Even if You're Goldman, Getting Out of Pensions Is Hard

Meanwhile, Rothesay has grown to manage some 24 billion pounds ($31 billion) of assets. In 2013, Goldman pulled in Blackstone, GIC and Massachusetts Mutual Life Insurance Co. as co-investors. Blackstone's investment is through David Blitzer's tactical opportunities unit.

Yet even now, Rothesay isn't ready for an initial public offering that would provide an exit for its backers.

Insuring pensions is a long-term business. Cash generation increases only slowly as capital is released when policies end on the death of the customer. That means it's hard to fund new business growth and pay predictable dividends to stock-market investors. The inflection point comes when the so-called back book of existing policies has grown to such a size that it's generating enough cash to do both.

Look at London-listed Just Group Plc. It trades at a discount to book value and still has a measly dividend yield of just 2.5%. Rothesay has paid the occasional special dividend, but for it's still focused on growth.

With an IPO still some way off, and Goldman understandably itching to get out after a decade, the challenge for the investment bank was to find patient investors willing to accept the model.

Goldman is lucky its co-investors have obliged by each agreeing to buy some of its stake. The deal values at Rothesay at about 2 billion pounds, a slight discount to embedded value. Like the U.S. bank, though, the buyers may have to wait some time for their own exit.

— Read Goldman-Backed Rothesay Life to Acquire MetLife Unit on ThinkAdvisor