US life retrocession block sold to Berkshire Hathaway
Swiss Re has sold off SFr1.3bn of US yearly renewable individual life retrocession business to Berkshire Hathaway to free up cash for further investment.
Swiss Re said the transaction builds on its tradition of portfolio steering and reinsurance risk transformation and will improve its capital efficiency.
Under the terms of the contract Swiss Re will, on a 100% quota share basis, reinsure a closed block of yearly renewable term individual life reinsurance business, written prior to 2004, with Berkshire Hathaway Life Insurance Company of Nebraska.
SFr300m freed up
The transaction is effective 1 October 2009 and will be reported by Swiss Re in the first quarter 2010. Swiss Re will release SFr300m of capital. Swiss Re will continue to provide administration and reporting services for the subject business.
Christian Mumenthaler, Swiss Re’s Head of Life & Health, said: “This is a significant step forward in Swiss Re’s strategy to increase capital efficiency.
“By transferring this block of life business, Swiss Re is monetising intangible assets and freeing up capital. The transaction puts us in an excellent position to redeploy the capital at more attractive returns.”
Not significant
The FT reported that George Quinn, chief financial officer, said in a conference call that the transaction was not expected to have significant impact on profitability. It said analysts welcomed the release of capital and potential balance sheet strengthening.
"While the historical performance of the underlying block has been mainly positive, the business does not meet Swiss Re's return hurdles," the group said in slides to investors.
Quinn said: "It's a small piece of portfolio management, but it's not life-changing for the firm."
