MetLife Discloses Failure to Pay Thousands of Workers' Pensions -- Update
December 15 2017 - 7:41PM
Dow Jones News
By Leslie Scism
MetLife Inc. said 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 affected by Friday'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 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.
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 earnings would be in the $200 million
to $400 million pretax range.
Another analyst, Jay Gelb of Barclays, estimated up to $1
billion pretax, which would assume many more years of owed
money.
In an investor outlook call Friday, MetLife Chief Financial
Officer John C.R. Hele said that the people owed money were
beneficiaries whom MetLife had "sought to locate over time
unsuccessfully."
Mr. Hele added that the disclosure won't impact the firm's
buyback plans in 2018, based on what MetLife knows currently.
Another executive, Michel Khalaf, said company officials
"periodically conduct deep-dive reviews of our business and our
processes." As part of that deep dive, the company recently
received data from a pilot program that revealed the need to
develop new protocols to locate pensioners.
The company's disclosure 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 reduce 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 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 19:26 ET (00:26 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
MetLife (NYSE:MET)
Historical Stock Chart
From Aug 2024 to Sep 2024
MetLife (NYSE:MET)
Historical Stock Chart
From Sep 2023 to Sep 2024