The President's Message 

Partners in Success accurately describes 2006 — a gratifying and profitable year for Lafayette Life. We enjoyed a strong sense of stability as the company embarked on its second century of exemplary performance.

In 2006, the nation saw a leveling of interest rates after the steady increases experienced throughout the previous two years. The stability of the interest rate environment has taken the country into a period of cautious financial optimism, resulting in a positive recovery in the stock market and business environment. Balancing that stability, however, has been a period of volatility in the nation’s housing market, and consequential uncertainty about its effect on the broader economy. Throughout periods of volatility and change over the past century, we have perpetuated our tradition of outstanding financial strength.

The outstanding results and steady progress in 2006 are the product of Partners in Success, those partners being our invaluable Lafayette Life field producers working in concert with our regional sales teams and home office associates. While serving in my first full year as CEO for this dynamic organization, my foremost impression of Lafayette Life is one of a profound spirit of teamwork among talented professionals dedicated to working together to serve both our policyholders and our community.

There is an embedded tradition here of both service and loyalty. Lafayette Life’s commitment to serving as Partners in Success is evident throughout every activity and achievement of the company in 2006. A few key examples include:

• The impressive sales and bottom-line results. While the industry grew new whole life insurance sales 2 percent last year, Lafayette Life increased 2006 new life insurance premium sales by 18 percent to over $32 million. At the same time, we reduced our absolute spending and increased GAAP operating profits nearly 25 percent to $36 million. All three Lafayette Life product lines — individual life, indexed annuities and group products — performed favorably.
• The release of the new Marquis Centennial Indexed Annuity. This highly competitive product provides both guaranteed security and the opportunity for additional growth for policyholders.
• The upgrading of our insurance rating by A.M. Best to A++, its highest rating. One of the most respected rating services in the industry, A.M. Best accorded Lafayette Life this increase from our previous A+ rating after we had proven that our merger with Western & Southern Financial Group was proceeding smoothly, effectively, and profitably for the company. In addition, as a member company of Western & Southern Financial Group®, Lafayette Life has a Comdex rank of 98 (out of a possible 100), allowing us to stand tall against any competitor while providing premier security to our policyholders.
• The continuing growth of our field force. We also successfully shared our story with some of the brightest financial professionals in the industry, adding 147 new agencies and more than 700 new producers. We are now represented by more than 2,400 independent financial professionals. We have vigorously maintained our commitment to these valued producer relationships over the decades.
• We enhanced our group line of business. Our Group Regional Directors have strong relationships with some of the most knowledgeable and professional producers in the business. During 2006, we increased group insurance market presence through three new marketing alliances and continued growth of our Regional Director sales distribution. We met our profitability goal and exceeded our group life premium persistency goal by providing prompt and courteous service to our loyal base of policyholders and producers.
• The establishment of an offsite mainframe in Lebanon, Ohio. This mainframe will ensure that Lafayette Life’s company and policyholder data remains secure, while saving the company over $250,000 per year from shared use of this mainframe with another Western & Southern Financial Group company.
• The creation of the Lafayette Life Community Foundation. Funded with a $3 million contribution from Western & Southern Financial Group, the Foundation awarded local grants to 23 worthy organizations in 2006.
• The tradition of personal generosity at Lafayette Life. We were the recipients of the United Way “Best Overall Campaign Award” for companies our size. A total of 99 percent of our employees contribute to the United Way, with the highest per capita giving amount for any company in our community. Yes, our associates are true leaders with heart.

As mentioned, 2006 also marked Lafayette Life’s first full year as a member company of Western & Southern Financial Group. To ensure that our merger was a success, we established eight best practice teams: Communication; Technology; Distribution; Financial, Actuarial, and Tax; Insurance Operations; Investment Group; Human Resources; and Corporate Functions. These teams worked together to manage the transition effectively, with the collaborative spirit of shared success that is the hallmark of Lafayette Life.

We see more change and continuing opportunities on the horizon. While welcoming the challenges ahead, Lafayette Life will continue to focus on steady, stable growth as we demonstrate unwavering commitment to our policyholders, producers, and home office associates. Together, working as true Partners in Success, we are positioned for even greater achievements.

Sincerely,

Jerry B. Stillwell