Manulife Financial Corporation (MFC) Earnings Call Transcript & Summary

Well, good afternoon and good morning, everybody. I'm very happy to be able to host this presentation. For those of you that don't know me, my name is John Aiken. I cover Canadian financials here at Barclays. Very pleased to have with me for this fireside chat, without a fireside, is Phil Witherington, Manulife's Chief Financial Officer. Phil, thank you very much for joining us, and welcome.

Thanks, John. It's great to see you again. And thanks for inviting me back. It's great to see that we've continued the conference and pivoted to digital virtual format.

It's just unfortunate this time that you don't get to visit with friends and family in London. But that's -- hopefully next year.

Let's hope so. Yes.

So Phil, I wanted to start off by asking what may be the obvious question, but maybe difficult to answer, that with the impact of the COVID-19 virus, the shutdown that we've seen across the global economies. But I would like you to talk about what the impact has been on Manulife, but also as we're starting to open up economies and obviously staggered Asia more open than we're seeing in North America, but Manulife has a very good view into this. Let me know if you could tell us what Manulife's view is in terms of how this may develop and what your outlook is coming out of the crisis?

Thanks, John, and that's a very topical question. And before talking about Manulife, I would like to actually say thank you to the frontline health care workers and other frontline employees in essential services that have done an amazing job throughout this crisis, I think that goes without saying, but also express my deepest sympathies to anyone whose families have been impacted by COVID-19, but also recognize the tremendous contributions of the wider community in terms of embracing social distancing and staying home to really help flatten the curve. I think it's important to recognize all of that upfront because it puts everything else into perspective. From a Manulife perspective, we felt a significant responsibility to step up and do everything that we can to really protect the health and well-being of our employees, our customers, our agents as well as the broader community. And we did take action early on to enable our employees to work from home. So we enabled 95% of our employees around the world to work from home in this environment. And as well as doing that, it was really about activating many of the digital tools that we already had on the shelf as well as accelerating the launch of some other digital tools to make sure that we were there for our customers to provide continuity of servicing as well as continue to be able to fulfill the new business needs of customers that actually don't go away in this environment, so that continuity of operation has been very important to us. When you look at our Q1 results, you can actually see the continuity of our business that has happened through this period of the pandemic. If you look at our ability to continue to grow, we know that Asia was the region that was first impacted by COVID-19, really from mid-January. And yet if we look at our results from Asia in the first quarter, from a new business perspective, because I think that's a good indicator of our ability to continue to operate in all respects as an organization, we actually grew our new business in key markets of Hong Kong and then Asia other markets in the first quarter. And then looking at our wealth and asset management business, our global wealth and asset management business actually became more profitable. We grew profits in the first quarter of 2020 relative to 2019, partly off the back of AUMA growth over the course of the year to the first quarter 2019. But I think it does reflect that we've been able to continue to operate. And in wealth and asset management, we actually generated net inflows in the first quarter of 2020 of $3.2 billion, and that included positive contributions from each of the lines of business: retirement, institutional and retail lines within wealth and asset management. I did talk about digitization slightly there. And I think digitization is a very important enabler of the ability to continue in this environment to continue to operate. And I think this, for us, is a competitive differentiator. The fact that we have, through our strategy, been investing in digital tools and digital capabilities in recent years, we had, going into this situation, therefore, the ability to pivot to non-face-to-face alternatives to face-to-face communication and sales in all of our markets in Asia. And I think there are -- if we just take the Philippines and Malaysia as examples of that, we went from 0% of our business that was enabled through non-face-to-face channels to 70% of new business that was coming through non-face-to-face channels. And in the U.S., actually, that statistic is even more extreme. It's gone from 0% to 100% of our business that has been fulfilled through digital means. So I think the digital component has actually been a very important enabler of growth. And it's not only in terms of generation of new business. If we look at our ability to position ourselves for growth in this environment, the digital tools are actually a very interesting way of attracting new people to our organization. So of course, as you know, a leading indicator of growth in Asia for us is the number of agents. And in the first quarter, we actually managed to grow the number of agents in our sales distribution force in Asia to 103,000. So compared to the fourth quarter of 2019, that's growth of 7%. If we compare it to the first quarter of 2019, so a year-on-year growth, it's 27% expansion in the scale of our distribution force in Asia. And I think there are various reasons for that. But I do believe the fact that Manulife has been investing in digital tools is one of the underlying drivers that makes Manulife a great place to work as an employee, but also as a distributor. I think I should be balanced and talk about, with respect to COVID-19, some of the policyholder experience implications and potential implications. You may have noticed from our first quarter results, we recognized a $50 million charge with respect to our travel insurance business in Canada. What we had seen in, really, the middle of March was, borders being closed, and in Canada, there was -- the borders were essentially closed to non-Canadians. Many Canadians decided that it would be inappropriate to travel. The government discouraged people from traveling. We were there for our customers. And of course, there is cost of that. That's what we're here for. We recognized the $50 million charge, and that reflects the reported claims in the first quarter as well as our estimate for those claims that have been incurred, but not reported as of 31st of March. I see that one as very much a onetime event and not something that I would expect to recur in the second quarter or beyond. Elsewhere within policyholder experience, when we think about the potential impact of a pandemic, it's reasonable to expect there would be some adverse mortality experience. But I think it's important to recognize that for a company like Manulife that is really diversified in terms of the portfolio, there are some businesses where -- or some parts of our business where mortality has an adverse effect and other parts of our business where there's an offsetting effect, whether it's longevity risk that is cut short as a result of higher rates of mortality. So overall, looking at both life risk and longevity risk, rule of thumb that we're applying is that in a scenario where we see 100,000 deaths in the U.S., we expect the net income impact, so after tax, to be in the order of $30 million. And of course, there'll be some variability in that depending upon which segments of the population and which geographies are impacted, but we think that's a good rule of thumb that puts in perspective the possible mortality experience implications of a pandemic. It's certainly not something that we consider significant in 100,000-death scenario. And even in a very adverse, a more extreme scenario, we do believe that to be manageable. Now as we look to the future and what happens over the next few weeks and months, it's good to look to Asia and see how some of the economies in Asia that have managed to flatten the curve and control the implications of the pandemic very well, look at those markets and use that as a guide for what could happen here in North America. And what we have seen is that in China, our workforce is very much getting back to the office. We have about 80% of our workforce back in the office now, and that's -- that previously was close to 0 before. And in Hong Kong, the transition, we're about partway through, just over half of our workforce are back in the office. And various markets in Asia are in different stages of, I suppose, the life cycle of this pandemic. But I think a statistic that is quite helpful to understand what the overall impact of the pandemic is beyond the first quarter. If we look at April and April sales generation, it was approximately 10% of the same period April in 2019. And to be able to generate 90% stability or 90% of the sales in the prior year in this environment, we think is a great outcome and really does speak to the resilience of our business as a result of the digital tools, but also the strength of our distribution channels and customer service capabilities.

