Metlife Case Study
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heyMetlife Case Study
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hey2. Provide a brief background about the corporation.
MetLife, Inc. is the holding corporation for the Metropolitan Life Insurance
Company, better known as MetLife, and its affiliates.
MetLife is among the largest global providers of insurance, annuities, and
employee benefit programs, with 90 million customers in over 60
countries.
Trusted by tens of millions of customers worldwide, and we serve more
than 90 of the top 100 FORTUNE 500® companies in the United States.
MetLife companies are a leading innovator and a recognized leader in
protection planning and retirement and savings solutions around the
world.
3. Summarize the facts and issues concerning the problems of the internal control of
the company that led to its failure and thus, penalized for it.
MetLife Inc. agreed to pay a $10 million fine to settle U.S. Securities and
Exchange Commission allegations that the insurer violated accounting rules in
setting reserves for its annuities business.
The U.S. Securities and Exchange Commission said the insurer failed to
maintain a sufficient system of internal accounting controls, resulting in both an
understatement and overstatement of reserves.
MetLife’s incorrect accounting for the RIS annuities arose from its practice of
releasing reserves – that is, reducing liability for future policy benefits, with a
corresponding increase in income – associated with annuitants who had not
responded to MetLife after two mailing attempts.
4. What were the violations committed by MetLife?
For over 25 years, MetLife followed a policy of assuming customers had died or
be found if they didn’t respond to two mailings made five and a half years apart,
the SEC said in a Wednesday statement.
MetLife violated accounting rules in setting reserves for its annuities business.
MetLife overstated its reserves and understated income related to its variable
annuity business.
MetLife attributed the error in accounting for reserves associated with the
variable annuity guarantees to data errors, including a failure to properly
incorporate policyholder withdrawals into its valuation model.
The first error involved MetLife’s reserves for benefits owed to annuity customers
whom MetLife had been unable to locate or reach via the information in its
systems.
Data errors, including a failure to properly incorporate policyholder withdrawals
into MetLife’s valuation model.
5. How could these have been avoided?
Improve their processes to deliver better service to our customers
Making use of use of products and platforms that provide a clear process and
record.
When someone notices that a flaw is possible in a company’s ICFR, it must be
reported immediately.
Correct the operations of the internal control in compliance with regulations and
meeting the needs of their clients.