Earnings Call Transcript
MANULIFE FINANCIAL CORP (MFC)
Earnings Call Transcript - MFC Q2 2020
Operator, Operator
Good morning and welcome to the Manulife Financial Second Quarter 2020 Financial Results Conference Call. Your host for today will be Ms. Adrienne O’Neill. Please go ahead, Ms. O’Neill.
Adrienne O’Neill, Host
Thank you and good morning. Welcome to Manulife’s earnings conference call to discuss our second quarter 2020 results. We are conducting this call virtually. Our earnings release, financial statements and related MD&A, statistical information package and webcast slides for today’s call are available on the Investor Relations section of our website at manulife.com. We’ll begin today’s presentation with an overview of our second quarter and an update on our strategic priorities by Roy Gori, our President and Chief Executive Officer. Following Roy’s remarks, Phil Witherington, our Chief Financial Officer, will discuss the Company’s financial and operating results. We will end today's presentation with Scott Hartz, our Chief Investment Officer who will discuss the performance of the Company's general account investment portfolio and the direct impact of markets. Following the prepared remarks which are recorded earlier this week to ensure optimal sound quality, we will move to the live question-and-answer portion of the call. We ask each participant to adhere to a limit of two questions. If you have additional questions, please re-queue and we will do our best to respond to all questions. Before we start, please refer to Slide 2 for a caution on forward looking statements and Slide 36 for a note on the use of non-GAAP financial measures in this presentation. Note that certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from what is stated. With that, I'd like to turn the call over to Roy Gori, our President and Chief Executive Officer. Roy?
Roy Gori, President and CEO
Thank you, Adrienne. Good morning everyone and thank you for joining us today. Turning to Slide 5, yesterday we announced our second quarter financial results. The coronavirus pandemic continues to disrupt the economy and capital markets worldwide. And as would be expected, COVID-19 had a significant impact on our performance, including first order impacts such as policyholder experience and sales, and second order impact such as market volatility and ALDA valuations. However, I’m pleased that despite these challenging conditions, we delivered solid results, which reflect the diversity and resilience of our businesses. We delivered net income attributed to shareholders of $727 million and core earnings of $1.6 million. Core ROE was resilient at 12.2% and our capital position remains strong with a LICAT ratio of 155%. Book value per share rose to $25.14, up 10% from the prior year quarter. Finally, our culture of expense discipline and the maturity of our expense efficiency program have played a crucial role in our success over the past few months, as evidenced by our expense efficiency ratio of 48.9% slightly below our 2022 targets of 50%. Turning to Slide 6, Manulife entered the downturn in a position of strength thanks to the work we've done over the past decade to derisk our business and reduce the company's sensitivity to market movements. The release of over $5 billion of capital for portfolio optimization activities since 2018 further strengthened our position. Our strategy, including the five priorities is sound and has not changed in light of recent events. I'm very proud of how the Manulife team executed during the second quarter, despite the very challenging backdrop triggered by the COVID-19 pandemic. While we've already achieved our portfolio optimization targets, we've generated an additional $285 million of capital benefit year-to-date, including $20 million in the second quarter through a variety of initiatives. The initiatives announced to date have resulted in a cumulative capital benefit of $5.4 billion. We have a mature expense efficiency program with processes in place that enable us to respond quickly to headwinds, such as lower sales activity related to COVID-19 and lower interest rates. As a result, core expenses declined by 5% in the second quarter of 2020 versus the prior year quarter. And I'm pleased to announce that we expect to achieve our target of $1 billion of expense efficiency by the end of 2020, two years ahead of schedule. Our third priority is to accelerate growth in our high potential businesses. We aspire to have these businesses generate two-thirds of total company core earnings by 2022. Our highest potential businesses accounted for 64% of total company core earnings in the first half of 2020. In Asia, we continue to expand our agency force, growing our number of agents by 35% year-over-year. In Global Wealth and Asset Management, we completed the formation of our previously announced asset management joint venture with Mahindra Finance in India. Our fourth priority is about our customers and how we're using technology to attract, engage and retain customers by delivering an outstanding experience. We achieved a net promoter score of 10, which is a 9-point improvement from the 2017 baseline score of 1 and a 2-point improvement from 2019. During the second quarter of 2020, we continued to enhance and accelerate our digital capability to adapt to the current environment and better support our customers during the pandemic. I will discuss our digital capabilities and transformation in greater detail on the following slide. Our final priority is building a high-performing team. Our target is to achieve top quartile employee engagement compared to global financial services and insurance peers by 2022. I want to take a moment to discuss the importance of civil rights and equality as they relate to black, indigenous and people of color. The incidents of racism and the subsequent protests across North America have deeply affected us all. I know we're all upset and sad, and those who are more directly impacted are in incredible pain. Regardless of our color, creed, nationality, or beliefs, we must come together and put an end to this injustice. The racist comments, racist actions, the stereotyping, the unjust treatment, and much more impact the daily lives of black indigenous and people of color and stand in the way of equal opportunity. I spent a lot of time listening through conversations with our employee resource group leaders and taking input from many of our employees who have taken the time to write to me and share their feelings and ideas. At Manulife, we're not just listening; we are taking action. To be clear, there is no tolerance for any form of discrimination or racism in our company. We condemn societal actions that threaten anyone's human rights. In line with our values, every colleague, customer, and partner is to be treated with respect at all times. Empathy and care for each other are the core of what it means to be a member of our team and are foundational to achieving diversity and inclusion efforts. We have an obligation to embrace the uniqueness each of us brings to our community and to ensure that we make everyone feel comfortable and safe. In June, we announced that Manulife will invest more than $3.5 million over the next two years to promote diversity, equity, and inclusion in the workplace and the communities we serve. Our strategy is comprehensive and focuses on supporting black, indigenous and people of color employees throughout their careers. We have committed to fostering an environment where all employees know that they belong and can truly thrive. Our program consists of three pillars: first, building representation of black, indigenous and people of color professionals through graduate programs, focused leadership recruitment efforts, and accelerated mid-career development. Second, rolling out programs designed to educate and train all employees that go beyond their existing unconscious