Continued momentum in Manulife's
transformation journey $0.8 billion capital release will be
returned to shareholders through expanded buyback program
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TORONTO, March 25,
2024 /PRNewswire/ - Manulife Financial
Corporation ("Manulife" or the "Company") announced today it has
agreed to reinsure $5.8 billion of
reserves1 of low ROE Canadian Universal Life block
to RGA Life Reinsurance Company of Canada ("RGA").
Key Highlights of the
Transaction:
- Reinsures $5.8 billion of
reserves1 of low ROE Canadian Universal Life block
- Represents largest Universal Life reinsurance transaction in
Canada
- Attractive earnings multiple of 16.2 times2 and book
value multiple of 1.0 times3
- Releases $0.8 billion of capital,
which we intend to return to shareholders via share buybacks,
resulting in core ROE4 and core EPS4
accretion of 0.14pps and $0.01,
respectively; as well as ROE4 and EPS4
accretion of 0.16pps and $0.02,
respectively
- Expect to dispose $0.6 billion of
alternative long-duration assets ("ALDA")
"This transaction is the largest Universal Life reinsurance
transaction in the Canadian insurance industry and represents
another milestone in our journey to transform our portfolio to
higher ROE and lower risk businesses. This deal, valued at 16.2
times earnings and priced at book value further demonstrates our
focus and ability to execute on attractive terms and our commitment
to unlocking shareholder value. With this transaction, we will have
released $11 billion of capital since
20185 and improved Core ROE by ~5% since 2017. We remain
highly focused on exploring additional organic and inorganic
actions to deliver value to shareholders."
— Roy Gori, Manulife President & Chief
Executive Officer
"We are pleased to partner with RGA, a highly reputable and
experienced counterparty. Manulife has been committed to improving
the profitability and profile of our inforce business. This
transaction will reduce our Canadian Universal Life reserves by
$5.8 billion, and we will dispose
$0.6 billion of ALDA backing this
block, further reducing our sensitivities to markets."
— Marc Costantini, Manulife Global Head of
Inforce Management
Transaction Summary
We will reinsure $5.8 billion of
reserves of low ROE Canadian Universal Life block to RGA at 16.2
times earnings multiple and approximately 1.0 times book value
multiple. In connection with the transaction, we expect to dispose
$0.6 billion of ALDA backing this
block.
Manulife will continue to administer all policies to maintain a
seamless customer service experience, while reinsuring a 100% quota
share on the reserves ceded, backed by significant structural
protections including posted collateral. The transaction is not
subject to closing conditions and is expected to close early in the
second quarter of 2024.
RGA is a highly rated global reinsurance company and is an
existing reinsurance partner of Manulife. This transaction marks
the third large inforce reinsurance transaction between Manulife
and RGA.
Delivering Value for
Shareholders
The transaction is priced at book value and is expected to
result in an annual reduction to core earnings of approximately
$50 million and net income attributed
to shareholders of approximately $40
million and, with a capital release of $0.8 billion, represents an attractive deal
multiple of 16.2 times core earnings. The transaction is expected
to be 0.14pps accretive to core ROE and $0.01 accretive to core EPS, including the impact
of share buybacks.
NCIB
We have received approval from the Office of the Superintendent
of Financial Institutions ("OSFI") to amend our existing Normal
Course Issuer Bid ("NCIB") to increase the number of common shares
that we may repurchase for cancellation from up to 50 million
common shares (approximately 2.8% of shares outstanding) to up to
90 million common shares (approximately 5% of shares outstanding).
The amended NCIB remains subject to the approval of the Toronto
Stock Exchange ("TSX"). As at February
29, 2024, Manulife had 1,805,798,064 common shares issued
and outstanding. Since the commencement of its current NCIB on
February 23, 2024 to March 21, 2024, Manulife has completed the
repurchase for cancellation of 4,960,000 common shares at a volume
weighted average repurchase price per common share of $32.53. All repurchases were made through the
facilities of the TSX.
Manulife's current NCIB commenced on February 23, 2024 and will continue until
February 22, 2025, when the NCIB
expires, or such earlier date as Manulife completes its purchases.
Purchases under the NCIB may be made through the facilities of the
TSX, the New York Stock Exchange, other designated exchanges and
alternative trading systems in Canada and the
United States at market prices prevailing at the time of
purchase or such other price as may be permitted. Manulife will
file an amended notice of intention to make an NCIB with the TSX.
The amended bid will commence after the TSX has accepted the
amended notice of intention, and continue until up to February 22, 2025. All common shares acquired by
Manulife under the NCIB will be cancelled. Repurchases will be
subject to compliance with applicable Canadian securities laws and
United States federal securities
laws.6,7
Slides related to this announcement are available on the
Manulife website.
