	---
^(11)^	Alternative long-duration assets (“ALDA”) include investments in private equity of $11,598, infrastructure of<br>$9,824, oil and gas of $1,950, timber and agriculture of $5,259 and various other invested assets of $2,573 (2020 – $7,954, $9,127, $2,296, $4,819 and $1,976, respectively).
---	---
^(12)^	Includes $3,457 (2020 – $3,371) of leveraged leases. Refer to note 1(e).
---	---

(b) Equity method accounted invested assets

Other invested assets include investments in associates and joint ventures which are accounted for using the equity method of accounting as presented in the following table.

	2021				2020
As at December 31,	Carrying<br>value		% of total		Carrying<br>value		% of total
Leveraged leases	$	3,457	****	40	$	3,371		40
Timber and agriculture	****	808	****	9		694		8
Real estate	****	1,528	****	17		1,187		14
Other	****	3,025	****	34		3,222		38
Total	$	8,818	****	100	$	8,474		100

The Company’s share of profit and dividends from these investments for the year ended December 31, 2021 were $1,300 and $2, respectively (2020 – $315 and $2).

153

(c) Investment income

For the year ended December 31, 2021	FVTPL			AFS			Other^(1)^			Total
Cash and short-term securities
Interest income	$	12	****	$	84	****	$	–	****	$	96	****
Gains (losses)^(2)^	****	85	****	****	(22	)	****	–	****	****	63	****
Debt securities
Interest income	****	5,645	****	****	576	****	****	9	****	****	6,230	****
Gains (losses)^(2)^	****	(5,600	)	****	(266	)	****	–	****	****	(5,866	)
Recovery (impairment loss), net	****	28	****	****	1	****	****	–	****	****	29	****
Public equities
Dividend income	****	670	****	****	61	****	****	–	****	****	731	****
Gains (losses)^(2)^	****	3,221	****	****	250	****	****	–	****	****	3,471	****
Impairment loss, net	****	–	****	****	(3	)	****	–	****	****	(3	)
Mortgages
Interest income	****	–	****	****	–	****	****	1,709	****	****	1,709	****
Gains (losses)^(2)^	****	–	****	****	–	****	****	133	****	****	133	****
Provision, net	****	–	****	****	–	****	****	1	****	****	1	****
Private placements
Interest income	****	–	****	****	–	****	****	1,931	****	****	1,931	****
Gains (losses)^(2)^	****	–	****	****	–	****	****	270	****	****	270	****
Impairment loss, net	****	–	****	****	–	****	****	45	****	****	45	****
Policy loans	****	–	****	****	–	****	****	366	****	****	366	****
Loans to Bank clients
Interest income	****	–	****	****	–	****	****	77	****	****	77	****
Provision, net	****	–	****	****	–	****	****	(2	)	****	(2	)
Real estate
Rental income, net of depreciation^(3)^	****	–	****	****	–	****	****	453	****	****	453	****
Gains (losses)^(2)^	****	–	****	****	–	****	****	677	****	****	677	****
Derivatives
Interest income, net	****	1,085	****	****	–	****	****	(35	)	****	1,050	****
Gains (losses)^(2)^	****	(5,925	)	****	–	****	****	(14	)	****	(5,939	)
Other invested assets
Interest income	****	–	****	****	–	****	****	57	****	****	57	****
Oil and gas, timber, agriculture and other income	****	–	****	****	–	****	****	2,996	****	****	2,996	****
Gains (losses)^(2)^	****	2,554	****	****	23	****	****	527	****	****	3,104	****
Impairment loss, net	****	–	****	****	–	****	****	(55	)	****	(55	)
Total investment income	$	1,775	****	$	704	****	$	9,145	****	$	11,624	****
Investment income
Interest income	$	6,742	****	$	661	****	$	4,114	****	$	11,517	****
Dividend, rental and other income	****	670	****	****	61	****	****	3,449	****	****	4,180	****
Impairments, provisions and recoveries, net	****	28	****	****	(2	)	****	(11	)	****	15	****
Other	****	(76	)	****	(66	)	****	57	****	****	(85	)
	****	7,364	****	****	654	****	****	7,609	****	****	15,627	****
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and<br>on the macro hedge program
Debt securities	****	(5,605	)	****	20	****	****	–	****	****	(5,585	)
Public equities	****	3,187	****	****	33	****	****	–	****	****	3,220	****
Mortgages	****	–	****	****	–	****	****	133	****	****	133	****
Private placements	****	–	****	****	–	****	****	270	****	****	270	****
Real estate	****	–	****	****	–	****	****	696	****	****	696	****
Other invested assets	****	2,628	****	****	(3	)	****	451	****	****	3,076	****
Derivatives, including macro hedge program	****	(5,799	)	****	–	****	****	(14	)	****	(5,813	)
	****	(5,589	)	****	50	****	****	1,536	****	****	(4,003	)
Total investment income	$	1,775	****	$	704	****	$	9,145	****	$	11,624	****

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For the year ended December 31, 2020	FVTPL			AFS			Other^(1)^			Total
Cash and short-term securities
Interest income	$	24		$	145		$	–		$	169
Gains (losses)^(2)^		(24	)		(112	)		–			(136	)
Debt securities
Interest income		5,805			692			–			6,497
Gains (losses)^(2)^		10,739			2,785			–			13,524
Impairment loss, net		(113	)		(6	)		–			(119	)
Public equities
Dividend income		517			38			–			555
Gains (losses)^(2)^		2,020			21			–			2,041
Impairment loss, net		–			(54	)		–			(54	)
Mortgages
Interest income		–			–			1,837			1,837
Gains (losses)^(2)^		–			–			86			86
Provision, net		–			–			(18	)		(18	)
Private placements
Interest income		–			–			1,883			1,883
Gains (losses)^(2)^		–			–			(18	)		(18	)
Impairment loss, net		–			–			(88	)		(88	)
Policy loans		–			–			390			390
Loans to Bank clients
Interest income		–			–			72			72
Provision, net		–			–			(2	)		(2	)
Real estate
Rental income, net of depreciation^(3)^		–			–			468			468
Gains (losses)^(2)^		–			–			(18	)		(18	)
Derivatives
Interest income, net		924			–			(31	)		893
Gains (losses)^(2)^		6,501			–			28			6,529
Other invested assets
Interest income		–			–			72			72
Oil and gas, timber, agriculture and other income		–			–			1,435			1,435
Gains (losses)^(2)^		(210	)		1			32			(177	)
Impairment loss, net		(9	)		(16	)		(396	)		(421	)
Total investment income	$	26,174		$	3,494		$	5,732		$	35,400
Investment income
Interest income	$	6,753		$	837		$	4,223		$	11,813
Dividend, rental and other income		517			38			1,903			2,458
Impairments, provisions and recoveries, net		(123	)		(76	)		(504	)		(703	)
Other		241			2,685			(61	)		2,865
		7,388			3,484			5,561			16,433
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and<br>on the macro hedge program
Debt securities		10,747			1			–			10,748
Public equities		1,908			9			–			1,917
Mortgages		–			–			86			86
Private placements		–			–			(47	)		(47	)
Real estate		–			–			1			1
Other invested assets		(318	)		–			103			(215	)
Derivatives, including macro hedge program		6,449			–			28			6,477
		18,786			10			171			18,967
Total investment income	$	26,174		$	3,494		$	5,732		$	35,400
^(1)^	Primarily includes investment income on loans carried at amortized cost, own use properties, investment properties,<br>derivative and hedging instruments in cash flow hedging relationships, equity method accounted investments, oil and gas investments, and leveraged leases.
---	---
^(2)^	Includes net realized and unrealized gains (losses) for financial instruments at FVTPL, real estate investment properties,<br>and other invested assets measured at fair value. Also includes net realized gains (losses) for financial instruments at AFS and other invested assets carried at amortized cost.
---	---
^(3)^	Rental income from investment properties is net of direct operating expenses.
---	---
155
---

(d) Investment expenses

The following table presents total investment expenses.

For the years ended December 31,	2021		2020
Related to invested assets	$	633	$	649
Related to segregated, mutual and other funds	****	1,347		1,138
Total investment expenses	$	1,980	$	1,787

(e) Investment properties

The following table presents the rental income and direct operating expenses of investment properties.

For the years ended December 31,	2021			2020
Rental income from investment properties	$	837	****	$	874
Direct operating expenses of rental investment properties	****	(464	)		(491	)
Total	$	373	****	$	383

(f) Mortgage securitization

The Company securitizes certain insured and uninsured fixed and variable rate residential mortgages and Home Equity Lines of Credit (“HELOC”) through creation of mortgage-backed securities under the Canadian Mortgage Bond Program (“CMB”), and the HELOC securitization program.

Benefits received from the securitization include interest spread between the asset and associated liability. There is no credit exposure from securitized mortgages under the Canada Mortgage and Housing Corporation (“CMHC”) sponsored CMB securitization program as they are insured by CMHC and other third-party insurance programs against borrowers’ default. Mortgages securitized in the Platinum Canadian Mortgage Trust II (“PCMT II”) program are uninsured.

Cash flows received from the underlying securitized assets/mortgages are used to settle the related secured borrowing liability. For CMB transactions, receipts of principal are deposited into a trust account for settlement of the liability at time of maturity. These transferred assets and related cash flows cannot be transferred or used for other purposes. For the HELOC transactions, investors are entitled to periodic interest payments, and the remaining cash receipts of principal are allocated to the Company (the “Seller”) during the revolving period of the deal and are accumulated for settlement during an accumulation period or repaid to the investor monthly during a reduction period, based on the terms of the note.

Securitized assets and secured borrowing liabilities

As at December 31, 2021	Securitized assets
Securitization program	Securitized<br>mortgages		Restricted cash and<br>short-term securities		Total		Secured borrowing<br>liabilities^(2)^
HELOC securitization^(1)^	$	2,618	$	1	$	2,619	$	2,500
CMB securitization	****	2,075	****	–	****	2,075	****	2,098
Total	$	4,693	$	1	$	4,694	$	4,598
As at December 31, 2020	Securitized assets
Securitization program	Securitized<br>mortgages		Restricted cash and<br>short-term securities		Total		Secured borrowing<br>liabilities^(2)^
HELOC securitization^(1)^	$	2,356	$	–	$	2,356	$	2,250
CMB securitization		2,273		–		2,273		2,332
Total	$	4,629	$	–	$	4,629	$	4,582
^(1)^	Manulife Bank, a subsidiary, securitizes a portion of its HELOC receivables through Platinum Canadian Mortgage Trust II<br>(“PCMT II”). PCMT II funds the purchase of the co-ownership interests from Manulife Bank by issuing term notes collateralized by an underlying pool of uninsured HELOCs to institutional investors. The<br>restricted cash balance for the HELOC securitization reflects a cash reserve fund established in relation to the transactions. The reserve will be drawn upon only in the event of insufficient cash flows from the underlying HELOCs to satisfy the<br>secured borrowing liability.
---	---
^(2)^	The PCMT II notes payable have floating rates of interest and are secured by the PCMT II assets. Under the terms of the<br>agreements, no principal is expected to be repaid within one year, $383 within 1-3 years, $1,815 within 3-5 years and $302 beyond 5 years. There is no specific maturity date for the contractual agreements. Under the terms of the notes, additional<br>collateral must be provided to the series as added credit protection and the Series Purchase Agreements govern the amount of over-collateralization for each of the term notes outstanding. Manulife Bank also securitizes insured amortizing mortgages<br>under the National Housing Act Mortgage-Backed Securities (“NHA MBS”) program sponsored by CMHC. Manulife Bank participates in CMB programs by selling NHA MBS securities to Canada Housing Trust (“CHT”), as a source of fixed rate<br>funding.
---	---

As at December 31, 2021, the fair value of securitized assets and associated liabilities were $4,725 and $4,601, respectively (2020 – $4,679 and $4,661).

156   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(g) Fair value measurement

The following table presents the fair values of invested assets and segregated funds net assets measured at fair value categorized by the fair value hierarchy.

As at December 31, 2021	Total fair value		Level 1		Level 2		Level 3
Cash and short-term securities	****	****	****	****	****	****	****	****
FVTPL	$	2,214	$	–	$	2,214	$	–
AFS	****	14,339	****	–	****	14,339	****	–
Other	****	6,041	****	6,041	****	–	****	–
Debt securities
FVTPL
Canadian government and agency	****	18,706	****	–	****	18,706	****	–
U.S. government and agency	****	12,607	****	–	****	12,607	****	–
Other government and agency	****	21,888	****	–	****	21,888	****	–
Corporate	****	133,763	****	–	****	133,723	****	40
Residential mortgage-backed securities	****	8	****	–	****	8	****	–
Commercial mortgage-backed securities	****	1,103	****	–	****	1,103	****	–
Other asset-backed securities	****	1,647	****	–	****	1,619	****	28
AFS
Canadian government and agency	****	3,964	****	–	****	3,964	****	–
U.S. government and agency	****	18,792	****	–	****	18,792	****	–
Other government and agency	****	2,871	****	–	****	2,871	****	–
Corporate	****	7,332	****	–	****	7,331	****	1
Residential mortgage-backed securities	****	1	****	–	****	1	****	–
Commercial mortgage-backed securities	****	79	****	–	****	79	****	–
Other asset-backed securities	****	58	****	–	****	58	****	–
Public equities
FVTPL	****	25,716	****	25,716	****	–	****	–
AFS	****	2,351	****	2,349	****	2	****	–
Real estate – investmentproperty^(1)^	****	11,421	****	–	****	–	****	11,421
Other invested assets^(2)^	****	24,300	****	257	****	–	****	24,043
Segregated funds net assets^(3)^	****	399,788	****	361,447	****	34,060	****	4,281
Total	$	708,989	$	395,810	$	273,365	$	39,814
As at December 31, 2020	Total fair value		Level 1		Level 2		Level 3
---	---	---	---	---	---	---	---	---
Cash and short-term securities
FVTPL	$	2,079	$	–	$	2,079	$	–
AFS		18,314		–		18,314		–
Other		5,774		5,774		–		–
Debt securities
FVTPL
Canadian government and agency		20,667		–		20,667		–
U.S. government and agency		11,449		–		11,449		–
Other government and agency		19,732		–		19,732		–
Corporate		128,297		–		127,787		510
Residential mortgage-backed securities		9		–		9		–
Commercial mortgage-backed securities		1,172		–		1,172		–
Other asset-backed securities		1,735		–		1,690		45
AFS
Canadian government and agency		4,548		–		4,548		–
U.S. government and agency		19,787		–		19,787		–
Other government and agency		4,613		–		4,613		–
Corporate		6,566		–		6,563		3
Residential mortgage-backed securities		1		–		1		–
Commercial mortgage-backed securities		93		–		93		–
Other asset-backed securities		55		–		55		–
Public equities
FVTPL		22,071		22,071		–		–
AFS		1,651		1,651		–		–
Real estate – investmentproperty^(1)^		10,982		–		–		10,982
Other invested assets^(2)^		19,149		100		–		19,049
Segregated funds net assets^(3)^		367,436		327,437		35,797		4,202
Total	$	666,180	$	357,033	$	274,356	$	34,791
157
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^(1)^	For real estate investment properties, the significant unobservable inputs are capitalization rates (ranging from 2.25% to<br>9.00% during the year and ranging from 2.75% to 8.50% during 2020) and terminal capitalization rates (ranging from 3.25% to 9.25% during the year and ranging from 3.25% to 9.25% during 2020). Holding other factors constant, a lower capitalization or<br>terminal capitalization rate will tend to increase the fair value of an investment property. Changes in fair value based on variations in unobservable inputs generally cannot be extrapolated because the relationship between the directional changes<br>of each input is not usually linear.
---	---
^(2)^	Other invested assets measured at fair value are held primarily in infrastructure and timber sectors. The significant<br>inputs used in the valuation of the Company’s infrastructure investments are primarily future distributable cash flows, terminal values and discount rates. Holding other factors constant, an increase to future distributable cash flows or<br>terminal values would tend to increase the fair value of an infrastructure investment, while an increase in the discount rate would have the opposite effect. Discount rates during the year ranged from 7.25% to 20.0% (2020 – ranged from 7.00% to<br>15.6%). Disclosure of distributable cash flow and terminal value ranges are not meaningful given the disparity in estimates by project. The significant inputs used in the valuation of the Company’s investments in timberland are timber prices<br>and discount rates. Holding other factors constant, an increase to timber prices would tend to increase the fair value of a timberland investment, while an increase in the discount rates would have the opposite effect. Discount rates during the year<br>ranged from 4.5% to 7.0% (2020 – ranged from 5.0% to 7.0%). A range of prices for timber is not meaningful as the market price depends on factors such as property location and proximity to markets and export yards.
---	---
^(3)^	Segregated funds net assets are measured at fair value. The Company’s Level 3 segregated funds assets are<br>predominantly in investment properties and timberland properties valued as described above.
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The following table presents fair value of invested assets not measured at fair value by the fair value hierarchy.

As at December 31, 2021	Carrying value		Fair value		Level 1		Level 2		Level 3
Mortgages^(1)^	$	52,014	$	54,089	$	–	$	–	$	54,089
Private placements^(2)^	****	42,842	****	47,276	****	–	****	42,110	****	5,166
Policy loans^(3)^	****	6,397	****	6,397	****	–	****	6,397	****	–
Loans to Bank clients^(4)^	****	2,506	****	2,503	****	–	****	2,503	****	–
Real estate – own use property^(5)^	****	1,812	****	3,024	****	–	****	–	****	3,024
Public Bonds HTM	****	1,320	****	1,320	****	–	****	1,320	****	–
Other invested<br>assets^(6)^	****	11,006	****	11,665	****	120	****	–	****	11,545
Total invested assets disclosed at fairvalue	$	117,897	$	126,274	$	120	$	52,330	$	73,824
As at December 31, 2020	Carrying value		Fair value		Level 1		Level 2		Level 3
Mortgages^(1)^	$	50,207	$	54,230	$	–	$	–	$	54,230
Private placements^(2)^		40,756		47,890		–		41,398		6,492
Policy loans^(3)^		6,398		6,398		–		6,398		–
Loans to Bank clients^(4)^		1,976		1,982		–		1,982		–
Real estate – own use property^(5)^		1,850		3,017		–		–		3,017
Other invested<br>assets^(6)^		11,046		11,903		128		–		11,775
Total invested assets disclosed at fairvalue	$	112,233	$	125,420	$	128	$	49,778	$	75,514
^(1)^	Fair value of commercial mortgages is determined through an internal valuation methodology using both observable and<br>unobservable inputs. Unobservable inputs include credit assumptions and liquidity spread adjustments. Fair value of fixed-rate residential mortgages is determined using the discounted cash flow method. Inputs used for valuation are primarily<br>comprised of prevailing interest rates and prepayment rates, if applicable. Fair value of variable-rate residential mortgages is assumed to be their carrying value.
---	---
^(2)^	Fair value of private placements is determined through an internal valuation methodology using both observable and<br>unobservable inputs. Unobservable inputs include credit assumptions and liquidity spread adjustments. Private placements are classified within Level 2 unless the liquidity adjustment constitutes a significant price impact, in which case the<br>securities are classified as Level 3.
---	---
^(3)^	Fair value of policy loans is equal to their unpaid principal balances.
---	---
^(4)^	Fair value of fixed-rate loans to Bank clients is determined using the discounted cash flow method. Inputs used for<br>valuation are primarily comprised of current interest rates. Fair value of variable-rate loans is assumed to be their carrying value.
---	---
^(5)^	Fair value of own use real estate and the fair value hierarchy are determined in accordance with the methodologies<br>described for real estate – investment property in note 1.
---	---
^(6)^	Primarily include leveraged leases, oil and gas properties (disposed of during 2021) and equity method accounted other<br>invested assets. Fair value of leveraged leases is disclosed at their carrying values as fair value is not routinely calculated on these investments. Fair value for oil and gas properties is determined using external appraisals based on discounted<br>cash flow methodology. Inputs used in valuation are primarily comprised of forecasted price curves, planned production, as well as capital expenditures, and operating costs. Fair value of equity method accounted other invested assets is determined<br>using a variety of valuation techniques including discounted cash flows and market comparable approaches. Inputs vary based on the specific investment.
---	---

As a result of COVID-19 and the associated economic environment, measurement uncertainty exists in determining the fair value of real estate and other invested assets. For the methodologies used in determining carrying values of the invested assets, refer to note 1(c).

Real Estate – For real estate investment properties, valuation inputs include existing and assumed tenancies, market data from recent comparable transactions, future economic outlook and market risk assumptions, capitalization rates and internal rates of return. Measurement uncertainty is partially driven by a reduction in the availability of information, which could have a negative impact on the future carrying value of these assets.

Timberland and Farmland – For investments in timberland and farmland, valuation inputs include asset-specific production, relevant commodity prices and discount rates. There remains uncertainty regarding these inputs used, which could have a negative impact on the future carrying value of these assets.

PrivateEquity – Included in the Company’s private equity investments are assets valued primarily based on net asset value as per financial statements provided by third-party general partners or sponsors and reasonable techniques from a market participant perspective. Significant measurement uncertainty relating to volatility in underlying markets could have an impact on the future carrying value of these assets.

158   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Infrastructure – For infrastructure investments, valuation is largely based on discounted cash flow techniques reflecting estimates regarding future cash flows, terminal values and discount rates. These assets are defensive in nature and are supported by existing contractual revenue streams. There remains uncertainty regarding critical valuation inputs listed, which could have a negative impact on the future carrying value of these assets.

Oil and Gas – Investments in oil and gas comprise of private equity interests. These investments are valued largely based on financial statements and inputs provided by third-party general partners and sponsors of the respective funds. Measurement uncertainty relating to future prices for relevant commodities could have an impact on the future carrying value of these assets.

Transfers between Level 1 and Level 2

The Company records transfers of assets and liabilities between Level 1 and Level 2 at their fair values as at the end of each reporting period. Assets are transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market. The Company had $5 of assets transferred between Level 1 and Level 2 during the years ended December 31, 2021 and 2020.

For segregated funds net assets, the Company had $5 transfers from Level 1 to Level 2 for the year ended December 31, 2021 (2020 – $nil). The Company had $249 transfers from Level 2 to Level 1 for the year ended December 31, 2021 (2020 – $15).

Invested assets and segregated funds net assets measured at fair value using significant unobservable inputs (Level 3)

The Company classifies fair values of invested assets and segregated funds net assets as Level 3 if there are no observable markets for these assets or, in the absence of active markets, most of the inputs used to determine fair value are based on the Company’s own assumptions about market participant assumptions. The Company prioritizes the use of market-based inputs over entity-based assumptions in determining Level 3 fair values. The gains and losses in the table below includes the changes in fair value due to both observable and unobservable factors.

The following table presents a roll forward for invested assets, derivatives and segregated funds net assets measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2021 and 2020.

For the year ended<br><br><br>December 31, 2021	Balance,<br>January 1,<br>2021		Total<br>gains<br>(losses)<br>included<br>in net<br>income^(1)^			Total<br>gains<br>(losses)<br>included<br>in AOCI^(2)^		Purchases		Sales			Settlements			Transfer<br><br><br>in^(3)^		Transfer<br><br><br>out^(3)^			Currency<br>movement			Balance,December 31,2021		Change in<br>unrealized<br>gains<br>(losses) on<br>assets still<br>held
Debt securities
FVTPL
Corporate	$	510	$	11	****	$	–	$	11	$	(93	)	$	–	****	$	11	$	(409	)	$	(1	)	$	40	$	(8	)
Other securitized assets	****	45	****	3	****	****	–	****	–	****	(9	)	****	(39	)	****	28	****	–	****	****	–	****	****	28	****	(4	)
AFS
Corporate	****	3	****	1	****	****	–	****	–	****	(3	)	****	–	****	****	–	****	–	****	****	–	****	****	1	****	–	****
Public equities
FVTPL	****	–	****	–	****	****	–	****	62	****	(62	)	****	–	****	****	–	****	–	****	****	–	****	****	–	****	–	****
Investment property	****	10,982	****	702	****	****	–	****	186	****	(376	)	****	–	****	****	–	****	–	****	****	(73	)	****	11,421	****	626	****
Other invested assets	****	19,049	****	2,731	****	****	2	****	5,058	****	(1,131	)	****	(1,453	)	****	5	****	–	****	****	(218	)	****	24,043	****	2,569	****
Total invested assets	****	30,589	****	3,448	****	****	2	****	5,317	****	(1,674	)	****	(1,492	)	****	44	****	(409	)	****	(292	)	****	35,533	****	3,183	****
Derivatives	****	3,443	****	(897	)	****	–	****	14	****	–	****	****	(182	)	****	–	****	(309	)	****	32	****	****	2,101	****	(547	)
Segregated funds net assets	****	4,202	****	350	****	****	–	****	68	****	(303	)	****	(28	)	****	–	****	–	****	****	(8	)	****	4,281	****	116	****
Total	$	38,234	$	2,901	****	$	2	$	5,399	$	(1,977)	****	$	(1,702)	****	$	44	$	(718)	****	$	(268)	****	$	41,915	$	2,752	****
159
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For the year ended<br>December 31, 2020	Balance,<br>January 1,<br>2020		Total<br>gains<br>(losses)<br>included<br>in net<br>income^(1)^			Total<br>gains<br>(losses)<br>included<br>in AOCI^(2)^			Purchases			Sales			Settlements			Transfer<br><br><br>in^(3)^		Transfer<br><br><br>out^(3)^			Currency<br>movement			Balance,December 31,2020		Change in<br>unrealized<br>gains<br>(losses) on<br>assets still<br>held
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Debt securities
FVTPL
Corporate	$	633	$	4		$	–		$	54		$	(272	)	$	(1	)	$	151	$	(50	)	$	(9	)	$	510	$	105
Other securitized assets		–		(8	)		–			–			–			(1	)		55		–			(1	)		45		–
AFS
Corporate		15		(6	)		2			–			–			–			5		(13	)		–			3		–
Investment property		11,002		(255	)		–			572			(318	)		–			47		–			(66	)		10,982		(300	)
Other invested assets		18,103		(401	)		(49	)		3,162			(1,076	)		(638	)		92		(3	)		(141	)		19,049		(902	)
Total invested assets		29,753		(666	)		(47	)		3,788			(1,666	)		(640	)		350		(66	)		(217	)		30,589		(1,097	)
Derivatives		1,456		2,953			(18	)		12			–			(1,165	)		–		342			(137	)		3,443		2,033
Segregated funds net assets		4,512		(6	)		–			(84	)		(149	)		(26	)		2		(3	)		(44	)		4,202		45
Total	$	35,721	$	2,281		$	(65	)	$	3,716		$	(1,815	)	$	(1,831	)	$	352	$	273		$	(398	)	$	38,234	$	981
^(1)^	These amounts are included in net investment income on the Consolidated Statements of Income except for the amount related<br>to segregated funds net assets, where the amount is recorded in changes in segregated funds net assets, refer to notes 1(h) and 22.
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^(2)^	These amounts are included in AOCI on the Consolidated Statements of Financial Position.
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^(3)^	The Company uses fair values of the assets at the beginning of the year for assets transferred into and out of<br>Level 3 except for derivatives, where the Company uses fair value at the end of the year and at the beginning of the year, respectively.
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Transfers into Level 3 primarily result from securities that were impaired during the year or securities where a lack of observable market data (versus the previous period) resulted in reclassifying assets into Level 3. Transfers from Level 3 primarily result from observable market data now being available for the entire term structure of the debt security.

Note 4    Derivative and Hedging Instruments

Derivatives are financial contracts, the value of which is derived from underlying interest rates, foreign exchange rates, other financial instruments, commodity prices or indices. The Company uses derivatives including swaps, forward and futures agreements, and options to manage current and anticipated exposures to changes in interest rates, foreign exchange rates, commodity prices and equity market prices, and to replicate permissible investments.

Swaps are over-the-counter (“OTC”) contractual agreements between the Company and a third-party to exchange a series of cash flows based upon rates applied to a notional amount. For interest rate swaps, counterparties generally exchange fixed or floating interest rate payments based on a notional value in a single currency. Cross currency swaps involve the exchange of principal amounts between parties as well as the exchange of interest payments in one currency for the receipt of interest payments in another currency. Total return swaps are contracts that involve the exchange of payments based on changes in the values of a reference asset, including any returns such as interest earned on these assets, in return for amounts based on reference rates specified in the contract.

Forward and futures agreements are contractual obligations to buy or sell a financial instrument, foreign currency or other underlying commodity on a predetermined future date at a specified price. Forward contracts are OTC contracts negotiated between counterparties, whereas futures agreements are contracts with standard amounts and settlement dates that are traded on regulated exchanges.

Options are contractual agreements whereby the holder has the right, but not the obligation, to buy (call option) or sell (put option) a security, exchange rate, interest rate, or other financial instrument at a predetermined price/rate within a specified time.

See variable annuity dynamic hedging strategy in the “Risk Management and Risk Factors” section of the Company’s 2021 MD&A for an explanation of the Company’s dynamic hedging strategy for its variable annuity product guarantees.

(a) Fair value of derivatives

The pricing models used to value OTC derivatives are based on market standard valuation methodologies and the inputs to these models are consistent with what a market participant would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), and market volatility. The significant inputs to the pricing models for most OTC derivatives are inputs that are observable or can be corroborated by observable market data and are classified as Level 2. Inputs that are observable generally include interest rates, foreign currency exchange rates and interest rate curves. However, certain OTC derivatives may rely on inputs that are significant to the fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data and these derivatives are classified as Level 3. Inputs that are unobservable generally include broker quoted prices, volatilities and inputs that are outside of the observable portion of the interest rate curve or other relevant market measures. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate

160   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

given the circumstances and consistent with what market participants would use when pricing such instruments. The Company’s use of unobservable inputs is limited and the impact on derivative fair values does not represent a material amount as evidenced by the limited amount of Level 3 derivatives. The credit risk of both the counterparty and the Company are considered in determining the fair value for all OTC derivatives after considering the effects of netting agreements and collateral arrangements.

The following table presents gross notional amount and fair value of derivative instruments by the underlying risk exposure.

As at December 31,		2021								2020
		Notional<br>amount			Fair value					Notional<br>amount		Fair value
Type of hedge	Instrument type			Assets			Liabilities				Assets			Liabilities
Qualifying hedge accounting relationships
Fair value hedges	Interest rate swaps	$	–		$	–		$	–	$	82	$	1		$	–
	Foreign currency swaps	****	57		****	1		****	1		57		–			4
Cash flow hedges	Foreign currency swaps	****	1,251		****	5		****	379		1,756		24			468
	Equity contracts	****	145		****	10		****	–		127		6			–
Net investment hedges	Forward contracts	****	671		****	9		****	–		628		1			10
Total derivatives in qualifying hedge accounting<br>relationships		****	2,124		****	25		****	380		2,650		32			482
Derivatives not designated in qualifying hedge accounting relationships
	Interest rate swaps	****	300,556		****	11,832		****	7,347		287,182		21,332			12,190
	Interest rate futures	****	11,944		****	–		****	–		16,750		–			–
	Interest rate options	****	10,708		****	514		****	–		11,622		663			–
	Foreign currency swaps	****	36,405		****	790		****	1,722		31,491		838			1,659
	Currency rate futures	****	3,086		****	–		****	–		3,467		–			–
	Forward contracts	****	45,295		****	2,674		****	562		38,853		3,833			565
	Equity contracts	****	18,577		****	1,667		****	27		15,738		1,092			66
	Credit default swaps	****	44		****	1		****	–		241		3			–
	Equity futures	****	11,359		****	–		****	–		10,984		–			–
Total derivatives not designated in qualifying hedge<br>accounting relationships		****	437,974		****	17,478		****	9,658		416,328		27,761			14,480
Total derivatives		$	440,098		$	17,503		$	10,038	$	418,978	$	27,793		$	14,962

The total notional amount above includes $258 billion (2020 – $274 billion) which refer to interest rates impacted under the interest rate benchmark reform, with a significant majority to USD LIBOR, CDOR and JPY LIBOR. Exposures indexed to USD LIBOR represent derivatives with a maturity date beyond June 30, 2023 while exposures to CDOR and JPY LIBOR represent derivatives with a maturity date beyond December 31, 2021. The exposure in the Company’s hedge accounting programs is primarily to USD LIBOR and CDOR benchmarks. Compared to the overall risk exposure, the effect of interest rate benchmark reform on existing accounting hedges is not significant. The Company continues to apply high probability and high effectiveness expectation assumptions for cash flows and there would be no automatic de-designation due to the impact from interest rate benchmark reform.

The following table presents the fair values of the derivative instruments by the remaining term to maturity. Fair values disclosed below do not incorporate the impact of master netting agreements (refer to note 8).

	Remaining term to maturity
As at December 31, 2021	Less than<br><br><br>1 year		1 to 3<br><br><br>years		3 to 5<br><br><br>years		Over 5<br><br><br>years		Total
Derivative assets	$	2,500	$	1,803	$	1,000	$	12,200	$	17,503
Derivative liabilities	****	294	****	387	****	379	****	8,978	****	10,038
	Remaining term to maturity
As at December 31, 2020	Less than<br><br><br>1 year		1 to 3<br><br><br>years		3 to 5<br><br><br>years		Over 5<br><br><br>years		Total
Derivative assets	$	1,656	$	3,524	$	1,228	$	21,385	$	27,793
Derivative liabilities		386		250		555		13,771		14,962
161
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The following table presents gross notional amount by the remaining term to maturity, total fair value (including accrued interest), credit equivalent amount and capital requirement by contract type.

	Remaining term to maturity (notional amounts)								Fair value										Capital<br>requirement^(2)^
As at December 31, 2021	Under 1<br><br><br>year		1 to<br><br><br>5 years		Over<br><br><br>5 years		Total		Positive		Negative			Net			Credit<br><br><br>equivalent<br>amount^(1)^
Interest rate contracts
OTC swap contracts	$	4,554	$	21,884	$	90,592	$	117,030	$	12,112	$	(7,717	)	$	4,395	****	$	1,582	$	29
Cleared swap contracts	****	21,722	****	27,665	****	134,139	****	183,526	****	441	****	(453	)	****	(12	)	****	–	****	–
Forward contracts	****	14,636	****	15,791	****	741	****	31,168	****	2,625	****	(483	)	****	2,142	****	****	299	****	5
Futures	****	11,944	****	–	****	–	****	11,944	****	–	****	–	****	****	–	****	****	–	****	–
Options purchased	****	1,406	****	2,789	****	6,513	****	10,708	****	515	****	–	****	****	515	****	****	113	****	9
Subtotal	****	54,262	****	68,129	****	231,985	****	354,376	****	15,693	****	(8,653	)	****	7,040	****	****	1,994	****	43
Foreign exchange
Swap contracts	****	1,941	****	8,869	****	26,903	****	37,713	****	801	****	(2,181	)	****	(1,380	)	****	1,302	****	25
Forward contracts	****	14,798	****	–	****	–	****	14,798	****	58	****	(79	)	****	(21	)	****	85	****	–
Futures	****	3,086	****	–	****	–	****	3,086	****	–	****	–	****	****	–	****	****	–	****	–
Credit derivatives	****	11	****	33	****	–	****	44	****	1	****	–	****	****	1	****	****	–	****	–
Equity contracts
Swap contracts	****	669	****	323	****	–	****	992	****	57	****	(10	)	****	47	****	****	29	****	–
Futures	****	11,359	****	–	****	–	****	11,359	****	–	****	–	****	****	–	****	****	–	****	–
Options purchased	****	10,974	****	6,716	****	40	****	17,730	****	1,616	****	(17	)	****	1,599	****	****	766	****	8
Subtotal including accrued interest	****	97,100	****	84,070	****	258,928	****	440,098	****	18,226	****	(10,940	)	****	7,286	****	****	4,176	****	76
Less accrued interest	****	–	****	–	****	–	****	–	****	723	****	(902	)	****	(179	)	****	–	****	–
Total	$	97,100	$	84,070	$	258,928	$	440,098	$	17,503	$	(10,038)	****	$	7,465	****	$	4,176	$	76
	Remaining term to maturity (notional amounts)								Fair value										Capital<br>requirement^(2)^
As at December 31, 2020	Under 1<br><br><br>year		1 to<br><br><br>5 years		Over<br><br><br>5 years		Total		Positive		Negative			Net			Credit<br><br><br>equivalent<br> <br>amount^(1)^
Interest rate contracts
OTC swap contracts	$	7,567	$	20,852	$	110,166	$	138,585	$	21,803	$	(12,816	)	$	8,987		$	2,607	$	73
Cleared swap contracts		2,314		18,784		127,581		148,679		432		(424	)		8			–		–
Forward contracts		11,092		18,355		1,259		30,706		3,739		(462	)		3,277			629		12
Futures		16,750		–		–		16,750		–		–			–			–		–
Options purchased		1,572		3,922		6,128		11,622		664		–			664			138		4
Subtotal		39,295		61,913		245,134		346,342		26,638		(13,702	)		12,936			3,374		89
Foreign exchange
Swap contracts		1,670		8,490		23,144		33,304		855		(2,195	)		(1,340	)		1,112		23
Forward contracts		8,741		34		–		8,775		95		(113	)		(18	)		56		–
Futures		3,467		–		–		3,467		–		–			–			–		–
Credit derivatives		192		49		–		241		3		–			3			–		–
Equity contracts
Swap contracts		1,227		289		–		1,516		43		(51	)		(8	)		27		–
Futures		10,984		–		–		10,984		–		–			–			–		–
Options purchased		8,168		6,181		–		14,349		1,051		(15	)		1,036			500		5
Subtotal including accrued interest		73,744		76,956		268,278		418,978		28,685		(16,076	)		12,609			5,069		117
Less accrued interest		–		–		–		–		892		(1,114	)		(222	)		–		–
Total	$	73,744	$	76,956	$	268,278	$	418,978	$	27,793	$	(14,962	)	$	12,831		$	5,069	$	117
^(1)^	Credit equivalent amount is the sum of replacement cost and the potential future credit exposure less any collateral held.<br>Replacement cost represents the current cost of replacing all contracts with a positive fair value. The amounts take into consideration legal contracts that permit offsetting of positions. The potential future credit exposure is calculated based on<br>a formula prescribed by OSFI.
---	---
^(2)^	Capital requirement represents the credit equivalent amount, weighted according to the creditworthiness of the<br>counterparty, as prescribed by OSFI.
---	---

The total notional amount of $440 billion (2020 – $419 billion) includes $121 billion (2020 – $131 billion) related to derivatives utilized in the Company’s variable annuity guarantee dynamic hedging and macro risk hedging programs. Due to the Company’s variable annuity hedging practices, many trades are in offsetting positions, resulting in materially lower net fair value exposure to the Company than what the gross notional amount would suggest.

162   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Fair value and the fair value hierarchy of derivative instruments

As at December 31, 2021	Fair value		Level 1		Level 2		Level 3
Derivative assets
Interest rate contracts	$	14,971	$	–	$	12,510	$	2,461
Foreign exchange contracts	****	854	****	–	****	854	****	–
Equity contracts	****	1,677	****	–	****	1,616	****	61
Credit default swaps	****	1	****	–	****	1	****	–
Total derivative assets	$	17,503	$	–	$	14,981	$	2,522
Derivative liabilities
Interest rate contracts	$	7,829	$	–	$	7,419	$	410
Foreign exchange contracts	****	2,182	****	–	****	2,181	****	1
Equity contracts	****	27	****	–	****	17	****	10
Total derivative liabilities	$	10,038	$	–	$	9,617	$	421
As at December 31, 2020	Fair value		Level 1		Level 2		Level 3
Derivative assets
Interest rate contracts	$	25,735	$	–	$	21,902	$	3,833
Foreign exchange contracts		957		–		957		–
Equity contracts		1,098		–		1,051		47
Credit default swaps		3		–		3		–
Total derivative assets	$	27,793	$	–	$	23,913	$	3,880
Derivative liabilities
Interest rate contracts	$	12,652	$	–	$	12,271	$	381
Foreign exchange contracts		2,244		–		2,239		5
Equity contracts		66		–		15		51
Total derivative liabilities	$	14,962	$	–	$	14,525	$	437

Level 3 roll forward information for net derivative contracts measured using significant unobservable inputs is disclosed in note 3(g).

(b) Hedging relationships

The Company uses derivatives for economic hedging purposes. In certain circumstances, these hedges also meet the requirements of hedge accounting. Risk management strategies eligible for hedge accounting are designated as fair value hedges, cash flow hedges or net investment hedges, as described below.

Fair value hedges

The Company uses interest rate swaps to manage its exposure to changes in the fair value of fixed rate financial instruments due to changes in interest rates. The Company also uses cross currency swaps to manage its exposure to foreign exchange rate fluctuations, interest rate fluctuations, or both.

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges in investment income. These investment gains (losses) are shown in the following table.

For the year ended December 31, 2021	Hedged items in qualifying<br><br><br>fair value hedging<br> <br>relationships	Gains (losses)<br>recognized on<br>derivatives			Gains (losses)<br>recognized for<br>hedged items			Ineffectiveness<br>recognized in<br>investment<br>income
Interest rate swaps	Fixed rate liabilities	$	–	****	$	–	****	$	–
Foreign currency swaps	Fixed rate assets	****	4	****	****	(2	)	****	2
Total		$	4	****	$	(2	)	$	2
For the year ended December 31, 2020	Hedged items in qualifying<br><br><br>fair value hedging<br> <br>relationships	Gains (losses)<br>recognized on<br>derivatives			Gains (losses)<br>recognized for<br>hedged items			Ineffectiveness<br>recognized in<br>investment<br>income
Interest rate swaps	Fixed rate liabilities	$	4		$	(2	)	$	2
Foreign currency swaps	Fixed rate assets		(2	)		3			1
Total		$	2		$	1		$	3

Cash flow hedges

The Company uses interest rate swaps to hedge the variability in cash flows from variable rate financial instruments and forecasted transactions. The Company also uses cross currency swaps and foreign currency forward contracts to hedge the variability from foreign

163

currency financial instruments and foreign currency expenses. Total return swaps are used to hedge the variability in cash flows associated with certain stock-based compensation awards. Inflation swaps are used to reduce inflation risk generated from inflation-indexed liabilities.

The effects of derivatives in cash flow hedging relationships on the Consolidated Statements of Income and the Consolidated Statements of Comprehensive Income are shown in the following table.

For the year ended December 31, 2021	Hedged items in qualifying<br>cash flow hedging<br>relationships	Gains (losses)<br>deferred in<br>AOCI on<br>derivatives			Gains (losses)<br>reclassified<br>from AOCI into<br>investment<br>income			Ineffectiveness<br>recognized in<br>investment<br>income
Foreign currency swaps	Fixed rate assets	$	(1	)	$	(1	)	$	–
	Floating rate liabilities	****	89	****	****	3	****	****	–
	Fixed rate liabilities	****	(19	)	****	(21	)	****	–
Equity contracts	Stock-based compensation	****	5	****	****	5	****	****	–
Total		$	74	****	$	(14)	****	$	–
For the year ended December 31, 2020	Hedged items in qualifying<br>cash flow hedging<br>relationships	Gains (losses)<br>deferred in<br>AOCI on<br>derivatives			Gains (losses)<br>reclassified<br>from AOCI into<br>investment<br>income			Ineffectiveness<br>recognized in<br>investment<br>income
Foreign currency swaps	Fixed rate assets	$	1		$	–		$	–
	Floating rate liabilities		(64	)		14			–
	Fixed rate liabilities		(14	)		(2	)		–
Equity contracts	Stock-based compensation		(2	)		16			–
Total		$	(79	)	$	28		$	–

The Company anticipates that net losses of approximately $42 will be reclassified from AOCI to net income within the next 12 months. The maximum time frame for which variable cash flows are hedged is 15 years.

Hedges of net investments in foreign operations

The Company primarily uses forward currency contracts, cross currency swaps and non-functional currency denominated debt to manage its foreign currency exposures to net investments in foreign operations.

The effects of net investment hedging relationships on the Consolidated Statements of Income and the Consolidated Statements of Other Comprehensive Income are shown in the following table.

For the year ended December 31, 2021	Gains (losses)<br>deferred in AOCI			Gains (losses)<br>reclassified from<br>AOCI into<br>investment income		Ineffectiveness<br>recognized in<br>investment<br>income
Non-functional currency denominated debt	$	61	****	$	–	$	–
Forward contracts	****	59	****	****	–	****	–
Total	$	120	****	$	–	$	–
For the year ended December 31, 2020	Gains (losses)<br>deferred in AOCI			Gains (losses)<br>reclassified from<br>AOCI into<br>investment income		Ineffectiveness<br>recognized in<br>investment<br>income
Non-functional currency denominated debt	$	161		$	–	$	–
Forward contracts		(53	)		–		–
Total	$	108		$	–	$	–

(c) Derivatives not designated in qualifying hedge accounting relationships

Derivatives used in portfolios supporting insurance contract liabilities are generally not designated in qualifying hedge accounting relationships because the change in the value of the insurance contract liabilities economically hedged by these derivatives is recorded through net income. Since changes in fair value of these derivatives and related hedged risks are recognized in investment income as they occur, they generally offset the change in hedged risk to the extent the hedges are economically effective. Interest rate and cross currency swaps are used in the portfolios supporting insurance contract liabilities to manage duration and currency risks.

164   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Investment income on derivatives not designated in qualifying hedge accounting relationships

For the years ended December 31,	2021			2020
Interest rate swaps	$	(1,986	)	$	2,423
Interest rate futures	****	(687	)		894
Interest rate options	****	(133	)		291
Foreign currency swaps	****	(166	)		(55	)
Currency rate futures	****	66	****		(47	)
Forward contracts	****	(1,751	)		3,785
Equity futures	****	(2,140	)		(1,111	)
Equity contracts	****	871	****		322
Credit default swaps	****	(2	)		(4	)
Total	$	(5,928)	****	$	6,498

(d) Embedded derivatives

Certain insurance contracts contain features that are classified as embedded derivatives and are measured separately at FVTPL, including reinsurance contracts related to guaranteed minimum income benefits and contracts containing certain credit and interest rate features.

Certain reinsurance contracts related to guaranteed minimum income benefits contain embedded derivatives requiring separate measurement at FVTPL as the financial component contained in the reinsurance contracts does not contain significant insurance risk. As at December 31, 2021, reinsurance ceded guaranteed minimum income benefits had a fair value of $734 (2020 – $1,007) and reinsurance assumed guaranteed minimum income benefits had a fair value of $86 (2020 – $112). Claims recovered under reinsurance ceded contracts offset claims expenses and claims paid on the reinsurance assumed are reported as contract benefits.

The Company’s credit and interest rate embedded derivatives promise to pay the returns on a portfolio of assets to the contract holder. These embedded derivatives contain credit and interest rate risks that are financial risks embedded in the underlying insurance contract. As at December 31, 2021, these embedded derivatives had a fair value of $11 (2020 – $(229)).

Other financial instruments classified as embedded derivatives but exempt from separate measurement at fair value include variable universal life and variable life products’ minimum guaranteed credited rates, no lapse guarantees, guaranteed annuitization options, CPI indexing of benefits, and segregated fund minimum guarantees other than reinsurance ceded/assumed guaranteed minimum income benefits. These embedded derivatives are measured and reported within insurance contract liabilities and are exempt from separate fair value measurement as they contain insurance risk and/or are closely related to the insurance host contract.

165

Note 5     Goodwill and Intangible Assets

(a) Change in the carrying value of goodwill and intangible assets

The following table presents the change in carrying value of goodwill and intangible assets.

As at December 31, 2021	Balance,<br>January 1		Net additions/<br>(disposals)^(1)^			Amortization<br>expense		Effect of changes<br>in foreign<br>exchange rates			Balance,<br>December 31
Goodwill	$	5,714	$	(5	)	$	n/a	$	(58	)	$	5,651
Indefinite life intangible assets
Brand	****	764	****	–	****	****	n/a	****	(3	)	****	761
Fund management contracts and other^(2)^	****	796	****	(3	)	****	n/a	****	(5	)	****	788
	****	1,560	****	(3	)	****	n/a	****	(8	)	****	1,549
Finite life intangible assets^(3)^
Distribution networks	****	806	****	131	****	****	44	****	(5	)	****	888
Customer relationships	****	738	****	(2	)	****	48	****	(1	)	****	687
Software	****	1,059	****	198	****	****	148	****	(18	)	****	1,091
Other	****	52	****	2	****	****	6	****	1	****	****	49
	****	2,655	****	329	****	****	246	****	(23	)	****	2,715
Total intangible assets	****	4,215	****	326	****	****	246	****	(31	)	****	4,264
Total goodwill and intangibleassets	$	9,929	$	321	****	$	246	$	(89	)	$	9,915
As at December 31, 2020	Balance,<br>January 1		Net additions/<br>(disposals)			Amortization<br>expense		Effect of changes<br>in foreign<br>exchange rates			Balance,<br>December 31
Goodwill	$	5,743	$	(5	)	$	n/a	$	(24	)	$	5,714
Indefinite life intangible assets
Brand		779		–			n/a		(15	)		764
Fund management contracts and other^(2)^		805		(2	)		n/a		(7	)		796
		1,584		(2	)		n/a		(22	)		1,560
Finite life intangible assets^(3)^
Distribution networks		801		59			42		(12	)		806
Customer relationships		795		–			54		(3	)		738
Software		991		262			189		(5	)		1,059
Other		61		(9	)		4		4			52
		2,648		312			289		(16	)		2,655
Total intangible assets		4,232		310			289		(38	)		4,215
Total goodwill and intangibleassets	$	9,975	$	305		$	289	$	(62	)	$	9,929
^(1)^	In December 2021, the Company purchased the Vietnamese operations of Aviva Plc including rights to an exclusive<br>distribution agreement with VietinBank.
---	---
^(2)^	Fund management contracts are mostly allocated to Canada WAM and U.S. WAM CGUs with the carrying values of $273 (2020<br>– $273) and $371 (2020 – $373), respectively.
---	---
^(3)^	Gross carrying amount of finite life intangible assets was $1,456 for distribution networks, $1,132 for customer<br>relationships, $2,484 for software and $124 for other (2020 – $1,332, $1,130, $2,310 and $123), respectively.
---	---

(b)Goodwill impairment testing

The Company completed its annual goodwill impairment testing in the fourth quarter of 2021 by determining the recoverable amounts of its businesses using valuation techniques discussed below (refer to notes 1(f) and 5(c)). The testing indicated that there was no impairment of goodwill in 2021 (2020 – $nil).

166   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

The following tables present the carrying value of goodwill by CGU or group of CGUs.

As at December 31, 2021<br><br><br>CGU or group of CGUs	Balance,<br>January 1		Net additions/<br>(disposals)			Effect of<br>changes in<br>foreign<br>exchange<br>rates			Balance,<br>December 31
Asia
Asia Insurance (excluding Japan)	$	159	$	(5	)	$	(2	)	$	152
Japan Insurance	****	433	****	–	****	****	(47	)	****	386
Canada Insurance	****	1,955	****	–	****	****	–	****	****	1,955
U.S. Insurance	****	338	****	–	****	****	(2	)	****	336
Global Wealth and Asset Management
Asia WAM	****	185	****	–	****	****	(2	)	****	183
Canada WAM	****	1,436	****	–	****	****	–	****	****	1,436
U.S. WAM	****	1,208	****	–	****	****	(5	)	****	1,203
Total	$	5,714	$	(5	)	$	(58	)	$	5,651
As at December 31, 2020<br><br><br>CGU or group of CGUs	Balance,<br>January 1		Net additions/<br>(disposals)			Effect of<br>changes in<br>foreign<br>exchange<br>rates			Balance,<br>December 31
Asia
Asia Insurance (excluding Japan)	$	159	$	–		$	–		$	159
Japan Insurance		420		–			13			433
Canada Insurance		1,957		–			(2	)		1,955
U.S. Insurance		349		(5	)		(6	)		338
Global Wealth and Asset Management
Asia WAM		187		–			(2	)		185
Canada WAM		1,436		–			–			1,436
U.S. WAM		1,235		–			(27	)		1,208
Total	$	5,743	$	(5)		$	(24	)	$	5,714

The valuation techniques, significant assumptions and sensitivities, where applicable, applied in the goodwill impairment testing are described below.

(c) Valuation techniques

When determining if a CGU is impaired, the Company compares its recoverable amount to the allocated capital for that unit, which is aligned with the Company’s internal reporting practices. The recoverable amounts were based on fair value less costs to sell (“FVLCS”) for Asia Insurance (excluding Japan) and Asia WAM. For other CGUs, value-in-use (“VIU”) was used.

Under the FVLCS approach, the Company determines the fair value of the CGU or group of CGUs using an earnings-based approach which incorporates forecasted earnings, excluding interest and equity market impacts and normalized new business expenses multiplied by an earnings-multiple derived from the observable price-to-earnings multiples of comparable financial institutions. The price-to-earnings multiple used by the Company for testing was 11.6 (2020 – 10.7). These FVLCS valuations are categorized as Level 3 of the fair value hierarchy (2020 – Level 3).

Under the VIU approach, used for CGUs with insurance business, an embedded appraisal value is determined from a projection of future distributable earnings derived from both the in-force business and new business expected to be sold in the future, and therefore, reflects the economic value for each CGU’s or group of CGUs’ profit potential under a set of assumptions. This approach requires assumptions including sales and revenue growth rates, capital requirements, interest rates, equity returns, mortality, morbidity, policyholder behaviour, tax rates and discount rates. For non-insurance CGUs, the VIU is based on discounted cash flow analysis which incorporates relevant aspects of the embedded appraisal value approach.

(d) Significant assumptions

To calculate embedded appraisal value, the Company discounted projected earnings from in-force contracts and valued 20 years of new business growing at expected plan levels, consistent with the periods used for forecasting long-term businesses such as insurance. In arriving at its projections, the Company considered past experience, economic trends such as interest rates, equity returns and product mix as well as industry and market trends. Where growth rate assumptions for new business cash flows were used in the embedded appraisal value calculations, they ranged from zero per cent to six per cent (2020 – zero per cent to 10 per cent).

Interest rate assumptions are based on prevailing market rates at the valuation date.

167

For 2021 and 2020, tax rates applied to the projections include the impact of internal reinsurance treaties and amounted to 28.0 per cent, 26.5 per cent and 21.0 per cent for the Japan, Canada and U.S. jurisdictions, respectively. Tax assumptions are sensitive to changes in tax laws as well as assumptions about the jurisdictions in which profits are earned. It is possible that actual tax rates could differ from those assumed.

Discount rates assumed in determining the value-in-use for applicable CGUs or group of CGUs ranged from 8.0 per cent to 10.1 per cent on an after-tax basis or 10.0 per cent to 12.7 per cent on a pre-tax basis (2020 – 8.0 per cent to 10.0 per cent on an after-tax basis or 10.0 per cent to 12.5 per cent on a pre-tax basis).

Key assumptions may change as economic and market conditions change, which may lead to impairment charges in the future. Adverse changes in discount rates (including from decline in interest rates) and growth rate assumptions for new business cash flow projections used in the determination of embedded appraisal values or reductions in market-based earnings multiples calculations may result in impairment charges in the future which could be material.

Note 6    InsuranceContract Liabilities and Reinsurance Assets

(a) Insurance contract liabilities and reinsurance assets

Insurance contract liabilities are reported gross of reinsurance ceded and the ceded liabilities are reported separately as reinsurance assets. Insurance contract liabilities include actuarial liabilities, benefits payable, provision for unreported claims and policyholder amounts on deposit. The components of gross and net insurance contract liabilities are shown below.

As at December 31,	2021			2020
Insurance contract liabilities	$	374,890	****	$	369,230
Benefits payable and provision for unreported claims	****	5,251	****		4,837
Policyholder amounts on deposit	****	12,134	****		11,487
Gross insurance contract liabilities	****	392,275	****		385,554
Reinsurance assets^(1)^	****	(44,531	)		(45,769	)
Net insurance contractliabilities	$	347,744	****	$	339,785
^(1)^	Reinsurance assets of $48 (2020 – $67) are related to investment contract liabilities, refer to note 7(b).<br>
---	---

Net insurance contract liabilities represent the amount which, together with estimated future premiums and net investment income, will be sufficient to pay estimated future benefits, policyholder dividends and refunds, taxes (other than income taxes) and expenses on policies in-force net of reinsurance premiums and recoveries.

Net insurance contract liabilities are determined using CALM, as required by the Canadian Institute of Actuaries.

The determination of net insurance contract liabilities is based on an explicit projection of cash flows using current assumptions for each material cash flow item. Investment returns are projected using the current asset portfolios and projected reinvestment strategies.

Each assumption is based on the best estimate adjusted by a margin for adverse deviation. For fixed income returns, this margin is established by scenario testing a range of prescribed and company-developed scenarios consistent with Canadian Actuarial Standards of Practice. For all other assumptions, this margin is established by directly adjusting the best estimate assumption.

Cash flows used in the net insurance contract liabilities valuation adjust the gross policy cash flows to reflect projected cash flows from ceded reinsurance. The cash flow impact of ceded reinsurance varies depending upon the amount of reinsurance, the structure of reinsurance treaties, the expected economic benefit from treaty cash flows and the impact of margins for adverse deviation. Gross insurance contract liabilities are determined by discounting gross policy cash flows using the same discount rate as the net CALM model discount rate.

The reinsurance asset is determined by taking the difference between the gross insurance contract liabilities and the net insurance contract liabilities. The reinsurance asset represents the benefit derived from reinsurance arrangements in force at the date of the Consolidated Statements of Financial Position.

The period used for the projection of cash flows is the policy lifetime for most individual insurance contracts. For other types of contracts, a shorter projection period may be used, with the contract generally ending at the earlier of the first renewal date on or after the Consolidated Statements of Financial Position date where the Company can exercise discretion in renewing its contractual obligations or terms of those obligations and the renewal or adjustment date that maximizes the insurance contract liabilities. For segregated fund products with guarantees, the projection period is generally set as the period that leads to the largest insurance contract liability. Where the projection period is less than the policy lifetime, insurance contract liabilities may be reduced by an allowance for acquisition expenses expected to be recovered from policy cash flows beyond the projection period used for the liabilities. Such allowances are tested for recoverability using assumptions that are consistent with other components of the actuarial valuation.

168   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(b) Composition

The composition of insurance contract liabilities and reinsurance assets by the line of business and reporting segment is as follows.

Gross insurance contract liabilities

	Individual insurance					Annuities<br>and pensions		Other<br>insurance<br>contract<br>liabilities^(1)^		Total, net of<br>reinsurance<br>ceded			Total<br>reinsurance<br>ceded		Total,<br><br><br>gross of<br>reinsurance<br>ceded
As at December 31, 2021	Participating		Non-<br>participating
Asia	$	64,586	$	36,387	****	$	6,869	$	3,590	$	111,432	****	$	2,749	$	114,181	****
Canada	****	13,518	****	44,320	****	****	16,554	****	14,981	****	89,373	****	****	430	****	89,803	****
U.S.	****	8,591	****	71,077	****	****	14,007	****	53,555	****	147,230	****	****	41,150	****	188,380	****
Corporate and Other	****	–	****	(676	)	****	22	****	363	****	(291	)	****	202	****	(89	)
Total, net of reinsurance ceded	****	86,695	****	151,108	****	****	37,452	****	72,489	****	347,744	****	$	44,531	$	392,275	****
Total reinsurance ceded	****	8,144	****	20,767	****	****	14,681	****	939	****	44,531	****
Total, gross of reinsuranceceded	$	94,839	$	171,875	****	$	52,133	$	73,428	$	392,275	****
	Individual insurance					Annuities<br>and pensions		Other<br>insurance<br>contract<br>liabilities^(1)^		Total, net of<br>reinsurance<br>ceded			Total<br>reinsurance<br>ceded		Total,<br><br><br>gross of<br>reinsurance<br>ceded
As at December 31, 2020	Participating		Non-<br>participating
Asia	$	55,262	$	36,930		$	7,114	$	3,652	$	102,958		$	2,127	$	105,085
Canada		12,796		44,468			18,462		14,620		90,346			443		90,789
U.S.		8,422		68,001			16,292		54,224		146,939			42,875		189,814
Corporate and Other		–		(684	)		34		192		(458	)		324		(134	)
Total, net of reinsurance ceded		76,480		148,715			41,902		72,688		339,785		$	45,769	$	385,554
Total reinsurance ceded		8,780		19,944			16,065		980		45,769
Total, gross of reinsuranceceded	$	85,260	$	168,659		$	57,967	$	73,668	$	385,554
^(1)^	Other insurance contract liabilities include group insurance and individual and group health including long-term care<br>insurance.
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Separate sub-accounts were established for participating policies in-force at the demutualization of MLI and John Hancock Mutual Life Insurance Company. These sub-accounts permit this participating business to be operated as separate “closed blocks” of participating policies. As at December 31, 2021, $29,000 (2020 – $29,480) of both reinsurance assets and insurance contract liabilities were related to these closed blocks of participating policies.

(c) Assets backing insurance contract liabilities, other liabilities and capital

Assets are segmented and matched to liabilities with similar underlying characteristics by product line and major currency. The Company has established target investment strategies and asset mixes for each asset segment supporting insurance contract liabilities which consider the risk attributes of the liabilities supported by the assets and expectations of market performance. Liabilities with rate and term guarantees are predominantly backed by fixed-rate instruments on a cash flow matching basis for a targeted duration horizon. Longer duration cash flows on these liabilities as well as on adjustable products such as participating life insurance are backed by a broader range of asset classes, including equity and alternative long-duration investments. The Company’s capital is invested in a range of debt and equity investments, both public and private.

Changes in the fair value of assets backing net insurance contract liabilities, that the Company considers to be other than temporary, would have a limited impact on the Company’s net income wherever there is an effective matching of assets and liabilities, as these changes would be substantially offset by corresponding changes in the value of net insurance contract liabilities. The fair value of assets backing net insurance contract liabilities as at December 31, 2021, excluding reinsurance assets, was estimated at $354,587 (2020 – $350,264).

As at December 31, 2021, the fair value of assets backing capital and other liabilities was estimated at $571,431 (2020 – $543,273).

169

The following table presents the carrying value of assets backing net insurance contract liabilities, other liabilities and capital.

	Individual insurance				Annuities<br>and pensions		Other insurance<br>contract<br>liabilities^(1)^		Other<br>liabilities^(2)^		Capital^(3)^		Total
As at December 31, 2021	Participating		Non-<br>participating
Assets
Debt securities	$	43,278	$	82,050	$	19,575	$	36,207	$	10,723	$	32,306	$	224,139
Public equities	****	14,667	****	8,112	****	453	****	374	****	626	****	3,835	****	28,067
Mortgages	****	3,799	****	13,295	****	4,572	****	8,526	****	21,802	****	20	****	52,014
Private placements	****	6,005	****	17,741	****	7,370	****	9,775	****	1,723	****	228	****	42,842
Real estate	****	3,467	****	6,814	****	987	****	1,782	****	6	****	177	****	13,233
Other	****	15,479	****	23,096	****	4,495	****	15,825	****	469,014	****	29,439	****	557,348
Total	$	86,695	$	151,108	$	37,452	$	72,489	$	503,894	$	66,005	$	917,643
	Individual insurance				Annuities<br>and pensions		Other insurance<br>contract<br>liabilities^(1)^		Other<br>liabilities^(2)^		Capital^(3)^		Total
As at December 31, 2020	Participating		Non-<br>participating
Assets
Debt securities	$	39,523	$	81,548	$	20,936	$	34,725	$	8,872	$	33,121	$	218,725
Public equities		12,365		6,971		461		310		402		3,213		23,722
Mortgages		3,069		12,536		4,923		8,315		21,338		26		50,207
Private placements		5,549		17,276		7,499		9,439		817		176		40,756
Real estate		3,385		6,466		1,027		1,697		57		200		12,832
Other		12,589		23,918		7,056		18,202		448,014		24,328		534,107
Total	$	76,480	$	148,715	$	41,902	$	72,688	$	479,500	$	61,064	$	880,349
^(1)^	Other insurance contract liabilities include group insurance and individual and group health including long-term care<br>insurance.
---	---
^(2)^	Other liabilities are non-insurance contract liabilities which include segregated<br>funds, bank deposits, long-term debt, deferred tax liabilities, derivatives, investment contracts, embedded derivatives and other miscellaneous liabilities.
---	---
^(3)^	Capital is defined in note 12.
---	---

(d) Significant insurance contract liability valuation assumptions

The determination of insurance contract liabilities involves the use of estimates and assumptions. Insurance contract liabilities have two major components: a best estimate amount and a provision for adverse deviation.

Best estimate assumptions

Best estimate assumptions are made with respect to mortality and morbidity, investment returns, rates of policy termination, operating expenses and certain taxes. Actual experience is monitored to ensure that assumptions remain appropriate and assumptions are changed as warranted. Assumptions are discussed in more detail in the following table.

Nature of factor and assumption methodology		Riskmanagement
Mortality<br><br><br>and<br><br><br>morbidity	Mortality relates to<br>the occurrence of death. Mortality is a key assumption for life insurance and certain forms of annuities. Mortality assumptions are based on the Company’s internal experience as well as past and emerging industry experience. Assumptions are<br>differentiated by sex, underwriting class, policy type and geographic market. Assumptions are made for future mortality improvements.<br> <br><br><br><br>Morbidity relates to the occurrence of accidents and sickness for insured risks. Morbidity is a key assumption for long-term care insurance,<br>disability insurance, critical illness and other forms of individual and group health benefits. Morbidity assumptions are based on the Company’s internal experience as well as past and emerging industry experience and are established for each<br>type of morbidity risk and geographic market. Assumptions are made for future morbidity improvements.	The Company maintains underwriting standards to determine the insurability of applicants. Claim trends are monitored on an ongoing basis. Exposure to<br>large claims is managed by establishing policy retention limits, which vary by market and geographic location. Policies in excess of the limits are reinsured with other companies.<br><br><br><br> <br>Mortality is monitored monthly and the overall 2021 experience was<br>unfavourable (2020 – unfavourable) when compared to the Company’s assumptions. Morbidity is also monitored monthly and the overall 2021 experience was favourable (2020 – favourable) when compared to the Company’s<br>assumptions.

170   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Nature of factor and assumption methodology		Riskmanagement
Investment returns	The Company segments<br>assets to support liabilities by business segment and geographic market and establishes investment strategies for each liability segment. Projected cash flows from these assets are combined with projected cash flows from future asset purchases/sales<br>to determine expected rates of return on these assets for future years. Investment strategies are based on the target investment policies for each segment and the reinvestment returns are derived from current and projected market rates for fixed<br>income investments and a projected outlook for other alternative long-duration assets.<br> <br><br><br><br>Investment return assumptions include expected future credit losses on fixed income investments. Credit losses are projected based on past experience<br>of the Company and industry as well as specific reviews of the current investment portfolio.<br> <br><br><br><br>Investment return assumptions for each asset class and geographic market also incorporate expected investment management expenses that are derived<br>from internal cost studies. The costs are attributed to each asset class to develop unitized assumptions per dollar of asset for each asset class and geographic market.	The Company’s policy of closely matching asset cash flows with those of the corresponding liabilities is designed to mitigate the Company’s<br>exposure to future changes in interest rates. The interest rate risk positions in business segments are monitored on an ongoing basis. Under CALM, the reinvestment rate is developed using interest rate scenario testing and reflects the interest rate<br>risk positions.<br> <br><br> <br>In 2021, the movement in interest rates negatively (2020<br>– negatively) impacted the Company’s net income. This negative impact was primarily due to increase in risk-free interest rates and the overall steepening of the yield curve in the U.S. and Canada.<br><br><br><br> <br>The exposure to credit losses is managed against policies that limit<br>concentrations by issuer, corporate connections, ratings, sectors and geographic regions. On participating policies and some non-participating policies, credit loss experience is passed back to policyholders<br>through the investment return crediting formula. For other policies, premiums and benefits reflect the Company’s assumed level of future credit losses at contract inception or most recent contract adjustment date. The Company holds explicit<br>provisions in actuarial liabilities for credit risk including provisions for adverse deviation.<br> <br><br><br><br>In 2021, credit loss experience on debt securities and mortgages was favourable (2020 – unfavourable) when compared to the Company’s<br>assumptions.<br> <br><br> <br>Equities, real estate and other alternative long-duration<br>assets are used to support liabilities where investment return experience is passed back to policyholders through dividends or credited investment return adjustments. Equities, real estate, oil and gas and other alternative long-duration assets are<br>also used to support long-dated obligations in the Company’s annuity and pension businesses and for long-dated insurance obligations on contracts where the investment return risk is borne by the Company.<br><br><br><br> <br>In 2021, investment experience on alternative long-duration assets backing<br>policyholder liabilities was favourable (2020 – unfavourable) primarily due to gains in private equities and real estate properties, partially offset by losses in timber and agriculture properties. In 2021, alternative long-duration asset<br>origination did not exceed (2020 – did not exceed) valuation requirements.<br> <br><br><br><br>In 2021, for the business that is dynamically hedged, segregated fund guarantee experience on residual,<br>non-dynamically hedged market risks were unfavourable (2020 – unfavourable). For the business that is not dynamically hedged, experience on segregated fund guarantees due to changes in the market value of<br>assets under management was also unfavourable (2020 – unfavourable). This excludes the experience on the macro equity hedges.<br> <br><br><br><br>In 2021, investment expense experience was unfavourable (2020 – unfavourable) when compared to the Company’s assumptions.
171
---
Nature of factor and assumption methodology		Riskmanagement
---	---	---
Policy termination and premium persistency	Policies are<br>terminated through lapses and surrenders, where lapses represent the termination of policies due to non-payment of premiums and surrenders represent the voluntary termination of policies by policyholders.<br>Premium persistency represents the level of ongoing deposits on contracts where there is policyholder discretion as to the amount and timing of deposits. Policy termination and premium persistency assumptions are primarily based on the<br>Company’s recent experience adjusted for expected future conditions. Assumptions reflect differences by type of contract within each geographic market.	The Company seeks to design products that minimize financial exposure to lapse, surrender and premium persistency risk. The Company monitors lapse,<br>surrender and persistency experience.<br> <br><br> <br>In aggregate, 2021 policyholder<br>termination and premium persistency experience was unfavourable (2020 – unfavourable) when compared to the Company’s assumptions used in the computation of actuarial liabilities.
Expenses and taxes	Operating expense<br>assumptions reflect the projected costs of maintaining and servicing in-force policies, including associated overhead expenses. The expenses are derived from internal cost studies projected into the future<br>with an allowance for inflation. For some developing businesses, there is an expectation that unit costs will decline as these businesses grow.<br> <br><br><br><br>Taxes reflect assumptions for future premium taxes and other non-income related taxes. For income taxes,<br>policy liabilities are adjusted only for temporary tax timing and permanent tax rate differences on the cash flows available to satisfy policy obligations.	The Company prices its products to cover the expected costs of servicing and maintaining them. In addition, the Company monitors expenses monthly,<br>including comparisons of actual expenses to expense levels allowed for in pricing and valuation.<br> <br><br><br><br>Maintenance expenses for 2021 were unfavourable (2020 – unfavourable) when compared to the Company’s assumptions used in the computation of<br>actuarial liabilities.<br> <br><br> <br>The Company prices its products to cover the<br>expected cost of taxes.
Policyholder  dividends, experience rating refunds, and other adjustable policy elements	The best estimate<br>projections for policyholder dividends and experience rating refunds, and other adjustable elements of policy benefits are determined to be consistent with management’s expectation of how these elements will be managed should experience emerge<br>consistently with the best estimate assumptions used for mortality and morbidity, investment returns, rates of policy termination, operating expenses and taxes.	The Company monitors policy experience and adjusts policy benefits and other adjustable elements to reflect this experience.<br><br><br><br> <br>Policyholder dividends are reviewed annually for all businesses under a<br>framework of Board-approved policyholder dividend policies.
Foreign currency	Foreign currency<br>risk results from a mismatch of the currency of liabilities and the currency of the assets designated to support these obligations. Where a currency mismatch exists, the assumed rate of return on the assets supporting the liabilities is reduced to<br>reflect the potential for adverse movements in foreign exchange rates.	The Company generally matches the currency of its assets with the currency of the liabilities they support, with the objective of mitigating the risk<br>of loss arising from movements in currency exchange rates.