bias training and will continue to support fair and equal treatment in the workplace. And third, supporting communities through donations and volunteerism focused on financial education and career mentorship. Through these pillars, we aim to create an inclusive culture that permeates our industry and the communities we serve across the globe, supporting black, indigenous and people of color as we strive for a society that offers true equality. Moving to Slide 7, we embarked on a digital transformation journey several years ago and have invested over $600 million in building digital capabilities in 2018. Clearly, the importance of digital has been further accentuated in recent months during the COVID-19 pandemic. In light of this, I'm sharing a few metrics that illustrate the capabilities that we have in place as a result of our investments in digital over the last few years. Percentage of APE available to be sold by a non-face-to-face method, straight-through processing, digital claim submission, and auto underwriting. These are just a few of the KPIs that we track internally to evaluate how our digital transformation is progressing, and we may share additional metrics with you over time. The vast majority of our products are available to prospective customers through non-face-to-face solutions. In Global Wealth and Asset Management, 90% of AUMA is available to new and existing retail and retirement customers. In Asia and Canada, 97% of our APE is now accessible to customers through non-face-to-face solutions. In the U.S., this figure is 80%. You'll notice that adoption of digital claim submissions increased to 95% this quarter, which reflects both our efforts to accelerate the rollout of additional capabilities and the shift in consumer behavior brought on by the pandemic. Our ambition is to auto underwrite a greater percentage of new business. However, you should expect this metric to grow slowly over time, given that we carefully evaluate the risk-return trade-off of auto underwriting additional products. Turning to Slide 8, in addition to having solid core digital capabilities in place, we've responded to the current environment by rapidly deploying new and existing technologies. In Canada, we expanded our partnership with Akira Health to provide a broader range of online medical services to our insurance customers to better support their health and wellness. In the U.S., we launched JH eApp, a digital new business platform to simplify and accelerate the life insurance purchase experience and also launched a new fully underwritten term life product which enables customers to purchase up to $1 million in life insurance coverage digitally. In our Global Wealth and Asset Management business, we launched a new retirement planner tool in the U.S. to deliver an innovative and engaging way for customers to visualize and plan for their retirement. Overall, the acceleration and expansion of our digital tools have greatly enabled us to engage effectively with customers in the current environment. Moving to Slide 9, in conclusion, I'm pleased with our second quarter results and the continued strength of our globally diverse business. Our high-performing team members remain committed to our customers and have continued to work diligently to transform the Manulife franchise into a digital customer leader. Their agility and resourcefulness have enabled us to adapt to our customers' needs by reorienting the customer experience to better suit the current environment. Against the challenging backdrop, our sales volumes were impressive, and our solid core earnings growth of 5% versus the prior year quarter highlights that resiliency. Our balance sheet and capital levels remain strong, which provides financial flexibility during times of elevated market uncertainty. We remain committed to both our dividends and medium-term financial targets, given that the demographics and economic fundamentals underpinning our strategy have not changed. While there continues to be a significant number of unknowns that will impact both the length of the downturn and the nature of the recovery, I'm confident that Manulife is well positioned to navigate this challenging new environment. Thank you. And I'll hand over to Phil Witherington, who will review the highlights of our financial results. Phil?
Phil Witherington, Chief Financial Officer
Thank you, Roy, and good morning, everyone. Turning to Slide 11 and our financial performance for the second quarter of 2020. As Roy mentioned, we delivered solid financial and operating results in a challenging environment. Core earnings were up 5% from the prior year quarter and core ROE was a healthy 12.2%. APE sales and NBV declined by 15% and 22%, respectively. The result that we believe is encouraging in light of the unprecedented COVID-19 containment measures that were in place to varying degrees in the four markets in which we operate. Our capital position demonstrated resilience once again in the quarter. Our LICAT ratio of 155% and leverage ratio of 26% provide us with financial flexibility that is valuable in the prevailing environment of elevated market uncertainty. Of note, we will complete our annual review of actuarial methods and assumptions during the third quarter of 2020. While this review is not yet complete, preliminary indication suggests that there will be a net post-tax charge of approximately $200 million in the third quarter of 2020. This year, the review will include among other items, lapse assumptions for Canada and Japan life insurance, certain mortality assumptions in all segments, a complete review of our Canadian variable annuity assumptions, and we expect to refine certain methodologies. I will highlight the key drivers of our second quarter performance with reference to the next few slides. Turning to Slide 12, core earnings in the second quarter of 2020 were $1.6 billion, up 5% from the prior year quarter on a constant exchange rate basis. The increase in core earnings was driven by favorable policyholder experience, the favorable impact of markets on seed money investments in segregated funds and mutual funds, and the impact of in-force business growth in Asia. These items were partially offset by the absence of core investment gains in the quarter compared with gains in the prior year quarter, lower new business volumes, primarily due to lower sales as a result of COVID-19, and lower investment income in Corporate and Other. We delivered net income attributed to shareholders of $727 million in the second quarter. Of note, we recognized losses of $916 million from investment-related experience driven by lower than expected returns on older, including fair value changes on private equity investments, real estate and oil and gas. The charge of $495 million from the direct impact of interest rates was driven by the narrowing of corporate spreads and the steepening of the U.S yield curve, partially offset by gains of $1.5 billion from the sale of AFS bonds. The gain of $568 million from the direct impact of equity markets reflects the rebound of global equity markets in the second quarter of 2020. When excluding the impact of gains on AFS bonds, the direct impact of interest rates and equity markets was broadly in line with our published sensitivities. Slide 13 shows our source of earnings analysis. Expected profit on in-force increased by 4% on a constant exchange rate basis, primarily driven by growth in Asia. New business gains were lower than the prior year quarter, reflecting a decline in sales volumes driven by the adverse impact of COVID-19. Overall, policyholder experience in the second quarter was favorable reflecting claim terminations in U.S long-term care due to the impact of COVID-19 and lower claims as a result of lower utilization of dental and health benefits and long-term disability in Canada and health benefits in Asia. These gains were partially offset by higher claims and lapse