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Global Credit Research - 19 Apr 2011
Approximately $250 million of securities rated.
New York, April 19, 2011 -- Moody's Investors Service has assigned a Baa1 senior debt rating to the
$250 million of 20-year fixed rate senior unsecured notes
to be issued by Ohio National Financial Services, Inc. (Ohio
National, senior debt at Baa1; stable outlook). The
outlook for the rating is stable.
Moody's said that Ohio National intends to use the debt proceeds
to purchase a newly-issued surplus note from Montgomery Re,
a Vermont-domiciled captive reinsurer (wholly-owned by The
Ohio National Life Insurance Company (ONLIC, A1 insurance financial
strength rating/stable)). Montgomery Re intends to use the proceeds
from the surplus note sale to purchase assets to be placed in a reinsurance
trust to support a portion of the Regulation XXX (level premium term policies)
and Guideline AXXX (universal life policies with no-lapse guarantees)
reserves on business that it will coinsure from Ohio National Life Assurance
Corp., a subsidiary of ONLIC.
According to Moody's Analyst Shachar Gonen, "Ohio National's
debt issuance will lock in long-term financing that will alleviate
the capital strain associated with the aforementioned regulatory reserves
related to an existing book of term and universal life insurance policies.
The 20 year term of the notes provides reasonably long-term financing
of the reserve runoff."
Moody's said it will treat the proceeds associated with financing the
regulatory reserves analytically as operating leverage and will exclude
the debt from its adjusted financial leverage and coverage ratios,
but will be counted in total leverage. On a proforma basis,
the total leverage metric is projected to be approximately 30%,
which is at the high end of the Aa range.
The rating agency stated that Ohio National's Baa1 senior debt rating
and the A1 insurance financial strength (IFS) rating on its operating
companies reflect Ohio National's good business profile, supported
by its stable and diverse life insurance product portfolio; extensive
variable cost distribution system -- which has been successfully
expanded during the last several years; and strong product development
capability, which is responsive to distribution channels.
In addition, the company's lead insurance subsidiary,
ONLIC, has maintained excellent capital levels with an risk-based
capital (RBC) ratio of 503% at year-end 2010.
Moody's noted that these strengths are partially offset by the company's
growing exposure to variable annuities with guarantees and its historical
income volatility, mainly due to above average impairments during
the financial crisis in 2008/09.
The Ohio National Life Insurance Company, the lead insurance subsidiary
of Ohio National, is headquartered in Cincinnati, Ohio.
At December 31, 2010, ONLIC reported total statutory assets
of $18 billion and total adjusted capital of $910 million.
The principal methodology used in rating Ohio National was "Moody's Global
Rating Methodology for Life Insurers," which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating Ohio National can also be found in
the Rating Methodologies sub-directory on Moody's website.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to pay punctually senior policyholder claims and
obligations. Please see Moody's website at www.moodys.com/insurance
for more information.
Please see the ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
Financial Institutions Group
Moody's Investors Service
MD - Insurance
Financial Institutions Group
Moody's Investors Service
Moody's Investors Service
Moody's rates Ohio National's senior debt Baa1; stable outlook
250 Greenwich Street
New York, NY 10007
No Related Data.
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