MetLife has a multipronged plan to improve the way it tracks down missing annuitants, the company said Thursday.
The actions come in the wake of a $510 million charge in the fourth quarter related to a group of 13,500 annuitants going back many years.
“We believe these remediation steps will further strengthen our internal control over financial reporting,” said CFO John McCallion in a conference call with analysts.
The New York-based company said that it would:
- Improve its administrative and accounting procedures and search practices to find, contact and record responses from unresponsive or missing plan annuitants, and to locate missing annuitants.
- Institute procedures to hasten communication and escalation issues within the company.
- Hire outside help to examine and analyze “facts and circumstances” which gave rise to the issue first discovered at the end of last year.
- Implement immediate changes to the data flows and valuation controls around the company’s variable annuity guaranteed reserves.
“We will test the ongoing operating effectiveness of all new controls subsequent to implementation and will consider the material weaknesses remediated after the applicable controls operate effectively for a sufficient period of time,” McCallion said.
Two senior company executives have left since the incident around the missing annuitants issue came to light.
CFO John C.R. Hele retired and was succeeded by 12-year MetLife veteran McCallion on May 1, the company said.
Analysts noted the suddenness of Hele’s departure.
Big companies like MetLife always have management changes from time to time, said president and CEO Steven A. Kandarian.
In any big company, “there's never a great or perfect time for an announcement of a major change at senior executive levels,” Kandarian said.
Under SEC rules, decisions surrounding high-level executives must be disclosed made within four days, he said.
“So it's not like there's a great deal of flexibility about timing of announcements, so that drives a lot of it,” Kandarian said.
Before joining MetLife, McCallion spent nearly 10 years at PwC in the insurance audit practice, where he worked with multinational and U.S. clients in the life and property/casualty insurance sectors.
In March, Marlene Debel, U.S. CFO for MetLife, was appointed to lead the company’s Retirement & Income Solutions business.
She replaced Robin Lenna who retired March 1, after leading the Retirement & Income Solutions unit for the past 12 years.
The company has previously declined to comment on the reasons for Lenna’s retirement.
MetLife Beats Street
MetLife on Wednesday reported first-quarter earnings of $1.25 billion.
On a per-share basis, the New York-based company said it had net income of $1.19.
Earnings, adjusted for non-recurring costs, came to $1.36 per share.
The results surpassed Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $1.17 per share.
The insurer posted revenue of $14.81 billion in the period. Its adjusted revenue was $15.14 billion.
MetLife shares have decreased 11 percent since the beginning of the year, while the Standard & Poor's 500 index has fallen slightly more than 1 percent. In the final minutes of trading on Wednesday, shares hit $45.05, a decrease of 13 percent in the last 12 months.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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