Prudential Financial (
) is contesting Financial Stability Oversight Council's (FSOC)
decision to label it as a non-bank systemically important financial
). AIG (
) and General Electric's (
) GE Capital Finance Inc, which were also labeled as SIFIs last
month will not contest their designation. The Fed has yet to
provide clear guidelines regarding the regulations imposed on the
non-bank companies deemed to be "Too Big To Fail," but higher
capital requirements and stress tests to ensure their ability to
absorb losses are expected.
) failed the Federal Reserve's Comprehensive Capital Analysis
and Review (CCAR) last year forcing it to sell its banking assets
to GE Capital. The company might still be designated as a SIFI, but
has not yet confirmed its status
See our full analysis of MetLife
Prudential is expected to have a closed door hearing before the
FSOC within the next 30 days with a final decision regarding the
company's status to be announced within 60 days of the hearing.
While the final implications of the SIFI designation are still
unclear companies are likely to cut back on capital intensive
products like variable annuities. Prudential was the highest seller
of variable annuities last year with a market share of 14% while
AIG was in seventh position with a market share of 6%. MetLife was
the biggest seller of variable annuities in 2011, but cut down on
sales in 2012, slipping to third spot. MetLife still has a market
share of 13% in the variable annuities market and a share of 11% in
the overall annuities market.
We will monitor the situation closely and update our models for
the insurance companies once the Fed sheds some light on the
regulations that will be imposed on the SIFIs.
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