(Bloomberg) -- Manulife Financial Corp. agreed to reinsure C$13 billion ($10 billion) of reserves with KKR & Co.’s Global Atlantic Financial Group and its partners in a deal the company said is the largest long-term care reinsurance transaction in the industry’s history.

The deal includes C$6 billion of long-term care reserves, or 14% of Manulife’s total, and will release C$1.2 billion of capital, which the Toronto-based insurer said it plans to return to shareholders through share buybacks. That will add to core earnings per share and return on equity, according to a statement Monday. Manulife will continue to administer the policies.

“We are taking some of the risks that we’ve accumulated over the years, and we are offloading it to another counterparty,” Manulife Chief Financial Officer Colin Simpson said in an interview. With inflation in medical costs putting pressure on the long-term care business, finding a reinsurer for the liabilities was significant. “Not only is it difficult to do a deal, but we’ve done the biggest deal.”

Manulife’s shares climbed 2.7% to C$27.80 at 12:59 p.m. in Toronto. They’re up 15% this year, more than the 3.7% increase in the S&P/TSX Financials Index.

The transaction is expected to be completed in the first half of next year, subject to regulatory approval.

The agreement could open up the market to similar deals in the future, Simpson said. Jeffrey Flynn, insurance-industry analyst for Bloomberg Intelligence, made a similar prediction, saying the deal “may open a new chapter in the life-insurance liability-transfer market, helping the group lower risk.”

“Manulife’s LTC block is relatively well-reserved — making a transaction easier — but the deal could suggest more LTC-exit activity,” Flynn said in a research note. Genworth Financial Inc., Unum Group, Ameriprise Financial Inc., MetLife Inc. and Prudential Financial Inc. all “have LTC exposure,” he wrote.

The deal is the third block transaction Global Atlantic has reached with Manulife, according to a separate statement from the New York-based insurance company, which focuses on the retirement and life-insurance sectors. Following a concurrent deal in which all the long-term care insurance risks are simultaneously reinsured with another firm, Global Atlantic will retain only the underlying spread-based risks of that portion.

Global Atlantic is a majority-owned subsidiary of investment firm KKR.

(Updates with CFO and analyst comments, share price, starting in third paragraph.)

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