The Company reviews actuarial methods and assumptions on an annual basis. If changes are made to assumptions (refer to note 6(h)), the full impact is recognized in income immediately.

(e) Sensitivity of insurance contract liabilities to changes in non-economic assumptions

The sensitivity of net income attributed to shareholders to changes in non-economic assumptions underlying insurance contract liabilities is shown below, assuming a simultaneous change in the assumption across all business units. The sensitivity of net income attributed to shareholders to a deterioration or improvement in non-economic assumptions for Long-Term Care (“LTC”) as at December 31, 2021 is also shown below.

In practice, experience for each assumption will frequently vary by geographic market and business and assumption updates are made on a business/geographic specific basis. Actual results can differ materially from these estimates for a variety of reasons including the interaction among these factors when more than one changes; changes in actuarial and investment return and future investment activity assumptions; changes in business mix, effective tax rates and other market factors; and the general limitations of internal models.

172   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Potential impact on net income attributed to shareholders arising from changes tonon-economic assumptions^(1)^

	Decrease in net income<br>attributed to shareholders
As at December 31,	2021			2020
Policy related assumptions
2% adverse change in future mortality<br>rates^(2),(4)^
Products where an increase in rates increases insurance contract liabilities	$	(500	)	$	(500	)
Products where a decrease in rates increases insurance contract liabilities	****	(500	)		(600	)
5% adverse change in future morbidity rates (incidence and termination)^(3),(4),(5)^	****	(5,500	)		(5,700	)
10% adverse change in future policy termination<br>rates^(4)^	****	(2,400	)		(2,600	)
5% increase in future expense levels	****	(600	)		(600	)
^(1)^	The participating policy funds are largely self-supporting and generate no material impact on net income attributed to<br>shareholders as a result of changes in non-economic assumptions. Experience gains or losses would generally result in changes to future dividends, with no direct impact to shareholders.
---	---
^(2)^	An increase in mortality rates will generally increase policy liabilities for life insurance contracts whereas a decrease<br>in mortality rates will generally increase policy liabilities for policies with longevity risk such as payout annuities.
---	---
^(3)^	No amounts related to morbidity risk are included for policies where the policy liability provides only for claims costs<br>expected over a short period, generally less than one year, such as Group Life and Health.
---	---
^(4)^	The impacts of the adverse sensitivities on LTC for morbidity, mortality and lapse do not assume any partial offsets from<br>the Company’s ability to contractually raise premium rates in such events, subject to state regulatory approval. In practice, the Company would plan to file for rate increases equal to the amount of deterioration resulting from the<br>sensitivities.
---	---
^(5)^	5% deterioration in incidence rates and 5% deterioration in claim termination rates.
---	---

Potential impact on net income attributed to shareholders arising from changes to non-economic assumptions for Long-Term Careincluded in the above table^(1),(2)^

	Decrease in net income<br>attributed to shareholders
As at December 31,	2021			2020
Policy related assumptions
2% adverse change in future mortality rates	$	(300	)	$	(300	)
5% adverse change in future morbidity incidence rates	****	(2,000	)		(2,100	)
5% adverse change in future morbidity claims termination rates	****	(3,100	)		(3,100	)
10% adverse change in future policy termination rates	****	(400	)		(400	)
5% increase in future expense levels	****	(100	)		(100	)
^(1)^	The impacts of the adverse sensitivities on LTC for morbidity, mortality and lapse do not assume any partial offsets from<br>the Company’s ability to contractually raise premium rates in such events, subject to state regulatory approval. In practice, the Company would plan to file for rate increases equal to the amount of deterioration resulting from the<br>sensitivities.
---	---
^(2)^	The impact of favourable changes to all the sensitivities is relatively symmetrical.
---	---

(f) Provision for adverse deviation assumptions

The assumptions made in establishing insurance contract liabilities reflect expected best estimates of future experience. To recognize the uncertainty in these best estimate assumptions, to allow for possible misestimation of and deterioration in experience and to provide a greater degree of assurance that the insurance contract liabilities are adequate to pay future benefits, the Appointed Actuary is required to include a margin in each assumption.

Margins are released into future earnings as the policy is released from risk. Margins for interest rate risk are included by testing a number of scenarios of future interest rates. The margin can be established by testing a limited number of scenarios, some of which are prescribed by the Canadian Actuarial Standards of Practice, and determining the liability based on the worst outcome. Alternatively, the margin can be set by testing many scenarios, which are developed according to actuarial guidance. Under this approach the liability would be the average of the outcomes above a percentile in the range prescribed by the Canadian Actuarial Standards of Practice.

Specific guidance is also provided for other risks such as market, credit, mortality and morbidity risks. For other risks which are not specifically addressed by the Canadian Institute of Actuaries, a range is provided of five per cent to 20 per cent of the expected experience assumption. The Company uses assumptions within the permissible ranges, with the determination of the level set considering the risk profile of the business. On occasion, in specific circumstances for additional prudence, a margin may exceed the high end of the range, which is permissible under the Canadian Actuarial Standards of Practice. This additional margin would be released if the specific circumstances which led to it being established were to change.

Each margin is reviewed annually for continued appropriateness.

173

(g) Change in insurance contract liabilities

The change in insurance contract liabilities was a result of the following business activities and changes in actuarial estimates.

For the year ended December 31, 2021	Net actuarial<br>liabilities			Other<br>insurance<br>contract<br>liabilities^(1)^			Net<br>insurance<br>contract<br>liabilities			Reinsurance<br>assets			Gross<br>insurance<br>contract<br>liabilities
Balance, January 1	$	325,408	****	$	14,377	****	$	339,785	****	$	45,769	****	$	385,554	****
New policies^(2)^	****	5,947	****	****	–	****	****	5,947	****	****	276	****	****	6,223	****
Normal in-force<br>movement^(2)^	****	4,689	****	****	1,283	****	****	5,972	****	****	(1,812	)	****	4,160	****
Changes in methods and assumptions^(2)^	****	287	****	****	–	****	****	287	****	****	455	****	****	742	****
Reinsurance transactions	****	–	****	****	–	****	****	–	****	****	–	****	****	–	****
Impact of changes in foreign exchange rates	****	(4,059	)	****	(188	)	****	(4,247	)	****	(157	)	****	(4,404	)
Balance, December 31	$	332,272	****	$	15,472	****	$	347,744	****	$	44,531	****	$	392,275	****
For the year ended December 31, 2020	Net actuarial<br>liabilities			Other<br>insurance<br>contract<br>liabilities^(1)^			Net<br>insurance<br>contract<br>liabilities			Reinsurance<br>assets			Gross<br>insurance<br>contract<br>liabilities
Balance, January 1	$	296,589		$	13,219		$	309,808		$	41,353		$	351,161
New policies^(3)^		3,166			–			3,166			481			3,647
Normal in-force<br>movement^(3)^		32,340			1,312			33,652			(3,030	)		30,622
Changes in methods and assumptions^(3)^		563			–			563			4,559			5,122
Reinsurance transactions^(4)^		(3,360	)		–			(3,360	)		3,360			–
Impact of changes in foreign exchange rates		(3,890	)		(154	)		(4,044	)		(954	)		(4,998	)
Balance, December 31	$	325,408		$	14,377		$	339,785		$	45,769		$	385,554
^(1)^	Other insurance contract liabilities are comprised of benefits payable and provisions for unreported claims and<br>policyholder amounts on deposit.
---	---
^(2)^	In 2021, the $10,719 increase reported as the change in insurance contract liabilities on the Consolidated Statements of<br>Income primarily consists of changes due to normal in-force movement, new policies and changes in methods and assumptions. These three items in the gross insurance contract liabilities were netted off by an<br>increase of $11,125, of which $9,868 is included in the Consolidated Statements of Income increase in insurance contract liabilities and $1,257 is included in gross claims and benefits. The Consolidated Statements of Income change in insurance<br>contract liabilities also includes the change in embedded derivatives associated with insurance contracts.
---	---
^(3)^	In 2020, the $36,982 increase reported as the change in insurance contract liabilities on the Consolidated Statements of<br>Income primarily consists of changes due to normal in-force movement, new policies, associated embedded derivatives and changes in methods and assumptions. These three items in the gross insurance contract<br>liabilities were netted off by an increase of $39,391, of which $37,876 is included in the Consolidated Statements of Income increase in insurance contract liabilities and $1,515 is included in gross claims and benefits. The Consolidated Statements<br>of Income change in insurance contract liabilities also includes the change in embedded derivatives associated with insurance contracts; however, these embedded derivatives are included in other liabilities on the Consolidated Statements of<br>Financial Position.
---	---
^(4)^	On September 30, 2020, the Company, through its subsidiary John Hancock Life Insurance Company (U.S.A.), entered into<br>a reinsurance agreement with Global Atlantic Financial Group Ltd to reinsure a block of legacy U.S. bank owned life insurance (“BOLI”). Under the terms of the transaction, the Company will maintain responsibility for servicing the policies<br>with no expected impact to the BOLI policyholders. The transaction was structured such that the Company ceded policyholder contract liabilities and transferred invested assets backing these liabilities.
---	---

(h) Actuarial methods and assumptions

A comprehensive review of actuarial methods and assumptions is performed annually. The review is designed to reduce the Company’s exposure to uncertainty by ensuring assumptions for both asset and liability related risks remain appropriate. This is accomplished by monitoring experience and selecting assumptions which represent a current best estimate view of expected future experience, and margins for adverse deviations that are appropriate for the risks assumed. While the assumptions selected represent the Company’s current best estimates and assessment of risk, the ongoing monitoring of experience and changes in the economic environment are likely to result in future changes to the actuarial assumptions, which could materially impact the measurement of insurance contract liabilities.

This year’s review of actuarial methods and assumptions did not reflect COVID-19 experience as it is too soon to assess the impact of COVID-19 on long-term assumptions. Experience related to COVID-19 will continue to be closely monitored, as well as emerging research on the long-term implications of COVID-19 on mortality and other assumptions.

174   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

2021 Review of Actuarial Methods and Assumptions

The completion of the 2021 annual review of actuarial methods and assumptions resulted in an increase in insurance contract liabilities of $287, net of reinsurance, and a decrease in net income attributed to shareholders of $41 post-tax.

	Change in insurance contract liabilities,<br><br><br>net of reinsurance
For the year ended December 31, 2021	Total			Attributed to<br>participating<br>policyholders’<br>account^(1)^			Attributed to<br>shareholders’<br>account			Change in net<br>income attributed<br>to shareholders<br>(post-tax)
U.S. variable annuity product review	$	51	****	$	–	****	$	51	****	$	(40	)
Mortality and morbidity updates	****	350	****	****	–	****	****	350	****	****	(257	)
Lapses and policyholder behaviour updates	****	686	****	****	18	****	****	668	****	****	(534	)
Expense updates	****	(653	)	****	(25	)	****	(628	)	****	503	****
Investment related updates	****	(257	)	****	(2	)	****	(255	)	****	168	****
Other updates	****	110	****	****	231	****	****	(121	)	****	119	****
Net impact	$	287	****	$	222	****	$	65	****	$	(41	)
^(1)^	The change in insurance contract liabilities, net of reinsurance, attributable to the participating policyholders’<br>account was primarily driven by a reduction in the expected long-term interest rates within the valuation models to reflect the low interest rate environment.
---	---

U.S. variable annuity product review

The review of the Company’s variable annuity products in the U.S. resulted in a $40 post-tax charge to net income attributed to shareholders.

The charge was primarily driven by updates to lapse assumptions to reflect emerging experience, partially offset by refinements to the Company’s segregated fund guaranteed minimum withdrawal benefit valuation models.

Updates to mortality and morbidity

Mortality and morbidity updates resulted in a $257 post-tax charge to net income attributed to shareholders.

The charge was driven by updates to older age mortality on certain products in the Company’s U.S. life insurance business, mortality assumption updates in Indonesia to reflect recent experience, as well as from refining assumptions on several reinsurance arrangements in Canada.

Updates to lapses and policyholder behaviour

Updates to lapses and policyholder behaviour assumptions resulted in a $534 post-tax charge to net income attributed to shareholders.

The Company completed a detailed review of lapse assumptions for non-participating policies within the Company’s U.S. life insurance business including those for universal life, variable universal life, and term products. The Company observed a trend of low lapse rates on the protection-focused universal life insurance products as consumers continue to value the product guarantees in the prolonged low interest rate environment. The Company lowered the overall lapse assumptions for these products to reflect actual experience, which resulted in a post-tax charge to net income attributed to shareholders.

Other updates to lapse and policyholder behaviour assumptions were made across several products in Canada and Japan to reflect recent experience, resulting in a modest post-tax charge to net income attributed to shareholders.

Expense updates

Updates to expense assumptions resulted in a $503 post-tax gain to net income attributed to shareholders**.**

The Company completed a detailed review of the investment expense assumptions across the Company. This resulted in a $263 post-tax gain to net income attributed to shareholders, primarily driven by scale benefits.

The Company also completed a global expense study, which resulted in a $256 post-tax gain to net income attributed to shareholders. The favourable result primarily reflects a reallocation of expenses across certain business lines to align with actual experience, as well as from expense savings related to various expense efficiency initiatives.

Investment related updates

Updates to investment return assumptions resulted in a $168 post-tax gain to net income attributed to shareholders.

The primary driver of the gain was an update to the Company’s corporate bond default rates to reflect recent experience; the Company reduced default assumptions for certain credit ratings in Canada, the U.S., and Japan. This was partially offset by a reduction to the Company’s Canadian real estate investment return assumptions.

175

Other updates

Other updates resulted in a $119 post-tax gain to net income attributed to shareholders.

This was primarily driven by Japan, whereby investment fees for certain mandates in the general account provided by affiliate investment managers were reviewed and updated to align with broader market levels.

2020 Review of Actuarial Methods and Assumptions

The 2020 annual review of actuarial methods and assumptions resulted in an increase in insurance contract liabilities of $563, net of reinsurance, and a decrease in net income attributed to shareholders of $198 post-tax.

	Change in insurance contract liabilities,<br>net of reinsurance
For the year ended December 31, 2020	Total			Attributed to<br>participating<br>policyholders’<br>account^(1)^			Attributed to<br>shareholders’<br>account			Change in net<br>income attributed<br>to shareholders<br>(post-tax)
Canada variable annuity product review	$	(42	)	$	–		$	(42	)	$	31
Mortality and morbidity updates		(304	)		(1	)		(303	)		232
Lapses and policyholder behaviour updates		893			–			893			(682	)
Investment related updates		(212	)		(153	)		(59	)		31
Other updates		228			455			(227	)		190
Net impact	$	563		$	301		$	262		$	(198	)
^(1)^	The change in insurance contract liabilities, net of reinsurance, attributable to the participating policyholders’<br>account was driven by refinements to the Company’s valuation models, primarily due to annual updates to reflect market movements in the first half of 2020.
---	---

Canada variable annuity product review

The review of the Company’s variable annuity product in Canada resulted in a $31 post-tax gain to net income attributed to shareholders.

The gain was driven by refinements to the segregated fund guaranteed minimum withdrawal benefit valuation models, partially offset by updates to lapse assumptions to reflect emerging experience.

Updates to mortality and morbidity

Mortality and morbidity updates resulted in a $232 post-tax gain to net income attributed to shareholders.

The gain was primarily driven by a review of the Company’s reinsurance arrangements and mortality margins for preferred risk classes in Canada Individual Insurance business, as well as updates to the morbidity assumptions on certain products in Japan. This was partially offset by a charge from the review of mortality assumptions in the U.S. Insurance business, where emerging experience showed higher mortality at older attained ages.

Other updates to mortality and morbidity assumptions were made across several products, largely in Canada, to reflect recent experience resulting in a net post-tax gain to net income attributable to shareholders.

Updates to lapses and policyholder behaviour

Updates to lapses and policyholder behaviour assumptions resulted in a $682 post-tax charge to net income attributed to shareholders.

The Company completed a detailed review of the lapse assumptions for universal life policies in Canada, including both yearly renewable term, and level cost of insurance products. The Company lowered the ultimate lapse assumptions due to the emergence of more recent data, which resulted in a post-tax charge of $504 to net income attributed to shareholders, primarily driven by adverse experience on large policies.

Other updates to lapse and policyholder behaviour assumptions were made across several products to reflect recent experience resulting in a net post-tax charge to net income attributable to shareholders. The primary driver of the charge was adverse lapse experience from retail policies in Japan.

Investment related updates

Updates to investment return assumptions resulted in a $31 post-tax gain to net income attributed to shareholders.

Other updates

Other updates resulted in a $190 post-tax gain to net income attributed to shareholders. This incorporated several positive items including updates to the Company’s U.S. segregated fund guaranteed minimum withdrawal benefit valuation models, as well as updates to the projection of the tax and liability cash flows in the U.S. to align with updated U.S. tax and statutory reporting standard changes, partially offset by refinements to the valuation models, primarily driven by annual updates to reflect market movements in the first half of 2020.

176   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(i) Insurance contracts contractual obligations

Insurance contracts give rise to obligations fixed by agreement. As at December 31, 2021, the Company’s contractual obligations and commitments relating to insurance contracts are as follows.

Payments due by period	Less than<br>1 year		1 to 3<br><br><br>years		3 to 5<br><br><br>years		Over 5 years		Total
Insurance contract liabilities^(1)^	$	12,793	$	10,977	$	17,091	$	868,749	$	909,610
^(1)^	Insurance contract liability cash flows include estimates related to the timing and payment of death and disability<br>claims, policy surrenders, policy maturities, annuity payments, minimum guarantees on segregated fund products, policyholder dividends, commissions and premium taxes offset by contractual future premiums on<br>in-force contracts. These estimated cash flows are based on the best estimate assumptions used in the determination of insurance contract liabilities. These amounts are undiscounted and reflect recoveries from<br>reinsurance agreements. Due to the use of assumptions, actual cash flows may differ from these estimates. Cash flows include embedded derivatives measured separately at fair value.
---	---

(j) Gross claims and benefits

The following table presents a breakdown of gross claims and benefits.

For the years ended December 31,	2021			2020
Death, disability and other claims	$	18,583	****	$	18,064
Maturity and surrender benefits	****	8,728	****		8,613
Annuity payments	****	3,276	****		3,560
Policyholder dividends and experience rating refunds	****	1,255	****		1,411
Net transfers from segregated funds	****	(732	)		(1,515	)
Total	$	31,110	****	$	30,133

(k) Reinsurance transactions

On November 15, 2021, the Company, through its subsidiary John Hancock Life Insurance Company (U.S.A.) (“JHUSA”), entered into a reinsurance agreement with Venerable Holdings, Inc. to reinsure a block of legacy U.S. variable annuity (“VA”) policies. Under the terms of the transaction, the Company will retain responsibility for the maintenance of the policies with no intended impact to VA policyholders. The transaction was structured as coinsurance for the general fund liabilities and modified coinsurance for the segregated fund liabilities. The transaction closed on February 1, 2022 resulting in an estimated after-tax gain of $750.

On September 30, 2020, the Company, through its subsidiary JHUSA, entered into a reinsurance agreement with Global Atlantic Financial Group Ltd to reinsure a block of legacy U.S. bank owned life insurance (“BOLI”). Under the terms of the transaction, the Company will maintain responsibility for servicing the policies with no expected impact to the BOLI policyholders. The transaction was structured such that the Company ceded policyholder contract liabilities and transferred invested assets backing these liabilities.

The transaction closed with an effective date of July 1, 2020. The Company recorded an after-tax gain of $262, which includes an increase in reinsurance assets and ceded premiums of $3.4 billion and $3.3  billion, respectively, on the Consolidated Statements of Income.

Note 7     Investment Contract Liabilities

Investment contract liabilities are contractual obligations that do not contain significant insurance risk. These contracts are measured either at fair value or at amortized cost.

(a) Investment contract liabilities measured at fair value

Investment contract liabilities measured at fair value include certain investment savings and pension products sold primarily in Hong Kong and mainland China. The following table presents the movement in investment contract liabilities measured at fair value.

For the years ended December 31,	2021			2020
Balance, January 1	$	932	****	$	789
New policies	****	54	****		180
Changes in market conditions	****	(38	)		90
Redemptions, surrenders and maturities	****	(138	)		(108	)
Impact of changes in foreign exchange rates	****	(8	)		(19	)
Balance, December 31	$	802	****	$	932
177
---

(b) Investment contract liabilities measured at amortized cost

Investment contract liabilities measured at amortized cost include several fixed annuity products sold in the U.S. and Canada that provide guaranteed income payments for a contractually determined period and are not contingent on survivorship.

The following table presents carrying and fair values of investment contract liabilities measured at amortized cost.

	2021				2020
As at December 31,	Amortized<br><br><br>cost, gross of<br>reinsurance<br>ceded^(1)^		Fair value		Amortized<br><br><br>cost, gross of<br>reinsurance<br>ceded^(1)^		Fair value
U.S. fixed annuity products	$	1,380	$	1,602	$	1,361	$	1,680
Canadian fixed annuity products	****	935	****	1,016		995		1,086
Investment contract liabilities	$	2,315	$	2,618	$	2,356	$	2,766
^(1)^	As at December 31, 2021, investment contract liabilities with the carrying value and fair value of $48 and $52,<br>respectively (2020 – $67 and $76, respectively), were reinsured by the Company. The net carrying value and fair value of investment contract liabilities were $2,267 and $2,566 (2020 – $2,289 and $2,690), respectively.<br>
---	---

The changes in investment contract liabilities measured at amortized cost was a result of the following business activities.

For the years ended December 31,	2021			2020
Balance, January 1	$	2,356	****	$	2,315
Policy deposits	****	92	****		202
Interest	****	71	****		61
Withdrawals	****	(191	)		(194	)
Fees	****	(1	)		(1	)
Other	****	(5	)		–
Impact of changes in foreign exchange rates	****	(7	)		(27	)
Balance, December 31	$	2,315	****	$	2,356

Carrying value of fixed annuity products is amortized at a rate that exactly discounts the projected actual cash flows to the net carrying amount of the liability at the date of issue.

Fair value of fixed annuity products is determined by projecting cash flows according to the contract terms and discounting the cash flows at current market rates adjusted for the Company’s own credit standing. As at December 31, 2021 and 2020, fair value of all investment contract liabilities was determined using Level 2 valuation techniques.

(c) Investment contracts contractual obligations

As at December 31, 2021, the Company’s contractual obligations and commitments relating to the investment contracts are as follows.

Payments due by period	Less than<br>1 year		1 to 3<br><br><br>years		3 to 5<br><br><br>years		Over 5<br>years		Total
Investment contract liabilities^(1)^	$	292	$	486	$	489	$	3,542	$	4,809
^(1)^	Due to the nature of the products, the timing of net cash flows may be before contract maturity. Cash flows are<br>undiscounted.
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Note 8     Risk Management

The Company’s policies and procedures for managing risks of financial instruments are disclosed in denoted components of the “Risk Management and Risk Factors” section of the MD&A for the year ended December 31, 2021. These MD&A disclosures are in accordance with IFRS 7 “Financial Instruments: Disclosures” and are an integral part of these Consolidated Financial Statements.

(a) Credit risk

Credit risk is the risk of loss due to inability or unwillingness of a borrower, or counterparty, to fulfill its payment obligations. Worsening regional and global economic conditions, segment or industry sector challenges, or company specific factors could result in defaults or downgrades and could lead to increased provisions or impairments related to the Company’s general fund invested assets, derivative financial instruments and reinsurance assets and an increase in provisions for future credit impairments that are included in actuarial liabilities.

The Company’s exposure to credit risk is managed through risk management policies and procedures which include a defined credit evaluation and adjudication process, delegated credit approval authorities and established exposure limits by borrower, corporate connection, credit rating, industry and geographic region. The Company measures derivative counterparty exposure as net potential credit exposure, which takes into consideration mark-to-market values of all transactions with each counterparty, net of any collateral held, and an allowance to reflect future potential exposure. Reinsurance counterparty exposure is measured reflecting the level of ceded liabilities.

178   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

The Company also ensures where warranted, that mortgages, private placements and loans to Bank clients are secured by collateral, the nature of which depends on the credit risk of the counterparty.

An allowance for losses on loans is established when a loan becomes impaired. Allowances for loan losses are calculated to reduce the carrying value of the loans to estimated net realizable value. The establishment of such allowances takes into consideration normal historical credit loss levels and future expectations, with an allowance for adverse deviations. In addition, policy liabilities include general provisions for credit losses from future asset impairments. Impairments are identified through regular monitoring of all credit related exposures, considering such information as general market conditions, industry and borrower specific credit events and any other relevant trends or conditions. Allowances for losses on reinsurance contracts are established when a reinsurance counterparty becomes unable or unwilling to fulfill its contractual obligations. The allowance for loss is based on current recoverable amounts and ceded policy liabilities.

Credit risk associated with derivative counterparties is discussed in note 8(d) and credit risk associated with reinsurance counterparties is discussed in note 8(i).

(i) Creditexposure

The following table presents the gross carrying amount of financial instruments subject to credit exposure, without considering any collateral held or other credit enhancements.

As at December 31,	2021		2020
Debt securities
FVTPL	$	189,722	$	183,061
AFS	****	33,097		35,663
Other	****	1,320		–
Mortgages	****	52,014		50,207
Private placements	****	42,842		40,756
Policy loans	****	6,397		6,398
Loans to Bank clients	****	2,506		1,976
Derivative assets	****	17,503		27,793
Accrued investment income	****	2,641		2,523
Reinsurance assets	****	44,579		45,836
Other financial assets	****	6,242		6,156
Total	$	398,863	$	400,369

As at December 31, 2021, 97% (2020 – 97%) of debt securities were investment grade-rated with ratings ranging between AAA to BBB.

(ii) Credit quality

Credit quality of commercial mortgages andprivate placements

Credit quality of commercial mortgages and private placements is assessed at least annually by using an internal rating based on regular monitoring of credit-related exposures, considering both qualitative and quantitative factors.

A provision is recorded when the internal risk ratings indicate that a loss represents the most likely outcome. These assets are designated as non-accrual and an allowance is established based on an analysis of the security and repayment sources.

179

The following table presents the credit quality of commercial mortgages and private placements.

As at December 31, 2021	AAA		AA		A		BBB		BB		B and lower		Total
Commercial mortgages
Retail	$	113	$	1,340	$	5,179	$	1,936	$	228	$	2	$	8,798
Office	****	56	****	1,256	****	6,004	****	1,291	****	87	****	40	****	8,734
Multi-family residential	****	557	****	1,869	****	3,771	****	767	****	32	****	–	****	6,996
Industrial	****	47	****	376	****	2,808	****	328	****	–	****	–	****	3,559
Other	****	212	****	1,010	****	787	****	956	****	47	****	–	****	3,012
Total commercial mortgages	****	985	****	5,851	****	18,549	****	5,278	****	394	****	42	****	31,099
Agricultural mortgages	****	–	****	–	****	119	****	242	****	–	****	–	****	361
Private placements	****	976	****	5,720	****	16,147	****	16,220	****	1,161	****	2,618	****	42,842
Total	$	1,961	$	11,571	$	34,815	$	21,740	$	1,555	$	2,660	$	74,302
As at December 31, 2020	AAA		AA		A		BBB		BB		B and lower		Total
Commercial mortgages
Retail	$	110	$	1,339	$	4,761	$	2,242	$	168	$	1	$	8,621
Office		66		1,297		5,948		1,174		164		20		8,669
Multi-family residential		613		1,675		2,896		582		33		–		5,799
Industrial		25		320		2,353		259		3		–		2,960
Other		238		966		914		984		355		7		3,464
Total commercial mortgages		1,052		5,597		16,872		5,241		723		28		29,513
Agricultural mortgages		–		–		127		77		106		–		310
Private placements		1,061		4,829		15,585		15,825		1,206		2,250		40,756
Total	$	2,113	$	10,426	$	32,584	$	21,143	$	2,035	$	2,278	$	70,579

Credit quality of residential mortgages and loans to Bank clients

Credit quality of residential mortgages and loans to Bank clients is assessed at least annually with the loan being performing or non-performing as the key credit quality indicator.

Full or partial write-offs of loans are recorded when management believes that there is no realistic prospect of full recovery. Write-offs, net of recoveries, are deducted from the allowance for credit losses. All impairments are captured in the allowance for credit losses.

The following table presents credit quality of residential mortgages and loans to Bank clients.

	2021						2020
As at December 31,	Insured		Uninsured		Total		Insured		Uninsured		Total
Residential mortgages
Performing	$	7,264	$	13,272	$	20,536	$	6,349	$	13,980	$	20,329
Non-performing^(1)^	****	6	****	12	****	18		9		46		55
Loans to Bank clients
Performing	****	n/a	****	2,506	****	2,506		n/a		1,976		1,976
Non-performing^(1)^	****	n/a	****	–	****	–		n/a		–		–
Total	$	7,270	$	15,790	$	23,060	$	6,358	$	16,002	$	22,360
^(1)^	Non-performing refers to payments that are 90 days or more past due.<br>
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The carrying value of government-insured mortgages was 14% of the total mortgage portfolio as at December 31, 2021 (2020 – 13%). Most of these insured mortgages are residential loans as classified in the table above.

(iii) Past due or credit impaired financial assets

The Company provides for credit risk by establishing allowances against the carrying value of impaired loans and recognizing impairment losses on AFS debt securities. In addition, the Company reports as impairment losses certain declines in the fair value of debt securities designated as FVTPL which it deems represent impairments due to non-recoverability of due amounts.

180   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

The following table presents past due but not impaired and impaired financial assets.

	Past due but not impaired
As at December 31, 2021	Less than<br>90 days		90 days<br>and greater		Total		Total<br>impaired
Debt securities
FVTPL	$	20	$	–	$	20	$	2
AFS	****	–	****	–	****	–	****	–
Private placements	****	63	****	–	****	63	****	175
Mortgages and loans to Bank clients	****	61	****	–	****	61	****	51
Other financial assets	****	261	****	47	****	308	****	–
Total	$	405	$	47	$	452	$	228
	Past due but not impaired
As at December 31, 2020	Less than<br>90 days		90 days<br>and greater		Total		Total<br>impaired
Debt securities
FVTPL	$	–	$	–	$	–	$	54
AFS		–		–		–		1
Private placements		30		–		30		170
Mortgages and loans to Bank clients		66		–		66		69
Other financial assets		56		58		114		2
Total	$	152	$	58	$	210	$	296

The following table presents gross carrying value and allowances for loan losses for impaired loans.

As at December 31, 2021	Gross<br>carrying value		Allowances<br>for loan losses		Net carrying<br>value
Private placements	$	197	$	22	$	175
Mortgages and loans to Bank clients	****	73	****	22	****	51
Total	$	270	$	44	$	226
As at December 31, 2020	Gross<br>carrying value		Allowances<br>for loan losses		Net carrying<br>value
Private placements	$	249	$	79	$	170
Mortgages and loans to Bank clients		97		28		69
Total	$	346	$	107	$	239

The following table presents movement of allowance for loan losses during the year.

	2021									2020
For the years ended December 31,	Private<br>placements			Mortgages<br>and loans to<br>Bank clients			Total			Private<br>placements			Mortgages<br>and loans to<br>Bank clients			Total
Balance, January 1	$	79	****	$	28	****	$	107	****	$	4		$	16		$	20
Provisions	****	14	****	****	12	****	****	26	****		94			31			125
Recoveries	****	(58	)	****	(16	)	****	(74	)		(6	)		(6)			(12	)
Write-offs^(1)^	****	(13	)	****	(2	)	****	(15	)		(13	)		(13	)		(26	)
Balance, December 31	$	22	****	$	22	****	$	44	****	$	79		$	28		$	107
^(1)^	Includes disposals and impact of changes in foreign exchange rates.
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(b) Securities lending, repurchase and reverse repurchase transactions

The Company engages in securities lending to generate fee income. Collateral exceeding the market value of the loaned securities is retained by the Company until the underlying security has been returned to the Company. The market value of the loaned securities is monitored daily and additional collateral is obtained or refunded as the market value of the underlying loaned securities fluctuates. As at December 31, 2021, the Company had loaned securities (which are included in invested assets) with a market value of $564 (2020 – $889). The Company holds collateral with a current market value that exceeds the value of securities lent in all cases.

The Company engages in reverse repurchase transactions to generate fee income to take possession of securities to cover short positions in similar instruments and to meet short-term funding requirements. As at December 31, 2021, the Company had engaged in reverse repurchase transactions of $1,490 (2020 – $716) which are recorded as short-term receivables. In addition, the Company had engaged in repurchase transactions of $536 as at December 31, 2021 (2020 – $353) which are recorded as payables.

181

(c) Credit default swaps

The Company replicates exposure to specific issuers by selling credit protection via credit default swaps (“CDS”) to complement its cash debt securities investing. The Company does not write CDS protection more than its government bond holdings. A CDS is a derivative instrument representing an agreement between two parties to exchange the credit risk of a single specified entity or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of “reference entities”), in return for a periodic premium. CDS contracts typically have a five-year term.

The following table presents details of the credit default swap protection sold by type of contract and external agency rating for the underlying reference security.

As at December 31, 2021	Notional<br>amount^(1)^		Fair value		Weighted<br>average maturity<br><br><br>(in years)^(2)^
Single name CDS^(3)^ – Corporate debt
A	$	16	$	–	****	1
BBB	****	28	****	1	****	2
Total single name CDS	$	44	$	1	****	2
Total CDS protection sold	$	44	$	1	****	2
As at December 31, 2020	Notional<br>amount^(1)^		Fair value		Weighted<br>average maturity<br><br><br>(in years)^(2)^
Single name CDS^(3)^ – Corporate debt
A	$	136	$	2		1
BBB		105		1		2
Total single name CDS	$	241	$	3		1
Total CDS protection sold	$	241	$	3		1
^(1)^	Notional amounts represent the maximum future payments the Company would have to pay its counterparties assuming a default<br>of the underlying credit and zero recovery on the underlying issuer obligations.
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^(2)^	The weighted average maturity of the CDS is weighted based on notional amounts.
---	---
^(3)^	Ratings are based on S&P where available followed by Moody’s, DBRS, and Fitch. If no rating is available from a<br>rating agency, an internally developed rating is used.
---	---

The Company held no purchased credit protection as at December 31, 2021 and 2020.

(d) Derivatives

The Company’s point-in-time exposure to losses related to credit risk of a derivative counterparty is limited to the amount of any net gains that may have accrued with a particular counterparty. Gross derivative counterparty exposure is measured as the total fair value (including accrued interest) of all outstanding contracts in a gain position excluding any offsetting contracts in a loss position and the impact of collateral on hand. The Company limits the risk of credit losses from derivative counterparties by: using investment grade counterparties, entering into master netting arrangements which permit the offsetting of contracts in a loss position in the case of a counterparty default and entering into Credit Support Annex agreements whereby collateral must be provided when the exposure exceeds a certain threshold. All contracts are held with counterparties rated BBB+ or higher. As at December 31, 2021, the percentage of the Company’s derivative exposure with counterparties rated AA- or higher was 17 per cent (2020 – 20 per cent). The Company’s exposure to credit risk was mitigated by $10,121 fair value of collateral held as security as at December 31, 2021 (2020 – $16,696).

As at December 31, 2021, the largest single counterparty exposure, without taking into consideration the impact of master netting agreements or the benefit of collateral held, was $2,132 (2020 – $4,110). The net exposure to this counterparty, after taking into consideration master netting agreements and the fair value of collateral held, was $nil (2020 – $nil). As at December 31, 2021, the total maximum credit exposure related to derivatives across all counterparties, without taking into consideration the impact of master netting agreements and the benefit of collateral held, was $18,226 (2020 – $28,685).

(e) Offsetting financial assets and financial liabilities

Certain derivatives, securities lent and repurchase agreements have conditional offset rights. The Company does not offset these financial instruments in the Consolidated Statements of Financial Position, as the rights of offset are conditional.

In the case of derivatives, collateral is collected from and pledged to counterparties and clearing houses to manage credit risk exposure in accordance with Credit Support Annexes to swap agreements and clearing agreements. Under master netting agreements, the Company has a right of offset in the event of default, insolvency, bankruptcy or other early termination.

In the case of reverse repurchase and repurchase transactions, additional collateral may be collected from or pledged to counterparties to manage credit exposure according to bilateral reverse repurchase or repurchase agreements. In the event of default by a counterparty, the Company is entitled to liquidate the collateral held to offset against the same counterparty’s obligation.

182   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

The following table presents the effect of conditional master netting and similar arrangements. Similar arrangements may include global master repurchase agreements, global master securities lending agreements, and any related rights to financial collateral.

				Related amounts not set off in the<br>Consolidated Statements of<br>Financial Position
As at December 31, 2021	Gross amounts of<br>financial instruments^(1)^			Amounts subject to<br>an enforceable<br>master netting<br>arrangement or<br>similar agreements			Financial<br>and cash<br>collateral<br>pledged<br>(received)^(2)^			Net<br>amount<br>including<br>financing<br>entities^(3)^			Net<br>amounts<br>excluding<br>financing<br>entities
Financial assets
Derivative assets	$	18,226	****	$	(8,410	)	$	(9,522	)	$	294	****	$	294	****
Securities lending	****	564	****	****	–	****	****	(564	)	****	–	****	****	–	****
Reverse repurchase agreements	****	1,490	****	****	(183	)	****	(1,307	)	****	–	****	****	–	****
Total financial assets	$	20,280	****	$	(8,593	)	$	(11,393	)	$	294	****	$	294	****
Financial liabilities
Derivative liabilities	$	(10,940	)	$	8,410	****	$	2,250	****	$	(280	)	$	(79	)
Repurchase agreements	****	(536	)	****	183	****	****	353	****	****	–	****	****	–	****
Total financial liabilities	$	(11,476	)	$	8,593	****	$	2,603	****	$	(280	)	$	(79	)
				Related amounts not set off in the<br>Consolidated Statements of<br>Financial Position
As at December 31, 2020	Gross amounts of<br>financial instruments^(1)^			Amounts subject to<br>an enforceable<br>master netting<br>arrangement or<br>similar agreements			Financial<br>and cash<br>collateral<br>pledged<br>(received)^(2)^			Net<br>amount<br>including<br>financing<br>entities^(3)^			Net<br>amounts<br>excluding<br>financing<br>entities
Financial assets
Derivative assets	$	28,685		$	(13,243	)	$	(15,323	)	$	119		$	119
Securities lending		889			–			(889	)		–			–
Reverse repurchase agreements		716			–			(715	)		1			1
Total financial assets	$	30,290		$	(13,243	)	$	(16,927	)	$	120		$	120
Financial liabilities
Derivative liabilities	$	(16,076	)	$	13,243		$	2,482		$	(351	)	$	(71	)
Repurchase agreements		(353	)		–			353			–			–
Total financial liabilities	$	(16,429	)	$	13,243		$	2,835		$	(351	)	$	(71	)
^(1)^	Financial assets and liabilities include accrued interest of $725 and $902, respectively (2020 – $892 and $1,114,<br>respectively).
---	---
^(2)^	Financial and cash collateral exclude over-collateralization. As at December 31, 2021, the Company was<br>over-collateralized on OTC derivative assets, OTC derivative liabilities, securities lending and reverse repurchase agreements and repurchase agreements in the amounts of $599, $875, $36 and $2, respectively (2020 – $1,373, $627, $74 and $nil,<br>respectively). As at December 31, 2021, collateral pledged (received) does not include collateral-in-transit on OTC instruments or initial margin on exchange traded<br>contracts or cleared contracts.
---	---
^(3)^	Includes derivative contracts entered between the Company and its financing entity which it does not consolidate. The<br>Company does not exchange collateral on derivative contracts entered with this entity. Refer to note 17.
---	---

The Company also has certain credit linked note assets and variable surplus note liabilities which have unconditional offsetting rights. Under the netting agreements, the Company has rights of offset including in the event of the Company’s default, insolvency, or bankruptcy. These financial instruments are offset in the Consolidated Statements of Financial Position.

183

A credit linked note is a fixed income instrument the term of which, in this case, is linked to a variable surplus note. A surplus note is a subordinated debt obligation that often qualifies as surplus (the U.S. statutory equivalent of equity) by some U.S. state insurance regulators. Interest payments on surplus notes are made after all other contractual payments are made. The following table presents the effect of unconditional netting.

As at December 31, 2021	Gross amounts of<br>financial instruments			Amounts subject to<br>an enforceable<br>netting arrangement			Net amounts of<br>financial instruments
Credit linked note^(1)^	$	1,054	****	$	(1,054	)	$	–
Variable surplus note	****	(1,054	)	****	1,054	****	****	–
As at December 31, 2020	Gross amounts of<br>financial instruments			Amounts subject to<br>an enforceable<br>netting arrangement			Net amounts of<br>financial instruments
---	---	---	---	---	---	---	---	---
Credit linked note^(1)^	$	932		$	(932	)	$	–
Variable surplus note		(932	)		932			–
^(1)^	As at December 31, 2021 and 2020, the Company had no fixed surplus notes outstanding, refer to note 18(g).<br>
---	---

(f) Risk concentrations

The Company defines enterprise-wide investment portfolio level targets and limits to ensure that portfolios are diversified across asset classes and individual investment risks. The Company monitors actual investment positions and risk exposures for concentration risk and reports its findings to the Executive Risk Committee and the Risk Committee of the Board of Directors.

As at December 31,	2021		2020
Debt securities and private placements rated as investment grade BBB or higher^(1)^	****	97%		97%
Government debt securities as a per cent of total debt securities	****	36%		37%
Government private placements as a per cent of total private placements	****	11%		11%
Highest exposure to a single non-government debt security and private<br>placement issuer	$	1,167	$	1,148
Largest single issuer as a per cent of the total equity portfolio	****	2%		2%
Income producing commercial office properties (2021 – 47% of real estate, 2020 – 53%)	$	6,244	$	6,745
Largest concentration of mortgages and real estate^(2)^ – Ontario, Canada (2021 – 28%, 2020 – 28%)	$	18,253	$	17,367
^(1)^	Investment grade debt securities and private placements include 39% rated A, 17% rated AA and 15% rated AAA (2020 –<br>40%, 16% and 16%) investments based on external ratings where available.
---	---
^(2)^	Mortgages and real estate investments are diversified geographically and by property type.
---	---

The following table presents debt securities and private placements portfolio by sector and industry.

	2021				2020
As at December 31,	Carrying value		% of total		Carrying value		% of total
Government and agency	$	84,244	****	32	$	85,357		33
Utilities	****	48,372	****	18		47,902		18
Financial	****	38,905	****	15		35,656		15
Consumer	****	32,671	****	12		29,684		11
Energy	****	19,637	****	7		20,963		8
Industrial	****	24,727	****	9		22,070		9
Other	****	18,425	****	7		17,850		6
Total	$	266,981	****	100	$	259,482		100

(g) Insurance risk

Insurance risk is the risk of loss due to actual experience for mortality and morbidity claims, policyholder behaviour and expenses emerging differently than assumed when a product was designed and priced. A variety of assumptions are made related to these experience factors, for reinsurance costs, and for sales levels when products are designed and priced, as well as in the determination of policy liabilities. Assumptions for future claims are generally based on both Company and industry experience, and assumptions for future policyholder behaviour and expenses are generally based on Company experience. Such assumptions require significant professional judgment, and actual experience may be materially different than the assumptions made by the Company. Claims may be impacted unexpectedly by changes in the prevalence of diseases or illnesses, medical and technology advances, widespread lifestyle changes, natural disasters, large-scale man-made disasters and acts of terrorism. Policyholder behaviour including premium payment patterns, policy renewals, lapse rates and withdrawal and surrender activity are influenced by many factors including market and general economic conditions, and the availability and relative attractiveness of other products in the marketplace. Some reinsurance rates are not guaranteed and may be changed unexpectedly. Adjustments the Company seeks to make to Non-Guaranteed elements to reflect changing experience factors may be challenged by regulatory or legal action and the Company may be unable to implement them or may face delays in implementation.

184   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

The Company manages insurance risk through global policies, standards and best practices with respect to product design, pricing, underwriting and claim adjudication, and a global underwriting manual. Each business unit establishes underwriting policies and procedures, including criteria for approval of risks and claims adjudication policies and procedures. The current global life retention limit is US$30 for individual policies (US$35 for survivorship life policies) and is shared across businesses. Lower limits are applied in some markets and jurisdictions. The Company aims to further reduce exposure to claims concentrations by applying geographical aggregate retention limits for certain covers. Enterprise-wide, the Company aims to reduce the likelihood of high aggregate claims by operating globally, insuring a wide range of unrelated risk events, and reinsuring some risk.

(h) Concentration risk

The geographic concentration of the Company’s insurance and investment contract liabilities, including embedded derivatives, is shown below. The disclosure is based on the countries in which the business is written.

As at December 31, 2021	Gross<br>liabilities		Reinsurance<br>assets			Net liabilities
U.S. and Canada	$	271,090	$	(42,806	)	$	228,284
Asia and Other	****	124,398	****	(1,773	)	****	122,625
Total	$	395,488	$	(44,579	)	$	350,909
As at December 31, 2020	Gross<br>liabilities		Reinsurance<br>assets			Net liabilities
U.S. and Canada	$	273,848	$	(44,645)		$	229,203
Asia and Other		114,878		(1,191	)		113,687
Total	$	388,726	$	(45,836	)	$	342,890

(i) Reinsurance risk

In the normal course of business, the Company limits the amount of loss on any one policy by reinsuring certain levels of risk with other insurers. In addition, the Company accepts reinsurance from other reinsurers. Reinsurance ceded does not discharge the Company’s liability as the primary insurer. Failure of reinsurers to honour their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. To minimize losses from reinsurer insolvency, the Company monitors the concentration of credit risk both geographically and with any one reinsurer. In addition, the Company selects reinsurers with high credit ratings.

As at December 31, 2021, the Company had $44,579 (2020 – $45,836) of reinsurance assets. Of this, 94 per cent (2020 – 94 per cent) were ceded to reinsurers with Standard and Poor’s ratings of A- or above. The Company’s exposure to credit risk was mitigated by $25,466 fair value of collateral held as security as at December 31, 2021 (2020 – $27,360). Net exposure after considering offsetting agreements and the benefit of the fair value of collateral held was $19,113 as at December 31, 2021 (2020 – $18,476).

Note 9     Long-Term Debt

(a) Carrying value of long-term debt instruments

As at December 31,	Issue date	Maturity date	Par value		2020
3.050% Senior notes^(1),(2)^	August 27, 2020	August 27, 2060	US  1,155	1,455	$	1,460
4.70% Senior notes^(1),(3)^	June 23, 2016	June 23, 2046	US  1,000	–		1,265
5.375% Senior notes^(1),(4)^	March 4, 2016	March 4, 2046	US     750	939		943
2.396% Senior notes^(1),(4)^	June 1, 2020	June 1, 2027	US     200	253		254
2.484% Senior notes^(1),(4)^	May 19, 2020	May 19, 2027	US     500	630		632
3.527% Senior notes^(1),(4)^	December 2, 2016	December 2, 2026	US     270	342		343
4.150% Senior<br>notes^(1),(4)^	March 4, 2016	March 4, 2026	US  1,000	1,263		1,267
Total				4,882	$	6,164

All values are in US Dollars.

^(1)^	These U.S. dollar senior notes have been designated as hedges of the Company’s net investment in its U.S. operations<br>which reduces the earnings volatility that would otherwise arise from the re-measurement of these senior notes into Canadian dollars.
^(2)^	MFC may redeem the notes in whole, but not in part, on August 27, 2025, and thereafter on every August 27 at a redemption<br>price equal to par, together with accrued and unpaid interest. Issue costs are amortized to the earliest par redemption date.
---	---
^(3)^	The Company redeemed in full the 4.70% Senior notes at par on, June 23, 2021, the earliest par redemption date.<br>
---	---
^(4)^	MFC may redeem the senior notes in whole or in part, at any time, at a redemption price equal to the greater of par and a<br>price based on the yield of a corresponding U.S. Treasury bond, from redemption date to the respective maturity date, plus a specified number of basis points. The specified number of basis points is as follows: 5.375% - 40 bps, 2.396% - 30 bps,<br>2.484% - 30 bps, 3.527% - 20 bps, and 4.150% - 35 bps. Issue costs are amortized over the term of the debt.
---	---

The cash amount of interest paid on long-term debt during the year ended December 31, 2021 was $210 (2020 – $229).

185

(b) Fair value measurement

Fair value of long-term debt instruments is determined using the following hierarchy:

Level 1 – Fair value is determined using quoted market prices where available.

Level 2 – When quoted market prices are not available, fair value is determined with reference to quoted prices of similar debt instruments or estimated using discounted cash flows based on observable market rates.

The Company measures long-term debt at amortized cost in the Consolidated Statements of Financial Position. As at December 31, 2021, the fair value of long-term debt was $5,439 (2020 – $7,042). Fair value of long-term debt was determined using Level 2 valuation techniques (2020 – Level 2).

(c) Aggregate maturities of long-term debt

As at December 31	Less than<br>1 year		1 to 3<br>years		3 to 5<br>years		Over 5<br>years		Total
2021	$	–	$	–	$	1,605	$	3,277	$	4,882
2020		–		–		–		6,164		6,164

Note 10     Capital Instruments

(a) Carrying value of capital instruments

As at December 31,	Issuance date		Earliest par<br>redemption date		Maturity date		Par value		2021		2020
JHFC Subordinated notes^(1),(2)^		December 14, 2006		n/a		December 15, 2036	$	650	$	647	$	647
2.818% MFC Subordinated debentures^(1),(3)^		May 12, 2020		May 13, 2030		May 13, 2035	$	1,000	****	995		995
4.061% MFC Subordinated notes^(1),(4),(5)^		February 24, 2017		February 24, 2027		February 24, 2032	US$	750	****	947		951
2.237% MFC Subordinated debentures^(1),(6)^		May 12, 2020		May 12, 2025		May 12, 2030	$	1,000	****	997		996
3.00% MFC Subordinated notes^(1),(7)^		November 21, 2017		November 21, 2024		November 21, 2029	S$	500	****	469		480
3.049% MFC Subordinated debentures^(1),(8)^		August 18, 2017		August 20, 2024		August 20, 2029	$	750	****	748		748
3.317% MFC Subordinated debentures^(1),(8)^		May 9, 2018		May 9, 2023		May 9, 2028	$	600	****	599		598
3.181% MLI Subordinated debentures^(1),(9)^		November 20, 2015		November 22, 2022		November 22, 2027	$	1,000	****	999		999
3.85% MFC Subordinated notes^(10)^		May 25, 2016		May 25, 2021		May 25, 2026	S$	500	****	–		481
2.389% MLI Subordinated debentures^(11)^		June 1, 2015		January 5, 2021		January 5, 2026	$	350	****	–		350
7.375% JHUSA Surplus notes^(12)^		February 25, 1994		n/a		February 15, 2024	US$	450	****	579		584
Total									$	6,980	$	7,829
^(1)^	The Company is monitoring regulatory and market developments globally with respect to the interest rate benchmark reform.<br>As these rates could potentially be discontinued in the future, the Company will take appropriate actions in due course to accomplish the necessary transitions or replacements. As at December 31, 2021, capital instruments of $647 have interest rate<br>referencing CDOR. In addition, capital instruments of $4,338, $947, and $469 have interest rate reset in the future referencing CDOR, the USD Mid-Swap rate, and the SGD swap rate, respectively.<br>
---	---
^(2)^	Issued by Manulife Holdings (Delaware) LLC (“MHDLL”), now John Hancock Financial Corporation (“JHFC”),<br>a wholly owned subsidiary of MFC, to Manulife Finance (Delaware) LLC (“MFLLC”), a subsidiary of Manulife Finance (Delaware) L.P. (“MFLP”). MFLP and its subsidiaries are wholly owned unconsolidated related parties of the Company.<br>The notes bear interest at a floating rate equal to the 90-day Bankers’ Acceptance rate plus 0.72%. With regulatory approval, JHFC may redeem the note, in whole or in part, at any time, at par, together<br>with accrued and unpaid interest. Refer to note 17.
---	---
^(3)^	Issued by MFC, interest is payable semi-annually. After May 13, 2030, the interest rate will reset to equal the 90-day Bankers’ Acceptance rate plus 1.82%. With regulatory approval, MFC may redeem the debentures, in whole, or in part, on or after May 13, 2025, at a redemption price together with accrued and unpaid<br>interest. If the redemption date is on or after May 13, 2025, but prior to May 13, 2030, the redemption price shall be the greater of: (i) the Canada yield price as defined in the prospectus; and (ii) par. If the redemption date<br>is on or after May 13, 2030, the redemption price shall be equal to par.
---	---
^(4)^	On the earliest par redemption date, the interest rate will reset to equal the<br>5-Year US Dollar Mid-Swap Rate plus 1.647%. With regulatory approval, MFC may redeem the debentures, in whole, but not in part, on the earliest par redemption date,<br>at a redemption price equal to par, together with accrued and unpaid interest.
---	---
^(5)^	Designated as a hedge of the Company’s net investment in its U.S. operations which reduces the earnings volatility<br>that would otherwise arise from the re-measurement of the subordinated notes into Canadian dollars.
---	---
^(6)^	Issued by MFC, interest is payable semi-annually. After May 12, 2025, the interest rate will reset to equal the 90-day Bankers’ Acceptance rate plus 1.49%. With regulatory approval, MFC may redeem the debentures, in whole, or in part, on or after May 12, 2025, at a redemption price equal to par, together with<br>accrued and unpaid interest.
---	---
^(7)^	On the earliest par redemption date, the interest rate will reset to equal the<br>5-Year Singapore Dollar Swap Rate plus 0.832%. With regulatory approval, MFC may redeem the debentures, in whole, but not in part, on the earliest par redemption date and thereafter on each interest payment<br>date, at a redemption price equal to par, together with accrued and unpaid interest.
---	---
^(8)^	Interest is fixed for the period up to the earliest par redemption date, thereafter, the interest rate will reset to a<br>floating rate equal to the 90-day Bankers’ Acceptance rate plus a specified number of basis points. The specified number of basis points is as follows: 3.049% – 105 bps, 3.317% – 78 bps. With<br>regulatory approval, MFC may redeem the debentures, in whole or in part, on or after the earliest par redemption date, at a redemption price equal to par, together with accrued and unpaid interest.
---	---
^(9)^	Interest is fixed for the period up to the earliest par redemption date, thereafter the interest rate will reset to a<br>floating rate equal to the 90-day Bankers’ Acceptance rate plus 1.57%. With regulatory approval, MLI may redeem the debentures, in whole or in part, on or after the earliest par redemption date, at a<br>redemption price equal to par, together with accrued and unpaid interest.
---	---
^(10)^	MFC redeemed in full the 3.85% subordinated notes at par, on May 25, 2021, the earliest par redemption date.<br>
---	---
^(11)^	MLI redeemed in full the 2.389% subordinated debentures at par, on January 5, 2021, the earliest par redemption date.<br>
---	---
^(12)^	Issued by John Hancock Mutual Life Insurance Company, now John Hancock Life Insurance Company (U.S.A.). Any payment of<br>interest or principal on the surplus notes requires prior approval from the Department of Insurance and Financial Services of the State of Michigan. The carrying value of the surplus notes reflects an unamortized fair value increment of US$9 (2020<br>– US$13), which arose as a result of the acquisition of John Hancock Financial Services, Inc. The amortization of the fair value adjustment is recorded in interest expense.
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186   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(b) Fair value measurement

Fair value of capital instruments is determined using the following hierarchy:

Level 1 – Fair value is determined using quoted market prices where available.

Level 2 – When quoted market prices are not available, fair value is determined with reference to quoted prices of similar debt instruments or estimated using discounted cash flows based on observable market rates.

The Company measures capital instruments at amortized cost in the Consolidated Statements of Financial Position. As at December 31, 2021, the fair value of capital instruments was $7,213 (2020 – $8,295). Fair value of capital instruments was determined using Level 2 valuation techniques (2020 – Level 2).

Note 11     Equity Capital and Earnings Per Share

The authorized capital of MFC consists of:

•	an unlimited number of common shares without nominal or par value; and
•	an unlimited number of Class A, Class B and Class 1 preferred shares without nominal or par value, issuable<br>in series.
---	---

(a) Preferred shares and other equity instruments

The following table presents information about the outstanding preferred shares and other equity instruments as at December 31, 2021 and 2020.

As at December 31, 2021	Issue date	Annual<br>dividend rate/<br><br><br>interest rate^(1)^		Earliest redemption<br>date^(2),(3)^	Number of<br>shares<br><br><br>(in millions)		Face<br><br><br>amount		Net amount^(4)^
						2021				2020
Preferred shares
Class A preferred shares
Series 2	February 18, 2005		4.65%	n/a		14	$	350	$	344	$	344
Series 3	January 3, 2006		4.50%	n/a		12		300	****	294		294
Class 1 preferred shares
Series 3^(5),(6),(7)^	March 11, 2011		2.348%	June 19, 2026		7		163	****	160		155
Series 4^(7),(8)^	June 20, 2016		floating	June 19, 2026		1		37	****	36		41
Series 5^(9)^	December 6, 2011		3.891%	December 19, 2021		8		200	****	–		195
Series 7^(5),(6),(10)^	February 22, 2012		4.312%	March 19, 2022		10		250	****	244		244
Series 9^(5),(6)^	May 24, 2012		4.351%	September 19, 2022		10		250	****	244		244
Series 11^(5),(6)^	December 4, 2012		4.731%	March 19, 2023		8		200	****	196		196
Series 13^(5),(6)^	June 21, 2013		4.414%	September 19, 2023		8		200	****	196		196
Series 15^(5),(6)^	February 25, 2014		3.786%	June 19, 2024		8		200	****	195		195
Series 17^(5),(6)^	August 15, 2014		3.80%	December 19, 2024		14		350	****	343		343
Series 19^(5),(6)^	December 3, 2014		3.675%	March 19, 2025		10		250	****	246		246
Series 21^(11)^	February 25, 2016		5.60%	June 19, 2021		17		425	****	–		417
Series 23^(5),(6),(10)^	November 22, 2016		4.85%	March 19, 2022		19		475	****	467		467
Series 25^(5),(6)^	February 20, 2018		4.70%	June 19, 2023		10		250	****	245		245
Other equity instruments
Limited recourse capital notes
Series 1^(12)^	February 19, 2021		3.375%	May 19, 2026		n/a		2,000	****	1,982		–
Series<br>2^(13)^	November 12, 2021		4.100%	February 19, 2027		n/a		1,200	****	1,189		–
Total						156	$	7,100	$	6,381	$	3,822
^(1)^	Holders of Class A and Class 1 preferred shares are entitled to receive<br>non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors. Non-deferrable interest is payable to LRCN – Series<br>1 holders semi-annually at the Company’s discretion.
---	---
^(2)^	Redemption of all preferred shares is subject to regulatory approval. MFC may redeem each series, in whole or in part, at<br>par, on the earliest redemption date or every five years thereafter, except for Class A Series 2, Class A Series 3 and Class 1 Series 4 preferred shares. Class A Series 2 and Series 3 preferred shares are past their respective<br>earliest redemption date and MFC may redeem these shares, in whole or in part, at par at any time, subject to regulatory approval, as noted. MFC may redeem the Class 1 Series 4, in whole or in part, at any time, at $25.00 per share if redeemed<br>on June 19, 2026 (the earliest redemption date) and on June 19 every five years thereafter, or at $25.50 per share if redeemed on any other date after June 19, 2021, subject to regulatory approval, as noted.
---	---
^(3)^	Redemption of all LRCN series is subject to regulatory approval. MFC may at its option redeem each series in whole or in<br>part, at a redemption price equal to par, together with accrued and unpaid interest. The redemption period for Series 1 is every five years during the period from May 19 and including June 19, commencing in 2026. The redemption period for<br>Series 2 is every five years during the period from February 19 and including March 19, commencing in 2027.
---	---
^(4)^	Net of after-tax issuance costs.
---	---
^(5)^	On the earliest redemption date and every five years thereafter, the annual dividend rate will be reset to the five-year<br>Government of Canada bond yield plus a yield specified for each series. The specified yield for Class 1 preferred shares is: Series 3 – 1.41%, Series 7 – 3.13%, Series 9 – 2.86%, Series 11 – 2.61%, Series 13 – 2.22%,<br>Series 15 – 2.16%, Series 17 – 2.36%, Series 19 – 2.30%, Series 23 – 3.83% and Series 25 – 2.55%.
---	---
^(6)^	On the earliest redemption date and every five years thereafter, Class 1 preferred shares are convertible at the<br>option of the holder into a new series that is one number higher than their existing series, and the holders are entitled to non-cumulative preferential cash dividends, payable quarterly if and when declared<br>by the Board of Directors, at a rate equal to the three-month Government of Canada Treasury bill yield plus the rate specified in footnote 5 above.
---	---
187
---
^(7)^	MFC did not exercise its right to redeem all or any of the outstanding Class 1 Shares Series 3 and Class 1<br>Shares Series 4 on June 19, 2021 (the earliest redemption date). After taking into account all election notices, 812,380 of 6,335,831 Class 1 Shares Series 3 were converted on a one-for-one basis, into Floating Rate Class 1 Shares Series 4 on June 19, 2021; and 1,014,452 of 1,664,169 Class 1 Shares Series 4 were converted on a one-for-one basis, into Class 1 Shares Series 3 on June 19, 2021. As a result, 6,537,903 Class 1 Shares Series 3 and 1,462,097 Class 1 Shares Series 4 remain outstanding. The annual fixed<br>dividend rate for the Class 1 Shares Series 3 was reset as specified in footnote 5 above to an annual fixed rate of 2.348% for a five-year period commencing on June 20, 2021.
---	---
^(8)^	The floating dividend rate for the Class 1 Shares Series 4 equals the three-month Government of Canada Treasury bill<br>yield plus 1.41%.
---	---
^(9)^	MFC redeemed in full the Class 1 Series 5 at par, on December 19, 2021, the earliest redemption date.<br>
---	---
^(10)^	Subsequent to December 31, 2021, the Company announced its intention to redeem the Class 1 Series 7 and Class 1<br>Series 23 at par, on March 19, 2022, the earliest par redemption date.
---	---
^(11)^	MFC redeemed in full the Class 1 Shares Series 21 at par, on June 19, 2021, the earliest redemption date.<br>
---	---
^(12)^	On February 19, 2021, MFC issued $2,000 million aggregate principal amount of Limited Recourse Capital Notes<br>– Series 1 (LRCN – Series 1), maturing on June 19, 2081. The LRCN – Series 1 bear interest at a fixed rate of 3.375% payable semi-annually, until June 18, 2026. On June 19, 2026 and every five years thereafter until<br>June 19, 2076, the interest rate on the LRCN – Series 1 will be reset at an interest rate equal to the five-year Government of Canada yield as defined in the prospectus, plus 2.839%. Non-deferrable<br>interest is payable semi-annually on the LRCN – Series 1 at the Company’s discretion. Non-payment of interest or principal when due will result in a recourse event, with the noteholders’ sole<br>remedy being receipt of their proportionate share of Class 1 Series 27 preferred shares held in a newly formed consolidated trust (the Limited Recourse Trust). All claims of the holders of LRCN – Series 1 against MFC will be extinguished<br>upon receipt of the corresponding trust assets. The Class 1 Series 27 preferred shares are eliminated on the Company’s Consolidated Statements of Financial Position while being held within the Limited Recourse Trust.
---	---
^(13)^	On November 12, 2021, MFC issued $1,200 million aggregate principal amount of Limited Recourse Capital Notes – Series<br>2 (LRCN – Series 2), maturing on March 19, 2082. The LRCN – Series 2 bear interest at a fixed rate of 4.10% payable semi-annually, until March 18, 2027. On March 19, 2027 and every five years thereafter until March 19, 2077, the interest<br>rate on the LRCN – Series 2 will be reset at an interest rate equal to the five-year Government of Canada yield as defined in the prospectus, plus 2.704%. Non-deferrable interest is payable semi-annually on the LRCN – Series 2 at the<br>Company’s discretion. Non-payment of interest or principal when due will result in a recourse event, with the noteholders’ sole remedy being receipt of their proportionate share of Class 1 Series 28 preferred shares held in a newly formed<br>consolidated trust (the Limited Recourse Trust). All claims of the holders of LRCN – Series 2 against MFC will be extinguished upon receipt of the corresponding trust assets. The Class 1 Series 28 preferred shares are eliminated on the<br>Company’s Consolidated Statements of Financial Position while being held within the Limited Recourse Trust.
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(b)Common shares

The following table presents changes in common shares issued and outstanding.

	2021				2020
For the years ended December 31,	Number of shares<br><br><br>(in millions)		Amount		Number of shares<br><br><br>(in millions)			Amount
Balance, January 1	****	1,940	$	23,042		1,949		$	23,127
Repurchased for cancellation	****	–	****	–		(10	)		(121	)
Issued on exercise of stock options and deferred share units	****	3	****	51		1			36
Total	****	1,943	$	23,093		1,940		$	23,042

Normal Course Issuer Bid

On March 13, 2020, the Office of the Superintendent of Financial Institutions (“OSFI”) announced measures to support the resilience of financial institutions. Consistent with these measures, OSFI set the expectation for all federally regulated financial institutions that dividend increases and share buybacks should be halted for the time being. On November 4, 2021, OSFI announced that this expectation is no longer in place.

The Company announced on February 1, 2022 the launch of a normal course issuer bid (“NCIB”) permitting the purchase for cancellation of up to 97 million common shares, representing approximately 5% of the Company’s issued and outstanding common shares. Purchases under the NCIB may commence through the Toronto Stock Exchange on February 3, 2022 and continue until February 2, 2023, when the NCIB expires, or such earlier date as the Company completes its purchases.

(c) Earnings per share

The following table presents basic and diluted earnings per common share of the Company.

For the years ended December 31,	2021		2020
Basic earnings per common share	$	3.55	$	2.94
Diluted earnings per common share	****	3.54		2.93

The following is a reconciliation of the number of shares in the calculation of basic and diluted earnings per share.

For the years ended December 31,	2021		2020
Weighted average number of common shares (in millions)	****	1,942		1,941
Dilutive stock-based awards^(1)^ (in millions)	****	4		2
Weighted average number of diluted common shares(in millions)	****	1,946		1,943
^(1)^	The dilutive effect of stock-based awards was calculated using the treasury stock method. This method calculates the<br>number of incremental shares by assuming the outstanding stock-based awards are (i) exercised and (ii) then reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the average market price of MFC common<br>shares for the year. Excluded from the calculation was a weighted average of nil (2020 – 18 million) anti-dilutive stock-based awards.
---	---

188   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(d) Quarterly dividend declaration subsequent to year end

On February 9, 2022, the Company’s Board of Directors approved a quarterly dividend of $0.33 per share on the common shares of MFC, payable on or after March 21, 2022 to shareholders of record at the close of business on February 23, 2022.

The Board also declared dividends on the following non-cumulative preferred shares, payable on or after March 19, 2022 to shareholders of record at the close of business on February 23, 2022.

Class A Shares Series 2 – 0.29063 per share
Class A Shares Series 3 – 0.28125 per share
Class 1 Shares Series 3 – 0.14675 per share
Class 1 Shares Series 4 – 0.096965 per share
Class 1 Shares Series 7 – 0.2695 per share
Class 1 Shares Series 9 – 0.271938 per share
Class 1 Shares Series 11 – 0.295688 per share

All values are in US Dollars.

Note 12     Capital Management

(a) Capital management

The Company monitors and manages its consolidated capital in compliance with the Life Insurance Capital Adequacy Test (“LICAT”) guideline, the capital framework issued by the Office of the Superintendent of Financial Institutions (“OSFI”). Under the capital framework, the Company’s consolidated capital resources, including available capital, surplus allowance, and eligible deposits, are measured against the base solvency buffer, which is the risk-based capital requirement determined in accordance with the guideline.

