Western and Southern Life Insurance Co. has received approval from Ohio's top insurance regulator to convert to a mutual holding company.

Lee Covington, director of the Ohio Department of Insurance, approved the conversion plan on Sept. 8. His signature was the last needed by the Cincinnati-based insurer to convert to a mutual holding company, which serves as a parent company to a number of subsidiaries. Ownership of the subsidiaries, in turn, is generally split between the mutual holding company and outside investors, with the mutual holding company always maintaining majority control, usually slightly more than 50 percent.

Under Western and Southern's proposed restructuring plan, two new companies will be created: Western-Southern Mutual Holding Co., which would be a non-stock mutual holding company owned by policyholders; and Western-Southern Financial Group, which will be a stock holding company. Western and Southern Life will be converted to a stock company and policyholders will become "members" of the mutual holding company.

Covington says policyholders will see no change in premiums or policy benefits. Policyholders with at least $1,000 worth of life insurance coverage with the insurer were eligible to vote on the proposal and approved the conversion in June.

Not all states allow mutual holding company structures. In 1997, the Ohio Legislature passed the Ohio Mutual Insurance Holding Company Act that allows companies to convert to a mutual holding company structure. Western and Southern is the second life insurance company in Ohio to adopt such a structure. Ohio National Life Insurance Co. converted in August 1998.

Western and Southern, which expects to complete the conversion by January 2001, was sued over the proposal in July. The lawsuit, which seeks class action status, claims the insurer is not offering fair value to policyholders for their ownership interests under the new structure. William Jacobs, an attorney with the Cincinnati law firm of Strauss & Troy, which represents the plaintiffs, says his firm still plans to seek damages from the insurer despite Covington's approval of the conversion plan.