10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2015

or

¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 000-19289

STATE AUTO FINANCIAL CORPORATION

(Exact name of Registrant as specified in its charter)

Ohio	31-1324304
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
518 East Broad Street, Columbus, Ohio	43215-3976
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (614) 464-5000

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý    No   ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ý    No   ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ý Non-accelerated filer ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No   ý

On May 1, 2015, the Registrant had 41,121,315 Common Shares outstanding.

Index to Form 10-Q Quarterly Report for the three month period ended March 31, 2015

	Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed consolidated balance sheets – March 31, 2015 and December 31, 2014	1
	Condensed consolidated statements of income – Three months ended March 31, 2015 and 2014	2
	Condensed consolidated statements of comprehensive income – Three months ended March 31, 2015 and 2014	3
	Condensed consolidated statements of cash flows – Three months ended March 31, 2015 and 2014	4
	Notes to condensed consolidated financial statements – March 31, 2015	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
	Part II. Other Information
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures	44

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

PART I – FINANCIAL STATEMENTS

Item 1. Condensed Consolidated Balance Sheets

($ and shares in millions, except per share amounts)	March 31, 2015			December 31, 2014
	(unaudited)
Assets
Fixed maturities, available-for-sale, at fair value (amortized cost $1,894.0 and $1,831.3, respectively)	$	1,964.0		$	1,891.9
Equity securities, available-for-sale, at fair value (cost $236.7 and $235.5, respectively)	310.6			310.4
Other invested assets, available-for-sale, at fair value (cost $54.4 and $50.5, respectively)	88.6			80.3
Other invested assets	5.3			5.3
Notes receivable from affiliate	70.0			70.0
Total investments	2,438.5			2,357.9
Cash and cash equivalents	68.4			86.3
Accrued investment income and other assets	36.1			33.8
Deferred policy acquisition costs (affiliated net assumed $49.6 and $46.8, respectively)	127.4			126.5
Reinsurance recoverable on losses and loss expenses payable	7.9			9.6
Prepaid reinsurance premiums	6.2			6.1
Due from affiliate	—			40.1
Current federal income taxes	0.7			1.1
Net deferred federal income taxes	84.3			97.4
Property and equipment, at cost	7.6			8.1
Total assets	$	2,777.1		$	2,766.9
Liabilities and Stockholders’ Equity
Losses and loss expenses payable (affiliated net assumed $504.8 and $494.3, respectively)	$	997.7		$	983.2
Unearned premiums (affiliated net assumed $205.4 and $201.7, respectively)	604.2			612.4
Notes payable (affiliates $15.5 and $15.5, respectively)	100.8			100.8
Postretirement and pension benefits (affiliated net ceded $62.3 and $63.2, respectively)	115.6			117.3
Due to affiliate	6.2			—
Other liabilities (affiliated net ceded $2.8 and $5.1, respectively)	48.4			80.3
Total liabilities	1,872.9			1,894.0
Stockholders’ equity:
Class A Preferred stock (nonvoting), without par value. Authorized 2.5 shares; none issued	—			—
Class B Preferred stock, without par value. Authorized 2.5 shares; none issued	—			—
Common stock, without par value. Authorized 100.0 shares; 47.8 and 47.7 shares issued, respectively, at stated value of $2.50 per share	119.5			119.3
Treasury stock, 6.8 and 6.8 shares, respectively, at cost	(116.1		)	(116.0		)
Additional paid-in capital	144.5			143.2
Accumulated other comprehensive income (affiliated net ceded $63.7 and $65.1, respectively)	81.0			71.7
Retained earnings	675.3			654.7
Total stockholders’ equity	904.2			872.9
Total liabilities and stockholders’ equity	$	2,777.1		$	2,766.9

See accompanying notes to condensed consolidated financial statements.

1

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Condensed Consolidated Statements of Income

($ in millions, except per share amounts)	Three months ended March 31
(unaudited)	2015			2014
Earned premiums (affiliated net assumed $105.4 and $47.1, respectively)	$	315.3		$	262.5
Net investment income (affiliate $1.2 and $1.2, respectively)	15.4			17.6
Net realized gains on investments:
Total other-than-temporary impairment losses	(0.5		)	(0.8		)
Portion of loss recognized in other comprehensive income	—			—
Other net realized investment gains	4.3			11.5
Total net realized gains on investments	3.8			10.7
Other income from affiliates	0.4			0.5
Total revenues	334.9			291.3
Losses and loss expenses (affiliated net assumed $74.1 and $30.4, respectively)	195.0			171.8
Acquisition and operating expenses (affiliated net assumed $77.3 and $38.9, respectively)	103.4			88.5
Interest expense (affiliates $0.2 and $0.2, respectively)	1.3			1.3
Other expenses	2.0			2.0
Total expenses	301.7			263.6
Income before federal income taxes	33.2			27.7
Federal income tax expense	8.5			0.6
Net income	$	24.7		$	27.1
Earnings per common share:
Basic	$	0.60		$	0.67
Diluted	$	0.60		$	0.66
Dividends paid per common share	$	0.10		$	0.10

See accompanying notes to condensed consolidated financial statements.

2

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Consolidated Statements of Comprehensive Income

($ in millions, except per share amounts)	Three months ended March 31
(unaudited)	2015			2014
Net income	$	24.7		$	27.1
Other comprehensive income, net of tax:
Net unrealized holding gains on investments:
Unrealized holding gains	17.0			23.0
Reclassification adjustments for gains realized in net income	(4.2		)	(10.7		)
Income tax expense	(4.5		)	(4.2		)
Total net unrealized holding gains on investments	8.3			8.1
Net unrecognized benefit plan obligations:
Reclassification adjustments for amortization to statements of income:
Negative prior service cost	(1.4		)	(1.4		)
Net actuarial loss	2.9			1.6
Income tax expense	(0.5		)	—
Total net unrecognized benefit plan obligations	1.0			0.2
Other comprehensive income	9.3			8.3
Comprehensive income	$	34.0		$	35.4

See accompanying notes to condensed consolidated financial statements.

3

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Condensed Consolidated Statements of Cash Flows

($ in millions)	Three months ended March 31
(unaudited)	2015			2014
Cash flows from operating activities:
Net income	$	24.7		$	27.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, net	5.5			3.4
Share-based compensation	1.0			1.0
Net realized gains on investments	(3.8		)	(10.7		)
Changes in operating assets and liabilities:
Deferred policy acquisition costs	(0.9		)	(2.9		)
Accrued investment income and other assets	(2.0		)	(1.5		)
Postretirement and pension benefits	(0.7		)	1.7
Other liabilities and due to/from affiliates, net	(49.6		)	(10.6		)
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums	1.6			(0.6		)
Losses and loss expenses payable	14.5			(8.2		)
Unearned premiums	(8.2		)	2.9
Federal income taxes	9.0			0.7
Cash provided from December 31, 2014 unearned premium transfer related to the homeowners quota share arrangement	63.5			—
Net cash provided by operating activities	54.6			2.3
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale	(212.8		)	(137.2		)
Purchases of equity securities available-for-sale	(19.7		)	(38.0		)
Purchases of other invested assets	(3.9		)	(0.4		)
Maturities, calls and pay downs of fixed maturities available-for-sale	83.2			68.9
Sales of fixed maturities available-for-sale	62.5			71.3
Sales of equity securities available-for-sale	21.5			34.6
Sales of other invested assets available-for-sale	0.2			0.2
Net cash used in investing activities	(69.0		)	(0.6		)
Cash flows from financing activities:
Proceeds from issuance of common stock	0.7			0.6
Payments to acquire treasury stock	(0.1		)	(0.1		)
Payment of dividends	(4.1		)	(4.2		)
Net cash used in financing activities	(3.5		)	(3.7		)
Net decrease in cash and cash equivalents	(17.9		)	(2.0		)
Cash and cash equivalents at beginning of period	86.3			80.3
Cash and cash equivalents at end of period	$	68.4		$	78.3
Supplemental disclosures:
Interest paid (affiliates $0.2 and $0.2, respectively)	$	1.3		$	1.3

See accompanying notes to condensed consolidated financial statements.

4

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of State Auto Financial Corporation and Subsidiaries (“State Auto Financial” or the “Company”) have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the 2014 Form 10-K.

5

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

2. Investments

The following tables set forth the cost or amortized cost and fair value of available-for-sale securities by lot at March 31, 2015 and December 31, 2014:

($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	287.0	$	19.0	$	(1.0	)	$	305.0
Obligations of states and political subdivisions	834.2		26.6		(1.5		)	859.3
Corporate securities	302.9		10.6		(2.5		)	311.0
U.S. government agencies mortgage-backed securities	469.9		20.5		(1.7		)	488.7
Total fixed maturities	1,894.0		76.7		(6.7		)	1,964.0
Equity securities:
Large-cap securities	181.6		54.3		(1.3		)	234.6
Small-cap securities	55.1		20.9		—			76.0
Total equity securities	236.7		75.2		(1.3		)	310.6
Other invested assets	54.4		34.2		—			88.6
Total available-for-sale securities	$	2,185.1	$	186.1	$	(8.0	)	$	2,363.2
($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	296.7	$	14.1	$	(1.5	)	$	309.3
Obligations of states and political subdivisions	742.5		27.4		(0.4		)	769.5
Corporate securities	333.4		10.2		(3.0		)	340.6
U.S. government agencies mortgage-backed securities	458.7		15.6		(1.8		)	472.5
Total fixed maturities	1,831.3		67.3		(6.7		)	1,891.9
Equity securities:
Large-cap securities	185.5		57.3		(0.6		)	242.2
Small-cap securities	50.0		18.2		—			68.2
Total equity securities	235.5		75.5		(0.6		)	310.4
Other invested assets	50.5		29.8		—			80.3
Total available-for-sale securities	$	2,117.3	$	172.6	$	(7.3	)	$	2,282.6

6

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

The following tables set forth the Company’s gross unrealized losses and fair value on its investments by lot, aggregated by investment category and length of time for individual securities that have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014:

	Less than 12 months						12 months or more						Total
($ millions, except # of positions)	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	41.1	$	(0.3	)	7	$	24.1	$	(0.7	)	7	$	65.2	$	(1.0	)	14
Obligations of states and political subdivisions	117.7		(1.5		)	23	6.8		—			3	124.5		(1.5		)	26
Corporate securities	33.3		(1.2		)	5	50.6		(1.3		)	10	83.9		(2.5		)	15
U.S. government agencies mortgage-backed securities	48.3		(0.7		)	5	39.4		(1.0		)	13	87.7		(1.7		)	18
Total fixed maturities	240.4		(3.7		)	40	120.9		(3.0		)	33	361.3		(6.7		)	73
Large-cap equity securities	14.0		(1.3		)	4	—		—			—	14.0		(1.3		)	4
Total temporarily impaired securities	$	254.4	$	(5.0	)	44	$	120.9	$	(3.0	)	33	$	375.3	$	(8.0	)	77
	Less than 12 months						12 months or more						Total
($ millions, except # of positions)	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	19.9	$	(0.3	)	4	$	52.0	$	(1.2	)	17	$	71.9	$	(1.5	)	21
Obligations of states and political subdivisions	6.1		—			5	30.9		(0.4		)	9	37.0		(0.4		)	14
Corporate securities	43.5		(0.9		)	8	56.1		(2.1		)	11	99.6		(3.0		)	19
U.S. government agencies mortgage-backed securities	44.0		(0.3		)	8	37.5		(1.5		)	13	81.5		(1.8		)	21
Total fixed maturities	113.5		(1.5		)	25	176.5		(5.2		)	50	290.0		(6.7		)	75
Large-cap equity securities	7.2		(0.6		)	2	—		—			—	7.2		(0.6		)	2
Total temporarily impaired securities	$	120.7	$	(2.1	)	27	$	176.5	$	(5.2	)	50	$	297.2	$	(7.3	)	77

The Company reviewed its investments at March 31, 2015, and determined that no additional other-than-temporary impairment existed in the gross unrealized holding losses other than those listed in the table below. The following table sets forth the realized losses related to other-than-temporary impairments on the Company’s investment portfolio recognized for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Equity securities:
Large-cap securities	$	—		$	(0.2	)
Small-cap securities	(0.5		)	(0.6		)
Total other-than-temporary impairments	$	(0.5	)	$	(0.8	)

7

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

The Company regularly monitors its investments that have fair values less than cost or amortized cost for signs of other-than-temporary impairment, an assessment that requires significant management judgment regarding the evidence known. Such judgments could change in the future as more information becomes known, which could negatively impact the amounts reported. Among the factors that management considers for fixed maturity securities are the financial condition of the issuer including receipt of scheduled principal and interest cash flows, and intent to sell including if it is more likely than not that the Company will be required to sell the investments before recovery. When a fixed maturity has been determined to have an other-than-temporary impairment, the impairment charge is separated into an amount representing the credit loss, which is recognized in earnings as a realized loss, and the amount related to non-credit factors, which is recognized in accumulated other comprehensive income. Future increases or decreases in fair value, if not other-than-temporary, are included in accumulated other comprehensive income.