The Company’s operating activities are primarily conducted within MLI and its subsidiaries. MLI is also regulated by OSFI and is therefore subject to consolidated risk-based capital requirements using the OSFI LICAT framework.

The Company seeks to manage its capital with the objectives of:

•	Operating with sufficient capital to be able to honour all commitments to its policyholders and creditors with a high degree<br>of confidence;
•	Retaining the ongoing confidence of regulators, policyholders, rating agencies, investors and other creditors in order to<br>ensure access to capital markets; and
---	---
•	Optimizing return on capital to meet shareholders’ expectations subject to constraints and considerations of adequate<br>levels of capital established to meet the first two objectives.
---	---

Capital is managed and monitored in accordance with the Capital Management Policy. The policy is reviewed and approved by the Board of Directors annually and is integrated with the Company’s risk and financial management frameworks. It establishes guidelines regarding the quantity and quality of capital, internal capital mobility, and proactive management of ongoing and future capital requirements.

The capital management framework considers the requirements of the Company as a whole as well as the needs of each of the Company’s subsidiaries. Internal capital targets are set above the regulatory requirements, and consider a number of factors, including expectations of regulators and rating agencies, results of sensitivity and stress testing and the Company’s own risk assessments. The Company monitors against these internal targets and initiates actions appropriate to achieving its business objectives.

Consolidated capital, based on accounting standards, is presented in the table below for MFC. For regulatory reporting purposes under the LICAT framework, the numbers are further adjusted for various additions or deductions to capital as mandated by the guidelines used by OSFI.

Consolidated capital

As at December 31,	2021			2020
Total equity	$	58,869	****	$	53,006
Exclude AOCI gain/(loss) on cash flow hedges	****	(156	)		(229	)
Total equity excluding AOCI on cash flow hedges	****	59,025	****		53,235
Qualifying capital instruments	****	6,980	****		7,829
Consolidated capital	$	66,005	****	$	61,064

(b) Restrictions on dividends and capital distributions

Dividends and capital distributions are restricted under the Insurance Companies Act (“ICA”). These restrictions apply to both MFC and its primary operating subsidiary MLI. The ICA prohibits the declaration or payment of any dividend on shares of an insurance company if there are reasonable grounds for believing a company does not have adequate capital and adequate and appropriate forms of liquidity or the declaration or the payment of the dividend would cause the company to be in contravention of any regulation made under the ICA respecting the maintenance of adequate capital and adequate and appropriate forms of liquidity, or of any direction made to the company by OSFI. The ICA also requires an insurance company to notify OSFI of the declaration of a dividend at least 15 days prior to the date fixed for its payment. Similarly, the ICA prohibits the purchase for cancellation of any shares issued by an insurance company or the redemption of any redeemable shares or other similar capital transactions, if there are reasonable grounds for believing that the company does not

189

have adequate capital and adequate and appropriate forms of liquidity or the payment would cause the company to be in contravention of any regulation made under the ICA respecting the maintenance of adequate capital and adequate and appropriate forms of liquidity, or any direction made to the company by OSFI. These latter transactions would require the prior approval of OSFI.

The ICA requires Canadian insurance companies to maintain adequate levels of capital at all times.

Since MFC is a holding company that conducts all of its operations through regulated insurance subsidiaries (or companies owned directly or indirectly by these subsidiaries), its ability to pay future dividends will depend on the receipt of sufficient funds from its regulated insurance subsidiaries. These subsidiaries are also subject to certain regulatory restrictions under laws in Canada, the United States and certain other countries that may limit their ability to pay dividends or make other upstream distributions.

Note 13    Revenue from Service Contracts

The Company provides investment management services, administrative services, distribution and related services to proprietary and third-party investment funds, retirement plans, group benefit plans and other arrangements. The Company also provides real estate management services to tenants of the Company’s investment properties.

The Company’s service contracts generally impose single performance obligations, each consisting of a series of similar related services for each customer.

The Company’s performance obligations within service arrangements are generally satisfied over time as the customer simultaneously receives and consumes the benefits of the services rendered, measured using an output method. Fees typically include variable consideration and the related revenue is recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved.

Asset based fees vary with asset values of accounts under management, subject to market conditions and investor behaviours beyond the Company’s control. Transaction processing and administrative fees vary with activity volume, also beyond the Company’s control. Some fees, including distribution fees, are based on account balances and transaction volumes. Fees related to account balances and transaction volumes are measured daily. Real estate management service fees include fixed portions plus recovery of variable costs of services rendered to tenants. Fees related to services provided are generally recognized as services are rendered, which is when it becomes highly probable that no significant reversal of cumulative revenue recognized will occur. The Company has determined that its service contracts have no significant financing components as fees are collected monthly. The Company has no significant contract assets or contract liabilities.

The following tables present revenue from service contracts by service lines and reporting segments as disclosed in note 19.

For the year ended December 31, 2021	Asia		Canada			U.S.		Global<br>WAM			Corporate<br>and Other			Total
Investment management and other related fees	$	217	$	230	****	$	499	$	3,198	****	$	(247	)	$	3,897
Transaction processing, administration, and service fees	****	287	****	918	****	****	12	****	2,517	****	****	(11	)	****	3,723
Distribution fees and other	****	251	****	20	****	****	65	****	799	****	****	(54	)	****	1,081
Total included in other revenue	****	755	****	1,168	****	****	576	****	6,514	****	****	(312	)	****	8,701
Revenue from non-servicelines	****	941	****	168	****	****	1,248	****	(1	)	****	75	****	****	2,431
Total other revenue	$	1,696	$	1,336	****	$	1,824	$	6,513	****	$	(237	)	$	11,132
Real estate management services included in net investmentincome	$	37	$	126	****	$	128	$	–	****	$	7	****	$	298
For the year ended December 31, 2020	Asia		Canada			U.S.		Global<br>WAM			Corporate<br>and Other			Total
Investment management and other related fees	$	223	$	202		$	514	$	2,770		$	(201)		$	3,508
Transaction processing, administration, and service fees		239		814			15		2,215			2			3,285
Distribution fees and other		187		16			67		718			(52	)		936
Total included in other revenue		649		1,032			596		5,703			(251	)		7,729
Revenue from non-servicelines		697		(19	)		2,115		7			62			2,862
Total other revenue	$	1,346	$	1,013		$	2,711	$	5,710		$	(189	)	$	10,591
Real estate management services included in net investmentincome	$	37	$	144		$	143	$	–		$	8		$	332

Note 14     Stock-Based Compensation

(a) Stock options

The Company grants stock options under its Executive Stock Option Plan (“ESOP”) to selected individuals. The options provide the holder the right to purchase MFC common shares at an exercise price equal to the higher of the prior day, prior five-day or prior ten-day average closing market price of the shares on the Toronto Stock Exchange on the date the options are granted. The options vest over a period not exceeding four years and expire not more than 10 years from the grant date. Effective with the 2015 grant, options may only be exercised after the fifth-year anniversary. A total of 73,600,000 common shares have been reserved for issuance under the ESOP.

190   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Options outstanding

	2021					2020
For the years ended December 31,	Number of<br>options<br><br><br>(in millions)			Weighted<br>average<br>exercise price		Number of<br>options<br><br><br>(in millions)			Weighted<br>average<br>exercise price
Outstanding, January 1	****	24	****	$	21.74		21		$	20.91
Granted	****	–	****	****	–		5			24.38
Exercised	****	(3	)	****	18.34		(2	)		18.17
Expired	****	–	****	****	24.73		–			24.27
Forfeited	****	–	****	****	23.96		–			23.73
Outstanding, December 31	****	21	****	$	22.09		24		$	21.74
Exercisable, December 31	****	8	****	$	18.94		6		$	19.52
						Options exercisable
---	---	---	---	---	---	---	---	---	---	---	---
For the year ended December 31, 2021		Weighted<br><br><br>average<br>exercise price		Weighted average<br>remaining<br>contractual life<br>(in years)		Number of<br>options<br><br><br>(in millions)		Weighted<br>average<br>exercise price		Weighted average<br>remaining<br>contractual life<br>(in years)
12.64—20.99	5	$	16.90	****	3.38	****	5	$	16.90	****	3.38
21.00—24.83	16	$	23.58	****	6.09	****	3	$	21.86	****	2.95
Total	21	$	22.09	****	5.49	****	8	$	18.94	****	3.20

All values are in US Dollars.

No stock options were granted in 2021. The weighted average fair value of each option granted in 2020 was estimated at $3.66 using the Black-Scholes option-pricing model. The pricing model used the following assumptions for the options granted in 2020: risk-free interest rate of 1.50%, dividend yield of 3.50%, expected volatility of 23.0% and expected life of 8 years. Expected volatility is estimated by evaluating a number of factors including historical volatility of the share price over multi-year periods.

Compensation expense related to stock options was $9 for the year ended December 31, 2021 (2020 – $14).

(b) Deferred share units

In 2000, the Company granted deferred share units (“DSUs”) on a one-time basis to certain employees under the ESOP. These DSUs vest over a three-year period and each DSU entitles the holder to receive one common share on retirement or termination of employment. When dividends are paid on common shares, holders of DSUs are deemed to receive dividends at the same rate, payable in the form of additional DSUs. The number of these DSUs outstanding was 188,000 as at December 31, 2021 (2020 – 285,000).

In addition, for certain employees and pursuant to the Company’s deferred compensation program, the Company grants DSUs under the Restricted Share Units (“RSUs”) Plan which entitle the holder to receive payment in cash equal to the value of the same number of common shares plus credited dividends on retirement or termination of employment. In 2021, the Company granted 34,000 DSUs to certain employees which vest after 36 months (2020 – 28,000). In 2021, 26,000 DSUs (2020 – 38,000) were granted to certain employees who elected to defer receipt of all or part of their annual bonus. These DSUs vested immediately. Also, in 2021, no DSUs (2020 – 2,600) were granted to certain employees to defer payment of all or part of their RSUs and/or Performance Share Units (“PSUs”). These DSUs vest immediately.

Under the Stock Plan for Non-Employee Directors, each eligible director may elect to receive his or her annual director’s retainer and fees in DSUs (which vest immediately) or common shares in lieu of cash. In 2021, 101,000 DSUs (2020 – 145,400) were issued under this arrangement. Upon termination of the Board service, an eligible director who has elected to receive DSUs will be entitled to receive cash equal to the value of the DSUs accumulated in his or her account, or at his or her direction, an equivalent number of common shares. The Company is allowed to issue up to one million common shares under this plan after which awards may be settled using shares purchased in the open market.

The fair value of 161,000 DSUs issued during the year was $24.11 per unit as at December 31, 2021 (2020 – 214,000 at $22.65 per unit).

For the years ended December 31,<br><br><br>Number of DSUs (in thousands)	2021			2020
Outstanding, January 1	****	2,169	****		2,395
Issued	****	161	****		214
Reinvested	****	100	****		145
Redeemed	****	(345	)		(576	)
Forfeitures and cancellations	****	(6	)		(9	)
Outstanding, December 31	****	2,079	****		2,169

Of the DSUs outstanding as at December 31, 2021, 188,000 (2020 – 285,000) entitle the holder to receive common shares, 840,000 (2020 – 811,000) entitle the holder to receive payment in cash and 1,051,000 (2020 – 1,073,000) entitle the holder to receive payment in cash or common shares, at the option of the holder.

Compensation expense related to DSUs was $6 for the year ended December 31, 2021 (2020 – $5).

The carrying and fair value of the DSUs liability as at December 31, 2021 was $46 (2020 – $43) and was included in other liabilities.

191

(c) Restricted share units and performance share units

For the year ended December 31, 2021, 6.8 million RSUs (2020 – 6.7 million) and 1.5 million PSUs (2020 – 1.1 million) were granted to certain eligible employees under MFC’s Restricted Share Unit Plan. The fair value of the RSUs and PSUs granted during the year was $24.11 per unit as at December 31, 2021 (2020 – $22.65 per unit). Each RSU and PSU entitles the holder to receive payment equal to the market value of one common share, plus credited dividends, at the time of vesting, subject to any performance conditions.

RSUs and PSUs granted in February 2021 will vest after 36 months from their grant date and the related compensation expense is recognized over this period, unless the employee is eligible to retire at the time of grant or will be eligible to retire during the vesting period, in which case the cost is recognized at the grant date or over the period between the grant date and the date on which the employee is eligible to retire, respectively. Compensation expense related to RSUs and PSUs was $135 and $31, respectively, for the year ended December 31, 2021 (2020 – $140 and $15, respectively).

The carrying and fair value of the RSUs and PSUs liability as at December 31, 2021 was $362 (2020 – $194) and was included in other liabilities.

(d) Global share ownership plan

The Company’s Global Share Ownership Plan allows qualifying employees to apply up to five per cent of their annual base earnings toward the purchase of common shares. The Company matches a percentage of the employee’s eligible contributions up to a maximum amount. The Company’s contributions vest immediately. All contributions are used to purchase common shares in the open market on behalf of participating employees.

Note 15     Employee Future Benefits

The Company maintains defined contribution and defined benefit pension plans and other post-employment plans for employees and agents including registered (tax-qualified) pension plans that are typically funded, as well as supplemental non-registered (non-qualified) pension plans for executives, retiree welfare plans and disability welfare plans that are typically not funded.

(a) Plan characteristics

The Company’s final average pay defined benefit pension plans and retiree welfare plans are closed to new members. All employees may participate in capital accumulation plans including defined benefit cash balance plans, 401(k) plans and/or defined contribution plans, depending on the country of employment.

All pension arrangements are governed by local pension committees or management, but significant plan changes require approval from the Company’s Board of Directors.

The Company’s funding policy for defined benefit pension plans is to make the minimum annual contributions required by regulations in the countries in which the plans are offered. Assumptions and methods prescribed for regulatory funding purposes typically differ from those used for accounting purposes.

The Company’s remaining defined benefit pension and/or retiree welfare plans are in the U.S., Canada, Japan and Taiwan (China). There are also disability welfare plans in the U.S. and Canada.

The largest defined benefit pension and retiree welfare plans are the primary plans for employees in the U.S. and Canada. These are the material plans that are discussed in the balance of this note. The Company measures its defined benefit obligations and fair value of plan assets for accounting purposes as at December 31 each year.

U.S. defined benefit pension and retiree welfare plans

The Company operates a qualified cash balance plan that is open to new members, a closed non-qualified cash balance plan, and a closed retiree welfare plan.

Actuarial valuations to determine the Company’s minimum funding contributions for the qualified cash balance plan are required annually. Deficits revealed in the funding valuations must generally be funded over a period of up to seven years. It is expected that there will be no required funding for this plan in 2022. There are no plan assets set aside for the non-qualified cash balance plan.

The retiree welfare plan subsidizes the cost of life insurance and medical benefits. The majority of those who retired after 1991 receive a fixed-dollar subsidy from the Company based on service. The plan was closed to all employees hired after 2004. While assets have been set aside in a qualified trust to pay future retiree welfare benefits, this funding is optional. Retiree welfare benefits offered under the plan coordinate with the U.S. Medicare program to make optimal use of available federal financial support.

The qualified pension and retiree welfare plans are governed by the U.S. Benefits Committee, while the non-qualified pension plan is governed by the U.S. Non-Qualified Plans Subcommittee.

Canadian defined benefit pension and retiree welfare plans

The Company’s defined benefit plans in Canada include two registered final average pay pension plans, a non-registered supplemental final average pay pension plan and a retiree welfare plan, all of which have been closed to new members.

192   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Actuarial valuations to determine the Company’s minimum funding contributions for the registered pension plans are required at least once every three years. Deficits revealed in the funding valuation must generally be funded over a period of ten years. For 2022, the required funding for these plans is expected to be $7. The non-registered supplemental pension plan is not funded.

The retiree welfare plan subsidizes the cost of life insurance, medical and dental benefits. These subsidies are a fixed-dollar amount for those who retired after April 30, 2013 and have been eliminated for those who retire after 2019. There are no assets set aside for this plan.

The registered pension plans are governed by Pension Committees, while the supplemental non-registered plan is governed by the Board of Directors. The retiree welfare plan is governed by management.

(b) Risks

In final average pay pension plans and retiree welfare plans, the Company generally bears the material risks which include interest rate, investment, longevity and health care cost inflation risks. In defined contribution plans, these risks are typically borne by the employee. In cash balance plans, the interest rate, investment and longevity risks are partially transferred to the employee.

Material sources of risk to the Company for all plans include:

•	A decline in discount rates that increases the defined benefit obligations by more than the change in value of plan assets;<br>
•	Lower than expected rates of mortality; and
---	---
•	For retiree welfare plans, higher than expected health care costs.
---	---

The Company has managed these risks through plan design and eligibility changes that have limited the size and growth of the defined benefit obligations. Investment risks for funded plans are managed by investing significantly in asset classes which are highly correlated with the plans’ liabilities.

In the U.S., delegated committee representatives and management review the financial status of the qualified defined benefit pension plan at least monthly, and steps are taken in accordance with an established dynamic investment policy to increase the plan’s allocation to asset classes which are highly correlated with the plan’s liabilities and reduce investment risk as the funded status improves. As at December 31, 2021, the target asset allocation for the plan was 30% return-seeking assets and 70% liability-hedging assets.

In Canada, internal committees and management review the financial status of the registered defined benefit pension plans on at least a quarterly basis. As at December 31, 2021, the target asset allocation for the plans was 20% return-seeking assets and 80% liability-hedging assets.

The Company’s long-term assumptions (e.g. mortality, inflation) have not been adjusted for the potential long-term impacts of COVID-19 as it is too soon to estimate them. Experience related to COVID-19 will continue to be closely monitored, as well as emerging research on the long-term implications of COVID-19 on mortality, inflation and other assumptions.

(c) Pension and retiree welfare plans

	Pension plans						Retiree welfare plans
For the years ended December 31,	2021			2020			2021			2020
Changes in defined benefit obligation:
Opening balance	$	4,901	****	$	4,817		$	638	****	$	645
Current service cost	****	44	****		41		****	–	****		–
Interest cost	****	115	****		150		****	15	****		20
Plan participants’ contributions	****	–	****		–		****	3	****		3
Actuarial losses (gains) due to:
Experience	****	3	****		2		****	–	****		(14	)
Demographic assumption changes	****	7	****		(67	)	****	1	****		(12	)
Economic assumption changes	****	(194	)		333		****	(29	)		49
Benefits paid	****	(303	)		(318	)	****	(42	)		(45	)
Impact of changes in foreign exchange rates	****	(13	)		(57	)	****	(2	)		(8	)
Defined benefit obligation,December 31	$	4,560	****	$	4,901		$	584	****	$	638
	Pension plans						Retiree welfare plans
For the years ended December 31,	2021			2020			2021			2020
Change in plan assets:
Fair value of plan assets, opening balance	$	4,595	****	$	4,453		$	606	****	$	598
Interest income	****	109	****		140		****	14	****		19
Return on plan assets (excluding interest income)	****	70	****		310		****	(1	)		33
Employer contributions	****	61	****		71		****	11	****		11
Plan participants’ contributions	****	–	****		–		****	3	****		3
Benefits paid	****	(303	)		(318	)	****	(42	)		(45	)
Administration costs	****	(9	)		(7	)	****	(2	)		(2	)
Impact of changes in foreign exchange rates	****	(13	)		(54	)	****	(2	)		(11	)
Fair value of plan assets,December 31	$	4,510	****	$	4,595		$	587	****	$	606
193
---

(d) Amounts recognized in the Consolidated Statements of Financial Position

	Pension plans						Retiree welfare plans
As at December 31,	2021			2020			2021			2020
Development of net defined benefit liability
Defined benefit obligation	$	4,560	****	$	4,901		$	584	****	$	638
Fair value of plan assets	****	4,510	****		4,595		****	587	****		606
Deficit (surplus)	****	50	****		306		****	(3	)		32
Effect of asset<br>limit^(1)^	****	37	****		–		****	–	****		–
Deficit (surplus) and net defined benefit liability(asset)	****	87	****		306		****	(3	)		32
Deficit is comprised of:
Funded or partially funded plans	****	(600	)		(446	)	****	(154	)		(134	)
Unfunded plans	****	687	****		752		****	151	****		166
Deficit (surplus) and net defined benefitliability (asset)	$	87	****	$	306		$	(3	)	$	32
^(1)^	In 2021, the Company recognized an impairment of $37 on the net defined benefit asset for one of its registered pension<br>plans in Canada. This was due to strong investment returns causing the surplus in that plan to increase above the present value of economic benefits that can be derived by the Company through reductions in future contributions. For the other funded<br>pension plans, the present value of the economic benefits available in the form of reductions in future contributions to the plans remains greater than the current surplus.
---	---

(e) Disaggregation of defined benefit obligation

	U.S. plans								Canadian plans
	Pension plans				Retiree welfare plans				Pension plans				Retiree welfare plans
As at December 31,	2021		2020		2021		2020		2021		2020		2021		2020
Active members	$	537	$	551	$	17	$	27	$	184	$	211	$	–	$	–
Inactive and retired members	****	2,371		2,528	****	416		445	****	1,468		1,611	****	151		166
Total	$	2,908	$	3,079	$	433	$	472	$	1,652	$	1,822	$	151	$	166

(f) Fair value measurements

The major categories of plan assets and the allocation to each category are as follows.

	U.S. plans^(1)^								Canadian plans^(2)^
	Pension plans				Retiree welfare plans				Pension plans				Retiree welfare plans
As at December 31, 2021	Fair value		% of total		Fair value		% of total		Fair value		% of total		Fair value		% of total
Cash and cash equivalents	$	90	****	3%	$	21	****	4%	$	14	****	1%	$	–	****	–
Public equity securities^(3)^	****	600	****	20%	****	57	****	10%	****	322	****	22%	****	–	****	–
Public debt securities	****	1,863	****	61%	****	501	****	85%	****	1,144	****	77%	****	–	****	–
Other<br>investments^(4)^	****	475	****	16%	****	8	****	1%	****	2	****	0%	****	–	****	–
Total	$	3,028	****	100%	$	587	****	100%	$	1,482	****	100%	$	–	****	–
	U.S. plans^(1)^								Canadian plans^(2)^
	Pension plans				Retiree welfare plans				Pension plans				Retiree welfare plans
As at December 31, 2020	Fair value		% of total		Fair value		% of total		Fair value		% of total		Fair value		% of total
Cash and cash equivalents	$	83		3%	$	30		5%	$	10		1%	$	–		–
Public equity securities^(3)^		593		19%		49		8%		339		22%		–		–
Public debt securities		2,009		66%		520		86%		1,186		77%		–		–
Other<br>investments^(4)^		373		12%		7		1%		2		0%		–		–
Total	$	3,058		100%	$	606		100%	$	1,537		100%	$	–		–
^(1)^	All the U.S. pension and retiree welfare plan assets have daily quoted prices in active markets, except for the private<br>debt, infrastructure, private equity, timber and agriculture assets. In the aggregate, the latter assets represent approximately 7% of all U.S. pension and retiree welfare plan assets as at December 31, 2021 (2020 – 9%).<br>
---	---
^(2)^	All the Canadian pension plan assets have daily quoted prices in active markets, except for the group annuity contract<br>assets that represent approximately 0.1% of all Canadian pension plan assets as at December 31, 2021 (2020 – 0.1%).
---	---
^(3)^	Equity securities include direct investments in MFC common shares of $1.2 (2020 – $1.1) in the U.S. retiree welfare<br>plan and $nil (2020 – $nil) in Canada.
---	---
^(4)^	Other U.S. plan assets include investment in REITs, private debt, infrastructure, private equity, timberland and<br>agriculture, and managed futures. Other Canadian pension plan assets include investment in the group annuity contract.
---	---

194   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(g) Net benefit cost recognized in the Consolidated Statements of Income

Components of the net benefit cost for the pension plans and retiree welfare plans were as follows.

	Pension plans				Retiree welfare plans
For the years ended December 31,	2021		2020		2021		2020
Defined benefit current service cost	$	44	$	41	$	–	$	–
Defined benefit administrative expenses	****	9		7	****	2		2
Service cost	****	53		48	****	2		2
Interest on net defined benefit (asset) liability	****	6		10	****	1		1
Defined benefit cost	****	59		58	****	3		3
Defined contribution cost	****	90		84	****	–		–
Net benefit cost	$	149	$	142	$	3	$	3

(h) Re-measurement effects recognized in Other Comprehensive Income

	Pension plans						Retiree welfare plans
For the years ended December 31,	2021			2020			2021			2020
Actuarial gains (losses) on defined benefit obligations due to:
Experience	$	(3	)	$	(2	)	$	–	****	$	14
Demographic assumption changes	****	(7	)		67		****	(1	)		12
Economic assumption changes	****	194	****		(333	)	****	29	****		(49	)
Return on plan assets (excluding interest income)	****	70	****		310		****	(1	)		33
Change in effect of asset limit	****	(37	)		5		****	–	****		–
Totalre-measurement effects	$	217	****	$	47		$	27	****	$	10

(i) Assumptions

The key assumptions used by the Company to determine the defined benefit obligation and net benefit cost for the defined benefit pension plans and retiree welfare plans were as follows.

	U.S. Plans								Canadian Plans
	Pension plans				Retiree welfare plans				Pension plans				Retiree welfare plans
For the years ended December 31,	2021		2020		2021		2020		2021		2020		2021		2020
To determine the defined benefit obligation at end ofyear^(1)^:
Discount rate	****	2.7%		2.4%	****	2.7%		2.4%	****	3.1%		2.5%	****	3.2%		2.6%
Initial health care cost trend rate^(2)^	****	n/a		n/a	****	7.0%		7.3%	****	n/a		n/a	****	5.4%		5.5%
To determine the defined benefit cost for theyear^(1)^:
Discount rate	****	2.4%		3.2%	****	2.4%		3.2%	****	2.5%		3.1%	****	2.6%		3.1%
Initial health care cost trend rate^(2)^	****	n/a		n/a	****	7.3%		7.5%	****	n/a		n/a	****	5.5%		5.6%
^(1)^	Inflation and salary increase assumptions are not shown as they do not materially affect obligations and cost.<br>
---	---
^(2)^	The health care cost trend rate used to measure the U.S. based retiree welfare obligation was 7.0% grading to 4.5% for<br>2032 and years thereafter (2020 – 7.3% grading to 4.5% for 2032) and to measure the net benefit cost was 7.3% grading to 4.5% for 2032 and years thereafter (2020 – 7.5% grading to 4.5% for 2032). In Canada, the rate used to measure the<br>retiree welfare obligation was 5.4% grading to 4.8% for 2026 and years thereafter (2020 – 5.5% grading to 4.8% for 2026) and to measure the net benefit cost was 5.5% grading to 4.8% for 2026 and years thereafter (2020 – 5.6% grading to<br>4.8% for 2026).
---	---

Assumptions regarding future mortality are based on published statistics and mortality tables. The current life expectancies underlying the values of the obligations in the defined benefit pension and retiree welfare plans are as follows.

As at December 31, 2021	U.S.		Canada
Life expectancy (in years) for those currently age 65
Males	****	22.0	****	23.8
Females	****	23.6	****	25.7
Life expectancy (in years) at age 65 for those currently age 45
Males	****	23.4	****	24.8
Females	****	24.9	****	26.6
195
---

(j) Sensitivity of assumptions on obligations

Assumptions used can have a significant effect on the obligations reported for defined benefit pension and retiree welfare plans. The potential impact on the obligations arising from changes in the key assumptions is set out in the following table. The sensitivities assume all other assumptions are held constant. In actuality, inter-relationships with other assumptions may exist.

As at December 31, 2021	Pension plans			Retiree welfare plans
Discount rate:
Impact of a 1% increase	$	(417	)	$	(58	)
Impact of a 1% decrease	****	492	****	****	70	****
Health care cost trend rate:
Impact of a 1% increase	****	n/a	****	****	17	****
Impact of a 1% decrease	****	n/a	****	****	(15	)
Mortality rates^(1)^
Impact of a 10% decrease	****	130	****	****	15	****
^(1)^	If the actuarial estimates of mortality are adjusted in the future to reflect unexpected decreases in mortality, the<br>effect of a 10% decrease in mortality rates at each future age would be an increase in life expectancy at age 65 of 0.8 years for U.S. and Canadian males and females, respectively.
---	---

(k) Maturity profile

The weighted average duration (in years) of the defined benefit obligations is as follows.

	Pension plans				Retiree welfare plans
As at December 31,	2021		2020		2021		2020
U.S. plans	****	9.7		9.9	****	9.5		9.8
Canadian plans	****	12.4		12.5	****	13.3		14.3

(l) Cash flows – contributions

Total cash payments for all employee future benefits, comprised of cash contributed by the Company to funded defined benefit pension and retiree welfare plans, cash payments directly to beneficiaries in respect of unfunded pension and retiree welfare plans, and cash contributed to defined contribution pension plans, are as follows.

	Pension plans				Retiree welfare plans
For the years ended December 31,	2021		2020		2021		2020
Defined benefit plans	$	61	$	71	$	11	$	11
Defined contribution plans	****	90		84	****	–		–
Total	$	151	$	155	$	11	$	11

The Company’s best estimate of expected cash payments for employee future benefits for the year ending December 31, 2022 is $70 for defined benefit pension plans, $93 for defined contribution pension plans and $13 for retiree welfare plans.

Note 16    Income Taxes

(a) Income tax expense

The following table presents income tax expense (recovery) recognized in the Consolidated Statements of Income.

For the years ended December 31,	2021			2020
Current tax
Current year	$	1,389	****	$	998
Adjustments related to prior years	****	(49	)		(83	)
Total current tax	****	1,340	****		915
Deferred tax
Change related to temporary differences	****	(108	)		253
Effects of changes in tax rates	****	(19	)		27
Total deferred tax	****	(127	)		280
Income tax expense	$	1,213	****	$	1,195

196   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

The following table discloses income tax expense (recovery) recognized directly in equity.

For the years ended December 31,	2021			2020
Recognized in other comprehensive income
Current income tax expense (recovery)	$	(3	)	$	(92	)
Deferred income tax expense (recovery)	****	(61	)		87
Total recognized in other comprehensiveincome	$	(64	)	$	(5	)
Recognized in equity, other than other comprehensive income
Current income tax expense (recovery)	$	5	****	$	25
Deferred income tax expense (recovery)	****	(15	)		(25	)
Total income tax recognized directly inequity	$	(10	)	$	–

(b) Current tax receivable and payable

As at December 31, 2021, the Company had approximately $660 and $357 of current tax receivable and current tax payable, respectively (2020 – $993 and $87).

(c) Tax reconciliation

The effective income tax rate reflected in the Consolidated Statements of Income varies from the Canadian tax rate of 26.50 per cent for the year ended December 31, 2021 (2020 – 26.50 per cent) for the items outlined in the following table.

For the years ended December 31,	2021			2020
Income before income taxes	$	8,125	****	$	6,770
Income tax expense at Canadian statutory tax rate	$	2,153	****	$	1,794
Increase (decrease) in income taxes due to:
Tax-exempt investment income	****	(261	)		(171	)
Differences in tax rate on income not subject to tax in Canada	****	(917	)		(528	)
Adjustments to taxes related to prior years	****	(47	)		(96	)
Tax losses and temporary differences not recognized as deferred taxes	****	53	****		–
Tax rate change	****	(19	)		27
Other differences	****	251	****		169
Income tax expense	$	1,213	****	$	1,195

(d) Deferred tax assets and liabilities

The following table presents the Company’s deferred tax assets and liabilities reflected on the Consolidated Statement of Financial Position.

As at December 31,	2021			2020
Deferred tax assets	$	5,254	****	$	4,842
Deferred tax liabilities	****	(2,769	)		(2,614	)
Net deferred tax assets(liabilities)	$	2,485	****	$	2,228

The following table presents movement of deferred tax assets and liabilities.

As at December 31, 2021	Balance,<br>January 1, 2021		Disposals			Recognized in<br>Income<br>Statement			Recognized in Other<br>Comprehensive<br>Income			Recognized<br>in Equity		Translation<br>and Other			Balance,<br>December 31,<br>2021
Loss carryforwards	****	497	$	(10	)	$	22	****	$	–	****	$	–	$	8	****	$	517	****
Actuarial liabilities	****	9,372	****	–	****	****	(666	)	****	–	****	****	–	****	(3	)	****	8,703	****
Pensions and post-employment benefits	****	215	****	–	****	****	7	****	****	(61	)	****	–	****	–	****	****	161	****
Tax credits	****	34	****	–	****	****	11	****	****	1	****	****	–	****	–	****	****	46	****
Accrued interest	****	1	****	–	****	****	–	****	****	–	****	****	–	****	–	****	****	1	****
Real estate	****	(1,033	****	–	****	****	(145	)	****	–	****	****	–	****	7	****	****	(1,171	)
Securities and other investments	****	(5,950	****	–	****	****	643	****	****	119	****	****	–	****	49	****	****	(5,139	)
Sale of investments	****	(56	****	–	****	****	16	****	****	–	****	****	–	****	–	****	****	(40	)
Goodwill and intangible assets	****	(849	****	–	****	****	29	****	****	–	****	****	–	****	16	****	****	(804	)
Other	****	(3	****	1	****	****	210	****	****	2	****	****	15	****	(14	)	****	211	****
Total	****	2,228	$	(9	)	$	127	****	$	61	****	$	15	$	63	****	$	2,485	****

All values are in US Dollars.

197
As at December 31, 2020	Balance,<br>January 1, 2020			Disposals		Recognized<br>in Income<br>Statement			Recognized in Other<br>Comprehensive<br>Income		Recognized<br>in Equity		Translation<br>and Other			Balance,<br>December 31,<br>2020
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Loss carryforwards	$	705		$	–	$	(210	)	$	–	$	–	$	2		$	497
Actuarial liabilities		8,443			–		1,063			–		–		(134	)		9,372
Pensions and post-employment benefits		226			–		–			(10		–		(1	)		215
Tax credits		32			–		2			–		–		–			34
Accrued interest		1			–		–			–		–		–			1
Real estate		(1,046	)		–		5			(2		1		9			(1,033	)
Securities and other investments		(4,704	)		–		(1,254)			(59		2		65			(5,950	)
Sale of investments		(69	)		–		13			–		–		–			(56	)
Goodwill and intangible assets		(876	)		–		24			–		–		3			(849	)
Other		(110	)		–		77			(16		22		24			(3	)
Total	$	2,602		$	–	$	(280	)		(87)	$	25	$	(32	)	$	2,228

All values are in US Dollars.

The total deferred tax assets as at December 31, 2021 of $5,254 (2020 – $4,842) include $942 (2020 – $1,005) where the Company has suffered losses in either the current or preceding year and where the recognition is dependent on future taxable profits in the relevant jurisdictions and feasible management actions.

As at December 31, 2021, tax loss carryforwards available were approximately $2,689 (2020 – $2,479) of which $2,514 expire between the years 2024 and 2041 while $174 have no expiry date, and capital loss carryforwards available were approximately $1 (2020 – $21) and have no expiry date. A $517 (2020 – $497) tax benefit related to these tax loss carryforwards has been recognized as a deferred tax asset as at December 31, 2021, and a benefit of $120 (2020 – $99) has not been recognized. The Company has approximately $200 (2020 – $188) of tax credit carryforwards which will expire between the years 2026 and 2041 of which a benefit of $154 (2020 – $154) has not been recognized. In addition, the Company has not recognized a deferred tax asset of $490 (2020 – $96) on other temporary differences of $1,867 (2020 – $385).

The total deferred tax liability as at December 31, 2021 was $2,769 (2020 – $2,614). This amount includes the deferred tax liability of consolidated entities. The aggregate amount of taxable temporary differences associated with the Company’s own investments in subsidiaries is not included in the Consolidated Financial Statements and was $24,034 (2020 – $22,782).

Note 17     Interests in Structured Entities

The Company is involved with both consolidated and unconsolidated structured entities (“SEs”) which are established to generate investment and fee income. The Company is also involved with SEs that are used to facilitate financing for the Company. These entities may have some or all the following features: control is not readily identified based on voting rights; restricted activities designed to achieve a narrow objective; high amount of leverage; and/or highly structured capital.

The Company only discloses its involvement in significant consolidated and unconsolidated SEs. In assessing the significance, the Company considers the nature of its involvement with the SE, including whether it is sponsored by the Company (i.e. initially organized and managed by the Company). Other factors considered include the Company’s investment in the SE as compared to total investments, its returns from the SE as compared to total net investment income, the SE’s size as compared to total funds under management, and its exposure to any other risks from its involvement with the SE.

The Company does not provide financial or other support to its SEs, when it does not have a contractual obligation to do so.

(a) Consolidated SEs

Investment SEs

The Company acts as an investment manager of timberlands and timber companies. The Company’s general fund and segregated funds invest in many of these companies. The Company has control over one timberland company which it manages, Hancock Victoria Plantations Holdings PTY Limited (“HVPH”). HVPH is a SE primarily because the Company’s employees exercise voting rights over it on behalf of other investors. As at December 31, 2021, the Company’s consolidated timber assets relating to HVPH were $979 (2020 – $949). The Company does not provide guarantees to other parties against the risk of loss from HVPH.

Financing SEs

The Company securitizes certain HELOC collateralized by residential property. This activity is facilitated by consolidated entities that are SEs because their operations are limited to issuing and servicing the Company’s funding. Further information regarding the Company’s mortgage securitization program is included in note 3.

198   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(b) Unconsolidated SEs

Investment SEs

The following table presents the Company’s investments and maximum exposure to loss from significant unconsolidated investment SEs, some of which are sponsored by the Company. The Company does not provide guarantees to other parties against the risk of loss from these SEs.

	Company’s investment^(1)^				Company’s maximum<br><br><br>exposure to loss^(2)^
As at December 31,	2021		2020		2021		2020
Leveraged leases^(3)^	$	3,457	$	3,371	$	3,457	$	3,371
Timberland companies^(4)^	****	842		776	****	842		776
Real estate<br>companies^(5)^	****	513		497	****	513		497
Total	$	4,812	$	4,644	$	4,812	$	4,644
^(1)^	The Company’s investments in these unconsolidated SEs are included in invested assets and the Company’s returns<br>from them are included in net investment income and AOCI.
---	---
^(2)^	The Company’s maximum exposure to loss from each SE is limited to amounts invested in each, plus unfunded capital<br>commitments, if any. The Company’s investment commitments are disclosed in note 18. The maximum loss is expected to occur only upon the entity’s bankruptcy/liquidation, or in case a natural disaster in the case of the timber companies.<br>
---	---
^(3)^	These entities are statutory business trusts which use capital provided by the Company and senior debt provided by other<br>parties to finance the acquisition of assets. These assets are leased to third-party lessees under long-term leases. The Company owns equity capital in these business trusts. The Company does not consolidate any of the trusts that are party to the<br>lease arrangements because the Company does not have decision-making power over them.
---	---
^(4)^	These entities own and operate timberlands. The Company invests in their equity and debt. The Company’s returns<br>include investment income, investment advisory fees, forestry management fees and performance advisory fees. The Company does not control these entities because it either does not have the power to govern their financial and operating policies or<br>does not have significant variable returns from them, or both.
---	---
^(5)^	These entities, which include the Manulife U.S. REIT, own and manage commercial real estate. The Company invests in their<br>equity. The Company’s returns include investment income, investment management fees, property management fees, acquisition/disposition fees and leasing fees. The Company does not control these entities because it either does not have the power<br>to govern their financial and operating policies or does not have significant variable returns from them, or both.
---	---

Financing SEs

The Company’s interests in and maximum exposure to loss from significant unconsolidated financing SEs are as follows.

	Company’s interests^(1)^
As at December 31,	2021		2020
Manulife Finance (Delaware), L.P.^(2)^	$	850	$	931
Total	$	850	$	931
^(1)^	The Company’s interests include amounts borrowed from the SE; the Company’s investment in its equity and<br>subordinated capital; and foreign currency and interest rate swaps with it.
---	---
^(2)^	This entity is a wholly owned partnership used to facilitate the Company’s financing. Refer to notes 10 and 18.<br>
---	---

(i) Other invested assets

The Company has investment relationships with a variety of other entities, which result from its direct investment in their debt and/or equity and which have been assessed for control. These other entities’ investments include but are not limited to investments in power and infrastructure, oil and gas, private equity, real estate and agriculture, organized as limited partnerships and limited liability companies. Most of these other entities are not sponsored by the Company. The Company’s involvement with these other entities is not individually significant. As such, the Company neither provides summary financial data for these entities nor individually assesses whether they are SEs. The Company’s maximum exposure to losses because of its involvement with these other entities is limited to its investment in them and amounts committed to be invested but not yet funded. The Company records its income from these entities in net investment income and AOCI. The Company does not provide guarantees to other parties against the risk of loss from these other entities.

(ii) Interest in securitized assets

The Company invests in mortgage/asset-backed securities issued by securitization vehicles sponsored by other parties, including private issuers and government sponsored issuers, to generate investment income. The Company does not own a controlling financial interest in any of the issuers. These securitization vehicles are SEs based on their narrow scope of activities and highly leveraged capital structures. Investments in mortgage/asset-backed securities are reported on the Consolidated Statements of Financial Position as debt securities and private placements, and their fair value and carrying value are disclosed in note 3. The Company’s maximum loss from these investments is limited to amounts invested.

Commercial mortgage-backed securities (“CMBS”) are secured by commercial mortgages and residential mortgage-backed securities (“RMBS”) are secured by residential mortgages. Asset-backed securities (“ABS”) may be secured by various underlying assets including credit card receivables, automobile loans and aviation leases. The mortgage/asset-backed securities that the Company invests in primarily originate in North America.

199

The following table presents investments in securitized holdings by the type and asset quality.

	2021								2020
As at December 31,	CMBS		RMBS		ABS		Total		Total
AAA	$	1,332	$	6	$	1,008	$	2,346	$	2,465
AA	****	–	****	–	****	11	****	11		32
A	****	53	****	3	****	585	****	641		661
BBB	****	–	****	–	****	227	****	227		208
BB and below	****	–	****	–	****	4	****	4		76
Total company exposure	$	1,385	$	9	$	1,835	$	3,229	$	3,442

(iii) Mutual funds

The Company sponsors and may invest in a range of public mutual funds with a broad range of investment styles. As sponsor, the Company organizes mutual funds that implement investment strategies on behalf of current and future investors. The Company earns fees which are at market rates for providing advisory and administrative services to these mutual funds. Generally, the Company does not control its sponsored mutual funds because either the Company does not have power to govern their financial and operating policies, or its returns in the form of fees and ownership interests are not significant, or both. Certain mutual funds are SEs because their decision-making rights are not vested in voting equity interests and their investors are provided with redemption rights.

The Company’s relationships with these mutual funds are not individually significant. As such, the Company neither provides summary financial data for these mutual funds nor individually assesses whether they are SEs. The Company’s interest in mutual funds is limited to its investment and fees earned, if any. The Company’s investments in mutual funds are recorded as part of its investment in public equities within the Consolidated Statements of Financial Position. For information regarding the Company’s invested assets, refer to note 3. The Company does not provide guarantees to other parties against the risk of loss from these mutual funds.

As sponsor, the Company’s investment in (“seed”) startup capital of mutual funds as at December 31, 2021 was $1,361 (2020 – $1,428). The Company’s retail mutual fund assets under management as at December  31, 2021 were $290,863 (2020 – $238,068). ****

Note 18     Commitments and Contingencies

(a) Legal proceedings

The Company is regularly involved in legal actions, both as a defendant and as a plaintiff. The legal actions where the Company is a party ordinarily relate to its activities as a provider of insurance protection or wealth management products, reinsurance, or in its capacity as an investment adviser, employer, or taxpayer. Other life insurers and asset managers, operating in the jurisdictions in which the Company does business, have been subject to a wide variety of other types of actions, some of which resulted in substantial judgments or settlements against the defendants; it is possible that the Company may become involved in similar actions in the future. In addition, government and regulatory bodies in Canada, the United States, Asia and other jurisdictions where the Company conducts business regularly make inquiries and, from time to time, require the production of information or conduct examinations concerning the Company’s compliance with, among other things, insurance laws, securities laws, and laws governing the activities of broker-dealers.

In June 2018, a class action was initiated against John Hancock Life Insurance Company (U.S.A.) (“JHUSA”) and John Hancock Life Insurance Company of New York (“JHNY”) in the U.S. District Court for the Southern District of New York on behalf of owners of approximately 1,500 Performance Universal Life (“UL”) policies issued between 2003 and 2010 whose policies were subject to a Cost of Insurance (“COI”) increase announced in 2018. The class, as defined, now covers approximately 1,300 of the 1,500 policies subjected to the COI increase. In addition to the class action, there are nine individual lawsuits opposing the Performance UL COI increases that also have been filed. Each of the lawsuits, except two, is brought by plaintiffs owning multiple policies and/or by entities managing them for investment purposes. Three of the non-class lawsuits are pending in New York state court; and six are pending in the U.S. District Court for the Southern District of New York. Discovery has commenced in these cases. No hearings on substantive matters have been scheduled. On January 5, 2022 the Court gave preliminary approval to a proposed settlement of the class litigation. It is too early to predict the range of potential outcomes for all of these lawsuits, and the Company intends to continue to vigorously defend these matters.

(b) Investment commitments

In the normal course of business, various investment commitments are outstanding which are not reflected in the Consolidated Financial Statements. There were $12,233 (2020 – $9,937) of outstanding investment commitments as at December 31, 2021, of which $957 (2020 – $638) mature in 30 days, $3,205 (2020 – $2,634) mature in 31 to 365 days and $8,071 (2020 – $6,665) mature after one year.

(c) Letters of credit

In the normal course of business, third-party relationship banks issue letters of credit on the Company’s behalf. The Company’s businesses utilize letters of credit for which third parties are the beneficiaries, as well as for affiliate reinsurance transactions between its subsidiaries. As at December 31, 2021, letters of credit for which third parties are beneficiary, in the amount of $99 (2020 – $103), were outstanding.

200   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

(d) Guarantees

(i) Guarantees regarding Manulife Finance (Delaware), L.P. (“MFLP”)

MFC has guaranteed the payment of amounts on the $650 subordinated debentures due on December 15, 2041 issued by MFLP, a wholly owned unconsolidated partnership.

(ii) Guarantees regarding The Manufacturers Life Insurance Company

MFC has provided a subordinated guarantee for the $1,000 subordinated debentures issued by MLI on November 20, 2015.

The following table presents certain condensed consolidated financial information for MFC and MFLP.

Condensed Consolidated Statements of Income Information

For the year ended December 31, 2021	MFC<br>(Guarantor)		MLI<br>consolidated		Other<br>subsidiaries of<br>MFC on a<br>combined basis			Consolidation<br>adjustments		Total<br>consolidated<br>amounts		MFLP
Total revenue	$	563	$	61,787	$	536	****	$	(1,065)	$	61,821	$	41	****
Net income (loss) attributed to shareholders and other equity<br>holders	****	7,105	****	7,342	****	(500	)	****	(6,842)	****	7,105	****	3	****
For the year ended December 31, 2020	MFC<br>(Guarantor)		MLI<br>consolidated		Other<br>subsidiaries of<br>MFC on a<br>combined basis			Consolidation<br>adjustments		Total<br>consolidated<br>amounts		MFLP
Total revenue	$	547	$	78,929	$	520		$	(1,088)	$	78,908	$	32
Net income (loss) attributed to shareholders		5,871		6,179		(500	)		(5,679)		5,871		(1	)

Condensed Consolidated Statements of Financial Position

As at December 31, 2021	MFC<br>(Guarantor)		MLI<br>consolidated		Other<br>subsidiaries of<br>MFC on a<br>combined basis		Consolidation<br>adjustments			Total<br>consolidated<br>amounts		MFLP
Invested assets	$	78	$	427,010	$	10	$	–	****	$	427,098	$	3
Total other assets	****	68,866	****	91,412	****	3,203	****	(72,724	)	****	90,757	****	1,088
Segregated funds net assets	****	–	****	399,788	****	–	****	–	****	****	399,788	****	–
Insurance contract liabilities	****	–	****	392,275	****	–	****	–	****	****	392,275	****	–
Investment contract liabilities	****	–	****	3,117	****	–	****	–	****	****	3,117	****	–
Segregated funds net liabilities	****	–	****	399,788	****	–	****	–	****	****	399,788	****	–
Total other liabilities	****	10,536	****	53,962	****	–	****	(904	)	****	63,594	****	852
As at December 31, 2020	MFC<br>(Guarantor)		MLI<br>consolidated		Other<br>subsidiaries of<br>MFC on a<br>combined basis		Consolidation<br>adjustments			Total<br>consolidated<br>amounts		MFLP
Invested assets	$	47	$	410,919	$	11	$	–		$	410,977	$	5
Total other assets		64,419		102,439		3		(64,925)			101,936		1,166
Segregated funds net assets		–		367,436		–		–			367,436		–
Insurance contract liabilities		–		385,554		–		–			385,554		–
Investment contract liabilities		–		3,288		–		–			3,288		–
Segregated funds net liabilities		–		367,436		–		–			367,436		–
Total other liabilities		12,131		59,683		–		(749	)		71,065		936

(iii) Guarantees regarding John Hancock Life Insurance Company (U.S.A.) (“JHUSA”)

Details of guarantees regarding certain securities issued or to be issued by JHUSA are outlined in note 23.

(e) Pledged assets

In the normal course of business, the Company pledges its assets in respect of liabilities incurred, strictly for providing collateral to the counterparty. In the event of the Company’s default, the counterparty is entitled to apply the collateral to settle the liability. The pledged assets are returned to the Company if the underlying transaction is terminated or, in the case of derivatives, if there is a decrease in the net exposure due to market value changes.

201

The amounts pledged are as follows.

	2021				2020
As at December 31,	Debt securities		Other		Debt securities		Other
In respect of:
Derivatives	$	5,525	$	23	$	5,924	$	35
Secured borrowings	****	–	****	2,575		–		2,790
Regulatory requirements	****	367	****	78		452		80
Repurchase agreements	****	535	****	–		353		–
Non-registered retirement plans in trust	****	–	****	377		–		424
Other	****	2	****	414		2		302
Total	$	6,429	$	3,467	$	6,731	$	3,631

(f) Participating business

In some territories where the Company maintains participating accounts, there are regulatory restrictions on the amounts of profit that can be transferred to shareholders. Where applicable, these restrictions generally take the form of a fixed percentage of policyholder dividends. For participating businesses operating as separate “closed blocks”, transfers are governed by the terms of MLI’s and John Hancock Mutual Life Insurance Company’s plans of demutualization.

(g) Fixed surplus notes

A third-party contractually provides standby financing arrangements for the Company’s U.S. operations under which, in certain circumstances, funds may be provided in exchange for the issuance of fixed surplus notes. As at December 31, 2021, the Company had no fixed surplus notes outstanding.

Note 19    Segmented Information

The Company’s reporting segments are Asia, Canada, U.S., Global WAM and Corporate and Other. Each reporting segment is responsible for managing its operating results, developing products, defining strategies for services and distribution based on the profile and needs of its business and market. The Company’s significant product and service offerings by the reporting segments are mentioned below.

Wealth and asset management businesses (Global WAM) – include mutual funds and exchange-traded funds, group retirement and savings products, and institutional asset management services across all major asset classes. These products and services are distributed through multiple distribution channels, including agents and brokers affiliated with the Company, independent securities brokerage firms and financial advisors pension plan consultants and banks.

Insurance and annuity products (Asia, Canada and U.S.) – include a variety of individual life insurance, individual and group long-term care insurance and guaranteed and partially guaranteed annuity products. Products are distributed through multiple distribution channels, including insurance agents, brokers, banks, financial planners and direct marketing. Manulife Bank of Canada offers a variety of deposit and credit products to Canadian customers.

Corporate and Other Segment – comprised of investment performance of assets backing capital, net of amounts allocated to operating segments; costs incurred by the corporate office related to shareholder activities (not allocated to the operating segments); financing costs; Property and Casualty Reinsurance Business; and run-off reinsurance operations including variable annuities and accident and health.

202   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Reporting segments

The following table presents results by reporting segments.

As at and for the year ended December 31, 2021	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total
Revenue
Life and health insurance	$	20,428	****	$	9,217	****	$	6,338	****	$	–	****	$	147	****	$	36,130	****
Annuities and pensions	****	2,558	****	****	344	****	****	33	****	****	–	****	****	–	****	****	2,935	****
Net premium income	****	22,986	****	****	9,561	****	****	6,371	****	****	–	****	****	147	****	****	39,065	****
Net investment income (loss)	****	4,889	****	****	1,469	****	****	5,061	****	****	28	****	****	177	****	****	11,624	****
Other revenue	****	1,696	****	****	1,336	****	****	1,824	****	****	6,513	****	****	(237	)	****	11,132	****
Total revenue	****	29,571	****	****	12,366	****	****	13,256	****	****	6,541	****	****	87	****	****	61,821	****
Contract benefits and expenses
Life and health insurance	****	18,240	****	****	10,276	****	****	9,307	****	****	–	****	****	159	****	****	37,982	****
Annuities and pensions	****	2,638	****	****	(3,371	)	****	(1,528	)	****	101	****	****	–	****	****	(2,160	)
Net benefits and claims	****	20,878	****	****	6,905	****	****	7,779	****	****	101	****	****	159	****	****	35,822	****
Interest expense	****	232	****	****	269	****	****	47	****	****	1	****	****	462	****	****	1,011	****
Other expenses	****	5,273	****	****	3,401	****	****	2,947	****	****	4,798	****	****	444	****	****	16,863	****
Total contract benefits and expenses	****	26,383	****	****	10,575	****	****	10,773	****	****	4,900	****	****	1,065	****	****	53,696	****
Income (loss) before income taxes	****	3,188	****	****	1,791	****	****	2,483	****	****	1,641	****	****	(978	)	****	8,125	****
Income tax recovery (expense)	****	(445	)	****	(336	)	****	(385	)	****	(233	)	****	186	****	****	(1,213	)
Net income (loss)	****	2,743	****	****	1,455	****	****	2,098	****	****	1,408	****	****	(792	)	****	6,912	****
Less net income (loss) attributed to:
Non-controlling interests	****	253	****	****	–	****	****	–	****	****	2	****	****	–	****	****	255	****
Participating policyholders	****	(567	)	****	101	****	****	18	****	****	–	****	****	–	****	****	(448	)
Net income (loss) attributed to shareholders andother equity holders	$	3,057	****	$	1,354	****	$	2,080	****	$	1,406	****	$	(792	)	$	7,105	****
Total assets	$	162,970	****	$	169,736	****	$	290,838	****	$	259,363	****	$	34,736	****	$	917,643	****
As at and for the year ended December 31, 2020	Asia			Canada			U.S.			Global WAM			Corporate<br>and Other			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Revenue
Life and health insurance	$	17,983		$	8,833		$	3,011		$	–		$	140		$	29,967
Annuities and<br>pensions^(1)^		2,496			334			120			–			–			2,950
Net premium income		20,479			9,167			3,131			–			140			32,917
Net investment income (loss)		6,630			8,458			17,519			39			2,754			35,400
Other revenue		1,346			1,013			2,711			5,710			(189	)		10,591
Total revenue		28,455			18,638			23,361			5,749			2,705			78,908
Contract benefits and expenses
Life and health insurance		17,997			10,385			16,099			–			(131	)		44,350
Annuities and pensions		3,430			4,380			2,929			146			–			10,885
Net benefits and claims		21,427			14,765			19,028			146			(131	)		55,235
Interest expense		269			342			54			2			514			1,181
Other expenses		5,123			3,141			2,714			4,329			414			15,721
Total contract benefits and expenses		26,819			18,248			21,796			4,477			797			72,137
Income (loss) before income taxes		1,636			390			1,565			1,272			1,908			6,771
Income tax recovery (expense)		(233	)		(131	)		(296	)		(172	)		(363	)		(1,195	)
Net income (loss)		1,403			259			1,269			1,100			1,545			5,576
Less net income (loss) attributed to:
Non-controlling interests		250			–			–			–			–			250
Participating policyholders		(609	)		64			–			–			–			(545	)
Net income (loss) attributed toshareholders	$	1,762		$	195		$	1,269		$	1,100		$	1,545		$	5,871
Total assets	$	145,801		$	167,236		$	288,814		$	236,593		$	41,905		$	880,349
^(1)^	In 2020, the Company ceded premiums to Global Atlantic Financial Group Ltd to reinsure a block of legacy U.S. BOLI<br>business. Refer to note 6(k) for details.
---	---

Geographical location

The results of the Company’s reporting segments differ from its geographical location primarily due to the allocation of Global WAM and Corporate and Other segments into the geographical location to which its businesses relate.

203

The following table presents results by geographical location.

For the year ended December 31, 2021	Asia		Canada		U.S.		Other			Total
Revenue
Life and health insurance	$	20,515	$	8,905	$	6,340	$	370	****	$	36,130
Annuities and pensions	****	2,558	****	344	****	33	****	–	****	****	2,935
Net premium income	****	23,073	****	9,249	****	6,373	****	370	****	****	39,065
Net investment income (loss)	****	5,313	****	1,255	****	4,830	****	226	****	****	11,624
Other revenue	****	2,818	****	3,363	****	4,952	****	(1	)	****	11,132
Total revenue	$	31,204	$	13,867	$	16,155	$	595	****	$	61,821
For the year ended December 31, 2020	Asia		Canada		U.S.		Other			Total
Revenue
Life and health insurance	$	18,072	$	8,474	$	3,012	$	409		$	29,967
Annuities and<br>pensions^(1)^		2,496		334		120		–			2,950
Net premium income		20,568		8,808		3,132		409			32,917
Net investment income (loss)		7,085		8,531		19,735		49			35,400
Other revenue		2,300		2,671		5,600		20			10,591
Total revenue	$	29,953	$	20,010	$	28,467	$	478		$	78,908
^(1)^	In 2020, the Company ceded premiums to Global Atlantic Financial Group Ltd to reinsure a block of legacy U.S. BOLI<br>business. Refer to note 6(k) for details.
---	---

Note 20    Related Parties

The Company enters into transactions with related parties in the normal course of business and at the terms that would exist in arm’s-length transactions.

(a) Transactions with certain related parties

Transactions with MFLP, a wholly owned unconsolidated partnership, are described in notes 10, 17 and 18.

(b) Compensation of key management personnel

The Company’s key management personnel are those personnel who have the authority and responsibility for planning, directing and controlling the activities of the Company. Directors (both executive and non-executive) and senior management are considered key management personnel. A summary of compensation of key management personnel is as follows.

For the years ended December 31,	2021		2020
Short-term employee benefits	$	65	$	69
Post-employment benefits	****	5		5
Share-based payments	****	57		57
Termination benefits	****	–		–
Other long-term benefits	****	2		3
Total	$	129	$	134

Note 21    Subsidiaries

The following is a list of Manulife’s directly and indirectly held major operating subsidiaries.

As at December 31, 2021<br><br><br>(100% owned unless otherwise noted in brackets beside company name)	Equity<br>Interest	Address	Description
The Manufacturers Life Insurance Company	$  67,375	Toronto, Canada	Leading Canadian-based financial services company that offers a diverse range of financial protection products and wealth management services
Manulife Holdings (Alberta) Limited	$  22,577	Calgary, Canada	Holding company
John Hancock Financial Corporation		Boston, Massachusetts, U.S.A.	Holding company
The Manufacturers Investment Corporation		Boston, Massachusetts, U.S.A.	Holding company
John Hancock Reassurance Company Ltd.		Boston, Massachusetts, U.S.A.	Captive insurance subsidiary that provides life, annuity and long-term care reinsurance to affiliates

204   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

As at December 31, 2021<br><br><br>(100% owned unless otherwise noted in brackets beside company name)	Equity<br>Interest	Address	Description
John Hancock Life Insurance Company (U.S.A.)		Boston, Massachusetts, U.S.A.	U.S. life insurance company licensed in all states, except New York
John Hancock Subsidiaries LLC		Boston, Massachusetts, U.S.A.	Holding company
John Hancock Financial Network, Inc.		Boston, Massachusetts, U.S.A.	Financial services distribution organization
John Hancock Investment Management LLC		Boston, Massachusetts, U.S.A.	Investment advisor
John Hancock Investment Management Distributors LLC		Boston, Massachusetts, U.S.A.	Broker-dealer
Manulife Investment Management (US) LLC		Boston, Massachusetts, U.S.A.	Investment advisor
Manulife Investment Management Timberland and Agriculture<br>Inc.		Boston, Massachusetts, U.S.A.	Manager of globally diversified timberland and agricultural portfolios
John Hancock Life Insurance Company of New York		New York, U.S.A.	U.S. life insurance company licensed in New York
John Hancock Variable Trust Advisers LLC		Boston, Massachusetts, U.S.A.	Investment advisor for open-end mutual funds
John Hancock Life & Health Insurance Company		Boston, Massachusetts, U.S.A.	U.S. life insurance company licensed in all states
John Hancock Distributors LLC		Boston, Massachusetts, U.S.A.	Broker-dealer
John Hancock Insurance Agency, Inc.		Boston, Massachusetts, U.S.A.	Insurance agency
Manulife Reinsurance Limited		Hamilton, Bermuda	Provides life and financial reinsurance to affiliates
Manulife Reinsurance (Bermuda) Limited		Hamilton, Bermuda	Provides life and annuity reinsurance to affiliates
Manulife Bank of Canada	$  1,686	Waterloo, Canada	Provides integrated banking products and service options not available from an insurance company
Manulife Investment Management Holdings (Canada) Inc.	$  1,236	Toronto, Canada	Holding company
Manulife Investment Management Limited		Toronto, Canada	Provides investment counseling, portfolio and mutual fund management in Canada
First North American Insurance Company	$  8	Toronto, Canada	Property and casualty insurance company
Manulife Securities Investment Services Inc.	$  77	Oakville, Canada	Mutual fund dealer for Canadian operations
Manulife Holdings (Bermuda) Limited	$  23,978	Hamilton, Bermuda	Holding company
Manufacturers P&C Limited		St. Michael, Barbados	Provides property and casualty reinsurance
Manulife Financial Asia Limited		Hong Kong, China	Holding company
Manulife (Cambodia) PLC		Phnom Penh, Cambodia	Life insurance company
Manulife Myanmar Life Insurance Company Limited		Yangon, Myanmar	Life insurance company
Manufacturers Life Reinsurance Limited		St. Michael, Barbados	Provides life and annuity reinsurance to affiliates
Manulife (Vietnam) Limited		Ho Chi Minh City, Vietnam	Life insurance company
Manulife Investment Fund Management (Vietnam) Company<br>Limited		Ho Chi Minh City, Vietnam	Fund management company
Manulife International Holdings Limited		Hong Kong, China	Holding company
Manulife (International) Limited		Hong Kong, China	Life insurance company
Manulife-Sinochem Life Insurance Co. Ltd. (51%)		Shanghai, China	Life insurance company
Manulife Investment Management International Holdings<br>Limited		Hong Kong, China	Holding company
Manulife Investment Management (Hong Kong) Limited		Hong Kong, China	Investment management and advisory company marketing mutual funds
Manulife Investment Management (Taiwan) Co., Ltd.		Taipei, Taiwan (China)	Investment management company
Manulife Life Insurance Company (Japan)		Tokyo, Japan	Life insurance company
205
---
As at December 31, 2021<br><br><br>(100% owned unless otherwise noted in brackets beside company name)	Equity<br>Interest	Address	Description
---	---	---	---
Manulife Investment Management (Japan) Limited		Tokyo, Japan	Investment management and advisory company and mutual fund business
Manulife Holdings Berhad (60.9%)		Kuala Lumpur, Malaysia	Holding company
Manulife Insurance Berhad (60.9%)		Kuala Lumpur, Malaysia	Life insurance company
Manulife Investment Management (Malaysia) Berhad (60.9%)		Kuala Lumpur, Malaysia	Asset management company
Manulife (Singapore) Pte. Ltd.		Singapore	Life insurance company
Manulife Investment Management (Singapore) Pte. Ltd.		Singapore	Asset management company
The Manufacturers Life Insurance Co. (Phils.), Inc.		Makati City, Philippines	Life insurance company
Manulife Chinabank Life Assurance Corporation (60%)		Makati City, Philippines	Life insurance company
PT Asuransi Jiwa Manulife Indonesia		Jakarta, Indonesia	Life insurance company
PT Manulife Aset Manajemen Indonesia		Jakarta, Indonesia	Investment management and investment advisor
Manulife Investment Management (Europe) Limited	$  41	London, England	Investment management company for Manulife Financial’s international funds
Manulife Assurance Company of Canada	$  69	Toronto, Canada	Life insurance company
EIS Services (Bermuda) Limited	$  1,057	Hamilton, Bermuda	Investment holding company
Berkshire Insurance Services Inc.	$  2,159	Toronto, Canada	Investment holding company
JH Investments (Delaware) LLC		Boston, Massachusetts, U.S.A.	Investment holding company
Manulife Securities Incorporated	$  132	Oakville, Canada	Investment dealer
Manulife Investment Management (North America) Limited	$  3	Toronto, Canada	Investment advisor

Note 22    Segregated Funds

The Company manages a number of segregated funds on behalf of policyholders. Policyholders are provided with the opportunity to invest in different categories of segregated funds that respectively hold a range of underlying investments. The Company retains legal title to the underlying investments; however, returns from these investments belong to the policyholders. Accordingly, the Company does not bear the risk associated with these assets outside of guarantees offered on certain variable life and annuity products. The “Risk Management and Risk Factors” section of the Company’s 2021 MD&A provides information regarding the variable annuity and segregated fund guarantees.

The composition of net assets by categories of segregated funds was within the following ranges for the years ended December 31, 2021 and 2020.

	Ranges in per cent
Type of fund	2021		2020
Money market funds	****	2% to 3%		2% to 3%
Fixed income funds	****	14% to 15%		14% to 16%
Balanced funds	****	22% to 23%		23% to 24%
Equity funds	****	60% to 62%		58% to 60%

Money market funds consist of investments that have a term to maturity of less than one year. Fixed income funds primarily consist of investments in fixed grade income securities and may contain smaller investments in diversified equities or high-yield bonds. Relative to fixed income funds, balanced funds consist of fixed income securities and a larger equity investment component. The types of equity funds available to policyholders range from low volatility equity funds to aggressive equity funds. Equity funds invest in a varying mix of Canadian, U.S. and global equities.

The underlying investments of the segregated funds consist of both individual securities and mutual funds (collectively “net assets”), some of which may be structured entities. The carrying value and change in segregated funds net assets are as follows. Fair value related information of segregated funds is disclosed in note 3(g).

206   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Segregated funds net assets

As at December 31,	2021			2020
Investments at market value
Cash and short-term securities	$	3,955	****	$	4,054
Debt securities	****	18,651	****		17,913
Equities	****	16,844	****		14,227
Mutual funds	****	354,882	****		326,889
Other investments	****	4,613	****		4,599
Accrued investment income	****	2,340	****		1,670
Other assets and liabilities, net	****	(1,089	)		(1,543	)
Total segregated funds net assets	$	400,196	****	$	367,809
Composition of segregated funds net assets
Held by policyholders	$	399,788	****	$	367,436
Held by the Company	****	408	****		373
Total segregated funds net assets	$	400,196	****	$	367,809

Changes in segregated funds net assets

For the years ended December 31,	2021			2020
Net policyholder cash flow
Deposits from policyholders	$	44,548	****	$	38,898
Net transfers to general fund	****	(732	)		(1,515	)
Payments to policyholders	****	(52,182	)		(44,818	)
	****	(8,366	)		(7,435	)
Investment related
Interest and dividends	****	24,092	****		16,775
Net realized and unrealized investment gains (losses)	****	21,549	****		24,514
	****	45,641	****		41,289
Other
Management and administration fees	****	(4,115	)		(3,942	)
Impact of changes in foreign exchange rates	****	(773	)		(5,580	)
	****	(4,888	)		(9,522	)
Net additions (deductions)	****	32,387	****		24,332
Segregated funds net assets, beginning of year	****	367,809	****		343,477
Segregated funds net assets, end ofyear	$	400,196	****	$	367,809

Segregated funds assets may be exposed to a variety of financial and other risks. These risks are primarily mitigated by investment guidelines that are actively monitored by professional and experienced portfolio advisors. The Company is not exposed to these risks beyond the liabilities related to guarantees associated with certain variable life and annuity products. Accordingly, the Company’s exposure to loss from segregated fund products is limited to the value of these guarantees.

These guarantees are recorded within the Company’s insurance contract liabilities. Assets supporting these guarantees are recognized in invested assets according to their investment type.

Note 23    Information Provided in Connection with Investments in Deferred Annuity Contracts and Signature Notes Issued or Assumed by John Hancock Life Insurance Company (U.S.A.)

The following condensed consolidated financial information, presented in accordance with IFRS, and the related disclosure have been included in these Consolidated Financial Statements with respect to JHUSA in compliance with Regulation S-X and Rule 12h-5 of the United States Securities and Exchange Commission (the “Commission”). These financial statements are incorporated by reference in the MFC and its subsidiaries registration statements that are described below and which relate to MFC’s guarantee of certain securities to be issued by its subsidiaries.

JHUSA maintains a book of deferred annuity contracts that feature a market value adjustment, some of which are registered with the Commission. The deferred annuity contracts may contain variable investment options along with fixed investment period options, or may offer only fixed investment period options. The fixed investment period options enable the participant to invest fixed amounts of money for fixed terms at fixed interest rates, subject to a market value adjustment if the participant desires to terminate a fixed investment period before its maturity date. The annuity contract provides for the market value adjustment to keep the parties whole with respect to the fixed interest bargain for the entire fixed investment period. These fixed investment period options that contain a market value adjustment feature are referred to as “MVAs”.

207

JHUSA may also sell medium-term notes to retail investors under its SignatureNotes program.

Effective December 31, 2009, John Hancock Variable Life Insurance Company (the “Variable Company”) and John Hancock Life Insurance Company (the “Life Company”) merged with and into JHUSA. In connection with the mergers, JHUSA assumed the Variable Company’s rights and obligations with respect to the MVAs issued by the Variable Company and the Life Company’s rights and obligations with respect to the SignatureNotes issued by the Life Company.

