MetLife has a $10 million score to settle after the US Securities and Exchange Commission alleged that the company violated key provisions of the federal securities laws.
The issue centers on how the insurer accounted for reserves associated with its annuities businesses – MetLife would acquire the assets of employer pension plans and convert them into group annuity contracts, according to Reuters.
For close to three decades, MetLife had a policy of assuming customers had passed away or couldn’t be found if they didn’t respond to two mailings that were made five and a half years apart, according to an SEC statement made on Wednesday. This practice – called pension risk transfer – allegedly put more profits in MetLife’s pocket since the firm could then free up money that was put aside to cover claims.
MetLife hasn’t admitted to or denied the SEC’s allegations, but has determined that the policy was insufficient to justify the release of reserves. In response to this error, MetLife boosted reserves by $510 million in 2017, stated the SEC, which also found that the insurer overstated its reserves and understated income when it came to the variable annuity business. MetLife reduced reserves by $896 million to correct for that error in 2017.
“MetLife’s insufficient internal controls caused longstanding accounting errors,” said Marc Berger, head of the SEC’s New York office.
“Our focus since we self-identified these issues has been to improve our processes to deliver better service to our customers,” MetLife said in an emailed statement to Bloomberg. “We successfully remediated both material weaknesses associated with this settlement as of December 2018.”
In a separate case, the insurer agreed to pony up $1 million to Massachusetts to address claims that it made misleading statements to investors in failing to pay pension benefits to thousands of retirees. As if that wasn’t enough hot water, at the start of 2019, MetLife also agreed to a $19.75-million penalty to New York state’s insurance regulator for that failure.