The end of MetLife Inc.’s “too big to fail” designation is a negative credit rating development, according to a report by Moody’s Investors Service Inc.

The New York-based insurer and the Financial Stability Oversight Council last week jointly asked a federal appeals court to dismiss the litigation regarding the insurer’s designation as a systemically important financial institution, which subjected it to stricter oversight and stricter capital requirements in December 2014. The insurer won a court challenge against the designation in March 2016 — a decision the government had been appealing until last week.

The decision to dismiss the appeal is credit negative because it reduced the likelihood of the Federal Reserve supervising MetLife, which would benefit creditors and be credit positive, according to the report by the New York-based ratings agency. The insurer has an A3 stable credit rating.

“MetLife’s insurance operations remain regulated by state-based regulators in the U.S. and various national regulators outside the U.S., which are developing mechanisms to provide groupwide supervision,” Moody’s said in its report.

Such groupwide supervision would enhance the credit quality of an insurer such as MetLife, which has operations in multiple business lines and jurisdictions, but higher regulatory costs associated with SIFI status partly offset those benefits, according to the report.

MetLife has reduced its risk profile as a global financial insurer, separating a substantial portion of its U.S. retail life insurance and annuity business as Brighthouse Financial Inc., which began operating as a separate company in August.

“MetLife’s decision to pursue a separation of Brighthouse was only partially based on the ramifications of the U.S. retail business being regulated as part of a SIFI,” Moody’s said in its report. “The other was MetLife’s focus on increasing sustainable cash generation and directing capital to businesses in which the company can achieve a clear competitive advantage.”

The Trump administration has been scaling back regulation, particularly the designation of companies as SIFIs, according to Moody’s. The FSOC rescinded the SIFI designation of American International Group Inc. in September.

“That rescission and the FSOC’s withdrawal of its appeal on MetLife raises the likelihood that the FSOC will rescind the SIFI designation of the other remaining nonbank SIFI, Prudential Financial Inc.,” the ratings agency said.