Ohio National executives today cited “challenging” economic conditions when they announced a major restructuring plan to demutualize the company.
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 public company and the issuance of all newly issued shares to Constellation as part of a sponsored demutualization. Constellation, an insurance holding company, is backed by Caisse de Dépôt et Placement du Québec and the Ontario Teachers’ Pension Plan Board, “two of the world’s largest, leading, long-term institutional investors,” Ohio National said in a press release.
This transaction will strengthen the company’s financial position, improve its position in the market, fuel future growth, and increase the capital strength of Ohio National and its insurance subsidiaries, the news release said.
The sponsored demutualization, which is subject to various government approvals including the approval of the Ohio Insurance Director and the approval of the ONMH members, provides for Constellation to fund cash payments or insurance payments totaling $ 500 million or eligible members in exchange for termination of their membership shares in ONMH.
In addition, as part of the transaction, Constellation and its investors undertake to raise an additional $ 500 million in capital over four years after the closing of the transaction to further strengthen Ohio National’s capital position and ability to fulfill these transaction commitments as well as investing in the future of the business.
Barbara A. Turner, President and CEO of Ohio National said, “Over the past few years we have taken targeted steps to ensure that our business is well positioned for the future and that our policyholders and employees are part of a stable and growing company . In a challenging economic environment, historically low interest rates, increased regulatory costs, and pressure across the industry, Ohio National is taking this next logical step to bolster its business with additional capital and a more flexible capital structure. This will continue to unlock our opportunities and allow us to minimize risks while investing in future business growth. “
Turner continued, “For our employees, network of financial professionals, policyholders and society at large, the solid capital structure and increased flexibility that this transaction provides add to the inherent value of our company. It also expands our ability to capitalize on 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 amazing 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 that can help realize the company’s latent potential. We look forward to working with Barbara and her management team, as well as Agam, to accelerate the company’s organic and inorganic growth and make Ohio National a leader in the life insurance and annuity industries. “
Agam Capital Management, an insurance solutions provider and strategic partner to Constellation, has extensive experience in variable annuity risk management and the insurance industry, which greatly strengthens Ohio National’s ability to capitalize on inorganic growth opportunities.
Agam co-founders Chak Raghunathan and Avi Katz said, “This strategic transaction will enable Ohio National to capitalize on growth opportunities in the life insurance and annuity industries. We believe we will leverage Agam’s industry-leading expertise Asset Liability Management and Enterprise Risk Management can leverage strengthening strategic decision-making as the company looks to the next phase of growth. “
Upon completion of the transaction, Ohio National will retain 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 member approval. The transaction is expected to close in the second half of 2021.
Sidley Austin represents Ohio National Financial Services on the proposed demutualization of Ohio National and its acquisition by Constellation Insurance Holdings, Inc.