Ohio National executives cited "challenging" economic conditions today in announcing an expansive reorganization plan to demutualize the company.
The Ohio National Mutual Holdings board of directors unanimously approved a strategic transaction with Constellation Insurance Holdings. ONMH is the parent company of Ohio National Financial Services, a leading provider of financial products.
The deal includes the conversion of ONMH to a stock company and the issuance of all of its newly issued stock to Constellation pursuant to a sponsored demutualization. Constellation, an insurance holding company, is backed by Caisse de dépôt et placement du Québec and Ontario Teachers’ Pension Plan Board, "two of the world’s largest, premier, long-term institutional investors," Ohio National said in a news release.
This transaction will strengthen the company’s financial position, enhance its market position, will facilitate future growth and will augment the capital strength of Ohio National and its insurance company subsidiaries, the release said.
The sponsored demutualization, which is subject to various regulatory approvals, including the approval of the Ohio Director of Insurance and the approval of ONMH’s members, provides for Constellation to fund cash payments or policy benefits, in the aggregate amount of $500 million, to be paid or provided to eligible members in exchange for the extinguishment of their membership interests in ONMH.
Additionally, as part of the transaction, Constellation and its investors are providing a commitment to infuse an additional $500 million of capital over a four-year time period following the closing of the transaction, further strengthening Ohio National’s capital position and its ability to fulfill its obligations, as well as to invest in the future of the business.
Barbara A. Turner, president and CEO of Ohio National, stated, “Over the past several years, we have been taking deliberate actions to ensure that our business is well positioned for the future and that our policyholders and associates are part of a stable and growing company. In the midst of a challenging economic environment, historically low-interest rates, increased regulatory costs and pressure for the entire industry, Ohio National is taking this next logical step to fortify the business with additional capital and a more flexible capital structure. This will further unlock our opportunities and enable us to mitigate risk while investing in the future growth of the business.”
Turner continued, “For our associates, network of financial professionals, policyholders and the community, the solidified capital structure and increased flexibility afforded by this transaction enhance the inherent value of our company. It also expands our ability to seize growth opportunities and respond to varying market conditions, resulting in a stronger, more responsive and innovative company that is well positioned for the future.”
Anurag Chandra, founder, chairman and CEO of Constellation, added, “Ohio National is an impressive company with tremendous potential. We believe this strategic transaction can have a transformative impact on Ohio National’s strategic and financial position, capital access, and financial strength ratings which can help unlock the company’s latent potential. We look forward to partnering with Barbara and her management team, as well as with Agam, to help accelerate the company’s organic and inorganic growth trajectory and build Ohio National into a market leader in the life insurance and annuity industries.”
Agam Capital Management, an insurance solutions provider and strategic partner to Constellation, brings substantial variable annuity risk management and insurance industry expertise, which significantly strengthens Ohio National's ability to capitalize on inorganic growth opportunities.
Agam's co-founders, Chak Raghunathan and Avi Katz, said, "This strategic transaction will position Ohio National to capitalize on growth opportunities in the life insurance and annuity industries. We expect to leverage Agam's industry leading asset liability management and enterprise risk management expertise to empower strategic decision making as the company looks toward its next phase of growth."
Upon closing of the transaction, Ohio National will maintain its management team and brand, and will continue to be headquartered in Cincinnati, Ohio.
The transaction is subject to customary conditions, including regulatory approvals and ONMH’s member approval. It is anticipated that the transaction will close in the second half of 2021.
Sidley Austin is representing Ohio National Financial Services in the proposed demutualization of Ohio National and its acquisition by Constellation Insurance Holdings, Inc.