Canadian life insurer Manulife Financial has agreed to sell its life retrocession business to US-based Pacific Life Insurance.

Manulife expects the transaction will result in an after-tax gain of about $275m.

Upon completion of the sale, Manulife expects to increase its Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of its subsidiary Manufacturers Life Insurance, by nearly six percentage points. The insurer’s MCCSR ratio was 243% on 31 March.

The retrocession business has nearly 90 employees in Toronto, Boston, Barbados and Cologne, Germany. The unit assumes risk from life reinsurers and has net life insurance in-force of $106bn.

Manulife said the transaction does not impact on its other reinsurance businesses, which focus on property and casualty retrocession and international employee-benefits management.

Manulife CEO Donald Guloien said although this business is profitable, it does not have a growth profile acceptable to the firm. The transaction releases capital which will be reinvested in higher growth businesses or to reduce leverage.

"Our remaining Reinsurance businesses provide good earnings profiles and are not impacted by the life retrocession sale," Guloien said

The transaction is subject to standard closing conditions including receipt of regulatory approvals and is expected to close during the third quarter 2011.