The insurance conglomerate MetLife announced this week that it will break off its retail arm due to a regulatory classification created by Dodd-Frank financial reform.
Company CEO Steven Kandarian said Tuesday that the Systemically Important Financial Institution (SIFI) label bestowed upon it in 2014 by federal regulators influenced their move.
Kandarian said the classification “risks higher capital requirements that could put [retail operations] at a significant competitive disadvantage.”
“Even though we are appealing our SIFI designation in court and do not believe any part of MetLife is systemic, this risk of increased capital requirements contributed to our decision,” he stated. “An independent company would benefit from greater focus, more flexibility in products and operations, and a reduced capital and compliance burden.”
The Dodd-Frank Act of 2010 granted federal regulators power to grant SIFI designations to “nonbank financial companies” large enough to cause market failures by going bankrupt. The distinction triggers additional regulatory oversight under the law.
MetLife is one of four insurance companies to receive SIFI status. General Electric Capital Corp., American International Group, and Prudential Financial are the other three.
Last fall, GE Capital made a move similar to the one revealed this week by MetLife. It sold a significant share of its US commercial leasing operations to Wells Fargo, after spinning off or selling other parts of the company.
MetLife is the largest insurer in the US, according to the New York Times’ Dealbook, with $880 billion in assets. Its retail operations are worth $240 billion.
