RGA and Manulife Strengthen Partnership with US$4.1 Billion Coinsurance Deal
Wednesday, Nov 20, 2024 4:47 pm ET
3min read Reinsurance Group of America (RGA) and Manulife Financial Corporation (Manulife) have recently announced a strategic US$4.1 billion coinsurance transaction, further solidifying their partnership and enhancing their market positions. This deal, which includes $1.9 billion in long-term care (LTC) and $2.2 billion in structured settlements, demonstrates the companies' commitment to optimizing their portfolios and unlocking shareholder value.
For RGA, this transaction allows for a significant diversification of its risk portfolio. By entering into a coinsurance agreement with Manulife, RGA gains exposure to both LTC and structured settlements markets, strengthening its market position. The 75% quota share structure enables RGA to maintain meaningful exposure while demonstrating strong risk management. This deal is expected to be earnings accretive for RGA in 2025, with attractive returns on capital.
Manulife, on the other hand, benefits from this transaction by optimizing its portfolio and unlocking shareholder value. The deal reduces Manulife's LTC reserves by 18% and LTC morbidity sensitivity by 17%, demonstrating the company's ability to transact on both mature and younger LTC blocks. The modest negative ceding commission on the LTC block further validates Manulife's LTC reserves and assumptions. Additionally, the transaction is expected to release $0.8 billion of capital, which Manulife intends to fully return to shareholders through common share buybacks post-closing. The deal is accretive to Manulife's core ROE and has an attractive core earnings multiple of 11.4 times, indicating a positive impact on the company's financial performance.
The competitive landscape of the reinsurance industry is further bolstered by this transaction. RGA's expertise in managing biometric risks and longevity risk is enhanced, differentiating it from competitors. The transaction also highlights RGA's robust asset platform, enabling it to reinsure both sides of the balance sheet and deliver tailored long-term value. By continuing to support Manulife's US permanent life business, RGA solidifies its partnership, potentially driving further growth and market share.
In conclusion, the US$4.1 billion coinsurance transaction between RGA and Manulife is a strategic move that benefits both companies. RGA diversifies its risk portfolio and strengthens its market position, while Manulife optimizes its portfolio and unlocks shareholder value. This deal demonstrates the companies' commitment to innovation, risk management, and long-term growth. As the reinsurance industry continues to evolve, partnerships like this one will play a crucial role in shaping its future.
For RGA, this transaction allows for a significant diversification of its risk portfolio. By entering into a coinsurance agreement with Manulife, RGA gains exposure to both LTC and structured settlements markets, strengthening its market position. The 75% quota share structure enables RGA to maintain meaningful exposure while demonstrating strong risk management. This deal is expected to be earnings accretive for RGA in 2025, with attractive returns on capital.
Manulife, on the other hand, benefits from this transaction by optimizing its portfolio and unlocking shareholder value. The deal reduces Manulife's LTC reserves by 18% and LTC morbidity sensitivity by 17%, demonstrating the company's ability to transact on both mature and younger LTC blocks. The modest negative ceding commission on the LTC block further validates Manulife's LTC reserves and assumptions. Additionally, the transaction is expected to release $0.8 billion of capital, which Manulife intends to fully return to shareholders through common share buybacks post-closing. The deal is accretive to Manulife's core ROE and has an attractive core earnings multiple of 11.4 times, indicating a positive impact on the company's financial performance.
The competitive landscape of the reinsurance industry is further bolstered by this transaction. RGA's expertise in managing biometric risks and longevity risk is enhanced, differentiating it from competitors. The transaction also highlights RGA's robust asset platform, enabling it to reinsure both sides of the balance sheet and deliver tailored long-term value. By continuing to support Manulife's US permanent life business, RGA solidifies its partnership, potentially driving further growth and market share.
In conclusion, the US$4.1 billion coinsurance transaction between RGA and Manulife is a strategic move that benefits both companies. RGA diversifies its risk portfolio and strengthens its market position, while Manulife optimizes its portfolio and unlocks shareholder value. This deal demonstrates the companies' commitment to innovation, risk management, and long-term growth. As the reinsurance industry continues to evolve, partnerships like this one will play a crucial role in shaping its future.
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