MetLife Disappointed With SIFI Re-Designation by FSOC
March 8, 2016 by Frank Klimko, Washington correspondent, BestWeek: frank.klimko@ambest.com
WASHINGTON – The Financial Stability Oversight Council voted to retain the systemically important financial institution designation for MetLife Inc., saying new information from the company did not change its appraisal that the company’s theoretical demise could spark wider economic problems.
The council, charged with safeguarding the U.S. economy, met behind closed doors to consider the annual review of the company’s SIFI designation. In a summary released after the meeting, the council announced it had decided to keep the SIFI designation on MetLife for at least another year.
“The council voted not to rescind the designation of MetLife,” the summary said. “The council provided the company and its lead state insurance regulator with a notice explaining the primary bases for the council’s decision not to rescind the designation.”
MetLife, the nation’s largest life insurer, wasn’t pleased with the decision.
“It is disappointing that FSOC failed to rescind its designation of MetLife as a non-bank Systemically Important Financial Institution,” the company said in a statement released after the meeting.
The summary, which did not provide details of the discussion, noted the council did address objections raised by the company contesting the determination during the annual reevaluation. The council found those arguments unconvincing, the summary said.
FSOC first designated MetLife in December 2014. It is one of three insurers with the SIFI designation, which means the companies are subjected to higher levels of prudential supervision. The FSOC in December upheld Prudential Financial Inc.’s designation as a SIFI.
“While FSOC’s decision comes as no surprise,” MetLife said, “it does highlight the need for Congress to move forward with legislation that provides more transparency to FSOC’s actions so that companies can address concerns directly and take steps that lead to de-designation.”
The marketplace consequences of a SIFI label have been dramatic. Another SIFI, American International Group Inc. is under attack by a prominent shareholder who wants to break up the company to shed the SIFI designation.
As part of MetLife’s effort to shed the designation, Massachusetts Mutual Life Insurance Co. and MetLife last month announced a $300 million deal in which MassMutual will acquire MetLife Premier Client Group and its affiliated broker-dealer, MetLife Securities, Inc., and related assets. The transaction, expected to close mid-year, requires regulatory approval (Best’s News Service, Feb. 29, 2016).
Although the company did not win before the council, MetLife attorneys received a sympathetic hearing before a federal judge last month in a lawsuit to remove the SIFI label. U. S. District Judge Rosemary M. Collyer, of the U. S. District Court for the District of Columbia, questioned the validity of the SIFI designation process (Best’s News Service, Feb. 10, 2016).
Operating units of MetLife have current Best’s Financial Strength Ratings of either A (Excellent) or A+ (Superior). On the morning of March 3, shares of MetLife Inc. (NYSE: MET) were trading at $42.05, down 0.10% from the previous close.
