By James McNair
The Cincinnati Enquirer

In a merger of companies owned by their policyholders, Western & Southern Financial Group said Thursday it would assume control of Lafayette Life Insurance Co. of Lafayette, Ind.

Financial terms were not disclosed. The deal will require the approval of Ohio and Indiana insurance regulators, as well as policyholders of both companies. The companies expect to complete the merger by year's end.

Western & Southern will pick up a 99-year-old company with 92,000 policyholders in 48 states, $18 billion worth of life insurance policies in force, $1.6 billion in assets and 200 employees, including 180 at its headquarters. Lafayette posted $364 million in premium revenue in 2003 and $270 million in net income.

Both companies are financial stalwarts. Western & Southern, which has more than $32 billion in assets and operates four life insurance units, is one of only eight life insurers rated AAA by Standard & Poor's. Lafayette has A ratings from S&P, A.M. Best and Fitch.

"This alliance will provide opportunities for each company to leverage its respective strengths," said John Barrett, Western & Southern's chairman and chief executive. "There are tremendous synergies between our two companies."

While careful to call the deal a merger, Western & Southern will call the shots. Lafayette CEO Bob Gibbons will report to Barrett, and Lafayette will fall under the control of Western's board.

William Olds, Lafayette's senior vice president of insurance operations, said Thursday that the company had been seeking a merger for some time.

"We've been looking and searching for the right partner to gain size and all the benefits that come with combining organizations, assets and business opportunities," Olds said.

The deal calls for Western & Southern to maintain Lafayette's name and headquarters for "at least three to five years" after the merger. Western & Southern also agreed to establish - and fund - a foundation mainly to benefit the city of Lafayette.

"We don't have any plans to move the company," said Western spokesman Herb Brown.

E-mail jmcnair@enquirer.com