The deal encompasses a 75% quota share on both ceded blocks and is expected to release $800m of capital for Manulife. Credit: Casimiro PT / Shutterstock.

Manulife has concluded its reinsurance transaction with Reinsurance Group of America (RGA), valued at $5.4bn (C$7.54bn), which includes $2.4bn of long-term care (LTC) reserves.

Announced in November 2024, this deal will help reinsure two blocks of legacy business.

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The reinsured LTC block, representing 6% of Manulife’s total LTC reserves as of 30 September 2024, is a younger block of policies that closely aligns with RGA’s current in-force LTC portfolio.

All policies within this block were issued in 2007 or later, ensuring a close match with RGA’s existing arrangements.

This deal is said to cumulatively reduce the company’s LTC reserves by 18% and LTC morbidity sensitivity by 17%.

Manulife president and CEO Roy Gori said: “With this second milestone LTC reinsurance transaction, we have now reinsured both mature and younger LTC blocks, further validating our prudent LTC reserves and assumptions. Additionally, this transaction reaffirms our commitment to unlocking shareholder value and further reshapes our portfolio to higher return and lower risk.”

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This transaction encompasses a 75% quota share on both ceded blocks and is expected to release $800m of capital for Manulife.

The company plans to fully return this capital to its shareholders through a common share buyback programme.

Manulife intends to repurchase for cancellation the full 90 million common shares allowed under its current normal course issuer bid (NCIB) programme, which is set to expire next month.

However, the transaction is estimated to lead to an annual reduction in core earnings and net income attributed to shareholders of $70m and $50m, respectively.

Founded in 1973, RGA specialises in life and health reinsurance and financial solutions.