Dive Brief:
- MetLife has agreed to pay $10 million to settle allegations it violated federal accounting controls in its handling of reserves for its annuities businesses, the Securities and Exchange Commission (SEC) said Thursday.
- The insurer improperly released reserves for annuity benefits associated with the company's retirement and income solutions business, which resulted in an increase in income, the SEC said.
- Without admitting or denying the findings, the company agreed to cease the practice.
Dive Insight:
For more than 25 years, MetLife’s practice was to presume annuitants had died or otherwise would never be found if they did not respond to two mailing attempts made approximately five and half years apart. Once it made that determination, it would generate income for its business by releasing funds held in reserve for the payments.
The company later determined that its processes for locating and contacting unresponsive annuitants were insufficient to justify the release of reserves. To correct this error, it increased reserves by $510 million as of year-end 2017.
The company was also found to have overstated reserves and understated income relating to variable annuity guarantees assumed by a subsidiary. The company said this error was caused by data mistakes, including a failure to properly incorporate policyholder withdrawals into MetLife’s valuation model. To correct this error, the company reduced reserves by $896 million in 2017.
"Investors are entitled to the reliability and accuracy of financial information," said Marc Berger, director of the SEC’s New York Regional Office. "The Commission found that MetLife’s insufficient internal controls caused longstanding accounting errors."
The company's practices violated the books and records and internal accounting controls provisions of federal securities laws.
