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Goodwill and Intangible Assets
 12 Months Ended
Dec. 31, 2023
Text block [abstract]  
Goodwill and Intangible Assets
Note 6  Goodwill and Intangible Assets
(a) Change in the carrying value of goodwill and intangible assets
The following table presents the change in carrying value of goodwill and intangible assets.
 
For the year ended December 31, 2023
 
Balance,
January 1,
2023
 
 
Net additions/
(disposals)
 
 
Amortization
expense
 
 
Effect of changes
in foreign
exchange rates
 
 
Balance,
December 31,
2023
 
Goodwill
  
$
6,014
 
  
$
–
 
  
$
n/a
 
  
$
(95
)
  
$
5,919
 
Indefinite life intangible assets
                                        
Brand
  
 
813
 
  
 
–
 
  
 
n/a
 
  
 
(22
)
  
 
791
 
Fund management contracts and other
(1)
  
 
1,048
 
  
 
–
 
  
 
n/a
 
  
 
(14
)
  
 
1,034
 
 
  
 
1,861
 
  
 
–
 
  
 
n/a
 
  
 
(36
)
  
 
1,825
 
Finite life intangible assets
(2)
                                        
Distribution networks
  
 
881
 
  
 
31
 
  
 
(53
)
  
 
(25
)
  
 
834
 
Customer relationships
  
 
643
 
  
 
(4
)
  
 
(53
)
  
 
(4
)
  
 
582
 
Software
  
 
1,068
 
  
 
274
 
  
 
(217
)
  
 
(23
)
  
 
1,102
 
Other
  
 
52
 
  
 
11
 
  
 
(5
)
  
 
(10
)
  
 
48
 
 
  
 
2,644
 
  
 
312
 
  
 
(328
)
  
 
(62
)
  
 
2,566
 
Total intangible assets
  
 
4,505
 
  
 
312
 
  
 
(328
)
  
 
(98
)
  
 
4,391
 
Total goodwill and intangible assets
  
$
  10,519
 
  
$
312
 
  
$
(328
)
  
$
(193
)
  
$
10,310
 
           
For the year ended December 31, 2022   Balance,
January 1,
2022		     Net additions/
(disposals)
(3),(4)
     Amortization
expense		     Effect of changes
in foreign
exchange rates		     Balance,
December 31,
2022		  
Goodwill
   $ 5,651     $ 255     $ n/a     $ 108     $ 6,014  
Indefinite life intangible assets
                                        
Brand
     761       –       n/a       52       813  
Fund management contracts and other
(1)
     788       228       n/a       32       1,048  
 
     1,549       228       n/a       84       1,861  
Finite life intangible assets
(2)
                                        
Distribution networks
     888       6       (47 )     34       881  
Customer relationships
     687       –       (56 )     12       643  
Software
     1,091       192       (235 )     20       1,068  
Other
     49       7       (6 )     2       52  
 
     2,715       205       (344 )     68       2,644  
Total intangible assets
     4,264       433       (344 )     152       4,505  
Total goodwill and intangible assets
   $ 9,915     $   688     $   (344 )   $   260     $   10,519  
 
(1)
 
Fund management contracts are mostly allocated to Canada WAM and U.S. WAM CGUs with carrying values of $
273
 
(2022 – $
273
) and $
386
 
(2022 – $
397
), respectively.
(2)
 
Gross carrying amount of finite life intangible assets was $
2,955
for software, $
1,511
 
for distribution networks, $
1,136
 
for customer relationships and $
138
 
for other (2022 – $
2,736
, $
1,517
, $
1,146
and $
136
), respectively.
(3)
 
In November 2022, the Company acquired control of Manulife Fund Management Co., Ltd., formerly known as Manulife TEDA Fund Management Co., Ltd, through the purchase of the remaining
51
% of shares that it did not already own from its joint venture partner. The transaction included cash consideration of $
334
and derecognition of the Company’s previous joint venture interest with a fair value of $
321
. Goodwill, indefinite life fund management contracts and distribution networks, and finite life management contracts
, included in Other,
of $255, $185, $52 and $3 were recognized.
(4)
 
In January 2022, the Company paid $
256
to VietinBank for an extension of the life of the distribution agreement acquired from Aviva Plc in December, 2021.
(b) Goodwill impairment testing
The Company completed its annual goodwill impairment testing in the fourth quarter of 2023 by determining the recoverable amounts of its businesses using valuation techniques discussed below (refer to notes 1 (f) and 6 (c)). The testing indicated that there was no impairment of goodwill in 2023 (2022 – $nil).
 
The following tables present the carrying value of goodwill by CGU or group of CGUs.
 