About Manulife
Manulife Financial Corporation is a leading international
financial services provider, helping people make their decisions
easier and lives better. With our global headquarters in
Toronto, Canada, we provide
financial advice and insurance, operating as Manulife across
Canada, Asia, and Europe, and primarily as John Hancock in the
United States. Through Manulife Investment Management, the
global brand for our Global Wealth and Asset Management segment, we
serve individuals, institutions, and retirement plan members
worldwide. At the end of 2023, we had more than 38,000 employees,
over 98,000 agents, and thousands of distribution partners, serving
over 35 million customers. We trade as 'MFC' on the Toronto, New
York, and the Philippine stock exchanges and under '945' in
Hong Kong.
Not all offerings are available in all jurisdictions. For
additional information, please visit manulife.com.
About RGA
Reinsurance Group of America, Incorporated (NYSE: RGA) is a
global industry leader specializing in life and health reinsurance
and financial solutions that help clients effectively manage risk
and optimize capital. Founded in 1973, RGA is today one of the
world's largest and most respected reinsurers and remains guided by
a powerful purpose: to make financial protection accessible to all.
As a global capabilities and solutions leader, RGA empowers
partners through bold innovation, relentless execution, and
dedicated client focus — all directed toward creating sustainable
long-term value. RGA has approximately $3.7
trillion of life reinsurance in force and assets of
$97.6 billion as of Dec. 31, 2023. To learn more about RGA and
its businesses, please visit rgare.com or follow RGA on LinkedIn
and Facebook. Investors can learn more at investor.rgare.com.
FOOTNOTES
All figures and estimates are based on December 31, 2023 position.
1.
|
IFRS 17 current
estimate of present value of future cashflows + risk adjustment +
contractual service margin.
|
2.
|
Ratio of capital
release to annual core earnings impact.
|
3.
|
Ratio of the market
value of assets transferred to the sum of IFRS 17 current estimate
of present value of future cash flows + risk adjustment +
contractual service margin.
|
4.
|
On an annualized basis
post expected share buybacks. Core ROE and diluted core earnings
per common share ("core EPS") are Non-GAAP ratios. See "Performance
and Non-GAAP measures" below and in our Fourth Quarter 2023
Management's Discussion and Analysis ("4Q23 MD&A") for
additional information.
|
5.
|
Pro forma. Includes $9
billion of capital release through 2022 under IFRS 4, $0.2 billion
from 2023 other initiatives under IFRS 17, an estimated $1.2
billion of capital release under IFRS 17 from the December 2023
reinsurance transaction including LTC with Global Atlantic to be
recognized in 2024 and $0.8 billion of capital release under IFRS
17 from this transaction to be recognized in 2024.
|
6.
|
In addition, Manulife
may undertake repurchases of its common shares outside of Canada
and the United States in compliance with applicable laws. Subject
to regulatory approval, Manulife may also acquire common shares
directly from other holders by way of private agreement pursuant to
issuer bid exemption orders issued by applicable securities
regulatory authorities. Any private purchase made under an
exemption order issued by a securities regulatory authority will
generally be at a discount to the prevailing market price. Manulife
may also enter into derivative-based programs in support of its
repurchase activities, including the writing of put options and
forward purchase agreements, accelerated share repurchase
transactions, other equity contracts or use other methods of
acquiring shares, in each case subject to regulatory approval and
on such terms and at such times as shall be permitted by applicable
securities laws. The total number of common shares repurchased
under the NCIB and all other potential arrangements will not exceed
90 million common shares.
|
7.
|
Manulife previously
entered into an automatic share repurchase plan under which its
designated broker will repurchase Manulife's common shares pursuant
to the NCIB, and the automatic plan will continue to apply to the
amended NCIB. The actual number of common shares purchased under
the automatic plan, the timing of such purchases and the price at
which common shares are purchased will depend upon future market
conditions. The automatic plan, which was pre-cleared by the TSX,
provides for the potential repurchase of common shares at any time,
including when Manulife ordinarily would not be active in the
market due to its own internal trading blackout periods, insider
trading rules, or otherwise.
|
PERFORMANCE AND NON-GAAP
MEASURES:
Manulife prepares its Consolidated Financial Statements in
accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board.
We use a number of non-GAAP and other financial measures to
evaluate overall performance and to assess each of our businesses.
This section includes information required by National Instrument
52-112 – Non-GAAP and Other Financial Measures Disclosure in
respect of "specified financial measures" (as defined therein).
Core earnings is a Non-GAAP financial measure and diluted core
earnings per common share ("core EPS") and core ROE are Non-GAAP
ratios. For more information on the non-GAAP and other financial
measures in this document and a complete list of transitional
financial measures, please see section A1 "Implementation of IFRS
17 and IFRS 9" and section E3 "Non-GAAP and other financial
measures" of the 4Q23 MD&A which are incorporated by reference
and available on the SEDAR+ website at www.sedarplus.com.
CAUTION REGARDING FORWARD-LOOKING
STATEMENTS:
From time to time, Manulife makes written and/or oral
forward-looking statements, including in this presentation. In
addition, our representatives may make forward-looking statements
orally to analysts, investors, the media and others. All such
statements are made pursuant to the "safe harbour" provisions of
Canadian provincial securities laws and the U.S. Private Securities
Litigation Reform Act of 1995.
