MetLife said Wednesday it is moving ahead with plans to spin off much of its Charlotte-based U.S. retail business, despite a federal judge’s ruling striking down the insurer’s too-big-to-fail label.
On Wednesday, the judge in Washington rescinded a federal panel’s 2014 classification of the New York-based company as a systemically important financial institution. The label, which MetLife appealed in court, would have put America’s largest life insurer under tougher government scrutiny and could have forced it to put more money in reserves.
In January, MetLife cited the label in announcing plans to separate much of its U.S. retail business, which is headquartered in Ballantyne Corporate Park. On Wednesday, MetLife spokeswoman Meagan Soffera said the judge’s ruling will not change those plans.
The government could still appeal the judge’s decision.
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MetLife consolidated its U.S. retail operations in the Ballantyne hub in exchange for millions of dollars in incentives awarded in 2013 by the state, the city of Charlotte and Mecklenburg County. MetLife says roughly 1,500 people are employed in the hub.
The company has said it intends to keep the separated company headquartered in Charlotte. MetLife has said it’s considering a possible spinoff, sale or an initial public offering of shares in an independent, publicly traded company.
Last month MetLife announced an agreement to sell Massachusetts Mutual Life Insurance its U.S. adviser force, which includes an operation that employs about 200 in the Charlotte hub.
The reasons for Wednesday’s ruling were sealed by the judge. The ruling undercuts the foundation of the Obama administration’s plan to more heavily regulate four non-bank businesses it determined had the potential to destabilize the American financial system. MetLife had called the designation arbitrary and unjustified.
“From the beginning, MetLife has said that its business model does not pose a threat to the financial stability of the United States,” MetLife CEO Steven Kandarian said in a statement Wednesday. “This decision is a win for MetLife’s customers, employees and shareholders.”
MetLife shares jumped more than 5 percent Wednesday to close at $44.73.
Filed last year, the MetLife suit is the biggest challenge yet to the Financial Stability Oversight Council, created by the 2010 Dodd-Frank financial overhaul law. The group’s members include Federal Reserve Chair Janet Yellen and Treasury Secretary Jacob Lew.
Other non-banks bearing the council’s “systemically important” designation are American International Group and Prudential, neither of which have brought challenges.
General Electric Co. has agreed to sell more than $160 billion of assets since April under a plan to shed the bulk of its GE Capital finance operations. GE has said it intends to submit an application to regulators this quarter to drop the label.
At a February hearing, U.S. District Judge Rosemary Collyer sharply questioned Justice Department attorney Eric Beckenhauer, asking why the council said it would conduct a “vulnerability analysis” of MetLife before making its determination, then failed to do so.
She also asked the government’s lawyer why FSOC assumed that MetLife would be at the brink of collapse in the event of a fiscal crisis.
“That’s not risk analysis,” she said. “That’s assuming the worst of the worst of the worst.”
Beckenhauer said it’s the nature of such crises to be unanticipated. MetLife is asking her to override the “considered judgment” of the heads of nine major financial regulators, he said.
Bloomberg News contributed.