Ohio National Life Insurance Co. is extending by about a month a buyout offer it made on some of its variable annuity products.
The insurer last year gave owners of ONcore variable annuities with a guaranteed minimum income benefit rider the ability to either surrender or exchange their contract for additional cash.
Ohio National originally scheduled the offer to run from Nov. 12 until Feb. 11. The insurer extended the time frame until March 15, according to a filing with the Securities and Exchange Commission.
These annuities are at the heart of an ongoing feud between Ohio National and broker-dealers and their representatives. The insurer in mid-December eliminated trailing commission payments made to brokers whose clients own ONcore variable annuities with a GMIB, thereby cutting off an annual income stream for brokers and their firms.
Several broker-dealers, including UBS Financial Services Inc., Commonwealth Financial Network and the six brokerages in Cetera Financial Group's network, have sued Ohio National in a bid to restore the commission payments.
Advisers have speculated that Ohio National timed its buyout to coincide with its move around trail commissions in the hopes it would incentivize brokers to exchange their clients' variable annuities for another product, thereby preserving their commission payments.
"This offer may provide an option to our contract owners that better fits their needs today," said Ohio National spokeswoman Angela Meehan. "Extending the offer date gives them additional time, if needed, to make that determination."
Dennis Gallant, senior analyst at Aite Group, believes Ohio National is extending its buyout offer because not as many customers took the offer as had been hoped or anticipated. That may be because keeping the contract is in many clients' best interests, and because advisers may be waiting to see if there's a favorable lawsuit outcome that would restore their commission payments.
"It's brinkmanship here. How long can we go?" Mr. Gallant said. "You still have to be wary about the client at the end of the day."
Several insurers have offered buyouts to variable annuity customers to get out of costly benefits underwritten around the time of the financial crisis. The resulting plunge in account values during the crisis may not have recovered fully enough to cover contract guarantees. When coupled with a decade of rock-bottom interest rates, the contracts' income guarantees have become more expensive.