That's fantastic, Phil. One of the things that I had discussions with investors is trying to draw the parallels between the current environment versus what we saw during the financial crisis coming out of 2008. I was wondering if you could talk about where you see Manulife today versus where it was heading into and coming out of the financial crisis.

That's a very important point, John. Thanks for raising that. Clearly, Manulife is a company that had a tough time during the financial crisis. And it's -- coming into this crisis, I think we're in a very different position for various reasons that I can talk through. Just in terms of a point on capital to start with, coming into 2020, I like our capital positions, so our Canadian group-wide capital ratio was 140%. That is strong and represented -- this is at the end of 2019, represented in excess of $22 billion of capital above the supervisory target. As well as that, we had, by the fourth quarter, achieved our medium-term leverage ratio target of 25%. So that speaks to the strength of the balance sheet coming into 2020. Now within 2020, since then, the capital position has strengthened further for various reasons, but as of the end of Q1, we're at 155% capital ratio, and that reflects CAD 31 billion of capital in excess of the supervisory target. That's group-wide consolidated capital. And our leverage ratio has fallen further to 23%. And maybe later, I can -- if appropriate, I can expand on some of the reasons for that. But getting back to your question on Manulife being a different company now to the global financial crisis. It is, and it represents many of the risk management and risk mitigation actions that we have taken over the past decade. We have made decisions to withdraw from product lines that are damaging in stressed environments. Variable annuity, for example, we withdrew from that line of business. We've also taken significant actions to reduce our exposure to interest rate and equity market sensitivities. They're now a fraction of what they were during the financial crisis. Despite the fact that actually the company has grown, we're a much bigger company now than we were then, and in dollar terms, the sensitivities are substantially less. I think another key reference point as well is the variability between core earnings and net income. We've made substantial progress in converging these metrics and making both core earnings and net income more stable. And if you look at 2018 full year results, you look at 2019, you look at the first quarter of 2020, what we see is that net income and core earnings are very close together. And in a quarter of tremendous volatility Q1 2020, I think that's a great outcome that does speak to the effectiveness of the overall hedge programs and risk mitigation programs that have put in place. I don't think any of that really is a coincidence. We haven't, by coincidence, achieved $1.3 billion of net income and $1 billion of core earnings through luck. In the type of environment we saw in Q1, luck doesn't work. I think it does reflect the careful thought that was put into the development of the strategy that was put in place at the beginning of 2018, whereby we identified 5 strategic priorities for the organization, which included very important priorities such as continuing to deliver growth and becoming more customer-centric and digitizing the company, but we also had some very important priorities around portfolio optimization, which was all about and is all about risk reduction, capital efficiency as well as expense efficiency as the second priority in our strategy. And having achieved a great deal with respect to both portfolio optimization, we've released $5 billion of -- in fact, by Q1, $5.3 billion of capital over the last couple of years as well as delivering $700 million of expense efficiencies. I think there are items that have really helped reduce the volatility of -- and risk exposures within our business as well as making us more resilient to the environment that -- any environment that's thrown at us. And expenses there are important because it's not just about becoming more efficient and contributing bottom line growth from increased efficiency, but it's the ability to have a lever to pull and have the organizational capability to adjust expenses to reflect the environment that we're in. And I think in the first quarter, the fact that expense growth was 2% despite some of the frictional expenses and frictional expense costs associated with COVID-19, which were really quite modest, I think to grow expenses by 2% is also a great outcome.

