Manulife signs reinsurance deal with Global Atlantic, plans to buy back shares

Manulife Financial Corp. has signed a reinsurance deal with Global Atlantic that it says will free up $1.2 billion in capital that it plans to use to buy back shares.

The Toronto-based insurer said Monday it is reinsuring $13 billion of reserves to Global Atlantic and its partners, including $6 billion in long-term care reserves.

By having Global Atlantic agree to insure its exposure to the portfolios, Manulife said the deal is expected to release $1.2 billion of capital that it plans return to shareholders via share buybacks.

The deal on long-term care (LTC) reserves was especially notable, as it’s a riskier area of insurance that Manulife has been working on deals for some time.

“With this largest-ever LTC reinsurance deal, we believe it marks an important step in establishing an active LTC reinsurance market,” Manulife chief executive Roy Gori told a conference call with investment analysts.

Manulife said it ceeded $270 million on the LTC reserves, while the rest of the reserves were done at full value.

Gori called the agreement a major milestone for the company as it reshapes its portfolio, reduces risk and delivers value to shareholders.

Scotiabank analyst Meny Grauman said in a note that the deal marked a “giant leap” for sentiment around LTC transactions by establishing a good valuation baseline for such deals.

Manulife said it has received approval from the Office of the Superintendent of Financial Institutions to buy back up to about 2.8% of its outstanding common shares starting in February.

The Canadian Press

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