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Manulife announces $5.4 billion reinsurance transaction, including $2.4 billion of long-term care, with RGA
LTCLTC Properties(LTC) Prnewswire·2024-11-20 21:30

Core Insights - Manulife Financial Corporation has entered into a 5.4billionreinsuranceagreementwithReinsuranceGroupofAmerica,whichincludes5.4 billion reinsurance agreement with Reinsurance Group of America, which includes 2.4 billion of long-term care reserves, marking a significant milestone in optimizing its portfolio [1][2][4] - The transaction is expected to release 0.8billionofcapital,whichwillbereturnedtoshareholdersthroughsharebuybacks[2][9][10]−ThecumulativereductionofLTCreserveswillbe180.8 billion of capital, which will be returned to shareholders through share buybacks [2][9][10] - The cumulative reduction of LTC reserves will be 18% and morbidity sensitivity by 17% upon closing, demonstrating the company's ability to manage its LTC portfolio effectively [2][3][8] Transaction Details - The reinsurance agreement involves a full risk transfer of 2.4 billion of LTC reserves and includes a legacy block of U.S. structured settlements with 3.0billionofreserves[2][4]−Thetransactionispricedatcloseto1.0timesbookvalue,withamodestnegativecedingcommissionof43.0 billion of reserves [2][4] - The transaction is priced at close to 1.0 times book value, with a modest negative ceding commission of 4% on the LTC block [4][10] - The deal is expected to be accretive to core return on equity (ROE) and have a neutral impact on core earnings per share (EPS) [2][10] Shareholder Value - The capital release of 0.8 billion will allow the company to repurchase up to 90 million common shares under its current normal course issuer bid (NCIB) program [9][10] - The transaction is anticipated to result in an annual reduction to core earnings and net income attributed to shareholders of 70millionand70 million and 50 million, respectively [10] - Manulife aims to dispose of $1.5 billion of alternative long-duration assets as part of this transaction [5][9] Management Commentary - The President and CEO of Manulife emphasized that this transaction unlocks significant shareholder value and accelerates the company's transformation towards higher returns and lower risk [2][3] - The Global Head of Strategy and Inforce Management noted the importance of this transaction in improving the return profile of the in-force business [3][4]