Manulife Closes Milestone $13B Reinsurance Transaction with Global Atlantic

The deal included C$6 billion of long-term care business, constituting the largest ever LTC reinsurance transaction.

(Manulife headquarters building on Bloor Street, Toronto. Credit: Skeezix100/Wikipedia.)

Manulife (Toronto) announced yesterday that it had successfully closed a transaction announced on Dec. 11, 2023 to reinsure four blocks of legacy/low ROE business with Global Atlantic (Des Moines). The deal included reinsuring C$13 billion of reserves, including $6 billion of long-term care (LTC) business—the largest ever LTC reinsurance transaction.

“An industry milestone, the transaction is the largest LTC reinsurance transaction ever, and our ability to transact with a leading reinsurance counterparty and its LTC reinsurance partner further validates the prudence of our LTC reserves and assumptions,” comments Roy Gori, President and CEO.

Roy Gori, President and CEO, Manulife.

As previously announced by the company in Dec. 2023, Manulife has received TSX and OSFI approval to commence share buybacks on February 23, 2024, to return unlocked capital from the transaction to its shareholders.

In its original announcement about the proposed transaction, Manulife noted that its ability to transact with a leading reinsurance counterparty and its LTC reinsurance partner further validates the prudence it LTC reserves and assumptions. Manulife characterized the deal as representing a full risk transfer with significant structural protection and with a highly experienced counterparty and its partners. The transaction released C$1.2 billion of capital, which the firm said it intended to fully return to shareholders via share buybacks, resulting in core EPS and core ROE. accretion

Manulife further said that the deal brought attractive earnings multiple of 9.5 times and 1.0 times book value multiple. The firm said the transaction reduced the risk from legacy blocks, including a 12 percent reduction in morbidity sensitivities. The firm expects to dispose of C$1.7 billion of alternative long-duration assets (ALDA).

In addition to the deal including a record LTC reinsurance transaction, Manulife characterizes the overall deal as a major milestone in reshaping its portfolio with core earnings contribution from LTC and variable annuities further reduced to 11 percent from 24 percent in 2017.

Further information on the transaction can be found at the following links from Manulife, including slides and a webcast conducted following the announcement.

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Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at AnthODonnell@IIReporter.com or (503) 936-2803.

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