Manulife Financial Corporation has entered into a CA$5.4 billion (US$3.85 billion) reinsurance agreement with Reinsurance Group of America (RGA), including CAD$2.4 billion of long-term care (LTC) reserves.
The company will reinsure a combined CA$5.4 billion in reserves across two blocks of legacy business for RGA, including portions of LTC and structured settlements in the US.
The transaction includes significant structural protections, including over-collateralised trusts to hold investment assets. The reinsurance represents a 75 per cent quota share on both ceded blocks.
In connection with the transaction, the company expects to dispose CA$1.5 billion of alternative long-duration assets (ALDA) by early 2025, subject to customary closing conditions.
The company states that it will continue to administer all reinsured policies for a seamless customer service experience.
Roy Gori, president and CEO at Manulife, comments: "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."
