MetLife Moves Closer to the Danger Zone

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Pity poor MetLife (NYSE: MET  ) . Never has a life insurer shed more in an attempt to wind up with less. In MetLife's case, its sale of its retail banking unit to GE Capital (NYSE: GE  ) was an exercise in frustration, as one regulatory hurdle rose up to replace those already vanquished. At the end of last year, the sale was finally given the green light, effectively pulling MetLife out from under the banking regulators' scrutiny.

The closing of that sale did not solve another pending problem, however. New procedures enacted by Dodd-Frank have empowered the Financial Stability Oversight Council to label any company as a "systemically important financial institution" if council members feel that the economy could be threatened by its failure. Earlier this week, the giant insurer announced that it had entered the last stage of the regulatory process that could give MetLife the SIFI designation that it feels it so richly does not deserve.

So far, not so good
Other companies -- like GE Capital, as well as MetLife peers AIG (NYSE: AIG  )  and Prudential (NYSE: PRU  )  -- have already earned that tag, which could push stricter new capital rules upon them. Though AIG and GE Capital are not challenging the classification, Prudential is appealing its recent designation.

MetLife's CEO Steven Kandarian has balked at this classification in the past and released a comment along with the company's announcement of the insurer's status. He noted that no other entity can be considered threatened by its ties to MetLife, and that unduly strict capital rules will extract costs from larger insurers only, thus impacting their ability to compete with their smaller, less regulated rivals.

So far, Kandarian's pleas have fallen on deaf ears, and things aren't looking great for MetLife. After all, the CEO had lumped fellows AIG and Prudential into an argument against MetLife's SIFI classification earlier this year at a summit in Washington, D.C., and look what happened to them. It also looks less likely that MetLife will escape the designation now, at the final stage of the regulatory process.

As Bloomberg notes, MetLife held over $840 billion in assets at the end of the first quarter, compared to Prudential's $724 billion. Unfortunately for Mr. Kandarian, it looks like he is going to have to get used to MetLife's new label very soon.

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9/28/2016 10:05 AM
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