MetLife Hires Investigators In Search For Missing Pensioners

Alistair Gray in New York

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US insurer MetLife has hired investigators to track down thousands of pensioners as the company seeks to resolve a scandal over missing payouts that has wiped about $8.5bn off its market capitalisation.

Executives on Wednesday said they were doing “everything humanly possible” to locate almost 13,500 people — owed on average $20,000 each — after they acknowledged MetLife failed to make proper efforts to find them over 25 years.

The failure arose because of practices dating back to the 1990s at MetLife’s pensions “risk transfer” business, under which companies transfer their retirement liabilities to insurers.

MetLife sought to contact eligible pensioners only twice: when they turned 65, and again a few months after the age of 70. If these efforts were unsuccessful, the company presumed the individuals would never be found.

As a result, the insurer mistakenly released funds from reserves that support future annuity payouts. The problem was brought to the attention of Michel Khalaf, recently appointed head of Metlife’s US division, in October.

The second-biggest US insurer by assets has had to provision $510m to account for the unpaid annuities. It has turned to location professionals at California-based Pension Benefit Information to help find the lost retirees by the summer.

Staff are also using the public records specialist Accurint, a division of LexisNexis, and have launched a campaign of phone calls and certified mailings. Retirees who they manage to locate will be due a lump sum to compensate for missing back payments.

In a hint that employees might lose jobs over the episode, Steven Kandarian, chairman and chief executive, said managers were “taking action to hold people accountable”.

Mr Kandarian — the former head of the Pension Benefit Guaranty Corporation, a federal agency that safeguards retirement schemes — said the episode was “especially distressing to me” and “deeply embarrassing”.

Shareholders in MetLife have taken fright at the reserve charge and the threat to its reputation. Shares have fallen 14 per cent since the company warned two weeks ago it would need to book a charge of more than half a billion dollars to cover the unmet obligations.

The mishap has prompted investors to question other US insurers about their practices. Mark Grier, vice-chairman of Prudential Financial, said last week that the debacle at MetLife was “certainly getting a lot of attention”.

“There are inevitably some customers we can’t locate for a number of reasons, but that number is small,” he said, adding he was “comfortable” the company was “meeting our obligations”.

As part of efforts to ensure the episode does not happen again, MetLife said it would now start sending annual letters to workers once they turned 55. They would send three letters as soon as they reached 65, including a certified mailing.

Regulators at the Securities and Exchange Commission and the New York Department of Financial Services are investigating.

Mr Kandarian said: “To date, MetLife has not found any evidence of intentional wrongdoing. We are undertaking a thorough review of our practices, processes and people to understand where we fell short.”

Source : https://www.ft.com/content/eee79eca-1197-11e8-940e-08320fc2a277

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MetLife Hires Investigators In Search For Missing Pensioners

Source:4-Traders

MetLife Hires Investigators In Search For Missing Pensioners