Manulife's Q1 2024 earnings call was a symphony of Asian success. Double-digit growth in APE sales, record core earnings contributions, and an upcoming Investor Day in Hong Kong and Jakarta - the narrative was clear: Asia is Manulife's powerhouse.

But amidst this chorus of eastern promise, a quieter, perhaps even more profound story unfolded. A story that, I suspect, most analysts missed in their rush to dissect the Asian dragon. That story is the potential for *sustained and significant* ROE expansion in Manulife's North American businesses, driven by a potent combination of reinsurance mastery, evolving actuarial assumptions, and a surprising shift in capital allocation.

Let's start with the big, obvious win: reinsurance. Manulife's Canadian UL deal, the largest ever in the country, follows hot on the heels of their groundbreaking LTC reinsurance deal with Global Atlantic, itself the largest of its kind. These deals aren't just about freeing up capital. Manulife is transacting at attractive earnings multiples - *ahead* of where they currently trade. This suggests savvy deal-making that, if replicated, could become a powerful engine of ROE growth.

But there's another, less obvious layer to the reinsurance story: its impact on actuarial assumptions. The Global Atlantic deal validated Manulife's LTC assumptions, establishing a baseline for future transactions and potentially paving the way for even more aggressive reinsurance activity in this traditionally complex space. Moreover, both deals removed volatile, less predictable blocks of business, allowing Manulife to recalibrate its risk adjustment under IFRS 17. This recalibration, while generating a modest quarterly earnings benefit of $20 million, speaks to a broader trend - more stable, predictable earnings from Manulife's core businesses, a recipe for confidence and, potentially, a higher ROE multiple from the market.

Now, let's throw in the wildcard: a surprise shift in capital allocation. Manulife reallocated surplus across its segments, with Global Wealth and Asset Management receiving a larger slice due to higher yields and increased size. This move, while seemingly technical, holds profound implications. As G-WAM, with its higher ROE profile, grows, it pulls the overall Manulife average upwards.

Here's the potential hypothesis: Manulife is laying the groundwork for a sustained ROE expansion beyond its medium-term target of 15%. The numbers tell a compelling story:

Q4 2023 Core ROE: 16.4%

Q1 2024 Core ROE: 16.7%

These aren't just blips - they represent a clear trend. Further supporting this hypothesis is the fact that Manulife has consistently exceeded its 15% target for three consecutive quarters.

Core ROE Trend

This chart illustrates Manulife's Core ROE performance over the past four quarters, highlighting the consistent trend above the 15% target.

While Asia will undoubtedly remain a critical engine of growth, the real surprise may be the extent to which Manulife's North American businesses, bolstered by reinsurance, more stable earnings profiles, and targeted capital allocation, contribute to a sustained, potentially market-redefining ROE expansion.

"Fun Fact: Did you know that John Hancock, Manulife's US subsidiary, was the first company to offer group life insurance to women at the same rates as men? That's right - back in 1890, they recognized the fundamental equality of life insurance needs, a testament to their forward-thinking approach that seems to be paying off handsomely today."