The retail unit slated for separation is a provider of variable annuities, where results can be tied to fluctuations in stock markets and interest rates. Sean Dargan, an analyst at Macquarie Group Ltd., said it still makes sense to limit those risks, whether or not MetLife is a SIFI. Still, Dargan said that the court victory may reduce time pressure to complete a deal, a pace that could allow Kandarian to get a better price.
The government oversight council was created by the 2010 Dodd-Frank law and charged with monitoring potential threats to the financial system after the near collapse in 2008 of companies including AIG, which required a U.S. bailout that swelled to $182.3 billion. While the largest banks automatically get tighter oversight, the council had to decide which other companies should be classified as SIFIs.
MetLife was one of the largest financial companies that didn’t take a Treasury Department rescue in the credit crisis. Kandarian has long said that his company doesn’t face the same risks as banks because it doesn’t have as much of its funds subject to immediate withdrawals. On some life policies, insurers collect periodic premiums and make payments only when a customer dies.
Shareholder Pressure
AIG CEO Peter Hancock has said he’s comfortable with Federal Reserve oversight, a stance that drew the ire of billionaire investor Carl Icahn. The activist said last year that Hancock should break the company into three separate insurers to help avoid SIFI status. AIG subsequently announced plans to sell some assets and nominated a representative of Icahn’s firm to the insurer’s board.
“AIG has activist investors who have been pushing really strong for AIG to split up as a company to avoid the SIFI designation,” Haines said. “AIG has fought that push and, right now, seems to be acquiescing to the SIFI designation. But this is just going to increase investor, shareholder pushes for these companies to consider moves to avoid the designation.”