Among the factors that management considers for equity securities and other invested assets are the length of time and/or the significance of decline below cost, the Company’s ability and intent to hold these securities through their recovery periods, the current financial condition of the issuer and its future business prospects, and the ability of the market value to recover to cost in the near term. When an equity security or other invested asset has been determined to have a decline in fair value that is other-than-temporary, the cost basis of the security is adjusted to fair value. This results in a charge to earnings as a realized loss, which is not reversed for subsequent recoveries in fair value. Future increases or decreases in fair value, if not other-than-temporary, are included in accumulated other comprehensive income.

The following table sets forth the amortized cost and fair value of available-for-sale fixed maturities by contractual maturity at March 31, 2015:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	38.6	$	39.4
Due after 1 year through 5 years	329.3		343.4
Due after 5 years through 10 years	278.9		293.1
Due after 10 years	777.3		799.4
U.S. government agencies mortgage-backed securities	469.9		488.7
Total	$	1,894.0	$	1,964.0

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations with or without call or prepayment penalties.

At March 31, 2015, State Auto P&C had U.S. government agencies mortgage-backed fixed maturity securities, with a carrying value of approximately $85.0 million, that were pledged as collateral for the Federal Home Loan Bank of Cincinnati ("FHLB") Loan. In accordance with the terms of the FHLB Loan, State Auto P&C retains all rights regarding these securities.

Fixed maturities with fair values of $8.8 million were on deposit with insurance regulators as required by law at March 31, 2015 and December 31, 2014. The Company retains all rights regarding these securities.

The following table sets forth the components of net investment income for the three months ended March 31, 2015 and 2014:

($ millions)	2015		2014
Fixed maturities	$	12.9	$	15.4
Equity securities	1.6		1.4
Cash and cash equivalents, and other	1.4		1.3
Investment income	15.9		18.1
Investment expenses	0.5		0.5
Net investment income	$	15.4	$	17.6

The Company’s current investment strategy does not rely on the use of derivative financial instruments.

8

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

Proceeds on sales of available-for-sale securities were $84.2 million and $106.1 million for the three months ended March 31, 2015 and 2014.

The following table sets forth the realized and unrealized holding gains (losses) on the Company’s investment portfolio for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Realized gains:
Fixed maturities	$	1.1		$	2.1
Equity securities	4.1			9.4
Other invested assets	—			0.1
Total realized gains	5.2			11.6
Realized losses:
Equity securities:
Sales	(0.5		)	(0.1		)
OTTI	(0.5		)	(0.8		)
Total realized losses	(1.0		)	(0.9		)
Net realized gains on investments	$	4.2		$	10.7
Change in unrealized holding gains, net of tax:
Fixed maturities	$	9.4		$	14.4
Equity securities	(1.0		)	(4.5		)
Other invested assets	4.4			2.4
Deferred federal income tax liability	(4.5		)	(4.3		)
Valuation allowance	—			0.1
Change in net unrealized holding gains, net of tax	$	8.3		$	8.1

9

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

3. Fair Value of Financial Instruments

Below is the fair value hierarchy that categorizes into three levels the inputs to valuation techniques that are used to measure fair value:

• Level 1 includes observable inputs which reflect quoted prices for identical assets or liabilities in active markets at the measurement date.

• Level 2 includes observable inputs for assets or liabilities other than quoted prices included in Level 1, and it includes valuation techniques which use prices for similar assets and liabilities.

• Level 3 includes unobservable inputs which reflect the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

The Company utilizes one nationally recognized pricing service to estimate the majority of its available-for-sale investment portfolio’s fair value. The Company obtains one price per security and the processes and control procedures employed by the Company are designed to ensure the value is accurately recorded on an unadjusted basis. Through discussions with the pricing service, the Company gains an understanding of the methodologies used to price the different types of securities, that the data and the valuation methods utilized are appropriate and consistently applied, and that the assumptions are reasonable and representative of fair value. To validate the reasonableness of the valuations obtained from the pricing service, the Company compares to other fair value pricing information gathered from other independent pricing sources. At March 31, 2015 and December 31, 2014, the Company did not adjust any of the prices received from the pricing service.

Transfers between level categorizations may occur due to changes in the availability of market observable inputs. Transfers in and out of level categorizations are reported as having occurred at the beginning of the quarter in which the transfer occurred. There were no transfers between level categorizations during the three months ended March 31, 2015 and 2014.

The following sections describe the valuation methods used by the Company for each type of financial instrument it holds that are carried at fair value:

Fixed Maturities

The Company utilizes a third party pricing service to estimate fair value measurements for the majority of its fixed maturities. The fair value estimate of the Company’s fixed maturity investments are determined by evaluations that are based on observable market information rather than market quotes. Inputs to the evaluations include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, and other market-observable information. The fixed maturity portfolio pricing obtained from the pricing service is reviewed for reasonableness. The Company regularly selects a random sample of security prices which are compared to one or more alternative pricing sources for reasonableness. Any discrepancies with the pricing are returned to the pricing service for further explanation and, if necessary, adjustments are made. To date, the Company has not identified any significant discrepancies in the pricing provided by its third party pricing service. Investments valued using these inputs include U.S. treasury securities and obligations of U.S. government agencies, obligations of states and political subdivisions, corporate securities (except for a security discussed below), and U.S. government agencies mortgage-backed securities. All unadjusted estimates of fair value for fixed maturities priced by the pricing service are included in the amounts disclosed in Level 2 of the hierarchy. If market inputs are unavailable, then no fair value is provided by the pricing service. For these securities, fair value is determined either by requesting brokers who are knowledgeable about these securities to provide a quote; or the Company internally determines the fair values by employing widely accepted pricing valuation models, and depending on the level of observable market inputs, renders the fair value estimate as Level 2 or Level 3. The Company holds one fixed maturity corporate security included in Level 3 and estimates its fair value using the present value of the future cash flows. Due to the limited amount of observable market information for this security, the Company includes the fair value estimate in Level 3.

10

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

Equities

The fair value of each equity security is based on an observable market price for an identical asset in an active market and is priced by the same pricing service discussed above. All equity securities are recorded using unadjusted market prices and have been disclosed in Level 1.

Other Invested Assets

Included in other invested assets are two international funds (“the funds”) that invest in equity securities of foreign issuers and are managed by third party investment managers. The funds had a fair value of $80.5 million and $72.9 million at March 31, 2015 and December 31, 2014, respectively, which was determined using each fund’s net asset value. The Company employs procedures to assess the reasonableness of the fair value of the funds including obtaining and reviewing each fund’s audited financial statements. There are no unfunded commitments related to the funds. The Company may not sell its investment in the funds; however, the Company may redeem all or a portion of its investment in the funds at net asset value per share with the appropriate prior written notice. Due to the Company’s ability to redeem its investment in the funds at net asset value per share at the measurement date, the funds have been disclosed in Level 2.

The remainder of the Company’s other invested assets consist primarily of holdings in publicly-traded mutual funds. The Company believes that its prices for these publicly-traded mutual funds based on an observable market price for an identical asset in an active market reflect their fair values and consequently these securities have been disclosed in Level 1.

11

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

The following tables set forth the Company’s available-for-sale investments within the fair value hierarchy at March 31, 2015 and December 31, 2014:

($ millions)	Total		Level 1		Level 2		Level 3
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	305.0	$	—	$	305.0	$	—
Obligations of states and political subdivisions	859.3		—		859.3		—
Corporate securities	311.0		—		307.5		3.5
U.S. government agencies mortgage-backed securities	488.7		—		488.7		—
Total fixed maturities	1,964.0		—		1,960.5		3.5
Equity securities:
Large-cap securities	234.6		234.6		—		—
Small-cap securities	76.0		76.0		—		—
Total equity securities	310.6		310.6		—		—
Other invested assets	88.6		8.1		80.5		—
Total available-for-sale investments	$	2,363.2	$	318.7	$	2,041.0	$	3.5
($ millions)	Total		Level 1		Level 2		Level 3
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	309.3	$	—	$	309.3	$	—
Obligations of states and political subdivisions	769.5		—		769.5		—
Corporate securities	340.6		—		331.2		9.4
U.S. government agencies mortgage-backed securities	472.5		—		472.5		—
Total fixed maturities	1,891.9		—		1,882.5		9.4
Equity securities:
Large-cap securities	242.2		242.2		—		—
Small-cap securities	68.2		68.2		—		—
Total equity securities	310.4		310.4		—		—
Other invested assets	80.3		7.4		72.9		—
Total available-for-sale investments	$	2,282.6	$	317.8	$	1,955.4	$	9.4

12

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following tables set forth a reconciliation of the beginning and ending balances for the three months ended March 31, 2015 and the year ended December 31, 2014, separately for each major category of assets:

($ millions)	Fixed maturities
Balance at January 1, 2015	$	9.4
Total realized gains – included in earnings	0.2
Total unrealized losses – included in other comprehensive income	(0.2		)
Purchases	—
Sales	(5.9		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2015	$	3.5
($ millions)	Fixed maturities
Balance at January 1, 2014	$	8.9
Total realized gains – included in earnings	—
Total unrealized gains – included in other comprehensive income	0.2
Purchases	0.3
Sales	—
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at December 31, 2014	$	9.4

The following sections describe the valuation methods used by the Company for each type of financial instrument it holds that is not measured at fair value but for which fair value is disclosed:

Financial Instruments Disclosed, But Not Carried, At Fair Value

Other Invested Assets

Included in other invested assets are common stock of the Federal Home Loan Bank of Cincinnati ("FHLB") and the Trust Securities. The Trust Securities and FHLB common stock are carried at cost, which approximates fair value. The fair value of the FHLB common stock at March 31, 2015 was $4.8 million and the fair value of the Trust Securities was $0.5 million. The investments have been placed in Level 3 of the fair value hierarchy.

13

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

Notes Receivable from Affiliate

In May 2009, the Company entered into two separate credit agreements with State Automobile Mutual Insurance Company (“State Auto Mutual") pursuant to which it loaned State Auto Mutual a total of $70.0 million. The Company estimates the fair value of the notes receivable from affiliate using market quotations for U.S. treasury securities with similar maturity dates and applies an appropriate credit spread. Consequently this has been placed in Level 2 of the fair value hierarchy.

($ millions, except interest rates)	March 31, 2015						December 31, 2014
	Carrying value		Fair value		Interest rate		Carrying value		Fair value		Interest rate
Notes receivable from affiliate	$	70.0	$	76.4	7.00	%	$	70.0	$	74.6	7.00	%

Notes Payable

Included in notes payable are the FHLB Loan and Subordinated Debentures. The Company estimates the fair value of the FHLB Loan by discounting cash flows using a borrowing rate currently available to the company for a loan with similar terms. This has been placed in Level 3 of the fair value hierarchy. The carrying amount of the Subordinated Debentures approximates its fair value as the interest rate adjusts quarterly and has been disclosed in Level 3.

($ millions, except interest rates)	March 31, 2015						December 31, 2014
	Carrying value		Fair Value		Interest rate		Carrying value		Fair value		Interest rate
FHLB Loan due 2033: issued $85.0, July 2013 with fixed interest	$	85.3	$	86.5	5.03	%	$	85.3	$	86.4	5.03	%
Affiliate Subordinated Debentures due 2033: issued $15.5, May 2003 with variable interest	15.5		15.5		4.46	%	15.5		15.5		4.44	%
Total notes payable	$	100.8	$	102.0			$	100.8	$	101.9

4. Reinsurance

The insurance subsidiaries of State Auto Financial, including State Auto Property & Casualty Insurance Company (“State Auto P&C”), Milbank Insurance Company and State Auto Insurance Company of Ohio (collectively referred to as the “STFC Pooled Companies”) participate in a quota share reinsurance pooling arrangement (“the Pooling Arrangement”) with State Auto Mutual and its subsidiaries and affiliates, State Auto Insurance Company of Wisconsin, Meridian Security Insurance Company, Patrons Mutual Insurance Company of Connecticut, Rockhill Insurance Company, Plaza Insurance Company, American Compensation Insurance Company and Bloomington Compensation Insurance Company, (collectively referred to as the “Mutual Pooled Companies”).

14

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

The following table sets forth a summary of the Company’s external reinsurance transactions, as well as reinsurance transactions with State Auto Mutual under the Pooling Arrangement, for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Premiums earned:
Assumed from external insurers and reinsurers	$	1.1		$	1.0
Assumed under Pooling Arrangement	315.3			262.5
Ceded to external insurers and reinsurers	(8.9		)	(6.0		)
Ceded under Pooling Arrangement	(209.9		)	(215.4		)
Net assumed premiums earned	$	97.6		$	42.1
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	$	0.8		$	0.7
Assumed under Pooling Arrangement	195.3			172.6
Ceded to external insurers and reinsurers	0.1			(2.4		)
Ceded under Pooling Arrangement	(121.2		)	(142.2		)
Net assumed losses and loss expenses incurred	$	75.0		$	28.7

Subject to the terms and conditions of the expired Homeowners Quota Share Arrangement ("HO QS Arrangement"), the participating reinsurers’ margin was capped at 9.0%, with any excess returned to the State Auto Group in the form of profit commission. For the three months ended March 31, 2015, the Company recognized $1.3 million of profit commission, which was reflected as a reduction in acquisition and operating expenses on our consolidated statements of income.

