(Bloomberg) -- Manulife Financial Corp.’s Chief Executive Officer Roy Gori, who surprised some investors with an earlier-than-expected retirement announcement this week, says he never wanted to stay in the job so long that people started wondering why he just wouldn’t leave.
Australian-born Gori, 56, who has led the Toronto-based insurer and asset manager since 2017, said in an interview Thursday he looked to the famous Indian cricketer Vijay Merchant for inspiration on this front.
“He once said, ‘Retire when they ask you, Why?, not Why not?’” Gori said. “I’m humbly hoping that more people are asking ‘Why?’ for me.”
The conditions were right, he said, because Manulife has a strong successor lined up to take over in May — Phil Witherington, 47, currently head of the Asia division. The firm also has “great business momentum,” in part from a series of deals to de-risk its balance sheet, Gori said.
Manulife just signed a third such accord in the span of less than a year, it said Wednesday, with Reinsurance Group of America agreeing to reinsure C$5.4 billion ($3.9 billion) of reserves.
Capital Release
The transaction, which includes C$2.4 billion in long-term care reserves, will allow Manulife to release C$800 million in capital, which it plans to return to shareholders through buybacks, according to a statement.
“I sort of take a step back and look at what we’ve actually achieved over the last 12 months,” Gori said, listing off the transactions. Those began with a record deal to reinsure C$13 billion of reserves with KKR & Co.’s Global Atlantic Financial Group, followed in March by plans to reinsure C$5.8 billion of Canadian policies with RGA Life Reinsurance Co. of Canada.
“When you take all of those three combined, we reinsured C$24 billion worth of reserves,” he said. In the process, Gori said, Manulife cut its long-term care reserves by about 20%, freed up about C$3 billion in capital and improved its return on equity.
Reinsurance deals lead to lower core earnings, as the insurer no longer books revenue from the policies. But offloading assets with a low return on equity improves overall profitability and cuts the amount of capital Manulife must hold under regulatory rules.
Stock Boost
Manulife shares gained 1.4% to C$45.66 on Thursday, bringing its total return this year including dividends to more than 60%.
“This follow-on transaction was well-telegraphed, but there were still lingering doubts on management’s ability to get it done,” Scotiabank analyst Meny Grauman wrote in a report. It’s significant that they succeeded, he wrote, and that the move involved a younger cohort of long-term care reserves than last year’s deal, which means it will cover a longer period of liability.
“While we don’t see Manulife shares reacting as dramatically to this deal as it did after December’s announcement, we think that it will still help drive Manulife’s valuation higher, and further validates our still-bullish thesis on this name,” Grauman said.
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