Phil, you talked about as part of the differentiating factor between now versus the global financial crisis, it was the capital strength. And you just mentioned the capital actually did grow in the -- or regulatory capital did grow in the quarter. I wanted you to address a topic that I've had conversations with investors is the dividends. What's the outlook? Is it safe? But then after that, I want you to talk about -- because in the past, you talk about capital allocation strategies for Manulife, but with the regulator stepping in, saying, no increase of the dividend, no buybacks. What are you looking at in terms of capital allocation? And I guess, we'd love you to talk about something that was announced in the quarter was the extension of the distribution agreement with Bank Danamon.

Okay. Great questions.

It's 5 parts.

Yes, no problem. I've written those down, John. Great questions. So I'll start head-on with the dividend as you highlighted there. We remain committed to our dividend. We have set out, in our medium-term financial operating guidance, a 30% to 40% dividend payout ratio as a percentage of core earnings. We stand by that as well as standing by our medium-term financial operating guidance for 10% to 12% growth in core earnings through the cycle. We don't expect to achieve the core EPS growth target in 2020 because of the environment that we find ourselves in. But beyond that, we do remain confident and optimistic. I think on the dividend, reflecting the strength of the capital position from Q4, earlier this year, we increased the dividend by 12%. And that's something that is now in the run rate that we expect to be sustained from here. And you did make reference there to the regulatory guidance on increases to dividends. Yes, our regulator, OSFI has asked for no further increases at the industry level in dividends until further notice. And that's something that naturally we will comply with. But we're pleased that we had increased the dividend earlier this year by 12%. That's now in the run rate. So in terms of capital allocation, I did touch earlier on the strength of the capital position, and we are at 155% LICAT. That's the $31 billion in excess of the supervisory target. I think it's important to recognize that, of course, that's strong, and we've increased the amount of surplus capital since Q4. But to understand where that increase has come from is actually very important. And if we look at what's happened in the first quarter, lower interest rates, lower risk-free rates. At the same time, it's widening corporate spreads. So in our liability segments, the impact of widening corporate spread, that actually reduces liabilities because we're able to project that we reinvest at higher yields for corporate credit assets than we would previously have been able to do so. So that has a favorable impact on our capital position through lower liabilities. And that, in the first quarter, was a benefit of approximately $2 billion. Now at the same time, if we look at how we have decided to invest our surplus portfolio, so assets that are not backing liabilities, we've taken quite a conservative view to the investment of our surplus portfolio. And 60% to 70% of that portfolio is invested in government bonds, treasuries. And so in the type of environment that we see in the first quarter with falling risk free rates, the value of those treasuries increases. And that's provided a tailwind that these are AFS, available for sale assets, that provide a tailwind in the order of $3 billion that is recognized not in the P&L, but in the balance sheet through a component of other comprehensive income, OCI. Another benefit that we saw in the first quarter from a capital perspective was the fact that we report on a Canadian basis -- Canadian dollar basis for a Canadian company. But then the foreign exchange tailwind with 70% of our operations being in non-Canadian dollar jurisdictions with a weakening Canadian dollar, that creates a foreign currency benefit to us. And again, if you look at our statement of changes in equity, that was approximately $3 billion of benefit in the first quarter. And that's all alongside the benefit from retained earnings. As I said earlier, we generated $1.3 billion of net income. So all of that really explains how we've been able to strengthen the capital position in this very challenging environment. But as CFO, my perspective is that many of the factors there are broader market factors. And therefore, I wouldn't bank all of those benefits. As markets normalize and assuming the external environment and the macro conditions improve, I would expect to give some of those or possibly all of those benefits back, but that doesn't mean that we'd be in a