Prudential, MetLife Gain After Senate Eases Dodd-Frank for Insurers

The bill eases a Dodd-Frank Act provision that imposes bank-like capital standards on insurers deemed systemically important

The Senate vote "should be a strong positive for the insurance firms deemed systemically important," an analyst said. The Senate vote "should be a strong positive for the insurance firms deemed systemically important," an analyst said.

More On Legal & Compliance

from The Advisor's Professional Library
  • The Custody Rule and its Ramifications When an RIA takes custody of a client’s funds or securities, risk to that individual increases dramatically. Rule 206(4)-2 under the Investment Advisers Act (better known as the Custody Rule), was passed to protect clients from unscrupulous investors.
  • Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.

Prudential Financial Inc. and MetLife Inc. rallied after the Senate approved a bill that gives Federal Reserve regulators more flexibility in how they apply capital rules to the biggest U.S. life insurers.

Prudential climbed 2.4% to $88.09 at 4:01 p.m. Wednesday in New York. It was up 0.16% in afternoon trading Thursday. MetLife jumped 3%, the biggest gain in the 83- company Standard and Poor’s 500 Financials Index, but was down 0.64% Thursday afternoon.

The bill eases a Dodd-Frank Act provision that imposes bank-like capital standards on insurers that are deemed systemically important. Prudential was named systemically important last year and MetLife is in the final stage of a government review to determine whether it gets the same designation.

“It is becoming increasingly clear that the Fed will be given the flexibility to tailor its regulation of insurance companies,” Ed Mills, an analyst at FBR Capital Markets, wrote in a research note today. “This should be a strong positive for the insurance firms deemed systemically important.”

MetLife has said regulatory uncertainty poses the biggest challenge to meetings its profitability target. The New York- based insurer hasn’t authorized a share repurchase since 2008.

Prudential Vice Chairman Mark Grier said today that he’s encouraged by the Senate’s action, and that the Newark, New Jersey-based insurer can meet any reasonable capital standard.

The Dodd-Frank section that’s being modified was written by Susan Collins, a Maine Republican and required the Fed to set minimum capital and leverage standards for non-bank firms, including the insurance industry. Collins has said her provision wasn’t meant to subject insurance companies to the same standards as banks, and the proposed revision was broadly supported by senators from both parties.

To become law, the bill, S. 2270, would need to be approved by the House of Representatives and signed by President Barack Obama.

--With assistance from Craig Giammona in New York.

---

Check out Funds as SIFIs Would Be ‘Too Burdened to Succeed’: ICI Chief on ThinkAdvisor.

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Discuss this story
This is where the comments go.