Manulife signs $4.3 billion reinsurance deal with RGA Life

(Reuters) -Manulife Financial said on Monday it has agreed to reinsure C$5.8 billion ($4.27 billion) of reserves of Canadian Universal Life block, as the country's top insurer looks to de-risk its business and improve shareholder returns.

The deal with RGA Life Reinsurance Company of Canada is expected to generate C$800 million of capital, which Manulife intends to use to buy back shares, it said.

CEO Roy Gori said the insurer has released C$11 billion of capital since 2018 and improved the core return on equity (ROE) by about 5% since 2017.

Manulife has been seeking to cut risk in its insurance portfolio and focus on profitable areas for growth. In December, it signed a C$13 billion deal to reinsure its long-term care business reserves.

"We remain highly focused on exploring additional organic and inorganic actions to deliver value to shareholders," Gori added.

A contract between a reinsurer and an insurer typically reduces the risk for the latter, allowing it to, in some cases, remain solvent by recovering a part of the payout and in others, transfer the risk of the business to create fresh capital.

Manulife's shares hit a 16-year high in February following strong quarterly results and are up about 21% since the C$13 billion reinsurance deal in December.

They rose about 0.8% on Monday, with an 11.5% year-to-date gain outperforming a roughly 7.4% rise in closest rival Sun Life's shares.

"We believe that this deal indicates that management remains focused on optimizing its profitability and capital deployment," Jefferies analyst John Aiken said.

The transaction marks the third large reinsurance transaction between Manulife and global reinsurance company RGA, Manulife said.

Under the latest deal, Manulife also expects to sell C$600 million in alternative long-duration assets (ALDA) that it had invested in to back the Canadian Universal Life block.

($1 = 1.3582 Canadian dollars)

(Reporting by Manya Saini in Bengaluru and Nivedita Balu in Toronto; Editing by Shilpi Majumdar and Shinjini Ganguli, Kirsten Donovan)