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Canadian-Backed Company to Acquire Ohio National

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What You Need to Know

  • Ohio National has been operating in Cincinnati since 1909.
  • Constellation, the buyer, is owned by public pension plan managers in Quebec and Ontario.
  • Constellation says it wants to preserve Ohio National's brand and independence.

Constellation Insurance Holdings Inc. — a 2-year-old insurance holding company with money from Canadian public pension plans — has agreed to pay $1 billion to acquire the mutual holding company that owns Ohio National Financial Services, the companies announced today.

Ohio National Mutual Holdings Inc. is the parent of Ohio National Financial Services. Ohio National’s best known subsidiary, The Ohio National Life Insurance Company, has been doing business in Cincinnati since 1909.

Barbara Turner, Ohio National’s CEO, said in a statement that the company agreed to the deal “in the midst of a challenging economic environment, historically low interest rates, increased regulatory costs and pressure for the entire industry.”

The Constellation deal will fortify Ohio National with more capital and create a more flexible capital structure, to manage risk and support the future growth of the business, Turner said.

Anurag Chandra, the founder, chairman and CEO of Constellation, said his firm wants to give Ohio National and other insurers more access to capital, “while preserving the independence, brand, existing operations and culture for which they are recognized.”

The Deal

A mutual holding company for an insurer is a corporation that’s owned by the insurer’s policyholders.

Constellation plans to help Ohio National shift away from the mutual holding company structure, through a process called a “sponsored demutualization,” the companies said.

Constellation will provide $500 million that Ohio National could use to pay the policyholder owners to extinguish their mutual holding company ownership interests, the companies said.

Also, Constellation will add $500 million in capital to the company over four years, to strengthen its capital position and its ability to meet its obligations, the companies said.

The deal is subject to approval by Ohio insurance regulators and Ohio National Mutual Holdings members.

The companies hope to complete the deal by the end of 2021.

The Companies

Constellation Insurance Holdings is a New York-based company that came to life in 2019.

Chandra is an executive who helped Reservoir Capital Group LLC and Black Diamond Capital Partners make Prosperity Life Insurance Group which is a vehicle for acquiring troubled life insurers and turning them around.

He started Constellation with $500 million from Caisse de dépôt et placement du Québec, a public pension plan asset manager based in Montreal, and the Ontario Teachers’ Pension Plan Board, a Toronto-based organization that provides defined benefit pension benefits for teachers in Ontario.

Chandra said when he started Constellation that he wanted to invest in demutualizing U.S. life insurers and U.S. property and casualty insurers. Further, he wants the companies Constellation acquires to sell new products and grow, not simply manage in-force business.

Ohio National is a company with $41 billion in assets under management. It came out of the 2007-2009 Great Recession with strong efforts to build a large variable annuity business.

The company startled life insurance agents and distributors in 2018, when it announced that it was leaving the variable annuity business.  Instead it planned to focus on the sale of life insurance and disability insurance, and cancel arrangements that called for it to pay trail commissions to the agents who had sold the variable annuities already in force.

(Image: Blue Planet Studio/Shutterstock.com)