Ohio National: No Strategy Change With Executive Shuffle

Ohio National's abrupt leadership change will have no impact on the company's decision to abandon the annuity market, a spokeswoman said.

Part of that strategy included the controversial decision to cut trail commissions on select variable annuities.

A company spokeswoman gave InsuranceNewsNet the following statement:

"The election of Barbara Turner as president and chief operating officer continues Ohio National's focus on serving our policyholders' protection needs, while we implement our strategy that focuses on core strengths in life and disability income insurance. Barbara and Ohio National remain committed to this recently announced strategy."

One leading industry analyst was not surprised.

Ohio National has gone "too far down the path" to reverse course now, said Sheryl Moore, president and CEO of Moore Market Intelligence.

"There is no reason to retract their decision other than the negative publicity, and they can settle for pennies on the dollar," she added.

Surprise Departure

Late Tuesday, the company announced the surprise departure of president and chief operations officer Christopher Carlson after just three months on the job. New President and COO Barbara A. Turner has been with Ohio National since 1997.

She is stepping into a sticky wicket.

Advisors were informed via a Sept. 28 letter that Ohio National was terminating contracts on some VAs. Commissions will end Dec. 12 on VAs with a guaranteed minimum income benefit rider.

The company has been sued twice so far in federal court by broker-dealers. Cetera Advisor Networks and First Allied Securities filed a joint claim Tuesday with FINRA asking the regulator to require Ohio National to pay the trails.

Earlier in September, Carlson announced that Ohio National would no longer accept any annuity applications. The insurer is focusing on life insurance and disability income insurance, a spokeswoman said.

With interest rates remaining at or near 0 since the 2008 financial crisis, insurers have struggled to meet the benefits promised by VAs sold prior to then.

The first woman to lead Ohio National in its 109-year history, Turner has plenty of experience to draw upon as she navigates the company forward. She was appointed senior vice president, annuities strategic business in January 2015, executive vice president and chief administrative officer in January 2016, and vice chairman and chief administrative officer in August 2018.

'Wrong-Headed Decision'

Some in the industry are holding out hope that Ohio National will revisit the decision to end trails. The lawsuit fights might end up costing the company substantially, said Kim O'Brien, founder and CEO of the nonprofit Americans for Asset Protection.

"Ohio National's wrong-headed decision to end trail commissions on VAs sets a bad precedent for all agents who choose trail compensation or products that pay additional commissions on flexible premiums," she said. "Insurance companies are in the business of keeping contractual promises regardless of whether the promise is made to policyholders or insurance professionals."

In addition to its decision to stop paying trail commissions, Ohio National followed up with an Oct. 29 email to clients offering a buyout of the VA contracts with the GMIB rider.

Ohio National distributes life and annuities through an independent producing general agent channel with about 11,000 agents, and through a career agency channel with about 4,000 agents, the company said. Career agents are apparently unaffected by the decision to stop paying trails on VAs with a GMIB.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.