5. Income Taxes

The following table sets forth the reconciliation between actual federal income tax expense and the amount computed at the indicated statutory rate for the three months ended March 31, 2015 and 2014:

($ millions)	2015					2014
Amount at statutory rate	$	11.6		35	%	$	9.7		35	%
Tax-exempt interest and dividends received deduction	(2.2		)	(7	)	(2.1		)	(8	)
Other, net	(0.9		)	(3	)	0.2			1
Valuation allowance	—			—		(7.2		)	(26	)
Federal income tax expense and effective rate	$	8.5		25	%	$	0.6		2	%

15

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

6. Pension and Postretirement Benefit Plans

The following table sets forth the components of net periodic cost for the Company’s pension and postretirement benefit plans for the three months ended March 31, 2015 and 2014:

($ millions)	Pension						Postretirement
	Three months ended March 31
	2015			2014			2015			2014
Service cost	$	2.0		$	1.3		$	—		$	—
Interest cost	2.8			2.8			0.2			0.3
Expected return on plan assets	(3.4		)	(3.2		)	—			—
Amortization of:
Negative prior service cost	—			—			(1.4		)	(1.4		)
Net actuarial loss	2.7			1.4			0.2			0.2
Net periodic cost (benefit)	$	4.1		$	2.3		$	(1.0	)	$	(0.9	)

The Company's share of contributions were $3.3 million for the three months ended March 31, 2015 and expects its remaining share of contributions to be an additional $9.7 million to the pension plan during 2015.

16

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

7. Other Comprehensive Income and Accumulated Other Comprehensive Income

The following table sets forth the changes in the Company’s accumulated other comprehensive income component (AOCI), net of tax, for the three months ended March 31, 2015 and 2014:

($ millions)		Unrealized Gains and Losses on Available-for-Sale Securities			Benefit Plan Items			Total
Beginning balance at January 1, 2015		$	110.0		$	(38.3	)	$	71.7
Other comprehensive income before reclassifications		12.5			—			12.5
Amounts reclassified from AOCI (a)		(4.2		)	1.0			(3.2		)
Net current period other comprehensive income		8.3			1.0			9.3
Ending balance at March 31, 2015		$	118.3		$	(37.3	)	$	81.0
Beginning balance at January 1, 2014		$	84.6		$	(3.8	)	$	80.8
Other comprehensive income before reclassifications		18.8			—			18.8
Amounts reclassified from AOCI (a)		(10.7		)	0.2			(10.5		)
Net current period other comprehensive income		8.1			0.2			8.3
Ending balance at March 31, 2014		$	92.7		$	(3.6	)	$	89.1
(a)	See separate table below for details about these reclassifications

The following table sets forth the reclassifications out of accumulated other comprehensive income, by component, to the Company’s condensed consolidated statement of income for the three months ended March 31, 2015 and 2014:

($ millions)
Details about Accumulated Other		Three months ended						Affected line item in the Condensed
Comprehensive Income Components		March 31						Consolidated Statements of Income
		2015			2014
Unrealized gains on available for sale securities		$	4.2		$	10.7		Realized gain on sale of securities
		4.2			10.7			Total before tax
		(1.5		)	—			Tax expense
		2.7			10.7			Net of tax
Amortization of benefit plan items
Negative prior service cost		1.4			1.4			(a)
Net actuarial loss		(2.9		)	(1.6		)	(a)
		(1.5		)	(0.2		)	Total before tax
		0.5			—			Tax benefit
		(1.0		)	(0.2		)	Net of tax
Total reclassifications for the period		$	1.7		$	10.5
(a)	These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see pension and postretirement benefit plans footnote for additional details).

17

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

8. Net Earnings per Common Share

The following table sets forth the compilation of basic and diluted earnings per common share for the three months ended March 31, 2015 and 2014:

($ and shares in millions, except per share amounts)	2015		2014
Numerator:
Net income for basic earnings per common share	$	24.7	$	27.1
Denominator:
Weighted average shares for basic net earnings per common share	41.0		40.8
Effect of dilutive share-based awards	0.4		0.3
Adjusted weighted average shares for diluted net earnings per common share	41.4		41.1
Basic net earnings per common share	$	0.60	$	0.67
Diluted net earnings per common share	$	0.60	$	0.66

The following table sets forth common stock options and restricted share units ("RSU award") provided to each outside director of the Company that were not included in the computation of diluted earnings per common share because the exercise price of the options, or awards, was greater than the average market price or their inclusion would have been antidilutive for the three months ended March 31, 2015 and 2014.

(shares in millions)	2015	2014
Total number of antidilutive options and awards	1.7	1.7

18

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

9. Segment Information

The Company has four reportable segments: personal insurance, business insurance, specialty insurance and investment operations. The reportable insurance segments are business units managed separately because of the differences in the type of customers they serve, the products they provide or services they offer. The insurance segments market a broad line of property and casualty insurance products throughout the United States through independent insurance agencies, which include retail agents and wholesale brokers. The personal insurance segment provides primarily personal automobile and homeowners to the personal insurance market. The business insurance segment provides primarily commercial automobile, commercial multi-peril, fire & allied and general liability insurance covering small-to-medium sized commercial exposures. The specialty insurance segment provides commercial coverages, including workers’ compensation for both the legacy State Auto Group and RTW's insurance subsidiaries, that require specialized product underwriting, claims handling or risk management services through a distribution channel of retail agents and wholesale brokers, which may include program administrators and other specialty sources. The investment operations segment, managed by Stateco, provides investment services.

The Company evaluates the performance of its insurance segments using industry financial measurements based on Statutory Accounting Practices (“SAP”), which include loss and loss adjustment expense ratios, underwriting expense ratios, combined ratios, statutory underwriting gain (loss), net premiums earned and net written premiums. One of the most significant differences between SAP and GAAP is that SAP requires all underwriting expenses to be expensed immediately and not deferred and amortized over the same period the premium is earned.

The investment operations segment is evaluated based on investment returns of assets managed by Stateco. Asset information by segment is not reported for the insurance segments because the Company does not produce such information internally.

19

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

The following table sets forth financial information regarding the Company’s reportable segments for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Revenue from external sources:
Insurance segments
Personal insurance	$	150.0		$	114.3
Business insurance	96.1			93.5
Specialty insurance	69.2			54.7
Total insurance segments	315.3			262.5
Investment operations segment
Net investment income	15.4			17.6
Net realized capital gains	4.2			10.7
Total investment operations segment	19.6			28.3
All other	—			0.5
Total revenue from external sources	334.9			291.3
Intersegment revenue	1.4			1.3
Total revenue	336.3			292.6
Reconciling items:
Eliminate intersegment revenues	(1.4		)	(1.3		)
Total consolidated revenues	$	334.9		$	291.3
Segment income before federal income tax:
Insurance segments SAP underwriting income (loss)
Personal insurance	$	17.4		$	5.1
Business insurance	(1.4		)	(8.5		)
Specialty insurance	(0.8		)	(0.5		)
Total insurance segments	15.2			(3.9		)
Investment operations segment
Net investment income	15.4			17.6
Net realized capital gains	4.2			10.7
Total investment operations segment	19.6			28.3
All other	(0.4		)	0.1
Total segment income before tax expense	34.4			24.5
Reconciling items:
GAAP expense adjustments	1.2			5.4
Interest expense on corporate debt	(1.3		)	(1.3		)
Corporate expenses	(1.1		)	(0.9		)
Total reconciling items	(1.2		)	3.2
Total consolidated income before federal income tax expense	$	33.2		$	27.7

Investable assets attributable to the Company’s investment operations segment totaled $2,506.9 million and $2,444.2 million at March 31, 2015 and December 31, 2014, respectively.

20

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Notes to Condensed Consolidated Financial Statements, Continued (Unaudited)

10.  Contingencies and Litigation

In accordance with the Contingencies Topic of the Financial Accounting Standards Board's Accounting Standards Codification, the Company accrues for a litigation-related liability when it is probable that such a liability has been incurred and the amount can be reasonably estimated. The Company reviews all litigation on an ongoing basis when making accrual and disclosure decisions. For certain legal proceedings, the Company cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in their early stages of development or where the plaintiffs seek indeterminate damages. Various factors, including, but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated. If the loss contingency in question is not both probable and reasonably estimable, the Company does not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. Based on currently available information known to the Company, it believes that its reserves for litigation-related liabilities are reasonable. However, in the event that a legal proceeding results in a substantial judgment against, or settlement by, the Company, there can be no assurance that any resulting liability or financial commitment would not have a material adverse effect on the financial condition, results of operations or cash flows of the consolidated financial statements of the Company.

In April 2013, a putative class action lawsuit (Schumacher vs. State Automobile Mutual Insurance Company, et al.) was filed against State Auto Mutual, State Auto Financial and State Auto P&C ("State Auto Defendants") in Federal District Court in Ohio. Plaintiffs claimed that, in connection with the homeowners policies of various State Auto companies, the coverage limits and premiums were improperly increased as a result of an insurance to value (“ITV”) program and alleged that they purchased coverage in excess of that which was necessary to insure them in the event of loss. Plaintiffs’ claims included breach of good faith and fair dealing, negligent misrepresentation and fraud, violation of the Ohio Deceptive Trade Practices Act, and fraudulent inducement. Plaintiffs sought compensatory and punitive damages to be determined by the court, as well as class certification. On February 2, 2015, the Court struck the class allegations, and on March 13, 2015, Plaintiffs settled with the State Auto Defendants for a nominal amount and dismissed their remaining individual claims with prejudice, thereby terminating the litigation.

The Company is involved in lawsuits in the ordinary course of its business arising out of or otherwise related to its insurance policies. Additionally, from time to time the Company may be involved in lawsuits, including class actions, in the ordinary course of business but not arising out of or otherwise related to its insurance policies. These lawsuits are in various stages of development. The Company generally will contest these matters vigorously but may pursue settlement if appropriate. Based on currently available information, the Company does not believe it is reasonably possible that any such lawsuit or related lawsuits will be material to its results of operations or have a material adverse effect on its consolidated financial position or cash flows.

Additionally, the Company may be impacted by adverse regulatory actions and adverse court decisions where insurance coverages are expanded beyond the scope originally contemplated in its insurance policies. The Company believes that the effects, if any, of such regulatory actions and published court decisions are not likely to have a material adverse effect on its financial or cash flow position.

21

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The term “State Auto Financial” as used below refers only to State Auto Financial Corporation and the terms “our Company,” “we,” “us,” and “our” as used below refer to State Auto Financial Corporation and its consolidated subsidiaries. The term “first quarter” as used below refers to the three months ended March 31, for the time period then ended. For a glossary of terms for State Auto Financial Corporation and its subsidiaries and affiliates and a glossary of selected insurance and accounting terms, see the section entitled “Important Defined Terms Used in this Form 10-K” included in our Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”).

The discussion and analysis presented below relates to the material changes in financial condition and results of operations for our consolidated balance sheets as of March 31, 2015 and December 31, 2014, and for the consolidated statements of income for the three month periods ended March 31, 2015 and 2014. This discussion and analysis should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2014 Form 10-K, and in particular the discussions in those sections thereof entitled “Overview,” “Executive Summary” and “Critical Accounting Policies.” Readers are encouraged to review the entire 2014 Form 10-K, as it includes information regarding our Company not discussed in this Form 10-Q. This information will assist in your understanding of the discussion of our current period financial results.

The discussion and analysis presented below includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Forward-looking statements speak only as of the date the statements were made available. Although we believe that the expectations reflected in forward-looking statements have a reasonable basis, we can give no assurance that these expectations will prove to be correct. Forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by the statements. For a discussion of the most significant risks and uncertainties that could cause our actual results to differ materially from those projected, see “Risk Factors” in Item 1A of the 2014 Form 10-K, updated by Part II, Item 1A of this Form 10-Q. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company has four reportable segments: personal insurance, business insurance, specialty insurance and investment operations. The reportable insurance segments are business units managed separately because of the differences in the type of customers they serve or products they provide or services they offer. The insurance segments market a broad line of property and casualty insurance products throughout the United States through independent insurance agencies, which include retail agents and wholesale brokers. The personal insurance segment provides primarily personal automobile and homeowners to the personal insurance market. The business insurance segment provides primarily commercial automobile, commercial multi-peril, fire & allied and general liability insurance covering small-to-medium sized commercial exposures in the business insurance market. The specialty insurance segment provides commercial coverages that require specialized product underwriting, claims handling or risk management services through a distribution channel of retail agents and wholesale brokers, which may include program administrators and other specialty sources. The investment operations segment, managed by Stateco, provides investment services. See “Personal and Business Insurance” and “Specialty Insurance” in Item 1 of the 2014 Form 10-K for more information about our insurance segments. Financial information about our reportable segments for 2015 is set forth in Note 9 of our condensed consolidated financial statements included in Item 1 of this Form 10-Q.

