According to the Zhong Tong Finance APP, Manulife Financial - S (00945) announced that on November 20, 2024, the company reached a 5.4 billion Canadian dollar reinsurance agreement with Reinsurance Group of America (RGA), of which 2.4 billion Canadian dollars are reserved for LTC.

Key points of the transaction are as follows: Reinsure 2.4 billion Canadian dollars of LTC reserves to RGA on the basis of comprehensive risk transfer. Together with the group's previous LTC reinsurance transactions (previous transactions), the cumulative reduction of LTC reserves will reach 18% when this transaction is completed, and the cumulative reduction of LTC morbidity rate sensitivity will reach 17%. This transaction involves younger LTC business, where the proportion of active life reserves is higher than in the group's previous transactions. The reinsurance fee commission for LTC business only achieves a slight negative 4%, further confirming the group's LTC reserves and assumptions. The transaction also includes 3 billion Canadian dollars of US Structural Pay Arrangement reserves. This transaction will help enhance the core ROE; the transaction multiple is quite attractive, at 11.4 times the core profit; the impact on core EPS is neutral. Nearly 1.0 times the book value; it is expected to release 0.8 billion Canadian dollars in capital, and the group plans to return all of this funds to the shareholders. It is expected to dispose of 1.5 billion Canadian dollars of unconventional long-term assets.

RGA is an experienced global reinsurance company, currently maintaining multiple reinsurance arrangements with Manulife. This transaction covers multiple important structural safeguard measures, including using excess collateral trusts to hold investment assets. This reinsurance transaction provides a 75% pro rata reinsurance to two groups of businesses.

In connection with this transaction, the company expects to dispose of 1.5 billion Canadian dollars of unconventional long-term assets. Manulife will continue to manage all reinsurance policies to provide a seamless customer service experience. The transaction is expected to be completed in early 2025 and is subject to customary closing conditions.

"Within 12 months, we completed a second milestone LTC reinsurance transaction, further unlocking significant shareholder value. This transaction will accelerate the company's transformation pace, reshape the business portfolio to achieve higher returns and lower risks, and further demonstrate our ability to conduct complex transactions involving both mature and younger LTC businesses, as well as collaborate with experienced counterparties for mutual benefit. This transaction is priced at 11.4 times core profits and is expected to increase our core ROE after releasing funds to shareholders through share buybacks."- Manulife President and Chief Executive Officer Roy Gori.

"Together with our previously completed LTC reinsurance transaction, we will reduce the cumulative reduction of LTC reserves by 18% within one year from the completion of this transaction, significantly improving the return status of our effective policy business. The pricing of this transaction further confirms the prudent level of our LTC reserves and assumptions. Through organic optimization of LTC business, we will have the opportunity to continue to create value for shareholders, while remaining open to further optimization through inorganic measures." - Marc Costantini, Manulife's Global Strategy and Effective Policy Management Director.