(Image credit: Matthew Field.)
The MetLife news comes as no surprise. MetLife’s decision to split a significant portion of its US business elevates the role regulatory environments will continue to play in shaping financial and non-banking institutions’ business models, and the downstream consequences will ultimately be a win-win for the consumer and the firm.
It’s an opportunity to improve the firm’s life insurance retail business, and it would behoove MetLife to spin off this segment of the business. MetLife, the newly spun-off company and customers can all benefit from this; the new company will be able to offer more competitive rates to its policy holders in line with industry-standard capital requirements, while MetLife’s balance sheet can be bolstered from the revenues raised from the spin-off.
The big picture? This is a positive sign that the market is can become more efficient and that regulatory requirements are effective, despite how any political party or skeptic wants to spin it.
Additionally, such a move could influence other SIFI organizations to use their “regulatory environment” as a business growth opportunity to restructure and reform—something which often gets overlooked amidst the sea of red tape and paperwork associated with process. The key question to ask first is, “Should we stay in this line of business?”
In short, this is a sign of things to come; we can absolutely expect to see more restructuring among major financial and non-banking institutions. In the wake of the recent RBS restructure and JP Morgan’s takeover of Bear Stearns, we’re well aware this process is extraordinarily complex. It takes years to move toxic assets out of a business, to re-shape existing legal entities to embrace newly acquired risky businesses and to redirect risk to a new entity. Yet with the global regulatory landscape becoming more convoluted and prudent, organizations and regulating bodies are (thankfully) thinking more pragmatically and moving forward in this process.
It’s a long-haul, but my team and I speak with financial services firms around the world on numerous aspects of restructuring and cost improvement initiatives. Many of these initiatives involve product activity analysis, know your customer (KYC) analytics, and associated risk assessments in multiple jurisdictions. It’s hard to see the forest through the trees at times, but there’s a silver lining with this MetLife news that is designed to benefit and protect the consumer and business.