One of the nations top sellers of variable annuities has exited the business, confirming what many experts have been claiming in recent years: the variable annuity market is very challenging. Ohio National Financial Services Inc., has laid off 300 employees in the wake of the change.
As of September 15, Ohio National will no longer accept applications for annuities, according to a recent article from InvestmentNews. Of the firm’s $42 billion in total assets under management, $24.9 billion, nearly 60%, is from annuities, making the company a top 20 seller. While the firm sells fixed and indexed annuities, approximately 95% of its annuity assets come from variable annuities.
As the primary reason for exit, Ohio National cited a “continuously changing regulatory landscape,” sustained low interest rates, the increasing cost of doing business and growth opportunities. CEO and Chairman, Gary Huffman, stated that the firm would shift focus to its life and disability-income insurance products.
“It’s a declining market,” said Jamie Hopkins, an insurance expert at The American College of Financial Services. “It may be bottoming out at this point. If you look for growth areas, I don’t view that as one.”
Across the industry variable annuity sales have fallen significantly in recent years. Earlier this year, VA sales had fallen for 17 consecutive quarters, dating back to 2014. Many blame the Department of Labor’s fiduciary rule for making the products more challenging for brokers to sell. The rule is now defunct, however the Securities and Exchange Commission and the National Association of Insurance Commissioners are currently working on their own advice rules.
Low interest rates are also blamed for the challenges facing variable annuities, making it difficult for firms to offer relatively attractive benefits.
Ohio National sold $1.3 billion in individual annuities in 2017 and $180.6 million in new life insurance. Retirement plans were its No. 3 product line with *88.7 million in sales. While the firm is concurrently exiting the retirement-plan business, it will continue to service and support all existing annuity and retirement-plan clients.
Written by Rachel Summit