(Reuters) - U.S. insurer MetLife Inc (MET.N) on Tuesday said internal failures that resulted in its not making payments to thousands of pensioners stretched back a quarter of a century and it would take a major effort this year to fix the problems.
The pension problem has dogged Metlife since it revealed the omission in December, prompting investigations by regulators, a two-week delay in the publication of its quarterly earnings and a $70 million charge in the fourth quarter. That charge, along with a hit from U.S. tax changes, helped drag its adjusted quarterly earnings down by over a third.
In total, Metlife raised reserves by $510 million to cover the cost of compensating those affected. The insurer estimates that about 13,500 people could be due payments.
“We remain committed to doing better and are taking the necessary steps to fix the situation,” MetLife’s chief financial officer, John Hele, said in a video presentation to investors on Tuesday.
Some life insurers, including MetLife, take over corporate pension plans from companies that want to offload them. The insurers then use a group annuity to make regular payments to the retirees who are entitled to benefits under those pensions.
MetLife’s problems - it made only two attempts to find the pensioners - has put other insurers on the defensive.
“This issue is certainly getting a lot of attention in the market,” Prudential Financial Inc’s (PRU.N) vice chairman, Mark Grier, said during a fourth quarter earnings call with analysts earlier this month.
“Given the size and the age of our block of business, there are inevitably some customers we can’t locate for a number of reasons, but that number is small,” Grier said.
MetLife’s fourth-quarter adjusted quarterly profit fell 36 percent, to $678 million, or 64 cents per share, compared with the same period a year earlier, the company reported on Tuesday. The result matched analyst expectations, according to Thomson Reuters I/B/E/S.
In addition to the $70 million reserve charge, changes in the U.S. tax law cost the company $298 million in the fourth quarter.
The insurer anticipates a $650 million to $850 million after-tax adjusted loss for 2018.
Overall, MetLife’s total adjusted revenue for the fourth quarter rose to $15.4 billion from $15.3 billion.
MetLife shares were down 1.6 percent to $44.50 in after-hours trading.
(This version of the story corrects to show the company anticipates a $650 million to $850 million after-tax adjusted loss for 2018, not $700 million to $900 million, in the 11th paragraph.)
Reporting by Suzanne Barlyn; Editing by Carmel Crimmins and Leslie Adler