MetLife is shifting its U.S. business to focus on more profitable products during a period of low interest rates, its chairman said last week.
One of the effects is to roll out products in the torrid living benefit market that reduces the guaranteed payout promised annuitants, MetLife chairman and CEO Steve Kandarian said.
He also said that while the divestiture of its bank to GE Capital in January removes it from oversight from federal regulators as a bank holding company, the potential for federal regulation remains.
“Even after the de-banking process is complete, substantial uncertainty will likely remain on the regulatory front as we face the possibility of being named a non-bank systemically important financial institution, or SIFI,” Kandarian said.
As we’ve said in the past, we do not believe that our company poses systemic risk to the financial system and we will continue to make that case to policymakers,” Kandarian said.
However, he said, “If MetLife is deemed to be systemically important, it is imperative that the final [prudential] rules be tailored to the life insurance business model, which differs dramatically from that of banks.”
As a result of this uncertainty, Kandarian said MetLife 2013 budget assumes no share buybacks pending federal government regulatory action.
Kandarian stated that up to $8 billion in share buybacks through 2016 could be affected by federal regulation. He said no decision on the scope of share buybacks through 2016 will be made until MetLife finds out if it will be designated SIFI and, if so, what additional capital will be required to hold by federal regulators.
Ironically, Kandarian made his comment the same day Federal Reserve Board Chairman Ben Bernanke wrote a letter to 24 senators indicating that it will keep in mind their concerns about using “bank-centric” rules in regulating insurance companies designated SIFI.
But, Bernanke noted that the provision of the Dodd-Frank Act governing Fed regulation of non-banks requires the agency to use metrics “that are no less than the generally applicable capital requirements that apply to insured depository institutions under the prompt corrective action framework.”