Buffett gets part of Swiss Re's US arm in £759m deal

The deal with Buffett's company, which already has a stake in Swiss Re, takes effect retroactively from 1 October last year. It has freed up SFr300m in capital, Swiss Re said.

The life insurance business had failed to meet Swiss Re's hurdle rate of 14 per cent returns, the company said. "This is a significant step forward in Swiss Re's strategy to increase capital efficiency," said Christian Mumenthaler, who is in charge of its life and health department. "The transaction puts us in an excellent position to redeploy the capital at more attractive returns."

The transaction, known as "retrocession", means Swiss Re transfers the business to another reinsurer – Berkshire Hathaway.

Reinsurance companies sell back-up coverage to other insurers, spreading risk in the event of huge losses.

Swiss Re said it would continue to carry out the administration and reporting for the business in question.

Shares in Swiss Re closed down 1.6 per cent at SFr49.30 on the Zurich exchange.

Among previous deals with Buffett, Swiss Re had its property and casualty reserves reinsured with Berkshire last year to cover up to SFr5bn in losses.

Buffett's company invested SFr3bn in Swiss Re last year, with the possibility of converting the investment into conventional Swiss Re shares in 2012. This would allow Berkshire to control roughly one-quarter of Swiss Re.

Berkshire owns several major insurance companies, including Geico and reinsurance giant General Re Corp.

Analysts mostly welcomed the deal, saying the freed-up capital could be used by Swiss Re for more profitable businesses.

Helvea analyst Tim Dawson warned there were limited opportunities to reinvest capital at this point, at least in the property and casualty business. "Nevertheless, on first review, this transaction should be a modest positive for the group," he said.