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Clients Love Accounts Probed by Cuomo, Says MetLife

Posted on 30 Jul 2010

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MetLife Inc., which retains about $10 billion of death benefits on behalf of families, said the life insurance accounts being probed by New York Attorney General Andrew Cuomo are popular with clients.

"The beneficiaries have full access to their funds," Chief Executive Officer Robert Henrikson said today in a conference call with analysts. "Our accountholders tell us they love it."

Cuomo began a fraud investigation this week after a Bloomberg Markets magazine report about how more than 100 companies including MetLife, the largest U.S. life insurer, earn investment income on $28 billion owed to beneficiaries. Henrikson joins John Strangfeld, the CEO of No. 2 Prudential Financial Inc., in saying that so-called retained-asset accounts provide convenience to survivors.

“Beneficiaries are vulnerable targets for abusive sales tactics,” Strangfeld said yesterday in a statement. “We believe that the Alliance Account takes the pressure off beneficiaries to do something with the money -- a situation that may lead to imprudent and expensive investment decisions.”

Cuomo said that he had served subpoenas on New York-based MetLife and Prudential, of Newark, New Jersey. He said his office was demanding information about the difference in interest income earned by the insurers and the rate paid to beneficiaries. He is also seeking information about how and when survivors are told about the conditions of the accounts. Henrikson said today his company hadn’t yet received a subpoena.

‘Full Access’

Cuomo’s office is also seeking information from Genworth Financial Inc., Unum Group, New York Life Insurance Co., Northwestern Mutual Life Insurance Co., Guardian Life Insurance Co. of America and an insurer acquired by France’s Axa SA, according to a person briefed on the demands.

“We are not aware of a subpoena, but we will certainly cooperate in every way should we receive one,” said Jim Sabourin, a spokesman for Chattanooga, Tennessee-based Unum. He said the accounts serve clients well.

“Beneficiaries have full access to the money in their retained-asset account and can withdraw the full amount right away or at a later date. Moreover, retained assets are merely one option for beneficiaries to receive a death benefit. Other options include a lump sum or payment in a certain number of installments,” Sabourin said.

MetLife’s Henrikson spoke today in a conference call to discuss second-quarter results. The New York-based insurer said late yesterday that net income was $1.56 billion in the three months ended June 30, compared with a loss of $1.4 billion in the year-earlier period. The company benefited from increased revenue and an investment gain on derivatives.