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Life Health > Life Insurance

Back to Basics...but Why?

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MetLife may not be moving forward with its forward mortgage business. In addition to a previous announcement that the company was contemplating the sale of MetLife Bank, N.A.’s depository business, the company is now exploring the possibility of a sale of the bank’s forward mortgage business as well.

MetLife Inc., (NYSE: MET) a global provider of insurance, annuities and employee benefits programs, has found that a bank holding structure may not be a desired focus. This consideration comes at an interesting time; MetLife performed relatively well during the recent financial crisis and did not need a capital infusion from the U.S. Treasury Department, but it has been one of a few insurance companies caught in the crosshairs of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Under Dodd-Frank, a non-bank insurer (such as MetLife, as well as Prudential and others) could be designated as a systemically important financial institution (SIFI), which would lead to regulation by the Federal Reserve Board as well as being subjected to additional requirements such as higher capital standards. The criteria for being considered SIFI includes having at least $50 billion in total consolidated assets.

“While the rules regarding ‘systemically important’ have not been finalized,” a MetLife spokesperson said, “exiting the depository business and deregistering as a bank holding company will enable MetLife to operate within the same regulatory framework as other insurance companies.”

Avoiding the SIFI label might be besides the point, especially since MetLife appears likely to be labeled SIFI regardless of its forward mortgage business.

“The primary reason for exploring the departure of the mortgage business is because it is not core to MetLife,” says Jeffrey Schuman, an analyst for Keefe, Bruyette, & Woods, a global investment bank that specializes in the insurance industry.

“It may help them from a regulatory standpoint, but that is not the main reason,” Schuman said. “The weakness of earnings in this sector could also play a part.”


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