MetLife Inc. provided new details this week about how it lost track of thousands of pension clients. But state and federal inquiries promise to drag on for months and will make it hard to put the scandal behind it any time soon.
The company scaled back its assessment of the problem on Tuesday, saying it had inappropriately lost track of 2 percent of the pension clients, or about 13,500 individuals, in the affected business unit. In December, MetLife said the issue could affect less than 5 percent of those clients.
Still, the update means MetLife has failed to pay pensions to two out of every 100 people in the program. Specifically, the company had given up after just two attempts to locate pensioners. The business problem, which it said began 25 years ago, is part of a unit that takes on pension obligations from employers who no longer want to manage them.
It is raising alarms among state and federal officials. The company has received inquiries from a number of state insurance and financial regulators, according to a person familiar with the matter. In response to a query, the Illinois Department of Insurance said it “is aware of the issue and is addressing it.”
Escalating Probes
MetLife has said that after it became aware of problems in that business late last year, it alerted the New York Department of Financial Services, its primary state regulator, which is examining the issue. It also indicated this week that an inquiry by the Securities and Exchange Commission’s enforcement division has turned into a formal agency investigation. William Galvin, the Massachusetts Secretary of the Commonwealth, announced a separate probe in December.
“Our office has a long history of locating lost assets for people in Massachusetts and our goal is to find residents who have not received their retirement assets and make sure they are fully compensated,” Galvin’s office said in response to a query.
“This was not our finest hour,” MetLife Chief Executive Officer Steven Kandarian said during a call Wednesday discussing fourth-quarter earnings. “MetLife’s core purpose is providing financial protection to our customers. Central to that purpose is the timely payment of benefits, which makes this issue especially distressing to me. I am deeply disappointed.”
Kandarian’s disappointment is understandable. He’s the former executive director of the Pension Benefit Guaranty Corp., a federal agency that guarantees the pensions of 40 million individuals.
Making Calls
The insurer is trying new strategies, including phoning clients and using certified mail to make sure it’s reaching them, Chief Financial Officer John Hele said Thursday at a conference.
“We phone people now,” Hele said. “Some older people pick up the phone. They may not read their mail. That’s working pretty well actually,” he said, adding that other new efforts include using the internet and certified mail.