Why MetLife Didn’t Tank Yesterday

Both life insurers and banks have felt the squeeze since the financial crisis, and for MetLife (NYSE: MET  ) , the not-so-proud owner of a banking unit, the pressure has been doubled. As regulators began piling rules on the banking sector, MetLife started divesting itself of anything bank-like. Unfortunately, the process has been frustratingly slow -- so slow, in fact, that the Fed has given the big insurer yet another extension  to file its capital plan with regulators.

Slow going, but not for lack of trying
Normally, this type of announcement would make investors a bit edgy, but MetLife is a special case. For the past year or more, the company has been on a frenzied slimming diet to rival that of Bank of America (NYSE: BAC  ) under the auspices of CEO Brian Moynihan's Project New BAC.

In just the past year, the insurer sold its reverse mortgage business  to Nationstar Mortgage (NYSE: NSM  ) , the same outfit that just bought a ton more mortgage servicing rights from B of A. Walter Investments (NYSE: WAC  ) , another go-getter that was involved in the Bank of America MSR sale, purchased MetLife's servicing platform, which was apparently all that was left after JPMorgan Chase (NYSE: JPM  ) bought $70 billion of the insurers' MSRs last November.

The coup de grace, though, was to be the sale of MetLife's retail banking arm to General Electric's (NYSE: GE  ) GE Capital subsidiary. After this sale was complete, MetLife would be able to un-bank itself, thereby getting out from under the steely gaze of bank regulators. But, alas, it was not to be.

Originally, the deal was to be approved by the Federal Deposit Insurance Corporation, which could never see its way clear to bless the union. The parties changed some terms of the sale, which pushed the whole affair away from the FDIC and under the microscope of the Office of the Comptroller of the Currency, which recently approved the deal. Not in time, however, for MetLife to avoid filing a capital plan.

One Fool's take
It seems obvious that everyone knows MetLife will be back to its non-banking self soon. The Fed has given three extensions to the insurer regarding this filing, knowing full well that this deal will close sometime in the near future.

Just as importantly, MetLife's investors know it. The stock closed 0.6% higher yesterday, certainly not an indication of mass disappointment. Between this and new regulations that may allow life insurers some laxity on reserves, shareholders know that change is on the way -- after which the company will be able to reward their loyalty. Clearly, they feel they won't have much longer to wait.

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