MET MetLife Inc

By Leslie Scism 

MetLife Inc. said Friday it had failed to pay monthly pension benefits to possibly tens of thousands of workers in accounts that it has on its books as part of its large retirement business.

The New York insurer said it is seeking to find the retirees who are owed money, and who 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 discovery of the overdue money and the process of locating the missing people to pay them would require strengthening reserves, MetLife said in a filing. The company also said the amount "may be material to our results of operations."

The workers impacted by Friday's disclosure were likely owed a defined amount of monthly income when MetLife took on responsibility for their 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, and how many years of missing income was owed.

Some Wall Street analysts assumed that the payments could be 10 or more years overdue. At $150 a month for 30,000 people -- 5% of the 600,000 -- over 10 years, that could be up to $540 million.

Analyst Thomas Gallagher of Evercore ISI estimated that the fourth-quarter charge against earning would be in the $200 million to $400 million pretax range.

Another analyst, Jay Gelb of Barclays, estimated "up to $1 billion pre-tax," which would assume many more years of owed money.

The company's disclosure of the lost workers recalls a scandal that played out across a large part of the life-insurance industry in recent years when state insurance regulators identified that there were billions of dollars of overdue life-insurance policies on insurers' books. In 2012, MetLife agreed to pay $40 million to settle a multistate probe of its handling of death benefits, in a deal that was expected to pay more than $400 million to heirs of life-insurance policyholders.

In Friday's filing, MetLife said that it is "improving the process used to locate a small subset of our total group annuitant population of approximately 600,000 that have moved jobs, relocated or otherwise can no longer be reached via the information provided for them." It said it is using "a wider set of search techniques" made available through advances in data technology.

The company said it would provide more disclosure when it reports fourth-quarter results.

The business of pension-risk transfer, in which employers with old-fashioned pension plans cut deals with insurers to take responsibility for retirees' monthly benefits, has surged in recent years.

The movement has transformed the management of pensions for employers, which can slash their exposure to the volatility of the stock and bond markets, as well as for the insurance industry, which gains a source of growth at a time when some traditional businesses are slipping.

Prudential Financial Inc. has emerged as the leader in U.S. pension-risk transfer, though MetLife and a host of others are also in the business.

Despite the spread of 401(k) plans, about 22,000 traditional plans sponsored by single, private-sector employers remain in the U.S., covering 30 million people.

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

(END) Dow Jones Newswires

December 15, 2017 18:54 ET (23:54 GMT)

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