Ohio National Financial Services Inc., among the top 20 sellers of variable annuities, is quitting the annuity business and is simultaneously laying off 300 employees, signaling the challenges of the variable annuity market in recent years.
Ohio National will no longer accept applications for annuities as of Sep. 15. Annuities represent the bulk of Ohio National's business — of the firm's $42 billion in total assets under management, $24.9 billion, or 59%, is from annuities, according to its most recent annual report.
About 95% of its annuity assets come from variable annuities. The firm also sells fixed and indexed annuities.
Ohio National is concurrently exiting the retirement-plan business, which plays a much smaller role in its product mix. The firm will continue to service and support existing annuity and retirement-plan clients.
Ohio National cited a "continuously changing regulatory landscape," sustained low interest rates, the increasing cost of doing business and growth opportunities as the primary reasons to exit the annuity business. Chairman and CEO Gary Huffman said the firm would shift focus to its life and disability-income insurance products.
Industrywide, variable annuity sales have dipped significantly in recent years. Before the second quarter of this year, VA sales had fallen for 17 consecutive quarters dating back to 2014.
"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."
The Department of Labor fiduciary rule, which is now defunct, made the products more challenging for brokers to sell when the regulation went into effect last year. And even though the DOL rule has been taken off the table, the Securities and Exchange Commission and the National Association of Insurance Commissioners are currently working on their own advice rules that could affect annuity sales.
Low interest rates have also made annuity guarantees more difficult for insurers to underwrite. They have also made it more challenging for firms to offer relatively attractive benefits.
Ohio National sold $1.3 billion in individual annuities in 2017. Life insurance was its No. 2 product, with $180.6 million in new life insurance sales, and retirement plans No. 3 with $88.7 million in sales.
The firm had been slipping in the variable-annuity sales rankings in recent years. In 2014, for example, the firm was the 14th biggest seller of the products, but was No. 17 by the end of 2017.