POOLING ARRANGEMENT

The STFC Pooled Companies and the Mutual Pooled Companies participate in a quota share reinsurance pooling arrangement referred to as the “Pooling Arrangement.” Under the Pooling Arrangement, State Auto Mutual assumes premiums, losses and expenses from each of the Pooled Companies and in turn cedes to each of the Pooled Companies a specified portion of premiums, losses and expenses based on each of the Pooled Companies’ respective pooling percentages. State Auto Mutual then retains the balance of the pooled business.

22

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

The following table sets forth the participants and their participation percentages in the Pooling Arrangement:

STFC Pooled Companies:
State Auto P&C	51.0	%
Milbank	14.0
SA Ohio	—
Total STFC Pooled Companies	65.0	%
State Auto Mutual Pooled Companies:
State Auto Mutual	34.5	%
SA Wisconsin	—
Meridian Security	—
Patrons Mutual	0.5
RIC	—
Plaza	—
American Compensation	—
Bloomington Compensation	—
Total State Auto Mutual Pooled Companies	35.0	%

23

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

RESULTS OF OPERATIONS

Our pre-tax income for the three months ended March 31, 2015 was $33.2 million compared to $27.7 million for the same 2014 period. The increase in pre-tax income was primarily due to improved underwriting results, which offset declines in net investment income and realized gains.

The following table sets forth certain key performance indicators we use to monitor our operations for the three months ended March 31, 2015 and 2014:

($ in millions, except per share amounts)	Three months ended March 31
GAAP Basis:	2015			2014
Total revenues	$	334.9		$	291.3
Net income	$	24.7		$	27.1
Basic earnings per share	$	0.60		$	0.67
Diluted earnings per share	$	0.60		$	0.66
Stockholders’ equity	$	904.2		$	817.5
Return on average equity (LTM)	12.2		%	8.6		%
Book value per share	$	22.05		$	20.05
Debt to capital ratio	10.0		%	11.0		%
Cat loss and ALAE ratio	1.4		%	2.4		%
Non-cat loss and LAE ratio	60.4		%	63.1		%
Loss and LAE ratio	61.8		%	65.5		%
Expense ratio	32.8		%	33.7		%
Combined ratio	94.6		%	99.2		%
Premium written growth	15.7		%	0.6		%
Investment yield	2.8		%	3.3		%
SAP Basis :
Cat loss and ALAE	1.4		%	2.4		%
Non-cat loss and ALAE	54.2		%	57.3		%
ULAE	6.4		%	6.0		%
Loss and LAE ratio	62.0		%	65.7		%
Expense ratio	34.1		%	35.3		%
Combined ratio	96.1		%	101.0		%

	Twelve months ended March 31
	2015	2014
Net premiums written to surplus	1.5	1.4

24

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Homeowners Quota Share Arrangement

To reduce risk and volatility in our homeowners line of business, while at the same time providing us with additional catastrophe reinsurance protection, the State Auto Group entered into a quota share reinsurance agreement on December 31, 2011 with a syndicate of unaffiliated reinsurers covering its homeowners line of business (the “HO QS Arrangement”). Under the HO QS Arrangement, the State Auto Group ceded to the reinsurers 75% of its homeowners business under policies in force at December 31, 2011 and new and renewal policies thereafter issued during the term of the agreement. The HO QS Arrangement expired on December 31, 2014. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Reinsurance Arrangements” in Item 7 of the 2014 Form 10-K for a discussion of the expired HO QS Arrangement.

The following tables set forth, on a GAAP and pro forma basis, certain of our key performance indicators before and after the impact of our HO QS Arrangement cession for the three months ended March 31, 2014:

Reconciliation Table 1

($ millions)	GAAP HO QS Arrangement Cession - Overall  Results
							Pro-Forma
							without HO QS
Three months ended March 31, 2014	As Reported			HO QS Cession			Cession
Net written premiums	$	265.4		$	37.9		$	303.3
Earned premiums	262.5			44.2			306.7
Losses and LAE incurred:
Cat loss and ALAE	6.3			2.4			8.7
Non-cat loss and LAE	165.5			20.5			186.0
Total Loss and LAE incurred	171.8			22.9			194.7
Acquisition and operating expenses	88.5			12.8			101.3
Net underwriting gain	$	2.2		$	8.5		$	10.7
Cat loss and ALAE ratio	2.4		%	5.4		%	2.8		%
Non-cat loss and LAE ratio	63.1		%	46.3		%	60.7		%
Total Loss and LAE ratio	65.5		%	51.7		%	63.5		%
Expense ratio	33.7		%	29.0		%	33.0		%
Combined ratio	99.2		%	80.7		%	96.5		%

25

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

The following tables set forth, on a SAP and pro forma basis, certain of our key performance indicators before and after the impact of the HO QS Arrangement cession for the three months ended March 31, 2014:

Reconciliation Table 2

($ millions)	SAP HO QS Arrangement Cession - Overall  Results
							Pro-Forma
							without HO QS
Three months ended March 31, 2014	As Reported			HO QS Cession			Cession
Net written premiums	$	265.4		$	37.9		$	303.3
Earned premiums	262.5			44.2			306.7
Losses and LAE incurred:
Cat loss and ALAE	6.3			2.4			8.7
Non-cat loss and ALAE	150.4			20.5			170.9
Total Loss and ALAE	156.7			22.9			179.6
ULAE	15.9			—			15.9
Total Loss and ALAE incurred	172.6			22.9			195.5
Underwriting expenses	93.8			11.0			104.8
Net underwriting (loss) gain	$	(3.9	)	$	10.3		$	6.4
Cat loss and ALAE ratio	2.4		%	5.4		%	2.8		%
Non-cat loss and ALAE ratio	57.3		%	46.3		%	55.7		%
Total loss and ALAE ratio	59.7		%	51.7		%	58.5		%
ULAE ratio	6.0		%	—			5.2		%
Total loss and LAE ratio	65.7		%	51.7		%	63.7		%
Expense ratio	35.3		%	29.0		%	34.6		%
Combined ratio	101.0		%	80.7		%	98.3		%

See additional pro forma reconciliation tables for the impact of the HO QS Arrangement cession on our homeowners line of business at Reconciliation Table 3. 

Use of Non-GAAP Financial Measures

In discussing the results of our insurance segments, we sometimes refer to GAAP financial measures in the context of “as reported” and to non-GAAP financial measures in the context of “pro forma.” These pro forma, or non-GAAP financial measures, exclude the impact of the HO QS Arrangement cession for the three months ended March 31, 2014. We believe the use of these non-GAAP financial measures will enable investors to (a) better understand the impact of the reinsurance arrangement cession on our reported results for the three months ended March 31, 2014, and (b) perform a meaningful comparison of our results of operations for the three months ended March 31, 2015 and 2014. We have also included Reconciliation Tables 1 – 3 and Tables 1 – 6 for readers to better understand the use and calculation of these non-GAAP financial measures.

Insurance Segments

The insurance segments market a broad line of property and casualty insurance products throughout the United States through independent insurance agencies, which include retail agents and wholesale brokers. The personal insurance segment provides primarily personal automobile and homeowners coverages to the personal insurance market. The business insurance segment provides primarily commercial automobile, commercial multi-peril, fire & allied and general liability insurance covering small-to-medium sized commercial exposures in the business insurance market. The specialty insurance segment provides commercial coverages requiring specialized product underwriting, claims handling or risk management services through a distribution channel of retail agents and wholesale brokers, which may include program administrators and other specialty sources.

We measure our top-line growth for our insurance segments based on net written premiums, which provide us with an indication of how well we are doing in terms of revenue growth before it is actually earned. Our policies provide a fixed amount of coverage for a stated period of time, often referred to as the “policy term.” As such, our written premiums are recognized as

26

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

earned ratably over the policy term. The unearned portion of written premiums, called unearned premiums, is reflected on our balance sheet as a liability and represents our obligation to provide coverage for the unexpired term of the policies.

Insurance industry regulators require our insurance subsidiaries to report their financial condition and results of operations using SAP. We use SAP financial results, along with industry standard financial measures determined on a SAP basis and certain measures determined on a GAAP basis, to internally monitor the performance of our insurance segments and reward our employees.

One of the more significant differences between GAAP and SAP is that SAP requires all underwriting expenses to be expensed immediately and not deferred over the same period that the premium is earned. In converting SAP underwriting results to GAAP underwriting results, acquisition costs are deferred and amortized over the periods the related written premiums are earned. For a discussion of deferred acquisition costs, see “Critical Accounting Policies – Deferred Acquisition Costs” section included in Item 7 of our 2014 Form 10-K.

All references to financial measures or components thereof in this discussion are calculated on a GAAP basis, unless otherwise noted.

The following table sets forth our insurance segments’ SAP underwriting gain (loss) and SAP combined ratio for the three months ended March 31, 2015 and 2014:

($ millions)	Three months ended
	March 31, 2015
	Personal		% Ratio	Business			% Ratio	Specialty			% Ratio	Total			% Ratio
Net written premiums	$	137.1		$	92.6			$	77.3			$	307.0
Earned premiums	150.0			96.1				69.2				315.3
Cat loss and ALAE	3.1		2.1	1.4			1.5	—			—	4.5			1.4
Non-cat loss and ALAE	77.4		51.6	53.5			55.7	40.0			57.8	170.9			54.2
ULAE	12.7		8.5	4.9			5.1	2.3			3.3	19.9			6.4
Underwriting expenses	39.4		28.7	37.7			40.8	27.7			35.9	104.8			34.1
SAP underwriting gain (loss) and SAP combined ratio	$	17.4	90.9	$	(1.4	)	103.1	$	(0.8	)	97.0	$	15.2		96.1
($ millions)	Three months ended
	March 31, 2014
	Personal		% Ratio	Business			% Ratio	Specialty			% Ratio	Total			% Ratio
Net written premiums	$	109.6		$	94.6			$	61.2			$	265.4
Earned premiums	114.3			93.5				54.7				262.5
Cat loss and ALAE	0.4		0.4	5.2			5.5	0.7			1.3	6.3			2.4
Non-cat loss and ALAE	65.1		57.0	56.0			59.9	29.3			53.5	150.4			57.3
ULAE	10.1		8.9	3.8			4.1	2.0			3.6	15.9			6.0
Underwriting expenses	33.6		30.7	37.0			39.1	23.2			37.9	93.8			35.3
SAP underwriting gain (loss) and SAP combined ratio	$	5.1	97.0	$	(8.5	)	108.6	$	(0.5	)	96.3	$	(3.9	)	101.0

27

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Personal Insurance Segment

The following table sets forth the net written premiums by major product line of business for our personal insurance segment for the three months ended March 31, 2015 and 2014:

Table 1

($ millions)	Net Written Premiums
Personal insurance segment:	2015		2014		% Change
Personal auto	$	82.4	$	89.5	(7.9	)
Homeowners	46.5		12.5		272.0
Other personal	8.2		7.6		7.9
Total personal	$	137.1	$	109.6	25.1

The following tables set forth the SAP loss and ALAE ratios by major product line of business for our personal insurance segment with the catastrophe and non-catastrophe impact shown separately for the three months ended March 31, 2015 and 2014:

Table 2

Statutory Loss and LAE Ratios	($ millions)									%
Three months ended March 31	Earned Premium		Cat Loss & ALAE			Non-Cat Loss & ALAE		Statutory Loss & LAE		Cat loss Ratio		Non-Cat Loss & ALAE Ratio	Total Loss and LAE Ratio
2015
Personal insurance segment:
Personal auto	$	86.1	$	—		$	55.1	$	55.1	—		64.0	64.0
Homeowners	55.9		3.0			20.9		23.9		5.3		37.5	42.8
Other personal	8.0		0.1			1.4		1.5		1.8		16.8	18.6
Total personal	150.0		3.1			77.4		80.5		2.1		51.6	53.7
ULAE	—		—			—		12.7		—		—	8.5
Total Loss and LAE	$	150.0	$	3.1		$	77.4	$	93.2	2.1		51.6	62.2
2014
Personal insurance segment:
Personal auto	$	92.4	$	(0.1	)	$	55.7	$	55.6	(0.1	)	60.3	60.2
Homeowners	14.6		0.6			7.2		7.8		4.5		49.3	53.8
Other personal	7.3		(0.1		)	2.2		2.1		(1.2	)	29.6	28.4
Total personal	114.3		0.4			65.1		65.5		0.4		57.0	57.4
ULAE	—		—			—		10.1		—		—	8.9
Total Loss and LAE	$	114.3	$	0.4		$	65.1	$	75.6	0.4		57.0	66.3

28

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

The personal insurance segment's net written premiums increased 25.1% compared to the same 2014 period (Table 1). Net written premiums for the three months ended March 31, 2014 reflect the cession of premiums under the expired HO QS Arrangement. Excluding the impact of the expired HO QS Arrangement, net written premiums decreased 7.1%⁽¹⁾, primarily due to declines in both personal auto and homeowners net written premium. The declines in the personal auto and homeowners lines of business were primarily attributable to, among other things, pricing and agency management actions taken to improve underwriting profitability, which negatively impacted new business premium.

