A transformer model is presented where both winding and core were modeled by Cauer circuits in order to take into account eddy currents. The physical property of the magnetic circuit allowed the insertion of a hysteresis model. Thermal effects in the winding insulation were also modeled by a Cauer circuit. The discretization of the circuits was optimized by an iterative method that fits the reluctance of a core part or the impedance of a winding layer to known analytical solutions. This reduced the number of required circuit elements substantially and the accuracy was increased.