Constellation Launches AuguStar Annuity Business

What You Need to Know

Ohio National stopped selling new variable annuities and paying trailing commissions in 2018.
Constellation acquired it in 2018 and has promised to invest $500 million.
Under the new AuguStar brand, the company plans to issue a full line of fixed and variable annuities.

Constellation Insurance today said its new AuguStar insurance business will sell a full line of individual annuities, not just life insurance.

Constellation — the company that acquired Ohio National in 2022 and promised to invest $500 million in reviving it — said the AuguStar Retirement division will write non-variable indexed annuities, multi-year guaranteed annuities, traditional variable annuities and registered index-linked annuities.

AuguStar Retirement will distribute the annuities through banks and broker-dealers as well as through independent market organizations’ networks of retail agents, the company said.

Cliff Jack, the CEO of AuguStar Retirement, said the division aims to sell products that consumers can trust and understand, using technology to automate processes as much as possible. “We want to offer an exceptional experience for both the financial advisor and the consumer,” he said.

What It Means

Life insurers, their rating agencies and their regulators may have concerns about insurers’ ability to manage investment risk, but many players are still eager to offer your clients income protection.

The History

Ohio National was founded in 1909 and built a large, respected life and annuity business. The company was a major player in the U.S. individual variable annuity market.

Because of Ohio National’s strong variable annuity sales, the company ended 2015 with 87.5% of its assets associated with customers’ separate accounts, according to a financial examination report posted by the New York State Department of Financial Services in June 2022.

The separate account activity was “mainly generated from the variable annuity guarantee block of business, which has been increasing each year, and exposes the company to additional risks,” according to officials’ summary of comments included in a previous examination report based on the 2015 results.

Company examiners recommended that Ohio National consider limiting its exposure to variable annuity risk.

Ohio National responded by announcing in 2018 that it would stop selling individual variable annuities and stop paying trailing commissions to the agents who had sold the annuities.

Agent groups sued over the trailing commission cuts but had trouble fighting the commission cuts in court.