Manulife has completed another major step in shrinking one of the more unpredictable parts of its legacy insurance portfolio. The Toronto-based financial-services company has closed a reinsurance transaction transferring biometric risk tied to C$3.2 billion of long-term-care reserves to Munich American Reassurance Company, better known as Munich Re Life US.
The closing comes less than two months after the agreement was announced and marks Manulife’s third significant long-term-care reinsurance transaction in under three years. Unlike some of its earlier transactions, this one focuses on a standalone LTC block and does not involve transferring the underlying investment assets. For Manulife, the immediate earnings impact is expected to be small. The larger significance is the continued reduction of exposure to claims assumptions that can play out over decades.
The C$3.2 Billion Figure Represents Insurance Reserves, Not a Purchase Price
The headline number needs some context. Manulife is not receiving C$3.2 billion in cash from Munich Re, nor is Munich Re purchasing a business for that amount. The figure represents IFRS insurance reserves associated with the portion of the long-term-care block covered by the reinsurance arrangement. Manulife says the C$3.2 billion amount is measured at an 80% quota share and reflects the IFRS 17 estimate of future cash flows, risk adjustment and contractual service margin.
That distinction matters because insurance reserves represent obligations expected to develop over many years. Under the deal, Munich Re Life US takes on the biometric risk associated with the reinsured portion of those obligations. Manulife announced the agreement on August 5, when it expected completion in the fourth quarter, and confirmed the closing on October 1. The reinsurance itself has an effective date of July 1, 2026, meaning the economic risk-sharing arrangement reaches back to the beginning of Manulife’s third quarter even though the formal closing occurred later.
Manulife Is Transferring Claims Risk Without Moving the Assets
One of the unusual aspects of the Munich Re transaction is its structure. Manulife described it as a full transfer of the relevant biometric risk with no corresponding transfer of investment assets. In practical terms, the transaction separates part of the insurance risk from the assets backing the wider portfolio instead of moving an entire package of liabilities and investments to another company.
For long-term-care insurance, biometric risk is particularly important because future financial results depend heavily on how policyholders actually use their benefits. Insurers must estimate how many people will eventually require care, when claims will begin and how long policyholders will remain on claim. Even modest differences from those assumptions can have a large financial impact when policies remain in force for decades. The Munich Re arrangement therefore gives Manulife protection against a portion of that future uncertainty while allowing it to retain the assets rather than executing the broader asset-and-liability transfer used in some traditional block reinsurance deals.
It Is Manulife’s Third Major LTC Reinsurance Deal Since Late 2023
The Munich Re agreement is not an isolated transaction. It extends a multi-year effort by Manulife to reduce exposure to legacy U.S. long-term-care business. The first major step came with the Global Atlantic transaction announced in December 2023 and closed in February 2024. That agreement covered roughly C$13 billion of reserves across several legacy businesses, including approximately C$6 billion of long-term-care reserves. Manulife described it at the time as the largest LTC reinsurance transaction completed by the industry.
Another deal followed with Reinsurance Group of America. Announced in November 2024 and completed in January 2025, it covered C$5.4 billion across U.S. long-term-care and structured-settlement blocks, including C$2.4 billion of LTC reserves. That transaction used a 75% quota share. Manulife said the successive deals demonstrated that it could find counterparties for both older and younger LTC blocks. With Munich Re, the company has now added a standalone long-term-care transaction to that track record rather than combining LTC with other legacy insurance products.
The Three Deals Have Cut Manulife’s LTC Morbidity Sensitivity by 24%
Manulife says the cumulative effect of the Global Atlantic, RGA and Munich Re transactions is a 24% reduction in its long-term-care morbidity sensitivity. That measure is important because morbidity assumptions help determine how frequently insured customers are expected to need long-term care and the resulting level of benefits that must ultimately be paid. Reducing sensitivity means future deviations in those assumptions should have a smaller financial effect on Manulife than before the transactions.
The reduction does not eliminate Manulife’s LTC exposure. The company still has a substantial in-force long-term-care business and remains responsible for managing risks attached to the portion it has retained. However, the direction has been consistent. After the RGA agreement, Manulife reported that earlier portfolio actions had reduced its LTC reserves materially. The Munich Re closing pushes that process further. Rather than betting that actual policyholder experience will precisely match actuarial forecasts for decades, Manulife is sharing more of that risk with large global reinsurers whose business models are specifically built around absorbing and diversifying insurance exposures.