⁽¹⁾   For the three months ended March 31, 2015 and 2014, respectively, the following table sets forth the reconciliation of as reported net written premiums to 2014 pro forma net written premiums that exclude the impact of the net written premium cession under the expired HO QS Arrangement:

($ millions)	2015		2014		% Change
Net written premiums:
Personal insurance segment	$	137.1	$	109.6	25.1
HO QS cession	—		37.9		(100.0	)
Pro forma net written premiums	$	137.1	$	147.5	(7.1	)

The personal insurance segment’s SAP catastrophe loss ratio for the three months ended March 31, 2015 was 2.1% compared to 0.4% for the same 2014 period (Table 2). The increase was primarily due to the absence of the HO QS Arrangement for the quarter ended March 31, 2015.

The personal segment’s SAP non-catastrophe loss and ALAE ratios for the three months ended March 31, 2015 was 51.6% compared to 57.0% for the same 2014 period (Table 2). The improvement was primarily driven by a decrease in the homeowners SAP non-catastrophe loss and ALAE ratio attributable to improvement in both weather and non-weather related losses, along with the impact of the HO QS Arrangement for the quarter ended March 31, 2014. Excluding the impact of the HO QS Arrangement, the homeowners non-catastrophe loss and ALAE ratio improved 9.6 points also as a result of lower weather and non-weather losses (Table 2 and Reconciliation Table 3). The improvement in the homeowners SAP non-catastrophe loss and ALAE ratio was partially offset by a 3.7 point increase in the personal auto SAP non-catastrophe loss and ALAE ratio, which was attributable to less favorable development of prior accident year losses and ALAE for the quarter ended March 31, 2015 compared to the same 2014 period.

The following tables set forth, on a SAP and pro forma basis, certain of our key performance indicators for the homeowners’ line of business before and after the impact of the HO QS Arrangement cession for the three months ended March 31, 2014:

Reconciliation Table 3

($ millions)	SAP HO QS Arrangement Cession -  Homeowners
Three months ended March 31, 2014	As Reported			HO QS Cession			Pro-Forma without HO QS Cession
Net written premiums	$	12.5		$	37.9		$	50.4
Earned premiums	14.6			44.2			58.8
Losses and ALAE incurred:
Cat loss and ALAE	0.6			2.4			3.0
Non-cat loss and ALAE	7.2			20.5			27.7
Total Loss and ALAE incurred	$	7.8		$	22.9		$	30.7
Cat loss and ALAE ratio	4.5		%	5.4		%	5.2		%
Non-cat loss and ALAE ratio	49.3		%	46.3		%	47.1		%
Total Loss and ALAE ratio	53.8		%	51.7		%	52.3		%

29

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Business Insurance Segment

The following table sets forth the net written premiums by major product line of business for our business insurance segment for the three months ended March 31, 2015 and 2014:

Table 3

($ millions)	Net Written Premiums
Business insurance segment:	2015		2014		% Change
Commercial auto	$	23.4	$	24.4	(4.1	)
Commercial multi-peril	30.0		30.2		(0.7	)
Fire & allied lines	17.4		18.4		(5.4	)
Other & product liability	17.8		17.2		3.5
Other commercial	4.0		4.4		(9.1	)
Total business	$	92.6	$	94.6	(2.1	)

The following table sets forth the SAP loss and ALAE ratios by major product line of business for our business insurance segment with the catastrophe and non-catastrophe impact shown separately for the three months ended March 31, 2015 and 2014:

Table 4

Statutory Loss and LAE Ratios	($ millions)								%
Three months ended March 31	Earned Premium		Cat Loss & ALAE		Non-Cat Loss & ALAE		Statutory Loss & LAE		Cat loss Ratio		Non-Cat Loss & ALAE Ratio	Total Loss and LAE Ratio
2015
Business insurance segment:
Commercial auto	$	25.3	$	—	$	16.6	$	16.6	—		65.6	65.6
Commercial multi-peril	29.9		0.7		15.7		16.4		2.5		52.2	54.7
Fire & allied lines	18.8		0.7		10.4		11.1		3.6		55.5	59.1
Other & product liability	17.8		—		9.7		9.7		—		54.7	54.7
Other commercial	4.3		—		1.1		1.1		(0.1	)	26.6	26.5
Total business	96.1		1.4		53.5		54.9		1.5		55.7	57.2
ULAE	—		—		—		4.9		—		—	5.1
Total Loss and LAE	$	96.1	$	1.4	$	53.5	$	59.8	1.5		55.7	62.3
2014
Business insurance segment:
Commercial auto	$	24.0	$	0.1	$	13.1	$	13.2	0.2		54.6	54.8
Commercial multi-peril	28.7		2.0		19.4		21.4		7.0		67.6	74.6
Fire & allied lines	19.4		3.1		11.9		15.0		16.0		61.4	77.4
Other & product liability	17.0		—		10.0		10.0		—		58.7	58.7
Other commercial	4.4		—		1.6		1.6		(1.0	)	36.3	35.3
Total business	93.5		5.2		56.0		61.2		5.5		59.9	65.4
ULAE	—		—		—		3.8		—		—	4.1
Total Loss and LAE	$	93.5	$	5.2	$	56.0	$	65.0	5.5		59.9	69.5

30

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Net written premiums for the business insurance segment for the three months ended March 31, 2015 decreased 2.1% compared to the same 2014 period (Table 3). The decrease in premiums was primarily due to (i) a decline in new business premium driven by lower submission activity, (ii) increased competition for new business submitted for quote, and (iii) premiums ceded under the State Auto Group's property aggregate excess catastrophe reinsurance agreement.

We continue to implement strategies to capitalize on opportunities to grow our business insurance segment. Business Insurance Evolution ("BIE"), our ongoing initiative to automate our small commercial accounts, has enabled us to implement automated underwriting rules and pricing for smaller accounts, which has increased the number of renewal accounts below $5,000 in premium processed without human intervention. Automating renewals of smaller accounts allows our underwriters to focus on writing larger commercial accounts. As we move forward, we are also implementing strategies to (i) automate the processing of new business, including our Business Owners' Policy, (ii) provide more consistent pricing and underwriting service to our agents and insureds, and (iii) improve our overall efficiency.

To more fully develop larger accounts, we have introduced practice groups. Through this initiative, we provide expertise for all lines of insurance solutions for niche or target markets, with a focus on writing premiums in excess of $25,000. Examples include our food industry practice group, which focuses on food manufacturing and processing risks, and the recently introduced light metal manufacturing practice group. We continue to look for industries and areas of focus where we have underwriting expertise and plan to expand our practice group initiatives.

The business insurance segment’s SAP catastrophe loss ratio for the three months ended March 31, 2015 was 1.5% compared to 5.5% for the same 2014 period (Table 4). The improvement was primarily related to commercial multi-peril and fire & allied SAP catastrophe loss ratios which declined 4.5 and 12.4 points, respectively. Catastrophe losses for the quarter ended March 31, 2014 were the result of more severe winter weather related events compared to the quarter ended March 31, 2015.

The business insurance segment’s SAP non-catastrophe loss and ALAE ratio for the three months ended March 31, 2015 was 55.7% compared to 59.9% for the same 2014 period (Table 4). The decrease was primarily driven by improvements in the commercial multi-peril and fire & allied SAP non-catastrophe loss and ALAE ratios both of which were impacted by fewer fire and weather-related losses as compared to the first quarter of 2014. The improvement in these lines was partially offset by a 10.8 point increase in the commercial auto SAP non-catastrophe loss and ALAE ratio, which was attributable to less favorable development of prior accident year losses and ALAE for the quarter ended March 31, 2015 compared to the same 2014 period.

Specialty Insurance Segment

The following table sets forth the net written premiums by unit for our specialty insurance segment for the three months ended March 31, 2015 and 2014.

Table 5

($ millions)	Net Written Premiums
Specialty insurance segment:	2015		2014		% Change
E&S property	$	8.3	$	7.6	9.2
E&S casualty	17.4		11.9		46.2
Programs	28.7		20.5		40.0
Workers’ compensation	22.9		21.2		8.0
Total specialty	$	77.3	$	61.2	26.3

31

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

The following table sets forth SAP loss and ALAE ratios for our specialty insurance segment with the catastrophe and non-catastrophe impact shown separately for the three months ended March 31, 2015 and 2014:

Table 6

Statutory Loss and LAE Ratios	($ millions)								%
Three months ended March 31	Earned Premium		Cat Loss & ALAE		Non-Cat Loss & ALAE		Statutory Loss & LAE		Cat loss Ratio		Non-Cat Loss & ALAE Ratio	Total Loss and LAE Ratio
2015
Specialty insurance segment:
E&S property	$	10.2	$	—	$	1.7	$	1.7	0.1		16.1	16.2
E&S casualty	15.6		—		9.0		9.0		—		57.8	57.8
Programs	22.2		—		15.9		15.9		(0.1	)	71.7	71.6
Workers’ compensation	21.2		—		13.4		13.4		—		63.3	63.3
Total specialty	69.2		—		40.0		40.0		—		57.8	57.8
ULAE	—		—		—		2.3		—		—	3.3
Total Loss and LAE	$	69.2	$	—	$	40.0	$	42.3	—		57.8	61.1
2014
Specialty insurance segment:
E&S property	$	8.1	$	0.7	$	0.4	$	1.1	8.7		4.7	13.4
E&S casualty	10.5		—		5.0		5.0		—		48.0	48.0
Programs	17.9		—		12.0		12.0		—		66.8	66.8
Workers’ compensation	18.2		—		11.9		11.9		—		65.3	65.3
Total specialty	54.7		0.7		29.3		30.0		1.3		53.5	54.8
ULAE	—		—		—		2.0		—		—	3.6
Total Loss and LAE	$	54.7	$	0.7	$	29.3	$	32.0	1.3		53.5	58.4

Net written premiums for the specialty insurance segment for the three months ended March 31, 2015 increased 26.3% compared to the same 2014 period (Table 5). The increase in premiums was primarily due to (i) growth in our E&S casualty unit due to the addition of underwriters in more geographic locations and new distribution relationships, including Partners General Insurance Agency, which was acquired by our parent, State Auto Mutual, in the second quarter of 2014, and (ii) growth in our Programs unit resulting from programs that began writing premiums during the second half of 2014.

The specialty insurance segment’s SAP non-catastrophe loss and ALAE ratio for the three months ended March 31, 2015 was 57.8% compared to 53.5% for the same 2014 period (Table 6). The increase was due to (i) greater favorable development of prior accident year E&S property losses in the first quarter of 2014 compared to the first quarter of 2015; (ii) an increase in the E&S casualty SAP non-catastrophe loss and ALAE ratio due to a shift in the business mix attributable to the acquisition of Partners General Insurance Agency in the third quarter of 2014; and (iii) adverse development of prior accident year losses within the Programs unit, primarily attributable to two programs now in run-off.

32

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Losses and loss expenses payable

The following table sets forth losses and loss expenses payable by major line of business at March 31, 2015 and December 31, 2014:

($ millions)	March 31, 2015		December 31, 2014		$ Change
Personal insurance segment:
Personal auto	$	172.9	$	176.0	$	(3.1	)
Homeowners	30.4		18.2		12.2
Other personal	7.5		7.7		(0.2		)
Total personal	210.8		201.9		8.9
Business insurance segment:
Commercial auto	80.7		79.0		1.7
Commercial multi-peril	97.7		94.2		3.5
Fire & allied lines	22.8		19.9		2.9
Other & product liability	155.7		154.2		1.5
Other business	2.6		2.5		0.1
Total business	359.5		349.8		9.7
Specialty insurance segment:
E&S property	9.5		8.3		1.2
E&S casualty	75.4		69.9		5.5
Programs	177.6		190.1		(12.5		)
Workers’ compensation	157.0		153.6		3.4
Total specialty	419.5		421.9		(2.4		)
Total losses and loss expenses payable, net of reinsurance recoverable on losses and loss expenses payable	$	989.8	$	973.6	$	16.2

Losses and loss expenses payable increased $16.2 million since December 31, 2014. The increase in the homeowners losses and loss expenses payable balance was attributable to fewer ceded losses and loss expenses due to the absence of the HO QS Arrangement in 2015 compared to December 31, 2014. The decline in the Programs losses and loss expenses payable balance was primarily due to payments on outstanding Risk Evaluation & Design, LLC ("RED") claims during the quarter ended March 31, 2015.

We conduct quarterly reviews of loss development reports and make judgments in determining the reserves for ultimate losses and loss expenses payable. Several factors are considered by us when estimating ultimate liabilities including consistency in relative case reserve adequacy, consistency in claims settlement practices, recent legal developments, historical data, actuarial projections, accounting projections, exposure changes, anticipated inflation, current business conditions, catastrophe developments, late reported claims, and other reasonableness tests.

