MetLife to pay $10M over internal control failures
MetLife Inc. agreed to pay a $10 million fine to settle U.S. Securities and Exchange Commission allegations that the insurer violated accounting rules in setting reserves for its annuities business.
For over 25 years, MetLife followed a policy of assuming customers had died or couldn’t be found if they didn’t respond to two mailings made five and a half years apart, the SEC said in a Wednesday statement. The practice boosted MetLife’s profits because it allowed the firm to free up money that had been set aside to cover claims.
MetLife, which didn’t admit or deny the SEC’s allegations, later determined that its policy was insufficient to justify the release of reserves. To correct its error, MetLife increased reserves by $510 million in 2017, the SEC said.
“MetLife’s insufficient internal controls caused longstanding accounting errors,” said Marc Berger, head of the SEC’s New York office.
The SEC also found that MetLife overstated its reserves and understated income related to its variable annuity business. To correct that error, MetLife reduced reserves by $896 million at the end of 2017.
“Our focus since we self-identified these issues has been to improve our processes to deliver better service to our customers,” MetLife said in an emailed statement. “We successfully remediated both material weaknesses associated with this settlement as of December 2018.”