At the start of 2016, the impact of oil markets was still a significant negative. Concerns that a China slowdown would ripple through Asia also persisted through part of the year. Then Brexit became a very real worry, dragging on a number of European economies already strained by the refugee crisis. Meanwhile, economic headwinds were blowing even harder: capital markets were volatile, equity markets stalled and – worse yet for Manulife – interest rates declined even further, continuing to test our hedging strategies. Then, in November, all of those concerns were superseded by the outcome of the U.S. election.

With all of this turbulence and gloom of 2016 now behind us, you can understand how elated I am to write the words: $4 billion of core earnings, a strong capital position, Total Shareholder Return of nearly 20% and an 11% increase in our dividend. Yes, there were disappointments this year as well. For example, net income, while improved over last year, was still below target. However, I believe that in hindsight, 2016 will

be viewed as strong and notable: in addition to achieving the four-year core earnings target we set back in 2012, we proved that our strategy of growing in Asia and our continued investment in our global Wealth and Asset Management platform were well conceived.

It was a good year to test management resolve and flexibility, and to see us persevere and execute under the stress of negative influences which were sometimes difficult to predict. While U.S. and Canadian Divisions remained steady and committed to their plan, Asia Division and global Wealth and Asset Management demonstrated strong growth. I refer you to the letter from Donald Guloien, Manulife’s CEO, for a detailed account of the many important initiatives, the financial success realized and the progress made during the past year. The Board is strongly supportive of Manulife’s customer-centric strategy, and its focus on Total Shareholder Return as a key filter for strategic decision-making.

I am pleased to report that your Board of Directors has been actively engaged and meeting the challenges and obligations of providing best-in-class governance. Fifteen diversely experienced Directors, nine Board meetings, 24 committee meetings, 16 education sessions, thousands of pages, hundreds of hours and nearly perfect attendance and participation. We tied for second place in The Globe and Mail’s annual corporate governance rankings and were winners of the Best Engagement by a Governance Team award at the Governance Professionals of Canada’s Excellence in Governance Awards. Our annual objectives were comprehensive and ambitious, starting with “Say on Pay.”

After shareholder support for our approach to executive compensation declined from 91% in 2015 to 77% in 2016, I pledged at the annual meeting to review our program and take action to meet shareholder expectations. John Cassaday, a Director and Chair of our Management Resources and Compensation

Committee, and I met individually with 25 shareholders representing nearly 50% of our institutional shareholder base to listen to their advice and suggestions for program improvements. We also consulted with proxy advisory firms. Subsequent months of meetings with management, along with the active participation and support of the CEO, resulted in seven significant changes which are listed and detailed in our Management Information Circular.

I would like to thank all of those who participated, especially Donald Guloien, who voluntarily accepted a reduction in his compensation to reflect support for the changes. Our CEO continues to set the tone at the top, with a commitment to integrity, ethics and a clear sense of purpose. Donald is a champion of building long-term shareholder value, and is passionate about the success of the Company.

Given the significant uncertainty we experienced throughout much of 2016, your Board’s objectives were focused to a great extent on issues of risk and risk management. The Company has been subjected to increased uncertainty brought on not only by the aforementioned economic headwinds, but also by new accounting rules, changing capital standards and highly active global regulatory regimes. In addition, cybersecurity remains an evergreen priority and a challenge for all financial institutions.

Manulife has built a robust risk management framework, staffed by seasoned, experienced professionals who provide an independent assessment of all Company activities. Oversight is effectively cascaded from executive management to business unit managers globally, and we monitor and assess quantitative and qualitative risk using comprehensive analytics with the Board’s Risk Committee oversight. Our risks are fully

described in our annual MD&A as part of the annual report, and updated quarterly.

Mindful of our risk and audit responsibilities, there is no better and more practical oversight than meeting face-to-face, and in 2016 the Board continued its practice of conducting global on-site visits across the Company. During the year, we deployed individual Directors and Director teams to engage, listen, inspect and verify. Internationally, these visits were to Hong Kong, mainland China, Japan, Cambodia, Singapore, Indonesia and the U.S. In addition to our local learnings, these visits gave us insight into the effectiveness of corporate functions, external vendors and providers, and the quality of the internal and external audit services which we rely upon.

