MET MetLife Inc

American International Group Inc. and Prudential Financial Inc. said they would extensively restructure their businesses if they came under severe financial stress, their latest pitch to convince regulators that they have credible plans for avoiding taxpayer help if they were to fail.

The public versions of the firms' 2015 "living wills" were released Friday by the Federal Reserve. They are the firms' second attempt to show the Fed they have credible plans to go through bankruptcy without assistance—a test they must meet because they have been designated "systemically important financial institutions," or SIFIs, under the 2010 Dodd-Frank law.

Firms that fail to provide credible living wills can be broken up by regulators or face restrictions on their business. MetLife Inc., the third U.S. insurance firm designated as a SIFI, will submit its first plan before the end of 2016.

The filings come amid pressure on the insurance firms to reconsider their size given the "living will" requirements and other stricter regulations that come with being a SIFI. MetLife on Tuesday said it was divesting large parts of us U.S. life insurance business in part as a result of the tougher rules, putting pressure on its rivals to consider similar moves.

The latest plans from AIG and Prudential provided more detail than they did last year—a response to orders by regulators. The firms file both private and public versions of the plans. Private versions can run tens of thousands of pages, but last year AIG and Prudential's public plans were 16 and 33 pages, respectively.

AIG's new, 43-page public plan released Friday contains a lengthier description of how it would unwind all its material legal entities; its previous version contained just a few paragraphs.

AIG's plan contemplates a scenario under which it could cease to exist, even in smaller form, by liquidating or selling off its businesses. If possible, AIG said it would seek to reorganize property-casualty insurance units so that they could continue to operate as going concerns, saving jobs and minimizing disruption to the economy as a whole. Otherwise, those operations would be sold or spun off in initial public offerings or large asset sales.

Its parent company and some of its noninsurance operations would be liquidated under a chapter 11 bankruptcy-court plan. Its life-insurance businesses would be placed into state receivership proceedings, where they would ultimately be liquidated.

AIG's plan also details the dramatic way it has shrunk in size and riskiness since 2008, when the then-sprawling insurance and financial-services conglomerate nearly collapsed and became a government ward with one of the largest bailouts, at nearly $185 billion at its peak. The bailout was fully repaid by the end of 2012.

AIG noted that since 2007, it has "materially decreased" its total assets by 53%, to $502 billion from $1.06 trillion; decreased total debt by 83% to $31 billion from $176 billion, and increased shareholders' equity 3% to $99 billion from $96 billion, among other moves. AIG has narrowed its focus to insurance after divesting aircraft leasing and most of the derivatives and other financial products that contributed to its 2008 problems.

Prudential, the second largest U.S. life insurer by assets behind MetLife, offered a 58-page plan under which its assets would shrink by about 60%.

It would put its U.S. insurance companies under rehabilitation proceedings run by state regulators, envisioning that they would emerge as operating companies.

If necessary to raise money during a bankruptcy, its parent company would sell certain businesses and reorganize around the ones that it retained, emerging from bankruptcy a leaner entity. While the plan doesn't specify what businesses would be sold, it says asset-management businesses "would be the most likely."

After reading the two firms' first living-will plans last year, the Fed said they hadn't adequately addressed certain obstacles to failing without taxpayer help and ordered them to "demonstrate that they are making significant progress" this time around.

That was a worrisome verdict for the firms, but the regulators' language was less severe than their rebuke to 11 large banks in August 2014. Those banks refiled their plans last year and are still awaiting a response from regulators, which is expected next month at the earliest.

Write to Ryan Tracy at ryan.tracy@wsj.com and Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

January 15, 2016 15:25 ET (20:25 GMT)

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