MetLife Inc. says it needs to do a better job of tracking group annuity plan participants, but that, overall, it had a good fourth quarter.
The New York-based insurer reported Tuesday that it will record a $510 million charge in connection with the previously reported group annuitant-tracking problems.
But the company says it also recorded a $1.2 billion net tax benefit as a result of the new federal Tax Cuts and Jobs Act, in spite of paying to pay $170 million in TCJA-related non-U.S. profit repatriation taxes.
MetLife also contends that its own closed block of long-term care insurance (LTCI) business looks OK.
The block generates about $750 million in premium revenue per year, the company increased premiums an average of 7% in 2017, and the amount of reserves recorded using state regulators’ statutory accounting rules is about $2.5 billion higher than the amount recorded using Generally Accepted Accounting Principles, the company says.
The company, which still offers group benefits and group retirement products, but spun off its individual life and annuity operations when it turned Brighthouse Financial Inc. into a separate company, talked about unusual gains and charges, and the performance of its LTCI block, Tuesday when it released earnings for the fourth quarter, and for all of 2017.
The company as a whole is reporting $2.1 billion in net income for the quarter on $16 billion in revenue, compared with a net loss of $2.2 billion on $13 billion in revenue for the fourth quarter of 2016.
Earnings at the company’s U.S. operations fell to $751 million, from $775 million.
U.S. group benefits earnings increased to $352 million, from $277 million, but retirement and income solutions earnings fell to $266 million, from $449 million.
Spending on ”commissions and other variable expenses” at the U.S. group benefits unit increased to $190 million, from $160 million.
Spending on commissions and variable expenses at the U.S. retirement and income solutions unit fell to $34 million, from $39 million.
MetLife said in a form filed with the U.S. Securities and Exchange Commission that it ended up with a group annuitant tracking problem because, about 25 years ago, someone at companies that are, or have been, MetLife subsidiaries decided that annuity program managers could disregard pension obligations for annuitants who failed to respond after the program managers made two attempts to contact them.
More aggressive efforts to find the “missing” participants showed that many of them are still out there and are eligible, or could become eligible, for benefits, according to MetLife.
The problem affected about 2% of the group annuitant population, MetLife said.
MetLife said it will fix the administrative issues that allowed the problem to fester by having its chief risk officer work with outside advisors to study what happened and develop a plan for improving internal controls.
MetLife has posted links to earnings-related documents here.
— Read MetLife Wins Epic Battle With Federal Regulators on ThinkAdvisor.