MetLife Inc. has agreed to pay $10m to settle Securities and Exchange Commission allegations of longstanding internal controls failures.
For close to three decades, MetLife had a policy of assuming customers had passed away or could not be found if they did not respond to two mailings that were made five and a half years apart, according to an SEC statement made on Wednesday.
This practice - called pension risk transfer - allegedly put more profits in MetLife's pocket since the firm could then free up money that was put aside to cover claims.
The Commission found that MetLife's insufficient internal controls caused longstanding accounting errors"
"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 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 $510m 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
MetLife has not admitted to or denied the SEC's allegations, but has determined that the policy was insufficient to justify the release of reserves, Reuters first reported.
"Our focus since we self-identified these issues has been to improve our processes to deliver better service to our customers," MetLife said. "We successfully remediated both material weaknesses associated with this settlement as of December 2018."
The company's practices violated the books and records and internal accounting controls provisions of federal securities laws.