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AIG in wait-and-see mode after MetLife wins legal challenge of SIFI tag


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AIG in wait-and-see mode after MetLife wins legal challenge of SIFI tag

American InternationalGroup Inc. is taking a wait-and-see approach after won its legal challenge against the Financial Stability OversightCouncil to remove its systemically important financial institution tag.

When asked whether AIG is considering shaking off its SIFI tag,AIG President and CEO Peter Hancock said during a March 31 interview on CNBC, "Itcertainly opens that opportunity, but I think it's something we want to reservejudgment [on] to see how the rules ultimately get written and how they get interpretedby the regulators."

However, Hancock hinted that AIG will likely follow in the footstepsof General Electric Capital Corp.,which reduced its risk profile before submittinga request to the FSOC to rescind its designation as a nonbank SIFI, as opposed toMetLife, which took the issue to court.

"We prefer to work with our regulators, and I think thatwe have equally dramatic reduction in risks, as GE, that were executed earlier,"the CEO said.

Hancock believes that the MetLife case is not yet over, sayingthat the ruling will get appealed.

"We'll watch how it progresses in the higher courts. Muchof the ruling is sealed, so we'll wait to see what emerges when that gets unsealed,"he said.

The "surprise" win may have cheered MetLife, but FBR analyst Randy Binner, who also expectsthe FSOC to appeal the ruling, believes the case will get more difficult for theinsurer if it is appealed up to the Supreme Court. He pointed out that the threejudges who would hear the case at the appeals court will be chosen from a pool of11 circuit judges, seven of whom were appointed by President Barack Obama or formerPresident Bill Clinton. As such, he believes the case would have a chance of headingto the Supreme Court, according to a March 30 note.

The U.S. Treasury Department did not disclose whether it willappeal, but it said it will continue to defend the FSOC's designation progress.The federal government has 30 days to appeal the ruling.

Binner said U.S. District Court Judge Rosemary Collyer's rulingwas a win not only for MetLife, but also for the other insurers that were givena SIFI tag, including Prudential FinancialInc. and AIG.

"The uncertainty created by the ruling likely prolongs theregulatory process for designated firms and increases the likelihood that the firmswork to fight designation through other avenues," the analyst said.