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Fitch: MetLife's SIFI Designation Is Credit Neutral
[December 22, 2014]

Fitch: MetLife's SIFI Designation Is Credit Neutral


Last week's decision by the U.S. Financial Stability Oversight Council (FSOC) to designate MetLife (Insurer Financial Strength: AA-, Stable Outlook) a nonbank systematically important financial institution (SIFI) is neutral to the credit ratings of the company, says Fitch Ratings.

The FSOC had already announced a preliminarily decision to designate MetLife a nonbank SIFI on Sept. 4; thus, the FSOC's reaffirmation of the decision was expected.

The specifics of the enhanced supervision to which nonbank SIFIs will be subject have not been finalized, so it is not possible to determine precisely what effect, if any, such requirements would have on MetLife. Fitch believes greater Fed oversight would, however, likely include higher capital requirements, which could eventually have some modest influence over MetLife's already strong balance sheet fundamentals. Regardless, the capital-based thresholds that we count among MetLife's multiple rating drivers are expected to remain consistent with our prior views.

MetLife continues to openly contest its SIFI designation. The company requested a hearing with the FSOC following the Sept. 4 announcement, and with Friday's affirmation, MetLife again responded in disagreement, stating that the company has 30 days to seek judicial review under the Dodd-Frank Act.

MetLife becomes the fourth nonbank SIFI designated by the FSOC, joining Prudential, AIG and General Electric Captal Corporation, which were designated in 2013. The council's authority to subject large nonbank financial institutions to consolidated supervision and enhanced prudential standards is granted under Title I of the Dodd-Frank Act.



As noted in Fitch's affirmation of MetLife's credit ratings on Dec. 15, the key rating drivers that could lead to an upgrade of the company's ratings include an NAIC risk-based capital ratio above 450%, financial leverage below 25%, and a GAAP fixed-charge coverage ratio above 9x.

Key rating drivers that could lead to a downgrade of MetLife's ratings include an NAIC risk-based capital ratio below 350%, financial leverage above 30%, and a GAAP fixed-charge coverage ratio below 5x.


The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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