By Adriano Marchese
Manulife Financial said Monday that it has agreed to a 13 billion Canadian dollar ($9.57 billion) reinsurance deal with Global Atlantic, reinsuring four blocks of legacy and low return-on-equity business.
The Canadian insurer said the deal is a full risk transfer, and includes significant structural protections, including overcollateralized trusts to hold investment assets.
The blocks include portions U.S. long-term-care, U.S. structured settlements and two Japan whole life products.
The LTC block represents C$6 billion, or 14% of Manulife's total long-term-care reserves as of Sept. 30, 2023, Manulife said. The company expects to dispose $1.7 billion of alternative long-duration assets in connection with the deal.
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.
Manulife said the transaction is priced at book value and is expected to result in an annual reduction to core earnings of about C$130 million and net income of about $15 million.
The company said the deal is expected to be $0.01 accretive to core earnings per share and $0.07 accretive to EPS, and that it also releases C$1.2 billion of capital which the company intends to return to shareholders.
Global Atlantic has two existing reinsurance arrangements with Manulife.
Write to Adriano Marchese at adriano.marchese@wsj.com
(END) Dow Jones Newswires
12-11-23 0730ET