We recognize that having a culture which values diversity, inclusiveness, fairness and equal opportunity is essential to achieving our goal of customer-centric transformation. In that regard, the Board has been enhanced by the addition of Pamela Kimmet, a highly regarded human resources professional who has direct experience in financial services, investments, and health and wellness. She is serving on both the Management Resources and Compensation Committee and the Risk Committee.

One of our many Board objectives last year was a review of overall management succession, which focused on both our selection process and our ongoing program for leadership development. The Board has an active interest in developing Manulife’s leaders to their full potential, providing cross-training, international

experience and stretch assignments, and ensuring paths to succession for the Executive Committee. All Directors participated in one or more phases of the year-long review to determine the quality, strength and potential of senior management. The Board is satisfied that we can meet our obligation of assuring the continuity of qualified leadership candidates for the foreseeable future.

While we welcomed Pamela in 2016, we were deeply saddened by the sudden passing of our friend, confidant and General Counsel, Stephen Sigurdson, and the loss of the former President, CEO, Chairman and mentor, Syd Jackson.

I am thankful for and honoured by the support I have received from shareholders and from my Board colleagues who continue to inspire me with their dedication and hard work. And as always, I feel a great sense of pride to be associated with the thousands of employees who are the heart and soul of Manulife/John Hancock and who generously share their time, talent and money in the communities which we serve.

I list here just a few of the examples of the causes to which they have responded. We’re excited to be part of the ParticipACTION 150 Playlist, an initiative aimed at getting Canadians moving for Canada’s 150th anniversary. In the U.S., we proudly support UNICEF Kid Power, an innovative program that motivates local school children to get active by linking movement

to the delivery of life-saving food packets to severely malnourished children overseas. In Asia, we’re pleased to be in our third year of sponsoring the Angkor Wat International Half Marathon, with this year’s charitable proceeds earmarked for heart health.

As I write this letter, there are reasons to be optimistic: stronger equity markets, rising oil prices, rising interest rates, a better possibility of economic growth in the U.S. and Europe, and a more stable outlook in China, all of which would be an advantage for our Company.

However, I am skeptical. Indeed, it seems to me that our work on your behalf should be even more cautious and vigilant as we pursue greater success at Manulife and John Hancock, committed to putting the customer at the centre of everything we do, promoting wellness and providing more financial certainty in this still-uncertain world.

Thank you for your ongoing support and trust in Manulife.

Richard B. DeWolfe

Chairman of the Board

Relative to last year, net income rose 34% and core earnings rose 17%, and we delivered $4 billion in 2016 core earnings, achieving a four-year target we set back in 2012.

Our insurance sales rose 11% globally, and set a record in Asia. We also had record gross flows in our global Wealth and Asset Management business. Asia and global Wealth and Asset Management are businesses of great focus for us, delivering both our strongest growth and highest returns.

We delivered a Total Shareholder Return of 19.9% in 2016. Subsequent to year-end, we also raised our dividend by 11%, marking our third consecutive year of increases, and a cumulative increase of 58% during this period. Thanks to the ongoing trust of our customers, we now manage and administer a record $977 billion in assets. Our capital position remains strong, finishing the year with a capital ratio of 230%. We also globally diversified our funding sources and expanded our investor base throughout the year.

Managing expenses remained a priority for our Company, and we continued to generate substantial savings through our Efficiency and Effectiveness initiative. The annual net pre-tax savings from the four-year program of this initiative reached $500 million in 2016, exceeding our target of $400 million. We have

embraced the ongoing need to operate more efficiently and effectively as a way of life, and continue to look for new ways to save money every day. As in prior years, we will utilize a portion of these savings to help fund long-term strategic priorities.

IMPROVING OUR PERFORMANCE

There is much to be proud of when looking back at 2016; however, we had set even more ambitious goals for ourselves. Our objective for core earnings was somewhat higher, and our goal for net income was considerably higher. Many organizations suffered overall net withdrawals in their asset management businesses and we did not, which was a considerable achievement; nonetheless, both the income and net flows in our Wealth and Asset Management business were lower than expected.

These shortfalls are reflected in the executive compensation for my team and me. And as our Chairman, Dick DeWolfe, notes in his message, we have also listened to our shareholders and made a number of changes to ensure that our compensation practices address the will of investors. I believe passionately that executive compensation should be totally aligned to long-term shareholder value creation, and while it is

  DELIVERING FOR OUR CUSTOMERS

During the year, we paid to our customers about $26 billion in claims, cash surrender values, annuity payments and other benefits. However, there were also numerous non-financial objectives delivered in 2016, thanks to the dedication and efforts of our Company’s 35,000 employees and 70,000 agents who serve more than 22 million customers around the world.