losses in our U.S life business. Of note, despite COVID-19 claims, U.S life policyholder experience has improved compared with the prior year quarter. Core earnings on surplus were in line with the prior year quarter as the favorable impact of markets on seed money investments in segregated funds and mutual funds was offset by lower investment income. Turning to Slide 14, core earnings decreased by 4% in our Global Wealth and Asset Management business driven by lower net fee revenue from changes in product mix, lower fee spread in the U.S retirement business and lower tax benefits partially offset by lower expenses from ongoing efficiency initiatives, which mitigate the adverse impacts from increased market volatility. Core earnings in Asia increased by 1% as in-force business growth across Asia and favorable policyholder experience as a result of lower medical claims were mostly offset by the impact of the lower new business volumes driven by the adverse impact of COVID-19. In the U.S., core earnings increased by 32%, primarily driven by favorable policyholder experience and a focus on expense discipline in the current economic environment. Core earnings in our Canadian business increased by 10%, primarily reflecting more favorable policyholder experience in our insurance businesses in part due to COVID-19, which was partially offset by the non-recurrence of gains from the second phase of our segregated fund transfer program in the prior year quarter, and the unfavorable impact of lower individual insurance sales. Slide 15 shows our new business value generation and APE sales. In the second quarter of 2020, we delivered new business value of $384 million, down 22% from the prior year quarter. In Asia, new business value decreased by 21% from the prior year quarter, primarily due to lower APE sales across all markets and the decline in interest rates in Hong Kong, partially offset by a more favorable business mix in Asia Other. In Canada, new business value decreased by 29% from the prior year quarter, primarily due to lower insurance sales volumes. And in the U.S., new business value decreased by 22% from the prior year quarter, primarily due to the impact of lower interest rates and lower sales due to the impact of COVID-19. In the second quarter of 2020, we delivered APE sales of $1.2 billion, down 15% from the prior year quarter. The declining Asia's APE sales of 17% from the prior year quarter was mainly driven by the adverse impact of COVID-19. Of note, sales improved in the latter part of the quarter, as certain markets in Asia began to reopen. As a result, APE sales in June 2020 increased by 4% compared with the same period of 2019. In Canada, APE sales declined by 18% from the prior year quarter driven by variability in the large case group insurance market. In the U.S., APE sales declined by a modest 3% from the prior year quarter, reflecting the net impact of COVID-19. Turning to Slide 16, our Global Wealth and Asset Management business generated net inflows of $5.1 billion in the second quarter, compared with neutral net flows in the prior year quarter, primarily affecting the funding of a $6.9 billion mandate from a new institutional client. In Canada, net inflows of $8.4 billion improved substantially in comparison to net flows of $0.1 billion in the second quarter of 2019. The improvement was driven by the institutional mandate and the non-recurrence of a large case retirement plan redemption in the second quarter of 2019. In Asia, net flows were neutral and lower than the prior year quarter due to higher redemptions of retail funds in Mainland China and higher redemptions in institutional asset management. In the U.S., net outflows were $3.3 billion in the second quarter of 2020, compared with net outflows of $1.8 billion in the second quarter of 2019. This decrease was driven by the redemption of a large case retirement plan and in retail from the portfolio rebalancing by several large advisors, partially offset by lower institutional redemptions. Our core EBITDA margin was 28%, up modestly from the prior year quarter. Our average AUMA remained stable compared with the prior year quarter as year-to-date net inflows of $8.3 billion were offset by the unfavorable impact of markets. Turning to Slide 17, we entered this downturn with a strong balance sheet and capital position, and this continues to be the case. Our LICAT ratio of 155% in the second quarter of 2020 represents $31 billion of capital above the supervisory target. This is in line with the prior quarter, as the adverse impact from the narrowing of corporate spreads was mainly offset by net capital issuances and favorable equity markets. Our leverage ratio increased to 26%, slightly above our medium term target of 25% as we are proactively pre-financing debt, which is approaching maturity. The stronger Canadian dollar also contributed to the increase. Turning to Slide 18, we continued to make meaningful progress towards our target of $1 billion of pre-tax expense efficiencies by 2022 and delivered $200 million of incremental savings in the first half of 2020 and $900 million program to date. The previously announced expense initiatives have already delivered significant benefits. We continued our disciplined approach towards vendor management, specifically focusing on rates renegotiations, cloud computing, and demand management while seeking to perform select services in-house where possible. We enhanced customer experience by digitizing sales platforms and internal processes, including underwriting, claims processing, and replacing paper statements with e-statements. Many of our digitization efforts have already resulted in reduced core volumes across our global business, therefore enabling efficiency. We've maintained strong governance as it relates to new spend and continue to see benefits from the people management actions we had taken in 2019. We expect that digital acceleration, which we undertook as a result of COVID-19 will further contribute to our expense optimization. We remain committed to consistently achieving our target of a 50% expense efficiency ratio by 2022 and as Roy mentioned, our expense efficiency program continues to progress well, and we are pleased to report we expect to achieve our target of $1 billion of expense efficiencies by the end of 2020, two years ahead of schedule. Turning to Slide 19 and core expenses. Our expense efficiency program is mature, and we have built a robust expense management infrastructure and a culture of expense efficiency in recent years. We reduced core general expenses by 5% on a constant exchange rate basis, compared with the prior year quarter and delivered a 3.6 percentage point improvement in the expense efficiency ratio. It's worth noting that we accomplished this while continuing to invest in our digital capabilities. Slide 20 outlines our medium-term financial operating targets and our recent performance. Core EPS growth and core ROE were below our targets, reflecting the challenging macroeconomic environment, combined with an unprecedented level of disruption as a result of COVID-19. Nonetheless, our performance during the first half of 2020 demonstrates Manulife's resilience. It is reasonable to expect COVID-19 related headwinds to continue for the remainder of 2020. However, despite this, we believe that the core earnings we generated in the first half of 2020 are a good overall indication of our near-term run rate. Looking to 2021 and beyond, we remain committed to our 10% to 12% core EPS growth rate and believe that it is well supported by both geographic and line of business diversification. In addition, we anticipate continued contributions in our well-established expense efficiency program and robust digital capabilities. I would now like to turn the call over to Scott Hartz, who will discuss the performance of our general account investment portfolio and the direct impacts of markets.
