MetLife has agreed to cough up $10 million to settle SEC allegations that it violated internal accounting controls related to reserves associated with its annuities businesses.
According to the Wall Street Journal, this settlement follows those with state authorities in Massachusetts and New York after it miscalculated pension payments, resulting in almost $21 million in penalties.
MetLife itself came forward in 2017 after it found that its efforts to locate beneficiaries of private-sector pension plans for which it had taken responsibility under pension risk transfer deals fell far short of the mark. Instead of pursuing searches, it had simply listed people as deceased or unresponsive who didn't answer a few attempts at mail contact.
Following that, it released funds for pension payments that should have been held in reserve for those recipients, and actually recorded the money as profit.
The company ended up making a determination that its procedures had been inadequate, and undergoing a revamp of the steps taken to locate beneficiaries. It also boosted its reserves for payment of pensions by $510 million at the end of 2017. Some of the amounts owed beneficiaries stretched back as far as the 1990s, in amounts of less than $150 per month.
Separately, the report said, MetLife had overstated its reserves and understated its income regarding variable annuities assumed through one of its subsidiaries. The report said Metlife "disclosed that it revised its 2017 earnings upward after discovering it had previously miscalculated reserves for a retirement-savings product in Japan."
This was another self-reported error that the company cited as a "failure to properly incorporate the policyholder withdrawals into its valuation model." It cast additional shade on the company's internal controls, with the company saying that the error "represents a material weakness in internal controls over financial reporting," but that the miscalculation "had no impact on payments to customers."
The SEC filing said that in 2017, MetLife cut reserves by $896 million to correct for the error and said, "We successfully remediated both material weaknesses associated with this settlement as of December 2018."
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
