MetLife Could Take Page From GE, Analysts Say

   (FROM THE WALL STREET JOURNAL 4/25/15) 
   By Leslie Scism 

As General Electric Co. moves to get out of the banking business and refocus on its industrial operations, it also aims to rid itself of some regulatory headaches.

According to analysts at Credit Suisse, its move could provide a roadmap to MetLife Inc., a company that has complained of potentially burdensome oversight from federal regulators.

In a note, Credit Suisse analysts said GE's decision to exit from banking could be a precursor to a similar move to slim down by MetLife, the biggest life insurer by assets in the U.S.

GE Capital and MetLife are two of the four non-banks designated as "systemically important financial institutions" by U.S. regulators.

The SIFI label means federal regulators believe the companies could pose significant risks to the financial system should they collapse, and thus they warrant additional oversight, such as tougher standards on capital buffers against losses. Besides GE and MetLife, the designated nonbank SIFIs are American International Group Inc., whose $180-billion-plus bailout in 2008, since repaid, is a large part of the reason there is a SIFI-designation program, and Prudential Financial Inc., which is almost as big as MetLife.

While the majority of the GE divestitures are expected to occur over the next two years, GE said it plans to apply with regulators for the unit to be "de-designated" as a SIFI next year.

For its part, MetLife has been adamant that its activities don't pose any sort of risk to the broader financial system, and that the SIFI designation could put it at a competitive disadvantage to most of its peers.

MetLife is challenging its status as a SIFI in federal court. The Credit Suisse analysts see MetLife following GE's lead if the insurer loses its legal fight, and if the new capital standards, which have yet to be developed by the Federal Reserve, prove onerous.

"We would expect [MetLife] management to strongly consider a broad restructuring including a breakup of the company," Thomas Gallagher and two other analysts wrote last week.

He went further in an email to The Wall Street Journal on Friday:

"I think MET has already been formulating a restructuring plan as part of its contingency planning," Mr. Gallagher said.

A MetLife spokesman said the company doesn't comment on analyst speculation.

At an investor event in 2013, MetLife Chief Executive Steven Kandarian was asked if a breakup of the company might be in the cards "if the SIFI rules become too difficult to manage," and he responded: "If the rules don't come out the way we think they will in terms of being reasonable, all options have to be put on the table."

Mr. Gallagher and the Credit Suisse team wrote that a potential MetLife "breakup and restructuring would have some added complexity compared to what GE recently announced, as GE is primarily selling off wholesale funded assets, and using proceeds to pay down debt and free up capital to buy back shares."

Credit Suisse said one option for MetLife might be splitting off its international business from its U.S. businesses. MetLife acquired much of its global footprint by buying an international life-insurance unit from AIG in 2010, as AIG was slimming down to repay U.S. taxpayers.

Or it could create a "good bank/bad bank structure" where parts of MetLife remain together as a SIFI but other parts are spun off.

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