GE Capital's "rescue" of Toho Life earlier this year is already looking like one of the deals of the decade.
GE initially stumped up ¥48 billion ($336 million) to bail out Toho through a reinsurance contract. In return it acquired a 90% interest in a new company, GE Capital Edison, which contains all the marketing infrastructure of the old Toho, and which has been funded by a ¥72 billion cash injection from GE and ¥7.2 billion from Toho. At a stroke GE obtained access to Toho's 2.5 million customers and use of its 7,000 tied sales force.
A second string of paper transactions between GE Capital Edison and Toho has reconfigured Toho's balance sheet to meet ministry of finance solvency ratios. However, Toho is now little more than a run-off entity, to be funded by a series of reinsurance fees paid by the new entity over the next 10 years.
"It was a great deal for GE, allowing them to buy the future and avoid the past," says David Threadgold, head of research at ING Barings in Tokyo.