One of the key contenders to take over Berkshire Hathaway when Warren Buffett eventually retires was taken out of the running yesterday after he resigned amid federal pressure over a fraud case.

Joseph Brandon stepped down as chief executive of Berkshire's General Re insurance group.

His departure comes after the convictions in February of four of the firm's former executives for fraud.

Franklin “Tad” Montross, General Re's co-president, will assume Mr Brandon's position immediately.

A federal jury in Hartford, Connecticut, found the four former General Re executives, including Ronald Ferguson, the former chief executive, guilty of participating in a sham transaction in 2000 between General Re and American International Group, the insurance giant.

The defendants helped to add $500 million to AIG's loss reserves - a key indicator of an insurer's health, prosecutors said.

One AIG executive was also convicted.

Neither the US Securities and Exchange Commission nor prosecutors has charged Mr Brandon with any wrongdoing.

However, the conviction of his fellow executives in relation to the AIG case and an ongoing inquiry into General Re appears to have made his position untenable.

Charles Hamilton, an analyst with FTN Midwest Securities in Nashville, said: “The pressure from the Securities and Exchange Commission and federal prosecutors was just too intense for them to keep him in his role.”

In a letter to shareholders as recently as February, Mr Buffett had thanked Mr Brandon for helping to improve General Re.

He wrote: “Thanks to Joe Brandon, General Re's CEO, and his partner, Tad Montross, the lustre of the company has been restored ... Joe and Tad have been running the business for six years and have been doing first-class business in a first-class way, to use the words of JPMorgan.”

Other possible candidates to succeed Mr Buffett included David Sokol, chairman of Berkshire's MidAmerican Energy, and Ajit Jain, who runs the Berkshire Hathaway Reinsurance Group.

Berkshire owns more than 60 businesses, including furniture, jewellery, restaurants, natural gas and corporate jet companies, although its biggest exposure is to insurance.

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