MET MetLife Inc

By Leslie Scism 

MetLife Inc. warned it may face a "significant fine" for alleged problems surrounding its sales of retirement-income products, according to a regulatory filing on Thursday.

The Financial Industry Regulatory Authority notified MetLife on Sept. 25 that it would recommend disciplinary action against the insurer's MetLife Securities Inc. broker-dealer.

The possible penalty from the Wall Street watchdog would cover "potential violations of Finra rules regarding alleged misrepresentations, suitability, and supervision in connection with sales and replacements" of variable annuities, according to the filing.

Variable annuities are products popular with older, risk-averse investors that offer tax advantages to invest in stock and bond funds. For an added fee at many insurers, investors can receive lifetime payments of a guaranteed-minimum amount even if the underlying funds perform poorly.

MetLife sold $6.35 billion of variable annuities in 2014, putting it in eighth place among U.S. sellers, according to industry-funded research and consulting firm Limra. Through June 30 of this year, it also was in eighth place with variable-annuity sales totaling $3.47 billon.

Some consumer advocates and financial advisers have been critical of variable annuities' complexity and fees, which often run 3.5% or more annually of the amount invested. The products are regulated by the Securities and Exchange Commission and agents who sell them must be securities-licensed.

MetLife said in its filing Thursday that it is cooperating with the Finra investigation but said in separate statement that "we strongly disagree with the conclusions reached by Finra, and we will defend ourselves vigorously." The company has set aside reserves for the potential fine, it said. It didn't provide an estimate of how high the penalty could be.

The new scrutiny from Finra comes as the U.S. Labor Department has proposed a "conflict of interest" draft rule that could impose stiff rules on sales of at least some types of annuities to retirees. One concern among critics of variable annuities and some other types of annuities is that brokers are motivated by substantial commissions--as much as 7% or even more in some instances--when other lower-cost products might better fit retirees' needs.

The life-insurance industry has largely opposed at least parts of the Labor Department proposal pertaining to variable annuities. They maintain that fees are justified because the lifetime-income guarantees are costly for insurers to provide, and that commissions are reasonable for the work involved in the sales process.

In 2014, New York state's top financial watchdog fined the U.S. insurance unit of AXA SA $20 million for failing to adequately report changes in certain variable annuities. It was the state's largest penalty against an insurance company. The New York State Department of Financial Services, in a consent order with AXA Equitable Life Insurance Co., argued the changes in variable annuities limited customers' investment return without providing adequate notice to the state.

AXA Equitable said in a statement at the time that it "should have communicated better to NYDFS when it made certain technical filings required under New York law."

Write to Leslie Scism at leslie.scism@wsj.com

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(END) Dow Jones Newswires

November 05, 2015 19:08 ET (00:08 GMT)

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