MetLife Inc. postponed its earnings report and said it would revise prior financial reports because of overdue monthly pension benefits that it had failed to pay to possibly tens of thousands of workers in past years.
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The giant insurer said it expects to increase its reserves by $525 million to $575 million on a pretax basis. It also disclosed that the Securities and Exchange Commission "has made an inquiry" about the matter.
Shares of MetLife fell 4.4% to $52 in after-hour trading.
The New York insurer disclosed the unpaid pensions in mid-December and has been working with a firm that specializes in finding addresses to get in touch with the retirees who are owed money. It had set a goal to determine by Feb. 1 how much money it owed people. A law firm hired by MetLife has been investigating how its retirement business erred in allowed the pensions to go unpaid.
In its Monday update, MetLife said it had determined that its reserves for the pension-risk-transfer business shouldn't have been reduced earlier, thus the need to take a charge to boost them. "Management of the company has determined the prior release of group annuity reserves resulted from a material weakness in internal control over financial reporting," MetLife said.
The total amount expected to weigh on fourth quarter 2017 net income is between $135 million and $165 million pretax, the company said. The company said the full-year 2017 net income impact would be between $165 million and $195 million pretax. In addition, the company intends to make prior period revisions to reflect the balance of these adjustments in the appropriate historical periods, the company said.
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MetLife now expects to release earnings on Feb. 13 instead of January 31.
It said last month that the missing pensioners generally have average benefits of less than $150 a month. It said it believes the group represents less than 5% of about 600,000 people who receive certain benefits from the firm.
The workers who didn't get their pensions were owed a defined amount of monthly income when MetLife took on responsibility for the pensions from their employers, under a booming business known as pension risk transfer.
MetLife didn't say in what years it had acquired these particular pension plans, how many different plans the people were involved in, and how many years of missing income was owed.
MetLife's effort to find pension-plan participants can be tied back to a pilot project that it launched in August 2016 partly because the U.S. Department of Labor was stepping up pressure on private-sector pension plans to do a better job finding missing participants, the executives said
MetLife's pension business isn't regulated by the Labor Department, but its managers were aware of some additional steps that these private-sector plans were taking. The Labor Department effort has been publicized in trade publications and has been the subject of discussion at organizations focused on employer-sponsored benefits programs.
MetLife is one of numerous large and highly rated life insurers that agree to take responsibility for some or all of the payments due participants in private-sector plans. These deals are called "pension risk transfer." Many employers with old-fashioned pension plans, under which they pay monthly benefits to retired workers, are eager to reduce their exposure to investment and interest risk in running pensions by striking risk-transfer agreements with insurers.
MetLife has been in the pension business for decades. In years past, it had used regular mail to contact future pension recipients, beginning about six months before their eligibility age for drawing the monthly checks, said Michel Khalaf, a senior MetLife executive whose responsibilities include the pension business, in an interview last month. MetLife used addresses it had on file for the people. If the letters were returned as undeliverable, it sought some additional addresses from data firms and sent more letters.
The pilot project involved "a few hundred" participants, Mr. Khalaf said last month. MetLife employees tapped into more data sources than previously used, and the company was "more aggressive in trying to find the addresses," Mr. Khalaf said.
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(END) Dow Jones Newswires
January 29, 2018 17:16 ET (22:16 GMT)