Manulife to reinsure $10B with KKR's Global Atlantic

(Bloomberg) –Manulife Financial Corp. agreed to reinsure C$13 billion ($10 billion) of reserves with KKR & Co.’s Global Atlantic Financial Group and its partners in a deal the company said is the largest long-term care reinsurance transaction in the industry’s history.

The deal includes C$6 billion of long-term care reserves, or 14% of Manulife’s total, and will release C$1.2 billion of capital, which the Toronto-based insurer said it plans to return to shareholders through share buybacks. That will add to core earnings per share and return on equity, according to a statement Monday. Manulife will continue to administer the policies.

“This agreement represents the largest LTC reinsurance transaction ever in the insurance industry, and it is a major milestone in our strategy to reshape our portfolio, reduce risk, deliver value to shareholders and invest in high-potential growth areas of our business,” Manulife Chief Executive Officer Roy Gori said in the statement.

The transaction is expected to be completed in the first half of next year, subject to regulatory approval.

The deal is the third block transaction Global Atlantic has reached with Manulife, according to a separate statement from the New York-based insurance company, which focuses on the retirement and life-insurance sectors. Following a concurrent deal in which all the long-term care insurance risks are simultaneously reinsured with another firm, Global Atlantic will retain only the underlying spread-based risks of that portion.

Global Atlantic is a majority-owned subsidiary of investment firm KKR.