Ohio National extends variable annuity buyout offer

The VAs are at the heart of an ongoing dispute with brokers and broker-dealers over canceled trail commissions

Feb 20, 2019 @ 12:19 pm

By Greg Iacurci

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.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

What is causing the fever for RIA deals?

Deputy editor Bob Hordt and senior columnist Jeff Benjamin discuss factors adding fuel to the M&A fire in the independent advice space.

Latest news & opinion

Merger mania: Why consolidation in the RIA space is about to explode

The pace is expected to pick up as big firms seek to get even bigger and older advisers look to cash out.

Voya Financial Advisors exposes more sensitive adviser information on its website

List of top advisers at the firm comes after Social Security numbers were put at risk.

Securities America hit with lawsuit seeking $18 million in damages

Firm is dealing with the fallout from a rogue broker it fired a year ago.

Brian Block continues his legal fight to stay out of prison

A judge denied Mr. Block's motion for a new trial, but he wants another day in court.

10 social media stars you're not following yet, but should be

Some of the great people using social media to discuss wealth management and financial advice who might not be on your radar.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print