MFC fully and unconditionally guaranteed the payment of JHUSA’s obligations under the MVAs and under the SignatureNotes (including the MVAs and SignatureNotes assumed by JHUSA in the merger), and such MVAs and the SignatureNotes were registered with the Commission. The SignatureNotes and MVAs assumed or issued by JHUSA are collectively referred to in this note as the “Guaranteed Securities”. JHUSA is, and each of the Variable Company and the Life Company was, a wholly owned subsidiary of MFC.

MFC’s guarantees of the Guaranteed Securities are unsecured obligations of MFC and are subordinated in right of payment to the prior payment in full of all other obligations of MFC, except for other guarantees or obligations of MFC which by their terms are designated as ranking equally in right of payment with or subordinate to MFC’s guarantees of the Guaranteed Securities.

The laws of the State of New York govern MFC’s guarantees of the SignatureNotes issued or assumed by JHUSA and the laws of the Commonwealth of Massachusetts govern MFC’s guarantees of the MVAs issued or assumed by JHUSA. MFC has consented to the jurisdiction of the courts of New York and Massachusetts. However, because a substantial portion of MFC’s assets are located outside the United States, the assets of MFC located in the United States may not be sufficient to satisfy a judgment given by a federal or state court in the United States to enforce the subordinate guarantees. In general, the federal laws of Canada and the laws of the Province of Ontario, where MFC’s principal executive offices are located, permit an action to be brought in Ontario to enforce such a judgment provided that such judgment is subsisting and unsatisfied for a fixed sum of money and not void or voidable in the United States and a Canadian court will render a judgment against MFC in a certain dollar amount, expressed in Canadian dollars, subject to customary qualifications regarding fraud, violations of public policy, laws limiting the enforcement of creditor’s rights and applicable statutes of limitations on judgments. There is currently no public policy in effect in the Province of Ontario that would support avoiding the recognition and enforcement in Ontario of a judgment of a New York or Massachusetts court on MFC’s guarantees of the SignatureNotes issued or assumed by JHUSA or a Massachusetts court on guarantees of the MVAs issued or assumed by JHUSA.

MFC is a holding company. MFC’s assets primarily consist of investments in its subsidiaries. MFC’s cash flows primarily consist of dividends and interest payments from its operating subsidiaries, offset by expenses and shareholder dividends and MFC stock repurchases. As a holding company, MFC’s ability to meet its cash requirements, including, but not limited to, paying any amounts due under its guarantees, substantially depends upon dividends from its operating subsidiaries.

These subsidiaries are subject to certain regulatory restrictions under laws in Canada, the United States and certain other countries, which may limit their ability to pay dividends or make contributions or loans to MFC. For example, some of MFC’s subsidiaries are subject to restrictions prescribed by the ICA on their ability to declare and pay dividends. The restrictions related to dividends imposed by the ICA are described in note 12.

In the United States, insurance laws in Michigan, New York, and Massachusetts, the jurisdictions in which certain of MFC’s U.S. insurance company subsidiaries are domiciled, impose general limitations on the payment of dividends and other upstream distributions or loans by these insurance subsidiaries. These limitations are described in note 12.

In Asia, the insurance laws of the jurisdictions in which MFC operates either provide for specific restrictions on the payment of dividends or other distributions or loans by subsidiaries or impose solvency or other financial tests, which could affect the ability of subsidiaries to pay dividends in certain circumstances.

There can be no assurance that any current or future regulatory restrictions in Canada, the United States or Asia will not impair MFC’s ability to meet its cash requirements, including, but not limited to, paying any amounts due under its guarantees.

The following condensed consolidated financial information, presented in accordance with IFRS, reflects the effects of the mergers and is provided in compliance with Regulation S-X and in accordance with Rule 12h-5 of the Commission.

208   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Condensed Consolidated Statement of Financial Position

As at December 31, 2021	MFC<br>(Guarantor)		JHUSA<br>(Issuer)		Other<br>subsidiaries			Consolidation<br>adjustments			Consolidated<br>MFC
Assets
Invested assets	$	78	$	116,705	$	310,679	****	$	(364	)	$	427,098	****
Investments in unconsolidated subsidiaries	****	68,655	****	9,107	****	20,788	****	****	(98,550	)	****	–	****
Reinsurance assets	****	–	****	63,838	****	11,309	****	****	(30,568	)	****	44,579	****
Other assets	****	211	****	18,085	****	49,956	****	****	(22,074	)	****	46,178	****
Segregated funds net assets	****	–	****	204,493	****	197,220	****	****	(1,925	)	****	399,788	****
Total assets	$	68,944	$	412,228	$	589,952	****	$	(153,481	)	$	917,643	****
Liabilities and equity
Insurance contract liabilities	$	–	$	166,535	$	257,044	****	$	(31,304	)	$	392,275	****
Investment contract liabilities	****	–	****	1,227	****	1,890	****	****	–	****	****	3,117	****
Other liabilities	****	899	****	21,806	****	50,836	****	****	(21,809	)	****	51,732	****
Long-term debt	****	4,882	****	–	****	–	****	****	–	****	****	4,882	****
Capital instruments	****	4,755	****	579	****	1,646	****	****	–	****	****	6,980	****
Segregated funds net liabilities	****	–	****	204,493	****	197,220	****	****	(1,925	)	****	399,788	****
Shareholders’ and other equity holders’ equity	****	58,408	****	17,588	****	80,855	****	****	(98,443	)	****	58,408	****
Participating policyholders’ equity	****	–	****	–	****	(1,233	)	****	–	****	****	(1,233	)
Non-controlling<br>interests	****	–	****	–	****	1,694	****	****	–	****	****	1,694	****
Total liabilities and equity	$	68,944	$	412,228	$	589,952	****	$	(153,481	)	$	917,643	****

Condensed Consolidated Statement of Financial Position

As at December 31, 2020	MFC<br>(Guarantor)		JHUSA<br>(Issuer)		Other<br>subsidiaries			Consolidation<br>adjustments			Consolidated<br>MFC
Assets
Invested assets	$	47	$	112,735	$	298,524		$	(329	)	$	410,977
Investments in unconsolidated subsidiaries		64,209		8,078		17,194			(89,481	)		–
Reinsurance assets		–		65,731		11,172			(31,067	)		45,836
Other assets		210		25,489		52,648			(22,247	)		56,100
Segregated funds net assets		–		191,955		178,224			(2,743	)		367,436
Total assets	$	64,466	$	403,988	$	557,762		$	(145,867	)	$	880,349
Liabilities and equity
Insurance contract liabilities	$	–	$	167,453	$	249,909		$	(31,808	)	$	385,554
Investment contract liabilities		–		1,208		2,081			(1	)		3,288
Other liabilities		718		25,594		52,761			(22,001	)		57,072
Long-term debt		6,164		–		–			–			6,164
Capital instruments		5,249		584		1,996			–			7,829
Segregated funds net liabilities		–		191,955		178,224			(2,743	)		367,436
Shareholders’ equity		52,335		17,194		72,120			(89,314	)		52,335
Participating policyholders’ equity		–		–		(784	)		–			(784	)
Non-controlling<br>interests		–		–		1,455			–			1,455
Total liabilities and equity	$	64,466	$	403,988	$	557,762		$	(145,867	)	$	880,349
209
---

Condensed Consolidated Statement of Income

For the year ended December 31, 2021	MFC<br>(Guarantor)			JHUSA<br>(Issuer)			Other<br>subsidiaries			Consolidation<br>adjustments			Consolidated<br>MFC
Revenue
Gross premiums	$	–	****	$	7,782	****	$	37,563	****	$	(1,001	)	$	44,344	****
Premiums ceded to reinsurers	****	–	****	****	(3,243	)	****	(3,031	)	****	995	****	****	(5,279	)
Net premium income	****	–	****	****	4,539	****	****	34,532	****	****	(6	)	****	39,065	****
Net investment income (loss)	****	530	****	****	3,779	****	****	8,440	****	****	(1,125	)	****	11,624	****
Other revenue	****	33	****	****	2,042	****	****	9,605	****	****	(548	)	****	11,132	****
Total revenue	****	563	****	****	10,360	****	****	52,577	****	****	(1,679	)	****	61,821	****
Contract benefits and expenses
Net benefits and claims	****	–	****	****	6,478	****	****	28,467	****	****	877	****	****	35,822	****
Commissions, investment and general expenses	****	12	****	****	3,451	****	****	14,419	****	****	(1,436	)	****	16,446	****
Other expenses	****	390	****	****	212	****	****	1,946	****	****	(1,120	)	****	1,428	****
Total contract benefits and expenses	****	402	****	****	10,141	****	****	44,832	****	****	(1,679	)	****	53,696	****
Income (loss) before income taxes	****	161	****	****	219	****	****	7,745	****	****	–	****	****	8,125	****
Income tax (expense) recovery	****	(28	)	****	115	****	****	(1,300	)	****	–	****	****	(1,213	)
Income (loss) after income taxes	****	133	****	****	334	****	****	6,445	****	****	–	****	****	6,912	****
Equity in net income (loss) of unconsolidated subsidiaries	****	6,972	****	****	1,218	****	****	1,552	****	****	(9,742	)	****	–	****
Net income (loss)	$	7,105	****	$	1,552	****	$	7,997	****	$	(9,742	)	$	6,912	****
Net income (loss) attributed to:
Non-controlling interests	$	–	****	$	–	****	$	255	****	$	–	****	$	255	****
Participating policyholders	****	–	****	****	(4	)	****	(448	)	****	4	****	****	(448	)
Shareholders and other equity holders	****	7,105	****	****	1,556	****	****	8,190	****	****	(9,746	)	****	7,105	****
	$	7,105	****	$	1,552	****	$	7,997	****	$	(9,742	)	$	6,912	****

Condensed Consolidated Statement of Income

For the year ended December 31, 2020	MFC<br>(Guarantor)			JHUSA<br>(Issuer)			Other<br>subsidiaries			Consolidation<br>adjustments			Consolidated<br>MFC
Revenue
Gross premiums	$	–		$	8,057		$	34,459		$	(1,108	)	$	41,408
Premiums ceded to reinsurers		–			(6,585	)		(3,014	)		1,108			(8,491	)
Net premium income		–			1,472			31,445			–			32,917
Net investment income (loss)		542			14,204			21,727			(1,073	)		35,400
Other revenue		5			2,869			12,884			(5,167	)		10,591
Total revenue		547			18,545			66,056			(6,240	)		78,908
Contract benefits and expenses
Net benefits and claims		–			14,804			44,293			(3,862	)		55,235
Commissions, investment and general expenses		17			3,146			13,573			(1,396	)		15,340
Other expenses		434			230			1,880			(982	)		1,562
Total contract benefits and expenses		451			18,180			59,746			(6,240	)		72,137
Income (loss) before income taxes		96			365			6,310			–			6,771
Income tax (expense) recovery		(26	)		54			(1,223	)		–			(1,195	)
Income (loss) after income taxes		70			419			5,087			–			5,576
Equity in net income (loss) of unconsolidated subsidiaries		5,801			1,344			1,763			(8,908	)		–
Net income (loss)	$	5,871		$	1,763		$	6,850		$	(8,908	)	$	5,576
Net income (loss) attributed to:
Non-controlling interests	$	–		$	–		$	250		$	–		$	250
Participating policyholders		–			–			(545	)		–			(545	)
Shareholders		5,871			1,763			7,145			(8,908	)		5,871
	$	5,871		$	1,763		$	6,850		$	(8,908	)	$	5,576

210   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Consolidated Statement of Cash Flows

For the year ended December 31, 2021	MFC<br><br><br>(Guarantor)			JHUSA<br><br><br>(Issuer)			Other<br><br><br>subsidiaries			Consolidation<br><br><br>adjustments			Consolidated<br><br><br>MFC
Operating activities
Net income (loss)	$	7,105	****	$	1,552	****	$	7,997	****	$	(9,742	)	$	6,912	****
Adjustments:
Equity in net income of unconsolidated subsidiaries	****	(6,972	)	****	(1,218	)	****	(1,552	)	****	9,742	****	****	–	****
Increase (decrease) in insurance contract liabilities	****	–	****	****	(562	)	****	11,281	****	****	–	****	****	10,719	****
Increase (decrease) in investment contract liabilities	****	–	****	****	50	****	****	(6	)	****	–	****	****	44	****
(Increase) decrease in reinsurance assets excluding coinsurance transactions	****	–	****	****	1,544	****	****	(790	)	****	–	****	****	754	****
Amortization of (premium) discount on invested assets	****	–	****	****	57	****	****	124	****	****	–	****	****	181	****
Other amortization	****	16	****	****	124	****	****	389	****	****	–	****	****	529	****
Net realized and unrealized (gains) losses and impairment on assets	****	62	****	****	1,533	****	****	3,229	****	****	–	****	****	4,824	****
Deferred income tax expense (recovery)	****	34	****	****	190	****	****	(351	)	****	–	****	****	(127	)
Stock option expense	****	–	****	****	(2	)	****	11	****	****	–	****	****	9	****
Cash provided by (used in) operating activities before undernoted items	****	245	****	****	3,268	****	****	20,332	****	****	–	****	****	23,845	****
Dividends from unconsolidated subsidiary	****	5,000	****	****	489	****	****	742	****	****	(6,231	)	****	–	****
Changes in policy related and operating receivables and<br>payables	****	(22	)	****	424	****	****	(1,092	)	****	–	****	****	(690	)
Cash provided by (used in) operating activities	****	5,223	****	****	4,181	****	****	19,982	****	****	(6,231	)	****	23,155	****
Investing activities
Purchases and mortgage advances	****	–	****	****	(31,746	)	****	(89,219	)	****	–	****	****	(120,965	)
Disposals and repayments	****	–	****	****	27,194	****	****	69,534	****	****	–	****	****	96,728	****
Changes in investment broker net receivables and payables	****	–	****	****	(202	)	****	16	****	****	–	****	****	(186	)
Investment in common shares of subsidiaries	****	(3,700	)	****	–	****	****	–	****	****	3,700	****	****	–	****
Net cash flows from acquisition and disposal of subsidiaries and businesses	****	–	****	****	–	****	****	(19	)	****	–	****	****	(19	)
Capital contribution to unconsolidated subsidiaries	****	–	****	****	(1	)	****	–	****	****	1	****	****	–	****
Return of capital from unconsolidated subsidiaries	****	–	****	****	1	****	****	–	****	****	(1	)	****	–	****
Notes receivable from parent	****	–	****	****	–	****	****	(129	)	****	129	****	****	–	****
Notes receivable from subsidiaries	****	(13	)	****	–	****	****	–	****	****	13	****	****	–	****
Cash provided by (used in) investing activities	****	(3,713	)	****	(4,754	)	****	(19,817	)	****	3,842	****	****	(24,442	)
Financing activities
Redemption of long-term debt	****	(1,250	)	****	–	****	****	–	****	****	–	****	****	(1,250	)
Redemption of capital instruments	****	(468	)	****	–	****	****	(350	)	****	–	****	****	(818	)
Secured borrowings	****	–	****	****	–	****	****	26	****	****	–	****	****	26	****
Change in repurchase agreements and securities sold but not yet purchased	****	–	****	****	–	****	****	186	****	****	–	****	****	186	****
Changes in deposits from Bank clients, net	****	–	****	****	–	****	****	(164	)	****	–	****	****	(164	)
Lease payments	****	–	****	****	(7	)	****	(117	)	****	–	****	****	(124	)
Shareholders’ dividends and other equity distributions	****	(2,500	)	****	–	****	****	–	****	****	–	****	****	(2,500	)
Common shares issued, net	****	51	****	****	–	****	****	3,700	****	****	(3,700	)	****	51	****
Preferred shares and other equity issued, net	****	3,171	****	****	–	****	****	–	****	****	–	****	****	3,171	****
Preferred shares redeemed, net	****	(612	)	****	–	****	****	–	****	****	–	****	****	(612	)
Contributions from (distributions to) non-controlling interests,<br>net	****	–	****	****	–	****	****	(13	)	****	–	****	****	(13	)
Dividends paid to parent	****	–	****	****	(742	)	****	(5,489	)	****	6,231	****	****	–	****
Capital contributions by parent	****	–	****	****	–	****	****	1	****	****	(1	)	****	–	****
Return of capital to parent	****	–	****	****	–	****	****	(1	)	****	1	****	****	–	****
Notes payable to parent	****	–	****	****	–	****	****	13	****	****	(13	)	****	–	****
Notes payable to subsidiaries	****	129	****	****	–	****	****	–	****	****	(129	)	****	–	****
Cash provided by (used in) financing activities	****	(1,479	)	****	(749	)	****	(2,208	)	****	2,389	****	****	(2,047	)
Cash and short-term securities
Increase (decrease) during the year	****	31	****	****	(1,322	)	****	(2,043	)	****	–	****	****	(3,334	)
Effect of foreign exchange rate changes on cash and short-term securities	****	–	****	****	(20	)	****	(299	)	****	–	****	****	(319	)
Balance, beginning of year	****	47	****	****	4,907	****	****	20,629	****	****	–	****	****	25,583	****
Balance, end of year	****	78	****	****	3,565	****	****	18,287	****	****	–	****	****	21,930	****
Cash and short-term securities
Beginning of year
Gross cash and short-term securities	****	47	****	****	5,213	****	****	20,907	****	****	–	****	****	26,167	****
Net payments in transit, included in other liabilities	****	–	****	****	(306	)	****	(278	)	****	–	****	****	(584	)
Net cash and short-term securities, beginning of year	****	47	****	****	4,907	****	****	20,629	****	****	–	****	****	25,583	****
End of year
Gross cash and short-term securities	****	78	****	****	4,087	****	****	18,429	****	****	–	****	****	22,594	****
Net payments in transit, included in other liabilities	****	–	****	****	(522	)	****	(142	)	****	–	****	****	(664	)
Net cash and short-term securities, end ofyear	$	78	****	$	3,565	****	$	18,287	****	$	–	****	$	21,930	****
Supplemental disclosures on cash flow information:
Interest received	$	499	****	$	4,112	****	$	7,847	****	$	(1,082	)	$	11,376	****
Interest paid	****	396	****	****	73	****	****	1,594	****	****	(1,082	)	****	981	****
Income taxes paid (refund)	****	–	****	****	(118	)	****	689	****	****	–	****	****	571	****
211
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Consolidated Statement of Cash Flows

For the year ended December 31, 2020	MFC<br><br><br>(Guarantor)			JHUSA<br><br><br>(Issuer)			Other<br><br><br>subsidiaries			Consolidation<br><br><br>adjustments			Consolidated<br><br><br>MFC
Operating activities
Net income (loss)	$	5,871		$	1,763		$	6,850		$	(8,908	)	$	5,576
Adjustments:
Equity in net income of unconsolidated subsidiaries		(5,801	)		(1,344	)		(1,763	)		8,908			–
Increase (decrease) in insurance contract liabilities		–			11,937			25,045			–			36,982
Increase (decrease) in investment contract liabilities		–			48			130			–			178
(Increase) decrease in reinsurance assets excluding coinsurance transactions		–			(3,133	)		759			–			(2,374	)
Amortization of (premium) discount on invested assets		–			54			100			–			154
Other amortization		7			145			504			–			656
Net realized and unrealized (gains) losses and impairment on assets		1			(9,420	)		(13,102	)		–			(22,521	)
Deferred income tax expense (recovery)		25			(784	)		1,039			–			280
Stock option expense		–			3			11			–			14
Cash provided by (used in) operating activities before undernoted items		103			(731	)		19,573			–			18,945
Dividends from unconsolidated subsidiary		3,000			411			1,270			(4,681	)		–
Changes in policy related and operating receivables and<br>payables		91			8,459			(7,447	)		–			1,103
Cash provided by (used in) operating activities		3,194			8,139			13,396			(4,681	)		20,048
Investing activities
Purchases and mortgage advances		–			(34,392	)		(77,589	)		–			(111,981)
Disposals and repayments		–			29,635			69,215			–			98,850
Changes in investment broker net receivables and payables		–			(431	)		(586	)		–			(1,017	)
Investment in common shares of subsidiaries		(4,483	)		–			–			4,483			–
Capital contribution to unconsolidated subsidiaries		–			(1	)		–			1			–
Return of capital from unconsolidated subsidiaries		–			22			–			(22	)		–
Notes receivable from parent		–			–			1,501			(1,501	)		–
Notes receivable from subsidiaries		1,494			–			–			(1,494	)		–
Cash provided by (used in) investing activities		(2,989	)		(5,167	)		(7,459	)		1,467			(14,148	)
Financing activities
Issue of long-term debt, net		2,455			–			–			–			2,455
Redemption of long-term debt		(652	)		–			–			–			(652	)
Issue of capital instruments, net		1,990			–			–			–			1,990
Redemption of capital instruments		–			–			(1,250	)		–			(1,250	)
Secured borrowings		–			709			667			–			1,376
Change in repurchase agreements and securities sold but not yet purchased		–			–			24			–			24
Changes in deposits from Bank clients, net		–			–			(579	)		–			(579	)
Lease payments		–			(9	)		(125	)		–			(134	)
Shareholders’ dividends paid in cash		(2,340	)		–			–			–			(2,340	)
Contributions from (distributions to) non-controlling interests,<br>net		–			–			(10	)		–			(10	)
Common shares repurchased		(253	)		–			–			–			(253	)
Common shares issued, net		36			–			4,483			(4,483	)		36
Dividends paid to parent		–			(1,270	)		(3,411	)		4,681			–
Capital contributions by parent		–			–			1			(1	)		–
Return of capital to parent		–			–			(22	)		22			–
Notes payable to parent		–			–			(1,494	)		1,494			–
Notes payable to subsidiaries		(1,501	)		–			–			1,501			–
Cash provided by (used in) financing activities		(265	)		(570	)		(1,716	)		3,214			663
Cash and short-term securities
Increase (decrease) during the year		(60	)		2,402			4,221			–			6,563
Effect of foreign exchange rate changes on cash and short-term securities		85			(59	)		(554	)		–			(528	)
Balance, beginning of year		22			2,564			16,962			–			19,548
Balance, end of year		47			4,907			20,629			–			25,583
Cash and short-term securities
Beginning of year
Gross cash and short-term securities		22			3,058			17,220			–			20,300
Net payments in transit, included in other liabilities		–			(494	)		(258	)		–			(752	)
Net cash and short-term securities, beginning of year		22			2,564			16,962			–			19,548
End of year
Gross cash and short-term securities		47			5,213			20,907			–			26,167
Net payments in transit, included in other liabilities		–			(306	)		(278	)		–			(584	)
Net cash and short-term securities, end ofyear	$	47		$	4,907		$	20,629		$	–		$	25,583
Supplemental disclosures on cash flow information:
Interest received	$	522		$	4,334		$	7,992		$	(1,112	)	$	11,736
Interest paid		426			109			1,765			(1,112	)		1,188
Income taxes paid (refund)		(2	)		721			639			–			1,358

212   |  2021 Annual Report  |  Notes to Consolidated Financial Statements ****

Note 24     Comparatives

Certain comparative amounts have been reclassified to conform to the current year’s presentation.

213

Additional Actuarial Disclosures

Source of Earnings

Manulife uses a Source of Earnings (“SOE”) to identify the primary sources of gains or losses in each reporting period. It is one of the key tools the Company uses to understand and manage its business. The SOE is prepared following OSFI’s regulatory guidelines, and in accordance with educational notes published by the Canadian Institute of Actuaries (“CIA”). The SOE attributes each component of earnings to one of ten categories: expected profit from in-force business, the impact of new business, experience gains or losses (comparing actual to expected outcomes), the impact of management actions and changes in assumptions, earnings on surplus funds, other insurance earnings, Global Wealth and Asset Management earnings, Manulife Bank earnings, unallocated overhead expenses, and income taxes. In aggregate, these elements explain the $7,105 million of net income attributed to shareholders in 2021.

Each of these ten categories is described below:

Expected profit from in-force business represents the formula-driven release of Provisions for Adverse Deviation (“PfADs”) on non-fee income insurance businesses, the expected net income on fee businesses, and the planned margins on one-year renewable businesses such as Group Benefits. PfADs are a requirement of the Canadian Actuarial Standards of Practice, and represent additional amounts held in excess of the expected cost of discharging policy obligations in order to provide a margin of conservatism. These amounts are released over time as the Company is released from the risks associated with the policy obligations.

The increase in 2021 over 2020 was primarily due to in-force business growth in all segments.

Impact of new business represents the financial impact of new business written in the period, including acquisition expenses. Writing new business creates economic value, which is offset by PfADs and other limits on capitalization of this economic value in actuarial liabilities.

The new business gain in 2021 has improved compared to 2020, driven by higher new business volumes and improved product margins in North America, Hong Kong, Singapore and Vietnam. This was partially offset by lower new business volumes in Japan and unfavourable new business product mix in China.

Experience gains or losses arise from items such as claims, policy persistency, fee income, and expenses, where the actual experience in the current period differs from the expected results assumed in the insurance and investment contract liabilities. It also includes experience gains or losses associated with actual investment returns and movements in investment markets differing from those expected on assets supporting insurance and investment contract liabilities. For most businesses, the expected future investment returns underlying policy valuations are updated quarterly for investment market movements and this impact is also included in experience gains and losses. This component also includes the impact of currency changes to the extent they are separately quantified. Experience gains do not include the impact of management actions or changes in assumptions during the reporting period, which are reported in “Management actions and changes in assumptions”.

The experience gains in 2021 were primarily driven by favourable investment related experience on general fund liabilities and favourable impact from gross equity markets exposure, partially offset by the unfavourable impact from interest rate movements, a net charge related to the impact of updated ultimate reinvestment rate (“URR”) assumptions issued by the Canadian Actuarial Standards Board (“ASB”), as well as unfavourable policyholder experience. The favourable investment related experience on general fund liabilities was driven by higher-than-expected returns (including fair value changes) on alternative long-duration assets (“ALDA”) primarily driven by gains on private equity and infrastructure, strong credit experience, and the favourable impact of fixed income reinvestment activities. The unfavourable impact of interest rate movements was primarily due to the increase in risk-free interest rates and the overall steepening of the yield curve in U.S. and Canada. The experience gains were partially offset by a charge in the P&C Reinsurance business for losses related to Hurricane Ida and the European floods.

The experience losses in 2020 were primarily driven by the unfavourable impact from interest rates movements, as well as the unfavourable investment related experience on general fund liabilities and impacts from gross equity markets exposure, partially offset by favourable policyholder experience. The unfavourable impact of interest rate movements was primarily due to the reduction in risk-free rates and, to a much lesser extent, lower corporate spreads, with spreads for some tenors and ratings being slightly below their respective 2019 levels. The unfavourable investment related experience on general fund liabilities reflected lower-than-expected returns (including fair value changes) on alternative long-duration assets (“ALDA”) primarily driven by investments in oil & gas and real estate, partially offset by the favourable impact of fixed income reinvestment activities.

Management actions and changes in assumptions reflect the income impact of changes to valuation methods and assumptions for insurance and investment contract liabilities and other management-initiated actions in the year that are outside the normal course of business.

The 2021 pre-tax earnings impact of changes in methods and assumptions was a $128 million charge compared to a $273 million charge in 2020. The $128 million charge in 2021 was primarily the result of a review of the lapse assumptions for non-participating policies in the U.S., including those for universal life, variable universal life, and term products, whereby the Company lowered the overall lapse assumptions to reflect lower actual lapse experience as consumers continue to value the product guarantees in the prolonged low interest

214   |  2021 Annual Report  |  Additional Actuarial Disclosures ****

rate environment. In addition, updates to older age mortality on certain products in the U.S. life insurance business resulted in a net charge to earnings. This was largely offset by favourable expense assumption updates, including a detailed review of the investment expense assumptions across the Company, as well as the completion of the Company’s global expense study. Note 6 of the Consolidated Financial Statements provides additional detail on the changes in actuarial methods and assumptions.

Impacts from material management action items reported in the Corporate segment in 2021 included losses from the sale of bonds designated as available for sale (“AFS”), charges resulting from reinsurance transactions in the U.S., as well as a restructuring charge related to actions that are expected to result in recurring annual expense savings by 2023.

Earnings on surplus funds reflect the actual investment returns on assets supporting the Company’s surplus (shareholders’ equity). These assets comprise a diversified portfolio and returns will vary with the underlying asset categories.

Other represents pre-tax earnings items on insurance business that are not included in any other line of the SOE.

Global Wealth and AssetManagement (“Global WAM”) represents pre-tax net income from the Global Wealth and Asset Management segment.

Manulife Bank represents pre-tax net income from Manulife Bank.

Unallocated overhead represents pre-tax unallocated overhead expenses from the Corporate and Other segments.

Income taxes represent tax charges to earnings based on the varying tax rates in the jurisdictions in which Manulife conducts business.

Manulife’s net income attributed to shareholders for the full year 2021 increased to $7,105 million from $5,871 million the previous year.

For the year ended December 31, 2021<br><br><br>(C$ millions)	Asia			Canada			U.S.			Corporate<br>and Other			Global<br>WAM			Total
Expected Profit from In-force Business	$	1,361	****	$	1,125	****	$	1,797	****	$	104	****	$	–	****	$	4,387	****
Impact of New Business	****	832	****	****	46	****	****	394	****	****	2	****	****	–	****	****	1,274	****
Experience gains (losses)	****	534	****	****	153	****	****	578	****	****	(143	)	****	–	****	****	1,122	****
Management actions and changes in assumptions	****	426	****	****	(88	)	****	(608	)	****	(470	)	****	–	****	****	(740	)
Earnings on surplus	****	188	****	****	203	****	****	266	****	****	(10	)	****	–	****	****	647	****
Other	****	138	****	****	8	****	****	38	****	****	39	****	****	–	****	****	223	****
Insurance	****	3,479	****	****	1,447	****	****	2,465	****	****	(478	)	****	–	****	****	6,913	****
Global Wealth and Asset Management	****	–	****	****	–	****	****	–	****	****	–	****	****	1,640	****	****	1,640	****
Manulife Bank	****	–	****	****	237	****	****	–	****	****	–	****	****	–	****	****	237	****
Unallocated overhead	****	–	****	****	–	****	****	–	****	****	(500	)	****	–	****	****	(500	)
Income (loss) before income taxes	$	3,479	****	$	1,684	****	$	2,465	****	$	(978	)	$	1,640	****	$	8,290	****
Income tax (expense) recovery	****	(422	)	****	(330	)	****	(385	)	****	186	****	****	(234	)	****	(1,185	)
Net income (loss) attributed toshareholders	$	3,057	****	$	1,354	****	$	2,080	****	$	(792	)	$	1,406	****	$	7,105	****
For the year ended December 31, 2020<br><br><br>(C$ millions)	Asia			Canada			U.S.			Corporate<br>and Other			Global<br>WAM			Total
Expected Profit from In-force Business	$	1,265		$	1,011		$	1,897		$	108		$	–		$	4,281
Impact of New Business		713			7			188			1			–			909
Experience gains (losses)		(304	)		(1,391	)		(1,000	)		(6	)		–			(2,701	)
Management actions and changes in assumptions		(100	)		134			(29	)		2,896			–			2,901
Earnings on surplus		238			333			485			(556	)		–			500
Other		154			(1	)		24			(11	)		–			166
Insurance		1,966			93			1,565			2,432			–			6,056
Global Wealth and Asset Management		–			–			–			–			1,272			1,272
Manulife Bank		–			213			–			–			–			213
Unallocated overhead		–			–			–			(524	)		–			(524	)
Income (loss) before income taxes	$	1,966		$	306		$	1,565		$	1,908		$	1,272		$	7,017
Income tax (expense) recovery		(204	)		(111	)		(296	)		(363	)		(172	)		(1,146	)
Net income (loss) attributed toshareholders	$	1,762		$	195		$	1,269		$	1,545		$	1,100		$	5,871

Embedded Value

The embedded value (“EV”) as of December 31, 2021 will be disclosed later.

215

Board of Directors

Current as of March 1, 2022

“Director Since” refers to the year of first election to the Board of Directors of The Manufacturers Life Insurance Company.

John M. Cassaday<br><br><br>Chairman of the Board<br><br><br>Manulife<br><br><br>Toronto, ON, Canada<br><br><br>Director Since: 1993	Nicole Arnaboldi<br><br><br>Corporate Director<br><br><br>Greenwich, CT, U.S.A.<br><br><br>Director Since: 2020	Guy L.T. Bainbridge<br><br><br>Corporate Director<br> <br>Edinburgh,<br>Midlothian,<br> <br>United Kingdom<br> <br>Director Since: 2019	Joseph P. Caron<br><br><br>Corporate Director<br><br><br>West Vancouver, BC, Canada<br><br><br>Director Since: 2010
Susan F. Dabarno<br><br><br>Corporate Director<br><br><br>Bracebridge, ON, Canada<br><br><br>Director Since: 2013	Julie E. Dickson<br><br><br>Corporate Director<br><br><br>Ottawa, ON, Canada<br><br><br>Director Since: 2019	Roy Gori<br><br><br>President and Chief<br><br><br>Executive Officer<br><br><br>Manulife<br><br><br>Toronto, ON, Canada<br><br><br>Director Since: 2017	Tsun-yan Hsieh<br><br><br>Chairman<br> <br>LinHart Group PTE Ltd.<br><br><br>Singapore, Singapore<br><br><br>Director Since: 2011
Vanessa Kanu<br><br><br>Chief Financial Officer<br><br><br>TELUS International<br><br><br>Ottawa, ON, Canada<br><br><br>Director since: 2022	Donald R. Lindsay<br><br><br>President and Chief<br><br><br>Executive Officer<br><br><br>Teck Resources Limited<br><br><br>Vancouver, BC, Canada<br><br><br>Director Since: 2010	John R.V. Palmer<br><br><br>Corporate Director<br><br><br>Toronto, ON, Canada<br><br><br>Director Since: 2009	C. James Prieur<br><br><br>Corporate Director<br> <br>Chicago, IL, U.S.A.<br><br><br>Director Since: 2013
Andrea S. Rosen<br><br><br>Corporate Director<br><br><br>Toronto, ON, Canada<br><br><br>Director Since: 2011	May Tan<br><br><br>Corporate Director<br><br><br>Hong Kong<br><br><br>Director Since: 2021	Leagh E. Turner<br><br><br>Co-Chief Executive Officer<br><br><br>Ceridian HCM Holding Inc.<br><br><br>Toronto, ON, Canada<br><br><br>Director Since: 2020

216   |  2021 Annual Report  |  Board of Directors ****

Executive Leadership Team

Current as of March 1, 2022

Roy Gori<br> <br>President and Chief<br><br><br>Executive Officer	Michael J. Doughty<br> <br>President and Chief Executive Officer,<br>Manulife Canada	Steven A. Finch<br> <br>Chief Actuary	James D. Gallagher<br> <br>General Counsel ****
Marianne Harrison<br> <br>President and Chief<br><br><br>Executive Officer, John<br> <br>Hancock	Scott S. Hartz<br> <br>Chief Investment Officer	Rahim Hirji<br> <br>Chief Risk Officer	Naveed Irshad<br> <br>Global Head of Inforce Management
Rahul M. Joshi<br> <br>Chief Operations Officer	Pamela O. Kimmet<br> <br>Chief Human Resources<br><br><br>Officer	Karen A. Leggett<br> <br>Chief Marketing Officer	Paul R. Lorentz<br> <br>President and Chief Executive Officer, Global<br>Wealth and Asset Management
Anil Wadhwani<br> <br>President and Chief<br><br><br>Executive Officer, Manulife<br> <br>Asia	Shamus E. Weiland<br> <br>Chief Information Officer	Philip J. Witherington<br> <br>Chief Financial Officer
217
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Office Listing

Corporate Headquarters<br> <br><br><br><br>Manulife Financial Corporation<br> <br><br><br><br>200 Bloor Street East<br> <br>Toronto, ON M4W 1E5<br><br><br>Canada<br> <br>Tel: +1<br>416-926-3000<br> <br><br> <br>Belgium<br> <br><br> <br>International Group Program – Europe<br><br><br>John Hancock International Services S.A.<br> <br><br><br><br>Avenue de Tervuren 270-272<br> <br>B-1150 Brussels<br> <br>Belgium<br> <br>Tel: +32 02 775 2940<br><br><br><br> <br>Cambodia<br><br><br><br> <br>Manulife (Cambodia) PLC<br><br><br><br> <br>14/F, TK Central<br><br><br>No. 12, Street 289<br> <br>Sangkat Boeung Kak 1<br><br><br>Khan Toul Kork<br> <br>Phnom Penh, Cambodia<br><br><br>Tel: 1-800-211-211<br><br><br><br> <br>Canada<br><br><br><br> <br>Canada Head Office<br><br><br><br> <br>500 King Street North<br><br><br>Waterloo, ON N2J 4C6<br> <br>Canada<br><br><br>Tel: +1 519-747-7000<br><br><br><br> <br>Affinity Markets<br> <br><br><br><br>200 Bloor Street East<br> <br>Toronto, ON M4W 1E5<br><br><br>Canada<br> <br>Tel: +1<br>800-668-0195<br> <br><br><br><br>Group Benefits<br> <br><br><br><br>500 King Street North<br> <br>Kitchener, ON N2J 4C6<br><br><br>Canada<br> <br>Tel: +1<br>519-747-7000<br> <br><br><br><br>Individual Insurance<br> <br><br><br><br>500 King Street North<br> <br>Waterloo, ON N2J 4C6<br><br><br>Canada<br> <br>Tel: +1<br>519-747-7000<br> <br><br><br><br>Manulife Bank of Canada<br> <br><br><br><br>500 King Street North<br> <br>Waterloo, ON N2J 4C6<br><br><br>Canada<br> <br>Tel: +1<br>519-747-7000<br> <br><br><br><br>Manulife Investment Management<br> <br><br><br><br>5^th^ Floor<br> <br>200 Bloor Street<br>East<br> <br>Toronto, ON M4W 1E5<br> <br>Canada<br><br><br>Public Markets Tel: +1 416-852-2204<br><br><br><br> <br>15^th^ Floor<br><br><br>250 Bloor Street East<br> <br>Toronto, ON M4W 1E5<br><br><br>Canada<br> <br>Real Estate Tel: +1 416-926-5500<br> <br><br> <br>500 King St North<br><br><br>Waterloo, ON N2J 4C6<br> <br>Canada<br><br><br>Tel: +1 519-747-7000	Manulife Quebec<br><br><br><br> <br>Maison Manuvie<br><br><br>900 de Maisonneuve Ouest<br> <br>Montréal, QC H3A 0A8<br><br><br>Canada<br> <br>Tel: +1<br>514-499-7999<br> <br><br><br><br>Manulife Securities<br> <br><br><br><br>1235 North Service Road West<br> <br>Oakville, ON L6M 2W2<br><br><br>Canada<br> <br>Tel: +1<br>905-469-2100<br> <br><br> <br>China<br> <br><br> <br>Manulife-Sinochem Life<br><br><br>Insurance Co., Ltd.<br> <br><br><br><br>6/F, Jin Mao Tower<br> <br>88 Century Boulevard<br><br><br>Pudong New Area<br> <br>Shanghai 200121<br><br><br>P.R. China<br> <br>Tel: +86 21 2069-8888<br><br><br>+86 21 2069-8930<br> <br><br><br><br>Manulife-Teda Fund<br> <br>Management Co., Ltd.<br><br><br><br> <br>Unit 2-7, 6/F,<br><br><br>China Life Financial Center<br> <br>No. 23, Zhenzhi Road,<br><br><br>Chaoyang District<br> <br>Beijing 10026<br><br><br>P.R. China<br> <br>Tel: +86 10 6657-7777<br><br><br><br> <br>Hong Kong<br><br><br><br> <br>Asia Head Office<br><br><br>10/F, The Lee Gardens<br> <br>33 Hysan Avenue<br><br><br>Causeway Bay, Hong Kong<br> <br>Tel: +852 2510-5888<br><br><br><br> <br>Manulife Investment<br><br><br>Management (Asia),<br> <br>a division<br><br><br>of Manulife Investment<br> <br>Management (Hong Kong)<br><br><br>Ltd.<br> <br><br><br><br>16/F, The Lee Gardens<br> <br>33 Hysan Avenue<br><br><br>Causeway Bay, Hong Kong<br> <br>Tel: +852 2910-2600<br><br><br><br> <br>Manulife (International) Ltd.<br><br><br><br> <br>22/F, Tower A<br><br><br>Manulife Financial Centre<br> <br>223-231 Wai Yip<br>Street<br> <br>Kwun Tong, Kowloon<br> <br>Hong Kong<br><br><br>Tel: +852 2310-5600<br> <br><br><br><br>Manulife Provident Funds<br> <br>Trust Co., Ltd.<br><br><br><br> <br>22/F, Tower A<br><br><br>Manulife Financial Centre<br> <br>223-231 Wai Yip<br>Street<br> <br>Kwun Tong, Kowloon<br> <br>Hong Kong<br><br><br>Tel: +852 2310-5600	Indonesia<br><br><br><br> <br>PT Asuransi Jiwa Manulife<br><br><br>Indonesia<br> <br><br><br><br>Sampoerna Strategic Square<br> <br>Jl. Jend. Sudirman Kav<br>45-46<br> <br>South Tower<br> <br>Jakarta 12930<br><br><br>Indonesia<br> <br>Tel: +62 21 2555-7788<br><br><br><br> <br>PT Manulife Aset Manajemen<br><br><br>Indonesia<br> <br><br><br><br>Sampoerna Strategic Square<br> <br>Jl. Jend, Sudirman Kav.<br>45-46<br> <br>31/F, South Tower<br> <br>Jakarta 12930<br><br><br>Indonesia<br> <br>Tel: +6221 2555-7788<br><br><br><br> <br>Ireland<br><br><br><br> <br>Manulife Investment<br><br><br>Management (Ireland) Ltd.<br> <br><br><br><br>Manulife Investment Management (Ireland) Ltd.<br> <br>Second Floor, 5 Earlsfort Terrace<br><br><br>Dublin 2<br> <br>D02 CK83<br><br><br>Ireland<br> <br>Tel: +353 87 695-4368<br><br><br><br> <br>Japan<br><br><br><br> <br>Manulife Investment<br><br><br>Management<br> <br>(Japan) Ltd.<br><br><br><br> <br>15/F Marunouchi Trust Tower<br><br><br>North Building<br> <br>1-6-1 Marunouchi, Chiyoda-ku<br><br><br>Tokyo, Japan 100-0005<br> <br>Tel: +81 3 6267-1955<br><br><br><br> <br>Manulife Life Insurance Co.<br><br><br><br> <br>30th Floor, Tokyo Opera City<br><br><br>3-20-2 Nishi Shinjuku, Shinjuku-ku<br><br><br>Tokyo, Japan 160-0023<br> <br>Tel: +81 3 6331-7000<br><br><br><br> <br>Macau<br><br><br><br> <br>Manulife (International) Ltd.<br><br><br><br> <br>Avenida De Almeida Ribeiro No. 61<br><br><br>Circle Square, 14 andar A<br> <br>Macau<br><br><br>Tel: +853 8398-0388<br> <br><br><br><br>Malaysia<br> <br><br><br><br>Manulife Investment Management<br> <br>(M) Berhad<br><br><br><br> <br>16th Floor, Menara Manulife<br><br><br>No. 6 Jalan Gelenggang<br> <br>Damansara Heights<br><br><br>50490 Kuala Lumpur, Malaysia<br> <br>Tel: +60 3 2719-9228<br><br><br><br> <br>Manulife Holdings Berhad<br><br><br><br> <br>Menara Manulife<br><br><br>No. 6 Jalan Gelenggang<br> <br>Damansara Heights<br><br><br>50490 Kuala Lumpur, Malaysia<br> <br>Tel: +60 3 2719-9228

218   |  2021 Annual Report  |  Office Listing ****

Myanmar<br> <br><br><br><br>Manulife Myanmar Life<br> <br>Insurance Company Limited<br><br><br><br> <br>16/F Kantharyar Office Tower<br><br><br>Cor. Kan Yeik Thar Road & U Aung Myat Road<br> <br>Mingalar Taung Nyunt Township<br><br><br>Yangon<br> <br>Myanmar<br><br><br>Tel: +09 765 467 110<br> <br><br><br><br>Philippines<br> <br><br><br><br>The Manufacturers Life<br> <br>Insurance Co. (Phils.), Inc.<br><br><br><br> <br>10/F, NEX Tower<br><br><br>6786 Ayala Avenue,<br> <br>1229 Makati City,<br><br><br>Metro Manila<br> <br>Philippines<br><br><br>Tel: +632 8884 7000<br> <br>Singapore<br><br><br><br> <br>Manulife Investment Management<br><br><br>(Singapore) Pte. Ltd.<br> <br><br><br><br>8 Cross Street<br> <br>#15-01 Manulife Tower<br><br><br>Singapore 048424<br> <br>Tel: +65 6501 5411<br><br><br><br> <br>Manulife (Singapore) Pte Ltd.<br><br><br><br> <br>8 Cross Street<br> <br>#15-01 Manulife Tower<br> <br>Singapore 048424<br> <br>Tel: +65<br>6501-5411<br> <br><br> <br>Switzerland<br><br><br><br> <br>Manulife IM (Switzerland) LLC<br><br><br>Bahnhofstrasse 52, 8001<br> <br>Zurich<br><br><br>Switzerland<br> <br>Tel: +41 79 448-3050<br><br><br><br> <br>Taiwan<br><br><br><br> <br>Manulife Investment<br><br><br>Management<br> <br>(Taiwan) Co., Ltd.<br><br><br><br> <br>6/F No., 1 Exchange Square, 89<br><br><br>Songren Road<br> <br>Taipei 11073,<br><br><br>Northern Taiwan, R.O.C.<br> <br>Tel: +886 2 2757-5969<br><br><br><br> <br>Thailand<br><br><br><br> <br>Manulife Asset<br><br><br>Management<br> <br>(Thailand) Co., Ltd.<br><br><br><br> <br>18/F Singha Complex<br><br><br>1788 New Petchaburi Road,<br> <br>Bang Kapi<br><br><br>Huai Khwang, Bangkok 10310<br> <br>Thailand<br><br><br>Tel: +66 0-2844-0123<br> <br><br><br><br>Manulife Insurance<br> <br>(Thailand)<br><br><br>Public Co., Ltd.<br> <br><br><br><br>18/F Singha Complex,<br> <br>1788 New Petchaburi Road,<br><br><br>Bang Kapi<br> <br>Huai Khwang, Bangkok 10310<br><br><br>Thailand<br> <br>Tel: +66 2 033-9000	United Kingdom<br> <br><br><br><br>Manulife Investment<br> <br>Management<br><br><br>(Europe) Ltd.<br> <br><br><br><br>One London Wall<br> <br>London EC2Y 5EA<br><br><br>United Kingdom<br> <br>Tel: +44 20 7256 3500<br><br><br><br> <br>United States<br><br><br><br> <br>John Hancock Head Office<br><br><br>and<br> <br>John Hancock Investment<br><br><br>Management<br> <br><br><br><br>197 Clarendon Street<br> <br>Boston, MA 02116-5010<br><br><br>U.S.A.<br> <br>Tel: +1<br>617-663-3000<br> <br>Tel: +1<br>617-572-6000<br> <br><br><br><br>Hancock Natural Resource Group<br> <br><br><br><br>197 Clarendon Street,<br> <br>8th Floor<br><br><br>Boston, MA 02116-5010<br> <br>U.S.A.<br><br><br>Tel: +1 617-747-1600<br><br><br><br> <br>International Group Program<br><br><br><br> <br>200 Berkeley Street<br><br><br>Boston, MA 02116-5023<br> <br>U.S.A.<br><br><br>Tel: +1 617-572-6000<br><br><br><br> <br>John Hancock Insurance<br><br><br><br> <br>200 Berkeley Street<br><br><br>Boston, MA 02116-5023<br> <br>U.S.A.<br><br><br>Tel: +1 617-572-6000<br><br><br><br> <br>Manulife Investment<br><br><br>Management<br> <br>(US) LLC<br><br><br><br> <br>197 Clarendon Street<br><br><br>Boston, MA 02116-5010<br> <br>U.S.A.<br><br><br>Tel: +1 617-375-1500<br><br><br><br> <br>Vietnam<br><br><br><br> <br>Manulife Investment Fund<br><br><br>Management<br> <br>(Vietnam) Co., Ltd.<br><br><br><br> <br>4/F, Manulife Plaza<br><br><br>75 Hoang Van Thai Street<br> <br>Tan Phu Ward, District 7<br><br><br>Ho Chi Minh City<br> <br>Vietnam<br><br><br>Tel: +84 8 5416-6777<br> <br><br><br><br>Manulife (Vietnam) Ltd.<br> <br><br><br><br>Manulife Plaza<br> <br>75 Hoang Van Thai Street<br><br><br>Tan Phu Ward, District 7<br> <br>Ho Chi Minh City<br><br><br>Vietnam<br> <br>Tel: +84 8 5416-6888<br><br><br><br> <br>West Indies<br><br><br><br> <br>Manulife Re<br><br><br>Manulife P&C Limited<br> <br><br><br><br>The Goddard Building<br> <br>Haggatt Hall<br><br><br>St. Michael, BB-11059<br> <br>Barbados, West Indies<br><br><br>Tel: +246 228-4910
219
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Glossary of Terms

Note: Refer to “Non-GAAP and Other Financial Measures” inSection 13 of the Management’s Discussion and Analysis for additional terms.

Accumulated Other Comprehensive Income (AOCI): A separate component of shareholders’ equity which includes net unrealized gains and losses on available-for-sale (AFS) securities, net unrealized gains and losses on derivative instruments designated within an effective cash flow hedge, and unrealized foreign currency translation gains and losses. These items have been recognized in other comprehensive income and may be subsequently reclassified to net income. AOCI also includes remeasurement of pension and other post-employment plans and real estate revaluation reserve. These items are recognized in other comprehensive income and will never be reclassified to net income.

**Available-For-Sale Financial Assets:**Non-derivative financial assets that are designated as available-for-sale or that are not classified as loans and receivables, held-to-maturity investments, or held for trading.

Book Value perShare: Ratio obtained by dividing common shareholders’ equity by the number of common shares outstanding at the end of the period.

**Cash Flow Hedges:**A hedge of the exposure to variability in cash flows associated with a recognized asset or liability, a forecasted transaction or a foreign currency risk in an unrecognized firm commitment that is attributable to a particular risk and could affect reported net income.

Deferred Acquisition Costs (DAC): Costs directly attributable to the acquisition of new business, principally agents’ compensation, which are capitalized on the Company’s Consolidated Statements of Financial Position and amortized into income over a specified period.

Guarantee Value: Typically within variable annuity products, the guarantee value refers to the level of the policyholder’s protected account balance which is unaffected by market fluctuations.

Hedging: The practice of making an investment in a market or financial instrument for the purpose of offsetting or limiting potential losses from other investments or financial exposures.

Dynamic Hedging: A hedging technique which seeks to limit an investment’s market exposure by adjusting the hedge as the underlying security changes (hence, “dynamic”).

**Macro hedging:**An investment technique used to offset the risk of an entire portfolio of assets. A macro hedge reflects a more broad-brush approach which is not frequently adjusted to reflect market changes.

Impaired Assets: Mortgages, debt securities and other investment securities in default where there is no longer reasonable assurance of collection.

In-Force: Refers to the policies that are currently active.

Insurance and Investment Contract Liabilities: The amount of money set aside today, together with the expected future premiums and investment income, that will be sufficient to provide for future expected policyholder obligations and expenses while also providing some conservatism in the assumptions. Expected assumptions are reviewed and updated annually.

Long Term Care (LTC) Insurance: Insurance coverage available on an individual or group basis to provide reimbursement for medical and other services to the chronically ill, disabled, or mentally challenged.

New Business Strain: The initial expense of writing an insurance policy that is incurred when the policy is written, and has an immediate negative impact on the Company’s financial position. Over the life of the contract, future income (premiums, investment income, etc.) is expected to repay this initial outlay.

Policyholder Experience: The actual cost in a reporting period from contingent events such as mortality, lapse and morbidity compared to the expected cost in that same reporting period.

Provisions for Adverse Deviation (PfAD): The amounts contained in the insurance and investment contract liabilities that represent conservatism against potential future deterioration of best estimate assumptions. These PfADs are released into income over time, and the release of these margins represents the future expected earnings stream.

Return on Common Shareholders’ Equity: A profitability measure that presents the net income available to common shareholders as a percentage of the average capital deployed to earn the income.

Universal Life Insurance: A form of permanent life insurance with flexible premiums. The customer may vary the premium payment and death benefit within certain restrictions. The contract is credited with a rate of interest based on the return of a portfolio of assets held by the Company, possibly with a minimum rate guarantee, which may be reset periodically at the discretion of the Company.

Variable Annuity: Funds are invested in segregated funds (also called separate accounts in the U.S.) and the return to the contract holder fluctuates according to the earnings of the underlying investments. In some instances, guarantees are provided.

Variable Universal Life Insurance: A form of permanent life insurance with flexible premiums in which the cash value and possibly the death benefit of the policy fluctuate according to the investment performance of segregated funds (or separate accounts).

220	2021 Annual Report	Glossary of Terms

Shareholder Information

MANULIFE FINANCIAL CORPORATION HEAD OFFICE

200 Bloor Street East

Toronto, ON Canada M4W 1E5

Telephone: 416 926-3000

Website**:** www.manulife.com ****

ANNUAL MEETING OF SHAREHOLDERS

Shareholders are invited to attend the annual meeting of Manulife Financial Corporation to be held on May 12, 2022 at 11:00 a.m.

STOCK EXCHANGE LISTINGS

Manulife Financial Corporation’s common shares are listed on:

Toronto Stock Exchange (MFC)

The New York Stock Exchange (MFC)

The Stock Exchange of Hong Kong (945)

Philippine Stock Exchange (MFC)

INVESTOR RELATIONS

Financial analysts, portfolio managers and other investors requiring financial information may contact our Investor Relations department or access our website at www.manulife.com. Email: investrel@manulife.com

SHAREHOLDER SERVICES

For information or assistance regarding your share account, including dividends, changes of address or ownership, lost certificates, to eliminate duplicate mailings or to receive shareholder material electronically**,** please contact our Transfer Agents in Canada, the United States, Hong Kong or the Philippines. If you live outside one of these countries, please contact our Canadian Transfer Agent.

Direct Deposit of Dividends

Shareholders resident in Canada, the United States and Hong Kong may have their Manulife common share dividends deposited directly into their bank account. To arrange for this service please contact our Transfer Agents.

Dividend Reinvestment Program

Canadian and U.S. resident common shareholders may purchase additional common shares without incurring brokerage or administrative fees by reinvesting their cash dividend through participation in Manulife’s Dividend Reinvestment and Share Purchase Programs. For more information, please contact our stock transfer agents: in Canada – TSX Trust Company; in the United States—American Stock Transfer & Trust Company, LLC

For other shareholder issues please contact Manulife Shareholder Services via e-mail to shareholder_services@manulife.com

More information

Information about Manulife Financial Corporation, including electronic versions of documents and share and dividend information is available online at www.manulife.com

TRANSFER AGENTS

Canada

TSX Trust Company

P.O. Box 700 Station B

Montreal, QC

Canada H3B 3K3

Toll Free: 1 800 783-9495

Collect: 416 682-3864

E-mail: manulifeinquiries@tmx.com

Website: www.tsxtrust.com

TSX Trust Company offices are also located in Toronto, Vancouver and Calgary.

United States

American Stock Transfer & Trust Company, LLC

P.O. Box 199036

Brooklyn, NY

United States 11219

Toll Free: 1 800 249-7702

Collect: 416 682-3864

E-mail: manulifeinquiries@tmx.com

Website: www.astfinanical.com

Hong Kong

Tricor Investor Services Limited

Level 54, Hopewell Centre

183 Queen’s Road East

Wan Chai, Hong Kong

Telephone: 852 2980-1333

E-mail: is-enquiries@hk.tricorglobal.com

Website: www.tricoris.com

Philippines

Rizal Commercial Banking Corporation

Ground Floor, West Wing,

GPL (Grepalife) Building,

221 Senator Gil Puyat Avenue,

Makati City, Metro Manila, Philippines

Telephone: 632 5318-8567

E-mail: rcbcstocktransfer@rcbc.com

Website: www.rcbc.com/stocktransfer

AUDITORS

Ernst & Young LLP

Chartered Accountants

Licensed Public Accountants

Toronto, Canada

MFC DIVIDENDS
Common Share Dividends Paid for 2021 and 2020			Per Share<br><br><br>Amount<br> <br>Canadian ($)
Year 2021	Record Date	Payment Date
Fourth Quarter	February 23, 2022	March 21, 2022	$    0.33
Third Quarter	December 1, 2021	December 20, 2021	$    0.33
Second Quarter	August 17, 2021	September 20, 2021	$    0.28
First Quarter	May 18, 2021	June 21, 2021	$    0.28
Year 2020
Fourth Quarter	February 23, 2021	March 19, 2021	$    0.28
Third Quarter	November 23, 2020	December 21, 2020	$    0.28
Second Quarter	August 17, 2020	September 21, 2020	$    0.28
First Quarter	May 19, 2020	June 19, 2020	$    0.28
Common and Preferred Share Dividend Dates in 2022*
---	---	---
* Dividends are not guaranteed and are subject to approval by the Board of<br>Directors.
Record date	Payment date
Common and<br> <br>Preferred<br>Shares	Common Shares	Preferred Shares
February 23, 2022	March 21, 2022	March 19, 2022
May 25, 2022	June 20, 2022	June 19, 2022
August 23, 2022	September 19, 2022	September 19, 2022
November 22, 2022	December 19, 2022	December 19, 2022
221
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Manulife Decisions made easier. Lives made better. Manulife, Manulife & Stylized M Design, and Stylized M Design are trademarks of The Manufacturers Life Insurance Company IR3934E and are used by it, and by its affiliates, including Manulife Financial Corporation, under license. 12

EX-99.2

Exhibit 99.2

Notice of annual meeting of<br><br><br>common shareholders
You’re invited to attend our 2022 annual meeting<br><br><br>of common shareholders
---	---
When<br><br><br>May 12, 2022<br><br><br>11 a.m. (Eastern time)<br> <br><br><br><br>How to attend<br> <br>Our<br>2022 annual<br> <br>meeting will be held<br><br><br>as a live webcast online at<br><br><br>https://web.lumiagm.com/463955449<br> <br><br><br><br>Please read the voting<br> <br>section starting on<br><br><br>page 7 for detailed<br> <br>information about how<br>to<br> <br>attend the meeting, vote<br> <br>and ask<br>questions. More<br> <br>information and updates<br> <br>on<br>how to attend the<br> <br>meeting will be made<br><br><br>available on our website<br> <br>(https://<br><br>www.manulife.com/en/<br>investors/annual-<br>meeting.html)	Four items of business<br><br><br>• Receiving the consolidated financial statements and auditors’ reports for the year ended December 31,<br>2021<br> <br>• Electing directors<br><br><br>• Appointing the auditors<br><br><br>• Having a say on executive pay
	Other matters that are properly brought before the meeting will be considered, but we are not aware of any at this time. The annual<br>meeting for The Manufacturers Life Insurance Company will be held at the same time and will also be a live webcast.
	Manulife is focused on protecting the health and well-being of our employees, clients and<br>communities. We are actively monitoring COVID-19 developments and the directives from public health and government authorities for group gatherings and physical distancing.<br><br><br><br> <br>This care and concern also extends to our shareholders<br>and policyholders, which is why we have decided to hold our 2022 annual meeting by live webcast instead of in person. We encourage you to vote your shares before the meeting.<br> <br><br><br><br>Anyone can attend the meeting, but you need a control number to vote or ask questions. Please see pages 7 to 11 for detailed<br>information about how to attend the meeting, vote and ask questions.
	By order of the board of directors,<br><br><br><br> <br><br><br><br><br><br> <br>Antonella Deo<br> <br>Corporate Secretary<br><br><br><br> <br>March 16, 2022

EX-99.3

Exhibit 99.3

Manulife 2022 Management information circular Manulife Financial Corporation Annual Meeting May 12, 2022 Notice of annual meeting of shareholders Your participation is important. Please read this document and vote. 1

Notice of annual meeting of<br><br><br>common shareholders
You’re invited to attend our 2022 annual meeting<br><br><br>of common shareholders
---	---
When<br><br><br>May 12, 2022<br><br><br>11 a.m. (Eastern time)<br> <br><br><br><br>How to attend<br> <br>Our<br>2022 annual<br> <br>meeting will be held<br><br><br>as a live webcast online at<br><br><br>https://web.lumiagm.com/463955449<br> <br><br><br><br>Please read the voting<br> <br>section starting on<br><br><br>page 7 for detailed<br> <br>information about how<br>to<br> <br>attend the meeting, vote<br> <br>and ask<br>questions. More<br> <br>information and updates<br> <br>on<br>how to attend the<br> <br>meeting will be made<br><br><br>available on our website<br> <br>(https://<br><br>www.manulife.com/en/<br>investors/annual-<br>meeting.html)	Four items of business<br><br><br>• Receiving the consolidated financial statements and auditors’ reports for the year ended December 31,<br>2021<br> <br>• Electing directors<br><br><br>• Appointing the auditors<br><br><br>• Having a say on executive pay
	Other matters that are properly brought before the meeting will be considered, but we are not aware of any at this time. The annual<br>meeting for The Manufacturers Life Insurance Company will be held at the same time and will also be a live webcast.
	Manulife is focused on protecting the health and well-being of our employees, clients and<br>communities. We are actively monitoring COVID-19 developments and the directives from public health and government authorities for group gatherings and physical distancing.<br><br><br><br> <br>This care and concern also extends to our shareholders<br>and policyholders, which is why we have decided to hold our 2022 annual meeting by live webcast instead of in person. We encourage you to vote your shares before the meeting.<br> <br><br><br><br>Anyone can attend the meeting, but you need a control number to vote or ask questions. Please see pages 7 to 11 for detailed<br>information about how to attend the meeting, vote and ask questions.
	By order of the board of directors,<br><br><br><br> <br><br><br><br><br><br> <br>Antonella Deo<br> <br>Corporate Secretary<br><br><br><br> <br>March 16, 2022

Message to shareholders

John Cassaday<br> <br><br><br><br>Chairman of the Board

Dear fellow shareholders,

On behalf of the board of directors, we are pleased to invite you to the annual meeting of common shareholders of Manulife Financial Corporation on May 12, 2022. As a holder of common shares, you have the right to receive our financial statements and to vote your shares at the meeting.

Our 2022 management information circular, which starts on page 3, includes important information about the business of the meeting and the items you will be voting on, as well as information about our corporate governance practices and executive compensation program. Please read the circular before you vote your shares.

Manulife’s President and CEO, Roy Gori, and the Executive Leadership Team continue to provide thoughtful leadership and drive strong progress against our five strategic priorities, fully supported by the board of directors. We are proud of Manulife’s many achievements this year and appreciate the dedication of the Manulife team, who keep our customers at the centre of everything we do.

Your board of directors recognizes the importance of fostering diversity, equity, and inclusion at all levels of the organization and our diversity policy and board succession practices reflect our long-standing commitment to board diversity. Highly qualified directors with diverse backgrounds bring varied perspectives and experiences, generating healthy debate and discussion, which we believe leads to more effective decision making.

Over the past year the board continued its focus on board succession to support Manulife’s strategic priorities by identifying, appointing and onboarding May Tan and Vanessa Kanu, two accomplished professionals with deep expertise in areas critical to Manulife’s ongoing growth and ambitions for the future. We also had two retirements from the board in the past year - we would like to thank Sheila Fraser and John Palmer for their valued contributions during their terms. You can read more about the directors nominated for election at the meeting starting on page 16.

You can read about Manulife’s accomplishments in 2021 and their impact on our executive pay in the letter from the chair of the management resources and compensation committee beginning on page 42. You will also find a more detailed discussion of the year’s performance and Manulife’s strategic progress in our 2021 annual report – available at manulife.com.

Manulife’s board of directors continues to believe that directly engaging with shareholders and other stakeholders is a critical process for receiving and understanding feedback on subjects that matter most to our stakeholders. In 2021, we continued to spend a considerable amount of time meeting with many of our shareholders. The discussions covered a broad range of topics, such as governance, the implementation of the IFRS 17 accounting standard, Manulife’s strategy and approach on ESG matters, including our Climate Action Plan and emission targets, risk management, executive compensation and Manulife’s progress on executing against its strategic priorities, including the growth of highest potential businesses, optimization of legacy businesses and capital deployment.

Please readthe circular and vote your shares

The meeting will be held as a live webcast on May 12, 2022 at 11:00 a.m. (Eastern time). You can find information about how to attend the meeting on page 7.

Your vote is important to us – we encourage you to consider the information set out in the circular and exercise your voting rights. See page 8 for details about how to vote.

2022 Management information circular	1

The meeting will cover four items of business: (1) receiving our financial statements; (2) voting to elect directors; (3) voting to appoint the auditors; and (4) voting to have a ‘say on executive pay’.

You will vote on all items except for the financial statements. The board recommends you vote FOR items 2 to 4.

We look forward to welcoming you at the meeting.

John Cassaday

Chairman of the Board of Directors

March 16, 2022

2	Manulife Financial Corporation

About this Management

Information Circular

This management information circular is being made available to you because you owned common shares of Manulife Financial Corporation as of the close of business on March 16, 2022. It includes important information about the meeting, the items of business to be covered and how to vote your shares.

You’re entitled to receive notice of, and vote these shares at, our 2022 annual meeting of common shareholders.

Management is soliciting your proxy for the meeting, which means we’re contacting you to encourage you to vote. This will be done mainly by mail, but you may also be contacted by phone, including in connection with the use of the Broadridge QuickVote^™^ service. We have retained Kingsdale Advisors (Kingsdale), and they may assist us with this process. We pay the costs of the engagement with Kingsdale, which we expect to be approximately $45,000.

In this document:

•	we, us, our, company and Manulife mean Manulife Financial Corporation
•	you, your and shareholder refer to holders of Manulife common shares
---	---
•	circular means this management information circular
---	---
•	meeting means our annual meeting of common shareholders on May 12, 2022
---	---
•	common shares or shares means common shares of Manulife Financial Corporation
---	---
•	Manufacturers Life means The Manufacturers Life Insurance Company
---	---

Information in this circular is as at February 28, 2022 and in Canadian dollars, unless indicated otherwise. Any information contained in, or otherwise accessible through, websites mentioned in this circular does not form a part of this document.

For more information

You can find financial information about Manulife in our 2021 annual report, which includes our audited consolidated financial statements and management’s discussion and analysis (MD&A) for the year ended December 31, 2021. The audit committee section of our annual information form has information about the audit committee, including the committee charter.

These documents are available on manulife.com, on SEDAR (sedar.com) and on EDGAR (sec.gov/edgar). You can also ask us for a copy of our 2021 annual report – simply email us at shareholder_services@manulife.com.

2022 Management information circular	3

Delivery of the 2022management information circular

As permitted by the Canadian Securities Administrators and pursuant to an exemption from the proxy solicitation requirement received from the Office of the Superintendent of Financial Institutions Canada, we are using notice and access to deliver this circular to both our registered and non-registered (beneficial) shareholders.

What is notice and access?

Instead of receiving a paper copy of the circular, a package was sent to shareholders with a notice explaining how to access the circular online and how to request a paper copy. A form of proxy for registered shareholders and ownership statement holders, or a voting instruction form for non-registered (beneficial) shareholders, was included with the notice with instructions so you can vote your shares.

How to access the circular online

Our website: https://www.manulife.com/en/investors/annual-meeting.html

Our transfer agent’s website: www.meetingdocuments.com/TSXT/MFC

On SEDAR: www.sedar.com

How to request a paper copy of the circular:

Shareholders may request a paper copy of the circular up to one year from the date the circular was filed on SEDAR. If you would like to receive a paper copy prior to the meeting, please follow the instructions provided in the notice or make a request by going to www.meetingdocuments.com/TSXT/MFC or contacting our transfer agent, TSX Trust Company (TSX Trust), at 1-888-433-6443 (toll free in Canada and the United States) or 416-682-3801 or via email at tsxt-fulfilment@tmx.com.

If you have questions about notice and access please call TSX Trust at 1-800-783-9495 (Canadian residents), 1-800-249-7702 (U.S. residents) or 416-682-3864.

Important information about your shares

On occasion you may be contacted by third parties with unsolicited offers to purchase your shares, often at prices below market value. Securities administrators in Canada and the U.S. recommend that investors exercise caution with these types of offers.

Manulife is not associated with these offers and does not endorse or approve them. If you are contacted with an offer to purchase your Manulife shares or have any questions with respect to your shares, please speak with your investment advisor or contact TSX Trust at 1-800-783-9495 (Canadian residents), 1-800-249-7702 (U.S. residents) or 416-682-3864.

4	Manulife Financial Corporation
Where to find it
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About the meeting
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Who can vote	7
How to vote	8
What the meeting will cover	12
About the directors
Key things about the board	16
Director profiles	18
2021 board committee reports	32
How we pay our directors	37
Executive compensation
Message from the Chair	42
Compensation discussion and analysis	44
Executive summary	44
Our compensation philosophy	46
Benchmarking against our peers	48
Our compensation program and 2021 performance	50
Compensation of the named executives	62
Share performance	79
Executive compensation details	80
Summary compensation table	80
Equity compensation	82
Retirement benefits	86
Termination and change in control benefits	92
Compensation oversight	97
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How the board oversees executive compensation	97
Managing compensation risk	99
The decision-making process	102
Compensation of employees who have a material impact on risk	104
Governance at Manulife
About the Manulife board	109
Board committees	111
Board roles and responsibilities	111
Serving as a director	119
Serving on other boards	119
Integrity	119
Equity ownership	119
Term limits	119
Independence	120
Board succession and diversity	121
Skills and experience	122
Director development	124
Assessment	125
Subsidiary governance	126
Other information
Sustainability and ESG	127
Liability insurance	128
Loans to directors and officers	129
Directors’ approval	129
This symbol tells you where<br><br><br>you can find more information
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2022 Management information circular	5
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About the meeting

This year’s annual meeting is on May 12, 2022.

