Swiss Reinsurance Co. said Monday it transferred part of its U.S. life insurance business to U.S. investor Warren Buffett's Berkshire Hathaway Inc. for 1.3 billion Swiss francs ($1.27 billion) to free up capital and invest it more profitably.
The deal with Buffett, who already has a stake in Swiss Re, takes effect retroactively on Oct. 1, 2009. It has freed up 300 million francs ($292 million) in capital, Swiss Re said.
The transaction known as "retrocession" means that Swiss Re transfers the business to another reinsurer — Berkshire Hathaway.
Reinsurance companies sell backup coverage to other insurers, spreading risk in the event of huge losses.
The life insurance business had failed to meet Swiss Re's hurdle rate of 14 percent of returns, the company said.
"Swiss Re believes the proceeds and capital released by this transaction can be more efficiently employed to achieve a higher return," the company said.
Swiss Re said it will continue doing the administration and reporting for the business in question.
Shares in Swiss Re were down 0.8 percent at 49.70 francs ($48.43) on the Zurich exchange.
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