Manulife Financial Corp. said first-quarter profit was lower than a year earlier due to the impact of a large reinsurance deal.
The insurance giant said its net income attributable to shareholders for the quarter ended March 31 was $866 million, down from $1.4 billion in the same quarter last year.
The company said the results included an $800 million impact from a $13 billion reinsurance deal with Global Atlantic, which the company said was the largest long-term care reinsurance deal ever.
Manulife said the decline in net income from the transaction was largely offset by growth in other comprehensive income, making it book value neutral.
Core profits were estimated at $1.75 billion, up from $1.53 billion a year earlier.
Manulife says the reinsurance arrangement was intended to reduce risk and redirect capital to growth areas.
In Canada, first-quarter core earnings were $364 million, up 3% compared to the same quarter last year.
Annual premium equivalent sales in Canada were $450 million in the quarter, up 54% from the same quarter last year. The increase included higher sales of participating life insurance, higher sales of group insurance and higher sales of segregated funds and fixed annuities, it said in a report to shareholders.
Manulife’s assets under management in Canada were $146.7 billion as of March 31, equivalent to $147.5 billion as of December 31. This was attributed to the impact of higher interest rates, partially offset by higher net assets of segregated funds, mainly related to equity market performance, it said in a report to shareholders.
In addition to the Global Atlantic deal, Manulife announced a universal life reinsurance deal this quarter that it described as the largest of its kind in Canada. Manulife CEO Roy Gori said on a conference call about financial results that the company plans to return $2 billion of capital released by both deals through share repurchases.
The company said it expects share repurchases to accelerate from $200 million in the first quarter to about $600 million per quarter by the end of the year.
The increased share buybacks come after the federal government introduced a new 2% tax on share buybacks that will apply to transactions starting in early 2024.
The government said the new tax, which is a continuation of a 1% tax on stock buybacks introduced in the U.S., is aimed at both raising revenues and encouraging companies to reinvest in their employees and businesses.
Company executives did not mention the tax during the call, but said they are investing to ensure sales agents have access to the digital tools they need to be highly productive.
Manulife’s focus on share buybacks helped boost its underlying return on equity, which approached 16% at the end of 2023 and stood at 16.7% in the first quarter.
Gori said investment returns had risen significantly from the 11% Manulife achieved in 2017 as the company took steps to shed low-yielding segments.
