Manulife Financial has struck a US $4.3 billion reinsurance deal with RGA Canada, a subsidiary of Reinsurance Group of America.
The transaction, expected to conclude early in the second quarter of 2024, is the largest Canadian universal life reinsurance deal to date.
Under the agreement, RGA Canada will reinsure US $4.3 billion of reserves from Manulife’s low return on equity (ROE) Canadian universal life block at 16.2 times earnings multiple and approximately 1.0 times book value multiple.
The deal will allow the insurer to release US $588.6 million in capital, which it plans to return to shareholders through share buybacks.
Priced at book value, the transaction is anticipated to reduce Manulife’s annual core earnings by around US $36.7 million and net income attributed to shareholders by approximately US $29.4 million.
Manulife will continue to administer all policies while reinsuring a 100 per cent quota share on the reserves ceded, backed by structural protections including posted collateral.
Roy Gori, Manulife president and CEO, says: “This transaction is the largest universal life reinsurance transaction in the Canadian insurance industry and represents another milestone in our journey to transform our portfolio to higher ROE and lower risk businesses.
“With this transaction, we will have released US $8.1 billion of capital since 2018 and improved core ROE by approximately five per cent since 2017.”
