Manulife Financial announces C$5.4B reinsurance transaction with RGA

Manulife Financial (MFC) announced that it has entered into a C$5.4B reinsurance agreement with Reinsurance Group of America, including C$2.4B of long-term care reserves. Key highlights of the transaction: “Reinsuring C$2.4B of LTC reserves to RGA on a full risk transfer basis. Inclusive of our previous LTC reinsurance transaction, upon closing we will have cumulatively reduced LTC reserves by 18% and LTC morbidity sensitivity by 17%. Transacted LTC block is younger, with a greater proportion of active life reserves than our previous transaction. Modest negative 4% LTC cede further validates our reserves and assumptions. Transaction also includes a legacy block of U.S. structured settlements with C$3B of reserves. Accretive to core ROE, and an attractive core earnings multiple of 11.4 times; neutral impact to core EPS. Close to 1.0x book value; expect to release C$0.8B of capital, which we intend to fully return to shareholders. Expect to dispose C$1.5B of alternative long-duration assets.” Roy Gori, Manulife President & Chief Executive Officer said, “We are further unlocking significant shareholder value with a second milestone LTC reinsurance transaction within 12 months, which accelerates our transformation to reshape our portfolio towards higher return and lower risk. This transaction further demonstrates our ability to execute on complex transactions and collaborate with experienced counterparties to deliver win-win outcomes, including on both mature and younger LTC blocks. The deal is priced at 11.4 times core earnings multiple and is expected to be accretive to core ROE after we return the released capital to shareholders through share buybacks.”