TSX/NYSE/PSE: MFC SEHK: 945

- Charges due to lower corporate bond yields and changes in actuarial

assumptions offset strong operational results and gains due to equity

market increases, resulting in a modest net loss for the quarter

- Margins improved through increased pricing, adjustments to sales

compensation and more favourable reinsurance terms

- Strong sales growth across most products other than variable

annuities generated a more balanced business mix

- Equity risk profile improved through hedging, pricing, product and

asset mix changes

- Excellent credit experience given challenging markets - asset quality

remains a competitive strength

- Two attractive acquisitions - AIC mutual funds and Pottruff & Smith

travel insurance

- Equity markets, interest rates and credit will continue to impact the

Company's balance sheet and earnings

- Focused on building to fortress capital levels over time - expect

benefits from merging U.S. operating subsidiaries at the end of 2009

TORONTO, Nov. 5 /CNW/ - Manulife Financial Corporation ("MFC") today reported a net loss attributed to shareholders of $172 million for the third quarter ended September 30, 2009, compared to net income of $510 million in the third quarter of 2008. The loss per share was $0.12 compared to fully diluted earnings per share of $0.33 in 2008. Current quarter results reflect equity market increases offset by lower corporate bond rates and changes in actuarial assumptions. The Manufacturers Life Insurance Company ("MLI") reported a Minimum Continuing Capital and Surplus Requirements ("MCCSR") ratio of 229 per cent as at September 30, 2009, up from 193 per cent last year.

In its second quarter earnings release, the Company included a forward-looking statement that estimated normalized earnings to be between $750 million and $850 million per quarter for the remainder of 2009 and 2010. The third quarter's adjusted earnings from operations(1) under this definition was approximately $803 million.

Chief Executive Officer Donald A. Guloien said, "Underlying earnings and performance were solid this quarter, but our results were negatively impacted by lower corporate bond rates and strengthening of reserves for changes in actuarial assumptions. We took actions to improve margins, increased our sales of products other than variable annuities, further improved our equity risk profile and continued to build toward fortress capital levels. We announced two attractive acquisitions and see numerous opportunities for strategic growth across a variety of markets. We remain highly disciplined and will continue to build upon Manulife's scale and key strengths including our superior asset quality, well recognized brands, leading products and distribution, excellence in investment management, and strong positioning in key growth markets."

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(1) Referred to in the second quarter report as normalized earnings. See

"Normalized Earnings and Adjusted Earnings from Operations -

Reconciliation with GAAP Measure" and "Performance and Non-GAAP

Measures" below.

FINANCIAL RESULTS

Chief Financial Officer Michael W. Bell said, "Continued declines in corporate bond rates required a further strengthening of actuarial reserves this quarter. We also increased reserves for changes in actuarial assumptions including those related to policyholder behaviour for variable annuity products. As a result of the decline in interest rates and changes in lapse assumptions, our interest rate sensitivity has increased. Nevertheless, Manulife's underlying business growth remains strong, and the quality of our investment portfolio remains a competitive strength. MLI's MCCSR remains strong at 229 per cent, and we continue to take focused action to improve our risk profile and strengthen our capital flexibility as we grow our Company. We anticipate that, at year end and subject to regulatory approvals, we will complete a reorganization of our U.S. subsidiaries which will deliver capital and operating efficiencies."

Increases in equity markets in North America, where the S&P 500 increased 15 per cent and the TSX increased 10 per cent in the quarter, generated non cash gains of $1.2 billion. Of this, $1.0 billion related to segregated fund guarantees and the remainder was attributable to future fees assumed on variable universal life products and gains on equities supporting policy liabilities.

The Company reported a non cash charge of $1.2 billion resulting from the decrease in interest rates and corporate spreads during the quarter. Changes in interest rates impact the actuarial valuation of in-force policies by changing the assumption for future returns on the investment of net future cash flows. The decline in interest rates also impacted the investment returns assumed for new business written in the quarter, particularly in U.S. Insurance.

As indicated in the prior quarter, the Company completed its annual review of all actuarial assumptions in the third quarter. This resulted in a charge to earnings of $783 million, including $469 million due to changes in assumptions of policyholder behaviour for segregated fund guarantee products (a charge that was within the Company's previously communicated expectations of less than $500 million). The remainder of the charge included assumption changes related to morbidity and other policyholder behaviour, partially offset by assumption changes related to mortality, expenses and investment related items.