Scott Hartz, Chief Investment Officer
Thank you, Phil, and good morning, everyone. I'm pleased to provide you with a more in-depth update of our investment-related experience and the direct impact of equity markets and interest rates on our results. Slide 22 shows a recent history of our investment-related experience, including losses of $916 million this quarter. Our prepared remarks on last quarter's analyst call summarized how our investment-related experience is derived. Our credit experience in the second quarter was a net charge of $20 million, which we believe is a good result in this environment and reflective of the high-quality well-underwritten nature of our $275 billion fixed income portfolio. As a reminder, in recessionary periods, we do expect credit results to be worse than our through-the-cycle reserve assumptions, and thus, it's not unreasonable to expect additional losses in the future as the impacts of the recessionary environment play out. Fixed income reinvestment activities have historically generated steady gains. However, we did not benefit from this item in the second quarter of 2020, given corporate spreads tightened considerably and opportunities in the private placement and commercial mortgage sectors were limited relative to the flow of premiums that needed to be reinvested. Volumes in these sectors are beginning to recover, and we expect more opportunity here, particularly after the usual summer slowdown. Hence, we would expect fixed income reinvestment to revert to a more normal trend starting this fall, but we would expect second half of the year's gains to the extent of the first quarter of 2020, as spreads have tightened considerably, but we still believe there will be attractive investment opportunities. Lower than expected returns were a significant drag on our experience this quarter with a charge of $777 million, driven by lower than expected returns, including fair value charges. Our overall ALDA portfolio is roughly $40 billion, and approximately two-thirds of this experience flows through to earnings, with the rest flowing to policyholders. The total return on our portfolio was down approximately 2% for the quarter, which when compared to the slightly greater than 2% assumed return embedded in our reserves, and then tax adjusted results in the $777 million charge. The factors have spanned several asset classes with approximately one-third of the charges on private equity investments, one-third on real estate and the remainder in oil and gas and other. Most of our private equity investments are made through investments in private equity funds whose valuations typically lag one quarter due to the timing of receipt of information from fund sponsors as is customary for this industry. Roughly three quarters of our private equity portfolio experienced this one-quarter lag. So we are broadly seeing March valuations being reflected this quarter. The total return on this portfolio for the quarter was down approximately 5% after being down about 1% in Q1. This compares favorably to the Russell 2000 small-cap index, which is the closest public proxy for our portfolio, which was down roughly 13% year-to-date as of June 30. While we will likely see a modest bounce back in our Q3 numbers, reflecting the Q2 partial recovery of public equities, we don't believe that will be significant. Charges on real estate were driven by appraisal losses. This portfolio is appraised each quarter by external appraisers without a lag. The total return of the portfolio is approximately negative 2% in Q2, reflecting roughly a 1% income return and a 3% appraisal loss. This reversed a 2% positive total return in Q1, so the total return year-to-date is roughly flat. The mark-to-market loss in Q2 came largely from our office portfolio, which represents roughly 70% of the total portfolio. Multifamily and industrial held up well. Retail declined in value the most on a percentage basis, but represents only 3% of the portfolio. The lower values in Q2 reflect updated appraisal assumptions, including expectations that future rent may be lower or grow at a slower rate, and likely reflects somewhat higher assuming vacancy rates. In some cases, they also reflect higher cap rates. Our office valuations are supported by long-term leases, which average 5.5 years and which somewhat mute the assumption changes. It is worth noting that there has not been a lot of trade activity in the market, making it more challenging for external appraisers to assign valuations in the current environment. What is difficult to assess for valuations going from here, I am concerned that the longer companies take to get back to the office, the more pressure we might see on office valuations. Finally, charges on oil and gas relate to our indirect U.S private equity holdings. This portfolio, much like the private equity portfolio, is largely valued in a one-quarter lag. I noted last quarter that given the significant drop in oil prices, we expected large drops in valuations and put through a one-time estimate based on experience from the last oil price collapse. We are now recognizing true-ups to these assumptions as we've received updated information from our fund partners and sponsors. While more recently, we've seen a significant increase in spot oil prices, the forward oil prices did not materially change in Q2. So we do not expect a significant recovery in valuations based on commodity price movements since the end of Q1. We do, however, expect our oil and gas portfolio to recover some of the losses over the medium term. In the short-term, market conditions will continue to be volatile based on supply and demand fluctuations and a short-term further drop in prices cannot be ruled out. Looking forward, our near-term investment-related experience is dependent upon the path of the economy. We expect all returns for the remainder of the year to be more aligned with our longer-term assumptions. Of course, we are in a very volatile, uncertain time, and hence should expect more variable results until we are through the pandemic. Stepping back, we note that the ALDA portfolio is not a fixed income portfolio. We expect much higher returns on it than in fixed income and hence also more volatility. While we construct a portfolio to be well-diversified and largely focused on lower-risk assets, performance will be variable quarter-to-quarter due to its mark-to-market nature. In times of market stress, such as these, we would expect the portfolio to underperform our long-term actuarial assumptions. We do review the expected investment return assumptions at our alternative long-duration assets on an annual basis as part of the annual actuarial review. While the review is not yet complete, preliminary work indicates that a reduction in the expected investment returns for ALDA is not warranted, given that these assets are expected to deliver or assumed through the cycle returns over the long-term. In fact, higher risk premiums built into the current valuations provide a tailwind to returns in the medium term. So at this point, we are not expecting changes to our assumptions as we are comfortable that the assumed returns reflect our long-term expectations. Now please turn to Slide 23. As you might recall, our dynamic program hedges variable annuity risk on a best estimate economic basis. Our macro program hedges the remaining equity market risks not covered by the dynamic program. Our interest rate hedging program uses a combination of long bonds in the cash market, forward starting interest rate swaps, treasury forwards, and treasury futures. We also use interest rate forms to hedge minimum interest rate guarantees in our liabilities. Our sensitivities to interest rates and equity market movements have been significantly reduced since the 2008 global financial crisis. Starting from 2013, when we achieved our hedging targets, you can see the impact from interest rates and equity markets have largely offset each other, and over time have had an immaterial impact on net income. Excluding the impact of gains on available for sale (AFS) bonds, the direct impact of interest rates in equity markets was broadly aligned with our published sensitivities this quarter. We recognized the gain of $568 million from the direct impact of equity markets, which reflects the rebound of global equity markets in the second quarter of 2020. Our variable annuity hedging program was 95% effective in hedging liability changes this quarter. We also recognized the charge of $495 million from the direct impact of interest rates, driven by the narrowing of corporate spreads, the steepening of the U.S yield curve, along with losses from increases in long-term swap spreads in Canada and a non-parallel movement swap spread curve in the U.S, partially offset by a gain of $1.5 billion from the sale of AFS bonds. Corporate spreads may quite significant this quarter, which partially reversed the sizable gain recognized in the first quarter of 2020. Our AFS bond portfolio consists of government bonds that we hold in surplus and is an important component of our interest rate risk management strategy. It serves as a natural offset to other interest-related items and is particularly important when large swings occur, such as the narrowing of corporate spreads this quarter. Our AFS bond portfolio increased in value significantly this year, and our realizations represent a little over half the total gain. And so, our AFS bond portfolio continues to have a significant amount of unrealized gains, and we will continue to use our discretion as to when those gains are realized. So while we continue to be at a period of extreme market volatility, our hedging programs have been effective at mitigating net income variability, and we remain within our equity and interest rate risk limits. This concludes our prepared remarks. Operator, we will now open the call to questions.
