Manulife plans share buyback on reinsurance deal for $5.8 billion of policies
Manulife Financial Corp. has struck another deal to offload some of its less-profitable assets, agreeing to reinsure $5.8 billion of Canadian policies with RGA Life Reinsurance Co. of Canada.
The deal will allow the Toronto-based insurer and asset manager to release $800 million in capital, which it plans to return to shareholders through share buybacks, according to a statement Monday. Manulife will continue to administer the policies, which are a block of Canadian universal life-insurance policies with a low return on equity.
“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,” Manulife ehief executive Roy Gori said in the statement.
Manulife shares rose 1.2 per cent to $33.06 at 3:19 p.m. They’ve gained 13 per cent this year, compared with a 3.5 per cent increase for the S&P/TSX Composite Financials Sector Index.
The deal comes three months after Manulife announced what it called at the time the largest long-term care reinsurance transaction in the industry’s history, reinsuring $13 billion of reserves with KKR & Co.’s Global Atlantic Financial Group and its partners.
Such deals result in lower core earnings, as the insurer no longer books revenue from the policies. But offloading assets with a low return on equity improves the company’s overall profitability and means it doesn’t have to hold as much capital under regulatory rules.
Manulife and RGA, a subsidiary of Chesterfield, Missouri-based Reinsurance Group of America Inc., have completed two previous transactions together. Manulife said the latest deal, scheduled for completion early in the
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