The Company's investment portfolio continued to perform well relative to overall market conditions, with $111 million of impairments in the quarter. The third quarter results included charges of $30 million for credit losses, $6 million for credit downgrades, $32 million in other than temporary impairments ("OTTI") on equity positions in the Corporate and Other Segment, as well as $43 million on private equity investments.

MLI reported a MCCSR ratio of 229 per cent as at September 30, 2009, up from 193 per cent last year. Significant progress has also been made in the reorganization of the Company's U.S. subsidiaries, with a planned merger of the main U.S. operating companies, under MLI, on track to be completed effective as of year end. The merger will result in a more efficient capital structure and provide improved operating efficiencies. Post reorganization, MLI expects to benefit from more stable capital ratios and a more diversified risk profile. While MLI's MCCSR ratio is expected to decline as a result of the re-organization, the Company's cushion for equity market declines over minimum regulatory requirements is expected to remain approximately unchanged because of the reduced equity sensitivity.

SALES AND BUSINESS GROWTH

Chief Operating Officer John D. DesPrez III said, "This quarter we improved our margins through price increases, adjustments to compensation and more favourable reinsurance terms. We also reduced our variable annuity risk profile through pricing adjustments, changes to our product and asset mix and hedging of an additional $3.8 billion of our in-force business. Our Asian business delivered strong results with further expansion in China and notable insurance market share gains in Japan and Indonesia. Canada's group businesses and fixed wealth products recorded particularly strong sales increases and our two acquisitions in Canada will further strengthen our market position in mutual funds and travel insurance. In the U.S., we strengthened key distribution relationships, increased sales of targeted products over the previous quarter and we demonstrated our leadership in wealth management with three new Five Star Morningstar Ratings(2) for our mutual funds and continued high rankings for our John Hancock Lifestyle funds."

Insurance new business embedded value ("NBEV") was 17 per cent higher than prior year levels driven by growth across all geographies, while wealth NBEV was down 48 per cent, reflecting lower variable annuity sales, hedging costs and other product mix changes.

Insurance sales experienced sequential increases over the prior two quarters across most business segments. Total insurance sales increased by two per cent, on a constant currency basis, over the prior year as strong advances in Asia and Canada were partially offset by a decline in the U.S.

Total wealth sales excluding variable annuity products also experienced sequential increases over the prior two quarters. Sales excluding variable annuity products increased by four per cent over the prior year, on a constant currency basis, as fixed return wealth product sales in both the U.S. and Canada continued to outpace prior year levels, resulting from consumers seeking stable investment returns.

Premiums and deposits, excluding variable annuity products, were $14.3 billion for the quarter, a decrease of two per cent over the prior year on a constant currency basis. Growth of in-force insurance business and higher sales of fixed return wealth products were offset by lower new mandates in the Institutional Advisory business.

Variable annuity and segregated fund deposits of $1.9 billion declined by $2.1 billion from the prior year as a result of the Company's on-going risk management initiatives across all geographies and, to a lesser extent, the general economic conditions.

Total funds under management as at September 30, 2009 were $437 billion, a 13 per cent increase over the prior year as a result of net positive policyholder cash flows of $20 billion and favourable currency movements. Over the last four quarters, investment returns have contributed approximately $19 billion to the increase.

Capitalizing on strategic opportunities, Canadian Division announced two acquisitions since the end of the second quarter. Manulife Mutual Funds announced the acquisition of AIC Limited's Canadian retail investment fund business, which added approximately $3.8 billion of assets under management, increasing the Canadian Division's mutual fund platform by approximately 40 per cent. This adds significant scale and bolsters the Canadian Division's presence in the Canadian retail investment fund market. Affinity Markets also announced the acquisition of Pottruff & Smith Travel Insurance Brokers Inc., one of the largest travel insurance brokers and third- party administrators in Canada. This acquisition solidifies Manulife's position as one of Canada's largest providers of travel insurance services, with a stronger platform for long-term growth as a travel insurer.