Operator, Operator
And the first question is from Humphrey Lee from Dowling & Partners. Please go ahead.
Humphrey Lee, Analyst
Good morning, and thank you for taking the questions. My first question is related to Asia. Clearly, the low new business gains were offset by favorable claims experience. I was wondering if you can provide some additional color in terms of how the shelter-in-place measures have affected the sales activities and claims experience in Asia throughout the quarter and into July, especially given some of the countries seeing a resurgence.
Anil Wadhwani, CEO, Asia
Thanks, Humphrey. This is Anil. So Asia had a sales drop of 17% year-on-year and 21% on new business value, largely impacted by the COVID situation that resulted in a significant impact on the mobility of our customers, as well as our distribution partners. I do want to emphasize that our core earnings, however, grew, which points to the resilience and diversified nature of our business in Asia. From an outlook perspective, it's a bit more challenging for us to predict, and I'll just explain why that's the case. On one hand, as we progressed through quarter two, we did witness some gradual relaxation of the measures, and Phil alluded to the fact that we saw a resurgence in the month of June. Our June sales showed year-on-year growth. But at the same time, we are also seeing the reemergence of the virus in some of the markets in Asia, specifically in Hong Kong, which is currently witnessing the third wave of the outbreak. That has resulted in additional social distancing measures, which impacts sales activity as well as the mobility of our clients and distribution partners, making predictions difficult for quarter three and quarter four of this year. We are focused on staying nimble to the situation on the ground. We continue to invest in technology and processes that make non-face-to-face processes simpler. You would have noted that we continue the expansion of our distribution, mainly our agency channel, which is now up 35% as well as broad interest in our health and protection products across many of our geographies in Asia. To your second question on policyholder experience, I can comment first and then hand it over to Steve if he has further comments. It's largely due to the positive claims experience that we've witnessed, as our customers defer non-essential visits to clinics and hospitals. I should underscore, however, that as the situation normalizes, the trend on claims experience or the positive claims experience is likely to normalize as well. Steve, do you have any further comments to add on policyholder experience?
Steve Finch, Chief Financial Officer
Thanks, Anil. Nothing further to add to that. But if I could just jump in, Humphrey, I think Anil's answer was spot on. The quarter two results, from a sales perspective, were really solid in light of an incredibly challenging environment as relates to the COVID restrictions that are in place. One of the things that has really come to the fore for us is the resiliency and the diversity of our business that Anil highlighted, but also the digitization efforts we've put in place over the last couple of years, which have really helped in the current environment. So it continues to be, and will be, an uncertain environment as we see second waves, maybe even third waves and flare-ups. But we feel that we're in a strong position to navigate that, and the diversity of our business and the fact that we operate across different markets, through different cycles in this crisis will certainly be an asset for us as we navigate that environment.
Humphrey Lee, Analyst
That makes sense. My second question is related to the U.S experience. Clearly, you had very favorable LTC related experience. Can you talk about what you saw in the quarter and if there was any difference between the experience between the active life block versus the disabled life block?
Steve Finch, Chief Financial Officer
Thanks, Humphrey. It's Steve Finch here. I'll take that question. I'll start bigger picture and then get into the details. In the U.S., we saw on long-term care, gains of just under $100 million pre-tax driven primarily by higher claim deaths. As we've seen in the news, people receiving care in facilities were disproportionately impacted by the virus. However, if we look at a four-quarter trend, claims and deaths were up almost 25% over normal run rates. Additionally, we noticed lower incidents, about 20% lower than normal. That's less people initiating their claims. We also saw an increase in insurance leaving care, either suspending home health visits or actually leaving facilities. Both of these trends are delays in claims, and we did not book a gain. So we increased our IBNR by approximately $100 million to recognize that fact. The rest of what we're seeing in terms of direct mortality impact of COVID is primarily driven by our U.S life business, where we observed about $36 million of COVID claims. But the vast majority was in our U.S life business. And then, to round out the picture in Canada, in our group business, we noticed varying trends, with less people going to receive routine care being a big driver of the gains in Canada. Additionally, in our long-term disability business, we saw lower incidence and higher recoveries. So I'll pause there.
Humphrey Lee, Analyst
So just to clarify, in the long-term care piece in the U.S, was less than a $100 million positive, but that is after booking a $100 million IBNR reserve, is that correct?
Steve Finch, Chief Financial Officer
That's correct.
Humphrey Lee, Analyst
And then, is there any difference between the active life versus the disabled life block?
Steve Finch, Chief Financial Officer
Yes. The higher claims and deaths were in the disabled block, those on claim that was the 24% over normal. On the active life block, there was a small gain this quarter, probably 5% to 10% higher than normal deaths, but the biggest driver was on those claims.
Humphrey Lee, Analyst
Got it. Thank you for the details.
Operator, Operator
Thank you. The next question is from Steve Theriault from Eight Capital. Please go ahead.
Steve Theriault, Analyst
Thanks. If I could start with a question on Japan. The new business value was down over 50% year-on-year, despite APE sales being down 17%. Can you provide some context on the mix? I'm also curious about the differences for Japan regarding APE available to be sold through non-face-to-face methods compared to your other regions and the 97% mentioned on that slide.
Anil Wadhwani, CEO, Asia
Yes. Thanks for the question. Japan sales were largely impacted by the introduction of the state of emergency in response to the outbreak, which severely constrained our distribution activities. Our sales in the second quarter were $113 million, which were down 18% year-on-year, illustrating the level of disruption experienced. From a product mix perspective, in Q2 of 2019, we had very little COLI sales, largely due to the temporary cessation of COLI sales from new tax laws. We did have COLI sales in Q2 of 2020, contributing to 45% of the product mix. Therefore, the fraction on COLI affected margins in terms of new business value and new business gain. Regarding non-face-to-face methods, in Japan we do have products that offer non-face-to-face capabilities, but they are slightly more elaborate. For example, in the case of COLI, a face-to-face interaction is typically required. Thus, it becomes a bit more challenging to offer all products non-face-to-face, but we do have the capabilities for non-face-to-face transactions in almost all markets, including Japan.
