Manulife Financial To Reinsure $13 Billion Of Reserves To Global Atlantic

(RTTNews) - Manulife Financial Corp. (MFC, MFC.TO) announced Monday it has agreed to reinsure $13 billion of reserves across four legacy/low ROE blocks, including $6 billion, or 14% of total long-term care (LTC) reserves, to Global Atlantic and its partners.

The transaction is priced at a one times book value multiple, with a modest negative ceding commission on LTC and structured settlement blocks, offset by a positive ceding commission on the Japan blocks.

The deal is a full risk transfer, and includes significant structural protections, including over-collateralized trusts to hold investment assets. The reinsurance represents an 80% quota share of the ceded LTC blocks and 100% quota share of the other ceded blocks.

Manulife will continue to administer all reinsured policies for a seamless customer service experience. The transaction is expected to close in the first half of 2024 and is subject to regulatory approval.

The transaction is expected to release $1.2 billion of capital and Manulife intends to return the full amount of freed up capital to shareholders via share buybacks.

The company has also received approval from the Office of the Superintendent of Financial Institutions (OSFI) to launch a normal course issuer bid (NCIB) that permits the purchase for cancellation of up to approximately 2.8% of our outstanding common shares commencing February 2024. The NCIB remains subject to the approval of the Toronto Stock Exchange.