(Bloomberg) – MetLife Inc. provided new details this weekabout how it lost track of thousands of pension clients.

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But state and federal inquiries promise to drag on for monthsand will make it hard to put the scandal behind it any timesoon.

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The company scaled back its assessment of the problem onTuesday, saying it had inappropriately lost track of 2 percent of the pension clients,or about 13,500 individuals, in the affected business unit.

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In December, MetLife said the issue could affect less than 5percent of those clients.

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Still, the update means MetLife has failed to pay pensions totwo out of every 100 people in the program.

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Specifically, the company had given up after just two attempts to locate pensioners.

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The business problem, which it said began 25 years ago, is partof a unit that takes on pension obligations from employers who nolonger want to manage them.

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It is raising alarms among state and federal officials.

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The company has received inquiries from a number of stateinsurance and financial regulators, according to a person familiarwith the matter. In response to a query, the Illinois Department ofInsurance said it “is aware of the issue and is addressing it.”

Escalating probes

MetLife has said that after it became aware of problems in thatbusiness late last year, it alerted the New York Department ofFinancial Services, its primary state regulator, which is examiningthe issue.

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It also indicated this week that an inquiry by the Securitiesand Exchange Commission's enforcement division has turned into aformal agency investigation. William Galvin, the MassachusettsSecretary of the Commonwealth, announced a separate probe inDecember.

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“Our office has a long history of locating lost assets forpeople in Massachusetts and our goal is to find residents who havenot received their retirement assets and make sure they are fullycompensated,” Galvin's office said in response to a query.

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“This was not our finest hour,” MetLife Chief Executive OfficerSteven Kandarian said during a call Wednesday discussingfourth-quarter earnings. “MetLife's core purpose is providingfinancial protection to our customers. Central to that purpose isthe timely payment of benefits, which makes this issue especiallydistressing to me. I am deeply disappointed.”

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Kandarian's disappointment is understandable. He's the formerexecutive director of the Pension Benefit Guaranty Corp., a federalagency that guarantees the pensions of 40 million individuals.

Making calls

The insurer is trying new strategies, including phoning clientsand using certified mail to make sure it's reaching them, ChiefFinancial Officer John Hele said Thursday at a conference.

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“We phone people now,” Hele said. “Some older people pick up thephone. They may not read their mail. That's working pretty wellactually,” he said, adding that other new efforts include using theinternet and certified mail.

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Pension risk-transfer deals have grown in popularity in the U.S.as employers grapple with the rising costs of retirement plans,especially in an era of low interest rates. Prudential FinancialInc. has taken on pension obligations of companies includingGeneral Motors Co. and Verizon Communications Inc.

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The troubles at MetLife underscore one of the challengesinherent in a business where employers have unloaded more than $86billion in pension obligations over the last five years.

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It can be tough enough for employers to keep track ofbeneficiaries over years or decades as they change jobs andmove.

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It's all the more fraught when obligations are shifted toinsurers — often requiring employers to clean up data files orconvert them to an electronic format, according to a 2016 reportfrom Prudential.

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At MetLife, the challenges were compounded by the fact that someof its risk-transfer business was written as much as 25 years agoand involved many participants who were still years from retiringand collecting pensions.

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With no hard-and-fast regulations governing how insurers trackclients, MetLife followed a policy of attempting to reachbeneficiaries twice — once when they approached 65 and again about5 1/2 years later, when they were required under federal law tobegin drawing benefits.

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If both attempts failed, MetLife would assume a customerwouldn't respond. The company then released the funds it had heldto pay the pension from its reserves.

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MetLife would welcome additional guidance from regulatorsrelated to the risk-transfer market, company spokesman RandyClerihue said.

Still acquiring

On Wednesday, MetLife said it's shifted focus to buying pensionplans from employers in which beneficiaries are alreadyretired.

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The insurer acquired a record $3.3 billion of pensionobligations last year and expects 2018 to be another active year,CFO Hele said.

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MetLife said it found problems with its past practices itself,citing a “lack of timely escalation” of the issue. Last October,the discovery was brought to the attention of Kandarian and MichelKhalaf, who took over the U.S. business three months earlier, theCEO said during Wednesday's call.

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“Some uncertainty remains around the issue, given ongoinginvestigations by the NY state regulator and the SEC,” Mark Dwelle,an analyst at RBC Capital Markets, told clients in a note onWednesday.

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The troubles have prompted analysts to question other companiesin the risk-transfer market. Prudential said earlier this monththat it's comfortable with its practices and the money backing thecontracts.

Past troubles

This isn't the first time insurers have been admonished for notdoing enough to reach clients. In recent years, MetLife and otherscame under scrutiny from regulators who accused them of holding onto benefits people hadn't claimed, rather than turning them over tostates or policyholders. Many insurers now use a governmentdatabase known as the “Death Master File” to double-check whetherclients are still alive.

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MetLife also indicated this week that it will attempt to contactannuitants more frequently and hire third parties to conduct acomprehensive examination led by its chief risk officer.

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“Finding and locating policyholders is nothing new to thesecompanies,” said Jukka Lipponen, president of Independent InsuranceAnalysts LLC.

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