We launched tools, products, services and partnerships to deliver on our Purpose, and to dramatically re-engineer our business and improve the customer experience. Our commitment to our customers’ health and wealth was once again in prominent focus throughout the year.

In Canada, we launched Manulife Vitality, offering our customers wearable devices to help them live healthier lives and save money through their life insurance program. We are using advanced, predictive analytics to simplify insurance underwriting and eliminate unnecessary medical testing, and became

the first insurer to accept life insurance applications from Canadians living with human immunodeficiency virus. After a successful pilot, we launched Retirement Redefined, a new holistic retirement planning platform that helps Canadians plan for life after retirement. We have also streamlined and simplified our travel insurance product offering.

In the U.S., John Hancock launched the first phase of our digital life insurance buying platform and made our first foray into digital advice. We also expanded our Vitality offering with HealthyFood, a leading program which provides discounts on healthy food purchases and further rewards customers for those purchases through savings on insurance premiums. We also continued to build our momentum in the Exchange Traded Funds market by adding six new funds to our lineup.

In Asia, we expanded our innovative ManulifeMOVE program to the Philippines and mainland China, building on the success we’ve seen in Hong Kong and Macau. In Indonesia, we launched klikMAMI, the first fully self-serve online mutual fund transaction platform in the market. Manulife Japan introduced a new service to enable immediate payment of premiums using text messages. In mainland China, we are using the WeChat messaging platform to process claims, reducing processing time from more than one week to as little as one day.

Around the world, our businesses are learning from each other, applying innovation and best practices gleaned from other parts of the organization, where they make sense.

“My Manulife account lets me spend more time with the most important people in my life – my family. I can pursue my career part-time and enjoy every moment with my kids.”

CAUTION REGARDING

FORWARD-LOOKING STATEMENTS

Manulife Financial Corporation  |  2016 Annual Report  |   Caution Regarding Forward-Looking Statements

2016

Manulife Financial Corporation

Annual Report

In 2016, we generated investment-related experience gains of $197 million which were included in core earnings in accordance with our definition of core earnings. The gains were driven by the favourable impact of fixed income reinvestment activities on the measurement of our policy liabilities and credit experience. While we reported lower returns on our alternative long-duration portfolio than expected in the valuation of our policy liabilities, we reported gains in the second half of the year that partially offset the charges reported in the first half of the year. The $530 million charge reported in 2015 included a charge of $876 million due to the sharp decline in oil and gas prices partially offset by a $346 million gain related to higher than expected returns on other asset classes as well as fixed income reinvestment activities. In accordance with our definition of core earnings, we included $197 million of investment-related experience gains in core earnings in 2016 and nil in 2015. (See “Performance and Non-GAAP Measures” below.)

The direct impact of equity markets and interest rates is relative to our policy liability valuation assumptions and includes changes to interest rate assumptions, as well as experience gains and losses on derivatives associated with our macro equity hedges. We also include gains and losses on the sale of available-for-sale (“AFS”) debt securities as management may have the ability to partially offset the direct impacts of changes in interest rates reported in the liability segments. Additional information related to the $484 million charge in 2016 is included in the “Analysis of Net Income” and the “Fourth Quarter Financial Highlights” below.

As noted in the Critical Accounting and Actuarial Policies section below, a comprehensive review of actuarial methods and assumptions is performed annually. In 2016 we strengthened our reserves to update morbidity, mortality, lapse, future premium and tax cash flow assumptions on our LongTerm Care business and to proactively reduce our ultimate reinvestment rate assumptions ahead of an expected update by the Actuarial Standards Board in 2017, partially offset by reserve releases related to other updates including policyholder experience assumptions in our U.S. Variable Annuity business.

The 2016 charge of $81 million included costs to integrate businesses acquired from Standard Life plc, NYL and Standard Chartered. The 2015 charge of $149 million included integration and acquisition costs of $99 million for the Standard Life transaction and $50 million for the NYL RPS acquisition and closed block reinsurance transaction (“Closed Block”).

