Venerable reinsuring roughly US$22B of Manulife variable annuities

Venerable Holdings Inc. is reinsuring about US$22 billion of variable annuity business of Manulife Financial Corp., representing over 75% of the Canadian insurer's legacy U.S. variable annuity block.

The reinsured business primarily consists of contracts with guaranteed minimum withdrawal benefits issued between 2003 and 2012 by Manulife subsidiary John Hancock Life Insurance Co. (USA).

A small block of policies with only guaranteed minimum death benefits is also included. John Hancock will retain administration of the block as part of the agreement.

The Canadian insurer expects roughly C$2.0 billion of capital to be released, including a one-time after-tax gain of about C$750 million to net income attributed to shareholders.

Manulife intends to use a significant portion of the capital released to buy back shares to neutralize the impact of the transaction on diluted EPS and core EPS. The transaction is expected to lower annual earnings by approximately C$200 million in 2022 and the impact is forecasted to decrease as the block runs-off.

Manulife also announced that it intends to increase the size of its proposed normal course issuer bid to permit the purchase for cancellation to up to 97 million common shares, representing about 5% of its issued and outstanding common shares.

The transaction is expected to close in the first quarter of 2022, subject to customary closing conditions.

Wells Fargo Securities LLC is serving as financial adviser, while Sidley Austin LLP is legal counsel to Venerable in connection with the transaction. Barclays is acting as exclusive financial adviser to Manulife on the transaction, while Debevoise & Plimpton LLP is serving as legal adviser.