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GIC increases stake in Rothesay Life
INVESTMENT bank Goldman Sachs is exiting its 32.7 per cent stake in UK pensions provider Rothesay Life, selling to other existing shareholders which include Singapore sovereign wealth fund GIC.
After the successful completion of the deal, GIC and private equity giant Blackstone, which both held 26.5 per cent each according to Rothesay Life's 2016 annual report, will hold equal largest stakes. Meanwhile, Massachusetts Mutual Life Insurance Company (MassMutual), which previously held 6.5 per cent, will increase its stake substantially.
The deal size was not disclosed, but a report by Sky News last week cited a source close to one of the shareholders saying the transaction valued the firm at £2 billion (S$3.54 billion).
A joint press release by the five firms above on Aug 8 said that Rothesay Life is well positioned to benefit from core structural drivers that generate considerable opportunities for growth.
"This transaction provides the business with long-term support from all shareholders, allowing Rothesay Life to continue providing clients with a full range of solutions on a large scale, as well as taking full advantage of strategic prospects as it maintains its value and risk-driven approach to underwriting," it said.
Choo Yong Cheen, chief investment officer of private equity at GIC, said in the release that Rothesay Life offers an important service, has a differentiated strategy and strong growth prospects with the increasing demand for annuity risk transfer solutions.
Goldman Sachs founded Rothesay Life in 2007. The firm specialises in the "bulk annuity" insurance market. It acquires pension liabilities from companies and underwrites the risk of providing corporate defined benefit pensions, in exchange for a fee.
GIC, Blackstone and MassMutual first purchased their stakes in December 2013.
As early as 2014, there was talk to list the firm. Goldman, meanwhile, had reportedly been trying to reduce its exposure to the business due to tougher Basel III capital requirements making the business less attractive for the bank.
An early-2016 listing was reportedly called off due to turmoil and uncertainty in the insurance industry caused by new regulations.
The firm has expanded aggressively in recent years. Assets under management have grown from £7.5 billion at end-2013 to £23.7 billion at end-2016. At end-2016, the firm was insuring the future pensions of over 380,000 people.
In 2016, Rothesay Life notably bought £6 billion worth of pension liabilities from Dutch insurer Aegon, backed by new capital from its shareholders. The four corporate shareholders had subscribed for £200 million of equity in 2016, according to Rothesay Life's annual report.
Based on the firm's annual report, Rothesay Life is the fourth largest annuity provider in the UK. Existing Rothesay Life clients include the pension schemes and members of companies like British Airways, General Motors and InterContinental Hotels.
Rothesay Life reported total revenue of £9 billion in 2016 including £6.2 billion of net premiums written. Net profit was £262 million.
The latest transaction is expected to close in the final quarter of the year and is subject to regulatory and anti-trust approvals.