8. Fourth Quarter Financial Highlights Profitability As at and for the quarters ended December 31, ($ millions, unless otherwise stated) 2022 2021 Profitability: Net income attributed to shareholders $ 1,891 $ 2,084 (1) Core earnings $ 1,746 $ 1,708 Diluted earnings per common share ($) $ 0.95 $ 1.03 Diluted core earnings per common share ($) $ 0.88 $ 0.84 Return on common shareholders’ equity (“ROE”) 14.4% 15.6% Core ROE 13.2% 12.7% (1) Impact of currency movement on the fourth quarter of 2022 (“4Q22”) core earnings compared with the fourth quarter of 2021 (“4Q21”) was a $46 million favourable variance. Manulife’s 4Q22 net income attributed to shareholders was $1,891 million compared with $2,084 million in 4Q21. Net income attributed to shareholders is comprised of core earnings (consisting of items we believe reflect the underlying earnings capacity of the business), which amounted to $1,746 million in 4Q22 compared with $1,708 million in 4Q21, and items excluded from core earnings, which amounted to a net gain of $145 million in 4Q22 compared with a net gain of $376 million in 4Q21. Net income attributed to shareholders in 4Q22 decreased compared with 4Q21 primarily driven by losses from investment-related experience (compared with gains in the prior year) and a smaller gain from the direct impact of markets, partially offset by the favourable impact of an increase in the Canadian corporate tax rate and higher core earnings. Investment-related experience in 4Q22 reflected lower-than-expected returns (including fair value changes) on ALDA related to real estate, partially offset by the favourable impact of fixed income reinvestment activities and strong credit experience. The gain from the direct impact of markets in 4Q22 was primarily driven by gains due to the flattening of the yield curve in the U.S. and Canada and the impact of favourable equity market performance, partially offset by losses from corporate spread movements across several markets of differing magnitudes and from the sale of AFS bonds. The 2% decrease in core earnings on a constant exchange rate basis compared with 4Q21 was driven by lower net fee income from lower average AUMA in Global WAM, lower new business gains in Asia and the U.S. and lower in-force earnings in U.S. Annuities of $55 million due to the variable annuity reinsurance transactions. These items were largely offset by higher yields on fixed income investments, gains on seed money investments and lower withholding taxes in Corporate and Other, improved policyholder experience in Canada and the U.S. and in-force business growth in Asia and Canada. 4Q22 core earnings included a net charge of $73 million ($82 million pre-tax) related to 1 Actions to policyholder insurance and annuity experience compared with a net charge of $97 million ($120 million pre-tax) in 4Q21. improve the capital efficiency of our legacy business resulted in $55 million lower core earnings in 4Q22 compared with 4Q21. Excluding these actions, in-force business increased 5%2 compared with 4Q21. Core earnings by segment is presented in the table below for the periods presented. For the quarters ended December 31, ($ millions) 2022 2021 Core earnings Asia $ 569 $ 547 Canada 350 286 U.S. 374 467 Global Wealth and Asset Management 267 387 Corporate and Other (excluding core investment gains) 86 (79) Core investment gains 100 100 Core earnings $ 1,746 $ 1,708 In Asia, core earnings were $569 million in 4Q22 compared with $547 million in 4Q21. The 1% increase on a constant exchange rate basis was driven by favourable changes in new business product mix and in-force business growth, partially offset by the impact of lower new business volumes primarily in Hong Kong. In addition, higher investment income on allocated capital increased core earnings by US$12 million compared with 4Q21 (see Corporate and Other segment). In Canada, core earnings were $350 million in 4Q22 compared with $286 million in 4Q21. The 22% increase primarily reflected experience gains in 4Q22 compared with losses in 4Q21 with contributions from all businesses, higher Manulife Bank earnings and higher insurance in-force earnings, partially offset by the impact of an increase in the corporate income tax rate and lower segregated fund in-force earnings due to lower equity markets. 1 Policyholder experience includes quarterly gains of nil post-tax in 4Q22 (4Q21 – gains of $5 million) from customers who have opted to change their existing medical coverage to the VHIS products in Hong Kong. These gains did not have a material impact on core earnings as they were offset by new business strain. 2 Excludes $70 million (pre-tax) in 4Q22 of lost expected profit on in-force relating to the U.S. variable annuity reinsurance transaction. Percentage growth is based on the pre-tax impact of these actions, and is stated on a constant exchange rate basis. 43