Read this section to find out who can vote, how you can vote and what you will be voting on.

Questions?<br> <br><br><br><br>Call our transfer agent in your region if you have any questions about the meeting. Registered holders can also call our transfer agent to get information on options<br>for managing your share account.
Canada	1-800-783-9495
United States	1-800-249-7702
Hong Kong	852-2980-1333
Philippines	632-5318-8567
Sign up fore-delivery<br> <br><br> <br>We want to provide you with<br>information the way you want to receive it. You can choose to receive<br>your shareholder materials online instead of in the mail.<br> <br><br><br><br>Non-registered (beneficial) shareholders<br><br><br>Visit proxyvote.com and enter the control number from your voting instruction form. Select “sign up”<br>to go paperless.<br><br><br><br> <br>Registered shareholders and ownership statement holders<br><br><br>Visit www.tsxtrust.com/MFCdigital and follow the instructions.
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Where to find it
---	---
Who can vote	7
How to vote	8
What the meeting will cover	12
6	Manulife Financial Corporation
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About the Meeting

Who can vote

If you held Manulife common shares as of 5 p.m. (Eastern time) on March 16, 2022 (the record date), you’re entitled to receive<br>notice of and vote at our 2022 annual meeting. We had 1,937,090,248 common shares outstanding as of this date and each share carries one vote.
	About quorum<br><br><br>Before the meeting can go ahead, at least two shareholders have to be present at the meeting, in person or by<br>proxy.

We must receive a simple majority of votes cast for an item to be approved.

Voting restrictions

Shares beneficially owned by the following entities and persons cannot be voted (except in circumstances approved by the Minister of Finance (Canada)):

•	the Government of Canada or any of its political subdivisions or agencies
•	the government of a province or any of its political subdivisions or agencies
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•	the government of a foreign country or any foreign government’s political subdivisions or agencies<br>
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•	any person who has acquired more than 10% of any class of shares of Manulife.
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Also, if any person, an entity controlled by any person, or any person together with an entity that person controls, beneficially owns more than 20% of the shares that can be voted, that person or entity cannot vote unless the Minister of Finance (Canada) allows it.

We are not aware of any person who beneficially owns or exercises control or direction (directly or indirectly) over more than 10% of the voting rights attached to Manulife common shares.

How to attend the meeting as a shareholder
On the day of the meeting:<br><br><br>1.  Log in: https://web.lumiagm.com/463955449. The link will be accessible one hour before the meeting start<br>time to allow you to test your connection<br> <br><br> <br><br><br><br>2.  Click “I have a control number”<br><br><br>3.  Enter your control number (on the proxy form included with the meeting materials)<br><br><br>4.  Enter your password: “manulife2022” (case sensitive)
Shareholders and their duly appointed proxyholders will be able to ask questions and vote during the meeting. For more information about how to vote during the meeting<br>and asking questions, please see pages 8 to 10, and additional instructions will be provided at the meeting, as necessary. Questions should be of interest to all shareholders, not personal in nature. If your question relates to a personal<br>matter, we will contact you after the meeting to follow up on your question. If we cannot answer a question during the meeting because of timing or technical limitations, we will follow up with you as soon as practicable after the meeting.<br><br><br><br> <br>More information and updates on how to attend the meeting will be available on our website<br>(https://www.manulife.com/en/investors/annual-meeting.html).
How toattend the meeting as a guest
Anyone can attend the meeting remotely as a guest. Guests may attend the meeting remotely but cannot vote or ask questions.<br><br><br><br> <br>1.  Log in:<br>https://web.lumiagm.com/ 463955449. ****<br> <br>2.  Click “I am a guest” and then complete<br>the required fields.
To access the meeting online either as a shareholder or a guest you<br>will need the latest versions of Chrome, Safari, Edge or Firefox. Please do not use Internet Explorer. You should log in early to ensure your browser is compatible. Internal network security protocols including firewalls and VPN connections may<br>block access to the Lumi platform. If you are experiencing any difficulty connecting or watching the meeting, ensure your VPN setting is disabled or use a computer on a network not restricted by the security settings of your organization. In the<br>event of difficulties during the registration process or with accessing and attending the meeting, please contact TSX Trust at 1-800-783-9495 (Canadian residents), 1-800-249-7702 (U.S. residents) or 416-682-3864.
2022 Management information circular	7
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How to vote

There are two ways to vote – by proxy before the meeting, or during the meeting. How you vote depends on whether you’re a registered shareholder, an ownership statement holder or a non-registered (beneficial) shareholder.

Shareholders are encouraged to vote their shares and submit proxies before the meeting.

Seepage 11 for important details about voting by proxy.	Registered shareholders and ownership statement holders<br><br><br>(your package includes a proxy form)<br> <br><br><br><br>You’re a registered shareholder if you have a share certificate in your name or your shares are recorded electronically in the Direct<br>Registration System (DRS) maintained by our transfer agent.<br> <br><br> <br>You’re<br>an ownership statement holder if you hold a share ownership statement that was issued when Manufacturers Life demutualized.
Vote by proxy<br> <br>You<br>or your authorized representative must complete the proxy form. If you’re a corporation or other legal entity, your authorized representative must complete the form.	You can vote your shares in one of four ways:
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		On the internet – Go to the website indicated on your proxy form. You will need the<br>personal identification/control number on the form.
		By phone (Canada and U.S. only) – Call the toll-free number on the proxy form and<br>follow the instructions. You will need the personal identification/control number on the form.
		By mail – Complete your proxy form and return it in the envelope provided.
		On your smartphone – Use the QR code found on your proxy form.
	Your proxy must be received by 5 p.m. (Eastern time) on May 10, 2022 for your vote to be counted. If<br>you’re mailing your proxy form, be sure to allow enough time for the envelope to be delivered. The deadline for the deposit of proxies can be waived by the Chairman at his discretion, without notice.<br><br><br><br> <br>If the meeting is adjourned, your proxy must be received by 5 p.m.(Eastern time) two business days before the meeting is reconvened.
Vote online during<br> <br>the meeting<br><br><br>You will find your control number on the proxy form included with your meeting materials.<br> <br><br><br><br>You will need your control number to be able to vote or ask questions at the meeting.	On the day of the meeting:<br> <br><br><br><br>1.  Log in: https://web.lumiagm.com/463955449. The link will be accessible one hour<br>before the meeting start time to allow you to test your connection.<br> <br><br><br><br>2.  Click “I have a control number”<br><br><br><br> <br>3.  Enter your control<br>number (on the proxy form included with the meeting materials)<br> <br><br><br><br>4.  Enter your password: “manulife2022” (case sensitive)<br><br><br><br> <br>5.  Follow the instructions to cast your<br>vote.<br> <br><br> <br>If you have already voted by proxy, your vote at the meeting, if<br>properly cast, will automatically revoke your previous vote.
8	Manulife Financial Corporation
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About the Meeting

		Registered shareholders and ownership statement holders<br><br><br>(continued)
Changing your vote<br> <br>You can revoke your proxy<br>form if you change your mind about how you want to vote your shares.		Sending new voting instructions with a later date will revoke the instructions you previously submitted.<br><br><br><br> <br>You can send a new proxy on the internet, by phone or by mail, by following<br>the instructions above. Or send a notice in writing, signed by you or your authorized representative to: Corporate Secretary, Manulife Financial Corporation, 200 Bloor Street East, Toronto, Canada M4W 1E5.<br><br><br><br> <br>Your new proxy must be received by 5 p.m. (Eastern time) onMay 10, 2022 for your vote to be counted. If you’re mailing your new proxy form, be sure to allow enough time for the envelope to be delivered.<br> <br><br><br><br>If the meeting is adjourned, your proxy must be received by 5 p.m. (Eastern time) two business days before the meeting is reconvened.<br><br><br><br> <br>If you miss the deadline, you can only revoke your proxy by giving a notice<br>in writing to the Chairman before the meeting begins. The notice must be signed by you or your authorized representative.
	See page 11 for important details about voting by proxy.	Non-registered (beneficial) shareholders<br><br><br>(your package includes a voting instruction form)<br> <br><br><br><br>You’re a non-registered shareholder if you hold your shares through an intermediary (a bank,<br>trust company, securities broker or other financial institution). This means the shares are registered in your intermediary’s name and you’re the beneficial shareholder.
Vote by proxy<br> <br>You<br>or your authorized representative must complete the voting instruction form.<br> <br>If you’re a corporation or other legal entity, your authorized representative must<br>complete the form.	You can give your voting instructions in one of four ways:
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		On the internet – Go to the website indicated on your voting instruction form and<br>follow the instructions on screen.
		By phone (Canada and U.S. only) – Call the toll-free number on your voting instruction<br>form and follow the instructions.
		By mail – Complete your voting instruction form and return it in the envelope<br>provided.
		On your smartphone – Use the QR code found on your voting instruction<br>form.
	Your intermediary must receive your voting instructions with enough time to act on your instructions. Check the<br>form for the deadline for submitting your voting instructions. If you’re mailing your voting instruction form, be sure to allow enough time for the envelope to be delivered. The deadline for the deposit of proxies can be waived by the Chairman<br>at his discretion, without notice.
2022 Management information circular	9
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Non-registered (beneficial) shareholders<br><br><br>(continued)
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Vote online during the meeting<br><br><br>You must appoint yourself (or another person) as proxyholder.<br> <br><br><br><br>Then you or the person you appoint must contact TSX Trust to get a control number.<br> <br><br><br><br>You need a control number to be able to vote or ask questions at the meeting.	First, appoint yourself as proxyholder by printing your name in the space provided on<br>the voting instruction form. You can also appoint someone else to be your proxyholder (see page 11 for more information). You can do this in one of two ways:<br><br><br>• sign and return the form in the envelope provided but do not fill in your voting instructions because you will<br>vote online during the meeting (check the form for the deadline for submitting it, and make sure you allow enough time for the envelope to be delivered), or<br><br><br>• go to the website indicated on the voting instruction form and follow the instructions.<br><br><br><br> <br>Then get a control number by contacting TSX Trust by no later than 5 p.m.(Eastern time) on May 10, 2022. You can do this in one of two ways:<br> <br>• call 1-866-751-6315 (within North America) or 212-235-5754 **** (outside of North America),<br>or<br> <br>• go online at www.tsxtrust.com/control-number-request.<br><br><br><br> <br>If you appointed someone else to be your proxyholder, that person must<br>contact TSX Trust to get a control number.<br> <br><br> <br>On the day of the meeting:<br><br><br>1.  Log in: https://web.lumiagm.com/ 463955449. The link will be accessible one<br>hour before the meeting start time to allow you to test your connection.<br> <br>2.  Click “I<br>have a control number”<br> <br>3.  Enter your control number<br><br><br>4.  Enter your password: “manulife2022” (case sensitive)<br><br><br>5.  Follow the instructions to cast your vote. If you have already voted by proxy, your vote<br>at the meeting, if properly cast, will automatically revoke your previous vote.
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Changing your vote<br> <br>You can<br>revoke your voting instruction form if you change your mind about how you want to vote your shares.	Follow the instructions on your voting instruction form, or contact your intermediary<br>for more information.<br> <br><br> <br>Your intermediary must receive your voting<br>instructions with enough time to act on your instructions. Check the form for the deadline for submitting your voting instructions. If you’re mailing your voting instruction form, be sure to allow enough time for the envelope to be delivered.<br>The deadline for the deposit of proxies may be waived or extended by the Chairman at his discretion, without notice.
10	Manulife Financial Corporation
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About the Meeting

More about voting by proxy<br> <br><br><br><br>Voting by proxy is the easiest way to vote. It means you’re giving someone else (your proxyholder) the authority to attend the meeting and vote for you according<br>to your instructions.<br> <br><br> <br>Roy Gori, President and Chief Executive Officer or, in his place, John<br>M. Cassaday, Chairman (with full power of substitution) have agreed to act as Manulife proxyholders to vote your shares at the meeting according to your instructions.<br> <br><br><br><br>If you do not name a different proxyholder when you complete your form, you are authorizing Mr. Gori or Mr. Cassaday to act as your proxyholder to vote for<br>you at the meeting according to your instructions.

About confidentiality and voting results<br><br><br>Our transfer agent independently counts and tabulates the votes to maintain confidentiality. A proxy form or voting instruction form is only<br>referred to us if it’s clear that a shareholder wants to communicate with the board or management, the validity of the form is in question, or the law requires it.<br> <br><br><br><br>After the meeting the voting results will be posted on manulife.com, on SEDAR (sedar.com) and on EDGAR (sec.gov/edgar).

If you do not indicate on the form how you want to vote your shares, Mr. Gori or Mr. Cassaday will vote:

•	FOR the election of the 14 nominated directors in this circular
•	FOR the appointment of Ernst & Young LLP as auditors
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•	FOR the advisory vote on our approach to executive compensation
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You can also appoint someone else to be your proxyholder – that individual does not need to be a Manulife shareholder. To do so, print the person’s name inthe blank space provided on the proxy form or voting instruction form, sign and return the form in the envelope provided but do not fill in your voting instructions because your proxyholder will vote during the meeting (check the form for thedeadline for submitting it, and make sure you allow enough time for the envelope to be delivered), or go to the website indicated on the proxy form or voting instruction form and follow the instructions. Once your intermediary receives yourinstructions your proxyholder needs to get a control number by contacting TSX Trust by no later than 5 p.m. (Eastern time) on May 10, 2022. They can do this in one of two ways:

•	call<br>1-866-751-6315 (within North America) or 212-235-5754 (outside of North America), or<br>
•	go online at www.tsxtrust.com/control-number-request.
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If there are amendments to the items to be voted on or any other matters that are properly brought before the meeting or any adjournment, your proxyholder can vote your shares as they see fit.

Questions?<br><br><br><br> <br>Call the transfer agent in your region if you have any questions or to ask for a new proxy form<br>(see page 6 for details).
2022 Management information circular	11
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What the meeting will cover

The meeting will cover four items of business.

1.Financial statements (manulife.com) ****

Our 2021 consolidated financial statements and the auditors’ reports on those financial statements will be presented at the meeting. You can find a copy in our 2021 annual report on manulife.com.

2. Electing directors (see page 15) ****

You will elect 14 directors to serve on our board until either the end of next year’s annual meeting of shareholders, or earlier if they leave the board. All 14 nominated directors currently serve on the board. You can read about the nominated directors beginning on page 15. The board recommends that you vote FOR the election of each nominated director.

3. Appointing the auditors

Ernst & Young LLP (Ernst & Young) (or a predecessor) have acted as external auditors to Manulife or an entity within the Manulife group of entities since 1905. The audit committee has recommended that the board re-appoint them as our auditors for fiscal 2022 to serve until the end of our next annual meeting.

We maintain independence from the external auditors through audit committee oversight, a robust regulatory framework in Canada, including the requirement to rotate the lead audit partner at least every five years, and Ernst & Young’s own internal independence procedures. The audit committee also conducts a formal review of the external auditors every year and a more comprehensive review every five years. The next comprehensive review is scheduled for 2024. We also plan to initiate a tendering process for the audit engagement once the initial adoption of IFRS 17 Insurance Contracts is complete in 2024. Given the complexities associated with IFRS 17, the audit committee does not feel it would be prudent to initiate a tendering process before adoption and the first annual audit cycle is complete.

The table below lists the services Ernst & Young provided to Manulife and its subsidiaries in the last two fiscal years and the fees they charged each year:

(in millions)	2021
Audit fees	****	31.7	$30.7
Includes the audit of our financial statements as well as the financial statements of our subsidiaries, segregated funds, audits of statutory filings, prospectus services,<br>report on internal controls, reviews of quarterly reports and regulatory filings
Audit-related fees	****	3.1	$3.5
Includes consultation concerning financial accounting and reporting standards not classified as audit, due diligence in connection with proposed or consummated transactions<br>and assurance services to report on internal controls for third parties
Tax fees	****	0.6	$1.0
Includes tax compliance, tax planning and tax advice services
All other fees	****	0.2	$0.2
Includes other advisory services
Total	****	35.6	$35.4

All values are in US Dollars.

Note: Total fees above exclude fees of $9.7 million in 2021 and $9.5 million in 2020 for professional services provided by Ernst & Young to certain investment funds managed by subsidiaries of Manulife Financial Corporation. For certain funds, these fees are paid directly by the funds. For other funds, in addition to other administrative costs, the subsidiaries are responsible for the auditor’s fees for professional services, in return for a fixed administration fee.

12	Manulife Financial Corporation

About the Meeting

Our auditor independence policy requires the audit committee to pre-approve all audit and<br>permitted non-audit services (including the fees and conditions) the external auditor provides.<br> <br><br><br><br>If a new service is proposed during the year that is outside the pre-approved categories or budget, it must be pre-approved by the audit committee, or by a member that the committee has appointed to act on its behalf.<br> <br><br><br><br>The board recommends that you vote FOR the appointment of Ernst & Young as auditors.<br><br><br><br> <br>4. Having a say on executive pay<br><br><br><br> <br>(see page 41)<br><br><br>The board believes that executive compensation programs must be sound, fair and competitive with the market and support our strategy and progress.

Audit committee review<br><br><br>The audit committee conducts a formal review of the external auditors every year, and a more comprehensive review every five years. These reviews<br>are based on recommendations by the Chartered Professional Accountants of Canada (CPA Canada) and the Canadian Public Accountability Board to assist the audit committee in their oversight duties.<br><br><br><br> <br>A comprehensive review was conducted in 2019, covering the five-year period<br>ended December 31, 2018. The 2021 review included an evaluation of the engagement partner and team, their independence, objectivity and the quality of communication and audit work performed.

The board recognizes the increased scrutiny of executive compensation generally and believes that shareholders should have the opportunity to fully understand our compensation objectives, philosophy and principles, and have a say on our approach to executive compensation. As a result, we’re asking you to vote on the following resolution:

Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders accept the approachto executive compensation disclosed in the management information circular delivered in advance of the 2022 annual meeting of common shareholders of Manulife Financial Corporation.

This is an advisory vote, so the results are not binding. The board will, however, take the results into account, together with feedback received from other shareholder engagement activities, when making decisions about compensation policies, procedures and executive pay in the future.

We discuss our executive compensation program and the impact our performance had on executive compensation for 2021 in detail starting on page 42. This disclosure has been approved by the board on the recommendation of the management resources and compensation committee.

The board recommends that you vote FOR our approach to executive compensation.

2022 Management information circular	13

Last year shareholders voted 92.62% in favour of our approach to executive compensation. If a significant number of shareholders oppose the resolution, the board will engage with shareholders (especially those who are known to have voted against it) to understand their concerns and will continue to review our approach to executive compensation in the context of those concerns.

We encourage any shareholders who are thinking of voting against the resolution to contact the board to discuss their specific issues or concerns (see page 109 for details about how to contact the board and page 117 for details about our shareholder engagement activities).

About shareholder proposals and proxy access<br> <br><br><br><br>Shareholder proposals<br> <br>We must receive shareholder proposals or nominations<br>under our proxy access policy for our 2023 annual meeting by 5 p.m. (Eastern time) on December 16, 2022 to consider including them in next year’s management information circular. Shareholder proposal submissions must be in writing and meet<br>the requirements of the Insurance Companies Act (Canada), which you can find online at http://laws-lois.justice.gc.ca. See page 118 for more information on our proxy access policy.<br><br><br><br> <br>Send your proposal or nomination notice to:<br><br><br>Corporate Secretary<br> <br>Manulife Financial Corporation<br><br><br>200 Bloor Street East<br> <br>Toronto, Ontario M4W 1E5<br><br><br>Canada<br> <br>email: corporate_governance@manulife.com
14	Manulife Financial Corporation
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About the directors

Read about the nominated directors before you vote your shares.

This year, 14 directors have been nominated for election to the board for a one-year term. All nominated directors were elected at our 2021 meeting, except May Tan (appointed to the board in December 2021) and Vanessa Kanu (appointed to the board in February 2022).

This group of directors has the mix of skills, experience and qualifications necessary for proper oversight and effective decision-making.

Appropriate size	Independent
14	All
directors is within an appropriate range for	directors are independent, except the CEO, and
healthy debate end effective decision-making	all board committee members are independent
Qualified and financially literate	Age
All	63
directors bring a mix of the competencies and experience necessary for effective oversight, and all are financially literate	is the average age of the nominated directors
Diverse
7women	3racially/ethnically diverse
54% of the nominated independent directors are women	23% of the nominated independent directors are members of a racially/ethnically diverse group
Balanced tenure
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7.7years
is the average tenure of the nominated<br>independent<br>directors

The board has a 12-year term limit. The board chair can serve a term of five years, regardless of the number of years served as a director.

Where to find it
Key things about the board	16	2021 board committee reports	32
Director profiles	18	How we pay our directors	37
2022 Management information circular	15
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Key things about the board

Diversity

Our board recognizes the importance of diversity and is committed to fostering diversity at all levels of the organization. The board has a long history of promoting diversity and believes that having highly qualified directors from diverse backgrounds brings different perspectives and experiences to the boardroom, generating healthy discussion and debate and more effective decision-making. See page 121 for more about diversity.

7 of the nominated independent<br>directors (54%) are women<br> <br><br> <br>3 of the nominated<br>independent directors (23%) are members of a racially/ethnically diverse group

Oversight

Our board continued to provide effective oversight and guidance to management throughout the past year, continuing their frequent involvement and interactions with management and maintaining their strong relationship. Board operations were a continued area of focus in 2021, including the following:

•	In addition to regularly scheduled meetings, interaction was maintained through frequent briefings with management, written updates and informal communications, and monthly update calls in months that did not have a<br>regularly scheduled meeting, to ensure that the board had a clear line of sight into significant areas of focus for the company
•	leveraging technology to continue to interact with each other and management during board sessions, and gathering ongoing director feedback to confirm continued effectiveness and that all directors’ voices were<br>heard
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•	taking advantage of scheduling flexibility to refine
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meeting scheduling, ensuring optimal participation from all directors and allowing for more discussion and stand-alone<br>sessions on topics of strategic importance
•	continued focus on board succession by identifying, appointing and onboarding two new directors with deep expertise in<br>corporate finance, banking, and capital markets in Asia, and expertise in public company finance and extensive leadership experience – areas critical to Manulife’s ongoing growth and ambitions for the future
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•	developing a hybrid meeting schedule (in-person vs virtual) to ensure optimal<br>participation from all directors given the global nature of the board and to help attract talented directors from across the globe.
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16	Manulife Financial Corporation
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About the Directors

Majority voting

Shareholders can vote for, or withhold their vote from, each director. Directors who receive more withhold than for votes must submit their resignation.

The corporate governance and nominating committee will review the details surrounding the resignation and report to the board. The board will accept the resignation unless there are exceptional circumstances. The board will decide whether to accept the resignation within 90 days of the meeting and a news release will be issued disclosing the resignation or the reasons why the resignation was not accepted. The director will not participate in these deliberations. The resignation will be effective when it is accepted by the board.

This policy applies only in uncontested elections, where the number of nominated directors is the same as the number of directors to be elected.

2021 attendance

The table below shows the number of board and committee meetings held in 2021 and overall attendance. Quorum for board meetings is a majority of the directors and directors are expected to attend all meetings of the board and the committees they’re members of, unless there are extenuating circumstances. Sheila Fraser retired from the board on June 7, 2021 and was no longer chair of the audit committee or member of the corporate governance and nominating committee as of that date.

In the COVID-19 environment, the board and management met virtually, using technology that allowed for full and effective participation. The board took advantage of scheduling flexibility to break up meeting dates, allowing for more discussion and stand-alone sessions on topics of strategic importance. The board also held monthly update calls to keep directors informed between regularly scheduled meetings.

	Number of<br>meetings		Overall meeting<br>attendance
Board		10		99%
Audit committee		5		100%
Corporate governance and nominating committee		5		100%
Management resources and compensation committee		5		94%
Risk committee		5		97%

Equity ownership

The director profiles that follow include the value of each director’s equity ownership. We calculated the value of equity ownership by multiplying the number of their common shares and<br>deferred share units (DSUs) by 25.68, the closing price of our common shares on the TSX on February 28, 2022.
We require all directors except Mr. Gori to own common shares,<br>preferred shares and/or DSUs with a total market value of at least six times the mandatory equity portion of the annual board retainer. Mr. Gori has separate equity ownership requirements as President and CEO, which he meets (see page<br>101).

All values are in US Dollars.

Directors are expected to meet their equity ownership requirements within six years of joining the board. The minimum as of February 28, 2022 was $780,927 (US$615,000, using an exchange rate of US$1.00 = $1.2698). Fluctuations in foreign exchange rates will cause variances in the minimum ownership requirements.

2022 Management information circular	17

Director profiles

John M. Cassaday (Chairman)<br><br><br><br> <br>Toronto, ON, Canada/Age 68/Independent
Key competencies and experience
---	---
•  Talent management/Executive compensation	• Public company executive/Director
•  Technology/Operations	• Digital transformation/Sales/Marketing
Mr. Cassaday has strong business and<br>senior executive experience and also serves on other public company boards. This experience qualifies him to serve as the chair of Manulife’s board and as a member of the corporate governance and nominating committee.
John Cassaday was appointed as Chairman of the Board on May 4, 2018. Mr. Cassaday was previously President and Chief Executive<br>Officer of Corus Entertainment Inc., a position he held since its inception in 1999 until his retirement on March 31, 2015. Prior to Corus, Mr. Cassaday was Executive Vice President of Shaw Communications, President and Chief Executive<br>Officer of CTV Television Network and President of Campbell Soup Company in Canada and the United Kingdom.<br> <br><br><br><br>Mr. Cassaday is a Fellow of the Institute of Corporate Directors, has an MBA from the Rotman School of Management at the University of Toronto as well as an Honorary<br>Doctor of Laws from the University of Toronto, and is a Member of the Order of Canada.<br> <br><br> <br>2021meeting attendance<br> <br>As Chairman, Mr. Cassaday is not a member of the audit, management resources and compensation or risk committees but attends at the<br>invitation of the respective committee chair.			****	Director since<br> <br>April 1993<br><br><br><br> <br><br> <br><br><br><br>Term limit:<br> <br>2023<br><br><br><br> <br><br> <br>2021 votes<br>for: 97.22%<br> <br><br> <br><br><br><br>Public company boards (last five years)<br> <br><br><br><br>•  Sleep Country Canada Holdings Inc., 2015-present<br><br><br>•  Sysco Corporation, 2004-present<br><br><br>•  Spin Master Corp., 2015-2018<br><br><br>•  Gibraltar Growth Corporation,<br>2015-2017
---	---	---	---	---
Board	10 of 10	100	%
Board committees
• Audit	5 of 5	100	%
• Corporate governance and nominating	5 of 5	100	%
• Management resources and compensation	5 of 5	100	%
• Risk	5 of 5	100	%

Equity ownership (as at February 28, 2022 and February 26, 2021) ****

Year	Commonshares		DSUs		Total commonshares and DSUs		Total value
2022		21,840		241,524		263,364		6,763,188	8.7x
2021		21,840		220,520		242,360		6,148,673	7.9x
Change		0		21,004		21,004
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

18	Manulife Financial Corporation

About the Directors

Nicole S. Arnaboldi<br> <br><br><br><br>Greenwich, CT, U.S.A./Age 63/Independent
Key competencies and experience
---	---
•  Finance/Accounting	• Talent management/Executive compensation ****
•  Insurance/Reinsurance/Investment management ****	• Asia experience
•  Risk management	• Public company executive/Director ****
Ms. Arnaboldi’s extensive<br>experience at a major financial institution, specifically in the asset management field, qualifies her to serve on our board and as a member of the audit committee and corporate governance and nominating committee.
Nicole Arnaboldi is a partner at Oak Hill Capital Management, a private equity firm. She is a former senior executive at Credit Suisse, a<br>global financial services company, and its predecessor Donaldson, Lufkin and Jenrette Securities Corporation, holding a number of senior roles in their wealth and asset management businesses, including Senior Advisor, and prior to that, Vice<br>Chairman, Credit Suisse Asset Management.<br> <br><br> <br>Ms. Arnaboldi is a member of the boards of<br>Commonfund and Merit Hill Capital (non-public companies). She also serves on various Harvard University advisory boards, including for HarvardX and Harvard Law School.<br><br><br><br> <br>Ms. Arnaboldi holds a Bachelor of Arts from Harvard College, and a JD and an MBA from Harvard<br>University.<br> <br><br> <br>2021 meeting attendance			Director since<br> <br>June 2020<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2033<br> <br><br><br><br><br> <br>2021 votes for: 99.67%<br><br><br><br> <br><br> <br>Publiccompany boards (last five years)<br> <br><br><br><br>• None
---	---	---	---
Board	10 of 10	100%
Board committees (Jan – Nov)
• Management resources and compensation	4 of 4	100%
• Risk committee	5 of 5	100%
Board committees (December)
• Audit	–	–
• Corporate governance and nominating	1 of 1	100%
On December 1, 2021 Nicole Arnaboldi’s committee membership<br>changed from the management resources and compensation committee and risk committee to the audit committee and corporate governance and nominating committee.

Equity ownership (as at February 28, 2022 and February 26, 2021)

Year	Common<br><br><br>shares		DSUs		Total common<br><br><br>shares and DSUs		Total value
2022		6,500		18,478		24,978		641,435	0.8x
2021		6,500		7,601		14,101		357,742	0.5x
Change		0		10,877		10,877
Ms. Arnaboldi joined the board on June 9, 2020. Under the<br>director equity ownership requirements, she is expected to meet the equity ownership requirements within six years of joining the board.
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

2022 Management information circular	19
Guy L.T. Bainbridge<br> <br><br><br><br>Edinburgh, Midlothian, United Kingdom/Age 61/Independent
---
Key competencies and experience
---	---
•  Finance/Accounting	• Risk management
•  Insurance/Reinsurance/Investment management	• Asia experience
Mr. Bainbridge’s extensive<br>financial and audit experience qualifies him to serve on our board, as a member of the corporate governance and nominating committee and as chair of the audit committee.
Guy Bainbridge is a former partner with KPMG LLP. He has acted as the key audit leader of several of the UK and world’s largest<br>financial institutions and served on KPMG’s UK and Europe boards.<br> <br><br> <br>Mr. Bainbridge also<br>serves as the audit committee chair of each of Yorkshire Building Society and ICE Clear Europe Limited (non-public companies). Mr. Bainbridge is a member of the Institute of Chartered Accountants in<br>England and Wales and holds a Master of Arts from the University of Cambridge.<br> <br><br> <br>2021 meetingattendance			****	Director since<br> <br>August 2019<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2032<br> <br><br><br><br><br> <br>2021 votes for: 99.74%<br><br><br><br> <br><br> <br>Publiccompany boards (last five years)<br> <br><br><br><br>• None
---	---	---	---	---
Board	10 of 10	100	%
Board committees
• Audit (chair)	5 of 5	100	%
• Corporate governance and nominating	5 of 5	100	%

Equity ownership (as at February 28, 2022 and February 26, 2021) ****

Year	Commonshares		DSUs		Total commonshares and DSUs		Total value
2022		0		16,105		16,105		413,576	0.5x
2021		0		9,782		9,782		248,169	0.3x
Change		0		6,323		6,323
Mr. Bainbridge joined the board on August 7, 2019. Under<br>the director equity ownership requirements, he is expected to meet the equity ownership requirements within six years of joining the board.
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

20	Manulife Financial Corporation

About the Directors

Joseph P. Caron<br> <br><br><br><br>West Vancouver, BC, Canada/Age 74/Independent
Key competencies and experience
---	---
•  Talent management/Executive compensation<br><br><br>•  Asia experience	• Government relations/Public policy/Regulatory<br><br><br>• Public company executive/Director
Mr. Caron brings business, government<br>and international experience to the board, providing a well rounded perspective that positions him well to serve on our board, and as a member of the audit committee and the corporate governance and nominating committee.
Joseph Caron is the former Principal and Founder of Joseph Caron Incorporated, a consulting business established in 2010 to provide<br>strategic counsel to Asian businesses seeking to grow in Canada and Canadian businesses and organizations focused on development in Asia. His experience includes four years with the international consulting firm HB Global Advisors Corporation (2010<br>to 2013), and almost four decades with the Government of Canada where he served in a number of key diplomatic posts, including Ambassador to the People’s Republic of China (2001 to 2005), Ambassador to Japan (2005 to 2008) and High Commissioner<br>to the Republic of India (2008 to 2010).<br> <br><br> <br>Mr. Caron holds a Bachelor of Arts in Political<br>Science from the University of Ottawa. He holds honorary degrees from York University and Meiji Gakuin University, and has been named a Distinguished Fellow of the Asia Pacific Foundation and an Honorary Research Associate of the University of<br>British Columbia’s Institute of Asian Research.<br> <br><br> <br>2021 meeting attendance			****	Director since<br> <br>October 2010<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2023<br> <br><br><br><br><br> <br>2021 votes for: 98.97%<br><br><br><br> <br><br> <br>Publiccompany boards (last five years)<br> <br><br><br><br>• None
---	---	---	---	---
Board	10 of 10	100	%
Board committees
• Audit	5 of 5	100	%
• Corporate governance and nominating	5 of 5	100	%

Equity ownership (as at February 28, 2022 and February 26, 2021) ****

Year	Commonshares		DSUs		Total commonshares and DSUs		Total value
2022		8,836		74,286		83,122		2,134,573	2.7x
2021		8,836		65,822		74,658		1,894,073	2.4x
Change		0		8,464		8,464
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

2022 Management information circular	21
Susan F. Dabarno<br> <br><br><br><br>Bracebridge, ON, Canada/Age 69/Independent
---
Key competencies and experience
---	---
•  Finance/Accounting	• Asia experience
•  Insurance/Reinsurance/Investment management	• Public company executive/Director
•  Talent management/Executive compensation	• Digital transformation/Sales/Marketing
•  Technology/Operations
Ms. Dabarno brings extensive global<br>wealth management and financial services experience to the board, and her roles in various executive capacities and accounting background qualify her to serve on our board and as a member of the risk committee and the management resources and<br>compensation committee.
Susan Dabarno has been a corporate director since 2011. She has extensive wealth management and distribution expertise and served from 2009<br>to 2010 as Executive Chair, and from 2003 to 2009 as President and Chief Executive Officer, of Richardson Partners Financial Limited, an independent wealth management services firm. Before joining Richardson Partners Financial Limited,<br>Ms. Dabarno was President and Chief Operating Officer at Merrill Lynch Canada Inc.<br> <br><br> <br>She is<br>a former director of the Toronto Waterfront Revitalization Corporation (government funded organization) and Bridgepoint Health Foundation (not-for-profit).<br><br><br><br> <br>Ms. Dabarno is a Fellow of Chartered Professional Accountants (FCPA) and holds a Class II<br>Diploma from McGill University.<br> <br><br> <br>2021 meeting attendance			****	Director since<br> <br>March 2013<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2025<br> <br><br><br><br><br> <br>2021 votes for: 99.84%<br><br><br><br> <br><br> <br>Publiccompany boards (last five years)<br> <br><br><br><br>• Cenovus Energy Inc., 2017-2021
---	---	---	---	---
Board	10 of 10	100	%
Board committees (Jan – Feb)
• Audit	1 of 1	100	%
• Corporate governance and nominating	1 of 1	100	%
Board committees (March – Dec)
• Management resources and compensation	3 of 3	100	%
• Risk	4 of 4	100	%
On February 28, 2021 Susan Dabarno’s committee membership changed<br>from the audit committee and corporate governance and nominating committee to the management resources and compensation committee and risk committee.

Equity ownership (as at February 28, 2022 and February 26, 2021)

Year	Common<br><br><br>shares		DSUs		Total common<br><br><br>shares and DSUs		Total value
2022		45,250		26,621		71,871		1,845,647	2.4x
2021		45,250		20,374		65,624		1,664,881	2.1x
Change		0		6,247		6,247
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

22	Manulife Financial Corporation

About the Directors

Julie E. Dickson<br> <br><br><br><br>Ottawa, ON, Canada/Age 64/Independent
Key competencies and experience
---	---
•  Finance/Accounting	• Risk management
•  Insurance/Reinsurance/Investment management	• Government relations/Public policy/Regulatory
Ms. Dickson’s extensive financial,<br>risk and regulatory experience qualifies her to serve on our board and as a member of the risk committee and the management resources and compensation committee.
Julie Dickson is a former Superintendent of Financial Institutions, Canada, Canada’s main financial services regulator. She currently<br>serves on the Canadian Public Accountability Board, and the boards of the Dubai Financial Services Authority and the Global Risk Institute.<br> <br><br><br><br>Ms. Dickson is an Officer of the Order of Canada and holds a Bachelor of Arts from the University of New Brunswick and a Masters of Economics from Queen’s<br>University.<br> <br><br> <br>2021 meeting attendance			****	Director since August 2019<br> <br><br><br><br><br> <br>Term limit:<br><br><br>2032<br> <br><br> <br><br><br><br>2021 votes for: 99.66%<br> <br><br><br><br><br> <br>Public company boards (last five years)<br><br><br><br> <br>• None
---	---	---	---	---
Board	10 of 10	100	%
Board committees
• Management resources and compensation	5 of 5	100	%
• Risk	5 of 5	100	%

Equity ownership (as at February 28, 2022 and February 26, 2021)

Year	Common<br><br><br>shares		DSUs		Total common<br><br><br>shares and DSUs		Total value
2022		0		31,025		31,025		796,722	1.0x
2021		0		19,565		19,565		496,364	0.6x
Change		0		11,460		11,460
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

2022 Management information circular	23
Roy Gori (President and Chief Executive Officer)<br><br><br><br> <br>Toronto, ON, Canada/Age 52/Not independent (management)
---
Key competencies and experience
---	---
•  Finance/Accounting	• Technology/Operations
•  Insurance/Reinsurance/Investment management	• Asia experience
•  Risk management	• Public company executive/Director
•  Talent management/Executive compensation	• Digital transformation/Sales/Marketing
Roy Gori is the President and Chief Executive<br>Officer of Manulife, Canada’s largest insurance company, and one of the largest insurance and asset management companies in the world. Appointed in 2017, Roy’s tenure as CEO has been marked by the introduction of a clear strategy and<br>values that build on Manulife’s strong foundations to include sharper focus on the customer and a shift to digital innovation, in line with the company’s mission to make customers’ decisions easier, and lives better.
As a champion of diversity, equity and inclusion, Roy is the Chair of Manulife’s DEI Council. He is also a passionate advocate for<br>health and wellness, promoting the benefits of behavioural insurance through award-winning products like Manulife Vitality and Manulife MOVE.<br> <br><br><br><br>Roy joined Manulife as President and Chief Executive Officer for Asia in 2015. In that role, he was responsible for operations in 12 markets across Asia, driving<br>Manulife’s rapidly growing business in the region. Roy started his career at Citibank in 1989, where he held progressively senior roles and was finally responsible for the company’s Asia Pacific retail business, which included its<br>insurance and wealth management business.<br> <br><br> <br>Roy holds a Bachelor of Economics and Finance from<br>The University of New South Wales, and an MBA from the University of Technology, Sydney. He is both a member and on the Board of Directors of the Business Council of Canada, a member of the U.S. Business Council, a member of the Geneva Association,<br>and a member of the Mayor of Shanghai’s International Business Leaders’ Advisory Council. A native Australian, Roy has worked and lived in Sydney, Singapore, Thailand, and Hong Kong, and is now based in Toronto.	Director since<br> <br>October 2017<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>applies to independent directors only<br> <br><br><br><br><br> <br>2021 votes for: 99.53%<br><br><br><br> <br><br> <br>Publiccompany boards (last five years)<br> <br><br><br><br>• None
---	---

2021 meeting attendance

Board	10 of 10	100	%
Board committees
Mr. Gori is not a member of any of the board committees but<br><br><br>attends at the invitation of the Chairman and/or committee chair

Equity ownership

As CEO, Mr. Gori has separate equity ownership requirements, which he meets.

You can read more about this on page 101.

24	Manulife Financial Corporation

About the Directors

Tsun-yan Hsieh<br><br><br><br> <br>Singapore, Singapore/Age 69/Independent
Key competencies and experience
---	---
•  Finance/Accounting<br><br><br>•  Talent management/Executive compensation<br><br><br>•  Technology/Operations<br><br><br>•  Asia experience	• Government relations/Public policy/Regulatory<br><br><br>• Public company executive/Director<br><br><br>• Digital transformation/Sales/Marketing
Mr. Hsieh’s extensive management<br>leadership, management consulting and academic experience, combined with his Asia perspective, qualifies him to serve on our board, and as a member of the audit committee and the corporate governance and nominating committee.
Tsun-yan Hsieh is Chairman of LinHart Group PTE Ltd., a firm he founded in 2010 to provide<br>leadership services internationally.<br> <br><br> <br>Mr. Hsieh, a resident of Singapore, has extensive<br>consulting experience in business strategy, leadership development and corporate transformation. Mr. Hsieh joined McKinsey & Company in 1980 and was elected a director from 1990 to 2008, when he retired. During his tenure, he served as<br>Managing Director of Canada and ASEAN practices and led McKinsey’s Organization and Leadership Practice globally.<br> <br><br><br><br>Mr. Hsieh is a director on the following non-public boards: LinHart Group PTE Ltd., Manulife US Real Estate Management Pte<br>Ltd., Dyson Holdings Pte. Ltd., Singapore Health Services Pte. Ltd., the Singapore Institute of Management and the National University of Singapore (NUS) Business School. He also serves as Provost Chair Professor at the NUS Business School and the<br>Lee Kuan Yew School of Public Policy.<br> <br><br> <br>Mr. Hsieh has a Bachelor of Science in Mechanical<br>Engineering from the University of Alberta and an MBA from Harvard Business School.<br> <br><br> <br>2021meeting attendance			****	Director since October 2011<br> <br><br><br><br><br> <br>Term limit:<br><br><br>2024<br> <br><br> <br><br><br><br>2021 votes for: 99.27%<br> <br><br><br><br><br> <br>Public company boards (last five years)<br><br><br><br> <br>• Singapore<br>Airlines,<br>2012-present
---	---	---	---	---
Board	9 of 10	90	%
Board committees (Jan – Feb)
• Management resources and compensation	2 of 2	100	%
• Risk	1 of 1	100	%
Board committees (March – Dec)
• Audit	4 of 4	100	%
• Corporate governance and nominating	4 of 4	100	%
On February 28, 2021 Tsun-yan<br>Hsieh’s committee membership changed from the management resources and compensation committee and risk committee to the audit committee and corporate governance and nominating committee.

Equity ownership (as at February 28, 2022 and February 26, 2021) ****

Year	Common<br><br><br>shares		DSUs		Total common<br><br><br>shares and DSUs		Total value
2022		0		144,311		144,311		3,705,906	4.7x
2021		0		127,583		127,583		3,236,781	4.1x
Change		0		16,728		16,728
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

2022 Management information circular	25
Vanessa Kanu<br> <br><br><br><br>Ottawa, ON/Age 44/Independent
---
Key competencies and experience
---	---
•  Finance/Accounting	• Technology/Operations
•  Risk management	• Asia experience
•  Talent management/Executive compensation	• Public company executive/Director ****
Ms. Kanu’s expertise in public<br>company finance and her extensive leadership experience qualify her to serve on our board and as a member of the audit committee and corporate governance and nominating committee.
Vanessa Kanu is a seasoned finance professional with over 20 years of business experience. Ms. Kanu currently serves as global CFO at<br>TELUS International, responsible for finance operations, including accounting, treasury, taxation, planning and analysis and reporting.<br> <br><br><br><br>Ms. Kanu currently sits on the board of the Ottawa Hospital Foundation.<br> <br><br><br><br>Ms. Kanu is a Chartered Accountant in Canada, a Certified Public Accountant in the United States (Illinois), and a member of the Institute of Chartered Accountants<br>of England and Wales. She holds a Bachelor of Science degree in International and Financial Economics from the University of Hull, UK.<br> <br><br><br><br>2021 meeting attendance			Director since<br> <br>February 2022<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2034<br> <br><br><br><br><br> <br>Public company boards (last five years)<br><br><br><br> <br>• None
---	---	---	---
Board	N/A	N/A
Board committees
• Audit	N/A	N/A
• Corporate governance and nominating	N/A	N/A

Equity ownership (as at February 28, 2022)

Year	Common<br><br><br>shares		DSUs		Total common<br><br><br>shares and DSUs		Total value		Total value as a<br><br><br>multiple of equity<br><br><br>ownership guideline
2022		0		0		0	$	0		N/A
Ms. Kanu joined the board on February 28, 2022. Under the<br>director equity ownership requirements, she is expected to meet the equity ownership requirements within six years of joining the board.
<br><br><br><br>			****	See page 37 for information about equity ownership
26	Manulife Financial Corporation
---	---

About the Directors

Donald R. Lindsay<br> <br><br><br><br>Vancouver, BC, Canada/Age 63/Independent
Key competencies and experience
---	---
•  Finance/Accounting<br><br><br>•  Risk management<br><br><br>•  Talent management/Executive compensation	• Technology/Operations<br><br><br>• Asia experience<br><br><br>• Public company executive/Director
Mr. Lindsay’s CEO and international<br>business experience and nearly two decades of experience in senior executive roles in investment and corporate banking and global financial services qualify him to serve on our board, as a member of the risk committee and as chair of the management<br>resources and compensation committee.
Donald Lindsay is President and CEO of Teck Resources Limited, Canada’s largest diversified mining, mineral processing and<br>metallurgical company, a position he has held since 2005.<br> <br><br> <br>Mr. Lindsay’s experience<br>includes almost two decades with CIBC World Markets Inc., where he ultimately served as President after periods as Head of Investment and Corporate Banking and Head of the Asia Pacific Region.<br><br><br><br> <br>Mr. Lindsay recently completed his three-year term as Chair of the Business Council of Canada.<br>He earned a Bachelor of Science in Mining Engineering from Queen’s University and holds an MBA from Harvard Business School.<br> <br><br><br><br>2021 meeting attendance			****	Director since<br> <br>August 2010<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2023<br> <br><br><br><br><br> <br>2021 votes for: 97.61%<br><br><br><br> <br><br> <br>Publiccompany boards (last five years)<br> <br><br><br><br>• Teck Resources Limited, 2005-present
---	---	---	---	---
Board	10 of 10	100	%
Board committees
• Management resources and compensation (chair)	5 of 5	100	%
• Risk	5 of 5	100	%

Equity ownership (as at February 28, 2022 and February 26, 2021) ****

Year	Commonshares		DSUs		Total commonshares and DSUs		Total value
2022		20,000		96,046		116,046		2,980,061	3.8x
2021		20,000		85,593		105,593		2,678,894	3.4x
Change		0		10,453		10,453
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

2022 Management information circular	27
C. James Prieur<br> <br><br><br><br>Chicago, IL, U.S.A./Age 70/Independent
---
Key competencies and experience
---	---
•  Finance/Accounting<br><br><br>•  Insurance/Reinsurance/Investment management<br><br><br>•  Risk management	• Talent management/Executive compensation<br><br><br>• Technology/Operations<br><br><br>• Asia experience<br><br><br>• Public company executive/Director
Mr. Prieur’s strong financial<br>background and his wealth of senior executive experience in the insurance business in Canada, the U.S. and globally qualify him to serve on our board, as a member of the management resources and compensation committee and as chair of the risk<br>committee.
James Prieur has been a corporate director since 2011 and, prior to that time, Mr. Prieur served as Chief Executive Officer and<br>director of CNO Financial Group, Inc. from 2006 until his retirement in 2011. CNO Financial Group is a life insurance holding company focused on the senior middle income market in the U.S. Prior to joining CNO Financial Group, Mr. Prieur was<br>President and Chief Operating Officer of Sun Life Financial, Inc. from 1999 to 2006 where he had previously led operations in Asia, Canada, U.S., and the UK.<br> <br><br><br><br>He serves on the board of the Alberta Investment Management Corporation, a Crown corporation of the Province of Alberta, and is a member of the President’s Circle of<br>the Chicago Council on Global Affairs, a not-for-profit organization.<br> <br><br><br><br>Mr. Prieur is a Chartered Financial Analyst and holds an MBA from the Richard Ivey School at Western University and a Bachelor of Arts from the Royal Military<br>College of Canada.<br> <br><br> <br>2021 meeting attendance			****	Director since <br>January 2013<br> <br><br><br><br><br> <br>Term limit:<br><br><br>2025<br> <br><br> <br><br><br><br>2021 votes for: 99.58%<br> <br><br><br><br><br> <br>Public company boards (last five years)<br><br><br><br> <br>• Ambac Financial Group, Inc.,<br>2016-present
---	---	---	---	---
Board	9 of 10	90	%
Board committees
• Management resources and compensation	3 of 5	60	%
• Risk (chair)	4 of 5	80	%
Mr. Prieur could not attend the May 2021 board meeting, management<br>resources and compensation committee meeting and risk committee meeting due to a temporary illness, resulting in extenuating circumstances that are not expected to continue.

Equity ownership (as at February 28, 2022 and February 26, 2021)

Year	Common<br><br><br>shares		DSUs		Total common<br><br><br>shares and DSUs		Total value
2022		145,000		128,387		273,387		7,020,578	9.0x
2021		145,000		110,445		255,445		6,480,640	8.3x
Change		0		17,942		17,942
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

28	Manulife Financial Corporation

About the Directors

Andrea S. Rosen<br> <br><br><br><br>Toronto, ON, Canada/Age 67/Independent
Key competencies and experience
---	---
•  Finance/Accounting<br><br><br>•  Risk management<br><br><br>•  Insurance/Reinsurance/Investment management	• Talent management/Executive compensation<br><br><br>• Public company executive/Director
Ms. Rosen’s experience as a global<br>financial services executive with particular experience in investment banking, wholesale and retail banking, risk management, human resources management and executive compensation qualifies her to serve on our board, as a member of the audit<br>committee and as chair of the corporate governance and nominating committee.
Andrea Rosen has been a corporate director since 2006. Prior to January 2005, her experience includes more than a decade with TD Bank<br>Financial Group, where she ultimately served as Vice Chair, TD Bank Financial Group and President of TD Canada Trust. Earlier in her career, she held progressively senior positions at Wood Gundy Inc. and was Vice President at Varity Corporation.<br><br><br><br> <br>She serves on the board of the Institute of Corporate Directors (not-for-profit).<br> <br><br> <br>Ms. Rosen has an LLB from<br>Osgoode Hall Law School, an MBA from the Schulich School of Business at York University and a Bachelor of Arts from Yale University.<br> <br><br><br><br>2021 meeting attendance			****	Director since<br> <br>August 2011<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2024<br> <br><br><br><br><br> <br>2021 votes for: 98.70%<br><br><br><br> <br><br> <br>Publiccompany boards (last five years)<br> <br><br><br><br>• Ceridian HCM Holding Inc., 2018-present<br><br><br>• Element Fleet Management Corp., 2019-present<br><br><br>• Emera Inc., 2007-present
---	---	---	---	---
Board	10 of 10	100	%
Board committees
• Audit	5 of 5	100	%
• Corporate governance and nominating (chair)	5 of 5	100	%

Equity ownership (as at February 28, 2022 and February 26, 2021) ****

Year	Commonshares		DSUs		Total commonshares and DSUs		Total value
2022		11,500		147,618		159,118		4,086,150	5.2x
2021		11,500		128,781		140,281		3,558,929	4.6x
Change		0		18,837		18,837
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

2022 Management information circular	29
May Tan<br> <br><br><br><br>Hong Kong/Age 66/Independent
---
Key competencies and experience
---	---
•  Finance/Accounting<br><br><br>•  Insurance/Reinsurance/Investment management<br><br><br>•  Risk management	• Talent management/Executive compensation<br><br><br>• Asia experience<br><br><br>• Public company executive/Director
Ms. Tan’s extensive leadership<br>experience in financial services and her deep knowledge of the industry in Asia qualify her to serve on our board and as a member of the risk committee and the management resources and compensation committee.
May Tan is a senior financial services executive who has held a number of senior roles at Standard Chartered Bank, including the position of<br>Chief Executive Officer, Standard Chartered Bank (Hong Kong). She has over 30 years of experience in corporate finance, banking, and capital markets in Asia. She holds the Fellow Chartered Accountant designation from the Institute of Chartered<br>Accountants in England and Wales and the Certified Public Accountant (Fellow) designation from the Hong Kong Institute of Certified Public Accountants.<br> <br><br><br><br>Ms. Tan is a director on the following non-public boards: Anticimex New TopHolding AB, MSIG Insurance (Hong Kong) Limited and<br>701 Limited.<br> <br><br> <br>Ms. Tan received a B.A. in Economics and Accounting from the University of<br>Sheffield.<br> <br><br> <br>2021 meeting attendance			Director since<br> <br>December 2021<br><br><br><br> <br><br> <br>Term<br>limit:<br> <br>2034<br> <br><br><br><br><br> <br>Public company boards (last five years)<br><br><br><br> <br>• CLP Holdings Limited 2018-present<br><br><br>• JP Morgan China Growth & Income PLC 2021-present<br><br><br>• Link Management Limited/Link REIT 2013-2022
---	---	---	---
Board (December)	–	–
Board committees
• Management resources and compensation	1 of 1	100%
• Risk	–	–

Equity ownership (as at February 28, 2022) ****

Year	Commonshares		DSUs		Total commonshares and DSUs		Total value
2022		0		449		449		11,530	0.0x
Ms. Tan joined the board on December 1, 2021. Under the<br>director equity ownership requirements, she is expected to meet the equity ownership requirements within six years of joining the board.
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

30	Manulife Financial Corporation

About the Directors

Leagh E. Turner<br> <br><br><br><br>Toronto, ON, Canada/Age 50/Independent
Key competencies and experience
---	---
•  Risk management<br><br><br>•  Talent management/Executive compensation ****<br><br><br>•  Technology/Operations	• Asia experience<br><br><br>• Public company executive/Director<br><br><br>• Digital transformation/Sales/Marketing
Ms. Turner’s extensive executive<br>experience in the technology sector and leadership expertise leveraging people, process and technology to drive organizational transformation qualify her to serve on our board and as a member of the risk committee and the management resources and<br>compensation committee.
Leagh Turner is a seasoned global executive in the technology sector currently holding the position of<br>Co-CEO for Ceridian HCM Holding Inc., a global human capital management software company. She also serves as a director of Plan International Canada. Ms. Turner is a strong advocate for the advancement of<br>women in leadership and has been recognized twice on the WXN (Women’s Executive Network) Canada’s Top 100 Most Powerful Women list.<br> <br><br><br><br>Ms. Turner holds a Bachelor of Arts from the University of Western Ontario.<br> <br><br><br><br>2021 meeting attendance			****	Director since November 2020<br> <br><br><br><br><br> <br>Term limit:<br><br><br>2033<br> <br><br> <br><br><br><br>2021 votes for: 99.44%<br> <br><br><br><br><br> <br>Public company boards (last five years)<br><br><br><br> <br>• Ceridian HCM Holding Inc.,<br>2022-present
---	---	---	---	---
Board	10 of 10	100	%
Board committees
• Management resources and compensation	5 of 5	100	%
• Risk committee	5 of 5	100	%

Equity ownership (as at February 28, 2022 and February 26, 2021) ****

Year	Common<br><br><br>shares		DSUs		Total common<br><br><br>shares and DSUs		Total value
2022		0		6,117		6,117		157,085	0.2x
2021		0		824		824		20,905	0.0x
Change		0		5,293		5,293
Ms. Turner joined the board on November 10, 2020. Under<br>the director equity ownership requirements, she is expected to meet the equity ownership requirements within six years of joining the board.
<br><br><br><br>			****	See page 37 for information about equity ownership

All values are in US Dollars.

2022 Management information circular	31

2021 board committee reports

Corporate governance and nominating committee

Andrea S. Rosen – Chair<br> <br><br><br><br>Nicole S. Arnaboldi<br> <br><br><br><br>Guy L.T. Bainbridge<br> <br><br><br><br>Joseph P. Caron<br> <br><br><br><br>John M. Cassaday<br> <br><br><br><br>Tsun-yan Hsieh<br> <br><br><br><br>John R.V. Palmer	All members of the corporate governance and nominating committee are independent. The board chair is also a member. There<br>is cross-membership between the corporate governance and nominating committee and the audit committee.<br> <br><br><br><br>The committee met five times in 2021. It has approved this report and is satisfied that it has carried out all of the responsibilities required by the committee<br>charter.
Key responsibilities	Key activities
---	---
Managing board renewal and succession, including identifying the necessary competencies, expertise, skills, background and personal qualities for potential candidates, identifying qualified<br>candidates, maintaining an evergreen list of qualified candidates and reviewing committee membership	• Continued oversight and enhancement of board succession<br>and diversity strategy.<br> <br>• Completed selection process for board recruitment firm to assist in identifying and<br>recruiting potential candidates based on criteria established by the committee.<br> <br>• Maintained and regularly refined<br>the evergreen list of potential director candidates.<br> <br>• Led searches to identify new director candidates in line<br>with the board’s overall needs and diversity policy, and led the vetting process.<br> <br>• Approved and recommended<br>the board approve the appointment of two new directors with skills and experience critical to Manulife’s ongoing growth.<br><br><br>• Reviewed the characteristics, experience and expertise necessary for prospective directors to align with<br>Manulife’s ambitions for the future.<br> <br>• Oversaw, reviewed, and refreshed the board’s diversity<br>policy.<br> <br>• Reviewed committee membership and recommended committee appointments for new directors.
Developing effective corporate governance policies and procedures, including subsidiary governance and environmental, social and governance (ESG) issues	• Oversaw the company’s ESG framework, including<br>matters related to climate change.<br> <br>• Reviewed reports on ESG strategy, trends, risks and opportunities, including<br>a review of the company’s climate change strategy.<br> <br>• Reviewed ESG reporting, including the company’s<br>2020 Sustainability Report and key performance indicators such as gender pay equity disclosure, environmental data, employee turnover and employee engagement, and reviewed stakeholder feedback on the report.<br><br><br>• Reviewed the updated sustainability strategy, including the direction and areas of focus for the company in this<br>area.<br> <br>• Reviewed the details of, and compliance with, board and committee charters and mandates of board and<br>committee chairs, directors and the CEO.<br> <br>• Considered all significant changes in director status and confirmed no<br>adverse impact.<br> <br>• Provided effective oversight during the pandemic, including by monitoring corporate governance<br>developments, assessing current practices against emerging best practices and other requirements, and enhancing practices for the virtual environment.<br><br><br>• Reviewed reports on the company’s virtual annual meeting of shareholders, designed to allow shareholder<br>participation in the pandemic environment.<br> <br>• Reviewed reports on subsidiary governance and the company’s<br>subsidiary governance framework.<br> <br>• Reviewed reports on shareholder feedback.
Developing and overseeing the processes for assessing board, committee, board chair, committee chair and individual director effectiveness, including director peer assessments	• With the assistance of an independent consultant,<br>refreshed and implemented the assessment process for the board, the chair of the board, the committees and chairs of each committee, including peer assessments.<br><br><br>• Reviewed and recommended that the board confirm the independence of the directors.<br><br><br>• Assessed the board’s relationship with<br>management.
32	Manulife Financial Corporation
---	---

About the Directors

Key responsibilities	Key activities
Overseeing the director orientation and education program	• Continued to enhance the new director orientation<br>program, facilitating efficient onboarding of directors to allow for effective oversight in the pandemic environment.<br><br><br>• Considered the relevant topics and developed the agenda for the director education program.
Overseeing director compensation ****	• Engaged independent consultant to perform review of<br>director compensation, including an overview of best practices, industry trends and peer benchmarking.

The committee meets without management present at each meeting.

The committee worked with an independent consultant, Meridian Compensation Partners, to conduct a comprehensive review of director compensation. Meridian’s fees in 2021 were $23,303. They were not retained in 2020. Following the review, the committee confirmed that no changes to the current fee structure were required for 2022.

Audit committee

Guy L.T. Bainbridge – Chair<br> <br><br><br><br>Nicole S. Arnaboldi<br> <br><br><br><br>Joseph P. Caron<br> <br><br> <br>Tsun-yan Hsieh<br> <br><br> <br>John R.V. Palmer<br><br><br><br> <br>Andrea S. Rosen	The audit committee and the board have determined that all members of the committee are independent, financially literate<br>and that Guy Bainbridge, Nicole Arnaboldi, Tsun-yan Hsieh, John Palmer and Andrea Rosen qualify as audit committee financial experts under the Sarbanes-Oxley Act of 2002. All of the members also meet<br>additional independence standards for audit committees under applicable U.S. and Canadian laws and securities exchange rules. The committee also serves as the conduct review committee. There is cross-membership between the audit committee and the<br>corporate governance and nominating committee, and the committee holds a joint meeting with the risk committee at least once a year.<br> <br><br><br><br>The committee met five times in 2021, including one joint meeting with the risk committee. It has approved this report and is satisfied that it has carried out all of the<br>responsibilities required by the committee charter.
Key responsibilities	Key activities
---	---
Overseeing the quality and integrity of financial information, including the effectiveness of our systems of internal control over financial reporting	• Reviewed significant accounting and actuarial practices<br>and policies (and areas where judgment was applied), financial disclosure (and recommended them to the board for approval), and management’s report on the effectiveness of internal controls over financial reporting.<br><br><br>• Received updates on the impacts of COVID-19 on financial reporting and<br>internal control matters.<br> <br>• Received frequent updates and reviewed key matters related to the implementation of<br>IFRS 17.<br> <br>• Reviewed critical audit matters and key audit matters communicated by the external<br>auditors.
Overseeing the performance, qualifications and independence of our external auditors	• Considered auditor tenure and the engagement of the<br>external auditors.<br> <br>• Conducted the annual review of Ernst & Young, including the engagement partner and<br>audit team, their independence, objectivity and quality of audit work performed, and recommended their reappointment as auditors to the board for approval.<br><br><br>• Reviewed and approved or pre-approved the auditor independence policy, the<br>scope of the annual audit plan and all related services and fees, recurring audit and non-audit services for the coming year, and audit and non-audit services proposed<br>during the year outside of previous approvals.
2022 Management information circular	33
---	---
Key responsibilities	Key activities
---	---
Overseeing our compliance program, including compliance with legal and regulatory requirements and the effectiveness of our compliance practices	• Oversaw compliance with applicable laws and regulations,<br>including the anti-money laundering/anti-terrorist financing program.<br> <br>• Reviewed reports and received frequent<br>updates on litigation and legislative and regulatory developments.
Overseeing our finance, actuarial, internal audit and global compliance functions	• Reviewed reports, opinions and recommendations from the<br>Chief Actuary, Chief Financial Officer (CFO), Chief Auditor and Global Compliance Chief.<br> <br>• Reviewed the annual<br>report of the independent actuarial peer reviewer.<br> <br>• Reviewed and approved the internal audit plan and reviewed<br>periodic reports on internal audit activities and audit results.<br> <br>• Reviewed the company’s financial plan.<br><br><br>• Reviewed reports on capital matters, including the company’s capital position, capital initiatives, capital<br>targets and ratios.<br> <br>• Reviewed and approved the mandates of the Global Compliance Chief, Chief Auditor, CFO and<br>Chief Actuary and the global compliance, internal audit, finance and actuarial functions, and reviewed the performance evaluation and assessed the effectiveness of each.
Developing our ethical standards and policies on managing conflicts of interest, protecting confidential information and monitoring customer complaints	• Reviewed the code of business conduct and ethics and the<br>procedures relating to conflicts of interest and restricting the use of confidential information.<br> <br>• Reviewed<br>reports on compliance with the code and Ethics Hotline activities.<br> <br>• Oversaw procedures for handling<br>complaints.
Monitoring arrangements with related parties and transactions that could have a material impact on our stability or solvency	• Provided oversight of transactions with related<br>parties, a group that includes directors and senior officers as defined by the Insurance Companies Act (Canada), including through the committee-approved related party transactions policy, which includes established procedures to ensure the<br>disclosure and review of related party transactions and that apply to a broad range of transactions with related parties, from the provision of products or services to a related party to the purchase of assets or services from a related party.<br><br><br>• Reviewed reports on the company’s related party procedures and effectiveness of the procedures to identify<br>material related party transactions and ensure any related party transactions comply with all requirements.

The committee meets without management present at each meeting. The committee also met in private with Ernst & Young, the independent actuarial peer reviewer, the CFO, Chief Risk Officer, Chief Actuary, Chief Auditor and Global Compliance Chief throughout the year.

Management resources and compensation committee

Donald R. Lindsay – Chair<br><br><br><br> <br>Susan F. Dabarno<br><br><br><br> <br>Julie E. Dickson<br><br><br><br> <br>C. James Prieur<br><br><br><br> <br>May Tan<br><br><br><br> <br>Leagh E. Turner	All members of the management resources and compensation committee are independent and meet the additional independence standards set out in our<br>director independence policy in compliance with applicable securities exchange rules. A majority of the members have finance, talent management and executive compensation, and risk management experience. There is cross-membership between the<br>management resources and compensation committee and the risk committee.<br> <br><br> <br>The committee met five<br>times in 2021. It has approved this report and is satisfied that it has carried out all of the responsibilities required by the committee charter.
34	Manulife Financial Corporation
---	---

About the Directors

Key responsibilities	Key activities
Overseeing global human resources strategy, policies and programs	• Reviewed the 2021 compensation program and recommended the<br>2022 compensation program to the board for approval.<br> <br>• Reviewed reports on the impact of COVID-19 on human resources strategy, employees and compensation programs.<br><br><br>• Monitored employee engagement, including the results of the global employee engagement survey.<br><br><br>• Reviewed the compensation programs, including base pay, incentives, pension and benefit plans, and made<br>recommendations to the board.<br> <br>• Received frequent updates on the company’s response to the pandemic in<br>relation to the health and well-being of employees.<br> <br>• Reviewed reports on talent management and diversity.<br><br><br>• Reviewed updates to the global compensation policy and reports on compensation plans.<br><br><br>• Oversaw the review of compensation of employees who have a material impact on our risk exposure.
Developing and maintaining succession plans for the CEO and other senior executives	• Completed succession planning reviews of the CEO and<br>senior executive roles.
Reviewing senior executive appointments before recommending them to the board for approval	• Provided oversight of the vetting process for executive<br>appointments.
Reviewing and recommending compensation performance goals and objectives for the CEO and other senior executives, assessing the performance of the CEO and other senior executives in light of<br>their performance goals and objectives and recommending their compensation	• Reviewed and approved the CEO’s annual objectives,<br>assessed the CEO’s performance and integrity and made compensation recommendations for approval by the board.<br><br><br>• Reviewed the performance assessment, compensation recommendations and assessment of integrity for the members of the<br>executive leadership team and the head of each oversight function and approved their annual objectives.<br> <br>• Reviewed<br>the company’s compensation peer group.<br> <br>• Considered the feedback from shareholder engagement meetings<br>regarding compensation programs.
Overseeing compensation plans and ensuring the compensation program aligns with risk management policies and practices and corporate strategy	• Reviewed reports of the independent consultant on<br>compensation matters.<br> <br>• Reviewed the performance and independence of the independent consultant.<br><br><br>• Reviewed reports on the alignment of compensation programs with sound risk management principles and established<br>risk appetite.<br> <br>• Reviewed reports on compensation for employees who have a material impact on our risk<br>exposure.
Overseeing governance of employee pension plans	• Oversaw the company’s global retirement and global<br>benefits programs.

The committee meets without management present at each meeting. The committee also works with a consulting firm to receive independent advice on compensation matters, and has retained Korn Ferry Hay Group, Inc. (Korn Ferry) as its independent consultant since November 2019. The committee chair approves all work carried out by the independent consultant. The committee met in private with Korn Ferry throughout the year. Please see page 97 for more about the independent consultant.

2022 Management information circular	35

Risk committee

C. James Prieur – Chair<br> <br><br><br><br>Susan F. Dabarno<br> <br><br><br><br>Julie E. Dickson<br> <br><br><br><br>Donald R. Lindsay<br> <br><br><br><br>May Tan<br> <br><br> <br>Leagh E.<br>Turner	All members of the risk committee are independent and a majority are knowledgeable about risk management and risk<br>disciplines. There is cross-membership between the risk committee and the management resources and compensation committee, and the committee holds a joint meeting with the audit committee at least once a year.<br><br><br><br> <br>The committee met five times in 2021, including one joint meeting with the audit committee. It has<br>approved this report and is satisfied that it has carried out all of the responsibilities required by the committee charter.
Key responsibilities	Key activities
---	---
Identifying and assessing our principal risks and overseeing the programs, procedures and controls in place to manage them	• Reviewed reports from the Chief Risk Officer on risk<br>appetite, risk limits, principal risk exposures, stress tests and emerging risks and policies, procedures and controls in place to manage principal risks.<br><br><br>• Received updates on risks related to COVID-19 and management’s<br>mitigation efforts.<br> <br>• Reviewed reports from the Chief Auditor on the adequacy and effectiveness of the procedures<br>and controls to manage the principal risks.<br> <br>• Reviewed reports on capital targets and ratios.<br><br><br>• Reviewed the company’s information services risk management program, including reports at each meeting on cyber<br>security risks, mitigation and resilience, and engaged in discussions regarding the effectiveness of the program and controls for identifying and addressing the related risks.<br><br><br>• Monitored updates from business segments on the key risks and risk management strategies.
Developing, overseeing and reviewing our enterprise risk management framework, risk appetite and risk limits	• Considered the appropriate balance of risk and return,<br>and reviewed the risk appetite and risk limits and recommended to the board for approval.
Reviewing the risk impact of the business plan and new business initiatives, including consistency with our risk appetite and related risk management and controls	• Reviewed the risk impact of the strategic plan,<br>including consistency with the approved risk appetite and related risk management and controls.
Aligning our compensation programs with sound risk management principles and our established risk appetite	• Reviewed reports on the alignment of compensation<br>programs with sound governance principles and established risk appetite.
Overseeing the risk management function	• Reviewed and approved the mandates of the Chief Risk<br>Officer and the risk management function, and reviewed the performance evaluation and assessed the effectiveness of each.<br><br><br>• Reviewed and approved the budget, structure, skills and resources of the risk management function.
Overseeing our compliance with risk management policies	• Reviewed and approved changes to the risk policy<br>framework and related enterprise policies.

