Swiss Re in $1.268 Billion Deal with Berkshire Hathaway Life Insurer

January 19, 2010

Swiss Re has concluded an agreement with Berkshire Hathaway Life Insurance Company of Nebraska to cede, a “closed block of yearly renewable term individual life reinsurance business, written prior to 2004.” The transfer is retroactive to October 1, 2009. Swis Re will report the transaction in the first quarter of 2010.

Under the terms of the agreement Swiss Re will receive a “ceding commission” of CHF 1.3 Billion ($1.268 billion) and will also free up around CHF 300 million ($292.5 million) in capital.

The transaction builds on Swiss Re’s tradition of portfolio steering and reinsurance risk transformation and will improve its capital efficiency,” said the announcement. The reinsurer also indicated that it would “continue to provide administration and reporting services for the subject business.”

Christian Mumenthaler, Swiss Re’s Head of Life & Health, described the deal as a “significant step forward in Swiss Re’s strategy to increase capital efficiency.” He added that by “transferring this block of life business, Swiss Re is monetizing intangible assets and freeing up capital. The transaction puts us in an excellent position to redeploy the capital at more attractive returns.”

The transaction further deepens the relationship between Swiss Re and Warren Buffett’s Berkshire Hathaway. The reinsurer wrote off more than CHF 6 billion ($5.85 billion) as a result of the financial crisis, but was buoyed up by an investment of CHF 3 billion ($2.925 billion) from Berkshire Hathaway, which received convertible notes issued by the company.

Source: Swiss Re – www.swissre.com

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