The Company continued to rebalance the risk profile of its product mix by reviewing its variable annuity product portfolio and implementing changes to its product features and pricing. With the equity market rally in the quarter, the Company also opportunistically hedged an additional $3.8 billion of in-force variable annuity business. Substantially all new variable annuity business in the U.S. and Canada continues to be hedged on an on- going basis. By quarter end, $19.5 billion of Guaranteed Value was hedged, up from $14.5 billion at the end of the second quarter and $5.7 billion at December 31, 2008. At September 30th, approximately 30 per cent of the gross Guaranteed Value was reinsured or hedged, up from 20 per cent at the prior year end.

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(2) For each fund with at least a 3-year history, Morningstar calculates

a Morningstar Rating based on a Morningstar Risk-Adjusted Return that

accounts for variation in a fund's monthly performance (including

effects of sales charges, loads and redemption fees), placing more

emphasis on downward variations and rewarding consistent performance.

The top 10% of funds in each category, the next 22.5%, 35%, 22.5% and

bottom 10% receive 5, 4, 3, 2 or 1 star respectively. The Overall

Morningstar Rating for a fund is derived from a weighted average of

the performance associated with its 3-, 5- and 10-year (if

applicable) Morningstar Rating metrics. Past performance is no

guarantee of future results. The overall rating includes the effects

of sales charges, loads and redemption fees, while the load- waived

does not. Load-waived rating for Class A shares should only be

considered by investors who are not subject to a front-end sales

charge.

OPERATING HIGHLIGHTS

Insurance

- Insurance sales experienced sequential increases over the prior two

quarters across most business segments. Total insurance sales

increased by two per cent over the prior year, on a constant currency

basis, as strong advances in Asia and Canada were partially offset by

a decline in the U.S.

- In the U.S., overall insurance sales improved by 18 per cent from the

prior quarter, but were down six per cent from prior year levels,

with both Life and Long-Term Care experiencing significant

improvements over the prior two quarters, but falling short of prior

year levels by four and 13 per cent, respectively. Despite general

economic trends, Life sales topped US$200 million in the quarter and

Long-Term Care sales were robust compared to strong prior year

comparables. Since the end of the first quarter, Life has introduced

higher prices on its Term and Universal Life offerings while Long-

Term Care has introduced new features and increased pricing on its

group segment.

- In Canada, overall insurance sales increased by six per cent over

prior year levels, with Group Benefits sales up 12 per cent,

partially offset by a four per cent decline in Individual Insurance

sales. Subsequent to the quarter, Affinity Markets announced the

acquisition of Pottruff & Smith Travel Insurance Brokers Inc., one of

the largest travel insurance brokers and third-party administrators

in Canada. This acquisition solidifies Manulife's position as one of

Canada's largest providers of travel insurance services, with a

stronger platform for long-term growth as a travel insurer.

- In Asia, record insurance sales levels were achieved in the quarter,

with overall sales exceeding the prior year by 16 per cent on a

constant currency basis. Japan sales were up seven per cent over the

prior year while Hong Kong sales increased by 29 per cent, with

strong sales momentum bolstered by new product offerings and

distribution initiatives. Japan and Indonesia reported significant

market share gains in 2009 reflecting consumer flight to quality.

China sales also continued to grow, up 18 per cent in the quarter,

reflecting contributions from new offices opened in the prior year

and recent marketing initiatives. During the quarter, Manulife

continued to expand its operations in China receiving an additional

license in the Province of Tianjin. This brought the total number of

licenses to 38, among the most of any foreign life insurance company

in China.

Wealth Management

- Wealth sales, excluding variable annuity products, increased by four

per cent over prior year levels on a constant currency basis, driven

by fixed return product sales in the U.S. and Canada. Fixed return

product sales continued to outpace prior year levels as consumers

sought more stable investment returns.

- Variable annuity sales were less than half of prior year levels

following from the Company's on-going risk management initiatives

across all geographies and, to a lesser extent, general economic

conditions.

- In the U.S., wealth sales excluding variable annuity products

improved by 21 per cent over the prior quarter, and were in line with

prior year levels. All product segments other than variable annuity

products experienced double digit growth over prior quarter levels,

with fixed return product sales up 16 per cent, retirement plan sales

up 30 per cent and mutual fund sales up 18 over the second quarter of

2009. Compared to prior year, fixed return product sales were up 37

per cent, retirement plan sales were flat, and mutual and other fund

sales were down 12 per cent. During the quarter, John Hancock

expanded its growing relationship with Edward Jones, announcing a

distribution agreement whereby financial advisors will have access to

the John Hancock 401(k) retirement plan platform. This has further

leveraged the strong relationship that has been built with Edward

Jones by the John Hancock Long-Term Care and Variable Annuity

businesses.