The 2016 charge of $74 million primarily relates to restructuring and impairment charges related to the discontinuance of new sales of our stand-alone individual long-term care product in the U.S., restructuring costs related to our Indonesia operations and the closure of our technology shared service centre in Malaysia. These items were partially offset by a gain with respect to one of the Company’s pension plans. In addition, a gain related to the release of tax-related contingencies was largely offset by an update to tax timing assumptions related to the valuation of policy liabilities was included. The 2015 charge of $14 million relates to the settlement cost from the buy-out of the U.K. pension plan and the recapture of a reinsurance treaty in Canada mostly offset by tax rate changes in Canada and Japan.

Developing more holistic and long-lasting customer relationships;

Continuing to build and integrate our global wealth and asset management businesses; and

Leveraging skills and experiences across our international operations.

Across Canada, the U.S. and parts of Asia, our life insurance offerings now include wearable devices to help our customers live healthier lives and save money;

In Canada, we are using advanced, predictive analytics to simplify insurance underwriting and eliminate unnecessary medical testing;

In the U.S., we have launched the first phase of our new digital buying platform and made our first foray into digital advice; and

In mainland China, we are using the WeChat messaging platform to process claims, reducing processing time from more than one week to as little as one day.

This item is a non-GAAP measure. For a discussion of our use of non-GAAP measures, see “Performance and Non-GAAP Measures” below.

Asia core earnings was $1,495 million in 2016 compared with $1,234 million in 2015. This represented a 15% increase after adjusting for costs arising from the expansion of our dynamic hedging program (there is a corresponding decrease in macro hedging costs in the Corporate and Other segment) and the impact of changes in foreign currency rates. The increase in core earnings was driven by solid growth from in-force business and continued strong growth in new business volumes, partially offset by less favourable policyholder experience and the impact of declining interest rates.

Canada core earnings was $1,384 million compared with $1,252 million in 2015. The 11% increase was primarily due to improved policy holder experience, and higher fee income on the Company’s wealth and asset management business due to higher asset levels.

U.S. core earnings was $1,615 million compared with $1,466 million in 2015. This represented a 6% increase after adjusting for the impact of currency rates. The increase in core earnings was driven by a US$52 million release of tax provision as a result of closing certain tax years and the improved policyholder experience in the second half of 2016 as a result of changes to long-term care assumptions (see below in “2016 Review of Actuarial Methods and Assumptions”). In addition, lower amortization of deferred acquisition costs on in-force variable annuity business were offset by the impact of lower insurance sales and lower fee income in WAM businesses due to fee compression in our pension business and changes in business mix.

Corporate and Other core loss excluding the expected cost of macro hedges and core investment gains was $409 million in 2016 compared with $298 million in 2015. The unfavourable variance of $111 million was due to higher interest expense on debt issuances and lower realized gains on available-for-sale equities, higher interest allocated to the divisions, and higher expenses in Corporate and Other and strategic investments in our Manulife Asset Management business, partially offset by the release of provisions and interest on uncertain tax positions in the U.S.

The expected cost of macro hedges was $261 million in 2016 compared with $226 million in 2015, an increase of $35 million. The charges were higher in the first half of 2016, and reduced in the second half related to actions to reduce equity risk.

Investment-related experience in core earnings in 2016 of $197 million reflected the favourable impact of fixed income reinvestment activities on the measurement of our policy liabilities and credit experience. While we reported lower returns on our alternative long-duration portfolio than expected in the valuation of our policy liabilities, we reported gains in the second half of 2016 that partially offset the charges reported in the first half of the year. Total investment-related experience in 2015 was a loss and therefore, in accordance with our definition of core earnings, we did not report any investment-related experience in core earnings in 2015. (See section “Performance and Non-GAAP Measures” below)

See “Fourth Quarter Financial Highlights” below for additional information with respect to 2016 net charges.

In 2016, the net charge of $364 million included charges of $205 million from gross equity exposure, $120 million from macro hedge experience and $39 million from dynamic hedging experience. As at December 31, 2016, the net notional value of shorted equity futures contracts in our macro hedge program was $1.5 billion (2015 – $5.6 billion).

The $335 million charge in 2016 for fixed income reinvestment assumptions was largely driven by the decrease in corporate spreads which resulted in a decline in the reinvestment yields on future fixed income purchases assumed in the measurement of policy liabilities and a charge to net income attributed to shareholders. This was partially offset by falling swap spreads at the 30-year point, the point in the curve where we have a large number of our interest rate hedges. The fall in swap rates resulted in an increase in the fair value of our swaps and a gain to net income attributed to shareholders. The $201 million gain 2015 was due to a decrease in swap spreads partially offset by a decrease in risk-free rates.