Steve Theriault, Analyst
And is the 4% lift in sales overall for Asia in June indicative for Japan or is Japan a little bit more soft?
Anil Wadhwani, CEO, Asia
Japan also saw a bit of resurgence in June. The 4% is more attributed to overall Asia, but Japan was able to recover some of the significant impacts, specifically in April and May, where they faced a tighter state of emergency. Even today, many of our employees are working from home, and mobility is still not back to normal levels, even with some of the relaxation measures in Japan.
Steve Theriault, Analyst
Thank you for that information. I have a follow-up question regarding the URR. We’ve heard from a few of our competitors this quarter. Can you provide any insights on what you're observing or anticipating regarding a potential URR charge, including the timeline? Also, I’m curious if you are considering making a move earlier than usual if we are heading toward a prescribed change.
Steve Finch, Chief Financial Officer
Sure. It's Steve. I'll take that one. The Actuarial Standards Board in Canada is looking at the URR given where interest rates have gone and the delay of the implementation of IFRS 17 by a year. Previously they had said they did not anticipate updating prior to IFRS 17, but those two factors have caused them to re-evaluate it. We expect them to go through their work this year and give guidance next year. They have to look at the URR as well as stochastic calibration guidance that they provide alongside. So we think they've got a fair bit of work to do, and we don't anticipate that it'll be finished this year. You can count on us updating in 2021 when the guidance comes out. For context, the methodology used by them for updating URR has generally been modest in nature. Our year-end disclosure gives a sensitivity for total company a 10 basis points reduction, estimated at a $350 million charge.
Steve Theriault, Analyst
And I guess just the last thing. How linear is that charge progress, if it is a bit bigger than the 10 basis points?
Steve Finch, Chief Financial Officer
I think the historical methodology suggests that guidance is pretty good in terms of the sensitivity of a 10 versus 15 basis points. Just for context, we did take a $500 million charge when they reduced by 15 basis points.
Operator, Operator
Thank you. The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead.
Gabriel Dechaine, Analyst
Good morning. I have a question for Scott or Phil or Steve on the ALDA. And I'd like to refer you to Slide 22. I recognize this year has been a tough one for ALDA valuation. But if I go back to that slide, it looks like pretty much every year, there's been some investment losses there. Just wondering what needs to happen for you to review some of the return assumptions in that portfolio because the potential implications are substantial.
Steve Finch, Chief Financial Officer
It's Steve; I can start. We do review the long-term expectations of ALDA, which back long-term liabilities. So we don't look too much at short-term volatility. There's a dialogue between Scott and his team and the actuarial team. The ALDA assumptions also undergo an independent third-party review process of all assumptions. If we were to look back over the last four years on average, we've achieved our returns, and returning to the last 10 years has been roughly 9%, which aligns with what we're assuming.
Scott Hartz, Chief Investment Officer
When we set these assumptions, we look backward at historical returns and also forward to see what we're expecting to earn on the investments we're currently making. If for whatever reason those returns were negative over the short term, we would definitely conduct a review, but historically we've achieved returns aligned with our expectations.
Gabriel Dechaine, Analyst
Right. And then I guess it's not a homogeneous portfolio. I'm wondering if oil and gas has had some issues. But CRE, you mentioned in your comments that if this work-from-home situation persists, you're more concerned, I forget exactly the quote here, but how many quarters or what type of time frame would we need to see experience losses or investment experience losses before we start to think about an assumption review.
Scott Hartz, Chief Investment Officer
We will go through these periods, and losses will be recognized during such times. If commercial real estate values decline significantly for a sustained period, then we will the trigger a review. If we see declines, it may prompt reassessing our long-term returns. But, again, it depends on the market condition and will take a while for valuations to normalize. In the longer term, we do expect those returns to continue to be achievable.
Steve Finch, Chief Financial Officer
Just as a general comment, I think we're in the midst of a pandemic, and no one really knows how it'll evolve, and changing very long-term assumptions at this stage would be premature.
Gabriel Dechaine, Analyst
Okay. Thanks for that.
Operator, Operator
Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead.
Doug Young, Analyst
Hi. Good morning. Maybe just back to you, Steve. The $200 million charge related to the review of actuarial assumptions, and I think that the release lists out a number of items that you're viewing. Is there one particular area? Obviously, you've talked about all that and that's not being part of this process. Is there one specific area that you're reviewing that could have a disproportionate impact on that review?
Steve Finch, Chief Financial Officer
Thanks, Doug. We do a comprehensive review every year, so there are lots of assumptions that we examine. One to call out at this stage is the Universal Life business in Canada, where we're seeing lower lapses since the last study. In this low interest rate environment, people are really valuing the benefits and we're experiencing this in larger policies. The ultimate lapse rates on this business, with the current assumptions under 0.5% annually and we expect to reduce that assumption further, which could have a larger impact.
Doug Young, Analyst
Okay. And then just second, on the LICAT ratio, I guess we had expected it to be a little weaker than it was. It held up rather well. Just wondering if you can do a waterfall kind of what was the items and we know corporate spreads coming in put pressure on it. Like what were the different items that caused it essentially to be flat sequentially?
Phil Witherington, Chief Financial Officer
Doug, this is Phil. The narrowing of corporate spreads was a headwind to the LICAT ratio, but that was largely offset by the impact of new capital issuances during the quarter. We mentioned last call that we would cautiously pre-finance maturing issuances, and that's what we did during Q2. This had a short-term positive impact on the LICAT ratio. There was also a small favorable impact from foreign exchange movements. Beyond those two items, those were the main drivers.
Doug Young, Analyst
Okay. And just a follow-up. I mean, Phil or Roy, I mean, you have 155% LICAT. I can do the math on what the excess capital would be at 120, 130, 140. In your mind, how much excess capital do you have currently, and how long are you willing to sit on this? I mean, it's nice to have in times of uncertainty, but it looks like a substantial amount of excess capital. Just wonder if you can quantify it, and how you think about it.
Roy Gori, President and CEO
Yes. Thanks, Doug. We’ve worked to strengthen the balance sheet and capital position as portfolio optimization became a focus to free up capital. While we achieved our $5 billion target of freed-up capital three years ahead of time, it has helped us reach the current LICAT position of 155%. In uncertain times, balance sheet strength and capital are very important. We've disclosed the strength of our capital position and its excess over supervisory minimums, and that is included in the deck. While we haven't provided further internal targets, we're in a very strong position for both the current climate and in the future for capital deployment. Organic growth is our primary objective and while we have additional flexibility and growth opportunities with a strong capital position, we consider that carefully.
