Manulife Financial Corp. has closed the second multibillion-dollar reinsurance deal in the past two years for its long-term care business, even as such transactions remain rare across the industry.

The Canada-based insurer's US subsidiaries of John Hancock will cede approximately $1.9 billion in long-term care (LTC) liabilities to Reinsurance Group of America Inc. (RGA), according to a Nov. 20, 2024, press release. The transaction will also involve $2.2 billion in structured settlement liabilities. The agreement is on a full-risk basis for both business lines with RGA coinsuring a 75% quota share, with John Hancock retaining the remaining portion. The LTC in-force block matches the characteristics of RGA's current LTC portfolio, which includes policies issued after 2006.

At the end of 2023, Manulife entered into the "largest-ever" LTC reinsurance agreement with KKR & Co. Inc.'s Global Atlantic Financial Group Ltd. The transaction involved an 80% quota share on a C$6.0 billion LTC block, or roughly $4.88 billion when converted to US dollars. Global Atlantic noted it would send 100% of the related LTC insurance risk to a "highly rated third-party global reinsurer" but would retain the underlying spread-based risk.

The group led by Manulife's John Hancock Life Insurance Co. (USA) reported $31.82 billion in total gross LTC policy and claims reserves at the end of 2023, according to disclosures made in US regulatory statements. The insurer's LTC reserves are only rivaled by Genworth Financial Inc.'s $40.99 billion in gross reserves.

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LTC reinsurance deals remain rare

Aside from Manulife's agreements with RGA and Global Atlantic, an analysis of data on Schedule S, Part 3, Section 2 of annual statutory filings finds only two other relatively large LTC reinsurance arrangements that took effect in recent years. Both transactions resulted from the recapture of a longstanding reinsurance arrangement.

RGA Reinsurance Co. in July 2023 reinsured a portion of a sizable closed block of Massachusetts Mutual Life Insurance Co.'s LTC business that had previously been ceded to LifeCare Assurance Co. RGA then retroceded the assumed MassMutual business to 21st Century Life and Health Co. Inc.'s John Alden Life Insurance Co.

MassMutual reported $674.8 million in premiums ceded and a $573.5 million reserve credit in connection with the cession to RGA Reinsurance. The reinsurer, in turn, showed $346.3 million in premiums ceded and $566.0 million in modified coinsurance reserves associated with the retrocession of the MassMutual business. In total, MassMutual reported $7.47 billion in total gross LTC policy reserves as of Dec. 31, 2023, the 10th highest total among US-domiciled life insurers.

We are able to glean some details about the LTC business that the RGA Reinsurance unit assumes, despite the insurer not having any direct LTC business on its book. The insurer's state regulator in Missouri requires the subsidiary to file some pages of the long-term care annual supplement exhibits that are generally reserved for direct underwriters of the business line.

The insurer's year-end 2023 statement reports the number of lives in force on its assumed LTC business was about 734,000 at the end of that year compared with a little over 681,000 in 2022.