The committee meets without management present at each meeting. The committee also met in private with the Chief Risk Officer, Chief Information Officer, Chief Information Risk Officer, Chief Auditor and the Global Compliance Chief throughout the year.

36	Manulife Financial Corporation

About the Directors

How we pay our directors

We structure director compensation with three goals in mind:<br><br><br>• to reflect directors’ responsibilities, time commitment and expected contribution<br><br><br>• to align directors’ interests with those of our shareholders<br><br><br>• to be competitive with global financial institutions that are comparable to us in scope and complexity.<br><br><br><br> <br>The table on page 38 shows the director fee schedule for<br>services provided to Manulife and Manufacturers Life in 2021. Fees are divided equally between the two companies.<br> <br><br><br><br>Directors do not receive stock options, perquisites, severance, pension or retirement benefits or participate in an equity-based compensation plan, other than receiving<br>deferred share units. Mr. Gori does not receive director compensation because he is compensated in the role of President and CEO.

Key features of the director compensation structure:<br><br><br>• Directors are paid a single annual retainer. No meeting fees or travel allowances are provided.<br><br><br>• Committee chairs receive an additional retainer to recognize the additional responsibilities and workload required<br>by this leadership role.<br> <br>• Directors must receive at least 50% of their board retainer in equity, even after<br>they have met their equity ownership requirement.<br> <br>• The director equity ownership requirement is six times the<br>mandatory equity portion of the annual board retainer. Directors are expected to meet this requirement within six years of joining the board.

In 2018, the board, working with an independent consultant, completed an extensive review of director compensation, and introduced a new flat fee structure and new director equity ownership requirements to align with best practices and reduce compensation volatility and complexity. The changes went into effect on January 1, 2019. The corporate governance and nominating committee reviewed director compensation in 2021, again with the assistance of an independent consultant, and confirmed that compensation continues to be in the range of appropriateness when benchmarked against companies of similar complexity. In light of increasing demands on directors, the corporate governance and nominating committee will continue to review director compensation to ensure it supports the goals described above.

About equity ownership

Directors are required to own equity in Manulife so their interests are aligned with the interests of our shareholders. Directors can count Manulife common shares, preferred shares or deferred share units towards meeting the ownership guidelines. Directors can beneficially own the shares or exercise control or direction over them.

We require all directors except Mr. Gori to own common shares, preferred shares and/or deferred share units with a total market value of at least six times the mandatory equity portion of the annual board retainer (US$615,000). Mr. Gori has separate equity ownership requirements as President and CEO, which he meets. You can read more about this on page 101.

See pages 18 to 31 for information about each nominated director’s equity ownership. Directors receive a minimum of 50% of their board retainer in equity and are expected to meet their equity ownership requirements within six years of joining the board. All directors who have served six years or more meet or exceed their equity ownership requirement.

About deferred share units

Deferred share units are notional shares that have the same value as Manulife common shares and earn additional units as dividend equivalents at the same rate as dividends paid on our common shares.

Deferred share units vest in full on the grant date, but directors can only redeem their deferred share units for cash or shares after they leave the board (on the anniversary of their departure for U.S. directors or within one year of leaving the board for all other directors). Deferred share units can only be transferred when a director dies.

2022 Management information circular	37

We calculate the number of deferred share units to be granted by dividing the dollar value to be received by the closing price of our common shares on the TSX on the last trading day before the grant date. Directors receive additional units as dividend equivalents when dividends are paid on our common shares. Deferred share units are granted to directors under the stock plan for non-employee directors – please see page 86 for more information.

Outstanding share-based awards

The table below shows the market value of deferred share units that have vested but not paid out as at December 31, 2021. Directors received these deferred share units as part of their compensation. These are valued using the closing price of our common shares on the TSX on December 31, 2021.

(as at December 31, 2021)	Share-based<br>awards held		Share price
Nicole Arnaboldi		18,478		24.31	$449,200
Guy Bainbridge		16,105		24.31	$391,513
Joseph Caron		74,286		24.31	$1,805,893
John Cassaday		241,524		24.31	$5,871,448
Susan Dabarno		26,621		24.31	$647,157
Julie Dickson		31,025		24.31	$754,218
Tsun-yan Hsieh		144,311		24.31	$3,508,200
Donald Lindsay		96,046		24.31	$2,334,878
John Palmer		120,680		24.31	$2,933,731
James Prieur		128,387		24.31	$3,121,088
Andrea Rosen		147,618		24.31	$3,588,594
May Tan		449		24.31	$10,915
Leagh Turner		6,117		24.31	$148,704

All values are in US Dollars.

Director compensation

DIRECTOR FEES

(US)
Annual retainers
Board member
Chairman
Vice chair of the board1 (paid in addition to the annual board member retainer and any other<br>retainers that apply)
Observer to subsidiary board (requested from time to time, may be paid an additional retainer and/or meeting fee at the board’s discretion)
Committee chair retainers
• Audit committee<br>• Management resources and compensation committee • Risk committee<br>• Corporate governance and nominating committee

All values are in US Dollars.

1	There is currently no vice chair of the board.
38	Manulife Financial Corporation
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About the Directors

2021 DIRECTOR COMPENSATION

The table below shows the compensation paid to the independent directors in 2021 for services provided to Manulife, Manufacturers Life and any Manulife subsidiary. Amounts are paid in U.S. dollars and were converted to Canadian dollars using the opening Bank of Canada exchange rate on the business day before each quarterly payment date:

•	US$1.00 = $1.2627 on March 30, 2021
•	US$1.00 = $1.2385 on June 29, 2021
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•	US$1.00 = $1.2677 on September 29, 2021
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•	US$1.00 = $1.2787 on December 30, 2021.
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Total director compensation is capped at US$4 million ($5,014,000): US$2 million ($2,507,000) each for Manulife and Manufacturers Life. Canadian amounts have been calculated using the Bank of Canada annual exchange rate for 2021 of US$1.00 = $1.2535. Total compensation paid in 2021 was below the capped amount.

	Annual fees
	Annual<br>retainer
Nicole Arnaboldi		258,690	0	–	–	258,690	0	$258,690
Guy Bainbridge		258,690	28,767	–	–	287,456	143,728	$143,728
Joseph Caron		258,690	0	–	–	258,690	129,345	$129,345
John Cassaday		504,760	0	–	–	504,760	252,380	$252,380
Susan Dabarno		258,690	0	–	–	258,690	129,345	$129,345
Julie Dickson		258,690	0	–	–	258,690	0	$258,690
Sheila Fraser		111,966	21,847	–	5,000	138,812	71,906	$ 66,906
Tsun-yan Hsieh		258,690	0	94,480	–	353,170	94,480	$258,690
Donald Lindsay		258,690	50,476	–	–	309,166	154,583	$154,583
John Palmer		258,690	0	–	–	258,690	129,345	$129,345
James Prieur		258,690	50,476	–	–	309,166	0	$309,166
Andrea Rosen		258,690	50,476	–	–	309,166	0	$309,166
May Tan		21,844	0	–	–	21,844	10,922	$10,922
Leagh Turner		258,690	0	–	–	258,690	129,345	$129,345
					TOTAL	3,785,676

All values are in US Dollars.

2022 Management information circular	39

Pro-rated fees

Fees shown in the 2021 director compensation table were pro-rated as a result of the following:

•	Sheila Fraser resigned from the board on June 7, 2021, and a $5,000 donation was made to The Ottawa Hospital<br>Foundation on her behalf.
•	Guy Bainbridge was appointed chair of the audit committee on June 7, 2021.
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•	May Tan joined the board on December 1, 2021.
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Subsidiary board fees

One of our directors received fees for services he provided to a subsidiary in 2021 through our subsidiary governance oversight program:

•	Tsun-yan Hsieh served on the board of Manulife US Real Estate Management Pte Ltd.,<br>and received fees for his services as shown in the table above. Mr. Hsieh’s term on the Manulife US Real Estate Management Pte Ltd. board ends on June 30, 2022.

Allocation of annual fees

Directors must decide, before the start of the new fiscal year, if they want to receive all or part of their compensation in equity instead of cash:

•	Fees earned is the amount received in cash.
•	Share-based awards is the amount received as equity.
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40	Manulife Financial Corporation
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Executive compensation

Executive compensation is designed to contribute to our long-term sustainable growth by rewarding executives for strong performance in executing our business strategy.

Where to find it
Message from the Chair	42
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Compensation discussion and analysis	44
Executive summary	44
Our compensation philosophy	46
Benchmarking against our peers	48
Our compensation program and 2021 performance	50
Compensation of the named executives	62
Share performance	79
Executive compensation details	80
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Summary compensation table	80
Equity compensation	82
Retirement benefits	86
Termination and change in control	92
Compensation oversight	97
How the board oversees executive compensation	97
Managing compensation risk	99
The decision-making process	102
Compensation of employees who have a material impact on risk	104
2022 Management information circular	41
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Message from the Chair

Don Lindsay<br> <br><br><br><br>Chair of the Management Resources and Compensation Committee<br> <br><br><br><br>The board is very pleased with the significant progress Manulife made on our strategic priorities to deliver strong financial results in 2021. We<br>successfully

navigated the operating challenges of an unpredictable environment and extended pandemic. The committee and full board are confident that our executive compensation program plays a key part in the company’s success by continuing to motivate and incentivize our executive team to take actions that will drive strong business performance, and ultimately create long-term shareholder value.

Business performance and compensation outcomes<br> <br>The 2021<br>annual incentive was funded at 142% for the named executives, reflecting strong performance across key metrics, all of which were designed to drive significant year-over-year improvements in our underlying financial and operational strength. Our<br>executives also drove strong outperformance across our five strategic priorities: accelerate growth, become a digital, customer leader, expense efficiency, portfolio

Compensation highlights<br><br><br>• The 2021 annual incentive was funded at 142% for the named executives, reflecting the scale of their<br>accomplishments despite the challenging environment (see page 53)<br> <br>• The 2019 performance share unit awards<br>vested in February 2022 at 84% of target (see page 59)<br> <br>• No discretion was applied to adjust the scores because<br>of COVID-19’s impact on the economic and operating environment

optimization, and acting as a high performing team. These areas also include goals linked to diversity, equity and inclusion, employee engagement and leadership accountability, and beginning in 2021, to Manulife’s Climate Action Plan. The 2019 performance share unit awards vested in February 2022 at 84% of target, reflecting solid performance across our book value per share and core return on equity metrics, given the various challenges associated with COVID-19. Notably, the performance criteria for these awards, set in late 2018 and granted in 2019, were not subsequently adjusted for the impact of COVID-19. Despite our strong financial performance, our share price underperformed our expectations during this period. However, we believe that our consistent delivery on our financial and strategic commitments, including record financial performance, will ultimately drive superior shareholder value creation. As a board, we remain confident that our strategy and executive compensation program will allow us to achieve our goals and we are optimistic that the stock market will reflect this success. As of this writing, we’ve seen outperformance in our share price over the first two months of 2022 relative to peers and the broader market.

Competitive market for talent on global basis

The executive team we have in place has demonstrated outstanding resiliency and creativity amid a persistent challenging macro-economic environment. The committee is focused on continuing to retain and motivate this team, which draws from a broad talent pool of unique skills and expertise aligned with our strategic priorities across Manulife’s differentiated business lines and geographies. Manulife is increasingly competing with other companies for talent on a global scale because we are a global company – a majority of our core earnings are derived from geographic markets outside Canada. In fact, only approximately one quarter of our core earnings in 2021 came from Canada. Accordingly, the committee is focused on delivering an executive compensation program that will effectively attract, retain and motivate our talented team of executives around the world. To support these efforts, the committee ensures we benchmark our executive compensation practices to the right groups of peers - companies that reflect the global complexity of our business and face similar factors that drive and impact our performance.

42	Manulife Financial Corporation

Executive Compensation

Persistent uncertain macro environment

The committee and full board engaged in extensive and rigorous deliberations in 2020 and early 2021 regarding the company’s business plan and macroeconomic assumptions that could impact our expected financial results and executive compensation plans. Uncertainty in our operating markets continues to impact both the company’s expectations and actual results, and accordingly the performance ranges for the metrics in our executive compensation program. For example, although there was a market consensus that interest rates would likely remain low, recently, we’ve seen an expectation that interest rates will rise throughout 2022. Market factors such as these inform the committee’s target-setting practices, along with Manulife’s business plan, projections and other considerations. The committee ultimately set ambitious performance targets for our 2021 annual incentive plan. The committee noted that the 2021 net income target was lower than 2020 as the prior year included benefits from reinsurance transactions that were not expected to reoccur in 2021, while the 2021 net income target included charges for the impact of updated ultimate reinvestment rate (URR) assumptions issued by the Canadian Actuarial Standards Board and restructuring charges. Adjusting for these items, the 2021 targeted net income growth was approximately 15%.

Evolving our executive compensation program and shareholderengagement

We have not made any changes to our executive compensation program for 2022. However, the upcoming implementation of IFRS 17 (an accounting standards change) in 2023 may significantly impact how we measure and present our financial results, and correspondingly has the potential to impact the performance metrics in our executive compensation program. This has prompted a comprehensive review in 2022 of our executive compensation program in anticipation of changes that may be required. As always, we will strive to discuss potential updates with our investors and communicate any changes and rationale clearly and transparently.

To that end, on behalf of the committee I would like to thank our investors for their continued engagement on topics including executive compensation, governance and strategic direction. Over the last year the company met with shareholders accounting for 43% of Manulife’s outstanding shares. Members of the board had the privilege of speaking directly with many of you about compensation topics. We appreciate your continued support of our strategy, as well as your candour and thoughtful feedback, which is critical to informing our decision-making process.

Don Lindsay

Chair of the Management Resources and Compensation Committee

2022 Management information circular	43

Compensation discussion & analysis

Executive summary

2021BUSINESS PERFORMANCE AND COMPENSATION

Manulife’s executive compensation program is designed to reward executives for the successful execution of our business strategy in the short-term, and the achievement of longer-term strategic initiatives designed to promote sustainable growth. The majority of executive pay is variable, and dependent on company performance and our common share price. This keeps the interests of our executives closely aligned with the interests of our shareholders.

The business targets for our annual incentive plan for 2021 were based on a plan that was established in 2020 that took into account the uncertainties and challenges introduced by COVID-19. Despite the challenging operating environment, Manulife posted record net income attributed to shareholders, core earnings, and a 31% increase in new business value (NBV) over 2020, while advancing on our key strategic initiatives. Despite the strong operational performance, our total shareholder return (TSR) was 11.6%, which is below the average of our peers.

The performance criteria for the 2019 performance share unit awards that vested in February 2022 were set in late 2018 and were not subsequently adjusted for the impact of COVID-19. Despite our strong financial performance, our share price underperformed our expectations during this period – and our performance share unit (PSU) payouts reflected this underperformance.

CEO COMPENSATION

Mr. Gori’s leadership continues to be a strength for Manulife. In recognition of the continued momentum the company has achieved under his direction, especially with the ongoing presence of COVID-19 in 2021, the board awarded Mr. Gori an annual incentive of US$4,600,800 for 2021. This award is a direct result of his exceptional leadership, Manulife’s strong financial results and continued progress against our strategic priorities in 2021.

CEO total direct compensation (US$)

	2018
Base salary		1,100,000	1,100,000	1,200,000	$1,200,000
Annual incentive^1^		3,088,800	3,700,000	2,822,400	$4,600,800
Equity-based incentives^1^		5,200,000	5,600,000	6,325,000	$6,825,000
Total direct compensation		9,388,800	10,400,000	10,347,400	$12,625,800

All values are in US Dollars.

1	Timing of awards: the 2021 column includes the annual incentive awarded for 2021 and paid in February 2022 and the<br>equity-based incentives granted in March 2021.

Note: For 2022, the board decided to maintain Mr. Gori’s base salary at US$1.2 million and his annual incentive target at 200% of salary. He received an equity award of US$8.2 million in March 2022.

LINKING CEO PAY TOSHAREHOLDER VALUE

We look at pay for performance from different perspectives to ensure there is strong alignment between what our executives earn and our TSR: a CEO lookback analysis, and five year pay and TSR alignment reviews.

The CEO lookback table, below, compares compensation awarded to the CEO in each of the last five years to the actual value of that compensation as of December 31, 2021.

44	Manulife Financial Corporation

Executive Compensation

The actual value includes the realized and realizable value of the awards granted each year as of December 31, 2021:

•	realized value includes: cash compensation paid for the year, including salary, annual incentive (earned for the year but<br>paid in the following year), payouts of restricted share units and performance share units that have vested, and gains realized from stock options exercised
•	realizable value includes: the value of restricted share units and performance share units that had not vested, and<br>outstanding stock options that were in-the-money.
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The analysis also compares the actual value to the CEO for each $100 of compensation awarded each year to the value earned by shareholders over the same period. We have indexed these values at $100 to provide a meaningful comparison.

The table illustrates that the actual value of CEO compensation is closely aligned with the shareholder experience. This is consistent with our emphasis on aligning executive compensation with the longer-term success of Manulife.

(in CAD$)	Total direct<br>compensation<br>awarded			Value of 100
					Manulife<br>CEO
2017		12,246,460	13,059,375			106.64	$125.28
2018		12,081,371	10,395,423			86.05	$110.55
2019		13,757,207	13,445,769			97.74	$144.05
2020		13,576,368	11,536,301			84.97	$101.43
2021		15,978,085	15,936,173			99.74	$111.60

All values are in US Dollars.

Total direct compensation awarded includes salary, annual incentive, share-based awards and option-based awards, as reported in the summary compensation table each year.

Actual value (realized and realizable) represents the actual value to the CEO of compensation awarded each year, realized between grant and December 31, 2021 or still realizable on December 31, 2021.

Value of $100 for CEO represents the actual value (realized and realizable) to the CEO for each $100 of total direct compensation awarded for each fiscal year.

Value of $100 for Manulife shareholders represents the cumulative value of a $100 investment in common shares made on the first trading day of the period, assuming dividends are reinvested.

Our pay-for-performance alignment review, includes a five-year lookback of our CEO’s compensation relative to our TSR performance against our peers (see page 65), and against various indices (see page 66).

Details about the 2021 compensation decisions for our other named executives begin on page 67.

2022 Management information circular	45

Our compensation philosophy

Our executive compensation program is designed to contribute to our long-term sustainable growth by rewarding executives for strong performance in executing our business strategy and achieving strategic initiatives.

Pay for performance is at the core of our approach to executive compensation. Compensation is tied to the achievement of our short, medium and long-term performance goals, so that most of what our executives earn is variable and not guaranteed. In practice, this has meant that executives earn more when performance is strong and earn less when performance is not strong. The board also has the discretion to adjust incentive payouts when significant events outside management’s control make awards unreasonable, unrepresentative or inappropriate. In 2021, the board did not make any discretionary adjustments to incentive payouts nor has it made one-off or special awards to our named executives, underscoring the board’s commitment to a rigorous program focused on pay for performance and the committee’s belief that our program is well-structured and effectively achieves the company’s compensation objectives.

We have set compensation for the majority of our named executives in U.S. dollars since 2004. As a global company, we draw from an international talent pool for executive talent at the most senior levels where the U.S. dollar is the most common currency basis for setting compensation. Foreign exchange rates may impact how much the named executives receive, depending on the currency in which they are paid. Accordingly, we take this into consideration when making compensation decisions to ensure our named executives are appropriately and competitively positioned relative to our Canadian, U.S. and global peer companies.

Five principles guide every compensation decision

46	Manulife Financial Corporation

Executive Compensation

What we do
<br><br><br><br>	Compensation aligned with long-term shareholder value
	•   most executive compensation is directly affected by our share price and the<br>value of our performance share units is based in part on relative TSR
	•   the annual incentive plan incorporates measures tied to our future<br>success
	•   equity ownership<br>guidelines, clawback provisions, stock option exercise restrictions and our code of business conduct and ethics discourage executives from taking undue risk
<br><br><br><br>	Compensation aligned with business strategy
	•   incentive compensation is tied to the achievement of key performance measures,<br>prudently balancing time horizons and performance perspectives
	•   performance measures<br>are tied directly to our business strategy, environmental, social and governance objectives and shareholder value
<br><br><br><br>	Compensation and performance benchmarked against peer companies
	• executive pay is benchmarked<br>against our compensation peer group
<br><br><br><br>	Compensation aligned with good governance practices
	•   compensation is aligned with the Financial Stability Board’s Principles for<br>Sound Compensation Practices
	•   employees must annually certify compliance with our code of business conduct and<br>ethics
	•   management resources and compensation committee receives independent<br>advice
	•   shareholders have a say on executive pay
	•   we engage with shareholders about our executive compensation<br>program
	•   employee engagement and diversity and<br>inclusion initiatives have an impact on compensation
<br><br><br><br>	Compensation aligned with risk management objectives
	•   incentive compensation for heads of control functions is based on measures that<br>are not directly linked to the business they oversee
	•   we stress test compensation plan designs
	•   the CEO and CFO must hold Manulife equity for one year after leaving<br>Manulife
	•   executive compensation clawed back for wrongdoing, even when a financial<br>restatement is not required
	•   the CRO and the risk committee review the alignment of compensation plans with<br>risk management objectives
	•   incentive<br>compensation for material risk takers considers feedback from internal audit, compliance and risk management
What we don’t do
<br><br><br><br>	No grossing up of perquisites
<br><br><br><br>	No repricing or backdating of stock options
<br><br><br><br>	No hedging or monetizing of equity awards
<br><br><br><br>	No multi-year guarantees in employment agreements
<br><br><br><br>	No severance of more than two years on termination following a change in control
<br><br><br><br>	No single-trigger change in control
2022 Management information circular	47
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Benchmarking against our peers

We regularly benchmark our<br>compensation against our peers to ensure compensation is competitive so we can attract and retain executive talent. We also benchmark our performance against our peers to assess our relative performance for our PSU awards.

Benchmarking compensation for individual roles

While we are headquartered and based out of Toronto, we operate on a global scale with the majority of our earnings derived from markets outside of Canada. Accordingly, we draw on and compete for talent with other global businesses, including those that compensate talent according to their local benchmarks and practices. We look at how other companies compensate roles that are similar to ours, benchmarking each component of compensation as well as total direct compensation. This allows us to set compensation competitively so we can attract and retain high performing executive talent capable of achieving our ambitious goals.

For our named executives, we primarily benchmark against our compensation peer group.

We also refer to pay information from three surveys published by prominent consulting firms:

•	Diversified Insurance Survey: widely referenced survey of pay levels among major insurance companies in the U.S.<br>
•	Financial Services Executive Compensation Survey: survey of major financial institutions in Canada<br>
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•	Insurance Executive Rewards Survey: survey of major insurance companies in the Asia Pacific region.<br>
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We target total direct compensation for our executives at the median level of the external market. High performing executives may be positioned above the median to reflect sustained high performance over time.

Peer groups

Manulife is made up of many related but discrete businesses that need people who have unique skills and capabilities. This makes it difficult to identify direct public company peers that are relevant for both compensation benchmarking and meaningful performance comparisons. Accordingly, we use two peer groups: a compensation peer group to benchmark and evaluate executive pay and a performance peer group to assess our total shareholder return performance for our PSU awards.

The committee has determined that the use of these two peer groups helps account for the operating and cultural complexities of our business.

Compensation peer group to benchmark executive pay

•	11 companies that meet the criteria below for the compensation peer group: seven insurance companies and four Canadian<br>banks.

Performance peer group to assess our relative TSR for our PSU awards.

•	15 companies: the seven insurance companies in the compensation peer group, and eight additional insurance companies that<br>create a basket of companies with an international footprint and lines of business similar to Manulife.
•	These eight additional insurance companies are not in the compensation peer group because individually they may not be<br>comparable in size or scope of business or because they do not disclose compensation data in a manner that allows us to reliably benchmark compensation for our named executives. The Canadian banks are not included in the performance peer group<br>because, while they are important competitors for capital and Canadian talent, they are not true competitors for many of our business lines and have different exposure to macroeconomic market influences, making their share performance less relevant<br>for comparison.
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48	Manulife Financial Corporation
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Executive Compensation

We review the companies in both groups every year to make sure they continue to meet the following criteria:

•	are in similar lines of business
•	have an international footprint
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•	are similar in size and complexity (for the compensation peer group)
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•	compete with us for talent (for the compensation peer group)
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•	have readily available compensation data (for the compensation peer group).
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Compensation peergroup<br> <br>• AIA Group Limited*<br><br><br>• Bank of Montreal<br><br><br>• Bank of Nova Scotia<br><br><br>• MetLife, Inc.*<br><br><br>• Power Corporation*<br><br><br>• Principal Financial Group Inc.*<br><br><br>• Prudential Financial, Inc.*<br><br><br>• Prudential plc*<br><br><br>• Royal Bank of Canada<br><br><br>• Sun Life Financial Inc.*<br><br><br>• Toronto-Dominion Bank	Performance peer group<br><br><br>• AIA Group Limited*<br> <br>• Allianz SE<br><br><br>• Assicurazioni Generali S.p.A.<br> <br>• Aviva plc<br><br><br>• AXA SA<br> <br>• Brighthouse Financial<br><br><br>• Dai-ichi Life<br><br><br>• MetLife, Inc.*<br> <br>• Power Corporation*<br><br><br>• Principal Financial Group Inc.*<br> <br>• Prudential Financial,<br>Inc.*<br> <br>• Prudential plc*<br> <br>• Sun Life Financial Inc.*<br><br><br>• Unum Group<br> <br>• Zurich Insurance Group Ltd.	New in 2021<br><br><br>We added Brighthouse Financial, Dai-ichi Life and Unum Group to the performance peer group to better reflect<br>our product portfolio and geographic footprint.^1^<br> <br>We started using the new performance peer<br>group in 2021.
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*	Included in both peer groups.
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1	The new performance peer group applies to the 2021 and 2022 PSU grants – it will have no impact on the outstanding<br>2020 PSU awards.
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Where we rank against our peers

The table below shows how we rank against our peers. We compare our total assets, market capitalization and revenue with the compensation peer group, using the most recently reported figures in U.S. dollars. This illustrates why this group is appropriate as a benchmark for compensation. We compare our one, three and five-year TSR against the performance peer group. Manulife’s TSR is based on the price of Manulife’s common shares on the TSX for the periods ended December 31, 2021. Peer TSR is based on their primary stock exchange and on local currencies.

(US$)	Peer group median		Manulife		Manulife<br>percentile
Total assets		759.7 billion		705.9 billion		48%
Market capitalization		58.6 billion		42 billion		38%
Total revenue		38.2 billion		47.6 billion		58%
One-year TSR		37.3		11.6		21%
Three-year TSR		54.3		44.1		32%
Five-year TSR		52.2		25.3		26%

All values are in US Dollars.

(source: Bloomberg)

2022 Management information circular	49

Our compensation program and

2021 performance

Total compensation

Our executive compensation program has three key components of direct compensation.

Element	Form	Performance criteria	Key characteristics
Base salary	Cash		• Fixed compensation based on role, performance, qualifications and experience
Annual incentive awards	Cash andequity	Key metrics:<br><br><br>• Net income attributed to shareholders (25%)<br><br><br>• Core earnings excluding core investment gains (25%)<br><br><br>• New business value (15%)<br><br><br>• Global Wealth and Asset Management (Global WAM) core earnings (15%)<br><br><br>• Strategic focus (20%)	• Variable compensation based on company objectives and individual performance goals<br><br><br>• Individual performance objectives are tied to financial performance and contribution to Manulife’s strategic<br>priorities, including performance goals linked to diversity, equity and inclusion, employee engagement and leadership accountability, and beginning in 2021, to Manulife’s Climate Action Plan<br><br><br>• 10% of annual incentives are delivered in Manulife common shares
Equity-based incentives	Performance share units (60%)	3-year vesting period<br> <br>Key<br>metrics:<br> <br>• Book value per share excluding AOCI (50%)<br><br><br>• Core return on equity (50%)<br><br><br>• Relative TSR multiplier (+/- 20%) compared to Manulife’s performance peer group	• Ties compensation to company and share price performance over both the medium and long<br>term<br> <br>• Strengthens retention and reinforces alignment with shareholder value<br><br><br>• Starting with 2019 grants, 10% of the vesting value of RSUs and PSUs are delivered in Manulife common<br>shares
	Restricted share units (40%)	3-year vesting period
50	Manulife Financial Corporation
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Executive Compensation

The executive compensation program also consists of the following elements:

Pension: Assists our employees as they save for their retirement

•	We typically offer capital accumulation plans, including defined contribution, cash balance and 401(k) plans, depending on<br>the country where the employee works

Benefits and wellness: Protects and invests in the well-being of our employees

•	We offer group life, disability, health and dental insurance and wellness and other programs that reflect local market<br>practice in the country where the employee works

Perquisites: Offers market-competitive benefits

•	We offer perquisites based on local market practice

About base salaries

Base salaries are set in February of each year and any changes go into effect on March 1. Each executive’s salary depends on several considerations, including qualifications, experience and role, performance, past promotions and career progression, salaries paid for comparable roles at peer companies and salaries of comparable roles within Manulife.

We benchmark salaries at least once a year against comparable roles at peer companies.

In 2021 and 2022, the CEO’s base salary did not increase. In 2021, there were no changes to the base salaries of any of our named executives. For 2022, base salaries were increased for our named executives with the exception of the CEO.

About the annual incentive

Our annual incentive plan is designed to reward senior executives for meeting company objectives and individual performance goals over a calendar year where performance is assessed based on “what” was achieved (contribution) and “how” it was achieved (exhibiting our company values). Incentive compensation for higher level positions is more heavily influenced by total company results, while the emphasis at less senior levels in the organization is more on segment, business unit or functional goals, with some links to global results to foster collaboration and a business owner mentality.

Performance objectives and weightings are:

•	linked to our strategy with targets consistent with our board-approved plan
•	stress tested and back tested to make sure potential awards are aligned with business performance and do not encourage<br>inappropriate risk-taking
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•	recommended by senior management and reviewed and approved by the board
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How we calculate the award for the senior executives

Each executive has a target annual incentive equal to a percentage of their base salary. For named executives, the actual annual incentive award depends on both the company performance score, which can range from 0% to 200%, and individual performance. We assess individual performance against goals that are tied to the financial and operating results of the named executive’s business, strategic initiatives for the year, and on their contribution to Manulife as a whole, including their impact on our risk culture. In line with our ESG priorities, the executive leadership team also have individual performance goals linked to diversity, equity and inclusion, employee engagement and leadership accountability. Beginning in 2021, the annual incentive includes goals linked to Manulife’s Climate Action Plan.

The minimum award under the plan is zero and the maximum award is 2.5 times target.

Base salary	Annual incentive target<br><br><br>% of base salary	Company performance score<br><br><br>Range:<br>0% - 200%	Adjustment for individual performance	Annual incentive award
2022 Management information circular	51
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Performance criteria and weighting****

Aligns compensation with shareholder experience				Net income attributed to shareholders<br><br><br>25%
	Threshold	Target	Maximum
score	25*	100	200
performance	30% below target	at target	40% above target
	*Below threshold performance results in a score of<br>zero.
Reflects the underlying earnings capacity and is an important factor in valuing Manulife’s share price				Core earnings excluding core investment gains^^<br><br><br>25%
	Threshold	Target	Maximum
score	0	100	200
performance	25% below target	at target	25% above target
Measures profitable growth in new business across our portfolio, including:<br><br><br>• New business value for insurance businesses<br><br><br>• Global WAM				New business profitability<br> <br>30%
	Threshold	Target	Maximum
score	0	100	200
performance	50% below target	at target	50% above target
Customer, employee and strategic initiatives that are quantifiable goals and deliverables, subject to a qualitative overlay, and aligned with our strategic and annual operating plan. Also<br>includes important employee engagement, diversity, equity and inclusion measures. Established at the beginning of the year and approved by the management resources and compensation committee.				Strategic focus<br> <br>20%

How the measures are defined

Net incomeattributed to shareholders: as disclosed in our annual report, available at manulife.com.

Core earnings excluding core investment gains: core earnings measures the underlying earnings capacity of our businesses. For the annual incentive plan, we exclude core investment gains to align with operational performance.

New business profitability: measures profitable growth in new business across our portfolio. Includes the following measures:

•	New business value for insurance businesses represents the change in shareholders’<br>economic value as a result of sales in the period. Calculated as the present value of shareholders’ interest in expected future distributable earnings, after the cost of capital, on actual new business sold in the period.
•	Global WAM core earnings : core earnings of our Global WAM segment, which provides fee-based wealth and asset management solutions to our retail, retirement and institutional customers around the world.
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52	Manulife Financial Corporation
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Executive Compensation

Non-GAAP and other financial measures

The company prepares our Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. We use a number of non-GAAP and other financial measures to evaluate overall performance and to assess each of our businesses. This section includes information required by National Instrument 52-112 – Non-GAAP and OtherFinancial Measures Disclosure in respect of “specified financial measures” (as defined therein).

Non-GAAPfinancial measures include core earnings, pre-tax core earnings, core general expenses, assets under management and administration and Global WAM managed assets under management and administration.

Non-GAAP ratios include core ROE; diluted core earnings per common share (core EPS); and expense efficiency ratio. In addition, non-GAAP ratios include the percentage growth/decline on a constant exchange rate (CER) basis in any of the above non-GAAP financial measures; general expenses; basic earnings per common share; and diluted earnings per common share.

Other specified financial measures include new business value (NBV); annualized premium equivalent (APE) sales; gross flows; net flows; remittances and any of the foregoing specified financial measures stated on a CER basis; and percentage growth/decline in any of the foregoing specified financial measures on a CER basis.

Non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under GAAP and, therefore, might not be comparable to similar financial measures disclosed by other issuers. Therefore, they should not be considered in isolation or as a substitute for any other financial information prepared in accordance with GAAP. For more information about non-GAAP and other financial measures, see that section in our 2021 Management’s Discussion and Analysis which is incorporated by reference and can be found on the company’s website at www.manulife.com/en/investors/results-and-reports.

2021 annual incentive

The company performance score for the 2021 annual incentive award is 142% for the named executives. This is based on performance against measures and objectives that were set at the beginning of the year, in line with our board-approved business plan (see the table on the following page). Despite the ongoing impacts of COVID-19 on our business results, the committee (similar to 2020) did not make any offsetting adjustments.

The committee set the performance ranges for the 2021 annual incentive award in November 2020. At that time, there remained widespread uncertainty about how COVID-19 would continue to impact our operations and financial results. These uncertainties included many factors outside of our management team’s control, such as the uncertainty around the ongoing spread of COVID-19, including any variants, as well as actions that have been, or may be taken by governmental authorities in response to COVID-19 that would disrupt our business.

The committee carefully considered these factors along with known charges in 2021 when setting the performance ranges, and ultimately set ambitious 2021 target values for our performance criteria. The committee noted that the net income 2021 target value was lower than 2020 as the prior year included benefits from reinsurance transactions that were not expected again in 2021, while the 2021 net income performance range included charges for the impact of updated URR assumptions issued by the Canadian Actuarial Standards Board and restructuring charges. Adjusting for these items, 2021 targeted net income growth was approximately 15%. The committee also noted that core earnings excluding investment gains in 2020 benefited from favourable policyholder experience which was not expected to reoccur in 2021, and the expected impact of changes in foreign exchange rates and lower interest rates on the yield of surplus assets in 2021. Targeted core earnings growth into 2021 would have been close to 10% adjusting for these factors.

For more information about each named executive’s annual incentive award, and a discussion of their performance against their individual goals, see the named executive profiles starting on page 62. Our plan design includes an adjustment for individual performance to determine each named executive’s final payout.

2022 Management information circular	53

Company performance score for 2021

Performance range							Performance criteria and weighting
Threshold<br> <br>0	Target<br> <br>100	Maximum<br> <br>200	Actual	Score	Weightedscore	2020<br>actual^1^
$3,735	$5,338	$7,473	$7,105	183%	46%	$5,871	Net income attributed toshareholders ^2^ ****<br><br><br>($ millions) ****<br> <br>25%
$4,188	$5,585	$6,981	$6,136	139%	35%	$5,516	Core earnings excluding coreinvestment gains<br><br><br>($ millions)<br> <br>25%
							New business profitability($ millions) ****<br><br><br>30%
$1,012	$2,024	$3,036	$2,243	122%	18%	$1,802	New business value (15%)
$600	$1,200	$1,800	$1,406	134%	20%	$1,100	Global WAM core earnings (15%)
				115%	23%	120%	Strategic focus^3^<br><br><br>Customer, employee and<br>strategic initiatives<br> <br>20%
					142%		2021 company performancescore
1	This column shows the 2020 actual results for reference. The 2020 company performance score was 84.
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2	Performance at threshold results in a performance score of 25%. Performance below threshold results in a performance score<br>of zero.
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3	Performance is assessed against several predetermined goals established in our business plan.
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Financial measures

We delivered strong financial results in 2021:

•	Record net income attributed to shareholders of $7.1 billion, up 28% on a CER basis, driven by gains from<br>investment-related experience (compared with losses in the prior year) and growth in core earnings.
•	Record core earnings of $6.5 billion, up 26% on a CER basis, driven by higher new business gains from our insurance<br>businesses, higher net fee income in Global WAM, and in-force business growth.
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•	NBV of $2.2 billion, up 31% on a CER basis, driven by higher volumes in Asia, stronger margins in Canada and improved<br>volumes and margins in the US segment.
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•	At the end of 2021, $1.4 trillion in assets under management and administration, including total invested assets of $0.4<br>trillion, and segregated funds net assets of $0.4 trillion.
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Understanding the strategic focus score

We made strong progress on our strategic priorities. Highlights from 2021 include:

Accelerate growth:

•	Global WAM net flows continue to be strong, especially in the higher margin Retail business; achieved record net flows of<br>$27.9 billion in 2021
•	NBV was $2.2 billion, 31% higher than 2020, driven by higher sales volumes and improved margins in Asia, Canada and<br>the U.S.
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54	Manulife Financial Corporation
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Executive Compensation

Digital, customer leader:

•	Relationship net promotor score (rNPS) of +21, a 20 point improvement from the 2017 baseline and a 9 point improvement<br>over 2020)
•	Straight-through-processing of 82%, compared with 81% in 2020
---	---
•	Total new business applications digitally submitted increased by 15 percentage points to 71%, driven by continued<br>improvements in Asia through the adoption of ePOS and the Distribution Toolkit (Hong Kong, Singapore, China and Vietnam) and the completion of iPipeline integration with the John Hancock brokerage app
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Expense efficiency:

•	Delivered expense efficiency ratio of 48.9% and achieved the target of less than 50% in 2021. This compares with 52.9% in<br>2020
•	Achieved expense efficiencies target of $1 billion in 2020, two years ahead of schedule <br>
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Portfolio optimization:

•	Achieved release of capital target three years ahead of schedule
•	Delivered $6.3 billion of cumulative capital benefits, including $0.4 billion in 2021
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•	Entered into an agreement to reinsure over 75% of the legacy U.S. variable annuity block to reduce risk and unlock value<br>from our legacy business. The transaction closed on February 1, 2022
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High performing team:

•	Ranked in the 86th percentile among global financial services and insurance peers on our 2021 employee engagement survey,<br>up from 80th in 2020 in the midst of a global pandemic
•	Named a World’s Best Employer by Forbes for the second year in a row
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For more information about core earnings, assets under management and administration, NBV, and net flows, see Non-GAAP and other financial measures on page 53. You can find more information about our financial results and our progress on our strategic priorities in our 2021 annual report at manulife.com.

About the equity-based incentives

We grant a competitive mix of equity-based incentives every year, which may include restricted share units (RSUs), performance share units (PSUs) and stock options depending on the executive’s position.

We increased the proportion of equity-based incentives allocated to performance share units and restricted share units in 2021 and did not award stock options to address several factors, including tax and business considerations and dilution.

Heads of control functions do not receive performance share units, to ensure their compensation is not tied to the performance of businesses they oversee.

The table below shows the mix of equity-based incentives for 2021 and 2022.

	PSUs		RSUs		Stock options
Chief Executive Officer		60%		40%		0%
Other named executives		60%		40%		0%
Chief Risk Officer/Chief Actuary		0%		100%		0%
Global Compliance Chief/Chief Auditor		0%		100%		0%
2022 Management information circular	55
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	Equity-based incentives
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	Restricted share units	Performance share units	Stock options
What they<br><br><br>are	Notional shares that pay out based on the price of Manulife common<br>shares	Notional shares that pay out based on our performance and on the price<br>of Manulife common shares	Rights to buy Manulife common shares in the future at a specified<br>price
Vesting and<br><br><br>payout	Vest and pay out in cash within three years; starting with 2019 grants,<br>10% of the award is delivered to the executive in Manulife common shares purchased on the open market<br> <br><br><br><br>Their payout value is equal to the average closing price of Manulife common shares on the TSX for the 10 trading days before the day they vest	Vest and pay out in cash within three years; starting with 2019 grants, 10% of<br>the award is delivered to the executive in Manulife common shares purchased on the open market<br> <br><br><br><br>The number of units that vest depends on our performance against absolute and relative performance conditions that are set at grant, aligned with our strategy and<br>approved by the board<br> <br><br> <br>Their payout value is equal to the average closing price of Manulife<br>common shares on the TSX for the 10 trading days before the day they vest, multiplied by the number of performance share units, the performance factor and beginning with the 2021 grants, the relative TSR modifier	Vest 25% every year for four years from the grant date<br><br><br><br> <br>Stock options granted from 2015 to 2020 cannot be exercised until five years from the grant date<br>except under extenuating circumstances<br> <br><br> <br>The exercise price is equal to the grant price<br><br><br><br> <br>Their ultimate value is the difference between the exercise price and the price of Manulife<br>common shares on the TSX when they are exercised<br> <br><br> <br>Stock options expire at the end of 10 years<br>and are only transferable upon death
		<br><br><br><br><br> <br>See page 57 for details about the performance conditions for the PSUs awarded for 2021
Dividend equivalents	Credited as additional units at the same rate as dividends paid on<br>Manulife common shares and subject to the same vesting conditions as the underlying units		Do not earn dividend equivalents
56	Manulife Financial Corporation
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Executive Compensation

	Equity-based incentives
	Restricted share units	Performance share units	Stock options
Grants	The grant price is the closing price of Manulife common shares on the TSX on the last trading day before the grant date or the average<br>closing price for the 10 trading days before the grant date (whichever is higher)<br> <br><br> <br>The grant<br>value of stock options is calculated using the Black-Scholes methodology
Notice of retirement	For awards granted in 2015 and after, senior executives have to provide three months’ notice before leaving Manulife or they will<br>lose their post-termination retirement benefits and all outstanding grants will be forfeited
Closed trading<br><br><br>windows	Equity-based incentives are not granted when our insiders are prohibited from trading. Annual awards are normally granted 10 or more<br>trading days following the end of the closed trading window after our year-end financial results are announced. Awards can also be made to select new executives at the time of hire. If the hire date falls<br>within a closed trading window the grant is delayed until after the end of the closed trading window. The company has an automatic stock option exercise program that allows insiders to elect in advance to have their expiring stock options exercised<br>through the program, which may occur within a closed trading window.

How we calculate the payout for performance share units

Performance share units granted in 2021 and 2022 vest and pay out based on the formula below.

Number of PSUs<br><br><br>Performance share units awarded and received as dividend equivalents during the three-year period	Performance factor<br><br><br><br> <br>range: 0-150<br><br><br><br> <br>Book value per share excluding AOCI<br><br><br>•  weighting: 50%<br><br><br>•  threshold: 10%<br><br><br>below target<br><br><br>•  maximum: 8% above target<br> <br><br><br><br>Core return on equity<br><br><br>•  weighting: 50%<br><br><br>•  threshold: 40%<br><br><br>below target<br><br><br>•  maximum: 32% above target	Relative TSR multiplier<br><br><br><br> <br>+/-20%<br><br><br><br> <br>Compared to our performance peer group as measured on the New York Stock Exchange<br>(NYSE).<br> <br><br> <br>Top quartile = +20%<br><br><br>2nd or 3rd quartile = +0%<br><br><br>Bottom quartile = -20%	Share price at the time of vesting	PSU payout

Performance is determined as an average of performance relative to the threshold, target and maximum targets set at the beginning of each of the three years in the performance period. The targets are tied to the board-approved budgets and consistent with our external guidance.

2022 Management information circular	57

Relative TSR uses a three-year performance period but is used as a modifier of the performance factor rather than a separate performance condition. This emphasizes conditions that are more directly controllable by management while continuing to have TSR and our share price meaningfully affect the payout value over a three-year period.

The board can adjust the calculated result up or down when significant events outside management’s control make awards unreasonable, unrepresentative or inappropriate. The board also believes management should not be penalized for making decisions that are in the long-term best interests of shareholders.

The performance factors for grants in 2021 and 2022 are determined as an average of performance relative to the threshold, target and maximum targets set at the beginning of each of the three years in the performance period, instead of based on performance measured against targets set for the cumulative three-year period. This change was made in response to the significant industry uncertainties, including the IFRS accounting changes coming in 2023, which affect our ability to set meaningful, appropriate targets three years in advance. The targets are tied to the board-approved budgets and consistent with our external guidance. The management resources and compensation committee views this change as temporary.

We disclose targets for PSUs at payout, when we compare our target performance to actual results. Disclosing this information before the end of the performance period would seriously prejudice Manulife’s interests because it could potentially relay confidential information about our strategy, initiatives and business plan to our competitors or be inappropriately interpreted as earnings guidance.

How the measures are defined

Book value per share excluding accumulated other comprehensive income (AOCI): Calculated by dividing total common shareholders’ equity less AOCI by the number of common shares outstanding at the end of the period. We exclude AOCI because it includes items such as currency impacts, which can be volatile and distort results.

Core return on equity (core ROE) : **** Calculated as core earnings available to common shareholders as a percentage of the capital deployed to earn the core earnings. Calculated using average common shareholders’ equity. Core ROE is a non-GAAP ratio. For more information, see Non-GAAP and other financial measures on page 53.

Relative TSR: TSR is a measure of the performance of common shares held by investors. Calculated by combining the price appreciation or depreciation, plus the value of dividends paid to shareholders (assuming dividends are reinvested in additional shares). Relative TSR is calculated by comparing the TSR of Manulife common shares traded on the NYSE with the TSR of our performance peer group over the performance period. To minimize distortions, the 20-day average share price is used for the

opening and closing share price in the calculation of TSR for both Manulife and our performance peers.

Payout of the equity-based incentives that were awarded in 2019

Restricted share units awarded in 2019 vested on March 5, 2022. Performance share units awarded in 2019 vested on March 5, 2022. The amounts in the table below include reinvested dividends.

	Vesting<br><br><br>date		Grant date<br>price		Performance<br>factor		Vesting date<br>price		Payout as a %<br>of grant value
2019 RSUs		March 5, 2022	$	22.60		–	$	26.02		132%
2019 PSUs		March 5, 2022	$	22.60		84%	$	26.02		111%
58	Manulife Financial Corporation
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Executive Compensation

The performance factor for the 2019 PSUs was 84%. Performance was assessed using performance conditions and goals that were set prior to 2019, at the time of the grant, in line with our board-approved business plan. See the table below for a detailed breakdown of how this score was calculated.

Number of<br><br><br>PSUs<br> <br>Performance share units awarded and received as dividend equivalents<br>during the three-year period	Performance<br><br><br>factor<br> <br>84%	Share price at the time of vesting	PSU payout
								As a<br>percentage<br>of original<br>award
---	---	---	---	---	---	---	---	---
Roy Gori	188,089	x	84%	x	$26.02	=	$4,111,030	111%
Phil Witherington	55,964	x	84%	x	$26.02	=	$1,223,200	111%
Marianne Harrison	87,327	x	84%	x	$26.02	=	$1,908,697	111%
Anil Wadhwani	67,175	x	84%	x	$26.02	=	$1,468,231	111%
Scott Hartz	50,381	x	84%	x	$26.02	=	$1,101,166	111%

Performance factor

The 2019 PSU grant was based on a single three-year performance period.

Performance range						Performance criteria<br><br><br>and weighting
Threshold<br><br><br>0	Target<br><br><br>100	Maximum<br><br><br>180	Actual	Score	Weighted<br>score
$20.16	$22.40	$24.19	$22.15	89%	29%	Book value<br> <br>per share<br><br><br>excluding AOCI<br> <br>($ millions)<br><br><br>33%
7.8%	13.0%	17.2%	12.3%	86%	28%	Core return onequity (%)<br> <br>33%
30 percentage<br> <br>points<br>below median	median	24 percentage<br> <br>points above<br>median	46.5% vs<br>53.1%<br> <br>(median)	78%	27%	Relative TSR<br> <br>34%
					84%	2019 PSUperformance factor

The performance factor of 84% is based on our performance against targets for the performance conditions across the three-year performance period. Book value per share excluding AOCI and core return on equity finished below target due to the impacts of COVID-19 on our business.

2022 Management information circular	59

In calculating the performance factor, the board excluded the impact of the 2019 and 2021 charges related to updating the URR assumptions issued by the Canadian Actuarial Standards Board, and the impact of the restructuring charge taken in 2021. These adjustments increased the score by 1.5%.

The board adjusted for the impact of these items because we believe compensation should be aligned with long-term shareholder value: senior executives should not be penalized when they take actions that are in the long-term best interest of shareholders even though there may be short term effects on core ROE or book value per share, or where there are legislative or regulatory changes outside our control.

Relative TSR is calculated by comparing the TSR of Manulife common shares traded on the NYSE compared with the TSR of our performance peer group across the performance period. To minimize distortions, we use the 20-day average share price for the opening and closing share price in the calculation of TSR for both Manulife and our performance peers. Relative TSR during the three-year period was 6.6 percentage points below the median TSR of the performance peer group.

Cost of management ratio

The table below shows a cost of management ratio as another measure of value for shareholders. The cost of management ratio expresses the total compensation reported for the named executives as a percentage of net income attributed to shareholders. It is affected by foreign exchange rates, the named executives each year and our net income. In 2021, this ratio remained consistent with the prior three years.

		2018
Total compensation reported for the named executives ( thousands)	49,615		35,909	38,492	36,828	$41,839
Net income attributed to shareholders ( millions)	2,104		4,800	5,602	5,871	$7,105
Cost of management ratio	2.4%		0.7%	0.7%	0.6%	0.6%

All values are in US Dollars.

1	Adjusted for the impacts of changes to our legacy businesses and U.S. Tax Reform in 2017, net income used for the<br>2017 annual incentive award was $4,767 million and the cost of management ratio was 1.0%.

Total compensation reported for the namedexecutives

The total compensation reported in the summary compensation table each year.

Cost of management ratio

Total compensation paid to the named executives divided by net income attributed to shareholders, expressed as a percentage.

Named executives each year

2021: Roy Gori, Phil Witherington, Marianne Harrison, Anil Wadhwani, Scott Hartz

2020: Roy Gori, Phil Witherington, Marianne Harrison, Anil Wadhwani, Scott Hartz

2019: Roy Gori, Phil Witherington, Rahul Joshi, Marianne Harrison, Anil Wadhwani

2018: Roy Gori, Phil Witherington, Warren Thomson, Marianne Harrison, Anil Wadhwani

2017: Roy Gori, Steve Roder, Warren Thomson, Marianne Harrison, Linda Mantia, Donald Guloien

60	Manulife Financial Corporation

Executive Compensation

2021 Target compensation mix

The charts below show the mix of components that make up target total direct compensation for our senior executives, and how those components pay out over time.

Most of each executive’s compensation is variable (or at risk), and a significant portion is tied to our share price. The proportion of at risk pay increases by level, making the link between pay and performance more pronounced for senior executives, because of the greater influence they have on our results. The combination of different incentive plans ensures that senior executives consider both the short-term and the long-term impact of their decisions.

The board believes this combination of incentives and time horizons helps to drive performance, align executive interests with those of shareholders, provide for competitive pay opportunities and encourage retention.

Chief Executive Officer

Other named executives (average)

2022 Management information circular	61

Compensation of the named executives

Roy Gori<br><br><br><br> <br>President and<br>CEO
Mr. Gori is President and CEO and a member of the board of directors. He has overall responsibility for Manulife’s strategy, operations and<br>performance. Mr. Gori joined Manulife in 2015 as President and CEO, Manulife Asia, and was promoted to his current role in 2017.
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Mr. Gori led Manulife to strong 2021 results, driving our ability to adapt and serve clients across the globe who are navigating a very uncertain environment. Under his leadership, we made progress on our strategic priorities, enhanced our organizational culture and ESG capabilities, achieved top quartile employee engagement scores, and delivered record financial results despite economic headwinds and the ongoing prevalence of COVID-19. The information below describes the company’s financial results and other factors that went into determining his compensation for 2021.

2021 FINANCIAL MEASURES

•	We reported record net income attributed to shareholders of $7.1 billion, up 28% from 2020
•	We achieved core earnings of $6.5 billion, up 26%^^from 2020<br>
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•	We delivered core ROE of 13.0% and ROE of 14.2%
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•	We achieved NBV of $2.2 billion, up 31%^1^ from 2020<br>
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•	We delivered APE sales of $6.1 billion, up 13%^1^ from 2020<br>
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•	Global WAM net inflows were $27.9 billion compared with net inflows of $8.9 billion in 2020
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•	Our TSR on the TSX was 11.6%^2^, close to the 25^th^ percentile of our peers (see page 49 for a list of our peers)
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PROGRESS AGAINSTMANULIFE’S FIVE STRATEGIC PRIORITIES

Accelerate growth:

•	We completed the acquisition of Aviva Vietnam and commenced a 16-year<br>bancassurance partnership with VietinBank to better meet the growing financial and insurance needs of the Vietnamese people
•	We continued our expansion of behavioural-based wellness insurance products through our Manulife Vitality program<br>in Canada, “Vitality for All” strategy in the U.S. and ManulifeMOVE in Asia
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•	Surpassed $1 trillion in Global WAM managed Assets under Management and Administration^3^
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Digital, customer leader:

•	Relationship net promotor score (rNPS) of +21, a 20 point improvement from the 2017 baseline and a 9 point improvement<br>from 2020
•	Total new business applications digitally submitted increased by 15 percentage points to 71%, driven by continued<br>improvements in Asia through the adoption of ePOS and the Distribution Toolkit (Hong Kong, Singapore, China and Vietnam) and the completion of iPipeline integration with the John Hancock brokerage app
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•	Auto underwriting of new business was 72%, up 13 percentage points from 2019, reflecting the value enhancement from our<br>digital investments as we scale growth
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1	Percentage growth in NBV, and APE sales is stated on a constant exchange rate basis.
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2	From January 1, 2022 to March 16, 2022, Manulife’s TSR was 7.0%, in the top quartile of our performance peer group<br>and 5.7% above the median of this group.
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3	This item is a non-GAAP financial measure. See Non-GAAP and other financial measures on page 53 for more<br>information.
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62	Manulife Financial Corporation
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Executive Compensation

Expense efficiency:

•	Delivered expense efficiency ratio of 48.9% and achieved our target of less than 50% in 2021^4^. This compares with 52.9% in 2020
•	Achieved annual savings of $100 million in 2021 resulting from restructuring in the first half of 2021 <br>
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Portfolio optimization:

•	Achieved release of capital target 3 years ahead of schedule
•	Delivered $6.3 billion of cumulative capital benefits, including $0.4 billion in 2021
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•	Entered into an agreement to reinsure over 75% of the legacy U.S. variable annuity block, to reduce risk and unlock value<br>from our legacy business. The transaction closed on February 1, 2022
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High performing team:

•	Ranked in the 86th percentile amongst global financial services and insurance peers on our 2021 employee engagement<br>survey, up from 80th in 2020
•	Named a World’s Best Employer by Forbes for the second year in a row
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•	Total company gender diversity of women at the executive level was 31%, exceeding target 18 months ahead of plan<br>
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TOTAL DIRECT COMPENSATION

Mr. Gori’s 2022 target total direct compensation takes into consideration the global scope and complexity of his role as President and CEO, what our global peers pay for similar roles (see page 49 for our compensation peer group), and what other senior executives at Manulife are paid.

The management resources and compensation committee received advice and additional research and analysis from its independent advisor when developing Mr. Gori’s compensation package. The board believes that Mr. Gori’s target compensation should be appropriately aligned against a global peer group, that it should reflect his performance, and that the pay mix should emphasize the focus on Manulife’s long-term performance and alignment with the shareholder experience.

The table below shows the total direct compensation the board approved for Mr. Gori for 2021, and his base salary and equity-based incentives for 2022, based on the recommendation of the management resources and compensation committee.

(in US$)	2019
Base salary		1,100,000	1,200,000	1,200,000	$1,200,000
Annual incentive^1^		3,700,000	2,822,400	4,600,800	$2,400,000<br>(target)
Equity-based incentives^1^
• PSUs		2,800,000	3,162,500	4,095,000	$4,920,000
• RSUs		1,120,000	1,265,000	2,730,000	$3,280,000
• stock options		1,680,000	1,897,500	0	$0
Total direct compensation		10,400,000	10,347,400	12,625,800	$11,800,000

All values are in US Dollars.

1	Timing of awards: the 2021 column includes the annual incentive awarded for 2021 and paid in February 2022 and the<br>equity-based incentives granted in March 2021.
4	This item is a non-GAAP ratio.
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2022 Management information circular	63
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2021 compensation mix

2022 target compensation mix

Base salary

Mr. Gori’s base salary has not changed since 2020.

Annual incentive

Mr. Gori’s 2021 annual incentive award was approved and paid in February 2022. It was paid out at 192% of his target and 63% higher than his 2020 award. Consistent with its standard practice, the committee combined the annual corporate performance score of 142% with its assessment of Mr. Gori’s personal performance and contributions across the company’s five strategic priorities (described in detail on page 62). The committee determined that Mr. Gori’s personal performance was exceptional in 2021, particularly given the challenging headwinds the company faced entering 2021 and continued to experience over the course of the year.

10% of the award was delivered in Manulife common shares purchased on the open market.

You can read about the annual incentive plan and our performance for the year starting on page 53.

Equity-based incentives

Mr. Gori’s 2021 equity-based incentive awards totaled US$6,825,000. The awards, made in March 2021, were based on his performance, the competitive position of his compensation compared to our global compensation peer group (see page 49) and the board’s focus on aligning executive pay with the interests of our shareholders.

You can read about the performance criteria for the performance share units starting on page 57.

The board approved US$8,200,000 in equity-based incentives for 2022, and allocated 60% to performance share units and 40% to restricted share units. These awards are intended to be forward-looking. The actual amount Mr. Gori realizes will be greater or less than the theoretical grant date amount based on our share price at the time of vesting and Manulife’s financial performance over the next three years.

64	Manulife Financial Corporation

Executive Compensation

PAY FOR PERFORMANCE LOOKBACK

To ensure the effectiveness of our executive compensation program and its alignment to our core principle of paying for performance, we conduct analyses from a variety of perspectives. In addition to the analysis shown in the Executive summary on page 44, we compare the percentile ranking of our annualized TSR and CEO realized and realizable pay to the percentile ranking of our eleven compensation peers over the previous five years (2016 to 2020, because 2021 compensation data for our peers is not yet available). These are plotted in the graph below. We use a time horizon of five years because the nature of our industry is to seek long-term results for shareholders.

For the companies in the shaded area, CEO compensation is aligned with returns. Companies above the shaded area have higher returns and lower CEO compensation than peers. Companies below the shaded area have lower returns and higher compensation than peers. This historical five-year analysis shows that Manulife’s CEO pay was in line with performance compared with our compensation peers.

See page 49 for information about our compensation peer group, and page 66 for details about how we calculate realized and realizable pay.

2022 Management information circular	65

Another view of pay for performance is illustrated in the graph below which compares Manulife’s TSR to the performance of the S&P/TSX Composite Financials Index and the median of our performance peer group. It also shows the CEO’s realized and realizable pay over the same period and how it aligns with our share price. When TSR has been lower, CEO pay has decreased; and when TSR has been higher, the CEO’s pay has increased. This alignment occurs because a significant portion of the CEO’s pay is equity-based.

—	Manulife
—	S&P/TSX Composite Financials Index
—	Performance Peer Group
⬛	Realized and realizable pay for the CEO
	2017		2018		2019		2020		2021
---	---	---	---	---	---	---	---	---	---	---
Manulife TSR (on the TSX)		13.3%		(23.3%)		42.0%		(9.2%)		11.6%
Median of our performance peer group		13.5%		(20.1%)		29.8%		(5.1%)		37.3%
S&P/TSX Composite Financials Index		13.3%		(9.3%)		21.4%		1.6%		36.5%
Realized and realizable pay for the CEO^1^	$	11.6M	$	1.7M	$	23.8M	$	4.2M	$	18.2M
1	Realized and realizable pay for Mr. Gori. Equity is valued based on our share price on the Toronto Stock Exchange<br>(TSX) as at December 31 for each year. For 2021, reflects $10.8 million received in cash (realized pay), and an increase of $7.3 million in outstanding equity awards that have not yet been realized (change in realizable pay).<br>
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Realized and realizable pay

•	cash compensation paid for a given year, including salary, annual incentive (earned for the year shown but paid the<br>following year),
•	payouts of restricted share units and performance share units upon vesting and gains realized from exercising stock<br>options, and
---	---
•	the change in value of outstanding restricted share units, performance share units, stock options, deferred share units<br>and shares held in escrow on December 31 of a given year compared to December 31 of the previous year, based on our share price on the TSX as at each of those dates.
---	---

Total shareholder return

TSR is the change in value of an investment between January 1 and December 31 of a given year, assuming dividends are reinvested. For Manulife, TSR reflects the value of our common shares on the TSX.

66	Manulife Financial Corporation

Executive Compensation

Phil Witherington<br><br><br><br> <br>Chief Financial Officer
Mr. Witherington is responsible for managing Manulife’s financial affairs, including financial accounting and reporting; planning and analysis; taxation; investor relations; treasury; capital management and financial<br>regulation, while also overseeing the strategy, transformation and corporate development functions, and our property and casualty reinsurance operations. He is a member of Manulife’s executive leadership team.
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In 2021, Mr. Witherington continued to play a critical role in the company’s achievement of a wide range of strategic objectives. This was demonstrated by the delivery of strong financial results in 2021 as measured by progress against our medium-term financial and operating targets, including exceeding our core EPS growth and core ROE targets. He contributed to all aspects of enterprise-wide strategic planning, resource prioritization and initiative governance, with a focus on supporting the growth of our highest potential businesses, and our digital and customer priorities. His involvement in our expense efficiency and portfolio optimization priorities has contributed to tangible financial outcomes and the delivery of notable milestones including the U.S. variable annuity block reinsurance transaction and achievement of our medium-term expense efficiency target. In leading our Global Finance function Mr. Witherington has advanced the company’s preparation for the implementation of IFRS 17, established a focused set of transformation priorities, and supported the on-going development and progression of talent across the company. The information below describes the company’s financial results and other factors that went into determining his compensation for 2021.

2021 FINANCIAL MEASURES

•	Reported net income attributed to shareholders of $7.1 billion in 2021, up 28% from 2020
•	Achieved core earnings of $6.5 billion, up 26% from 2020
---	---
•	Expense efficiency ratio improved by 4 percentage points to 48.9% in<br>2021
---	---
•	Delivered strong core ROE of 13.0% in 2021, up 2.1 percentage points from 2020
---	---
•	The Manufacturers Life Insurance Company’s Life Insurance Capital Adequacy Test (LICAT)^1^ total ratio was 142% as at December 31, 2021 (December 31, 2020: 149%)
---	---
•	Improved the financial leverage ratio by 0.8 percentage points to 25.8% as at December 31, 2021<br>
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CONTRIBUTION TO THE DELIVERY OF MANULIFE’S FIVE STRATEGIC PRIORITIES

•	Led the Finance function to partner effectively with colleagues and played a critical role in driving strategy,<br>governance, and execution against key strategic priorities
•	Supported growth in our highest potential businesses with targeted allocation of capital and internal resources to<br>initiatives in our Asia and Global WAM segments
---	---
•	Played a key role in the execution of the legacy U.S. variable annuity reinsurance transaction, which reduces risk and<br>unlocks value in our legacy business
---	---
•	Exercised continued expense discipline, while continuing to invest in our businesses, to deliver an expense efficiency<br>ratio of 48.9%, a four-percentage point improvement from 2020 and achieving our medium-term target of less than 50%. The improvement in the ratio compared with 2020 was driven by a 25% increase in pre-tax core earnings^2^ and a 5% increase in core general expenses.^2^ Total general expenses increased 9% on a constant exchange rate basis.
---	---
1	This item is disclosed under the Office of the Superintendent of Financial Institution’s Life Insurance Capital<br>Adequacy Test Public Disclosure Requirements guideline.
---	---
2	This item is a non-GAAP financial measure. See Non-GAAP and other financial measures on page 53 for more<br>information.
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2022 Management information circular	67
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•	Led the delivery of Manulife’s first fully virtual Investor Day in June 2021, which included the introduction of<br>additional financial disclosures/metrics for our Asia and Global WAM segments
---	---
•	Continued to make progress on diversifying our investor base by increasing the number of international investors, which<br>now represent 47% of the institutional shareholder base
---	---
•	Continued to progress our preparation for adoption of IFRS 17 in 2023, including disclosing additional guidance on the<br>impacts of the standard at our 2021 Investor Day
---	---
•	Refreshed the Finance Transformation Program to provide for a coordinated, global approach that is focused on supporting<br>both the execution of functional priorities, including IFRS 17 transition, and our enterprise-wide strategic priorities, including Strategic Cost Management.
---	---
•	Delivered on a broad range of capital deployment actions, including an 18% common share dividend increase, announcement of<br>a share buy-back program, and M&A activities to support inorganic growth in both Asia and Global WAM.
---	---
•	Continued to upgrade talent in key roles and build a more diverse Finance team through internal appointments, external<br>appointments and ongoing talent development. Improved gender diversity with women in 33% of Finance roles at the executive level.
---	---
•	Employee engagement score for Finance increased 0.17 points to 4.48 on a 5-point<br>scale (79^th^ percentile).
---	---

TOTAL DIRECT COMPENSATION

The table below shows the total direct compensation the board approved for Mr. Witherington for 2021, and his base salary and equity-based incentives for 2022, based on the recommendation of the CEO and the management resources and compensation committee.

(in CAD$)	2019
Base salary		867,000	915,000	915,000	$950,000
Annual incentive^1^		1,770,000	1,453,000	2,280,000	$1,282,500 (target)
Equity-based incentives^1^
• PSUs		1,100,000	1,250,000	1,620,000	$1,680,000
• RSUs		440,000	500,000	1,080,000	$1,120,000
• stock options		660,000	750,000	0	$0
Total direct compensation		4,837,000	4,868,000	5,895,000	$5,032,500

All values are in US Dollars.

1	Timing of awards: the 2021 column includes the annual incentive awarded for 2021 and paid in February 2022 and the<br>equity-based incentives granted in March 2021.
68	Manulife Financial Corporation
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Executive Compensation

2021 compensation mix

2022 target compensation mix

Base salary

Mr. Witherington’s salary for 2021 was $915,000 and was increased to $950,000 for 2022.

Annual incentive

Mr. Witherington’s 2021 annual incentive award was approved and paid in February 2022. It was 185% of his target and 57% greater than his 2020 award. 10% of the award was delivered in Manulife common shares purchased on the open market.

Equity-based incentives

Mr. Witherington’s 2021 equity-based incentive awards totaled $2,700,000. The awards, granted in March 2021, were based on his performance, the competitive position of his compensation compared to the peer group and the board’s focus on aligning executive pay with the interests of our shareholders.

In February 2022, the board approved $2,800,000 in equity-based incentives for Mr. Witherington and allocated 60% to performance share units and 40% to restricted share units. These awards are intended to be forward-looking. The actual amount Mr. Witherington realizes will be greater or less than the theoretical grant date amount based on our share price at the time of vesting and Manulife’s financial performance over the next three years.

2022 Management information circular	69
Marianne Harrison<br><br><br><br> <br>President and CEO, John Hancock
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Ms. Harrison is responsible for all aspects of the company’s U.S. segment, including providing life insurance products and administering in-force long-term care and<br>insurance-based wealth accumulation products in the U.S. She also operates as a matrix leader to the U.S. Mutual Fund business and the U.S. Retirement Plan Services business, which have primary accountability to the Global WAM segment. She is a<br>member of Manulife’s executive leadership team.
---

In 2021, Ms. Harrison helped her team successfully manage through the continued challenges of the pandemic, achieved strong financial results across multiple measures, and transformed how the U.S. segment operates. Under her leadership, International sales hit a new record and brokerage sales were very strong with improved margins. Ms. Harrison continued to actively drive diversity and inclusion initiatives and placed enhanced focus on engaging, developing and connecting with our employees. The information below describes the US segment’s financial results and other factors that went into determining her compensation for 2022.