The risks and uncertainties inherent in our estimates include, but are not limited to, actual settlement experience different from historical data, trends, changes in business and economic conditions, court decisions creating unanticipated liabilities, ongoing interpretation of policy provisions by the courts, inconsistent decisions in lawsuits regarding coverage and additional information discovered before settlement of claims. Our results of operations and financial condition could be impacted, perhaps significantly, in the future if the ultimate payments required for claims settlement vary from the liability currently recorded. For a discussion of our reserving methodologies as well as a measure of sensitivity discussion see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Losses and Loss Expenses Payable” in Item 7 of the 2014 Form 10-K.

33

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Acquisition and Operating Expenses

Our GAAP acquisition and operating expense ratios were 32.8% and 33.7% for the three months ended March 31, 2015 and 2014, respectively.

Acquisition and operating expenses for the three months ended March 31, 2015 increased $14.9 million compared to the same 2014 period. This increase was primarily attributable to the absence of the HO QS Arrangement in the quarter ended March 31, 2015 compared to the same period of 2014. Excluding the impact of the HO QS Arrangement, acquisition and operating expenses increased $2.1 million (Reconciliation Table 1).

Investment Operations Segment

Our investments in fixed maturities, equity securities and certain other invested assets are reported as available-for-sale and carried at fair value. The unrealized holding gains or losses, net of applicable deferred taxes, are included as a separate component of stockholders’ equity as accumulated other comprehensive income and as such are not included in the determination of net income.

We have investment policy guidelines with respect to purchasing fixed maturity investments for our insurance subsidiaries which preclude investments in bonds that are rated below investment grade, at the time of purchase, by a recognized rating service. Our fixed maturity portfolio is composed of high quality, investment grade issues, comprised almost entirely of debt issues rated AAA, AA or A. We obtain investment ratings from Moody’s, Standard & Poor’s and Fitch. If there is a split rating, we assign the lowest rating obtained. At March 31, 2015, there were no fixed maturity investments rated below investment grade in our available-for-sale investment portfolio.

For further discussion regarding the management of our investment portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Investment Operations Segment” in Item 7 of the 2014 Form 10-K.

Composition of Investment Portfolio

The following table sets forth the composition of our investment portfolio at carrying value at March 31, 2015 and December 31, 2014:

($ millions)		March 31, 2015		% of Total	December 31, 2014		% of Total
Cash and cash equivalents		$	68.4	2.7	$	86.3	3.5
Fixed maturities, at fair value:
Fixed maturities		1,772.6		70.7	1,680.0		68.7
Treasury inflation-protected securities		191.4		7.7	211.9		8.7
Total fixed maturities		1,964.0		78.4	1,891.9		77.4
Notes receivable from affiliate (a)		70.0		2.8	70.0		2.9
Equity securities, at fair value:
Large-cap securities		234.6		9.4	242.2		9.9
Small-cap securities		76.0		3.0	68.2		2.8
Total equity securities		310.6		12.4	310.4		12.7
Other invested assets, at fair value:
International funds		80.5		3.2	72.9		3.0
Other invested assets		8.1		0.3	7.4		0.3
Total other invested assets, at fair value		88.6		3.5	80.3		3.3
Other invested assets, at cost		5.3		0.2	5.3		0.2
Total portfolio		$	2,506.9	100.0	$	2,444.2	100.0
(a)	In May 2009, we entered into two separate Credit Agreements with State Auto Mutual. Under these Credit Agreements, State Auto Mutual borrowed a total of $70.0 million from us on an unsecured basis. Interest is payable semi-annually at a fixed annual interest rate of 7.00%. Principal is payable May 2019.

34

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

The following table sets forth the amortized cost and fair value of available-for-sale fixed maturities by contractual maturity at March 31, 2015:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	38.6	$	39.4
Due after 1 year through 5 years	329.3		343.4
Due after 5 years through 10 years	278.9		293.1
Due after 10 years	777.3		799.4
U.S. government agencies mortgage-backed securities	469.9		488.7
Total	$	1,894.0	$	1,964.0

Expected maturities may differ from contractual maturities as the issuers may have the right to call or prepay the obligations with or without call or prepayment penalties. The duration of the fixed maturity portfolio was approximately 5.06 and 4.32 as of March 31, 2015 and December 31, 2014, respectively.

Investment Operations Revenue

The following table sets forth the components of net investment income for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Gross investment income:
Fixed maturities	$	12.9		$	15.4
Equity securities	1.6			1.4
Other	1.4			1.3
Total gross investment income	15.9			18.1
Less: Investment expenses	0.5			0.5
Net investment income	$	15.4		$	17.6
Average invested assets (at cost)	$	2,226.0		$	2,130.3
Annualized investment yield	2.8		%	3.3		%
Annualized investment yield, after tax	2.2		%	2.6		%
Net investment income, after tax	$	12.2		$	13.6
Effective tax rate	20.5		%	22.8		%

35

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

The following table sets forth realized gains and the proceeds received on sale for our investment portfolio for the three months ended March 31, 2015 and 2014:

($ in millions)	2015					2014
	Realized gains (losses)			Proceeds received on sale		Realized gains (losses)			Proceeds received on sale
Realized gains:
Fixed maturities	$	1.1		$	62.5	$	2.1		$	71.3
Equity securities	4.1			19.0		9.4			33.0
Other invested assets	—			0.1		0.1			0.1
Total realized gains	5.2			81.6		11.6			104.4
Realized losses:
Equity securities:
Sales	(0.5		)	2.5		(0.1		)	1.6
OTTI	(0.5		)	—		(0.8		)	—
Total realized losses	(1.0		)	2.5		(0.9		)	1.6
Net realized gain on investments	$	4.2		$	84.1	$	10.7		$	106.0

During the first three months of 2015, equity sales were executed for various reasons, including: (i) the achievement of our price target; (ii) in response to changes in business conditions, which in our opinion diminished the future business prospects on these securities; and (iii) in order to manage our equity holdings consistent with our investment objectives.

When a fixed maturity security has been determined to have an other-than-temporary decline in fair value, the impairment charge is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to non-credit factors, which is recognized in accumulated other comprehensive income. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Investments” included in Item 7 of the 2014 Form 10-K for other-than-temporary impairment (“OTTI”) indicators. Future increases or decreases in fair value, if not other-than-temporary, are included in accumulated other comprehensive income. We did not recognize OTTI on our fixed maturity portfolio for the three months ended March 31, 2015 and 2014.

When an equity security or other invested asset has been determined to have a decline in fair value that is other-than-temporary, we adjust the cost basis of the security to fair value. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Investments” included in Item 7 of the 2014 Form 10-K for OTTI impairment indicators. This results in a charge to earnings as a realized loss, which is not reversed for subsequent recoveries in fair value. Future increases or decreases in fair value, if not other-than-temporary, are included in accumulated other comprehensive income.

The following table sets forth the realized losses related to OTTI on our investment portfolio recognized for the three months ended March 31, 2015:

($ millions, except # of positions)	Number of positions	Total impairment
Equity securities:
Small-cap securities	7	(0.5	)

36

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Gross Unrealized Investment Gains and Losses

Based upon our review of our investment portfolio at March 31, 2015, we determined that there were no individual investments with an unrealized holding loss that had a fair value significantly below cost continually for more than one year. The following table sets forth detailed information on our available-for-sale investment portfolio by lot at fair value for our gross unrealized holding gains (losses) at March 31, 2015:

($ millions, except # of positions)	Cost or amortized cost		Gross unrealized holding gains		Number of gain positions	Gross unrealized holding losses			Number of loss positions	Fair value
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	287.0	$	19.0	33	$	(1.0	)	14	$	305.0
Obligations of states and political subdivisions	834.2		26.6		245	(1.5		)	26	859.3
Corporate securities	302.9		10.6		58	(2.5		)	15	311.0
U.S. government agencies mortgage-backed securities	469.9		20.5		91	(1.7		)	18	488.7
Total fixed maturities	1,894.0		76.7		427	(6.7		)	73	1,964.0
Equity securities:
Large-cap securities	181.6		54.3		26	(1.3		)	4	234.6
Small-cap securities	55.1		20.9		72	—			—	76.0
Total equity securities	236.7		75.2		98	(1.3		)	4	310.6
Other invested assets	54.4		34.2		3	—			—	88.6
Total available-for-sale investments	$	2,185.1	$	186.1	528	$	(8.0	)	77	$	2,363.2

The following table sets forth our unrealized holding gains by investment type, net of deferred tax that was included as a component of accumulated other comprehensive income at March 31, 2015 and December 31, 2014, and the change in unrealized holding gains, net of deferred tax, for the three months ended March 31, 2015:

($ millions)	March 31, 2015			December 31, 2014			$ Change
Available-for-sale investments:
Unrealized holding gains:
Fixed maturities	$	70.0		$	60.6		$	9.4
Equity securities	73.9			74.9			(1.0		)
Other invested assets	34.2			29.8			4.4
Unrealized gains	178.1			165.3			12.8
Net deferred federal income tax liability	(59.8		)	(55.3		)	(4.5		)
Unrealized gains, net of tax	$	118.3		$	110.0		$	8.3

Fair Value Measurements

We primarily use one independent nationally recognized pricing service in developing fair value estimates. We obtain one price per security, and our processes and control procedures are designed to ensure the value is accurately recorded on an unadjusted basis. Through discussions with the pricing service, we gain an understanding of the methodologies used to price the different types of securities, that the data and the valuation methods utilized are appropriate and consistently applied, and that the assumptions are reasonable and representative of fair value. To validate the reasonableness of the valuations obtained from the pricing service, we compare to other fair value pricing information gathered from other independent pricing sources. See Note 3, “Fair Value of Financial Instruments” to our condensed consolidated financial statements included in Item 1 of this Form 10-Q for a presentation of our available-for-sale investments within the fair value hierarchy at March 31, 2015 and December 31, 2014.

As of March 31, 2015, Level 3 assets as a percentage of total assets were 0.1% which we have determined to be insignificant.

37

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Other Items

Income Taxes

The following table sets forth the components of our federal income tax expense for the three months ended March 31, 2015 and 2014, respectively.

($ millions)	2015		2014
Income before federal income taxes	$	33.2	$	27.7
Current tax expense	0.4		0.6
Deferred tax expense	8.1		7.2
	8.5		7.8
Valuation allowance	—		(7.2		)
Total federal income tax expense	8.5		0.6
Net income	$	24.7	$	27.1

For the three months ended March 31, 2015 and 2014, we recorded current federal income tax expense of $0.4 million and $0.6 million, respectively, which related to the Alternative Minimum Tax ("AMT"), an alternative tax system. We calculate our AMT and, if it is greater than our federal income tax, we provide for the AMT. While we currently have both federal income tax and AMT net operating loss ("NOL") carryforwards, the Internal Revenue Code only permits a 90% offset of the AMT obligation, compared to a 100% offset of the federal income tax obligation. The disallowed utilization of the 10% portion of the AMT NOL represents our current federal income tax expense.

Deferred tax expense for the quarter ended March 31, 2015 was $8.1 million compared to $7.2 million for the same period of 2014. The deferred tax expense for both periods was primarily attributable to the utilization of NOL carryforwards. The deferred tax expense for the quarter ended March 31, 2014 was offset by a change in the valuation allowance against net deferred federal income taxes.

The effective tax rates for the three months ended March 31, 2015 and 2014 were 25.0% and 2.0%, respectively. See Note 5 of our condensed consolidated financial statements included in Item 1 of this Form 10-Q.

38

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

LIQUIDITY AND CAPITAL RESOURCES

General

Liquidity refers to our ability to generate adequate amounts of cash to meet our short- and long-term needs. Our primary sources of cash are premiums, investment income, investment sales and the maturity of fixed income security investments. The significant outflows of cash are payments of claims, commissions, premium taxes, operating expenses, income taxes, dividends, interest and principal payments on debt and investment purchases. The cash outflows may vary due to uncertainties regarding settlement of large losses or catastrophic events. As a result, we continually monitor our investment and reinsurance programs to ensure they are appropriately structured to enable the insurance subsidiaries to meet anticipated short-term and long-term cash requirements without the need to sell investments to meet fluctuations in claim payments.

Liquidity

Our insurance subsidiaries must have adequate liquidity to ensure that their cash obligations are met. However, as discussed below, the STFC Pooled Companies do not have the day-to-day liquidity concerns normally associated with an insurance company due to their participation in, and the terms of, the Pooling Arrangement. In addition, State Auto P&C’s $100.0 million credit facility is available for general corporate purposes such as funding liquidity needs.  See “Borrowing Arrangements - Credit Facility” included in this Item 7.

