Manulife Financial said on Monday it has agreed to reinsure $5.8 billion of reserves of Canadian Universal Life block with RGA Life Reinsurance Company of Canada.
The insurer expects the deal to generate $800 million of capital that it intends to use for share buybacks.
“With this transaction, we will have released $11 billion of capital since 2018 and improved core return on equity (ROE) by about 5 per cent since 2017,” Manulife CEO Roy Gori said in a statement.
Manulife has been seeking to cut risk in its insurance portfolio and improve shareholder returns in recent months. It had inked a $13 billion deal in December to reinsure its long-term care business reserves.
A contract between a reinsurer and an insurer typically reduces the risk for the latter, allowing it to remain solvent by recovering a part of the payout.
The transaction is expected to close early in the second quarter of 2024.
(Reporting by Manya Saini in Bengaluru; Editing by Shilpi Majumdar)
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