weakened capital position. We would still be in a very strong capital position, which speaks to your question around capital deployment. And our capital deployment priorities have actually not changed, and we have considered whether they should change, but they haven't changed. So our first priority is to continue to invest in organic growth. And when I look at our footprint around the world, there is so much opportunity to grow, particularly in Asia and Global WAM, but it's also true in the U.S. and Canada, where there are still meaningful growth opportunities. But if we look at the underlying demographic factors in Asia, the retirement gap around the world, there is tremendous demand and need for insurance and wealth management services. So capturing that, those organic opportunities are very important to us. And just to illustrate what we are doing to capture some of those organic opportunities, growing our agency distribution force in Asia. I said earlier that we had continued to grow our agency footprint in the first quarter. Year-on-year, that's 27% growth, and that's a reflection of our investment. It doesn't just happen. We've been consciously growing. Some of the outcomes when we look at the growth in markets such as Hong Kong, 21% growth in the first quarter in new business volumes. Asia or other markets, including China and Vietnam, 5% growth in the first quarter despite this very challenging COVID-19 backdrop. One thing that we had done even in this environment, just a few weeks ago, and you touched on this, John, in your question, the Danamon exclusive bancassurance arrangement, that was a 10-year arrangement that was due to expire within the next 18 months. We were proactive in our conversations with Danamon. It's a great relationship. Danamon is a leading bank in Indonesia, and it's a material component of our distribution in Indonesia. Rather than wait for the agreement to expire and then go to a competitive process, we had a bilateral conversation with Danamon and agreed to extend that exclusive distribution for 15 years on top of what was left to expire of the agreement. So that's now locked in until the end of 2036. So that provides -- in this environment, we've been able to deploy capital, and I consider this organic deployment of capital to secure distribution in a market that's expected to grow substantially for an extra 15 years. So organic growth, our first priority. Second, immediately following organic growth is the progressive dividend policy. Now I said earlier, the 30%, 40% payout ratio that we remain committed to. The dividend really is a very important way for us to deploy capital and return capital to shareholders. Beyond organic growth and dividends, we also have the opportunistic share buybacks as a component of our capital deployment strategy. We have halted share buybacks in response to the guidance that OSFI has provided to the industry in Canada. That's not just us, that's all banks and federally regulated insurers as well. And that doesn't mean that it's not part of our strategy. We retain share buybacks as an important component of capital deployment, it's just halted for the time being. We were in the markets in the first quarter, buying back shares. We deployed $250 million of capital, 10 million shares. And I'd expect that to come back at an appropriate time as and when the regulatory guidance is amended. And finally, we've got M&A opportunities. And we've always put this one, in recent years, lower down on our listed priorities, primarily because we are not dependent upon M&A activity in order to achieve our stated goals. These are potential opportunities that could help accelerate the execution of our strategy and our overall ambitions. But we take a view that any M&A activity would have to be highly strategically relevant. So it's not something that would simply be a scale play, we'd be looking at something that's strategically relevant and very disciplined. We would be very disciplined in looking for value opportunities rather than simply trying to deploy the capital that we have. I am not ashamed and will not apologize for being strongly capitalized. I think in this environment, the benefits of being strongly capitalized really pay off.

Fantastic. Phil, just as a follow-on in terms of the capital deployment. When you look at Asia region, obviously, you touched on that being a focal point. But can you talk about China specifically? So we've got a -- what is not even arguably a great growth potential in the region, but also a change in ownership rules from a regulatory standpoint. Can you talk about Manulife's willingness to deploy capital into China on both the insurance as well as on the asset management side of the equation?