Phil Witherington, Chief Financial Officer
Yes, just a couple of supplements. We will manage the balance sheet conservatively, and that's what we're doing. It's worth pointing out that we have built the capital far in excess for a number of quarters for the reasons that Roy highlighted. However, we also have been deploying capital along that way. We announced a dividend increase of 12%, and we expect to maintain our dividend policy with subsequent increases in line with our medium-term financial operating guidance. We have flexibility for both organic investments as seen in our partnership with Danamon Bank in Indonesia while also considering potential inorganic opportunities.
Doug Young, Analyst
Maybe I try it different. Is there a minimum LICAT that you wouldn't go below? Like, would you go below 130? Do you care to throw a number in there?
Phil Witherington, Chief Financial Officer
I would remind you that when we transitioned from MCCSR to LICAT, the point of transition was 129%, that was a strong position. In fact, a 200% MCCSR ratio was equivalent to a LICAT of 115%. While we're in a strong position, there isn't a minimum LICAT target to spare.
Operator, Operator
Thank you. The next question is from David Motemaden from Evercore ISI. Please go ahead.
David Motemaden, Analyst
Good morning. Just a question for Phil. Just on specifically last quarter you talked about the $2.5 billion of injections to the local subsidiaries. I'm wondering if there were any additional injections during the second quarter of this year? And if so, how those were funded?
Phil Witherington, Chief Financial Officer
Great. David, thank you for the question and good morning. You recall correctly that I mentioned last quarter the $2.5 billion injected to our subsidiaries. Since that time, we have not down-streamed any further capital from MLI to our subs, reflecting the stability from a macroeconomic perspective over the time that has passed since then, as well as some other measures mitigating the sensitivity of our subsidiaries to macroeconomic factors. So the $2.5 billion injection stabilized the situation, and I do not anticipate any further top-ups.
David Motemaden, Analyst
Okay, great. Just a quick follow-up before I move to my next question. I'm not sure how significant the LICAT ratio is at this moment, considering the importance of the local solvency ratios. Regarding the debt that was issued at the HoldCo and injected into MLI, that's what raised the LICAT to 155. Once you start repaying that debt in Q3, should we expect the LICAT to decrease, not factoring in any capital generation or other changes?
Phil Witherington, Chief Financial Officer
Yes, David, that's a good point. It's fair to say that the LICAT ratio is flattered at the moment by the pre-financing activity in Q2. It is deliberate, we are being conservative and pre-financing over a larger horizon in order to mitigate risk from market closings. But the deployment of the capital we've raised is clear in the medium term. We have redeemed $750 million of debt and have further maturities in the coming quarters. So we have much flexibility here. However, we want to balance our capital strategy, as we're proactively monitoring the debt markets and coupon rates are currently low.
David Motemaden, Analyst
Yes, thanks, Phil. I totally agree with that as well. And then just my second question for Roy and Phil, just on the 10% to 12% EPS growth target that you reiterated in '21 and beyond. Hoping you can just give us a bit more sense for the growth rates, the earnings growth rates that you're thinking about by geography that give you confidence that you can hit that return target.
Roy Gori, President and CEO
Yes. Thanks, David. I’m not going to get into forecasting by segment or geography. But I would say we do have confidence in our medium-term targets, and in particular, the 10% to 12% growth ambition in core earnings. Our confidence stems from the strength of our positioning entering this crisis. Again, I cited our balance sheet and capital position earlier, which allows us to be offensive during these periods. The three macro trends critical to our industry and us include the emergence of the middle class in Asia, aging demographics leading to a retirement gap, and greater digitization. These three trends were significant prior to COVID and more so today. We believe we are positioned strongly for growth.
David Motemaden, Analyst
Okay, great. And you mentioned expenses being a pretty big component, and I guess you're almost there a couple of years earlier than expected on the billion dollars of net expense saves. So is there anything else that you're considering, in terms of maybe upside to those expense saves that can help you get to the 10% to 12% goal?
Roy Gori, President and CEO
Yes. Great question. The focus on expenses has paid dividends for us and is paying dividends and is a great offset to challenges. The achievement of our billion-dollar goal two years early shows our commitment to a culture of efficiency. It's easy to cut costs, but achieving sustainability and removing costs without negative top-line impacts is crucial. We must leverage our global scale, renegotiate with vendors and digitize processes to maintain these costs, and we will keep looking for further opportunities to enhance efficiency beyond 2020.
Phil Witherington, Chief Financial Officer
Yes. And to add, reaching the $1 billion expense efficiency target two years ahead of schedule is great, but achieving a 50% cost efficiency ratio is crucial going forward. We have seen expense growth rates decline from historic levels of 7% to 9% down to 3% to 5%, and this quarter we achieved a reduction of 5%, reflecting savings from our efficiency measures.
Paul Holden, Analyst
Thanks. Good morning. I want to ask a question on expected profit growth for both Canada and the U.S. We've seen capital optimization measures slow, you’ve run ahead of pace on your expense savings, and we're also seeing pretty good sales growth in recent quarters out of those two businesses. So just wondering where we can expect to see expected profit growth start to accelerate?
Steve Finch, Chief Financial Officer
Sure. It's Steve here. As you've noted, there are certain drag factors impacting North American expected profit growth recently. Over the long-term, we expect approximately 6% for total company expected profit growth, with higher growth in Asia and lower growth in North America due to those legacy actions.
Paul Holden, Analyst
Okay. And then just a follow-up on the efficiency savings. Where specifically should we look for those to show up in terms of the income statement?
Steve Finch, Chief Financial Officer
Sure. The efficiency ratio is a good indicator because it tracks our progress overall to our medium-term objective. It shows up in the experience gains line within the source of earnings. We use that efficiency ratio to better quantify our actual savings.
Operator, Operator
Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead.
Mario Mendonca, Analyst
Good morning. Could you elaborate on your ALDA return assumptions? I noticed the average return is 9.3% before the PfAD and 6.1% afterward. Specifically, on a pre-PfAD basis, which asset classes do you think could generate returns exceeding 11%, and how do those compare to the ones around the 5% or 6% level? It would be helpful to understand which asset classes you believe can still deliver those returns in the current environment.
