MetLife CEO Warned Federal Regulators in 2014 of Possible Breakup, Court Filing Shows
January 27 2016 - 5:51PM
Dow Jones News
By Leslie Scism
MetLife Inc. Chief Executive Steven Kandarian warned federal
regulators 15 months ago that the big life insurer could split up
if subjected to stricter U.S. oversight, according to new court
documents filed Wednesday.
"Frankly, what we have under consideration is a breakup of
MetLife," Mr. Kandarian said at a closed-door hearing of the
Financial Stability Oversight Council on Nov. 3, 2014.
The CEO's comments, which haven't previously been reported, came
about six weeks before the panel of U.S. regulators concluded
MetLife posed significant risks to the financial system and
warranted tougher oversight. It was the fourth nonbank financial
firm to be designated as a "systemically important" firm after
rival insurers American International Group Inc. and Prudential
Financial Inc., and General Electric Co.'s finance arm.
MetLife is now challenging that designation in federal court,
saying it doesn't pose risks to the financial system and that the
government used flawed metrics in reaching its decision. On
Wednesday it filed a transcript of the 2014 hearing with some
portions unredacted.
Mr. Kandarian said at the hearing he raised the prospect of a
breakup because "I don't want people to say later on, 'Geez, we had
no idea that you were thinking of this,' " according to the
transcript.
Earlier this month, MetLife said it would divest a large part of
its U.S. life-insurance business, both for strategic reasons and to
ease some of the capital burden it anticipates facing as a
systemically important firm. The Federal Reserve has yet to develop
rules for MetLife and two other insurers designated as systemically
important.
At the 2014 hearing Mr. Kandarian identified greater capital
requirements as a primary concern, saying that an investment bank
had been hired to analyze the potential impact.
"If the capital rules are extremely harsh from our perspective
and makes us uncompetitive in certain lines of business, then we
will have to exit those businesses in some form," he said,
according to the transcript. "And that is what is being studied:
How would you do that? How would you exit those businesses?"
At the time, MetLife was concerned the Fed would use rules
tailored for the banking industry, as the Fed hadn't historically
regulated insurance companies. MetLife's fear was that such
bank-centric rules could result in unusually steep capital amounts
for MetLife.
Since then, the Fed has indicated it would adjust rules for the
insurance industry. But MetLife has said the insurer would still
operate at a disadvantage as compared with smaller rivals.
Write to Leslie Scism at leslie.scism@wsj.com
(END) Dow Jones Newswires
January 27, 2016 17:36 ET (22:36 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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