The risk reduction actions in 2016 included selling equity investments supporting our products with guarantee features and increasing the amount of interest rate hedges. The sale of equity investments resulted in a decrease in our underlying earnings sensitivity before hedging and also reduced the amount of hedging instruments used in the macro hedging program.

This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.

The 2016 net charge from macro equity hedges was $381 million and consisted of a $261 million charge related to the estimated expected cost of the macro equity hedges relative to our long-term valuation assumptions and a charge of $120 million because actual markets outperformed our valuation assumptions (included in the direct impact of equity markets and interest rates and variable annuity guarantee liabilities above).

As outlined under “Critical Accounting and Actuarial Policies” below, net insurance contract liabilities under International Financial Reporting Standards (“IFRS”) for Canadian insurers are determined using the Canadian Asset Liability Method (“CALM”). Under CALM, the measurement of policy liabilities includes estimates regarding future expected investment income on assets supporting the policies. Experience gains and losses are reported when current period activity differs from what was assumed in the policy liabilities at the beginning of the period. These gains and losses can relate to both the investment returns earned in the period, as well as to the change in our policy liabilities driven by the impact of current period investing activities on future expected investment income assumptions. Our definition of core earnings in 2016 and 2015 (see “Performance and Non-GAAP Measures”) includes up to $400 million (2014 – up to $200 million) of favourable investment-related experience reported in a single year.

See “Critical Accounting and Actuarial Assumptions – Review of Actuarial Methods and Assumptions” below.

The direct impact of equity markets and interest rates is relative to our policy liability valuation assumptions and includes changes to interest rate assumptions, as well as experience gains and losses on derivatives associated with our macro equity hedges. We also include gains and losses on the sale of available-for-sale (“AFS”) debt securities as management may have the ability to partially offset the direct impacts of changes in interest rates reported in the liability segments. See table above for components of this item. Additional information related to the $484 million charge in 2016 is included in the “Fourth Quarter Financial Highlights” below.

The 2016 charge of $81 million included costs to integrate businesses acquired from Standard Life plc, NYL and Standard Chartered. The 2015 charge of $149 million included integration and acquisition costs of $99 million and $50 million for the Standard Life transaction and NYL RPS acquisition and closed block reinsurance transaction (“Closed Block”), respectively.

The 2016 charge of $74 million primarily relates to restructuring and impairment charges related to the discontinuance of new sales of our stand-alone individual long-term care product in the U.S., restructuring costs related to our Indonesia operations and the closure of our technology shared service centre in Malaysia. These items were partially offset by a gain with respect to one of the Company’s pension plans. In addition, a gain related to the release of tax-related contingencies was largely offset by an update to tax timing assumptions related to the valuation of policy liabilities was included.

For the purpose of comparable period-over-period reporting, we exclude the $7,996 million impact of the Closed Block reinsurance transaction, which is shown separately from premiums ceded to reinsurers, for the full year 2015. The net reinsurance premium was fully offset by an increase in the change in reinsurance assets in the Consolidated Statements of Income. For other periods, amounts in this subtotal equal the “net premiums” in the Consolidated Statements of Income.

Segregated fund assets, mutual fund assets and other funds are not available to satisfy the liabilities of the Company’s general fund.

Other funds represent pension funds, pooled funds, endowment funds and other institutional funds managed by the Company on behalf of others.

Average rates for the quarter are from Bank of Canada which are applied against Consolidated Statements of Income items for each period. Average rate for the full year is a 4 point average of the quarterly average rates.

Impact of currency movement on the fourth quarter of 2016 (“4Q16”) core earnings compared with the fourth quarter of 2015 (“4Q15”) was a $10 million favourable variance.

This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.

The impact of changes in risk-free rates for full year 2016 was largely driven by a fall in Japanese interest rates. The charges in 4Q16 largely came from North America where interest rates rose and the yield curve steepened, reversing the movements seen in the first three quarters of 2016. The impact of the yield curve steepening resulted in an accounting mismatch between our insurance liabilities and our interest rate hedges. This occurred because our policy liabilities are valued with reference to actuarial interest rate models, whereas our interest rate hedges are valued at current market rates. This accounting mismatch can be material when there is a significant change in the shape of the interest rate curve as was the case in 4Q16.

The decrease in corporate spreads in 4Q16 and the full year of 2016 resulted in a decline in the reinvestment yields on future fixed income purchases assumed in the measurement of policy liabilities and a charge to net income attributed to shareholders.

