MetLife Inc. discovered a material weakness in internal controls tied to a block of Japanese variable annuities, a little over a month after disclosing another issue with financial reporting at a pension business.
The company had set aside too much money for the business and released some reserves backing those contracts, the New York-based company said Thursday in a statement. The change didn’t affect payment to customers and boosted 2017 annual net income by $264 million. The Securities and Exchange Commission is investigating, MetLife said in a filing.
The Japan disclosure adds to recent stumbles by the insurer. MetLife said in December that it had failed to locate some customers who were owed pension payments, prompting an SEC investigation and inquiries from state regulators. The company found it had to increase reserves for the pension issue. It said in January that it had a material weakness in controls tied to the pension disclosure.
MetLife’s Japan disclosure relates to variable annuities assumed from a former operating joint venture. It’s now included in MetLife Holdings, a unit that houses policies the company is trying to wind down. While extra reserves may seem like a good thing, regulators work to make sure that insurers aren’t over-reserving just to meet certain goals, such as socking away money for release in rougher earnings periods.
MetLife has been seeking to fix the pension problem. It is increasing outreach to customers, including using certified mail and phone calls. Robin Lenna, who led the company’s retirement and income solutions business, stepped down after the pension disclosures.
MetLife slipped 1% to $45.73 a share Thursday in New York trading, extending its decline for the year to 9.6%. The statement was released after the close of regular trading.
— Read 3 Steps to Proactively Manage Orphan Policies on ThinkAdvisor.