Constellation Insurance Holdings has agreed to acquire Cincinnati-based Ohio National Mutual Holdings (ONMH) and its wholly owned subsidiary Ohio National Financial Services in a transaction worth $1bn.

Constellation is backed by institutional investors Caisse de dépôt et placement du Québec (CDPQ) and Ontario Teachers’ Pension Plan Board.

Transaction details

Under the agreement, ONMH will be converted to a stock company and all of its newly issued stock will be issued to Constellation pursuant to a sponsored demutualisation.

The sponsored demutualisation has secured the green light of the ONMH board, and is currently pending regulatory approvals, including the clearance of the Ohio Director of Insurance and ONMH’s members.

ONMH believes that the deal will improve its financial and market position, as well as enhance its capital strength.

In lieu of the extinguishment of their membership interests in ONMH, Constellation will offer cash payments or policy benefits worth $500m.

Constellation also pledged to pump an additional $500m over four years upon deal completion to enhance Ohio National’s capital position and invest in the future of the business.

Ohio National president and CEO Barbara Turner calls the deal a “logical step” to strengthen the business with a more flexible capital structure.

She said that the deal will help unlock opportunities, reduce risk and drive future growth.

Turner stated: “For our associates, network of financial professionals, policyholders and the community, the solidified capital structure and increased flexibility afforded by this transaction enhance the inherent value of our Company.

“It also expands our ability to seize growth opportunities and respond to varying market conditions, resulting in a stronger, more responsive and innovative company that is well positioned for the future.”

Ohio National will retain its management team and brand post deal completion in the second half of this year. It will remain based in Cincinnati, Ohio.

Set up in 1909, Ohio National has a presence across 49 states. Its affiliated companies managed $41.2bn in assets at the end of December 2020.

Constellation founder, chairman and CEO Anurag Chandra said: “We believe this strategic transaction can have a transformative impact on Ohio National’s strategic and financial position, capital access, and financial strength ratings which can help unlock the Company’s latent potential.

“We look forward to partnering with Barbara and her management team, as well as with Agam, to help accelerate the Company’s organic and inorganic growth trajectory and build Ohio National into a market leader in the life insurance and annuity industries.”

Other major deals in 2021

The insurance industry has seen several big deals since the start of this year.

In January, Massachusetts Mutual Life Insurance Company (MassMutual) agreed to acquire the annuity business of American Financial Group (AFG) in a cash deal worth $3.5bn.

Earlier this month, CUNA Mutual Group signed an agreement to buy Assurant’s prearranged funeral insurance and final expense business, Global Preneed, along with related legal entities and assets in a cash deal valued at around $1.3bn.

Also recently, private equity firm Apollo Global Management agreed to buy the rest of its insurance affiliate Athene Holding it does not already own in an all-stock transaction worth nearly $11bn.