Old-fashioned defined-benefit pension schemes are a 2tn liability for uk companies. but when fully funded schemes are offloaded to insurers, millstones can become money-spinners. a deal on wednesday suggests the value of rothesay life, behind some of the biggest of these transactions, has nearly tripled in three years.

Private equity group blackstone was paid 2.1bn for its 36 per cent stake by the two other main shareholders us-based insurer massmutual and singapore sovereign wealth fund gic. the deal values the business at 5.75bn, up from the 2bn implied by a 2017 transaction. that valuation, reflecting recent growth, suggests reassuring bulk. it is larger than the market capitalisation of about 30 ftse 100 companies.

Rothesay hailed exceptional long-term support from its investors. ownership matters in this industry. worries about short-termists taking on long-term liabilities surfaced with private equity giant apollos move into the annuities business in the us.

They were also aired in a high court case last year, when a judge blocked a 12bn transfer of annuities from prudential to rothesay. the ruling is due to be appealed in october.

Rothesay is still a relative newbie. it was set up in 2007 by ex-goldmanite addy loudiadis. her expertise in derivatives, once applied to helping greece meet european deficit rules, is relevant to running annuity portfolios. the instruments can help hedge interest rate and longevity risks.

Some risks are harder to mitigate. rothesay boosts performance its return on capital averages 13 per cent over five years with complex and illiquid investments. some, like loans secured on ground rents, carry legislative risk, according to moodys. overall, it judges rothesays portfolio as relatively conservative.

Market volatility and falling rates have reduced rothesays capital coverage required for solvency from 202 per cent at the end of 2019. but it remains high at 189 per cent. the pandemic has slowed the market for bulk annuity deals after a record-breaking 2019. but it should pick up again and rothesay should benefit. legacy pensions are a headache for many finance directors. if they can afford to offload them, they will.

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