Warren Buffett buys Spanish bank's insurance business for €600m

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US billionaire Warren Buffett has bought the insurance business of Caixabank for €600m (£486m) in a deal that will allow the struggling Spanish lender to book a gain of €524m.

Berkshire Hathaway (NYSE: BRK-A - news) , the conglomerate run by Mr Buffett, said it had bought the Caixabank’s life insurance operation, VidaCaixa, handing the Barcelona-based lender vital funds as it attempts to bolster its finances following the announcement last month of an €4.4bn provision against current and future losses.

Caixabank is seen as one of Spain’s stronger lenders, but has been hurt by the collapse in the country’s real estate market that in common with its peers has left it with large writedowns on its loan portfolios.

The decision to sell off its insurance business follows a similar move earlier this year by Banco Santander (Amsterdam: SANT.AS - news) , Spain’s largest bank, which transferred its life insurance business to Deutsche Bank (Xetra: 514000 - news) .

VidaCaixa will continue to service the insurance policies for Berkshire Hathaway, which owns one of the world’s largest insurance and reinsurance businesses.

Berkshire Hathaway has used the financial crisis to make several investments in the financial sector. At the height of the financial crisis the company invested $5bn (£3.1bn) in US investment bank Goldman Sachs (NYSE: GS - news) , while last year it put $5bn into Bank of America (NYSE: IKJ - news) after the lender became the subject of market fears over its financial stability.

The company has also signed a series of reinsurance deals with other insurers, including AIG, Lloyd’s of London and Swiss Re.

Mr Buffett sees the insurance sector as a highly profitable business and has used the premiums paid to the company to help finance its global expansion that has seen him become one of the world richest men. He is currently reckoned to be the third richest man in the world with a fortune of $46bn, according to Forbes magazine.