Ohio National and Constellation

[Allen Trent]

Even A.M. best always listed Ohio Nationals assets as between 500 million to 750 million they were never that big of a company.

I believe they were in the $2-$3B range in terms of Capital & $40B+ in Assets under management.

 

[DHK]

Oh, I guess they were a bit bigger than I originally thought.

Notice $1 Billion to $1.25 Billion... and STABLE outlook that was affirmed in September 2020.

 

[scagnt83]

Gee! We are talking about a life insurance company, not health insurance. Why would young healthy clients jump ship en mass? It is not like they are going to be hit with huge rate increases in the future.

WL from ON was often sold for its CV accumulation. If/when the pension plan cuts/eliminates dividends, WL policy holders who want accumulation will seek other policies if they still can.

Many Term policies were sold because of conversion options. ON had very strong conversion options. But if they eliminate new sales, or dont have competitive WL products for new sales (from a CV standpoint) then the term owners will leave for better products. (those who still can from a health perspective)

 

[Allen Trent]

Oh, I guess they were a bit bigger than I originally thought.

Notice $1 Billion to $1.25 Billion... and STABLE outlook that was affirmed in September 2020.

View attachment 6869

And I think that is STAT statutory adjusted Capital, but their GAAP equity is like $2.6B. For whatever reason, most industries use GAAP, but insurance uses STAT

 

[Tahoe Ray]

Oh, I guess they were a bit bigger than I originally thought.

Notice $1 Billion to $1.25 Billion... and STABLE outlook that was affirmed in September 2020.

View attachment 6869

Always a tough spot to be in, David. I was w/ AIG in 2008 and jumped ship to ING during their issues. ING shut down domestic variable products in 2010 and AIG has gone on to flourish.

I'm glad I made the leap b/c it made me start my agency (not saying you're captive or anything) but it may end up being ok in the long run.

Who knows but this type of news/stuff is certainly challenging. I'm sure you and your group will end up doing what works best for you/your clients and not look back (one way or the other).

 

[DHK]

Statutory accounting is including all liquidation and costs as of right now... where as GAAP allows for amortizing costs over a period of time. That's why GAAP looks better, but Stat is the minimum industry standard for regulators.

 

[DayTimer]

Only $500 million?? All of this over $500 million? Wow. They are in serious trouble.

That is exactly what I thought. $500 is essentially a discount to book value, is it not? It isn't valuing future profitability at all it would seem.

Many Term policies were sold because of conversion options. ON had very strong conversion options. But if they eliminate new sales, or dont have competitive WL products for new sales (from a CV standpoint) then the term owners will leave for better products. (those who still can from a health perspective)

This happened to me with the Lincoln National Life Insurance Company. I bought convertible term back in the day and then stopped offering whole life. Still paying for that convertible term because I can't get that face amount for that price now anywhere. But it was a bit of a "FU" if you asked me. I'd be sick if I recently funded an ON whole life contract for CV accumulation and this happens.

 

[Lloyds of Lubbock]

Gee! We are talking about a life insurance company, not health insurance. Why would young healthy clients jump ship en mass? It is not like they are going to be hit with huge rate

Multiple reasons;
Lack of confidence in the company. From a consumer and agent standpoint.
If you have a premium financed policy, it will be subject to a margin call. Some banks are putting very small lending percentages on cash values.
Agents see this as an opportunity to replace. Questionable ethics but it does happen.
I think this is enough.
I was with Equitable when they went public. The sales price of one of the largest insurers was less than the price for Executive Life.
Why did they do it... they needed the money.

 

[scagnt83]

This happened to me with the Lincoln National Life Insurance Company. I bought convertible term back in the day and then stopped offering whole life. Still paying for that convertible term because I can't get that face amount for that price now anywhere. But it was a bit of a "FU" if you asked me. I'd be sick if I recently funded an ON whole life contract for CV accumulation and this happens.

I can understand your position with that. At least they do have a strong GUL, UL, and IUL to convert to. But when you want a specific product, that doesnt help much.

And yeah, Id be sick as a client and as an agent.

As an agent, I would free look any recently issued policy. And have some very serious conversations with those still in their first 2 years of the policy. Thats if they still trust you as an agent...

 

[scagnt83]

I could never figure out why their DI was so much (typically 20%) less expensive than their competitors like Guardian and Mass (even Principal and Standard in many cases).

I have to wonder looking back if they were just trying to suck up as much premium as possible to stave this off.

Same with their fully convertible term.

At one time they had fully convertible term (allowing conversion to any permanent product "currently sold") that competed with the lowest term rates on the market. It has slowly increased over the years and now is about in line with Penn and Lincoln.

But it always made me wonder how such a highly rated carrier could price fully convertible term at such rock bottom prices.... literally 50% less than their competition at times in the past.