Insurer Swiss Re is to transfer the liabilities of a lossmaking US life reinsurance contract to investor Warren Buffett for 1.3 billion Swiss francs (Dh4.66bn) to free up cash and bolster its finances.
The deal with the US investor's Berkshire Hathaway makes Berkshire Hathaway Life Insurance of Nebraska liable for up to $1.5bn (Dh5.5bn) in reinsurance claims. Berkshire Hathaway will also be the recipient of premiums from the block.
For Swiss Re, the deal will also free up about 300 mn Swiss francs in capital, allowing it to be invested more profitably elsewhere, the world's second-biggest reinsurer, said yesterday. "The transaction is marginally positive for Swiss Re. This block of business was slightly loss-making in 2009," said Helvea analyst Tim Dawson.
Swiss Re said the business no longer met its investment thresholds, and that passing it to Berkshire Hathaway would have boosted operating profit at its life unit by 40 mn Swiss francs in the first nine months of 2009. Getting rid of the contract will also reduce its financial exposure to lethal pandemics by about 10 per cent.
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