MET MetLife Inc

By Kimberly Chin 

MetLife Inc. has agreed to pay $10 million to settle Securities and Exchange Commission allegations that it violated internal accounting controls related to reserves associated with its annuities businesses.

The accounting lapses resulted in the failure to pay thousands of workers their monthly pension benefits.

The SEC's settlement comes a year after MetLife agreed to settle with Massachusetts and pay a fine of $1 million over pension payments.

"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. MetLife didn't admit any wrongdoing or deny the SEC's allegations.

In 2017, the New York insurer disclosed it had failed to adequately look for beneficiaries of its private-sector pension plans for which it had taken responsibility. Instead, it designated people as deceased or unresponsive after a few mailing attempts went unanswered. As a result, the SEC said MetLife had improperly released reserves for the pension payments that should've been paid out to beneficiaries, and the company ended up recording the reserves as profit.

Some retirees were owed money from as far back as the 1990s, with amounts averaging less than $150 a month. The workers affected by MetLife's disclosure were likely 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 had later deemed its processes for locating and reaching unresponsive beneficiaries as insufficient. In an effort to correct the issue, the insurer increased its pension-payment reserves at the end of 2017 by $510 million to adjust for the improper releases.

In a separate matter, the SEC said MetLife had overstated its reserves and understated its income regarding another of its retirement-savings products, variable annuities, that were assumed through one of its subsidiaries.

MetLife self-reported the error, citing its failure to properly incorporate the policyholder withdrawals into its valuation model. The insurer disclosed that it revised its 2017 earnings upward after discovering it had previously miscalculated reserves for a retirement-savings product in Japan.

This raised new questions about the insurance giant's internal controls. At the time, the company said the mistake "represents a material weakness in internal controls over financial reporting," and the miscalculation "had no impact on payments to customers."

In 2017, the company cut its reserves by $896 million to correct the error, according to the SEC filing.

"We successfully remediated both material weaknesses associated with this settlement as of December 2018," the company said.

--Leslie Scism contributed to this article.

Write to Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

December 18, 2019 21:55 ET (02:55 GMT)

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