For the year ended December 31, 2023
CGU or group of CGUs
 
Balance,
January 1,
2023
 
 
Net additions/
(disposals)
 
 
Effect of
changes
in foreign
exchange
rates
 
 
Balance,
December 31,
2023
 
Asia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asia Insurance (excluding Japan)
 
$
  162
 
 
$
–
 
 
$
(3
) 
 
$
  159
 
         
Japan Insurance
  
 
360
 
  
 
–
 
  
 
(32
)
  
 
328
 
         
Canada Insurance
  
 
1,960
 
  
 
–
 
  
 
(2
)
  
 
1,958
 
         
U.S. Insurance
  
 
360
 
  
 
–
 
  
 
(10
)
  
 
350
 
         
Global Wealth and Asset Management
  
 
                          
 
         
Asia WAM
  
 
450
 
  
 
–
 
  
 
(12
)
  
 
438
 
         
Canada WAM
  
 
1,436
 
  
 
–
 
  
 
–
 
  
 
1,436
 
         
U.S. WAM
  
 
1,286
 
  
 
–
 
  
 
(36
)
  
 
1,250
 
         
Total
  
$
6,014
 
  
$
–
 
  
$
(95
)
  
$
5,919
 
         
For the year ended December 31, 2022
CGU or group of CGUs
   Balance,
January 1,
2022		     Net additions/
(disposals)		     Effect of
changes
in foreign
exchange
rates		     Balance,
December 31,
2022		  
         
Asia
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
         
Asia Insurance (excluding Japan)
   $
152
     $ –     $
10
     $
162
  
         
Japan Insurance
  
 
386
 
  
 
 –
 
  
 
(26
) 
  
 
360
 
         
Canada Insurance
  
 
1,955
 
  
 
 –
 
  
 
5
 
  
 
1,960
 
         
U.S. Insurance
  
 
336
 
  
 
 –
 
  
 
24
 
  
 
360
 
         
Global Wealth and Asset Management
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
         
Asia WAM
  
 
183
 
  
 
255
 
  
 
12
 
  
 
450
 
         
Canada WAM
  
 
1,436
 
  
 
 –
 
  
 
 –
 
  
 
1,436
 
         
U.S. WAM
  
 
 
1,203
 
 
  
 
 
–
 
 
  
 
 
83
 
 
  
 
 
1,286
 
 
         
Total
   $ 5,651     $ 255     $ 108     $ 6,014  
The valuation techniques, significant assumptions and sensitivities, where applicable, applied in the goodwill impairment testing are described below.
(c) Valuation techniques
When determining if a CGU is impaired, the Company compares its recoverable amount to the allocated capital for that unit, which is aligned with the Company’s internal reporting practices. The recoverable amounts were based on fair value less costs to sell (“FVLCS”) for Asia Insurance (excluding Japan) and Asia WAM. For other CGUs, value-in-use (“VIU”) was used.
Under the FVLCS approach, the Company determines the fair value of the CGU or group of CGUs using an earnings-based approach which incorporates forecasted earnings, excluding interest and equity market impacts and normalized new business expenses multiplied by an earnings-multiple derived from the observable price-to-earnings multiples of comparable financial institutions. The price-to-earnings multiple used by the Company for testing
ranged from
5.1 to 12.7 (2022 –
 
4.4 to
 11.6). These FVLCS valuations are categorized as Level 3 of the fair value hierarchy (2022 – Level 3).
Under the VIU approach, used for CGUs with insurance business, an embedded appraisal value is determined from a projection of future distributable earnings derived from both the in-force business and new business expected to be sold in the future, and therefore, reflects the economic value for each CGU’s or group of CGUs’ profit potential under a set of assumptions. This approach requires assumptions including sales and revenue growth rates, capital requirements, interest rates, equity returns, mortality, morbidity, policyholder behaviour, tax rates and discount rates. For non-insurance CGUs, the VIU is based on discounted cash flow analysis which incorporates relevant aspects of the embedded appraisal value approach.
(d) Significant assumptions
To calculate an insurance appraisal value, the Company discounted projected earnings from in-force contracts and valued 20 years of new business growing at expected plan levels, consistent with the periods used for forecasting long-term businesses such as insurance. In arriving at its projections, the Company considered past experience, economic trends such as interest rates, equity returns and product mix as well as industry and market trends. Where growth rate assumptions for new business cash flows were used in the embedded appraisal value calculations, they ranged from
zero per cent to 13.0
 
per cent (2022 – zero per cent to
nine
per cent).
Interest rate assumptions are based on prevailing market rates at the valuation date.
Tax
rates applied to the projections include the impact of internal reinsurance treaties and
were
28.0 per cent, 27.8 per cent and 21.0 per cent for the Japan, Canada and U.S. jurisdictions, respectively
 
(2022 – 
28.0 per cent, 27.5 per cent and 21.0 
per cent,
respectively). Tax assumptions are sensitive to changes in tax laws as well as assumptions about the jurisdictions in which profits are earned. It is possible that effective tax rates could differ from those assumed.
 
Discount rates assumed in determining the value-in-use for applicable CGUs or group of CGUs ranged from 10.0 per cent to 13.0 per cent on an after-tax basis or 12.5 per cent to 16.3 per cent on a pre-tax basis (2022 – 10.0 per cent to 12.0 per cent on an after-tax basis or 12.5 per cent to 15.0 per cent on a pre-tax basis).
Key assumptions may change as economic and market conditions change, which may lead to impairment charges in the future. Adverse changes in discount rates (including from changes in interest rates) and growth rate assumptions for new business cash flow projections used in the determination of embedded appraisal values or reductions in market-based earnings multiples calculations may result in impairment charges in the future which could be material.