- John Hancock Lifestyle Portfolios offered through mutual fund,

variable annuity and 401(k) wealth management product lines have

continued to produce very strong returns through September 30, 2009.

The Lifestyle Portfolios that underlie the mutual fund and 401(k)

products rank in the 8th, 11th, 13th, 14th and 29th percentiles of

their Morningstar peer groups year-to-date for Balanced, Aggressive,

Growth, Moderate and Conservative, respectively(3). John Hancock is

ranked as the third largest provider of lifestyle/lifecycle asset

allocation solutions in the industry as of September 30, 2009,

according to data from Strategic Insight, with over $55 billion in

assets under management.

- In Canada, wealth sales excluding variable annuity products increased

by five per cent over the prior year. Strong increases in fixed

products and group retirement sales more than offset declines in

Manulife Bank loan volumes. Fixed products sales increased by 57 per

cent while group retirement sales more than quadrupled prior year

levels, driven by record sales of group annuities. Year-to-date,

group retirement sales exceeded $1 billion reflecting strong results

in the defined contribution market.

- During the quarter, Manulife Mutual Funds announced the acquisition

of AIC Limited's Canadian retail investment fund business. This

acquisition added $3.8 billion of assets under management, an

increase of approximately 40 per cent to the Canadian Division's

mutual fund platform, increasing scale and bolstering the division's

presence in the Canadian retail investment fund market.

- In Asia, wealth sales excluding variable annuity products increased

by 59 per cent over the prior year, driven by strong growth in

Indonesia. Indonesia fund sales more than tripled, benefiting from

the equity market recovery.

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(3) The Morningstar percentile ranking compares a Fund's Morningstar risk

and return scores with all the Funds in the same Category, where

1(equal sign) Best and 100(equal sign) Worst. The rankings above are

based on the period from 1/1/09 to 9/30/09 for John Hancock Lifestyle

Portfolios, Class A. Lifestyle Aggressive was ranked 208 out of

2,028 funds in the Large Cap Blend category, Lifestyle Growth was

ranked 251 out of 2,028 funds in the Large Cap Blend category,

Lifestyle Balanced was ranked 97 out of 1,218 funds in the Moderate

Allocation category, Lifestyle Moderate was ranked 91 out of 647

funds in the Conservative Allocation category, and Lifestyle

Conservative was ranked 189 out of 647 funds in the Conservative

Allocation category.

Corporate

- During the quarter, the Company raised $1 billion through the

issuance of Innovative Tier 1 Notes. The notes pay 7.405 per cent per

annum until December 30, 2019, with 5 year resets thereafter equal to

5-year Government of Canada bonds plus 5 per cent. The notes may be

redeemed in whole or in part on or after December 31, 2014, with

regulatory (OSFI) approval.

- In a separate news release, the Company also announced today that the

Board of Directors approved a quarterly shareholders' dividend of

$0.13 per share on the common shares of the Company, payable on and

after December 21, 2009 to shareholders of record at the close of

business on November 17, 2009.

- The Company is proud to have recently appointed two highly qualified

and distinguished Directors to its Board:

- Linda Bammann was appointed to the Board of Directors of Manulife

Financial Corporation and The Manufacturers Life Insurance Company

effective August 5, 2009. Ms. Bammann joins Manulife's Board

possessing strong risk management expertise and first hand management

experience from her senior executive risk management positions with

several large U.S. banks, including JPMorgan Chase and Bank One.

- John Palmer was appointed to the Board of Directors of Manulife

Financial Corporation and The Manufacturers Life Insurance Company

effective November 4, 2009. Mr. Palmer brings extensive financial

institution experience to Manulife's Board, including seven years as

Superintendent of Financial Institutions of Canada. Mr. Palmer was

the Deputy Managing Director of the Monetary Authority of Singapore

and has advised other regulators including the Australian Prudential

Regulation Authority. He is a chartered accountant and previously was

Canadian Managing Partner and Deputy Chairman of KPMG LLP (Canada).