In terms of operating performance, we significantly increased insurance sales as compared with the second quarter of 2011 with all-time record sales in Asia. We work diligently to improve our product mix in line with our lower risk product strategy, we strengthened our underlying earnings for the first quarter and we were able to generate strong new business embedded value.
In terms of capital management and financial position, our variable annuity hedging program mitigated 88% of the effects of lower equity markets and interest rates and was essentially fully effective over the first half of the year 2012. Our capital ratio stands at 213% as of the end of June. We significantly reduced our earnings sensitivity to interest rates in the quarter and remained ahead of our hedging timetable and we decreased our leverage this quarter.
On the other hand, it is possible that third quarter basis change could be up to C$1 billion, which is related to businesses, which do not make up a significant portion of our go-forward business plan. It is also apparent that the impact of continued macroeconomic headwinds makes the achievement of our 2015 earnings objectives more of a stretch. Steve will talk in more detail about these items in a few minutes.
In summary, we’re pleased that we made substantive progress against our strategic priorities, strengthened underlying earnings and benefited from the positive impacts of our hedging programs. Without question, this quarter’s results provide many reasons for optimism about our operational performance and capacity to grow. Our strategy is delivering results that will position Manulife for the future earnings growth and ROE expansion.Read the rest of this transcript for free on seekingalpha.com