Swap spreads at the 30-year point, the point on the curve where we have a large number of our interest rate hedges, rose in 4Q16 and fell for the full year of 2016. The 4Q16 rise in swap spreads resulted in a decrease in the fair value of our swaps and a charge to net income attributed to shareholders. The full year fall in swap spreads resulted in an increase in the fair value of our swaps and a gain to net income attributed to shareholders.

Gains (charges) on sale of AFS bonds and derivative positions in the Corporate and Other segment was a result of realizing gains (charges) at the time of sale. As at December 31, 2016, the AFS fixed income assets held in the surplus segment were in a net after-tax unrealized loss position of $683 million.

The direct impact of equity markets was primarily driven by losses in the dynamic hedging program due to basis risk losses in fund manager and hedge asset performance which was exacerbated by the large change in interest rates during the fourth quarter.

Risk reduction activities: In 3Q16, we reported a charge of $155 million related to actions to reduce our exposure to equity markets and interest rates. The risk reduction actions in 2016 included selling equity investments supporting our products with guarantee features and increasing the amount of interest rate hedges. The sale of equity investments resulted in a decrease in our underlying earnings sensitivity before hedging and also reduced the amount of hedging instruments used in the macro hedging program.

In Asia, core earnings in 4Q16 was $388 million compared with $334 million in 4Q15. This was a 16% increase compared with 4Q15 after adjusting for costs arising from the expansion of our dynamic hedging program (there is a corresponding decrease in macro hedging costs in the Corporate and Other segment) and the impact of changes in foreign currency rates. The growth in core earnings was driven by solid growth of in-force business and continued strong growth in new business volumes, partially offset by less favourable policyholder experience and the impact of declining interest rates.

In Canada, core earnings was $359 million in 4Q16 compared with $352 million in 4Q15, an increase of $7 million.

In the U.S, core earnings was $471 million in 4Q16 and $332 million in 4Q15. The $139 million increase in core earnings over the prior year includes a US$52 million release of tax provisions as a result of closing certain tax years, improved policyholder experience in 4Q16 as a result of changes to long-term care assumptions in 3Q16 and lower amortization of deferred acquisition costs on in-force variable annuity business partially offset by lower fee income in WAM businesses driven by fee compression in our pension business and changes in business mix.

Corporate and Other core loss excluding expected cost of macro hedges and core investment gains was $75 million in 4Q16 compared with $85 million in 4Q15. The $10 million favourable variance in core earnings reflected a $73 million release of provisions and interest on uncertain tax positions in the U.S. partially offset by higher expenses in Corporate and Other and strategic investments in our Manulife Asset Management business.

This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.

The 4Q16 net charge from macro equity hedges was $110 million and consisted of a $36 million charge related to the estimated expected cost of the macro equity hedges relative to our long-term valuation assumptions and a charge of $74 million because actual markets outperformed our valuation assumptions (included in direct impact of equity markets and interest rates and variable annuity guarantee liabilities below).

As outlined under “Critical Accounting and Actuarial Policies” below, net insurance contract liabilities under IFRS for Canadian insurers are determined using CALM. Under CALM, the measurement of policy liabilities includes estimates regarding future expected investment income on assets supporting the policies. Experience gains and losses are reported when current period activity differs from what was assumed in the policy liabilities at the beginning of the period. These gains and losses can relate to both the investment returns earned in the period, as well as to the change in our policy liabilities driven by the impact of current period investing activities on future expected investment income assumptions. The direct impact of equity markets and interest rates is separately reported. Our definition of core earnings (see “Performance and Non-GAAP Measures”) includes up to $400 million of favourable investment-related experience reported in a single year.

The direct impact of equity markets and interest rates is relative to our policy liability valuation assumptions and includes changes to interest rate assumptions, including experience gains and losses on derivatives associated with our macro equity hedges. We also include gains and losses on derivative positions and the sale of AFS bonds in the Corporate and Other segment. See table below for components of this item.

The 4Q16 charge of $25 million included costs to integrate businesses acquired from Standard Life, New York Life and Standard Chartered.

The 4Q16 gain of $13 million included a gain with respect to one of the Company’s pension plans, partially offset by charges related to restructuring and impairment charges related to the discontinuance of new sales of our stand-alone individual long-term care product in the U.S. and restructuring costs related to our Indonesia operations and the closure of our technology shared service centre in Malaysia.