Yes. Thanks, John, for the question. We are willing to deploy capital into China. We see China as a very important part of our group and a significant growth opportunity for us. If we look at our experience in recent years, China has been a market that has consistently performed and outperformed. It's a market where we have a presence in 51 cities across multiple provinces. So it's -- there certainly is not a constraint for us in terms of only operating in a particular province or city. We do have a very wide and broad reach across the entire country. In this environment, one thing you did mention is the change in foreign ownership rules. And this is -- it's an interesting development that, of course, we were very pleased to hear that the ownership rules have been relaxed, and there is a possibility of increasing share ownership. But one thing I'd like to highlight is that Manulife has, since the formation of our joint venture in China just over 20 years ago, we have held 51% of the interest in that JV. Our partner is Sinochem, a state-owned entity. Sinochem has been a fantastic partner, where we've held 51% and had operational control. And I think that's been very important to us in being able to be disciplined in how pricing is determined in order to create long-term value as well as being able to put in place consistent risk management policies with other parts of the group. Of course, we are very happy with the performance of our business in China -- insurance business in China. And if there is an opportunity for us to increase the extent of our ownership, naturally, we'd be very happy to do so. But I think we're in the situation where both JV partners are very pleased with the performance. It's a good relationship. So it's not something that is, I suppose, a necessity for us to action. It's something that would be a nice to have for us, but a great way for us to potentially deploy capital. I think it's important also to recognize that beyond the insurance operations in China with Manulife Sinochem, we have other businesses in China, in particular, on the wealth and asset management side. So we have Manulife TEDA, which is a joint venture asset management company as well as a wholly owned asset management company that has a WFOE status, so a wholly owned foreign enterprise license that enables us to take international wealth management solutions onshore into China, and we set up that corridor to enable us to do that, and we're quite optimistic about the growth opportunity there.

Fantastic. Just as a sidenote, WFOE is one of my favorite acronyms. Sticking in Asia, Phil, you talked about the growth that you're seeing in the region. One of, I'm going to say, the notional stumbling blocks, though, was Japan, although for very obvious reasons, the tax change. But in the quarter, Manulife highlighted the optimism that you're seeing in the region. Are you able to talk to what you're seeing in Japan and what the growth expectations are?

Yes, I can do. And you're right to call that out, John, that in the first quarter, we saw quite a notable decline in the scale of our new business sales in Japan. And also profitability as a consequence of that, and that's a year-on-year comparison. And the reason for that in Japan is that, as we had said in the first quarter of 2019, we had seen a significant ramp-up in sales of corporate-owned life insurance business as customers anticipated a change in tax regulations that did actually happen in Q2 2019. And when changes in tax regulations happen, it's really an incentive for customers to, if they have a need for those products, to buy them while the old tax rules are in place before more restrictive tax rules are put in place, and that's exactly what happened. So year-on-year, we have some distortion there in the comparison points, and that's almost entirely what explains the year-on-year decline in scale of the Japan operation -- new business in the Japan operation. If I compare Q1 to Q4, we've actually seen sequential growth in Japan. It's one of the few markets actually where you see -- Q4 is traditionally a very strong quarter as you head into the end of the year. Q1 tends to be, in most markets, a little softer. But Japan, we've actually seen, I think, it's 13% sequential growth quarter-on-quarter. So that is positive. And what we see come back is demand for corporate and life insurance business. So I think the tax rules now are less attractive than they were for customers 18 months ago. But there's still an underlying customer need, and there is a tax benefit from purchase of corporate-owned life insurance. So we'd expect to see demand to trickle back. And if we compare Q1 to Q4, we've seen the increase in demand in the range of 25% to 30%, so it's gradually rebuilding. Elsewhere in Asia, though, and I think this is a very important story for us, which -- in markets outside of Japan, the demographic demand remains in place. The growth of the middle class is expected to double by 2025. The growing retirement gap that exists, the increasing need for protection solutions in line with the emergence of -- continued emergence of the middle class and all the needs that, that drives in terms of the need for mortality protection on mortgages, mortality protected school plans, savings plans. That's all remaining intact. And therefore, regardless of the current situation with COVID-19, we do remain optimistic about the future prospects across Asia. I think the fact that we have seen double-digit growth in the first quarter, and we've seen a fairly resilient -- at the total company level, resilient April as well with, as I said earlier, about 10% decline in sales, I think that speaks to the demand still being there in this environment, but we do expect it to come back strong in the medium term. One thing that differentiates Manulife from many of our peers is the quality of our distribution, the quality of the agency force. We have 103,000 agents as well as the quality of our bancassurance distribution. We have 8 exclusive bancassurance partners across the region, including DBS, which spans across multiple markets. And it's the stability that having exclusive bancassurance alongside the agents that only sell Manulife products, that stability really provides for quarter after quarter of our ability to continue to sell and drive growth. I think Hong Kong is a really good example of our resilience in Asia. And it's not just looking at the first quarter of 2020. If we go back and look at what happened in 2019, it's a really tough environment in Hong Kong with protests and some political disruption. Throughout that, we were able to grow our new business volumes in Hong Kong by 36%. So that's in 2019, against the backdrop of an industry that was really struggling in many perspectives because the industry had become dependent upon visitors from Mainland China. And that's very much a market that has contracted over the past 18 months as a result of -- largely as a result of, I think, the protests in Hong Kong in 2019 and then, of course, in 2020, COVID-19. But the fact that we have been primarily focused on the domestic market shows that we're able to be resilient in this type of environment. And actually, we become a place that attracts customers as well as attracting employees and distributors in environments of stress. So I do feel Hong Kong is a good example of our overall resilience and ability to continue to grow across Asia.