Under the terms of the Pooling Arrangement, State Auto Mutual receives all premiums and pays all losses and expenses associated with the insurance business produced by the STFC Pooled Companies and the other pool participants, and then it settles the intercompany balances generated by these transactions with the pool participants within 60 days following each quarter end. We believe this provides State Auto Mutual with sufficient liquidity to pay losses and expenses of our insurance operations on a timely basis. When settling the intercompany balances, State Auto Mutual provides the pool participants with full credit for the premiums written net of losses paid during the quarter, retaining all receivable amounts from insureds and agents and reinsurance recoverable on paid losses from unaffiliated reinsurers. Any receivable amounts that are ultimately deemed to be uncollectible are charged-off by State Auto Mutual and allocated to the pool participant on the basis of its pooling percentage.

As a result of the Pooling Arrangement, we have an off-balance sheet credit risk related to the balances due to State Auto Mutual from insureds, agents and reinsurers, which are offset by the unearned premiums from the respective policies. While the total amount due to State Auto Mutual from policyholders and agents is significant, the individual amounts due are relatively small at the policyholder and agency level. Based on historical data, this credit risk exposure is not considered to be material to our financial position, though the impact to income on a quarterly basis may be material. The State Auto Group mitigates its exposure to this credit risk through its in-house collections unit for both personal and commercial accounts which is supplemented by third party collection service providers. The amounts deemed uncollectible by State Auto Mutual and allocated to the STFC Pooled Companies are included in the other expenses line item in the accompanying consolidated statements of income.

We generally manage our cash flows through current operational activity and maturing investments, without a need to liquidate any of our other investments; however, should our written premiums decline or paid losses increase significantly, or a combination thereof, we may need to liquidate investments at losses in order to meet our cash obligations. This action was not necessary for the three months ended March 31, 2015.

We maintain a portion of our investment portfolio in relatively short-term and highly liquid investments to ensure the immediate availability of funds to pay claims and expenses. At March 31, 2015 and December 31, 2014, we had $68.4 million and $86.3 million, respectively, in cash and cash equivalents, and $2,363.2 million and $2,282.6 million, respectively, of total available-for-sale investments. Our fixed maturities available-for-sale included $8.8 million of securities on deposit with insurance regulators as required by law at both March 31, 2015 and December 31, 2014. In addition, substantially all of our fixed maturity and equity securities are traded on public markets. For a further discussion regarding investments, see “Investments Operations Segment” included in this Item 2.

Net cash provided by operating activities was $54.6 million and $2.3 million for the three months ended March 31, 2015 and 2014, respectively. Net cash from operations will vary from period to period if there are significant changes in underwriting results, primarily a combination of the level of premiums written and loss and loss expenses paid, changes in cash flows from investment income or federal income tax activity.

Net cash used in investing activities was $69.0 million and $0.6 million for the three months ended March 31, 2015 and 2014, respectively. The increase was attributable to the investment of funds received as a result of the expiration of the HO QS Arrangement.

39

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Net cash used in financing activities was $3.5 million and $3.7 million for the three months ended March 31, 2015 and 2014, respectively.

Borrowing Arrangements

Credit Facility

State Auto P&C has a $100.0 million five-year revolving credit facility (the "Credit Facility") maturing in July 2018 with a syndicate of lenders. During the term of the Credit Facility, State Auto P&C has the right to increase the total facility to a maximum amount of $150.0 million, provided that no event of default has occurred and is continuing. The Credit Facility is available for general corporate purposes and provides for interest-only payments during its term, with principal and interest due in full at maturity. Interest is based on LIBOR or a base rate plus a calculated margin amount. All advances under the Credit Facility are to be fully secured by a pledge of specific investment securities of State Auto P&C. The Credit Facility includes certain covenants and requirements, including financial requirements that State Auto Financial maintain a minimum net worth and a certain debt to capitalization ratio. As of March 31, 2015, State Auto P&C had not made any borrowings under the Credit Facility and State Auto P&C and State Auto Financial were in compliance with all covenants and requirements of the Credit Facility.

FHLB Loan

State Auto P&C has outstanding an $85.0 million loan ("FHLB loan") from the Federal Home Loan Bank of Cincinnati. The FHLB Loan is a 20-year term loan, callable after three years with no prepayment penalty thereafter. The FHLB Loan provides for interest-only payments during its term, with principal due in full at maturity. The interest rate is fixed over the term of the loan at 5.03%. The FHLB Loan is fully secured by a pledge of specific investment securities of State Auto P&C.

Subordinated Debentures

State Auto Financial’s Delaware business trust subsidiary (the “Capital Trust”) has outstanding $15.0 million liquidation amount of capital securities, due 2033. In connection with the Capital Trust’s issuance of the capital securities and the related purchase by State Auto Financial of all of the Capital Trust’s common securities (liquidation amount of $0.5 million), State Auto Financial has issued to the Capital Trust $15.5 million aggregate principal amount of unsecured Floating Rate Junior Subordinated Debt Securities due 2033 (the “Subordinated Debentures”). The sole assets of the Capital Trust are the Subordinated Debentures and any interest accrued thereon. Interest on the Capital Trust’s capital and common securities is payable quarterly at a rate equal to the three-month LIBOR rate plus 4.20%, adjusted quarterly. The applicable interest rates for March 31, 2015 and 2014 were 4.46% and 4.44%, respectively.

Reinsurance Arrangements

Members of the State Auto Group follow the customary industry practice of reinsuring a portion of their exposures and paying to the reinsurers a portion of the premiums received. Insurance is ceded principally to reduce net liability on individual risks or for individual loss occurrences, including catastrophic losses. Although reinsurance does not legally discharge the individual members of the State Auto Group from primary liability for the full amount of limits applicable under their policies, it does make the assuming reinsurer liable to the extent of the reinsurance ceded.

To minimize the risk of reinsurer default, the State Auto Group cedes only to third-party reinsurers who are rated A- or better by A.M. Best or Standard & Poor’s and also utilizes both domestic and international markets to diversify its credit risk. We utilize reinsurance to limit our loss exposure and contribute to our liquidity and capital resources.

Each member of the State Auto Group is party to working reinsurance treaties for casualty, workers’ compensation and property lines with several reinsurers arranged through reinsurance intermediaries. These agreements are described in more detail below. We have also secured other reinsurance to limit the net cost of large loss events for certain types of coverage. The State Auto Group also makes use of facultative reinsurance for unique risk situations. The State Auto Group also participates in state insurance pools and associations. In general, these pools and associations are state sponsored and/or operated, impose mandatory participation by insurers doing business in that state, and offer coverage for hard-to-place risks at premium rates established by the state sponsor or operator, thereby transferring risk of loss to the participating insurers in exchange for premiums which may not be commensurate with the risk assumed.

For a discussion of our other reinsurance arrangements see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Reinsurance Arrangements” in Item 7 of the 2014 Form 10-K.

40

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Regulatory Considerations

At March 31, 2015, all of our insurance subsidiaries were in compliance with statutory requirements relating to capital adequacy.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

None.

CREDIT AND FINANCIAL STRENGTH RATINGS

On April 28, 2015, A.M. Best revised the State Auto Group’s financial strength rating to A- (Excellent) with a stable outlook from A (Excellent) with a negative outlook.

On April 16, 2015, Standard & Poor's revised the Company's credit rating to BB+ with a stable outlook from BB+ with a negative outlook.

MARKET RISK

With respect to Market Risk, see the discussion regarding this subject at “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Investment Operations Segment – Market Risk” in Item 7 of the 2014 Form 10-K. There have been no material changes from the information reported regarding Market Risk in the 2014 Form 10-K.

Item 3. Quantitative and Qualitative Disclosure of Market Risk

The information called for by this item is provided in this Form 10-Q under the caption “Market Risk” under Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

With the participation of our principal executive officer and principal financial officer, our management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report:

1. Information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission;

2. Information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure; and

3. Our disclosure controls and procedures are effective in timely making known to them material information required to be included in our periodic filings with the Securities and Exchange Commission.

Changes in Internal Control over Financial Reporting

There has been no change in our internal controls over financial reporting that occurred during the most recent fiscal quarter that has materially affected, nor is it likely to materially affect, our internal control over financial reporting.

41

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

In April 2013, a putative class action lawsuit (Schumacher vs. State Automobile Mutual Insurance Company, et al.) was filed against State Auto Mutual, State Auto Financial and State Auto P&C ("State Auto Defendants") in Federal District Court in Ohio. Plaintiffs claimed that, in connection with the homeowners policies of various State Auto companies, the coverage limits and premiums were improperly increased as a result of an insurance to value (“ITV”) program and alleged that they purchased coverage in excess of that which was necessary to insure them in the event of loss. Plaintiffs’ claims included breach of good faith and fair dealing, negligent misrepresentation and fraud, violation of the Ohio Deceptive Trade Practices Act, and fraudulent inducement. Plaintiffs sought compensatory and punitive damages to be determined by the court, as well as class certification. On February 2, 2015, the Court struck the class allegations, and on March 13, 2015, Plaintiffs settled with the State Auto Defendants for a nominal amount and dismissed their remaining individual claims with prejudice, thereby terminating the litigation.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in the 2014 Form 10-K under Part I, Item 1A – Risk Factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

42

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

Item 6. Exhibits

Exhibit No.	Description of Exhibits
10.01	Employment Agreement dated as of March 27, 2015, among State Auto Financial Corporation, State Auto Property & Casualty Insurance Company, State Automobile Mutual Insurance Company and Michael E. LaRocco
10.02	Executive Change of Control Agreement dated as of March 27, 2015, among State Auto Financial Corporation, State Auto Property & Casualty Insurance Company, State Automobile Mutual Insurance Company and Michael E. LaRocco
10.03	Credit Agreement dated as of May 8, 2009, between State Automobile Mutual Insurance Company, as borrower, and State Auto Property & Casualty Insurance Company, as lender. This document is incorporated by reference to the Form 8-K Current Report filed on May 13, 2009 (see Exhibit 10.1 therein).
10.04	Credit Agreement dated as of September 29, 2011, among State Auto Financial Corporation, as borrower, a syndicate of financial institutions, as the lenders party thereto, KeyBank National Association, as Administrative Agent, Lead Arranger, Sole Book Runner and Swingline Lender, and JPMorgan Chase Bank, N.A. and PNC BANK, National Association, as Co-Documentation Agents. This document is incorporated by reference to the Form 8-K Current Report filed on September 30, 2011 (see Exhibit 10.1 therein). [This corrects the incorporation by reference for Exhibit 10.46 contained in the Form 10-K Annual Report for year ended December 31, 2014.]
10.05	Credit Agreement dated as of July 26, 2013, among State Auto Property & Casualty, as borrower, a syndicate of financial institutions, as the lenders party thereto, KeyBank National Association, as Administrative Agent, Lead Arranger, Sole Book Runner and Swingline Lender, and JPMorgan Chase Bank, N.A. and PNC BANK, National Association, as Co-Documentation Agents. This document is incorporated by reference to the Form 8-K Current Report filed on July 30, 2013 (see Exhibit 10.1 therein). [This corrects the incorporation by reference for Exhibit 10.47 contained in the Form 10-K Annual Report for year ended December 31, 2014.]
31.01	CEO certification required by Section 302 of Sarbanes Oxley Act of 2002
31.02	CFO certification required by Section 302 of Sarbanes Oxley Act of 2002
32.01	CEO certification required by Section 906 of Sarbanes Oxley Act of 2002
32.02	CFO certification required by Section 906 of Sarbanes Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

43

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

(a majority-owned subsidiary of State Automobile Mutual Insurance Company)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	State Auto Financial Corporation
Date: May 6, 2015	/s/ Steven E. English
	Steven E. English
	Chief Financial Officer
	(Duly Authorized Officer and
	Principal Financial Officer)

44

EX-10.01

EXHIBIT 10.01

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made as of March 27, 2015, by and among State Auto Financial Corporation, an Ohio corporation (“State Auto Financial”), State Auto Property and Casualty Insurance Company, an Iowa-domiciled insurance company (“State Auto P&C”), State Automobile Mutual Insurance Company, an Ohio-domiciled mutual insurance company (“State Auto Mutual”), and Michael E. LaRocco (“Executive”). State Auto Financial, State Auto P&C, State Auto Mutual and each of their respective subsidiaries and affiliates, present and future, are hereinafter collectively referred to as “State Auto.”

Background Information

WHEREAS, State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto and State Auto Financial is a majority owned subsidiary of State Auto Mutual, while State Auto Mutual is the ultimate controlling entity in the State Auto holding company system; and

WHEREAS, as a result of Executive’s role, as described below, in serving State Auto Financial, State Auto Mutual and the other State Auto companies, it is appropriate that this Employment Agreement be entered into among State Auto P&C, State Auto Financial, State Auto Mutual and Executive; and

WHEREAS, State Auto desires to employ Executive as the Chief Executive Officer and President of State Auto; and

WHEREAS, Executive desires to accept such employment on the terms and conditions set forth below.

Statement of Agreement

NOW, THEREFORE, in consideration of such employment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

Article I    Definitions.

