Manulife & RGA close largest ever Canadian universal life reinsurance deal

Manulife Financial Corporation has successfully closed the previously announced transaction to reinsure a low ROE Canadian Universal Life block with RGA Life Reinsurance Company of Canada.

If you recall, the transaction was announced last month, with Manulife  agreeing to reinsure CAD 5.8 billion (USD 4.4 billion) of reserves of low ROE Canadian universal life block to RGA Life Reinsurance Company of Canada.

As a result, Manulife Financial Corporation, has officially completed the largest universal life reinsurance transaction in the Canadian market to date.

Terms of the transaction state that Manulife will continue to administer all policies to maintain a seamless customer service experience, while reinsuring a 100% quota share on the reserves ceded, backed by significant structural protections including posted collateral.

Further, Manulife also noted that the transaction is priced at book value and is expected to result in an annual reduction to core earnings of approximately $50 million, and net income attributed to shareholders of approximately $40 million and, with a capital release of $0.8 billion, represents an attractive deal multiple of 16.2 times core earnings.

Manulife President and Chief Executive Officer Roy Gori, commented: “Closing this deal represents another milestone in our journey to transform our portfolio to higher ROE and lower risk businesses. This transaction, the largest Universal Life reinsurance transaction in the Canadian insurance industry, confirms our continued momentum in executing on our strategy of reshaping our portfolio at attractive terms and our commitment to unlocking shareholder value.”

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