Manulife Financial Corporation has closed its previously announced transaction to reinsure biometric risk on a block of long-term care policies with $3.2 bn of reserves to Munich American Reassurance Company, a subsidiary of Munich Re Group.
The agreement transfers the full biometric risk on the $3.2 bn LTC block to Munich Re Life US. Including Manulife’s previous long-term care reinsurance transactions, the company said it has now reduced its LTC morbidity sensitivity by a cumulative 24%.
Pricing was similar to Manulife’s earlier transactions, with a modest negative 5% cede. The company said the pricing provides further validation of its reserves and underlying assumptions.
The transaction is expected to be largely neutral to capital. Manulife estimates an immaterial annual impact of about $30 mn on both core earnings and net income attributed to shareholders in the first year, with the effect declining over time.
The announcement represents our third LTC reinsurance transaction in under three years and first on a standalone LTC block, reflecting our ability to reduce our risk profile and strengthen our business through innovative actions.
Phil Witherington, president and chief executive officer of Manulife
Witherington said Manulife continues to see opportunities to improve its long-term care portfolio through organic initiatives aimed at increasing risk-adjusted returns and generating shareholder value.
The latest transaction extends Manulife’s use of reinsurance to reduce exposure within its long-term care business. It is the company’s first transaction focused on a standalone LTC block after two earlier LTC reinsurance deals completed within the past three years.
Manulife Financial Corporation is an international financial services provider headquartered in Toronto, Canada. The company operates as Manulife across Canada and Asia and primarily as John Hancock in the United States, providing financial advice, insurance and health solutions for individuals, groups and businesses.