The forward-looking statements in this document include, but are
not limited to, statements with respect to the disposal of ALDA
assets, the expected closing time of the reinsurance transactions
referred to in this document and their associated capital release
and possible share buybacks under a normal course issuer bid and
also relate to, among other things, our objectives, goals,
strategies, intentions, plans, beliefs, expectations and estimates,
and can generally be identified by the use of words such as "may",
"will", "could", "should", "would", "likely", "suspect", "outlook",
"expect", "intend", "estimate", "anticipate", "believe", "plan",
"forecast", "objective", "seek", "aim", "continue", "goal",
"restore", "embark" and "endeavour" (or the negative thereof) and
words and expressions of similar import, and include statements
concerning possible or assumed future results. Although we believe
that the expectations reflected in such forward-looking statements
are reasonable, such statements involve risks and uncertainties,
and undue reliance should not be placed on such statements and they
should not be interpreted as confirming market or analysts'
expectations in any way.
Certain material factors or assumptions are applied in making
forward-looking statements and actual results may differ materially
from those expressed or implied in such statements. Important
factors that could cause actual results to differ materially from
expectations include but are not limited to: general business and
economic conditions (including but not limited to the performance,
volatility and correlation of equity markets, interest rates,
credit and swap spreads, inflation rates, currency rates,
investment losses and defaults, market liquidity and
creditworthiness of guarantors, reinsurers and counterparties); the
ongoing prevalence of COVID-19, including any variants, as well as
actions that have been, or may be taken by governmental authorities
in response to COVID-19, including the impact of any variants;
changes in laws and regulations; changes in accounting standards
applicable in any of the territories in which we operate; changes
in regulatory capital requirements; our ability to obtain premium
rate increases on in-force policies; our ability to execute
strategic plans and changes to strategic plans; downgrades in our
financial strength or credit ratings; our ability to maintain our
reputation; impairments of goodwill or intangible assets or the
establishment of provisions against future tax assets; the amount
of contractual service margin recognized for service provided; the
accuracy of estimates relating to morbidity, mortality and
policyholder behaviour; the accuracy of other estimates used in
applying accounting policies, actuarial methods and embedded value
methods; our ability to implement effective hedging strategies and
unforeseen consequences arising from such strategies; our ability
to source appropriate assets to back our long-dated liabilities;
level of competition and consolidation; our ability to market and
distribute products through current and future distribution
channels; unforeseen liabilities or asset impairments arising from
acquisitions and dispositions of businesses; the realization of
losses arising from the sale of investments classified as fair
value through other comprehensive income; our liquidity, including
the availability of financing to satisfy existing financial
liabilities on expected maturity dates when required; obligations
to pledge additional collateral; the availability of letters of
credit to provide capital management flexibility; accuracy of
information received from counterparties and the ability of
counterparties to meet their obligations; the availability,
affordability and adequacy of reinsurance; legal and regulatory
proceedings, including tax audits, tax litigation or similar
proceedings; our ability to adapt products and services to the
changing market; our ability to attract and retain key executives,
employees and agents; the appropriate use and interpretation of
complex models or deficiencies in models used; political, legal,
operational and other risks associated with our non-North American
operations; geopolitical uncertainty, including international
conflicts; acquisitions or divestitures, and our ability to
complete transactions; environmental concerns, including climate
change; our ability to protect our intellectual property and
exposure to claims of infringement; and our inability to withdraw
cash from subsidiaries and the fact that the amount and timing of
any future common share repurchases will depend on the earnings,
cash requirements and financial condition of Manulife, market
conditions, capital requirements (including under LICAT capital
standards), common share issuance requirements, applicable law and
regulations (including Canadian and U.S. securities laws and
Canadian insurance company regulations), and other factors deemed
relevant by Manulife, and may be subject to regulatory approval or
conditions, our ability to sell ALDA assets and the timing to close
the reinsurance transactions described in this document.
Additional information about material risk factors that could
cause actual results to differ materially from expectations and
about material factors or assumptions applied in making
forward-looking statements may be found in our 4Q23 Management's
Discussion and Analysis under "Risk Management and Risk Factors
Update" and "Critical Actuarial and Accounting Policies", in our
2023 Management's Discussion and Analysis under "Risk Management
and Risk Factors" and "Critical Actuarial and Accounting Policies",
and in the "Risk Management" note to the Consolidated Financial
Statements in our most recent annual and interim reports and
elsewhere in our filings with Canadian and U.S. securities
regulators.
The forward-looking statements in this presentation are, unless
otherwise indicated, stated as of the date hereof and are presented
for the purpose of assisting investors and others in understanding
our financial position and results of operations, our future
operations, as well as our objectives and strategic priorities, and
may not be appropriate for other purposes. We do not undertake to
update any forward-looking statements, except as required by
law.
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SOURCE Manulife Financial Corporation