Leslie Scism and
MetLife Inc. said roughly 13,500 workers were left without their monthly retirement benefits over the past quarter century because of a records mistake, the first time the insurance giant disclosed the specific number of people affected by the pension snafu.
In a regulatory filing Tuesday, MetLife attributed the problems to a policy established 25 years ago to contact would-be pension recipients twice. This was rather than employing aggressive search techniques to track down people and make them aware of their eligibility for monthly income. It then shrank balance-sheet reserves that reflected MetLife’s payment obligation to these people.
The company also said it lacked a system under which details about the missing payments were escalated throughout the company. At least some top executives, the company has previously said, didn’t become aware of the problems until last fall.
The number of people who didn’t receive payments represents about 2% of the 600,000 people for whom MetLife has responsibility for paying pensions. Previously it said fewer than 5% of the 600,000—or as many as 30,000—were affected.
The problems originated within a MetLife business known as “pension risk transfer,” in which the insurer assumes responsibility for some or all of the payments due participants in private-sector pension plans.
In mid-December, MetLife said a pilot project had determined that it had failed to aggressively search for plan participants and that reserves for the pension-risk business needed to be bolstered to account for improper releases in prior years. In January it said it expected to increase its reserves by $525 million to $575 million pretax and take a pretax charge for 2017’s fourth quarter of $135 million to $165 million. At a 35% tax rate, that would equate to $88 million on an after-tax basis.
On Tuesday MetLife adjusted the total reserve increase to $510 million pretax and lowered the quarterly charge to $70 million after tax because the number of people affected was lower than initially estimated.
The new math means that an average of about $38,000 is added to reserves for each of the 13,500 retirees. Of that, about $20,000 on average is for overdue benefits and the rest reflects future benefits and interest. The average person is 76 years old, according to the company, and has a monthly pension benefit of $150, or $1,800 a year.
MetLife also said Tuesday an internal review concluded that some procedures need “further enhancement” to ensure there aren’t missing or unresponsive beneficiaries in other lines of business. But no “issues which would be material” were identified in other products and other parts of its global enterprise.
For the fourth quarter MetLife reported a profit of $2.09 billion, or $1.97 a share, up from a loss of $2.23 billion, or $2.03 a share, a year earlier. The company recorded a net $1.2 billion after-tax benefit in the quarter after the U.S. tax overhaul.
Excluding one-time items MetLife’s adjusted profit fell 36% to $678 million, or 64 cents a share. Total revenue jumped 25% to $15.75 billion. Analysts polled by Thomson Reuters had forecast adjusted earnings of 64 cents a share on $15.51 billion in revenue.
“Although our underlying financial performance remained solid, the reserve charge and its impact…are unacceptable and deeply disappointing,” MetLife Chief Executive Steven A. Kandarian said in prepared remarks. “We can and will do better.”
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