According to the Zhitong Finance App, Manulife Finance-S (00945) announced that it has agreed to reinsure its 5.8 billion Canadian dollar reserve business involving a low return on equity (ROE) to RGA Life Reinsurance Company of Canada (RGA).
Manulife President and Chief Executive Officer Roy Gori (Roy Gori) said, “This transaction marks the largest universal life reinsurance transaction in the history of the Canadian insurance industry, and is another milestone in our transformation of our business portfolio into a higher ROE and lower risk business. The deal was valued at 16.2 times profitable and priced at book value, further reflecting our focus and ability to execute the deal on attractive terms and our commitment to unlocking shareholder value. Through this transaction, the capital we have released since 2018 will reach $11 billion, and our core ROE will increase by nearly 5% since 2017. We will continue to create value for our shareholders through other natural and unnatural measures.”
Marc Costantini, Manulife's Global Head of Effective Policy Management, said: “We are delighted to partner with RGA, a highly reputable and experienced counterparty. Manulife has always been committed to improving the profitability and operating conditions of our active insurance policy business. This transaction will reduce our Canadian Universal Life Insurance reserves by $5.8 billion, and we will also dispose of $600 million in alternative long-term assets that support this part of the business to further reduce our market sensitivity.”
The deal is priced at book value and is expected to reduce core profit by approximately 50 million Canadian dollars per year and net revenue attributable to shareholders by about 40 million Canadian dollars per year; since it will release 800 million Canadian dollars in capital, the transaction can bring an attractive 16.2 times core profit multiplier. The transaction is expected to increase core ROE by 0.14 percent and core earnings per share by 0.01 Canadian dollars, including the impact of share repurchases.