Manulife completes LTC reinsurance deal with RGA

Manulife Financial Corporation has finalized its agreement to reinsure two blocks of legacy long-term care (LTC) insurance business with Reinsurance Group of America (RGA).

Effective January 1, 2025, the transaction includes both mature and younger LTC blocks, marking a significant step in the company’s efforts to optimize its portfolio.

“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,” said Roy Gori, president and CEO of Manulife. “Additionally, this transaction reaffirms our commitment to unlocking shareholder value and further reshapes our portfolio to higher return and lower risk.”

Manulife originally announced the deal in November 2024. This marks the company’s development in streamlining its offerings, aligning with its long-term strategy.

Here are the key details of the Manulife-RGA transaction:

• Reinsured reserves: $2.4 billion in LTC reserves transferred to RGA on a full risk-transfer basis.
• Cumulative impact: Including a prior LTC reinsurance transaction, Manulife has reduced LTC reserves by 18% and LTC morbidity sensitivity by 17%.
• LTC block characteristics: The reinsured LTC block is younger, with a higher proportion of active life reserves compared to the prior transaction.
• Validation of reserves: A modest negative 4% LTC cede confirms the soundness of Manulife’s reserves and assumptions.
• Additional legacy business: The transaction includes $3.0 billion in reserves from a legacy block of US structured settlements.
• Financial metrics:
  • Accretive to core return on equity (ROE) with a core earnings multiple of 11.4x.
  • Neutral impact on core earnings per share (EPS).
  • Close to a 1.0x book value.
• Capital release and deployment: Manulife expects to release $0.8 billion of capital, which it plans to return fully to shareholders.
• Asset disposition: The company anticipates disposing of $1.5 billion in alternative long-duration assets (ALDA).

“The pricing of this transaction further validates our prudent LTC reserves and assumptions,” Marc Costantini, Manulife global head of strategy and inforce management, noted. “There continues to be attractive opportunities to generate shareholder value through organic LTC optimization, and we remain open to further inorganic opportunities.”

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