Phil Witherington, Chief Financial Officer
Sure. It's a good question because this portfolio is not uniform. Historically, some assets have yielded higher returns while others have yielded lower returns. The assets with lower returns are around 5%, possibly slightly below that. On the other hand, private equity could provide higher returns, averaging over 11%. Oil and gas could also be a high-return area, but it currently constitutes a very small portion of the portfolio. Infrastructure falls in the middle range, so having direct access to these asset classes is crucial.
Mario Mendonca, Analyst
Okay. I want to follow up on that. If you were to summarize all of those asset classes and you needed to say a billion dollars would be invested, what would be the next best return you could expect from outside of those? If 9.3% is the average across all, what would the next best return be? Would it be around 7%? I'm trying to determine what the next best guess would be for the highest returning assets.
Phil Witherington, Chief Financial Officer
Yes, so for I think the next best would be likely in the range of 6% to 8% whereas fixed income would be around 3% or 4%, I would say.
Mario Mendonca, Analyst
I have one final question. I know IFRS 17 is still some time away, but I am starting to consider it. What changes will occur under IFRS 17? Will the excess returns included in the reserve essentially reduce the reserves due to these excess returns? Will there be a requirement to record lower reserves? For instance, will there be a significant charge against shareholders' equity to adjust your reserves in the IFRS 17 framework because of the use of ALDA?
Phil Witherington, Chief Financial Officer
So Mario, this is Phil. It's important in IFRS 17 valuable assets and liabilities are disconnected. This gives more flexibility if changes must arise and accordingly allows assets to have their true value realized without impacting underlying liabilities. We'll commit to ALDA as it gives rise to stable cash flows matching long-term liabilities with appropriate risks.
Steve Finch, Chief Financial Officer
When you look at the long duration liabilities, where the illiquidity premium can apply, meaning higher returns for ALDA, this could cushion and negate potential immediate losses we might experience. One could expect overall to influence retained capital positively, pending market movements this year.
Mario Mendonca, Analyst
Okay. So there's actually some advantages then under IFRS 17, and in ALDA world, is that there isn't a big massive hit when you change the assumption. But just to put a final point on. Are you saying that the illiquidity premium on the long-dated liabilities would be sufficiently high, such that you would not have to take a big hit against your book value on conversion to IFRS 17 because of the ALDA?
Steve Finch, Chief Financial Officer
It's too early to comment on balance sheets because of the many facets of IFRS 17. We expect to provide more clarity as we move closer to the date.
Operator, Operator
Thank you. The next question is from Nigel D'Souza from Veritas. Please go ahead.
Nigel D'Souza, Analyst
Thank you. Good morning. Two quick questions for me. First, I just want to touch on the credit experience, and Scott, you mentioned that you expect credit results to run a bit worse than your cycle reserve assumptions in any recessionary environment. I was wondering if you could expand on that. I mean, year-to-date we've seen negative credit experience concentrated in the non-investment grade bucket, which Manulife has very little exposure to. So the negative credit experience, is that just from an expectation for probability defaults to increase across the credit spectrum? What do you see as the driver there? And could you touch on what drove impairments or credit experience this quarter?
Scott Hartz, Chief Investment Officer
Yes, correct. The essence is that we saw credit experience impacted by two factors: impairments and downgrades requiring added reserves for the expected defaults. We recognized a net charge of $20 million this quarter, influenced primarily by losses in the oil and gas sector and downgrades that occurred earlier this year. Going forward, we will continue to watch the market closely as the economy significantly impacts overall credit performance.
Nigel D'Souza, Analyst
Yes, that's really helpful. And just a last quick question on your investment-related experience. I understand there's a lot of moving parts, and you mentioned the lag for private equity and real estate valuations, but it sounds like the unfavorable experience that we had in the first quarter has largely played out. Is that fair to say? And is it also fair to say that you're still on track for core investment gains to restart in 2021?
Scott Hartz, Chief Investment Officer
Yes. That’s right. I'm feeling positive about where the portfolio is valued relative to current conditions, while we expect Q2 may enjoy a modest bounce back based on partial recovery of public equity values, but won't expect it to create significant gains. My expectation is that core investment gains will return, provided market conditions remain stable, and we’ll see a recovery as we progress into the next year.
Darko Mihelic, Analyst
Hi, thank you. Good morning. And thanks for extending the call. I wanted to revisit, Steve, your comments earlier in the call. You mentioned in long-term care that you're noting a 24% to 25% higher deaths versus the four-quarter trend, and you also mentioned a 20% lower incidence. Now, when I look at the impact on net income for changes to the non-economic assumptions for long-term care, the numbers look far bigger.
Steve Finch, Chief Financial Officer
Sure, Darko. I appreciate that nuance. The implications are related primarily to trends and short-term variances, therefore, not capitalized impacts reflected. We're not changing assumptions in the true long-term context greatly, but our observations are on a much shorter term.
Roy Gori, President and CEO
Yes, Darko, it's a good question that we're actively analyzing, but it's early to announce the long-term consequences. Given the unpredictability of COVID-19, we can only analyze shorter-term dynamics as these will likely remain uncertain until a vaccine is widely distributed.
Darko Mihelic, Analyst
Fair enough, I could appreciate that entirely. Just a last update, Steve, if you can. Premium rate increases, the size of the reserve you have there? And has there been any negative impact or any issues with getting premium rate increases?
Steve Finch, Chief Financial Officer
We have made steady progress at achieving premium increases. If you recall, we had embedded $1.9 billion in reserves with continued positive actions and steady progress to achieve our rates, without major new complications.
Operator, Operator
Thank you. The next question is from Paul Holden from CIBC. Please go ahead.
Paul Holden, Analyst
Thanks. Good morning. I want to ask a question on expected profit growth for both Canada and U.S. We've seen capital optimization measures slow; you’ve run ahead of pace on your expense savings, and we're also seeing pretty good sales growth in recent quarters out of those two businesses. So just wondering where we can expect to see expected profit growth start to accelerate?
Steve Finch, Chief Financial Officer
Sure. It's Steve here. The expected profit growth will reflect both historical variances and stability in the business as macroeconomic variables evolve. As the business stabilizes and capital optimization measures progress, we would expect to see the expected profit growth starting to accelerate, especially through the second half of 2020.
Operator, Operator
Thank you. There are no further questions at this time. I'd like to turn the meeting back over to Ms. O’Neill.
Adrienne O’Neill, Host
Thank you, operator. We will be available after the call if there's any follow-up questions. Have a nice morning, everybody.
Operator, Operator
Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.