Long-Term-Care Insurance Has Been a Difficult Business for the Industry
The challenge is not unique to Manulife. Older long-term-care policies have created problems across the U.S. insurance industry because many were priced when insurers had far less real-world claims experience. The National Association of Insurance Commissioners says assumptions used for older policies often underestimated both the number of policyholders who would qualify for benefits and how long those customers would remain on claim. At the same time, policy lapse rates turned out to be lower than insurers originally expected.
That combination is costly. When fewer customers cancel coverage, more policies survive long enough to produce claims. If those claims are also more frequent or last longer than projected, the insurer can face much larger benefit obligations than anticipated when premiums were originally set. Regulators and insurers have responded over the years with premium increases, revised reserving assumptions and stricter pricing standards for newer policies. For an established insurer carrying older blocks, reinsurance provides another option: rather than waiting decades for all of that uncertainty to resolve, part of the future claims risk can be transferred to a reinsurer today.
Munich Re Is Taking the Risk That Manulife Wants to Reduce
Munich American Reassurance Company is the U.S. life-reinsurance operation within Munich Re Group and operates commercially as Munich Re Life US. Its core business is fundamentally different from a direct consumer insurer. Rather than primarily selling individual policies to households, a reinsurer takes portions of risks originated by other insurers and spreads those exposures across a much larger and more diversified portfolio.
Munich Re Life US markets solutions covering individual life, disability, group insurance, financial reinsurance and portfolio optimization. It specifically promotes its ability to work with insurers on in-force blocks and to develop structures designed to improve capital efficiency, manage volatility and strengthen balance sheets. That expertise makes large legacy portfolios natural territory for the company. From Munich Re’s perspective, taking on a carefully priced portion of Manulife’s LTC risk can add another stream of insurance exposure to an already broad global pool. For Manulife, the value comes from placing that uncertainty with a company whose principal business is analyzing and absorbing precisely these kinds of long-duration risks.
The Immediate Earnings Cost Is Relatively Small
Despite the C$3.2 billion reserve figure, Manulife does not expect the transaction to create a similarly dramatic change in quarterly earnings or capital. When announcing the agreement, the company said the deal was expected to be largely neutral to capital. It estimated the reduction to both core earnings and net income attributable to shareholders at roughly C$30 million during the first year, with that impact declining over time.
Manulife also described the pricing as similar to its previous LTC deals, with a modest negative 5% cede on an IFRS basis. In simplified terms, the company is accepting a relatively limited financial cost to shed a portion of a risk that could otherwise produce considerable future earnings volatility. That trade-off is different from the Global Atlantic deal, which was explicitly associated with a sizable capital release and subsequent share repurchases. The Munich Re transaction appears more focused on risk reduction than an immediate capital windfall. It trades a small amount of expected earnings for greater certainty around a difficult legacy liability.
The Deal Should Be Largely Invisible to Policyholders
Reinsurance operates behind the scenes. The National Association of Insurance Commissioners describes it as insurance purchased by an insurance company: one insurer transfers some or all of a risk to another insurer, but the reinsurance agreement remains separate from the original insurance relationship with the customer. That distinction explains why multi-billion-dollar reinsurance transactions can occur without consumers suddenly receiving entirely new policies.
The practical change is primarily on the insurers’ balance sheets and in how future claims costs are shared. Munich Re becomes responsible to Manulife under the terms of the reinsurance agreement when covered liabilities arise. The underlying insurance obligation, however, does not simply vanish because a reinsurer has entered the picture. That is one reason Manulife can significantly reduce the economic volatility of its legacy portfolio while the change remains relatively uneventful from a customer’s perspective. For a policyholder who may have purchased coverage decades earlier, the headline is enormous. The day-to-day interaction with the insurance coverage can remain much more ordinary.
The Broader Goal Is a Business With Less Legacy Risk and Higher Returns
The closing fits Manulife’s wider effort to shift the company toward businesses that management considers capable of generating stronger growth and returns with less legacy volatility. At the end of the second quarter of 2026, Manulife reported C$2.11 billion of net income attributable to shareholders, up 17% from a year earlier, while core earnings increased 12% to C$1.92 billion. Core return on equity reached 16.3%, compared with 15% in the same quarter of 2025.
Those numbers also put the LTC strategy into perspective. Manulife has targeted core ROE of more than 18% by 2027 while pursuing growth in areas including Asia, wealth and asset management and newer insurance businesses. Long-term-care reinsurance does not generate that growth directly. Instead, it removes part of a legacy risk that can consume management attention, capital and earnings capacity when assumptions move unexpectedly. With the Munich Re transaction now completed, Manulife has another piece of that cleanup behind it—and a smaller portion of its future results tied to how decades-old LTC assumptions ultimately play out.
