(August 8 2013) — The European life insurer Rothesay Life is up for sale, according to regulatory filings submitted by its owner Goldman Sachs.
Goldman Sachs, which launched Rothesay in 2007, plans to sell the majority of its stake within the next 12 months, the 10-Q statement revealed. Goldman filed this quarterly report with the US Securities and Exchange Commission on August 8.
The new capital requirements from Basel III regulation motivated Goldman to “explore different options” with its European insurance arm, a source informed on the matter told aiCIO.
Rothesay Life was not mentioned by name in the filing, but a Goldman Sachs spokesman confirmed it was the subject of the discussed sale.
As of June, assets related to the insurer totaled $9.66 billion, and consisted primarily of financial instruments. Liabilities outstripped assets at $10.62 billion. Both of these figures exclude intercompany assets, which “are expected to be included as part of a sales transaction”.
Rothesay Life has been the counterparty to a number of UK pension funds who have annuitised large parts of their liabilities, and leads the European market by volume in that space.
In December, the insurer took over £680 million of liabilities from the Merchant Navy Officers Pension Fund, which was the largest bulk annuity transaction in the UK last year.
This sale represents a large chunk of the £1 billion in new group annuities Rothesay Life said it issued in 2012.
Towers Watson’s senior consultant Ian Aley said in a statement that while Rothesay Life was well regarded, Goldman Sachs may struggle to find a trade buyer.
“The public offering route makes it harder for a monoline insurer to draw down capital as needed, so this would have to raise enough to provide a war chest to fund reserves against future business,” he said.
“In the meantime, Rothesay Life will continue to quote prices for pension risk transfer. Rothesay Life has capital in place, regulatory oversight and support from Goldman Sachs to see these deals through. However, trustees thinking of transacting with Rothesay Life while it searches for a buyer will want to understand the business plan.”
Aley added that demand for pension risk transfers was likely to be strong over the next decade, with £1 trillion or so of liabilities outstanding in the UK market, meaning there should be scope for the market to grow if insurance can be delivered at an acceptable price.
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