2021 FINANCIAL MEASURES

•	Reported U.S. segment net income attributed to shareholders of US$1,667 million, compared with US$987 million in<br>2020
•	Contributed 29% of the company’s core earnings from operating segments and, as at December 31, 2021, accounted<br>for 17% of the company’s assets under management and administration
---	---
•	Delivered U.S. segment core earnings of US$1.5 billion, an increase of 4% compared with 2020
---	---
•	Delivered new business value of US$216 million, an increase of 80% compared with 2020
---	---
•	Delivered APE sales of US$628 million, an increase of 38% compared with 2020
---	---
•	Generated wealth and asset management net inflows of $15.1 billion, compared with net outflows of $9.6 billion<br>in 2020
---	---
•	Gross flows in the U.S. were $85.2 billion, an increase of 20%^^compared with 2020
---	---
•	U.S. segment assets under management of US$193 billion as at December 31, 2021 increased 2% from<br>December 31, 2020
---	---

CONTRIBUTION TO THE DELIVERY OF MANULIFE’S FIVE STRATEGIC PRIORITIES

•	Continued to make progress on legacy optimization, including achieving rate increases on Long Term Care and driving<br>inorganic initiatives like the U.S. variable annuity block reinsurance transaction
•	Achieved strategic cost management targets in 2021. Identified $122 million of opportunities by the first quarter of 2021<br>and well positioned to achieve $135 million beyond 2021
---	---
•	Transformed the U.S. Segment operating model through the launch of the Continuous Delivery Organization, which delivers<br>outcomes that will change and improve the overall customer experience. This new way of operating consists of Value Streams, which are cross-organizational teams that exist to help the U.S. Brokerage, International and Inforce businesses<br>
---	---
•	John Hancock is making significant progress to improve the digital experience for our producers, which drives a better<br>customer outcome. For example:
---	---
–	Increased the percentage of Traditional Brokerage Apps submitted via digital channels from 4% in July to 33% at year-end
---	---
–	Decreased cycle times across all submission methods from 59 days to 42 days; decreased cycle time for traditional<br>Brokerage Apps submitted via eApp from 57 days to 29 days
---	---
–	Increased the percentage of eligible applications that are underwritten via a straight-thru-process from 37% to 46%<br>
---	---
70	Manulife Financial Corporation
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Executive Compensation

•	Launched “Inclusion Boston” program that drives DEI action plans and recommended practices throughout the U.S.<br>segment. Joined the CEO Action Governing Committee for Racial Equity, which aims to root out and end systemic racism through public policy, and nominated a John Hancock DEI Director to the Fellowship
•	Continued to build a pipeline of diverse talent, sponsoring the employment of more than 600 Boston teens at John Hancock<br>and 50 local non-profit organizations through its MLK Scholars program – the largest, most comprehensive corporate summer job program of its kind in the U.S.
---	---
•	Launched Executive Leader Communication Training program and Underwriting Trainee Program
---	---
•	Launched an enhanced set of employee benefits focused on DEI mental health benefits for underrepresented groups,<br>including the LGBTQ+2 and BIPOC communities
---	---
•	Employee engagement score for the U.S. segment increased from 4.27 to 4.35 on a<br>5-point scale
---	---

TOTAL DIRECT COMPENSATION

The table below shows the total direct compensation the board approved for Ms. Harrison for 2021 and for her base salary and equity-based incentives for 2022, based on the recommendation of the CEO and the management resources and compensation committee.

(in US$)	2019
Base salary		725,000	740,000	740,000	$755,000
Annual incentive^1^		1,315,000	965,000	1,702,000	$1,019,250 (target)
Equity-based incentives^1^
• PSUs		1,300,000	1,300,000	1,560,000	$1,620,000
• RSUs		520,000	520,000	1,040,000	$1,080,000
• stock options		780,000	780,000	0	$0
Total direct compensation		4,640,000	4,305,000	5,042,000	$4,474,250

All values are in US Dollars.

1	Timing of awards: the 2021 column includes the annual incentive awarded for 2021 and paid in February 2022 and the<br>equity-based incentives granted in March 2021.
2022 Management information circular	71
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2021 compensation mix

2022 target compensation mix

Base salary

Ms. Harrison’s salary for 2021 was US$740,000 and was increased to US$755,000 for 2022.

Annual incentive

Ms. Harrison’s 2021 annual incentive award was approved and paid in February 2022. It was 170% of her target and 76% greater than her 2020 award. 10% of the award was delivered in Manulife common shares purchased on the open market.

Equity-based incentives

Ms. Harrison’s 2021 equity-based incentive awarded totaled US$2,600,000. The awards, granted in March 2021, were based on her performance, her anticipated future contributions, the competitive position of her compensation compared to our global compensation peer group (see page 49), and the board’s focus on aligning executive pay with the interests of our shareholders.

The board approved US$2,700,000 in equity-based incentives for 2022 and allocated 60% to performance share units and 40% to restricted share units. These awards are intended to be forward-looking. The actual amount Ms. Harrison realizes will be greater or less than the theoretical grant date amount based on our share price at the time of vesting and Manulife’s financial performance over the next three years.

72	Manulife Financial Corporation

Executive Compensation

Anil Wadhwani<br><br><br><br> <br>President & CEO, Manulife<br>Asia
Mr. Wadhwani joined Manulife as President and CEO of Manulife Asia on November 13, 2017. He is responsible for the overall management of Manulife’s insurance operations in 11 markets^1^ across Asia, including Japan, Hong Kong, Macau, Singapore, mainland China, Vietnam, Indonesia, the Philippines, Malaysia, Cambodia and Myanmar. He also operates as a matrix leader to the Global WAM<br>business in Asia, which has primary accountability to the Global WAM segment. He is a member of Manulife’s executive leadership team.
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In 2021, Mr. Wadhwani continued to maintain business momentum for Asia region, demonstrating Manulife Asia’s tremendous resilience and ability to innovate through digitization to serve our customers despite difficult market conditions across Asia region. Under his leadership, the company continued to post strong performance results for Asia region through innovation, digitization, and broader ways of customer engagement. The information below describes the Asia segment financial results and other factors that went into determining his compensation for 2021.

2021 FINANCIAL MEASURES

•	Reported net income attributed to shareholders of US$2,437 million, compared with US$1,322 million in 2020<br>
•	Contributed 32% of the company’s core earnings from operating segments and, as at December 31, 2021, accounted<br>for 11% of the company’s assets under management and administration
---	---
•	Generated Asia segment core earnings^2^ of US$1,736 million in<br>2021 compared with US$1,576 million in 2020
---	---
•	Achieved new business value of US$1,329 million, an increase of 27% compared with 2020
---	---
•	Delivered APE sales of US$3,229 million, an increase of 11% compared with 2020
---	---
•	Generated wealth and asset management net inflows of $2.0 billion in Asia wealth and asset management, compared with<br>net inflows of $3.9 billion in 2020
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CONTRIBUTION TO THE DELIVERY OF MANULIFE’S FIVE STRATEGIC PRIORITIES

•	Launched the start of a 16-year bancassurance relationship with VietinBank which<br>gives us opportunities to serve 14 million customers and acquired Aviva Vietnam, increasing our market leading position in Vietnam
•	Re-defined bancassurance model through structured governance and digital<br>capabilities enabling 30% growth in APE sales
---	---
•	Continued to grow our customer base and improve market share that outpaced our competitors across Asia in critical markets<br>with 16.4 million customers in 2021
---	---
•	Continued to rank as #1 insurer in Vietnam and Cambodia and increased our rankings in Singapore and the Philippines by 1<br>place in the third quarter of 2021 and first half of 2021^3^ respectively
---	---
•	Demonstrated progress on digital & transformation roadmap and customer experience by delivering a record rNPS of<br>46 in 2021 for our insurance customers, a 7.4 percentage point increase from the prior year, and an overall straight-through-processing of 84% in Dec 2021
---	---
•	Increased the Investment-Linked product mix to 27.5% compared to 15.9% a year ago in the low interest rate environment<br>
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2022 Management information circular	73
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1	Excludes India and Taiwan, which have Manulife Investment Management business only.
---	---
2	Excluding Asia wealth and asset management core earnings.
---	---
3	Latest available data from respective regulators.
---	---
•	Improved expense efficiency ratio by 0.6pps compared to prior year
---	---
•	Achieved capital management targets ahead of schedule by delivering US$741 million in remittances^4^
---	---
•	Continued to strengthen leadership pipeline and advance diversity and inclusion initiative. Women represented 34% at the<br>executive level, exceeding the VP representation target of 29%
---	---
•	Employee engagement score for the Asia segment achieved a new record high of 4.39 on a<br>5-point scale which placed us in the 92^nd^ percentile against Gallup’s Finance & Insurance Company benchmark and in the 73^rd^ percentile against Gallup all industries benchmark
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TOTAL DIRECT COMPENSATION

The table below shows the total direct compensation the board approved for Mr. Wadhwani for 2020, and his base salary and equity-based incentives for 2021, based on the recommendation of the CEO and the management resources and compensation committee.

(in US$)	2019
Basesalary		660,000	690,000	690,000	$710,000
Annual incentive^1^		1,198,000	1,017,000	1,587,000	$958,500 (target)
Equity-basedincentives^1^
• PSUs		1,000,000	1,100,000	1,350,000	$1,440,000
• RSUs		400,000	440,000	900,000	$960,000
• stock<br>options		600,000	660,000	0	$0
Total directcompensation		3,858,000	3,907,000	4,527,000	$4,068,500

All values are in US Dollars.

1	Timing of awards: the 2021 column includes the annual incentive awarded for 2021 and paid in February 2022 and the<br>equity-based incentives granted in March 2021

2021 compensation mix

2022 target compensation mix

4	For more information about remittances, see Non-GAAP and other financial measures on page 53.<br>
74	Manulife Financial Corporation
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Executive Compensation

Base salary

Mr. Wadhwani’s salary was US$690,000 and was increased to US$710,000 for 2022.

Annual incentive

Mr. Wadhwani’s 2021 annual incentive award was approved and paid in February 2022. It was 170% of his target and 56% greater than his 2020 award. 10% of the award was delivered in Manulife common shares purchased on the open market.

Equity-based incentives

Mr. Wadhwani’s 2021 equity-based incentive awards totaled US$2,250,000. The awards, made in March 2021, were based on his performance, his anticipated future contributions, the competitive position of his compensation compared to the peer group and the board’s focus on aligning executive pay with the interests of our shareholders.

The board approved US$2,400,000 in equity-based incentives for 2022 and allocated 60% to performance share units and 40% to restricted share units. These awards are intended to be forward-looking. The actual amount Mr. Wadhwani realizes will be greater or less than the theoretical grant date amount based on our share price at the time of vesting and Manulife’s financial performance over the next three years.

2022 Management information circular	75
Scott Hartz<br><br><br><br> <br>Chief Investment<br>Officer
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Mr. Hartz is Chief Investment Officer for Manulife. He oversees all of Manulife’s U.S., Canadian, Asian and newly expanded European general account investments. Mr. Hartz is also the Chief Investment Officer for<br>John Hancock Life Insurance Company (U.S.A.), a wholly owned subsidiary of Manulife. He is a member of Manulife’s executive leadership team.
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In 2021 Mr. Hartz’s deep investment acumen and experience enabled us to act decisively in a rapidly changing landscape. He balanced short-term considerations with long-term needs and expectations. Under his leadership, our investment team consistently focused on what was in the best interest of the organization, our customers and investors and delivered strong investment-related experience gains in 2021. The information below describes the company’s financial results, general fund performance and other factors that went into determining his compensation for 2021.

2021 FINANCIAL MEASURES

•	General fund invested assets of $427.1 billion as at December 31, 2021 increased 4% from December 31, 2020<br>
•	Maintained average ratings across our total fixed income portfolio throughout 2021, which was 97% investment grade with<br>72% rated A or higher
---	---
•	General fund assets invested into renewable energy and energy efficiency projects had a carrying value of<br>$13.1 billion as at December 31, 2021
---	---
•	Generated a gain of $2,042 million in investment-related experience, driven by higher-than expected returns on<br>alternative long-duration assets strong credit experience and the favourable impact of fixed income reinvestment activities
---	---
•	Reported a net charge of $817 million from the direct impact of equity markets and interest rates and variable<br>annuity guarantee liabilities, impacted by changes to the ultimate reinvestment rate, higher risk-free interest rates, loss on the sale of available-for-sale bonds and<br>changes in the slope of the yield curve, partially offset by strong equity market performance
---	---
•	Delivered $11.6 billion of net investment income in 2021
---	---

CONTRIBUTION TO THE DELIVERY OF MANULIFE’S FIVE STRATEGIC PRIORITIES

•	Played a key role in the execution of the legacy U.S. variable annuity reinsurance transaction, which reduces the volume<br>of the hedging program and risk profile
•	Effectively managed our assets and hedging programs through volatile markets, resulting in healthy investment gains and<br>favourable credit experience
---	---
•	Continued to expand our capabilities for the Asia balance sheet and provide our clients with superior risk adjusted<br>returns
---	---
•	Supported Global WAM segment in expanding opportunities to offer third party investors access to private market<br>investments and a number of new private equity and infrastructure funds
---	---
•	Continued multi-year transformation and digitization of infrastructure supporting investment operations<br>
---	---
•	Employee engagement score for the General Account increased 0.26 points from the prior year to 4.57 on a 5-point scale, achieving top-quartile results
---	---
•	Supported the assessment and policy decisions in advance of IFRS17 implementation
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76	Manulife Financial Corporation
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Executive Compensation

TOTAL DIRECT COMPENSATION

The table below shows the total direct compensation the board approved for Mr. Hartz for 2021, and his base salary and equity-based incentives for 2022, based on the recommendation of the CEO and the management resources and compensation committee.

(in US$)	2019
Base salary		686,800	700,000	700,000	715,000
Annual incentive^1^		1,558,000	1,191,000	1,864,000	1,072,500 (target
Equity-based incentives^1^
• PSUs		750,000	1,000,000	1,200,000	1,260,000
• RSUs		300,000	400,000	800,000	840,000
• stock options		450,000	600,000	0	0
Total direct compensation		3,744,800	3,891,000	4,564,000	3,887,500

All values are in US Dollars.

1	Timing of awards: the 2021 column includes the annual incentive awarded for 2021 and paid in February 2022 and the<br>equity-based incentives granted in March 2021

2021 compensation mix

2022 target compensation mix

2022 Management information circular	77

Base salary

Mr. Hartz’s salary for 2021 was US$700,000 and was increased to US$715,000 for 2022.

Annual incentive

Mr. Hartz’s 2021 annual incentive award was approved and paid in February 2022. It was 178% of his target and 57% greater than his 2020 award. 10% of the award was delivered in Manulife common shares purchased on the open market.

Equity-based incentives

Mr. Hartz’s 2021 equity-based incentive awards totaled US$2,000,000. The awards, granted in March 2021, were based on his performance, the competitive position of his compensation compared to the peer group and the board’s focus on aligning executive pay with the interests of our shareholders.

The board approved US$2,100,000 in equity-based incentives for 2022 and allocated 60% to performance share units and 40% to restricted share units. These awards are intended to be forward-looking. The actual amount Mr. Hartz realizes will be greater or less than the theoretical grant date amount based on our share price at the time of vesting and Manulife’s financial performance over the next three years.

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Share performance

The graph below compares the cumulative value of $100 invested in Manulife common shares on December 31, 2016 with the value of $100 invested in two major market indices and an “index” of our performance peers for the five-year period based on median performance, assuming dividends are reinvested.

Manulife’s share price performance compared to peers and other relevant indices is one lens the board reviews when establishing executive pay levels.

—	S&P/TSX Composite<br> <br>Index ($)
---	S&P/TSX Composite<br> <br>Financials Index ($)
—	Median of our performance peer group ($)
—	Manulife ($)
(as at December 31)	2016
---	---	---	---	---	---	---	---
Manulife		100.00	113.32	86.97	123.51	112.14	125.15
S&P/TSX Composite Index		100.00	109.08	99.39	122.09	128.93	161.28
S&P/TSX Composite Financials Index		100.00	113.32	102.76	124.70	126.72	172.98
Median of our performance peer group (see page 49)		100.00	113.54	90.73	117.76	111.82	153.58

All values are in US Dollars.

1	Represents the value of a $100 investment after five years if it had achieved the median annual share price performance of<br>the performance peer group in each individual year (see page 49 for a listing of these peers). The value shown here is different from the median five-year TSR for the performance peer group shown on page 49, because that page uses a cumulative<br>five-year period.
2022 Management information circular	79
---	---

Executive compensation details

Summary compensation table

The table below shows the compensation awarded to the named executives for our last three fiscal years. For each named executive, the 2021 row includes the annual incentive paid in February 2022 and share-based and option-based awards granted in March 2021. We set compensation for the majority of the named executives in U.S. dollars, and have converted the amounts below to Canadian dollars consistent with our financial statements. Fluctuations in exchange rates can contribute to changes in the compensation amounts reported from year to year.

	Year		Salary
Roy Gori<br><br><br>President and CEO		2021<br> <br>2020<br><br><br>2019		1,518,805 1,584,887<br>1,461,167	8,622,705 5,887,690<br>5,175,576	0 2,523,296<br>2,218,104	5,836,575 3,580,497<br>4,902,130	747,457 951,902<br>813,100	134,644 168,816<br>125,472	$16,860,186<br> <br>$14,697,088<br><br><br>$14,695,549
Phil Witherington<br><br><br>Chief Financial Officer		2021<br> <br>2020<br><br><br>2019		915,000 907,000<br>864,167	2,700,000 1,750,000<br>1,540,000	0 750,000<br>660,000	2,280,000 1,453,000<br>1,770,000	226,284 258,281<br>226,000	53,627 53,532<br>51,955	$6,174,911<br> <br>$5,171,813<br><br><br>$5,112,122
Marianne Harrison<br><br><br>President and CEO, John Hancock		2021<br> <br>2020<br><br><br>2019		931,232 989,024<br>960,012	3,284,840 2,420,236<br>2,402,946	0 1,037,244<br>1,029,834	2,159,157 1,224,199<br>1,742,244	177,510 226,444<br>199,500	7,416 7,416<br>13,129	$6,560,155<br> <br>$5,904,563<br><br><br>$6,347,665
Anil Wadhwani<br><br><br>President and CEO, Manulife Asia		2021<br> <br>2020<br><br><br>2019		867,450 921,524<br>865,468	2,842,650 2,047,892<br>1,848,420	0 877,668<br>792,180	2,013,268 1,290,166<br>1,587,230	43,295 46,053<br>43,300	512,757 517,689<br>511,046	$6,279,420<br> <br>$5,700,992<br><br><br>$5,647,644
Scott Hartz<br><br><br>Chief Investment Officer		2021<br> <br>2020<br><br><br>2019		877,520 935,767<br>911,454	2,526,800 1,861,720<br>1,386,315	0 797,880<br>594,135	2,364,670 1,510,903<br>2,064,194	195,812 247,359<br>247,467	0 0<br>3,320	$5,964,802<br> <br>$5,353,629<br><br><br>$5,206,885

All values are in US Dollars.

Base salary

Mr. Gori’s salary is set in U.S. dollars, but paid semi-monthly in Canadian dollars using the Bank of Canada noon exchange rate that applied on the previous pay date. Mr. Witherington’s salary is set and paid in Canadian dollars. Ms. Harrison’s and Mr. Hartz’s salaries are set and paid in U.S. dollars. Mr. Wadhwani’s salary is set in U.S. dollars but paid in Hong Kong dollars. For executives who are paid in U.S. dollars or Hong Kong dollars, we used the average annual exchange rates outlined in the table below to convert to Canadian dollars.

	Exchange rate for<br>U.S. dollars	Exchange rate for<br>HK dollars
2021	US$1.00 = $1.254	HK$1.00 = $0.1613
2020	US$1.00 = $1.341	HK$1.00 = $0.1729
2019	US$1.00 = $1.327	HK$1.00 = $0.1694
Supplementary table: total<br> <br>compensationin U.S. dollars<br> <br>This table shows total compensation<br>for the named executives in U.S.<br>dollars for convenience. Amounts<br>paid in other currencies<br>were<br>converted to U.S. dollars consistent<br>with our financial statements.
---	---	---
		(US)
Roy Gori	2021<br> <br>2020<br><br><br>2019
Phil Witherington	2021<br> <br>2020<br><br><br>2019
Marianne Harrison	2021<br> <br>2020<br><br><br>2019
Anil<br>Wadhwani	2021<br> <br>2020<br><br><br>2019
Scott Hartz	2021<br> <br>2020<br><br><br>2019

All values are in US Dollars.

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Share-based awards<br> <br>The grant date fair value<br>of performance<br>share units, restricted share units and<br>deferred share units awarded to the<br> <br>named executives in the table to the right.		Grant date	Share price
	2021	March 2		25.15	US$1.00 = $1.2634
	2020	March 3		24.38	US$1.00 = $1.3298
	2019	March 5		22.60	US$1.00 = $1.3203
The grant date fair value is the closing price of a Manulife common share on the TSX on the last trading day before the grant date or the average closing price for the last 10 trading days<br>before the grant date (whichever is higher).

All values are in US Dollars.

Option-based awards<br> <br>We did not award<br>stock options in 2021.<br> <br><br> <br>The grant date fair value of stock options<br>awarded to the named<br>executives was<br>calculated using the data in the table to<br>the right.<br> <br><br> <br>We used the<br>Black-Scholes methodology to<br>determine the fair value of the stock option<br>awards (using the same assumptions we use<br>for accounting purposes):			Exercise<br><br><br>price			Exchange rate<br>for awards in<br>             <br>   U.S. dollars
	2020	March 3		24.38	15.0%		US$1.00 = $1.3298
	2019	March 5		22.60	20.2%		US$1.00 = $1.3203
		Expected life<br>(years)		Expectedvolatility	Risk-free<br>interest rate		Expected<br>dividend yield
	2020	8.0		23.0%	1.50%		3.50%
	2019	6.3		28.0%	2.50%		3.50%

All values are in US Dollars.

Annual incentive<br> <br>Paid in cash in the year<br>following the fiscal year in which the award was earned.<br>The U.S. dollar amounts were converted to Canadian dollars using the exchange<br>rates that applied on the previous pay dates.	Exchange rate for<br>awards in in U.S. dollars
		2021<br> <br>2020<br><br><br>2019	US$1.00 = $1.2686<br> <br>US$1.00 = $1.2686<br><br><br>US$1.00 = $1.3249

Pension value

The sum of the amounts under compensatory change for each named executive in the pension tables on pages 87 and 88.

All other compensation

Mr. Gori’s amount includes:

•	2021: $31,139 for club membership fees, and a $100,000 flexible spending account allowance.
•	2020: $23,249 for club membership fees, $43,557 reimbursement for a disallowed tax credit related to his relocation to<br>Canada in 2017 and a $100,000 flexible spending account allowance.
---	---
•	2019: $21,940 for club membership fees and a $100,000 flexible spending account allowance.
---	---

Mr. Witherington’s amount includes:

•	2021: a $50,000 flexible spending account allowance.
•	2020: a $50,000 flexible spending account allowance.
---	---
•	2019: a $50,000 flexible spending account allowance.
---	---

Ms. Harrison’s amount includes:

•	2021: $7,416 in total perquisites.
•	2020: $7,416 in total perquisites.
---	---
•	2019: $13,129 in total perquisites.
---	---

Mr. Wadhwani’s amount includes:

•	2021: HK$2,328,000 housing allowance, HK$5,415 for club membership fees and HK$845,487 for expenses related to his personal<br>driver.
•	2020: HK$2,328,000 housing allowance, HK$67,480 for club membership fees and HK$598,675 for expenses related to his personal<br>driver.
---	---
•	2019: a HK$2,328,000 housing allowance, HK$82,960 for club membership fees and HK$605,842 for expenses related to his<br>personal driver.
---	---

Mr. Hartz’s amount includes:

•	2019: $3,320 in total perquisites.
2022 Management information circular	81
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Equity compensation

Outstanding share-based and option-based awards (as at December 31, 2021) **** ****

	Option-based awards
	Grant date	Number of<br>securities<br>underlying<br>unexercised<br>options		Option<br>exercise<br>price			Value of<br>unexercised<br>in-the-money<br>options
Roy Gori	Mar 02, 2015		260,931		21.81	Mar 02, 2025		$600,141
	Feb 23, 2016		436,301		17.59	Feb 23, 2026		$2,844,683
	Feb 28, 2017		243,473		24.61	Feb 28, 2027		$0
	Jun 8, 2017		167,872		23.51	Jun 8, 2027		$100,723
	Feb 27, 2018		395,962		24.73	Feb 27, 2028		$0
	Mar 5, 2019		485,894		22.60	Mar 5, 2029		$733,700
	Mar 3, 2020		689,991		24.38	Mar 3, 2030		$0
Phil Witherington	Feb 24, 2015		30,896		22.02	Feb 24, 2025		$64,573
	Feb 23, 2016		43,462		17.59	Feb 23, 2026		$283,372
	Feb 28, 2017		34,315		24.61	Feb 28, 2027		$0
	Feb 27, 2018		120,707		24.73	Feb 27, 2028		$0
	Mar 5, 2019		144,572		22.60	Mar 5, 2029		$218,304
	Mar 3, 2020		205,086		24.38	Mar 3, 2030		$0
Marianne Harrison	Feb 21, 2012		19,270		12.64	Feb 21, 2022		$221,027
	Feb 19, 2013		147,980		15.52	Feb 19, 2023		$1,271,148
	Feb 25, 2014		124,131		21.20	Feb 25, 2024		$361,221
	Feb 24, 2015		140,368		22.02	Feb 24, 2025		$293,369
	Feb 23, 2016		290,867		17.59	Feb 23, 2026		$1,896,453
	Feb 28, 2017		197,822		24.61	Feb 28, 2027		$0
	Feb 27, 2018		197,981		24.73	Feb 27, 2028		$0
	Mar 5, 2019		225,594		22.60	Mar 5, 2029		$340,647
	Mar 3, 2020		283,632		24.38	Mar 3, 2030		$0
Anil Wadhwani	Feb 27, 2018		137,064		24.73	Feb 27, 2028		$0
	Mar 5, 2019		173,534		22.60	Mar 5, 2029		$262,036
	Mar 3, 2020		239,997		24.38	Mar 3, 2030		$0
Scott Hartz	Feb 21, 2012		38,541		12.64	Feb 21, 2022		$442,065
	Feb 19, 2013		102,123		15.52	Feb 19, 2023		$877,237
	Feb 25, 2014		75,495		21.20	Feb 25, 2024		$219,690
	Feb 24, 2015		85,054		22.02	Feb 24, 2025		$177,763
	Feb 23, 2016		119,983		17.59	Feb 23, 2026		$782,289
	Feb 28, 2017		98,911		24.61	Feb 28, 2027		$0
	Feb 27, 2018		102,798		24.73	Feb 27, 2028		$0
	Mar 5, 2019		130,150		22.60	Mar 5, 2029		$196,527
	Mar 3, 2020		218,179		24.38	Mar 3, 2030		$0

All values are in US Dollars.

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	Share-based awards
	Grant date	Type of share-<br><br><br>based award	Number of<br>shares or<br><br><br>units of<br>shares<br> <br>that have<br>not vested		Market or<br><br><br>payout value of<br> <br>share awards<br><br><br>that have not<br> <br>vested
Roy Gori	Mar 5, 2019	PSU		188,089		4,534,830
		RSU		75,236		1,813,943
	Mar 3, 2020	PSU		188,746		4,550,660
		RSU		75,498		1,820,259
	Mar 2, 2021	PSU		213,542		5,148,486
		RSU		142,360		3,432,307
		MFC shares^1^(2015)		131,930			$3,180,832
Phil Witherington	Mar 5, 2019	PSU		55,964		1,349,299
		RSU		22,385		539,714
	Mar 3, 2020	PSU		56,101		1,352,604
		RSU		22,441		541,047
	Mar 2, 2021	PSU		66,866		1,612,138
		RSU		44,577		1,074,742
Marianne Harrison	Mar 5, 2019	PSU		87,327		2,105,464
		RSU		34,931		842,186
	Mar 3, 2020	PSU		77,587		1,870,620
		RSU		31,035		748,243
	Mar 2, 2021	PSU		81,349		1,961,326
		RSU		54,233		1,307,550
		DSU					$158,661
Anil Wadhwani	Mar 5, 2019	PSU		67,175		1,619,586
		RSU		26,870		647,829
	Mar 3, 2020	PSU		65,650		1,582,830
		RSU		26,261		633,143
	Mar 2, 2021	PSU		70,398		1,697,308
		RSU		46,932		1,131,530
Scott Hartz	Mar 5, 2019	PSU		50,381		1,214,683
		RSU		20,153		485,879
	Mar 3, 2020	PSU		59,683		1,438,948
		RSU		23,873		575,579
	Mar 2, 2021	PSU		62,577		1,508,724
		RSU		41,718		1,005,816

All values are in US Dollars.

1

As part of the process of relocating Mr. Gori from Hong Kong to Toronto, his outstanding RSUs, PSUs and DSUs were<br>vested and settled and the after-tax proceeds were used to buy Manulife common shares to ensure the awards he earned while employed in Hong Kong were appropriately allocated. Mr. Gori did not receive<br>additional units as part of this arrangement. These shares were placed in an escrow account and are subject to the same underlying performance, holding and forfeiture conditions as the share-based awards they replaced, except for the shares<br>underlying the PSUs, which will be forfeited proportionately if performance is below target but will not be adjusted if performance is above target. This arrangement gave Mr. Gori substantial personal ownership of Manulife common shares that<br>would otherwise have ultimately been settled in cash. See page 86 of our 2018 management information circular, which is available at manulife.com. The term MFC shares refers to the common shares with underlying conditions from his original<br>equity awards granted in 2015.

In the tables above and to the left:

•	the value of unexercised in-the-money<br>stock options is the difference between the exercise price of the stock options and $24.11, the closing price of Manulife common shares on the TSX on December 31, 2021. The amount is zero if the exercise price is higher than our year-end closing share price
•	the market or payout values of the share-based awards are based on $24.11, the closing price of Manulife common shares on<br>the TSX on December 31, 2021
---	---
2022 Management information circular	83
---	---
•	the value of performance share units and performance deferred share units that have not yet vested is calculated using a<br>performance factor of 100%
---	---
•	restricted share units (RSUs), performance share units (PSUs) and deferred share units (DSUs) are paid out in cash.<br>Starting with 2019 awards, 10% of RSU and PSU payments are delivered in Manulife common shares purchased on the open market.
---	---

Incentive planawards – value vested or earned during the year

The table below shows, for each named executive:

•	the value of stock options that vested in 2021 is the amount that would have been realized if they had been exercised on<br>the vesting date, based on the closing price of Manulife common shares on the TSX
•	the value of stock options that was received in 2021 is the actual gain realized by named executives who have exercised<br>options
---	---
•	the value of share-based awards that vested and were paid in 2021
---	---
•	the annual cash bonus earned for 2021.
---	---
	Option-based awards
---	---	---	---	---	---
	Value vested<br>during the year
Roy Gori		1,087,679	0	3,491,907	$5,836,575
Phil Witherington		290,263	0	1,064,478	$2,280,000
Marianne Harrison		490,860	1,020,633	1,745,966	$2,159,157
Anil Wadhwani		328,834	0	1,208,726	$2,013,268
Scott Hartz		297,663	2,071,722	634,570	$2,364,670

All values are in US Dollars.

Stock options exercised in 2021

Ms. Harrison and Mr. Hartz exercised stock options in 2021 under our automatic stock option exercise program (see below):

	Grant date		Number of options	Exercise price ($)	Gain ($)
Marianne Harrison		22-Feb-2011	48,370	$18.91	$289,480
		21-Feb-2012	57,813	$12.64	$731,153
Scott Hartz		22-Feb-2011	101,831	$18.91	$609,428
		21-Feb-2012	115,625	$12.64	$1,462,294

Automatic stock option exercise program

Executives with outstanding stock options are given the opportunity to elect to have their vested stock options automatically exercised prior to expiration. This program is designed to protect executives from having stock options expire in-the-money if they were unable to exercise due to a black out period, or if they were in possession of material non-public information. Elections were made during a time when they were not in possession of any material non-public information and are irrevocable. If an executive leaves Manulife, any elections under the program will terminate.

About deferred share units

In 2021, executives in Canada and the U.S. were given the opportunity to exchange some or all of their annual incentive award, vested restricted share units and vested performance share units for deferred share units, subject to local tax rules and rulings. We may also grant deferred share units to some new hires and to other executives in special situations.

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Deferred share units are notional shares that track the value of Manulife common shares and earn dividend equivalents at the same rate as dividends paid on the common shares. They can only be redeemed for cash when the executive retires or leaves Manulife. For each unit redeemed, the executive will receive the market value of a Manulife common share at the time of redemption. Vesting conditions are specific to each grant, however deferred share units received in exchange for other vested awards, as described above, vest immediately. Deferred share units align executives with the long-term interests of shareholders and are only transferable if the executive dies.

Canadian executives can no longer exchange restricted share units and performance share units that are granted after 2015, in accordance with a change in Canadian tax rulings. Instead, to promote longer term equity ownership, Canadian executives can choose to receive deferred share units instead of restricted share units as long as they make this choice prior to the grant.

About the deferred compensation account

Some U.S. executives can defer up to 90% of their base salary and some or all of their annual incentive and vested restricted share units into a deferred compensation account. The money must remain in the account for at least three years and is adjusted as though the funds had been invested in one or more investment options designated by Manulife and selected by the executive. On withdrawal, the executive can take the cash either in a lump sum or in annual instalments.

Securities authorized for issue under equity compensation plans

The table below shows the total number of securities to be issued and available for issue under our equity compensation plans as at December 31, 2021:

	Number of securities to<br>be issued upon exercise<br>of outstanding options,<br>warrants and rights		Weighted average<br>of exercise price of<br>outstanding options,<br>warrants and rights		Number of securities<br>remaining available for<br>future issuance under<br>equity plans
Equity compensation plans approved by security holders		21,630,763	$	22.09		6,250,306

This table tells you about our plans and their status as at December 31, 2021:

Executive stock option plan
The executive stock option plan was approved by shareholders at the 2000 annual and special<br>meeting. Deferred share units, share appreciation rights, restricted shares and performance awards can also be granted under the executive stock option plan. We need shareholder approval to make changes to the plan.
Maximum number of common shares that may be issued	73,600,000
• as a % of common shares outstanding	3.8%
Maximum number of common shares that may be issued (% of outstanding common shares that cannot be exceeded)
• to any one participant, or	5%
• to insiders as a whole	10%
Total number of common shares that have been issued in respect of stock options and deferred share units	45,990,616
• as a % of common shares outstanding	2.4%
2022 Management information circular	85
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Stock plan for non-employee directors
---	---
The stock plan for non-employee directors was approved by<br>shareholders at the 2001 annual and special meeting. Deferred share units can also be granted under the stock plan. We need shareholder approval to make changes to the plan.
Maximum number of common shares that may be issued	1,000,000
• as a % of common shares outstanding	less than 0.1%
Maximum number of common shares that may be issued (% of outstanding common shares that cannot be exceeded)
• to any one participant, or	5%
• to insiders as a whole	10%
Total number of common shares that have been issued in respect of deferred share units	728,316
• as a % of common shares outstanding	less than 0.05%

We did not grant stock options to senior executives in 2021. The table below shows the total number of stock options, share-settled deferred share units outstanding, and securities available for future grant under the plans:

(as at December 31, 2021)	Stock options/<br>DSUs outstanding				Securities available for future issue
	Number		As a % of diluted<br><br><br>common shares		Number		As a % of diluted<br><br><br>common shares
Stock plan for non-employee<br>directors		271,684		0.01%		6,250,306		0.32%
Stock options		21,171,325		1.09%
Deferred share units		187,754		0.01%
Total		21,630,763		1.11%		6,250,306		0.32%

Overhang, dilution and burn rate

(as at December 31)	2019		2020		2021
Overhang		1.63%		1.56%		1.44%
the total number of common shares reserved for issue to employees and directors, less the number of stock<br>options and share-settled deferred share units redeemed, expressed as a percentage of the weighted average number of securities outstanding in the year
Dilution		1.09%		1.24%		1.15%
the total number of stock options and share-settled deferred share units outstanding, expressed as a<br>percentage of the weighted average number of securities outstanding in the year
Burn rate
the number of stock options and share-settled deferred share units granted annually, expressed as a percentage of the weighted average number of securities outstanding in the year
• Executive stock option plan		0.19%		0.25%	****	0.00%
• Stock plan for<br>non-employee directors		0.01%		0.01%	****	0.01%

Retirement benefits

Executives participate in various defined benefit and defined contribution pension plans and supplemental retirement arrangements.

All our traditional defined benefit pension programs have been closed to new members because of the financial risks associated with them. In their place, we have introduced capital accumulation retirement programs including cash balance, 401(k) and defined contribution plans, where our only contributions are typically a fixed percentage of each employee’s pensionable earnings taking median market practice into account.

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Executive Compensation

We may also provide supplemental retirement arrangements if tax rules limit the benefits that would otherwise be provided by our registered (or tax qualified) pension plans. The supplemental arrangements are not tax qualified and are typically unfunded.

To receive the benefits from our supplemental arrangements, executives generally must comply with several conditions after they leave our employment:

•	non-solicit: all executives, other than the few in traditional defined benefit<br>supplemental arrangements, have a non-solicit provision for 24 months after their employment ends
•	non-compete:
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–	24 months for all executives in traditional defined benefit supplemental arrangements
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–	between 12 and 24 months for Senior Officers in capital accumulation supplemental arrangements.
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•	if an executive breaches the non-compete provision in their traditional defined<br>benefit supplemental arrangement, the benefits are reduced by one-third
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•	if an executive breaches any of the post-employment conditions attached to all or a part of their capital accumulation<br>supplemental arrangements, those benefits are fully forfeited.
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Amounts below that are determined in another currency have been converted using the exchange rates used in our 2021 consolidated financial statements.

DEFINED BENEFIT PENSIONPLAN TABLE

Ms. Harrison and Mr. Hartz participate in the John Hancock defined benefit plans. Ms. Harrison has earned cash balance benefits for the periods she worked in the U.S. from March 2008 to December 2012 and since her return in October 2017. Mr. Hartz earned final average pay benefits until December 31, 2011 and has been earning cash balance benefits thereafter.

The table below shows:

•	their years of credited service at the end of 2021 and at the normal retirement age of 65
•	the estimated annual benefit accrued or earned for service up to the end of 2021, and to age 65
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•	a reconciliation of the defined benefit obligation from December 31, 2020 to December 31, 2021.<br>
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	Number of<br>years of<br><br><br>credited<br>service				Annual<br><br><br>benefits<br> <br>payable				Compensatory<br>change				Closing<br><br><br>present<br>value of<br>defined<br>benefit<br>obligation
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Dec 31,<br>2021		Age<br>65		Dec 31,<br><br><br>2021
Marianne Harrison		9.1		16.1		16,600	27,600	199,300		20,700	0	3,500		$223,400
Scott Hartz		38.5		42.7		683,000	689,400	10,968,200		20,400	0	(561,100		$10,427,500

All values are in US Dollars.

Annual benefits payable

Based on current pensionable earnings and the noted credited service, payable from age 65.

Opening and closing defined benefit obligation

Value of the projected pension for service to December 31, 2020 and December 31, 2021 respectively, using the actuarial assumptions used to determine the defined benefit obligations at those dates, as disclosed in Note 15 of our 2021 consolidated financial statements.

Service cost

Value of the projected pension earned for service in 2021, using the actuarial assumptions used to determine the defined benefit obligations at December 31, 2021, as disclosed in Note 15 of our 2021 consolidated financial statements.

Other

The impact of any plan amendments and differences between the actual and assumed compensation.

2022 Management information circular	87

Non-compensatory change

Includes the impact of interest accruing on the opening defined benefit obligation, changes in the actuarial assumptions, experience gains and losses and any amounts due to currency fluctuations.

Exchange rates

Ms. Harrison and Mr. Hartz’s year-end amounts have been converted using the December 31 exchange rate of US$1.00 = $1.2678 for 2021 and US$1.00 = $1.2732 for 2020. The other amounts have been converted using the average 2021 exchange rate of US$1.00 = $1.2536.

DEFINED CONTRIBUTION PENSION PLAN TABLE

Messrs. Gori and Witherington participate in the Manulife defined contribution plan and supplemental arrangement in Canada. Ms. Harrison and Mr. Hartz participate in the John Hancock 401(k) plan and the defined contribution supplemental arrangement in the U.S. Mr. Wadhwani participates in the Manulife Mandatory Provident Fund Top-up in Hong Kong.

Messrs. Gori and Witherington participated in the Manulife Mandatory Provident Fund Top-up in Hong Kong before June 2017 and January 2018 respectively, when they worked in Hong Kong.

Ms. Harrison participated in the Manulife defined contribution plan and supplemental arrangement in Canada from January 2013 to September 2017 and before March 2008, when she worked in Canada. She participated in the John Hancock 401(k) plan and the defined contribution supplemental arrangement from March 2008 to December 2012, when she worked in the U.S. previously.

The table below is a reconciliation of the account balances from December 31, 2020 to December 31, 2021:

	Opening<br><br><br>accumulated<br> <br>value		Compensatory change
		Service cost
Roy Gori		3,425,800		$747,500	0	690,200	$4,863,500
Phil Witherington		1,308,700		$226,300	0	213,400	$1,748,400
Marianne Harrison		3,566,400		$156,700	0	511,300	$4,234,400
Anil Wadhwani		304,300		$43,300	0	67,500	$415,100
Scott Hartz		3,421,900		$175,100	0	567,600	$4,164,600

All values are in US Dollars.

Service cost

The total amount contributed and/or notionally credited to each named executive in 2021 by Manulife or John Hancock under their respective plans.

Other

The impact of any plan amendments.

Non-compensatory change

Includes any contributions made by the named executives, all investment income credited during the year and any amounts due to currency fluctuations.

Exchange rates

Year-end amounts for Mr. Gori, Mr. Witherington and Mr. Wadhwani for the plan in Hong Kong have been converted using the December 31 exchange rate of HK$1.00 = $0.1626 for 2021 and HK$1.00 = $0.1642 for 2020. Other Hong Kong plan amounts have been converted using the average 2021 exchange rate of HK$1.00 = $0.1613.

Year-end amounts for Ms. Harrison and Mr. Hartz for the U.S. plan have been converted using the December 31 exchange rate of US$1.00 = $1.2678 for 2021 and US$1.00 = $1.2732 for 2020. Other U.S. plan amounts have been converted using the average 2021 exchange rate of US$1.00 = $1.2536.

88	Manulife Financial Corporation

Executive Compensation

Canada

	Closed defined benefit pension plan	Defined contribution pension plan
Who<br><br><br>participates	This plan<br>has been closed to new members since January 1, 1999<br> <br>None of the current NEOs participate in this plan	Canadian-based employees who were hired after January 1, 1999
Terms		Participants contribute 2% of pensionable earnings<br><br><br><br> <br>Participants can make voluntary contributions ranging from 0.5% to 5% of pensionable earnings<br><br><br><br> <br>Pensionable earnings are limited to $233,680 for 2021 and are calculated as base salary (plus the<br>annual incentive for officers)<br> <br><br> <br>Participants choose from a range of options to invest their<br>account
Annual<br> <br>pension<br><br><br>formula		We<br>contribute 3% of pensionable earnings and a 50% match on participant voluntary contributions after the first year of employment<br> <br><br><br><br>Our contributions and participant contributions combined are limited to the defined contribution maximum under the Income Tax Act ($29,210 in 2021)<br><br><br>Our contributions vest immediately
Retirement		When they<br>leave employment, participants can transfer the value of their account to a locked-in retirement vehicle, or purchase a life annuity
****	Closed<br>defined benefit<br> <br>supplemental arrangement	Defined<br>contribution<br> <br>supplemental arrangement
	These<br>arrangements have not been offered since January 1, 1999.<br> <br><br> <br>None of the current NEOs have<br>these arrangements, and there are no employees remaining with one of these arrangements.	Executives who were hired after January 1, 1999 and employees who were<br>promoted to an executive level after this date are eligible<br> <br><br> <br>We credit 10% of pensionable<br>earnings (15% for Mr. Gori) above the pensionable earnings maximum to a notional account for each participant<br> <br><br><br><br>Pensionable earnings are calculated as base salary and the annual incentive, including the amount taken as deferred share units<br><br><br><br> <br>Investment income credits are based on the investment options selected by the participant<br><br><br><br> <br>Participants can take the value of their account in instalments at retirement, or withdraw it as<br>a lump sum with our consent
2022 Management information circular	89
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United States

	Defined benefit pension plan<br><br><br>(cash balance)	401(k) plan
Who participates	All U.S. employees	Participation is voluntary for all U.S. employees
Terms	Participants do not contribute<br> <br><br><br><br>Participants receive contribution credits in a notional account that earns interest credits<br> <br><br><br><br>Interest credits are based on the average annual yield of 10-year Treasury Constant Maturities in effect on each business day<br>during the two months ending September 30 of the preceding calendar year	Participants contribute up to 50% of their eligible salary to the IRS maximum<br>(US$19,500 in 2021)<br> <br><br> <br>Eligible salary is limited to the IRS maximum (US$290,000 in 2021)<br><br><br><br> <br>Participants choose from a range of options to invest their account
Pension formula	We credit participant accounts with 4% of eligible compensation up to the<br>Social Security Wage Base, plus 8% of eligible compensation that exceeds this base<br> <br><br> <br>Eligible<br>compensation is limited to the IRS maximum (US$290,000 in 2021), and is calculated as base salary plus the annual incentive received<br> <br><br><br><br>Our contributions vest after three years of service	We contribute a 100% match on participant contributions to a maximum of 4% of<br>eligible salary<br> <br><br> <br>Our contributions and participant contributions combined are limited to the<br>IRS maximum (US$58,000 in 2021)<br> <br><br> <br>Our contributions vest immediately
Retirement	Normal retirement is 65, but benefits can be paid at any retirement age based on the value of the participant’s account on the date their pension<br>begins<br> <br><br> <br>Payments are normally made as a life annuity, but participants can choose a lump sum<br>or other payment option	Participants receive the value of their account when they leave employment or<br>if they become permanently disabled
	Closed defined benefit pension plan<br>(final average pay) and defined<br>benefit<br>supplemental arrangements	Defined contribution<br> <br>supplemental arrangement
	Mr. Hartz earned final average pay benefits in these plans until<br>December 31, 2011. No other NEOs participate in these plans.<br> <br><br> <br>The final average pay<br>benefit is the sum of the following:<br> <br><br><br><br>i)  1.43% of average compensation (highest 3 years) up to the average Social Security Wage Base (SSWB) for each<br>year of pre-2012 service up to 30 years,<br> <br>ii) 1.80% of average compensation in<br>excess of the average SSWB for each year of pre-2012 service up to 30 years, and<br><br><br>iii)1.00% of the sum of (i) and (ii) for each year of pre-2012 service in excess<br>of 30 years.	We credit 8% of eligible compensation above the IRS maximum to a notional<br>account for each participant<br> <br><br> <br>Eligible compensation is calculated as base salary and the<br>annual incentive, including the amount taken as deferred share units<br> <br><br> <br>Our notional<br>contributions vest after three years of service<br> <br><br> <br>Investment income credits are based on the<br>investment options selected by the participant<br> <br><br> <br>Participants receive the value of their<br>account in 18 monthly instalments beginning the seventh month after leaving employment
90	Manulife Financial Corporation
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Executive Compensation

Hong Kong

	Defined contribution plan<br> <br><br><br><br>(Manulife Mandatory Provident Fund (MPF) Top-up)
Who participates	All Hong Kong permanent employees
Terms	Participants contribute 5% of annual salary<br><br><br><br> <br>Contributions on salary up to the MPF maximum (HK$360,000 in 2021) go to the mandatory account.<br>Contributions on salary above the MPF maximum go to the voluntary account<br> <br><br> <br><br><br><br>Participants choose from a range of options to invest their account
Pension	We contribute based on length of service as follows:<br><br><br><br> <br>Less than 5 years<br><br><br>5% of annual salary<br> <br><br><br><br>5 to 10 years<br> <br>7.5% of annual salary<br><br><br><br> <br>More than 10 years<br><br><br>10% of annual salary<br> <br><br><br><br>All our contributions, other than the first 5% of annual salary up to the MPF maximum, go to the voluntary account<br><br><br><br> <br>Our contributions to the mandatory account vest immediately<br><br><br><br> <br>Our contributions to the voluntary account vest on a sliding scale based on length of service<br>that grades by 10% per year starting at 30% after three years to 100% after 10 years
Retirement	Participants can receive the value of the voluntary account at any time but<br>can receive the value of the mandatory account only after age 60
2022 Management information circular	91
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Termination and change in control

The table below shows the estimated amounts that would be provided to each named executive if employment is terminated under five different scenarios, assuming the scenario took place on December 31, 2021.

The actual amounts will depend on our share price at the time as well as other variables, such as the named executive’s age and years of service. The information below is calculated as at December 31, 2021 for all of the named executives.

	Type of payment	Retirement<br>(early or<br>normal)			Termination<br>with<br>cause		Termination<br>without cause
Roy Gori	Severance		–	–		–		9,028,800	$11,396,419
	Additional vesting of RSUs, PSUs and stock options		–	–		–		21,182,366	$21,667,334
	Pension		–	–		–		–	–
	Total value		–	–		–		30,211,166	$33,063,753
Phil Witherington	Severance		–	–		–		3,225,375	–
	Additional vesting of RSUs, PSUs and stock options		–	–		–		3,736,305	–
	Pension		–	–		–		–	–
	Total value		–	–		–		6,961,680	–
Marianne Harrison	Severance		–	–		–		3,271,059	–
	Additional vesting of RSUs, PSUs and stock options		8,468,363	–		–		8,468,363	–
	Pension		–	–		–		–	–
	Total value		8,468,363	–		–		11,739,422	–
Anil Wadhwani	Severance		–	–		–		3,050,042	–
	Additional vesting of RSUs, PSUs and stock options		–	–		–		4,339,778	–
	Pension		–	–		–		–	–
	Total value		–	–		–		7,389,820	–
Scott Hartz	Severance		–	–		–		–	–
	Additional vesting of RSUs, PSUs and stock options		5,914,542	–		–		5,914,542	–
	Pension		–	–		–		–	–
	Total value		5,914,542	–		–		5,914,542	–

All values are in US Dollars.

Equity-based awards are treated according to the terms and conditions of the award agreements and plan documents unless the named executive has entered into an agreement that indicates otherwise. See below for information about Mr. Gori’s change in control agreement and employment agreement.

The amount shown for additional vesting of RSUs, PSUs and stock options is the estimated value that would be payable under each termination scenario, and is based on $24.11, the closing price of Manulife common shares on the TSX on December 31, 2021. The value of performance share units is calculated assuming a performance factor of 100%.

Resignation and retirement

No severance is paid if the named executive resigns or retires.

Ms. Harrison and Mr. Hartz were eligible for normal retirement. Mr. Gori, Mr. Witherington and Mr. Wadhwani were not eligible for either early or normal retirement.

92	Manulife Financial Corporation

Executive Compensation

Termination with cause

If Manulife terminates a named executive’s employment with cause, employment ends immediately, no severance is paid and performance share units, restricted share units, stock options and the supplemental retirement benefit are forfeited.

Termination without cause

All the named executives except Mr. Hartz have employment agreements that specify their entitlements if they are terminated without cause. These are outlined in the table below, and are conditional on the executive signing a full and final release and remaining bound by covenants in their employment agreements relating to:

•	protection of confidential information (indefinitely)
•	company ownership of our intellectual property (indefinitely)
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•	non-solicitation (24 months for Mr. Gori, Mr. Witherington, Ms. Harrison and Mr.<br>Wadhwani)
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•	non-competition (12 months for Mr. Gori, Mr. Wadhwani; 24 months for Ms. Harrison;<br>18 months for Mr. Witherington)
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•	non-disparagement (24 months for Mr. Gori, Ms. Harrison and Mr. Wadhwani;<br>indefinitely for Mr. Witherington).
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Breaches of any of the covenants entitle Manulife to seek a court injunction, in addition to pursuing any other available rights and remedies.

Roy Gori	Mr. Gori is entitled to:<br><br><br>• 24 months of compensation in lieu of notice comprised of base salary and target annual incentive<br><br><br>• an annual incentive payment calculated at target for the year in which his active employment ends, pro-rated based on the end date<br> <br>• continued vesting and exercisability of<br>share-based awards and stock options for 24 months following his termination date<br> <br>• continued participation in<br>the group benefits plan for 24 months (excluding life, short-term, and long-term disability insurance)<br> <br><br><br><br>If he commences new employment during the severance period:<br><br><br>• he will no longer participate in the group benefits plans<br><br><br><br> <br>If, after June 5, 2023, he and Manulife agree to a mutual separation:<br><br><br>• he is entitled to normal retirement treatment for purposes of his share-based awards and stock options
Phil Witherington	Mr. Witherington is entitled to:<br><br><br>• 18 months of compensation in lieu of notice comprised of base salary and target annual incentive<br><br><br>• an annual incentive payment calculated at target for the year in which his active employment ends, pro-rated based on the end date<br> <br>• continuation of group benefits for 18 months<br>(excluding life, short-term and long-term disability insurance)<br> <br>• reimbursement of the costs for his relocation<br>to Hong Kong, provided the relocation occurs within 10 months of his termination date<br> <br><br> <br>If he<br>commences new employment or self-employment during the severance period:<br> <br>• he will no longer participate in the<br>group benefits plans<br> <br>• severance payments will cease and he will be entitled to a lump sum payment of 50% of the<br>remaining severance payments
2022 Management information circular	93
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Marianne Harrison	Ms. Harrison is entitled to:<br><br><br>• 18 months of compensation comprised of base salary and target annual incentive<br><br><br>• continuation of group benefits for 18 months (excluding life, short-term and long-term disability insurance)<br><br><br><br> <br>If she commences new employment or self-employment during the severance period:<br><br><br>• she will no longer participate in the group benefits plans<br><br><br>• severance payments will cease and she will be entitled to 50% of the remaining severance payments
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Anil Wadhwani	Mr. Wadhwani is entitled to:<br><br><br>• 18 months of notice or compensation in lieu of notice comprised of base salary and target annual incentive<br><br><br>• an annual incentive payment calculated at target for the year in which his active employment ends, pro-rated based on the end date<br> <br>• continuation of medical, dental and group<br>life insurance coverage for up to 18 months from the end date<br> <br><br> <br>If he commences new employment<br>or self-employment during the severance period:<br> <br>• he will no longer receive medical, dental and group life<br>insurance coverage<br> <br>• severance payments will cease and he will be entitled to a lump sum payment of 50% of the<br>remaining severance payments

Change in control

Mr. Gori is the only named executive who has a change in control agreement that protects him from losing employment benefits if there is a change in control. He entered into a change in control agreement when he was appointed President.

If there is a change in control and Mr. Gori’s employment is terminated without cause or for good reason within a protection period that starts 90 days before a change in control and ends 24 months after the change in control, he is entitled to:

•	two times his annual salary and two times his average annual incentive awarded in the prior three years<br>
•	full vesting and payment of outstanding awards, including those granted within the past year, while performance share<br>units remain subject to applicable performance conditions
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•	continuation of his group benefits for up to two years (excluding life and disability insurance)
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•	two years eligibility for relocation benefits as defined by our relocation policy
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•	extension of the period to exercise stock options to one year after the date of termination or the date specified in the<br>award (whichever is later, however it cannot be later than the actual option expiry date).
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Mr. Gori’s existing equity-based incentive awards will have accelerated vesting if, following a change in control, the successor employer does not assume or honour the awards, or offer equivalent awards under new substitute plans.

Change in control is described as any of the following:

•	the incumbent directors no longer constitute at least a majority of the board
•	any party becomes a beneficial owner holding directly or indirectly 35% of our voting shares
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•	our shareholders approve a merger, amalgamation, consolidation, statutory share exchange or a similar transaction<br>requiring the approval of shareholders, unless immediately following the transaction our shareholders retain majority voting control, no person would beneficially own 35% or more of our voting shares, and the incumbent directors constitute a<br>majority of the board
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94	Manulife Financial Corporation
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Executive Compensation

•	our shareholders approve the complete liquidation or dissolution of Manulife or the sale of our assets, unless immediately<br>following the transaction pre-existing beneficial owners retain majority voting control, no person would beneficially own 35% or more of our voting shares, and the incumbent directors constitute a majority of<br>the board
•	management of Manulife is transferred to a non-affiliated party.<br>
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Good reason is described as any of the following events during the protection period:

•	we diminish Mr. Gori’s position, authority or scope or scale of duties or responsibilities<br>
•	we require him to be based at a location more than 40 km from his current work location or to travel to a significantly<br>greater extent
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•	we reduce his annual base salary or do not increase it in line with adjustments to the base salary of other executives<br>
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•	we reduce his target incentive awards
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•	we do not either continue or provide an alternative to Manulife’s welfare benefit plans or programs for benefits,<br>perquisites and expense reimbursements
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•	we do not maintain reasonable and adequate indemnification for his services as an officer of Manulife.<br>
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How a change in employment status affects equity compensation

The chart below summarizes the treatment under the terms and conditions of the award agreements and plan documents of restricted share units (RSUs), performance share units (PSUs), stock options and deferred share units (DSUs) when a named executive retires, resigns, is terminated without cause or dies:

•	treatment of the award on resignation or termination may be specified in the named executives’ employment agreements<br>(see pages 93 and 94)
•	if a named executive reaches normal or early retirement during the severance period that follows a termination without<br>cause, certain vested options may be exercised until the end of the severance period
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•	awards that have not vested may be forfeited if the executive breaches post-employment conditions. The named executives<br>are subject to non-competition and non-solicitation conditions for two years
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•	awards may be clawed back as the board can recoup or cancel the incentive awards if the named executive is involved in<br>fraud or a serious misconduct
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•	awards are forfeited if the named executive is terminated with cause
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•	restricted share units, performance share units, stock options, deferred share units and performance deferred share units<br>may be transferred to a beneficiary or an estate when a named executive dies.
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2022 Management information circular	95
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	Early retirement^1, 2^<br><br><br>• 55 years old and<br>age plus<br>continuous service<br>totals at least 65	Normalretirement^1, 2^<br><br><br>• 65 years old, or<br>• 55 years old and<br>age plus<br>continuous service<br>totals at least 70	Resignation orterminationwithout cause	Death
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RSUs/PSUs	Number is pro-rated<br><br><br><br> <br>Payment on the scheduled payout date, subject to any performance conditions	Number is pro-rated for grants within<br>the first anniversary of the grant date<br> <br><br> <br>Vest in full for grants beyond the first anniversary<br>of the grant date<br> <br><br> <br>Payment on the scheduled payout date, subject to any performance<br>conditions	Forfeited on resignation<br><br><br><br> <br>Number is pro-rated based on service from the date of<br>grant on termination without cause	Vest in full<br><br><br><br> <br>Payment as of the date of death<br><br><br><br> <br>Performance conditions are waived
Stock options	Unvested options terminate<br><br><br><br> <br>Vested options can be exercised until the end of the term	Unvested options are pro-rated for<br>grants made in the previous 12 months<br> <br><br> <br>Unvested options continue to vest in full according to<br>the vesting schedule<br> <br><br> <br>Vested options<br><br><br>can be exercised until the end of the<br> <br>term	Unvested options are forfeited upon resignation and continue to vest for 90<br>days upon termination without cause<br> <br><br> <br>Vested options can be exercised for a 90-day period beginning one year after resignation or termination without cause	Unvested options vest<br><br><br><br> <br>Vested options can be exercised within one year of the date of death
DSUs	Canadian executives must redeem vested awards by December 15<br>of the following year<br> <br><br> <br>U.S. executives can redeem vested awards on the date they’ve<br>designated on their deferral election form
1	Named executive must notify us three months before retiring. Vested stock options that were granted up to and including in<br>2014 can be exercised for up to three years following retirement (defined as 55 years old and 10 years continuous service, while normal retirement is defined as 65 years old).
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2	We changed our definitions of early and normal retirement effective January 27, 2020, to ensure award terms for mid- and later-career hires are competitive:
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•	early retirement: 55 years old and age plus continuous service totals at least 60
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•	normal retirement: 55 years old and age plus continuous services totals at least 65.
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96	Manulife Financial Corporation
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Executive Compensation

Compensation oversight

How the board oversees executive compensation

The table on the following page explains the respective roles of<br>Manulife’s board, management and outside advisors in designing and awarding executive compensation.<br> <br><br><br><br>We make sure Manulife’s executive compensation program follows good governance practices by aligning it with the Financial Stability Board’s (FSB) Principles<br>for Sound Compensation Practices, the FSB’s Implementation Standards and other governance best practices related to compensation.<br> <br><br><br><br>We conduct an internal audit of the executive compensation program every year to confirm alignment with the FSB’s Principles and Implementation Standards.
Independent advisor to the board<br><br><br><br> <br>The management resources and compensation committee works with Korn Ferry, a consulting firm<br>that provides independent advice on executive compensation. The independent advisor:<br> <br>• attends committee<br>meetings<br> <br>• provides advice about decisions related to compensation<br><br><br>• reports on compensation trends.<br> <br><br><br><br>The committee began working with Korn Ferry in November 2019. The table below shows the fees paid to Korn Ferry for their work with the committee over the last two<br>years:
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	2020		2021
Executive compensation-related fees	$	803,795		$272,710
All other fees	$	354,910		$1,801,806
Korn Ferry meets the requirements of an independent advisor and<br>does not work with management directly without the committee’s prior approval. In 2021 Korn Ferry provided advice to the committee on our incentive plan programs including the design, measures and market competitiveness, as well as compensation<br>decisions. All other fees in 2021 include marketing benchmarking surveys, executive search and execution of a talent management program in Asia and a leadership development program for executives on our global leadership team.
2022 Management information circular	97
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Board of directors<br> <br><br><br><br>Oversees our overall approach to compensation, including alignment with sound risk management principles and Manulife’s risk appetite<br><br><br><br> <br>Approves:<br><br><br>• overall financial plans and strategy upon which the targets for our incentive programs are based<br><br><br>• major compensation decisions, including compensation for the CEO and other senior executives
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Board committees<br> <br><br><br><br>The board carries out its compensation-related responsibilities with the help of two board committees: the management resources and compensation<br>committee and the risk committee<br> <br><br> <br>All board committee members are independent	See page 120 for<br>information about<br>director<br>independence
You’ll find more about each committee’s members and responsibilities starting on page <br>32
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Management resources and compensation committee<br><br><br>•  oversees our approach to human resources, including the executive compensation program<br><br><br>•  recommends major compensation decisions to the board<br><br><br>•  all members are knowledgeable, senior leaders with broad experience as a senior officer or chair of the<br>board of a major organization (public, private or not-for-profit), and the majority have experience in executive compensation<br><br><br>•  there is cross-membership with the risk committee	Risk committee<br><br><br>•  reviews the alignment of our incentive compensation plans with sound risk management principles and<br>practices and our risk appetite<br> <br>•  the majority of members have knowledge of risk management, as well as<br>technical knowledge of relevant risk principles<br> <br>•  there is cross-membership with the management resources<br>and compensation committee
Management’s executive compensation committee<br><br><br>•  includes the Chief Risk Officer, the Chief Financial Officer and the Chief Human Resources Officer<br><br><br>•  reviews incentive plan business performance measures, targets, weightings and results for alignment with<br>our business strategy and risk management objectives<br> <br>•  monitors the incentive program designs of our<br>peers<br> <br>•  reviews compensation program changes for alignment with our risk management objectives	Chief Risk Officer<br><br><br>•  participates in management resources and compensation committee meetings where recommendations for the<br>design of the compensation program are reviewed and approved to ensure there is informed discussion of the associated risks<br><br><br>•  reviews the incentive compensation oversight process<br><br><br>•  reviews changes to the compensation program with the risk committee to make sure they are in line with our<br>risk management objectives<br> <br>•  also a member of management’s executive compensation committee
98	Manulife Financial Corporation
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Executive Compensation

Managing compensation risk

Compensation is aligned with the company’s risk appetite and risk<br>management objectives, and discourages inappropriate risk taking.<br> <br><br> <br>We use a compensation risk<br>framework to structure how we manage the risks associated with the compensation program and the design features that mitigate these risks. The framework includes four categories, which shape the development of our compensation program. We assess our<br>compensation program against the framework every year.
Business risk<br> <br><br><br><br>Business risk has two aspects:<br><br><br>•  the risk that our compensation program encourages behaviour that is not in line with our business strategy,<br>our risk appetite statement and our goal of generating long-term shareholder value<br> <br>•  the risk that the<br>compensation program discourages the taking of healthy risks<br> <br><br> <br>We seek to manage both aspects<br>of business risk by including performance measures in our incentive plans that align compensation with our business strategy and reflect the impact employees have on performance	Talent risk<br> <br><br><br><br>Talent risk is the risk that our compensation program will not attract and retain talented employees<br><br><br><br> <br>We seek to manage this risk by designing our compensation program to be competitive and appealing<br>to the talent we want to attract		Performance risk<br> <br><br><br><br>Performance risk is the risk that our compensation program will not motivate employees to maintain high performance standards<br><br><br><br> <br>We seek to manage this risk by including appropriate links between pay and performance and<br>designing compensation to encourage executives to achieve performance objectives without taking undue risk	Compliance and ethical risk<br> <br><br><br><br>Compliance and ethical risk is the risk that our compensation program will encourage employees to engage in questionable, unethical or illegal behaviour<br><br><br><br> <br>We seek to manage this risk through strong oversight and control mechanisms, and by structuring<br>our compensation program in a way that minimizes the potential incentive to breach compliance and ethical guidelines
---	---	---	---	---
	<br><br><br><br>	See page 113 for information about our risk appetite and our enterprise risk management framework
2022 Management information circular	99
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Mitigatingcompensation risk

We seek to manage potential risk through our risk management policies, the design of our executive compensation program and proper oversight of our incentive plans. We also integrate our risk appetite into our incentive plans and performance assessments.

Program design

•	compensation award horizons are appropriately balanced between short and longer term
•	incentive plans include several performance objectives, combining various performance scenarios
---	---
•	incentive plan awards depend on both company performance and TSR, which links our strategy and risk appetite with<br>improving shareholder outcomes and capital strength
---	---
•	performance share unit awards balance efficient use of capital and long-term equity growth
---	---
•	compensation for the Chief Risk Officer, Global Compliance Chief, Chief Auditor, and Chief Actuary is not linked to our<br>business performance to promote unbiased oversight and advice to senior management and the board
---	---
•	annual incentives for segment control function heads providing oversight are not directly linked to the performance of<br>businesses they oversee
---	---

Incentive plan oversight

•	the management resources and compensation committee oversees all incentive plans, including payout distribution, control<br>and monitoring processes and the potential impact they may have on business risk
•	segment heads, with the support of their associated risk officers, human resources heads, and compliance officers, review<br>and approve significant changes to material segment incentive compensation plans, and attest annually that they do not generate inappropriate levels of business risk for the segment and for Manulife as a whole
---	---
•	we stress test and back test compensation plan designs to make sure payouts under different scenarios are appropriate and<br>in line with our business performance
---	---
•	the Chief Risk Officer and the risk committee also review the alignment of compensation plans with risk management<br>objectives
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Risk perspective in performance assessment

•	individual risk management objectives are included in annual goals for all senior leaders
•	we assess employees against risk management criteria to make sure they are mindful of the risks inherent in their jobs and<br>are working within the boundaries of our policies and practices, while still providing appropriate incentives for material risk takers to achieve our objectives
---	---
•	performance assessments are expected to reflect how the employee contributed to managing our risk profile within our risk<br>appetite and also take into account any reports from internal audit, compliance or risk management highlighting inappropriate actions
---	---
•	incentive compensation for material risk takers is adjusted for risk and considers reports from internal audit, compliance<br>and risk management. Any adjustments made are reported to the management resources and compensation committee
---	---

Risk management policies

•	Clawbacks – if a vice president or above commits fraud, theft, embezzlement or serious misconduct, whether or<br>not there is a financial restatement, the board can, at its discretion, cancel some or all of the executive’s vested or unvested incentive awards, and require repayment of all or a portion of the incentive awards that have already been paid<br>
•	Equity ownership requirements – all executives are required to meet equity ownership requirements. The CEO and<br>CFO are required to maintain their equity ownership for one year after leaving Manulife
---	---
•	Share retention requirements – the CEO and CFO must hold at least 50% of the net realized gains from the<br>exercise of stock options in common shares during their employment and for one year after leaving the company, to the extent they do not otherwise meet their equity ownership requirements
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100	Manulife Financial Corporation
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Executive Compensation

•	No hedging – executives and directors are not allowed to use strategies (for example, short selling, or buying<br>or selling a call or put option or other derivatives) to hedge or offset a change in price of Manulife securities. This policy is incorporated into our code of business conduct and ethics. All employees and directors are required to certify<br>compliance with the code every year

Equity ownership guidelines

Executives are required to own Manulife securities to align their interests with those of our shareholders.

Executives have five years from the date they are appointed or promoted to the position to meet the requirement. All of the named executives meet or exceed the equity ownership guidelines.

Deferred share units (DSUs), restricted share units (RSUs), performance share units (PSUs), common shares and preferred shares that executives own personally all qualify to meet the guideline, but stock options do not. We use the grant price or the current market price (whichever is higher) to calculate the value of awards and assume a performance factor of 100% for PSUs. Shares held personally are valued at the current market price.

The following table shows equity ownership for each named executive as at March 7, 2022.

We calculated the value using a share price of the greater of $24.78, the closing price of Manulife common shares on the TSX on March 7, 2022, and the grant price. Salaries were converted to Canadian dollars using the exchange rate of US$1.00 = Cdn$1.2773 on that date.

	Time at<br>level		Required<br>ownership<br>as multiple<br>of base<br><br><br>salary		RSUs
Roy Gori		4.4 years		7.0		9,625,988	16,309,864	0	11,912,072	37,847,925	24.7
Phil Witherington		4.2 years		4.0		2,797,184	4,751,870	0	583,867	8,132,921	8.6
Marianne Harrison		9.2 years		4.0		3,507,612	6,030,468	238,848	342,807	10,119,734	10.5
Anil Wadhwani		4.3 years		4.0		3,052,965	5,230,170	0	518,966	8,802,101	9.7
Scott Hartz		3.0 years		4.0		2,709,928	4,656,467	0	1,591,383	8,957,779	9.8

All values are in US Dollars.