That's great, Phil. I wanted to circle back to comments you made in my initial question about the digitization and the -- where things have ramped up. But as economies have opened up in Asia, how has the use of the digital channels held in? Are you seeing retracement? Are you seeing stability? Or are you actually even seeing some growth?

In digital channels, John, we -- yes, we've seen tremendous growth over the past -- in particular, over the past quarter. We've been building digital tools and capabilities for a number of years. The -- I think in the absence sometimes of a real need to take up digital tools, sometimes the adoption is modest or slow. But what the current environment has done is really provided a very tangible reason as to why digital tools should be there and can be used. One of the really important observations that we have and an expectation for the future is that as part -- one of the consequences of COVID-19 and the very real reason to pivot to digital tools, that helps to increase customer comfort and familiarity with these tools. And so we do expect, on an ongoing basis, to see a greater willingness of customers to use some of the digital tools that really enable a more efficient operation of our existing distribution channels across Asia. So all of our markets have, over the course of the last quarter, been able to pivot to non face-to-face enablement. So it's not just 1 market or 2 markets. It's all of our markets in Asia that now have that capability. And I gave a statistic earlier that in Philippines and Malaysia, we've seen the take-up of those digital tools go from 0% to 70% of new business. So this is actually a very important trend. And in Hong Kong, prior to COVID-19, it was required that the sale of life insurance is a transaction for regulatory reasons that needed to be face-to-face. But as a result of the people staying home and the social distancing protocols, the regulator in Hong Kong has relaxed that requirement for an interim period and allowed us to use our digital tools, e-signature tools, video conferencing tools, authenticated video conferencing tools that enable us to continue to sell in this environment. So that's been very important alongside our electronic point of sales tools that have automated underwriting already built in to the back end so that we provide a seamless process for our customers. So I think this is important for the future. I think it's important to attracting talent to the organization and growing our distribution channels. And I actually believe that this will become a competitive advantage -- relative competitive advantage to Manulife, given that we've been investing for a number of years.

Well, it's good to hear, Phil. But in terms of not just the top line impact, but in terms of bottom line, is this a tailwind to expenses? And can this actually help you over the longer term, achieve or even beat your efficiency targets?

It is certainly good for the -- for our expense efficiency priority. As you know, we look at efficiency, not only in terms of absolute expenses but relative to revenues. And that's the -- that's why we like so much the cost efficiency ratio metric where we have a 50% target because we're able to look at how overall we can make ourselves more efficient and productive. I see the biggest benefit of digitization as being productivity, our ability to improve productivity. You think of an individual member of the sales force, if they're not having to run around, hop around on a moped or a scooter from customer to customer, potentially 3 or 4 journeys to complete paper forms, an introductory meeting, a follow-up meeting, if there could be one face-to-face meeting and then all the other follow-up completed through a digital format or you can run through in one session with a customer the end-to-end sales process through an ePOS, electronic point of sales-enabled process with a policy issued at the back end, collection of cash electronically through the banking system, that enables substantial improvements in productivity of our sales force. So that's what I'm most excited about. But of course, alongside that, there are opportunities to reduce absolute expenses. This -- it fits with our belief in going paperless. We do spend money on printing and mailing costs. If we're able to achieve greater sustained take-up of our digital tools, those costs will go down. So yes, I am optimistic about the potential benefits of digitalization to expense efficiency.

Phil, that's fantastic. I could chat with you almost indefinitely, but we bumped up against our time. So I want to say thank you very much for taking the time to provide your views on Manulife. And to everyone joining us, thank you very much. Stay safe. And hopefully, things will start to look a little bit better.

Thank you, John, and stay safe yourself, and thanks, everyone, for listening. See you soon.

Yes. Thanks, again, Phil.