Roy Gori

As part of the process of relocating Mr. Gori from Hong Kong to Toronto in May 2017, his outstanding RSUs, PSUs and DSUs were replaced with Manulife common shares. His share-based awards were vested and settled and the after-tax proceeds were used to buy 421,492 shares that were placed in an escrow account and made subject to the same underlying performance, holding and forfeiture conditions as the share-based awards they replaced, except for the shares underlying the PSUs, which will be forfeited proportionately if performance is below target but will not be adjusted if performance is above target. Mr. Gori did not receive additional units as part of this transaction. This arrangement ensured the awards earned by Mr. Gori while employed in Hong Kong were appropriately allocated and gave Mr. Gori substantial personal ownership of Manulife common shares in place of his share-based awards that would otherwise have settled in cash. See page 86 of our 2018 management information circular, which is available at manulife.com. The total value of his personal shareholdings, including the shares remaining in escrow, was $11,912,072, based on a share price of $24.78, the closing price of Manulife common shares on the TSX on March 7, 2022.

2022 Management information circular	101

The decision-making process

We use the following process to determine compensation for the CEO, all executive leadership team members and heads of control functions, including the<br>named executives. The executive leadership team is made up of our most senior leaders who have responsibility for setting our strategy. Base salary increases and equity-based incentives are awarded at the beginning of each year. Annual incentives<br>are approved after the end of each fiscal year.
Review plan design		Management presents its initial recommendations for compensation structure and supporting rationale for the upcoming year to the<br>management resources and compensation committee. This includes:<br> <br><br><br><br>• compensation components<br><br><br>• compensation mix<br><br><br>• performance measures<br> <br><br><br><br>The management resources and compensation committee discusses the recommendations and provides feedback to management. The committee seeks advice and guidance about<br>compensation issues from its independent compensation advisor, and may seek feedback from shareholders and proxy advisory firms<br> <br><br><br><br>The risk committee reviews the risk management aspects of the program<br> <br><br><br><br>Once the recommendations are finalized, the management resources and compensation committee recommends the compensation program and structure to the board for<br>approval
---	---	---
<br><br><br><br>	See page 50 for this<br><br><br>year’s compensation<br> <br>program
Set performance goals		The board approves the individual performance goals of the CEO and other senior executives<br><br><br><br> <br>The management resources and compensation committee:<br><br><br><br> <br>• reviews, approves and recommends to the board<br>the individual performance goals of the executive leadership team and heads of control functions<br> <br>• reviews,<br>approves and recommends to the board the business performance measures and financial targets for incentive plan purposes. Targets are aligned with the board-approved plans and are intended to be achievable yet provide a performance<br>“stretch”<br> <br>• reviews stress tests of different scenarios to set appropriate financial targets,<br>performance peer group composition and plan changes
<br><br><br><br>	See pages 54 and 57<br>for this<br>year’s<br> <br>performance goals
Ongoing review of<br> <br>market and trends		The management resources and compensation committee:<br> <br><br><br><br>• reviews and approves changes to the composition of the compensation and performance peer groups<br><br><br>• reviews the competitive positioning of target compensation against desired market positioning<br><br><br>• reviews ongoing trends
<br><br><br><br>	See page 48 for more<br><br><br>about compensation<br> <br>benchmarking
102	Manulife Financial Corporation
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Executive Compensation

Assess<br><br><br>performance		The CFO presents and discusses the business performance results with the management resources and compensation committee<br><br><br><br> <br>The independent advisor provides their perspective on the soundness of performance measures and<br>standards used for the incentive plans<br> <br><br> <br>The management resources and compensation committee<br>reviews the performance factors for the annual incentive plan and performance share units<br> <br><br> <br>The<br>board reviews the performance results and assesses circumstances that might result in a discretionary adjustment, and then approves the performance factors<br> <br><br><br><br>Management presents to the management resources and compensation committee a summary of any adjustments to incentive compensation for material risk takers resulting<br>from reports from internal audit, compliance or risk management
<br><br><br><br>	See pages 54 and<br> <br>59 for this<br>year’s<br> <br>performance results
Finalize<br><br><br>Compensation		The CEO discusses and approves the individual performance and<br>compensation recommendations for all executive leadership team members and heads of control functions with the management resources and compensation committee<br> <br><br><br><br>During sessions held without management, the management resources and compensation committee and the board discuss compensation for the CEO, all executive leadership<br>team members and heads of control functions<br> <br><br> <br>The board exercises independent judgment when<br>making final compensation decisions
<br><br><br><br>	See the named<br> <br>executive profiles<br><br><br>starting on page 62<br> <br>for details about<br>their<br> <br>compensation this year
2022 Management information circular	103
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Compensation of employees who have

a material impact on risk

We are committed to ensuring our compensation program is aligned with the Financial Stability Board’s (FSB) Principles for Sound Compensation Practices, the Financial Stability Board’s Implementation Standards and other governance practices related to compensation. Our internal auditors conduct an annual independent review of the executive compensation program. The last audit was finalized in April 2021 and confirmed that we continued to be aligned with the FSB Principles and Standards. See page 97 for more information about our compensation governance practices.

You can read about the management resources and compensation committee’s composition and<br>mandate in its report on page 34, and the compensation decision-making process and program design beginning on page 102

FSB PRINCIPLES AND BASEL COMMISSION FOR BANKING SUPERVISION

PILLAR 3 REQUIREMENTS

The tables below show the breakdown of 2021 compensation for employees who have a material impact on our risk exposure (material employees). Material employees include:

•	all executives who were members of the executive leadership team at any point in 2021, and
•	employees who have:
---	---
–	authority and responsibility for policy-setting and implementation of controls, or
---	---
–	significant influence, oversight and approval authority on general account assets, or
---	---
–	oversight of a significant business unit that could have a material impact on our risk exposure.
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Compensation awarded in U.S. dollars was converted to Canadian dollars using the exchange rates we used for the summary compensation table (see page 80).

2021 compensation

	( thousands)
Number of<br><br><br>material<br> <br>employees	Total<br>compensation		Variable compensation
43		$28,591	Annual incentive plan	49,933	78,635	56,118	$0
			Special awards	111
			RSUs	26,264
			PSUs	26,991
			Other medium-term<br>incentives	2,864
			Stock options	0
			Total	106,163

All values are in US Dollars.

Manulife provided no sign-on bonuses to material employees in 2021. Sign-on bonuses, when provided, replace compensation employees forfeit when they leave their previous employer.

104	Manulife Financial Corporation

Executive Compensation

Variable compensation

The annual incentive and grant values of restricted share units, performance share units and stock options awarded for 2021. With the exception of one retiree and two employees who left the company, all material employees received incentive awards for 2021.

Deferred variable compensation

The total value of restricted share units, performance share units, deferred share units and stock options awarded for 2021.

Severance payments

In 2021, no severance payments were made or agreed to for material employees. The number of terminations each year fluctuates depending on circumstances.

DEFERRED COMPENSATION OUTSTANDING

	( thousands)
Number of<br><br><br>material<br> <br>employees	RSUs/PSUs/DSUs
	Outstandingvested
43		143,464	24,860	1,865	181,060	32,710	56,118	$20,681

All values are in US Dollars.

Restricted share units, performance share units and deferred share units

Amounts are based on $24.11, the closing price of Manulife common shares on the TSX on December 31, 2021.

Vested and unvested, unexercised in-the-money stock options

Amounts are the difference between the exercise price of the stock options and $24.11, the closing price of Manulife common shares on the TSX on December 31, 2021.

Other medium-term incentives

Some material risk takers participate in medium-term incentive plans outside of our RSU/PSU/stock option plans. These plans are based on an internal book value of a business or the market value of funds managed.

Deferred compensation paid out in 2021

The total value of restricted share units and performance share units vested and paid out and any gains from stock options exercised in 2021. In 2021 there were no discretionary adjustments of deferred compensation or payments made due to malus, clawbacks or similar reversals or downward revaluations of awards.

Implicit change in deferred compensation value

The increase (or decrease) in value of deferred compensation due to any change in share price and performance vesting conditions.

2022 Management information circular	105

Governance at Manulife

We believe that excellent corporate governance is critical to our long-term success – for us, our shareholders and our customers. Our board of directors sets the tone at the top, promoting a strong culture of integrity and ethical behaviour throughout our entire organization.

Our governance policies and practices are consistent in all material respects with the various rules and requirements that apply to us, including:

•	Insurance Companies Act (Canada)
•	corporate governance guidelines established by OSFI and the Canadian Securities Administrators
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•	U.S. Securities and Exchange Commission rules and regulations
---	---
•	TSX corporate governance guidelines
---	---
•	New York Stock Exchange corporate governance rules for domestic issuers.
---	---
Where to find it
---
About the Manulife board	109
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Board committees	111
Board roles and responsibilities	111
Serving as a director	119
Serving on other boards	119
Integrity	119
Equity ownership	119
Term limits	119
Independence	120
Board succession and diversity	121
Skills and experience	122
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Director development	124
Assessment	125
Subsidiary governance	126
Other information	127
Sustainability and ESG	127
Liability insurance	128
Loans to directors and officers	129
Directors’ approval	129
106	Manulife Financial Corporation
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Governance at Manulife

What we do

Independence<br><br><br>•   All our directors are independent except for the CEO and all members of our four board committees are<br>independent<br> <br>•   Board committees can retain independent advisors<br><br><br>•   The roles of board chair and CEO are separate<br><br><br>•   We have an annual strategic planning meeting with the board and management separate from regular board<br>meetings<br> <br>•   In camera sessions are held at every board and committee meeting without management<br>present to facilitate open and candid discussion
Ethics and integrity<br><br><br>• We promote a strong culture of integrity and ethical behavior, and have an Ethics Hotline where anyone, including<br>third parties, can file a confidential report on ethics matters<br> <br>• We require all directors to certify compliance<br>with our code of business conduct and ethics every year
Leadership and development<br><br><br>• We provide directors with orientation and continuing education<br><br><br>• The board has a formal annual assessment process involving peer and management input<br><br><br>• We continuously monitor board succession requirements and candidates, maintain a skills matrix for directors and,<br>where appropriate, use an independent recruiting firm to assist in board recruiting
Diversity and succession<br><br><br>•   We have a board diversity policy that includes diversity characteristics such as gender, age, race,<br>ethnicity, culture, disability, sexual orientation and geographic representation, as well as any other characteristics that may be identified from time to time.<br><br><br>•   The board strives to maintain parity between men and women among the independent directors, and has<br>established a specific objective that at least 40% of the independent directors are women<br><br><br>•   Diversity and inclusion is promoted and embedded in our global talent management, talent acquisition<br>and leadership programs<br> <br>•   We have an ongoing process to identify board succession candidates whose<br>skills align with the key competencies and experience necessary to support our operations and strategy and in 2021 we used an independent recruiting firm to help identify and track a diverse group of board succession candidates<br><br><br>•   Shareholders elect individual directors annually<br><br><br>•   Our majority voting policy is informed by best-in-practice governance standards and complies with the TSX rules<br><br><br>•   We limit directors to a term of 12 years under our tenure policy (in accordance with the policy the<br>board chair may serve a term of five years regardless of the number of years served as a director)
Shareholder engagement and alignment<br><br><br>•   We have a robust shareholder engagement program with publicly available shareholder engagement<br>principles and an annual shareholder engagement outreach program that the Chairman and at least one other director participate in<br><br><br>•   We require directors and executives to meet equity ownership guidelines, and directors to receive at<br>least 50% of the annual board retainer in equity, to align their interests with those of our shareholders<br><br><br>•   We have a proxy access policy
Risk oversight<br><br><br>•   We have strong risk oversight, carried out by the board and supported by the risk committee<br><br><br>•   The audit and risk committees have joint meetings at least once a<br>year
2022 Management information circular	107
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What we don’t do
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<br><br><br><br>	No hedging or monetizing of Manulife securities, including equity awards
<br><br><br><br>	No stock options, perquisites, severance, pension or retirement benefits or participate in an equity-based compensation plan, other than receiving deferred share units,for non-executive directors
<br><br><br><br>	No slate voting for directors<br><br><br>•   Shareholders can vote for or withhold their vote from individual<br>directors
<br><br><br><br>	No staggered voting for directors<br><br><br>•   We have annual elections for all directors
<br><br><br><br>	No unequal voting structure<br><br><br>•   We do not have dual-class or subordinate voting shares
<br><br><br><br>	No tie-breaking vote<br><br><br>•   Our board chair does not have a deciding vote in the event of a tie at the board
108	Manulife Financial Corporation
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Governance at Manulife

About the Manulife board

The board is responsible for overseeing our business and affairs as set out in the board’s mandate. You can read about the board’s responsibilities in more detail beginning on page 111, and you will find a copy of the board’s mandate on manulife.com as well as on SEDAR (sedar.com). The board carries out its responsibilities directly and through its four standing committees, which you can read about beginning on page 32.

Other than the CEO, all of our directors are independent, and all members of the board’s standing committees are independent. This ensures the board and committees can effectively oversee all aspects of our business and act in Manulife’s best interests.

The board needs a mix of certain competencies, experience and personal qualities for proper oversight and effective decision-making, and sets its size and composition accordingly. The board routinely reviews its size and make-up with the corporate governance and nominating committee, and may appoint new directors to the board between annual meetings. You can read more about board diversity and the competencies and experience of our directors beginning on page 121.

The board and each committee set aside time at each meeting to meet without management present.

Year in review<br> <br>The board introduced the following<br>governance enhancements in the past year:<br> <br>• completed a strategic review of board succession, including the<br>identification, appointment and onboarding of two new directors with deep expertise in corporate finance, banking, and capital markets in Asia, and expertise in public company finance and extensive leadership experience—areas critical to<br>Manulife’s ongoing growth and ambitions for the future<br> <br>• continued to enhance the new director orientation<br>program<br> <br>• increased board oversight of ESG matters<br><br><br>• diversity policy refreshed to reflect an increased commitment that women will represent no less than 40% of the<br>independent directors (subject to fluctuations during periods of transition)<br> <br>• refreshed the board<br>self-assessment process with assistance from an independent consultant<br> <br>• developed a hybrid meeting schedule (in-person vs virtual) to ensure optimal participation from all directors given the global nature of board and to help attract talented directors from across the globe.

The board holds monthly update calls to keep directors informed between regularly scheduled meetings.

The corporate governance and nominating committee reviews the board mandate annually. The board mandate, committee charters and position descriptions for the board chair, committee chairs, individual directors and the CEO are posted on manulife.com.

Contacting theboard

Our board of directors values regular and constructive engagement with shareholders, and encourages shareholders to express their views on governance matters directly to the board. If you have questions regarding our governance practices you can send them to the board chair at the following address:

Chairman of the Board

Manulife Financial Corporation

200 Bloor Street East

Toronto, Ontario M4W 1E5

Canada

Email:  corporate_governance@manulife.com

If your question relates to a board committee matter, please address your note to the chair of the appropriate committee.

2022 Management information circular	109
Board chair<br> <br>provides independent board leadership and oversight
---	---	---	---
Board of directors<br><br><br>oversees:<br> <br>• culture of<br>integrity and ethics<br> <br>• strategic planning<br><br><br>• risk management<br><br><br>• leadership development and succession planning		• corporate<br>governance<br> <br>• internal controls<br><br><br>• communications and public disclosure
Audit committee<br><br><br>• oversees the external auditors, internal control over financial reporting and our finance, actuarial, internal<br>audit and global compliance functions<br> <br>• serves as the conduct review committee<br><br><br>• reviews our compliance with legal and regulatory requirements	Corporate governance and nominatingcommittee<br> <br>• develops our governance policies, practices and procedures<br><br><br>• develops and oversees the approach to director succession and development, including approach to diversity<br><br><br>• develops and oversees the process for assessing effectiveness of the board, its committees and individual<br>directors<br> <br>• oversees director compensation<br><br><br>• oversees the company’s environmental, social and governance framework, including matters related to climate<br>change	Management resources and compensationcommittee<br> <br>oversees:<br><br><br>• our global human resources strategy, policies and programs<br><br><br>• management succession<br><br><br>• executive compensation<br><br><br>• pension plan governance	Risk committee<br><br><br>oversees:<br> <br>• the management of<br>our principal risks<br> <br>• our programs and procedures to manage those risks
Management<br><br><br>• reports to the committees and the board<br><br><br>• control functions such as finance, risk, compliance and internal audit operate independently of the business<br>units
110	Manulife Financial Corporation
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Governance at Manulife

Board committees

The board has four standing committees to help carry out its mandate:

•	audit committee
•	corporate governance and nominating committee
---	---
•	management resources and compensation committee
---	---
•	risk committee.
---	---

Each committee is made up entirely of independent directors, and has a committee charter. Committees set aside time at each meeting to meet in camera (without management present), and may also use part of this time to meet with independent advisors and individual members of management.

Committee chairs report to the board, providing updates on the committee’s deliberations and any recommendations that require the board’s approval.

Committees review their charter every year and update it as necessary. They also conduct an assessment of the committee’s performance and effectiveness in carrying out the responsibilities set out in its charter. Each committee considers the results when developing its priorities and work plan for the coming year.

The corporate governance and nominating committee reviews committee composition at least once a year and reconstitutes committee membership as appropriate. The CEO is not involved in any of these decisions.

You can access the committee charters and position description for each committee chair on manulife.com and read the 2021 committee reports beginning on page 32.

Independent advice

The board and committees may retain outside advisors to receive independent advice, and we pay for the cost of these services.

Board roles and responsibilities

The board is responsible for approving our strategy, risk<br>oversight, leadership development and succession planning, among other things. It reviews and approves our financial statements, significant investments, the raising of capital and other significant matters such as significant mergers, acquisitions<br>and divestitures.<br> <br><br> <br>1 — PROMOTING A CULTURE OF INTEGRITY	The board and ESG<br><br><br>ESG crosses several aspects of the board’s roles, including culture, strategic planning, risk oversight, leadership and<br>compensation, diversity and disclosure.
	You can read more about this on the following pages, and also in our 2021 Sustainability<br>Report and Public Accountability Statement.

AND ETHICAL BEHAVIOUR

The board and management promote a strong culture of integrity and ethical behaviour.

Our code of business conduct and ethics applies to all directors, officers and employees and sets out the importance of Manulife’s values, ethics in the workplace and our business relationships, avoiding conflicts of interest, protecting our assets, and prompt reporting of illegal or unethical behaviour.

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Anyone, including third parties, can contact our Global Compliance Office, or file a confidential<br>report by contacting our Ethics Hotline, 24 hours a day, 7 days a week. Reports can be made anonymously.
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Online<br><br><br>By phone	manulifeethics.com<br> <br>1-866-294-9534<br><br><br>(toll free in North America)

All Manulife directors, officers and employees have a duty to comply with the code and to report an incident if they suspect fraud or other unethical behaviour or wrongdoing, including a breach relating to accounting, auditing or internal controls. The code makes it clear that an individual can report suspected or potential illegal or unethical behavior without fear of retaliation for any report made in good faith.

Each year everyone subject to the code must

complete annual training and confirm that they have read and comply with the code. The audit committee monitors compliance with the code and reviews the code every year.

Some limited aspects of the code can be waived for directors and senior executives in exceptional situations if approved by the board on the recommendation of the audit committee, and promptly disclosed. To date, the board has not waived any aspect of the code. You can access a copy of the code on manulife.com.

2— STRATEGIC PLANNING

The board and senior management hold an annual strategic planning meeting, separate from regular board meetings, where board members and management review Manulife’s strategy and discuss emerging trends, the competitive environment, risk issues and any significant business issues or products as important context for our strategic direction. The strategic planning meeting includes sessions on each of the key operating segments as well as areas of importance to the company’s strategy, such as key businesses and break-out growth areas, strategic cost management, culture and talent, and digital and transformation initiatives. In 2021, the board continued to provide effective oversight and guidance to management on strategic planning matters in the pandemic environment, including leveraging technology and taking advantage of scheduling flexibility to refine meeting scheduling, allowing for more in-depth discussion and stand-alone sessions on topics of strategic importance.

Management develops strategic, financial and capital plans, our risk appetite and allocation of resources. The strategic business plans include the strategy and related opportunities and risks for Manulife and each of our business segments.

The board reviews the plans, risk appetite and resource allocation, consults further with management and considers any other key issues before it approves them.

The board monitors management’s progress on strategic plans throughout the year. It receives regular updates from the CEO and management on strategic developments and our performance against the strategic plan, and oversees adjustments management makes to the plans to reflect new conditions or environmental factors.

The strategic planning meeting regularly rotates among the company’s geographies to give the board an opportunity to visit our operations and meet with local staff. The 2021 meeting was held virtually due to COVID-19 and the directives from public health and government authorities for group gatherings, travel and social distancing.

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3 — RISK OVERSIGHT<br><br><br>The company’s strategic direction drives our overall risk appetite, which defines the amount and types of risks we are willing to assume in<br>pursuit of our objectives. All risk-taking activities are managed within the company’s risk appetite framework.<br> <br><br><br><br>The company’s overall risk appetite has three components: risk-taking philosophy, risk appetite statements, and risk limits and<br>tolerances.<br> <br><br> <br>The activities required to achieve our strategy are guided<br>by our values and involve elements of risk-taking. When making decisions about risk-taking and risk management, we place a priority on the following risk management objectives:<br><br><br>• safeguarding the commitments and expectations established with our customers, creditors,<br>shareholders and employees<br> <br>• supporting the successful design and delivery of customer<br>solutions<br> <br>• prudently and effectively deploying the capital that shareholders have invested<br>in us with appropriate risk/return profiles	Managing climate-related risk<br><br><br>The risk committee considers climate-related risks and opportunities through the ongoing monitoring and reporting of emerging<br>risks.<br> <br><br> <br>The identification and assessment of<br>climate-related risks is communicated through an Environmental Risk Policy, which sets out an enterprise-wide framework for the management of environmental risks within our business activities. Our 2021 management’s discussion and analysis<br>includes disclosures related to our climate risk governance, risk management, strategy, and metrics.<br> <br><br><br><br>In 2021, we continued the climate-related risk identification process across businesses, geographies, and time horizons. We<br>also performed a series of climate change stress tests to gain insight into the impact of climate-related risks on our investment portfolios and to inform capital management.
• investing wealth and asset management’s customer<br>assets<br>consistent with their objectives, including investment risks and return
• to achieve and maintain a high level of operational<br>resilience
•	to safeguard the well-being of our employees, and promote a diverse, equitable and inclusive business environment<br>
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•	protecting and/or enhancing our reputation and brand
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•	maintaining our targeted financial strength rating.
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We only accept risks we can appropriately analyze and monitor. Risk management drives our success by providing a framework to mitigate exposures within our risk appetite, and effectively deploying our capital towards appropriate risk/return profiles. As an integrated component of our business model, risk management helps us achieve our objectives and encourages organizational learning.

We categorize the risks we face into five principal areas, to identify, measure, assess and manage our risk profile: strategic, market, credit, product, and operational.

The board looks to the audit committee, risk committee and management resources and compensation committee to assist in overseeing certain areas of risk:

•	audit committee
–	oversees compliance with legal and regulatory requirements
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–	oversees policies and internal control systems for effectiveness to mitigate our exposure to financial reporting risk<br>
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–	reviews our quarterly and annual financial statements and related disclosure before recommending them to the board for<br>their review and approval
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•	risk committee
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–	reviews and assesses our principal risks, including our overall risk profile and reviewing our risk appetite<br>
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–	reviews the risk impact of the business plan and new business initiatives
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–	oversees the risk management function
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–	oversees our compliance with risk management policies
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–	evaluates the company’s risk culture
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•	management resources and compensation committee and risk committee
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–	reviews our executive compensation program to ensure alignment against our risk management principles and our risk<br>appetite
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Each director, other than the board chair, sits on two committees. There is cross-membership between the management resources and compensation committee and the risk committee, and the corporate governance and nominating committee and the audit committee, which adds depth to committee deliberations. The audit committee and risk committee have at least one joint meeting every year.

In 2021, the board continued to provide effective oversight of risk-related matters in the COVID-19 environment, increasing the frequency and depth of the board’s involvement and interactions with management.

The board meets directly with OSFI, our principal regulator, every year, and there are regular meetings between the board chair and OSFI throughout the year.

Enterprise risk management (ERM) framework

Our ERM framework provides a structured approach to risk-taking and risk management activities across the enterprise, supporting our long-term revenue, earnings and capital growth strategy. It is communicated through risk policies and standards, which are intended to enable a consistent design and execution of strategies across the organization. Within this framework we have tailored approaches to managing the different risks we are exposed to, and to evaluating potential comparable risk-adjusted returns on contemplated business activities.

We are subjected to external and internal risk factors (such as economic conditions, political environment, technology and risk culture), which can significantly impact the levels and types of risks we might face in pursuing our strategies. Our ERM framework incorporates relevant impacts and mitigating actions as appropriate.

As part of our ERM framework, we have a compensation risk framework in place to support the governance and design of controls for the risks associated with the compensation program. Our compensation programs are assessed against this framework every year.

The enterprise-wide information security program, which is overseen by the Chief Information Risk Officer and includes regular reporting to the risk committee, seeks to mitigate information security risks. This program establishes our information and cyber security framework, including governance, policies and standards, and appropriate controls to protect information and computer systems.

Compliance andreporting

Management oversees the principal risks and implementation of controls to manage risk, and regularly assesses whether there are any material deficiencies. They update the board on our principal risks at least quarterly.

Controls and certifications

We update our risk policies, risk management processes, internal controls and management information systems regularly to make sure they match our risk profile and comply with regulatory requirements. We also perform stress testing on an ongoing basis to support the way we identify, assess and mitigate risk.

The CEO and CFO certify our disclosure controls and procedures, annual financial statements and quarterly financial statements, among other things, to meet legal and regulatory requirements.

4 — LEADERSHIP DEVELOPMENT AND SUCCESSION

The management resources and compensation committee reviews our approach to human resources, talent management, compensation and the succession planning process for senior executives.

Diversity

We value a high performing workforce that reflects the diversity of our customers and the communities where we operate. We believe that a diverse workforce, especially in leadership roles, can enhance performance, foster innovation and improve business results.

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We are committed to developing a more diverse and inclusive workforce that is more representative of our customer base and has more women and Black, Indigenous, and People of Colour (BIPOC) in leadership positions.

Roy Gori has signed the Catalyst Accord 2022, committing to increase the percentage of women in executive positions in Canada to 30% or greater by 2022. We have established action plans to drive accountability for greater diversity in our workforce.

We are increasing our efforts in hiring, supporting and creating awareness of people with disabilities (PWD) through various initiatives globally to attract and hire PWDs. In 2022, we will be providing additional sensitivity training to our recruiters and hiring managers, as well as improving efforts to make us more accessible in physical and system accommodations.

In 2020, we announced leadership and recruitment goals to increase the representation of BIPOC employees across our North American businesses. This includes increasing BIPOC representation in leadership roles (director level and above) by 30% by 2025 and annually hiring at least 25% BIPOC talent into new graduate program positions across our businesses and functions. In addition to these commitments, we have signed on to a pledge with the BlackNorth Initiative in Canada, as well as the CEO Action for Diversity and Inclusion pledge in the U.S. Both of these efforts align with our objective of advancing diversity and inclusion in the workplace.

Our global executive Diversity, Equity and Inclusion (DEI) Council guides, supports and facilitates the implementation of our DEI strategy. Chaired by our CEO, the DEI Council is made up of executive leaders who are passionate about DEI. There are 13 employee resource groups (ERG) with 39 chapters and more than 13,000 members. Open to all employees, ERGs support local employee engagement, champion our larger DEI initiatives and provide opportunities for personal and professional development.

The table below shows the number of women in leadership positions at Manulife and our subsidiaries:

(as at February 28, 2022)
Women in senior leadership roles (vice president and higher)	157 of 500	31%
Women in senior officer roles (senior vice president and higher)	24 of 98	24%
Women on the executive leadership team	3 of 15	20%

Increasing the representation of women and BIPOC leaders is a priority in our corporate strategy, and we’ve made tangible progress by:

•	embedding diversity practices in our global talent management programs and including diversity results in workforce<br>reporting to senior management and the board
•	implementing annual DEI plans for each business segment and function
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•	introducing diversity dashboard quarterly reviews with the executive leadership team
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•	formally including diversity goals in all people leader’s goals
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•	building representation of BIPOC professionals through focused recruitment efforts from diverse post-secondary schools<br>across North America
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•	accelerating development program opportunities for mid-career BIPOC leaders and<br>leaders of our ERGs
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•	incorporating diversity into the ongoing review and discussion of our succession candidates
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•	offering internal and external training and development programs for members of diverse employee groups<br>
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•	providing unconscious bias training for all employees
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•	providing programs designed to educate and train all employees that go beyond our mandatory unconscious bias training,<br>including regular listening forums to foster conversations and build inclusion across our global team, allyship resources and targeted training for all managers on leading inclusively. We partnered with Accenture to launch two learning platforms for<br>all leaders in late 2020: All Against Racism (North America) and Inclusive Leadership (Asia)
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•	continuing to provide dedicated support and development of our internal employee communities for women and BIPOC employees<br>that focus on professional development and networking. This includes our GWA (Global Women’s Alliance), VIBE (Valuing the Inclusion of Black Experiences), IPTA (Indigenous Peoples and Their Allies), AMP (Association of Multicultural<br>Professionals), PACES (Pan-Asian Community for Employee Success), Ability (Disabilities) and Being Yourself (mental health focus) ERGs. Each chapter has an executive sponsor (vice president or higher, and<br>country general manager level in some cases) to increase exposure and impact
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•	internally and externally celebrating and promoting the history, culture, and contributions of diverse communities,<br>including annual celebrations of International Women’s Day, Black History Month, Martin
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Luther King Jr. Day, Juneteenth, National Indigenous Peoples Day, Orange Shirt Day, Pacific Heritage Month, South Asian Celebration, International Day of Pink, PRIDE, Ally Week, Mental Health Awareness Month, National Disability<br>Employment Awareness Month, Autism awareness day, International Day of Persons with Disabilities and many more
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•	communicating transparently to employees about diversity and profiling leaders who demonstrate authenticity<br>
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•	revising workforce policies around flexible work arrangements and increasing our parental leave to better accommodate and<br>retain employees. We increased maternity and paternity leave benefits in Canada to a market leading position in 2021
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•	adding more external partnerships with leading networks that support the advancement of women and BIPOC employees,<br>creating awareness of LGBTQ+ and disabled communities, and providing opportunities to share best practices and attend events and educational sessions that encourage leadership across the organization. Organizations include Catalyst, Women in Capital<br>Markets, Career Edge, ICON Talent Partners, Onyx, Sensational Foundation, The Women’s Foundation, Community Business, Pink Dot, and many more
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•	continuing to enhance sourcing, assessment and selection of potential employees. We follow a formal recruitment process<br>where all vacancies are posted internally and externally, and all executive search vendors must ensure their slate of candidates is diverse and includes a focus on women
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•	implementing diverse slate requirements internally to increase hire and promotion rates of diverse candidates. To support<br>diverse candidate slates, we introduced the use of technology in our hiring process that reduces biased job posting language and hired two dedicated diverse candidate recruiters. All recruiters are trained in inclusive hiring practices<br>
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•	enhancing the collection of applicant and employee diversity data across the organization
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We may also establish other measurable objectives for increasing diversity in leadership as we continue to develop our overall approach to diversity globally.

Management development and assessment

The management resources and compensation committee oversees our human resources strategy and our talent management program globally.

Management development

We integrate our talent and succession planning process for senior management with the primary objective of having high performing individuals in critical roles across the organization.

We’re focusing on several areas to ensure we have depth of talent and diverse leadership to fill critical roles in the future:

•	acquiring and retaining high performing, high potential talent
•	selective external hiring of exceptional, seasoned executives
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•	increasing our diversity to better reflect the global markets where we operate
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•	identifying early high performing, high potential employees, with a focus on growing our pipeline of women in senior<br>roles, developing their skills and providing regular assessments
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•	engaging our talent and driving high performance, including a board review of the 2021 employee engagement survey results<br>and overseeing management actions to continuously improve employee engagement
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•	significantly investing in the development of our top talent both on the job and through formal development programs.<br>
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High potential employees participate in development programs that combine formal training in specific areas and practical work experience that is meaningful and varied. The program may include roles in different divisions or an international assignment, among other things.

We have adapted our hiring and onboarding practices to support all employees in a completely remote work environment due to the pandemic. We have also added personal communications from senior leaders (including a note from Roy Gori) to incoming employees to enhance connection with the organization in a challenging situation. As the pandemic continues globally, especially in our Asia markets, the implementation of our Working Better guidelines in partnership with our technology teams have made it possible for our employees to work remotely, while still being able to spend more time with their loved ones. These efforts helped Manulife win a number of best employer awards in 2021 across our different geographies. You can find more information in our 2021 annual report available on manulife.com.

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Assessment

We have a formal assessment process that is based on corporate and individual performance. The independent directors assess the CEO’s performance every year and the board approves the CEO’s objectives for the following year. The management resources and compensation committee reviews assessments of the performance of senior executives every year, based on business performance, including risk-related aspects, and individual performance. The board also approves compensation decisions for the CEO and other senior executives based on these assessments.

The audit committee assesses the effectiveness of the heads of our oversight functions, including the CFO, Chief Auditor, Chief Actuary and Global Compliance Chief. The risk committee assesses the effectiveness of the Chief Risk Officer. The management resources and compensation committee and the board approve all senior executive appointments.

Management succession planning

Our succession strategy is based on promoting talented individuals within the organization and hiring from outside to strengthen our capabilities where appropriate and to build diverse perspectives and fresh thinking.

The board and committees review the succession plans for senior management and the heads of our key oversight functions. The board develops the CEO’s succession plan, and the management resources and compensation committee monitors succession plans for senior executives. The management resources and compensation committee, with the assistance of the audit committee and risk committee where appropriate, also monitors succession plans for the heads of our oversight functions.

Management devotes its attention to developing talent below the senior executive level to ensure there is a well-trained, high performing pool of executives that is representative of our customer base and the communities where we operate, and that has a broad range of business and functional experience that can contribute to a common culture and values for building a sustainable, high performing company. Developing our people helps retention and ensures orderly transitions.

The management resources and compensation committee conducts regular reviews of senior executive succession planning.

5 — COMMUNICATIONS AND SHAREHOLDER ENGAGEMENT

Disclosure policy and practices

The board has established policies and standards for the disclosure of material information to ensure it is timely, accurate and balanced.

The executive disclosure committee is responsible for overseeing and monitoring our disclosure processes and practices, including the review, from time to time, of Manulife’s disclosure policy. It is made up of members of senior management and reports to the audit committee on disclosure matters. The executive disclosure committee reviews all material information in disclosure documents before the audit committee and board review and approval.

A cross-functional group that includes members of senior management, as well as employees from our legal, investor relations and corporate communications groups, and others as required, reviews information and developments to assess materiality in compliance with our disclosure policies.

The board reviews and approves our financial statements, management’s discussion and analysis (MD&A) and earnings releases, annual information form, management information circular and other material disclosure based on the review and recommendation of the audit committee. The audit committee also reviews and approves our disclosure policy.

Engagement

We have a longstanding practice of engaging with our stakeholders, as we believe that engaging and communicating directly with shareholders and other stakeholders is important for receiving timely and meaningful feedback. Our shareholder engagement principles help shareholders understand how the board engages with shareholders and how they can contact the board. These are available on manulife.com.

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The board’s shareholder engagement outreach program facilitated by our investor relations group includes:<br><br><br>• an annual shareholder engagement outreach program to generate dialogue and feedback on a variety of topics in<br>which the board chair and at least one other director participate each year<br> <br>• ongoing communication, which is an<br>important part of creating an open, candid and productive dialogue. Directors make themselves available throughout the year to engage and respond to questions from shareholders<br><br><br>• encouraging shareholders to participate at the annual meeting, because it offers a valuable opportunity to discuss<br>Manulife, our corporate governance practices and other topics.<br> <br><br> <br>Say on executivepay<br> <br>This year shareholders will again have an opportunity to have a say on our approach to executive pay. This is an advisory vote, so the results are not<br>binding. The board will, however, take the results into account together with feedback received from other shareholder engagement activities, when making decisions about compensation policies, procedures and executive pay in the future. You can read<br>more about this on page 13.<br> <br><br> <br>Shareholder proposals<br><br><br>Shareholders can submit proposals to be considered at an annual meeting and included in our circular. The corporate governance and nominating committee oversees this<br>process. See page 14 for more information.<br> <br><br> <br>We did not receive any proposals to be considered<br>at the 2022 annual meeting.	As part of the annual Shareholder Outreach Program, John Cassaday, the Chairman, Andrea Rosen, the chair of<br>the corporate governance and nominating committee and a member of the audit committee, and Guy Bainbridge, the chair of the audit committee and a member of the corporate governance and nominating committee met with investors who collectively own<br>approximately 43% **** of Manulife’s outstanding institutional shares.* A broad range of matters were discussed, including:<br><br><br>• governance – Manulife’s approach to governance, including board composition, succession planning and<br>auditor independence<br> <br>• accounting – topics related to the implementation of IFRS 17, including oversight,<br>readiness and potential impacts<br> <br>• ESG – Manulife’s strategy and approach on ESG matters, including our<br>Climate Action Plan and emission targets, and how our shareholders are integrating ESG factors into their investment decision-making<br><br><br>• risk management – views on emerging risks and approach to risk management, including geopolitical risks<br><br><br>• executive compensation – potential refinements to our compensation plan design and target setting, as well as<br>shareholder input<br> <br>• strategic priorities – Manulife’s progress on executing against its priorities,<br>including the growth of highest potential businesses, optimization of legacy businesses and capital deployment.
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Proxy access

The board understands that proxy access has become a matter of importance for shareholders and has a proxy access policy that allows shareholders to nominate directors for election at the next annual meeting.

Eligible shareholders (or a group of up to 20 eligible shareholders) who have held full voting and economic rights in at least 5% of the outstanding common shares for at least three years as of the date of the nomination, may nominate up to 20% of the number of directors to be elected at the next annual meeting. Nominations must be made in compliance with the proxy access policy and nominees must meet the eligibility criteria described in the policy. See page 14 for more information on submitting nominations under the proxy access policy.

You can find our proxy access policy at manulife.com.

For more information

You can find more information about Manulife on manulife.com, including webcasts of the quarterly investor conference calls and senior management’s presentations to the investment community, our annual reports and other investor information.

*	As of December 31, 2021.
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Serving as a director

We and the board expect directors to conduct themselves professionally, with integrity and always in the best interests of Manulife.

A director must commit the necessary time to their duties as a director and we expect them to attend all of their meetings except in extenuating circumstances. We compensate directors appropriately and our fee schedule is competitive with the market (see page 37 for details).

If a director is contemplating joining another public company board, changes employment or<br>country of residence, or there is any other significant change, the director must notify the chair of the corporate governance and nominating committee. The chair will review the	Directors who receive more withheld votes than for votes in an uncontested election<br>have to submit their resignation. See page 17 for more about our majority voting policy.

matter and consider an appropriate course of action including, in the case of a public company appointment, seeking the approval of the committee. As part of its review, the committee considers whether there are circumstances that could impair the director’s ability to exercise independent judgment or create a conflict of interest, as well as whether the proposed appointment would impede the director’s ability to devote the time and commitment necessary. We expect the director to resign if the change creates a conflict of interest, or affects our ability to comply with legal or regulatory requirements or our own internal policies.

SERVING ON OTHER BOARDS

We have not set a limit for the number of public company boards our directors can serve on, however, as noted above, the corporate governance and nominating committee must review and approve a proposed appointment to another public company board to ensure the additional commitment does not create a conflict of interest or affect the director’s independence or ability to devote appropriate time to Manulife. Two of our directors, Andrea Rosen and Leagh Turner, currently serve on the board of Ceridian HCM Holding Inc.

INTEGRITY

In addition to complying with our code of business conduct and ethics, directors are required to follow rules established to ensure they exercise independent judgment and avoid conflicts of interest.

EQUITY OWNERSHIP

We require directors to hold equity in Manulife to help align their interests with those of our shareholders. All independent directors must hold at least six times the mandatory equity portion of the annual board member retainer. Directors are expected to meet their equity ownership requirements within six years of joining the board. To facilitate equity ownership, all directors receive a minimum of 50% of the annual board retainer in deferred share units. Mr. Gori has separate equity ownership requirements as President and CEO, which he meets. See pages 17 and 101 for details.

TERMLIMITS

Independent directors can serve up to 12 years on our board, to balance the benefits of experience with the need for board renewal and new perspectives. When term limits were introduced, a transitional provision was included to allow (until 2019) independent directors who had served at least 12 years on the board as of the date of the 2014 annual meeting but had not turned 72 (the mandatory retirement age in effect before December 5, 2013) to be re-elected. John Cassaday was previously re-elected under this transitional provision.

A director who has served the maximum term will only be nominated for election in exceptional circumstances. The board does, however, have discretion to nominate a director again for up to three years if the director’s specific expertise meets the needs of the board at that time.

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The board chair may serve a full five-year term in that role regardless of the number of years that individual has served as a director. Mr. Cassaday’s term as Chairman will end at the 2023 meeting and a comprehensive board Chair succession process will be followed to ensure an orderly transition.

INDEPENDENCE

We have a board independence policy that complies with all applicable legal, regulatory and securities exchange requirements and which is available on manulife.com. The policy is used every year in determining the independence of the company’s directors.

A director is independent if the individual doesn’t have a direct or indirect relationship with Manulife that could reasonably be expected to interfere with the director’s ability to exercise independent judgment. Other than the CEO, who must be a member of the board under the Insurance Companies Act (Canada), all of the nominated directors are independent. Members of the audit committee and the management resources and compensation committee also meet the additional independence requirements applicable to those committees.

Independent Chairman

The board chair must be an independent director. The board chair is appointed each year by the directors and can serve up to five years in the role. The board appointed John Cassaday to the role of Chairman effective following his successful election at the 2018 meeting. Mr. Cassaday has never been a Manulife employee. In accordance with our term limits policy, Mr. Cassaday’s term as Chairman will end at the 2023 meeting and a comprehensive board chair succession process will be followed to ensure an orderly transition.

The Chairman is responsible for providing leadership to the board, encouraging open discussion and debate, overseeing performance and guiding deliberations on strategic and policy matters. The Chairman has frequent discussions with senior management and one-on-one sessions with board members, sets the meeting agendas and attends all committee meetings whenever possible. The Chairman also has frequent interactions with Manulife’s primary regulator to facilitate direct and open communication. The Chairman works closely with the corporate governance and nominating committee on all governance matters. The Chairman’s mandate is available on manulife.com.

Independent directors

The independent directors meet regularly with senior management, and meet without management present at each board and committee meeting to facilitate open and candid discussion.

The independent directors also meet in a closed session at least once every year to review the performance of the CEO and approve his compensation, review the board’s own performance assessments and approve the board’s objectives for the following year.

They also regularly have closed sessions with our external auditors, other independent advisors, heads of our control functions and other members of management.

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BOARD SUCCESSION AND DIVERSITY

The corporate governance and nominating committee oversees the board succession process and manages board succession in light of the board’s overall needs, term limits and retirements. In doing so, the committee takes a long-term, strategic view of board succession and diversity is an important consideration. In accordance with the board’s diversity policy, the committee will consider the following when identifying candidates for nomination to the board:

•	qualifications, including skills, expertise, competencies and experience, and other qualities the board identifies from time to time as being necessary for effective oversight given the global nature of the<br>company’s operations and strategy, and the rapidly evolving global economic environment
•	characteristics that will foster a board culture that welcomes multiple perspectives and is free of conscious or unconscious bias and discrimination
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•	characteristics that contribute to board diversity, including gender, age, race, ethnicity, culture, disability, sexual orientation and geographic representation, as well as any other characteristics that may be<br>identified from time to time
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•	legal and regulatory requirements, such as those relating to residency and independence
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The corporate governance and nominating committee engages independent advisors to assist in identifying candidates and requires advisors to present a diverse slate of candidates for consideration who meet the selection criteria that the board has identified. It also maintains a list of prospective candidates who meet established criteria and diversity objectives. In 2021 the committee worked with an independent strategic advisor to assist with the long-term board succession plan.

Diversity<br> <br>The board recognizes the<br>importance of diversity and is committed to fostering diversity at all levels of the organization, including within its own ranks. The board has a history of promoting diversity and believes that having highly qualified directors from diverse<br>backgrounds brings different perspectives and experiences to the boardroom, generating healthy discussion and debate and more effective decision-making.
This commitment to diversity is reflected in the board’s long-standing diversity policy (which you can access on manulife.com) and in the board succession practices described to the left which include<br>consideration of those characteristics that contribute to board diversity and inclusion.
With respect to gender in particular, the board strives to maintain parity between men and women among the independent directors and has established a specific objective that at least 40% of the independent directors<br>are women, recognizing that board composition may fluctuate from time to time during periods of transition.
The table below shows the number of women and directors who are members of a racially/ethnically diverse group currently on the board. You can read more about management diversity on page 114.
(nominated directors as at<br>February 28, 2022)
Female directors (as a percentage of total directors)	7 of 14	50%
Female directors (as a percentage of independent directors)	7 of 13	54%
Racially/ethnically diverse directors (as percentage of total directors)	3 of 14	21%
Racially/ethnically diverse directors (as percentage of independent directors)	3 of 13	23%
The corporate governance and nominating committee reviews the<br>policy and specific objectives annually and may recommend changes to the policy and the objectives as appropriate. The board and committee’s effectiveness at implementing the policy is taken into account during annual performance<br>evaluations.
2022 Management information circular	121
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The board chair, committee chairs and other directors interview suitable candidates and an independent firm conducts a background check. The committee considers input from all of these sources before it recommends a candidate for the board’s review and approval for nomination or appointment to the board.

Changes in board membership:

•	Sheila Fraser resigned from the board in June 2021.
•	John Palmer is not standing for re-election as he is at the end of his 12-year term limit.
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•	May Tan and Vanessa Kanu were appointed after extensive search processes. Ms. Tan and Ms. Kanu are seasoned<br>executives with deep expertise in areas critical to Manulife’s ongoing growth and ambitions for the future in their home markets of Hong Kong and Canada, respectively. You can read more about these new directors in the director profiles<br>starting on page 18.
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SKILLS AND EXPERIENCE

The corporate governance and nominating committee helps determine the necessary qualities, skills and experience for a member of the board of a global financial services company and Manulife in particular. The committee maintains a skills matrix to identify any gaps or emerging areas of importance in the board’s overall skill set.

Directors must possess six core attributes:

•	a reputation for integrity and ethical behaviour
•	a demonstrated ability to exercise judgment and communicate effectively
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•	financial knowledge
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•	prominence in their area of expertise
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•	experience relevant to our operations
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•	sufficient time to dedicate to board and committee work.
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In addition to the core attributes, all members of the board have considerable senior executive experience, operations/governance experience in one or more of Asia, Canada and the U.S., and are financially literate within the meaning of applicable securities laws.

The table on the following page shows the diverse experience of the board and individual nominees in areas identified as necessary for effective oversight of the company given its current operations and strategy. These qualifications are considered in reviewing board succession and evaluating potential board members.

To support the board’s role in overseeing Manulife’s ESG framework, experience in and an understanding of ESG matters are also considered essential characteristics. Directors are expected to have a significant knowledge and understanding of ESG issues relevant to and based on their respective experiences in their professional careers or as a corporate director. In addition to considering appropriate ESG experience possessed by potential director candidates, directors gain ESG experience through ongoing education sessions and reports on ESG strategy, trends, risks and opportunities and all directors are encouraged to attend sessions on ESG matters at meetings of the corporate governance and nominating committee.

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Governance at Manulife

Key competencies
Finance/Accounting<br><br><br>We operate in a financial environment with complex accounting, actuarial and capital management issues
Insurance/Reinsurance/Investmentmanagement<br> <br>We value industry expertise as it provides insight into operations, strategy, and market factors
Risk management<br><br><br>We operate in a complex risk environment and experience in risk disciplines provides us with expertise to effectively manage our principal risks
Talent management/Executivecompensation<br> <br>We want to attract, develop and retain the best talent globally as we focus on transforming our business
Technology/Operations<br><br><br>We value technology expertise as we focus on transforming our business by using technology to become a digital, customer leader
Keyexperience
Asia experience<br><br><br>Business and cultural experience in regions in which we operate, particularly in those regions where we are focusing on accelerating growth, is essential to providing<br>oversight in the best long-term interests of the company
Government relations/Publicpolicy/Regulatory<br> <br>Experience with governmental agencies provides valuable insight into government processes and actions, and knowledge of the regulatory<br>environments across our geographical footprint is essential to understanding the threats and opportunities of our long-term strategy
Public companyexecutive/Director<br> <br>Public company experience provides practical insights on the operations and governance of a complex, publicly-traded organization
Digitaltransformation/Sales/Marketing<br> <br>Experience in sales and marketing provides valuable market and consumer insights as we focus on transforming our business and<br>becoming a digital, customer leader
2022 Management information circular	123
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DIRECTOR DEVELOPMENT

Directors receive ongoing education to keep them up to date in their knowledge and understanding of our businesses and market and regulatory environment so they can carry out their responsibilities effectively.

Orientation

We’re able to attract qualified and experienced directors from various backgrounds with a diverse range of skills. New directors participate in a comprehensive orientation program to increase their knowledge of Manulife and matters that are important to our operations. The program is tailored to each director’s knowledge, skills and experience. It was enhanced in 2020 and again in 2021 to take advantage of the virtual environment to create a more flexible program tailored to individual director needs.

Directors receive information about Manulife, the board and board committees and their duties as a director. The board chair and committee chairs meet with new directors to discuss the role of the board and committees and to give them an opportunity to have a candid discussion and ask questions.

We also arrange sessions with senior management on a wide variety of relevant subjects to help new directors gain a deeper understanding of our strategic priorities, businesses and challenges.

All directors have a standing invitation to attend committee meetings whether or not they are a member, and new directors are encouraged to do so as part of their orientation.

Continuing education

We run a continuing education program for all directors and the corporate governance **** and nominating committee coordinates the program agenda.

The program includes regular presentations by senior executives about emerging issues and topics relevant to our business and operations and the regulatory environment, as well as information packages developed to enhance the director’s understanding of the subject matter. External experts are also invited from time to time to speak on various topics.

In typical years we also organize site visits for directors so they gain additional insights into various aspects of our business and our global operations. Site visits also give directors an opportunity to meet directly with management and other employees in those areas or regions. Due to COVID-19 concerns and restrictions, members of the board engaged with Manulife employees at a number of virtual events.

Committee chairs may also coordinate education sessions on specific topics for their committee members.

124	Manulife Financial Corporation

Governance at Manulife

The table below provides highlights of our continuing education program for directors in 2021:

Topic	Date	Audience
Business and operations
Asia Overview	January/May 2021	board
U.S Overview	February 2021	board
Agile Business Models	April 2021	board
Customer Experience & Digital Strategy	May 2021	board
Diversity, Equity and Inclusion	May 2021	board
Cybersecurity Deep Dive	May 2021	board
Canada Overview	June 2021	board
Market trends and regulatory updates
LIBOR Transition Overview	June 2021	audit and risk<br>committees
Disruptive Business Models	August 2021	board
Macroeconomic Environment and Inflation Overview	August 2021	board
Digital Acceleration	October 2021	board
Blockchain & Digital Currency	November 2021	board

We also encourage directors to participate in outside professional development programs. We pay for these expenses so long as the program is approved in advance according to established procedures.

All of our directors are members of the Institute of Corporate Directors (ICD) and the National Association of Corporate Directors (NACD), which provide continuing education for directors through publications, seminars and conferences. They are also provided with corporate subscriptions to certain relevant industry publications.

ASSESSMENT

The corporate governance and nominating committee retained an independent consultant to help carry out a self-assessment of the board, committees, the board chair and committee chairs in 2021.

Directors engaged in an iterative interview process with the independent consultant to assess the performance and effectiveness of:

•	the board vis-à-vis its objectives<br>
•	the board chair in carrying out his mandate
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•	the committees and the chairs of those committees, in addressing areas of focus, and
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•	themselves and their peers.
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Senior executives were also invited to participate in the assessment process, providing another opportunity for management feedback.

Assessment results are compiled and reported to the board chair and the chair of the corporate governance and nominating committee. The corporate governance and nominating committee reviews the results and provides a final report to the full board, which is used to address any areas for improvement and develop the board’s priorities for the following year.

The board chair also has one-on-one interviews with each director to receive any candid feedback on the performance of the board, committees and peer directors for developing the board’s priorities for the following year. He then meets with the board to discuss the recommendations and plan the implementation of the board’s priorities for the coming year.

2022 Management information circular	125

SUBSIDIARY GOVERNANCE

The corporate governance and nominating committee is responsible for reviewing the adequacy and effectiveness of the board’s governance policies, practices, and procedures, including supporting the board’s oversight of the activities of our subsidiaries globally. Our global subsidiary governance policy and standard establish a subsidiary governance framework that further supports the board in fulfilling its oversight role in relation to subsidiaries. We have adopted a risk-based approach to subsidiary governance (i.e., we categorize our subsidiaries based on various factors, including size, regulatory status, and minority interests and align governance practices to the risk categorization of the subsidiary. The boards of our significant subsidiaries are comprised of both internal (i.e., employee) directors and external (i.e., non-employee) directors. Internal directors bring industry experience and knowledge, and external directors can contribute different experience, expertise and independence and add a diverse perspective to subsidiary boards. Advancing the diversity of our subsidiary boards is a key priority for the board and our subsidiaries. By the end of 2022, each of our significant subsidiary boards will have adopted a board diversity policy.

We have a global operating model comprised of (i) a central team focused on driving subsidiary governance best practices and consistency (wherever possible), as well as supporting an enterprise-wide view of subsidiary governance, and (ii) local centres-of-excellence with day-to-day accountability for governance matters. This hybrid approach to subsidiary governance allows us to balance global oversight and transparency with local execution.

126	Manulife Financial Corporation

Other Information

Other information

Sustainability and ESG

We report on the economic, environmental and social dimensions of our products and services, operations and community activities in our annual Sustainability Report and Public Accountability Statement. The report provides information about our environmental, social and governance priorities and performance – including our approach to climate change. You can download a copy of the report from the sustainability section of our website at manulife.com/sustainability.

Guided by our corporate values, we have taken a forward-thinking approach to our sustainability agenda; an approach that drives action in the best interests of our various stakeholders. To ensure our sustainability efforts make an impact beyond our business, we actively engage with recognized international initiatives and frameworks to help drive progress across industries and geographies.

Since 2017, Manulife has been a supporter of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD)<br>recommendations. In alignment with the TCFD recommendations, our 2021 Management’s Discussion and Analysis includes disclosures related to our climate risk governance, risk management, strategy, and metrics, in the Strategic Risk section, under<br>Environmental, Social and Governance Risks.<br> <br><br> <br>Our sustainability strategy<br><br><br>Our sustainability strategy supports our mission of making decisions easier and lives better. Building on our history as a trusted insurer, long-term investor and good<br>corporate citizen, our strategy incorporates input from external and internal stakeholders, our learnings from ongoing engagement with external sustainability associations, and our experience over the years in this space. Our sustainability strategy<br>has four pillars:<br> <br>• Our environment: Reduce the impact of our operations on the physical environment and<br>invest in supporting the transition to a lower-carbon economy<br> <br>• Our people: Invest in the health and<br>wellbeing of our employees and continue building a diverse and inclusive workplace<br> <br>• Our customers andshareholders: Manage our ESG risks and opportunities to benefit our customers, shareholders and employees, and operate in an ethical manner<br><br><br>• Our communities: Create measurable social impact by investing in the health and wellbeing of our<br>communities

Commitment to net zero emissions<br> <br>We recognize the link<br>between environmental and financial stewardship, and in 2021, we announced our net zero emissions commitment to support climate goals worldwide. We are actively incorporating climate change considerations into all our decision-making, including how<br>we manage our operations, how we make investment decisions, and how we develop and offer financial products and services:<br><br><br>• Operations: substantially reducing emissions to lessen our footprint<br><br><br>• Investments: actively investing for a sustainable future<br><br><br>• Products and services: developing innovative solutions that contribute to climate change mitigation and<br>resilience.<br> <br><br> <br>You can read more about our commitments at manulife.com/sustainability<br><br><br><br> <br>Beginning in 2021, members of the executive leadership team have performance goals linked to our<br>Climate Action Plan (see page 51).

Oversight of sustainability initiatives

The corporate governance and nominating committee has oversight responsibility for the company’s ESG framework. The committee reviews our sustainability strategy progress and stays informed of ESG trends, risks and opportunities through management reporting.

The committee’s oversight of our ESG frame complements the work of the Executive Sustainability Council (ESC). The ESC, which consists of eight members of our executive leadership team, is responsible for establishing the enterprise’s sustainability ambition, guiding the development of the sustainability strategy and providing recommendations and direction on matters related to sustainability. In addition to the ESC, we have a number of subsidiary-specific committees that oversee and facilitate the implementation of specific sustainability objectives.

2022 Management information circular	127

You can read more about the board’s oversight of sustainability and ESG initiatives on page 32.

Sustainability highlights

The pandemic has shone a light on the disparities and fragilities that exist in our world. It has posed threats to the economy, to public health, and to the livelihoods of the communities in which we live, work, and raise our families. Climate change also presents serious threats, and the events of the past year have heightened the need for companies to sharpen their focus on building a greener, better future for all. Manulife is committed to playing its part.

Environment and climate change

•	We recently announced commitments to help further combat climate change
•	We’re proud that our vast natural resource holdings have enabled us to realize net zero Scope 1 and 2 carbon<br>emissions since 2019, and we are uniquely positioned in our sector to accelerate the use of natural solutions in the fight against climate change
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•	We are committed to further reducing absolute Scope 1 and 2 emissions 35% by 2035
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•	We acknowledge the important role continued progress on financed emissions will have on our enterprise-wide climate<br>impact. We are committed to a net zero investment portfolio by 2050
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•	We have committed to the Science Based Targets initiative (SBTi), to guide and validate our target setting, measurement<br>and progress reporting
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Employees: diversity, equity and inclusion

•	Our strategy is spearheaded by our Chief Diversity Officer, and our Global DEI Council guides, supports, and facilitates<br>its implementation
•	Consistent with our announcement in 2020 that we would invest more than $3.5 million over the next two years to promote<br>DEI in the workplace and our communities, we are focused on increasing the representation of diverse talent at all levels in the organization, creating greater inclusion across the company through enhanced training, and supporting organizations<br>helping Black, Indigenous, and People of Colour (BIPOC) communities
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•	We set two leadership and recruitment goals to support these efforts: increase BIPOC representation in leadership roles by<br>30% by 2025, and annually hire at least 25% BIPOC talent in our graduate program
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•	We exceeded our 2020 BIPOC new grad hiring target of 25%, with 37% in the U.S. and 40% in Canada
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Sustainability disclosures and commitments

More information on our sustainability initiatives can be found in our 2020 Sustainability Report and Public Accountability Statement and our sustainability website (manulife.com/sustainability). These disclosures are aligned with popular reporting frameworks, including the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosure (TCFD).

The report also discusses our membership of several global sustainability networks, including the Principles for Responsible Investment (PRI) and Climate Action 100+.

Liability insurance

We have liability insurance to protect our directors and officers against liabilities they may incur as directors and officers of Manulife and our subsidiaries in circumstances where we cannot indemnify them. Our current policy provides approximately US$500 million in coverage and will be reviewed in September 2022.

128	Manulife Financial Corporation

Other Information

Loans to directors and officers

We may grant loans to our directors, officers and other employees in the regular course of business as long as the loans are in compliance with legal and regulatory requirements and are on market terms, and therefore on the same terms as loans we make to customers with similar creditworthiness.

As at February 28, 2022 the total indebtedness to Manulife or any of our subsidiaries of all officers, directors and employees and former officers, directors and employees of Manulife or our subsidiaries, excluding routine indebtedness under applicable Canadian securities laws, was $720,986.

Name and principal position	Involvement of<br>company or<br>subsidiary	Largest amountoutstanding duringfinancial year endedDecember 31, 20211()	Amountoutstanding as atFebruary 28, 20221()
Paul Lorentz, President and CEO, Global Wealth and Asset Management	Manulife Bank as Mortgagee

All values are in US Dollars.

1

Amount represents a Manulife One Account secured against a secondary residence of the borrower. As at<br>December 31, 2021, the facility had a balance of $802,194 in a sub account with a fixed rate of 2.04% per annum and a 5 year term and a revolving balance of $89,228 at the Manulife One variable base rate of 3.05% per annum. As at<br>February <br>28, 2022, the facility had a balance of $574,137 in the sub account and a revolving balance of $146,849.

Directors’ approval

The board of directors has approved the contents of this circular and authorized us to distribute it to all shareholders of record.

Antonella Deo

Corporate Secretary

March 16, 2022

2022 Management information circular	129

Manulife Our registered office Manulife Financial Corporation 200 Bloor Street East Toronto, Ontario M4W 1E5 Canada IR3833E manulife.com 2

EX-99.4

Exhibit 99.4

MANULIFE FINANCIAL CORPORATION
Proxy Voting Information<br><br><br>We offer you four ways to vote your shares
MAIL	Complete, sign, date and mail this proxy form in<br>the envelope provided.
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INTERNET	Go to the website:<br><br><br><br> <br>www.tsxtrust.com/vote-proxy<br><br><br><br> <br>Follow the instructions on the screen.<br><br><br><br> <br>You will need the Control Number located on this proxy form.
TELEPHONE	Call toll free 1-888-489-7352 in Canada or the United States from any touch-tone telephone and follow the instructions. You will need the Control<br>Number located on this proxy form.
SMARTPHONE<br> <br><br><br><br>Scan QR Code	<br><br><br><br>
Proxy Form – Annual Meeting of CommonShareholders
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Proxy Information
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This proxy confers discretionary authority on<br>the proxy named herein to vote in respect of any amendments or variations to the matters identified in the notice of meeting or any other matter which may properly come before the meeting in such manner as such proxy in his or her judgment may<br>determine.<br> <br><br> <br>A shareholder has the right to appoint a person torepresent him or her at the meeting other than the management representatives designated in this proxy. Such right may be exercised by filling in the name of the other person in the blank space provided; such other person need not be a<br>shareholder.
Notes
•   This proxy must be signed by a shareholder or his or her attorney duly authorized in writing. If you<br>are an individual, please sign exactly as your shares are registered. If the shareholder is a corporation, a duly authorized officer or attorney of the corporation must sign this proxy, and if the corporation has a corporate seal, its corporate seal<br>should be affixed.<br> <br><br><br><br>•   Signatories on behalf of a trust, estate or under a power of attorney or similar authority should<br>specify the capacity in which they sign. Documentation may be required evidencing authority.<br> <br><br><br><br>•   If the shares are held by two or more persons, then all those persons should sign this proxy.<br><br><br><br> <br>•   This proxy should be read in<br>conjunction with the accompanying Management Information Circular and Notice of Annual Meeting of Common Shareholders.<br> <br><br><br><br>•   If not dated, this proxy is deemed to bear the date on which it was mailed on behalf of management<br>of the Company.<br> <br><br> <br>•   For your<br>proxy vote to be counted, this proxy must be completed and delivered in accordance with the Voting Instructions above.
Request for Financial Statements
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If you wish to receive the financialstatements and MD&A for the next year by mail, you must check the appropriate box below.
I wish to receive the Interim Financial Statements and<br>MD&A                                        ☐
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I wish to receive the Annual Financial Statements and<br>MD&A                                        ☐
	You may also make your request online at tsxtrust.com/financialstatements. Our Company code number is 4658A.

Save paper – reduce mail – to receive documents electronically rather than via the mail,

sign up for e-delivery after casting your vote at www.tsxtrust.com/vote-proxy

MANULIFE FINANCIAL CORPORATION<br><br><br>Annual Meeting of Common Shareholders<br> <br>May 12, 2022
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE☒
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This proxy is solicited on behalf of management of Manulife Financial Corporation (the “Company”).

The undersigned shareholder of the Company hereby appoints Roy Gori, President and Chief Executive Officer, or failing him, John M. Cassaday, Chairman of the Board, with full power of substitution, or instead of any of them, , as proxy of the undersigned, to attend, vote and act for and on behalf of the undersigned at the Annual Meeting of Common Shareholders of the Company to be held at 11:00 a.m. Eastern Time on Thursday, May 12, 2022, and at all adjournments thereof, and are specifically directed to vote the common shares represented by this proxy upon the following matters.

Information on the following can be found in theManagement Information Circular and Notice of Annual Meeting of Common Shareholders dated March 16, 2022.

The directorsand management recommend shareholders vote FOR items 1, 2 and 3. Where no choice is specified, the proxyholders designated by management intend to vote FOR items 1, 2 and 3.

1.   Election of Directors
The proposed nominees are:
		FOR	WITHHOLD
01	Nicole S. Arnaboldi	☐	☐
02	Guy L.T. Bainbridge	☐	☐
03	Joseph P. Caron	☐	☐
04	John M. Cassaday	☐	☐
05	Susan F. Dabarno	☐	☐
06	Julie E. Dickson	☐	☐
07	Roy Gori	☐	☐
08	Tsun-yan Hsieh	☐	☐
09	Vanessa Kanu	☐	☐
10	Donald R. Lindsay	☐	☐
11	C. James Prieur	☐	☐
12	Andrea S. Rosen	☐	☐
13	May Tan	☐	☐
14	Leagh E. Turner	☐	☐
2.   Appointment of Auditors
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	FOR	WITHHOLD
Appointment of Ernst & Young LLP as<br>Auditors	☐	☐
3.   Advisory Resolution Accepting Approach to ExecutiveCompensation
	FOR	AGAINST
Advisory resolution accepting approach to<br>executive compensation	☐	☐
Please Sign and Return this Proxy Form
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To be valid, this proxy must be signed and received by the Company’s transfer agent, TSX Trust Company, P.O. Box 721, Agincourt, Ontario, Canada, M1S 0A1, no later than 5:00 p.m. Eastern Time on Tuesday, May 10, 2022 or, if the meeting is adjourned, no later than 5:00 p.m. Eastern Time on the second business day preceding the day to which the meeting is adjourned. This proxy revokes and supersedes all proxies of earlier dates.

Please see the Notes on the reverse side of this form forinstructions on how to complete this proxy and vote your shares.

Dated this             day of                                        ,2022.

Signature of Shareholder/Authorized Officer            <br>	Name of Shareholder (Please PRINT clearly)                 <br>

EX-99.5

Exhibit 99.5

Manulife Financial Corporation 2022 Annual Meeting of Shareholders Notice of availability of Management Information Circular Manulife is focused on protecting the health and well-being of our employees, clients, and communities. We are actively monitoring COVID-19 developments and the directives from public health and government authorities for group gatherings and physical distancing. This care and concern also extends to our shareholders, which is why we have decided to hold our 2022 annual meeting by live webcast instead of in person. More information and updates on how to attend the meeting will be made available on our website, https://www.manulife.com/en/investors/annual-meeting.html. When: May 12, 2022 11:00 a.m. (Eastern time) Where: Our 2022 annual meeting will be held as a live webcast at https://web.lumiagm.com/463955449. Items of business at the meeting • Receiving the consolidated financial statements and auditors’ reports for the year ended December 31, 2021 (see page 12 of the circular) • Electing directors (see page 15 of the circular) • Appointing the auditors (see page 12 of the circular) • Having a say on executive pay (see page 41 of the circular) Notice-and-access Pursuant to an exemption from the proxy solicitation requirement granted by the Office of the Superintendent of Financial Institutions (Canada), and as permitted by the Canadian Securities Administrators, we are using notice-and-access to deliver our management information circular (“circular”) to our registered and non-registered shareholders. Instead of receving a printed copy of the circular, you are receiving this notice which tells you how to access our circular online. The circular contains information about the meeting, as well as information about our corporate governance practices and executive compensation program. We encourage you to read the circular before voting your shares. If you require a printed version, a copy can be requested from our transfer agent by following the instructions on the reverse side. As a global financial services company, we are taking steps to reduce our environmental footprint, support the transition to a low carbon economy, and invest in climate change mitigation and resilience. Notice-and-access greatly reduces the amount of paper sent to shareholders and is aligned with our focus on sustainability. 1

How to access the circular online Our website: https://www.manulife.com/en/investors/ annual-meeting.html Our transfer agent’s website: www.meetingdocuments.com/ TSXT/MFC On SEDAR: www.sedar.com How to request a paper copy of the circular Go to www.meetingdocuments.com/TSXT/MFC or call our transfer agent, TSX Trust Company (“TSX”), at 1-888 433-6443 (toll free in Canada and the United States) or 416-682-3801 or via email at tsxt-fulfilment@tmx.com. In order to receive the circular in advance of the voting deadline and meeting date, TSX must receive your request no later than 5:00 p.m. (Eastern Time) on Thursday, April 28, 2022. The circular will be mailed within three business days of receiving your request. If you submit your request after the meeting, the circular will be mailed within 10 calendar days of receiving your request. If you have questions about notice-and-access please call TSX at 1-800-783-9495 (Canadian residents), 1-800-249-7702 (US residents) or 416-682-3864. How to vote There are two ways to vote: by proxy before the meeting or online during the meeting. Shareholders are encouraged to vote their shares before the meeting by following the instructions on the proxy form or voting information form included with this notice. The deadline for submitting your vote before the meeting is 5:00pm on Tuesday, May 10, 2022. If you wish to attend and vote online at the meeting, there are additional steps you must take. Please refer to page 8 of the circular for more information on how to vote. Go Digital We want to provide you with information the way you want to receive it. You can choose to receive Manulife Financial Corporation’s meeting materials online instead of in the mail. If you received a proxy form, visit www.tsxtrust.com/ MFCdigital to enrol for electronic delivery. If you received a voting instruction form, visit proxyvote.com and use the control number provided on your voting instruction form to enrol for electronic delivery. Manulife, Manulife & Stylized M Design, and Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates, including Manulife Financial Corporation, under license. MP2186603E 03/22 2