Capitalized terms used herein which are not defined herein shall have the meanings ascribed to such terms in the Executive Change of Control Agreement dated the same date as this Agreement among State Auto Financial, State Auto P&C, State Auto Mutual and Executive (the “Executive Agreement”), a copy of the form of which is attached hereto as Exhibit A and incorporated herein by this reference.

Article II    Actions by State Auto Boards

Effective as of May 8, 2015, each respective State Auto Board of Directors and applicable committees thereof shall take such actions as may be necessary or appropriate to elect Executive to the offices of Chief Executive Officer and President of such State Auto company. No later than May 8, 2015, each respective State Auto Board of Directors shall take such actions as may be necessary or appropriate to elect Executive as a director of such State Auto company.

Article III    Employment Duties and Term.

(A)     Duties.

Upon his election to such offices, Executive shall perform the duties of Chief Executive Officer and President of State Auto as described in the Bylaws or the Code of Regulations, as applicable, of each State Auto company, as well as such other duties and services requested or directed by any State Auto Board of Directors. Executive shall devote his full time and attention and best efforts to the performance of such duties. Executive shall serve as an officer of State Auto so long as Executive shall be duly elected by the respective State Auto Boards of Directors at any time or times during the term of this Agreement.

(B)    Term.

The term of this Agreement shall be for a period commencing on April 27, 2015 (“Commencement Date”), and ending on December 31, 2018, unless terminated at an earlier date pursuant to an event described in Article V of

this Agreement (the “Initial Term”). Beginning on January 1, 2019 and each anniversary thereof, the term of this Agreement may be extended for an additional one-year period upon the mutual written consent of the parties hereto; provided, that the term of this Agreement may not be extended past the end of the calendar year in which Executive attains age 65. The Initial Term, plus any extensions thereof, shall be the term of this Agreement (referred to hereafter as the “Employment Term”).

Article IV    Compensation.

State Auto agrees to pay to Executive and Executive agrees to accept the following amounts as compensation in full for Executive’s services in any capacity hereunder or in the performance of other like duties assigned to Executive by the Board of Directors of State Auto:

(A)    Base Compensation.

At the outset of the Employment Term, State Auto shall pay to Executive a base salary (the “Base Salary”) in the amount of Eight Hundred Fifty Thousand Dollars ($850,000.00) per year, payable in accordance with State Auto’s general policies and procedures for payment of compensation to its salaried personnel, plus such increases in annual base compensation that the Compensation Committee of the Board of Directors of State Auto Financial (the “STFC Compensation Committee”) may authorize as provided herein. The compensation of Executive shall be reviewed by the STFC Compensation Committee no less often than once each calendar year during the Employment Term and may be increased by the STFC Compensation Committee as it determines in the good faith exercise of its business judgment based on such factors as the STFC Compensation Committee deems appropriate. In no event shall the Base Salary be less than the Base Salary set forth above; provided, however, that this restriction may be suspended by the STFC Compensation Committee if the STFC Compensation Committee determines, on the basis of such commercially reasonable factors as it deems appropriate in the good faith exercise of its business judgment, that imposing such suspension is in the best interests of State Auto Financial (“Exigent Circumstances”). Any reduction or suspension of any portion of Executive’s compensation, bonus or other payments based upon Exigent Circumstances will not constitute grounds for a claim by Executive that he has suffered an involuntary Termination Without Cause (as defined below).

(B)    Short Term Incentive Cash Compensation Plans.

Executive shall participate in the State Auto Financial Corporation Leadership Bonus Plan (the “LBP”) or any successor plan with an incentive bonus target equal to no less than 100% of Executive’s then current Base Salary. It is contemplated that a portion of the bonus opportunity under the LBP shall be “performance-based compensation,” as such term is used in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and payable based upon the achievement of peer comparison and/or other performance goals determined by the STFC Compensation Committee and any remaining portion of the bonus opportunity shall be payable at the discretion of the STFC Compensation Committee. Executive’s participation in the LBP shall be according to the terms and conditions of the LBP. It is understood and agreed that the LBP or any similar cash incentive compensation plan may be amended, suspended, or terminated by State Auto at any time. It is understood and agreed that the bonus compensation potential from the LBP shall not be less than the bonus compensation potential available to Executive under the LBP in effect for Executive on the date of this Agreement, provided that this restriction may be suspended due to Exigent Circumstances.

(C)    Long Term Incentive Compensation Plan.

Executive shall participate in the State Auto Financial Corporation Long-Term Incentive Program (the “LTIP”) or any successor plan with an incentive bonus target equal to no less than 140% of Executive’s current Base Salary. It is contemplated that the bonus opportunity under the LTIP or any successor plan shall be “performance-based compensation,” as such term is used in Section 162(m) of the Code, and payable based upon the achievement of peer comparison and/or other performance goals determined by the STFC Compensation Committee. Executive’s participation in the LTIP shall be according to the terms and conditions of the LTIP. It is understood and agreed that the LTIP or any similar cash incentive compensation plan may be amended, suspended, or terminated by State Auto at any time. It is understood and agreed that the bonus compensation potential from the LTIP shall not be less than the bonus compensation potential available to Executive under the LTIP in effect for Executive on the date of this Agreement, provided that this restriction may be suspended due to Exigent Circumstances.

(D)    Participation in Retirement Plan and Rights Under Other Agreements.

(1) Executive shall be entitled to participate in the following plans: (a) any State Auto employee stock purchase plan; (b) the State Auto Insurance Companies Retirement Savings Plan, a defined contribution plan, qualified under Section 401(k) of the Code; and (c) any successor or similar stock purchase or retirement plans generally made available to employees of State Auto, so long as State Auto continues to offer such plans or similar plans to employees of State Auto. It is understood and agreed that the foregoing plans or any successor or similar plans may be amended, suspended, or terminated by State Auto at any time.

(2) Executive shall be entitled to participate in State Auto’s nonqualified, unfunded Incentive Deferred Compensation Plan (“IDCP”) or any successor or similar deferred compensation plan made available to any executive of State Auto, so long as State Auto continues to offer such plan or successor or similar plans to any executive of State Auto. It is understood and agreed that the foregoing plan or any successor or similar plan may be amended, suspended or terminated by State Auto at any time as provided in such plan document. The terms and conditions of Executive’s deferred compensation benefits shall be controlled by the applicable IDCP documents, and in the event of any inconsistencies with this Agreement, or any prior agreements between the parties, the provisions of the IDCP documents shall control.

(3) Executive shall be entitled to participate in the 2009 Equity Incentive Compensation Plan or any successor or additional equity based compensation plans (the “Equity Plans”) implemented by State Auto. Notwithstanding any other provision contained in the Equity Plans, in the event Executive’s employment is terminated for any reason, he shall have a period of not less than 90 days in which to exercise any equity based award made pursuant to the Equity Plans, which has vested pursuant to the terms of such Equity Plans, provided, however, that the period during which such award can be exercised will be such longer period as is provided under the terms of such equity based award agreement then applicable. However, notwithstanding the foregoing, if such exercise period spans two consecutive calendar years, such exercise shall occur no later than March 15th of the second calendar year. It is understood and agreed that the Equity Plans may be amended, suspended or terminated by the STFC Compensation Committee at any time.

(E)    Relocation Expenses

State Auto shall reimburse Executive for the reasonable expenses he and his family incur in relocating from Seattle, Washington, to Columbus, Ohio, including but not limited to reasonable moving expenses, temporary additional living expenses while Executive continues to own his current principal residence and such other programs and reimbursements State Auto makes available to its current executive employees who relocate as part of their employment, all as described in State Auto’s Employee Reference Guide. Executive agrees to reimburse State Auto for all relocation expenses State Auto paid if Executive voluntarily terminates his employment within two years from the Commencement Date.

(F)    Other Fringe Benefits.

In addition to the benefits provided for in the preceding provisions of this Article IV, Executive shall receive and enjoy any and all other fringe benefits generally made available to employees of State Auto as described in State Auto’s Employee Reference Guide, in accordance with State Auto’s regular employment policies and practices. In addition, the STFC Compensation Committee and the Boards of Directors of State Auto Financial and State Auto Mutual shall have the authority to grant such additional fringe benefits and perquisites to Executive as each, in its discretion, deems appropriate. In addition, Executive shall be entitled to reimbursement for all out-of-pocket expenses incurred by Executive in the performance of his duties hereunder; provided that such reimbursement shall be in accordance with State Auto’s then existing policy regarding the same and further provided that no reimbursement shall be made later than the end of the calendar year following the calendar year in which such expense was incurred. If such benefits are taxable, State Auto shall ensure that terms of the benefits will comply with Section 409A of the Code and the Treasury Regulations and other guidance promulgated or issued thereunder.

(G)    Participation in Future Compensation, Retirement, and Fringe Benefit Plans.

In addition to the benefits provided for in the preceding provisions of this Article IV, Executive shall participate in and shall also receive and enjoy such other compensation, retirement, or fringe benefits which are now or in the future generally made available to executives of State Auto. If such benefits are taxable, State Auto shall ensure that terms of the benefits will comply with Section 409A of the Code and the Treasury Regulations and other guidance promulgated or issued thereunder.

(H)    Vacation.

Executive shall be entitled to four weeks of paid vacation (two weeks for the period beginning on the Commencement Date and ending on December 31, 2015) and such other personal absence days as State Auto provides its other employees.

Article V    Termination.

(A)    Disability.

If during the Employment Term Executive shall be unable to substantially perform his duties hereunder because of illness or other incapacity constituting a disability as defined in Section 409A of the Code (referred to hereafter as “Disability”), and such Disability shall persist for a period of at least six months in any 12 month period, State Auto shall thereafter have the right, on not less than 45 days’ written notice to Executive, to terminate Executive’s employment under this Agreement, in which case the date of Executive’s separation from service (as defined in Section 409A of the Code) shall be not less than the 45th day following the date of written notice. In such event, in addition to any other benefits to which Executive would be entitled, State Auto shall be obligated to pay Executive his full compensation pursuant to Sections (A), (B), and (C) of Article IV hereof accruing through the date of such separation from service and per the terms of the applicable plan or program. A determination of Disability shall be subject to the certification of a qualified medical doctor agreed to by State Auto and Executive or, in the event of Executive’s incapacity to designate a qualified medical doctor, by Executive’s legal representative. If State Auto and Executive (or his legal representative, as the case may be) fail to agree upon a qualified medical doctor, each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, who shall make the determination as to Disability. In addition to the foregoing disability compensation described in this Article V Section (A), Executive shall continue to receive such health insurance benefits or their equivalent as he and his spouse receive on the date of Disability, as well as such group life insurance as Executive has in place on his life, as of the date of Disability, pursuant to the terms of such plans as are generally made available to State Auto employees. Executive’s compensation and other benefits described in Article IV shall be reinstated in full in the event of his return to employment with State Auto.

(B)     Death.

In the event of Executive’s death during his employment hereunder, in addition to any other benefits to which any person would be entitled upon Executive’s death, State Auto shall be obligated to pay Executive’s beneficiary, as designated on the form attached hereto as Exhibit B (the “Beneficiary”) Executive’s full compensation pursuant to Section (A) hereof accruing through the date of his death. In addition, a pro rata share of the compensation to which Executive is entitled pursuant to Article IV Sections (B) and (C) hereof shall be paid to the Beneficiary pursuant to the terms of the LBP and the LTIP (collectively, the “Bonus Plans”), provided the bonus contemplated by any of the Bonus Plans is in fact earned under the terms of such Bonus Plan then in effect for the particular period in which Executive were to die. Said pro rata share of the bonus due under the LBP shall be determined by dividing a numerator equal to the number of whole months that have elapsed in the calendar year on the date of Executive’s death by the denominator of 12. The pro-rata share of the payment due under the LTIP shall be determined by dividing a numerator equal to the number of whole months that have elapsed in the then current LTIP’s measurement period on the date of Executive’s death divided by a denominator equal to the duration of the measurement period. If the bonus due under the LBP, or the LTIP is earned under Article IV, said sums will be paid to the Beneficiary as soon as practicable following the end of the calendar year following the determination by State Auto that the bonus due under the LBP or the LTIP has in fact been earned pursuant to the terms of each such bonus opportunity, but no later than March 15 following such calendar year.

(C)    Voluntary Termination.

Except as provided in the Executive Agreement, in the event Executive voluntarily terminates his employment, he shall cease to receive compensation as of the date of such separation from service, except that to which he may then be entitled pursuant to the terms of the LBP or the LTIP, as then in effect. It is understood and agreed that as respects the LBP and the LTIP, Executive is required to be employed by State Auto on the date such amount is paid, if he had in fact earned such bonus under the terms of the LBP or the LTIP, unless the terms of the LBP or the LTIP, as applicable, provide otherwise.

(D)    Termination for Cause.

(1) In the event that the Boards of Directors of State Auto Mutual, State Auto Financial and State Auto P&C (collectively, the “Boards”) jointly determine that this Agreement and Executive’s employment should be terminated for Cause, as defined in (2) below, Executive shall be entitled to receive payment of any Base Salary accrued through the date of separation from service. If the Boards decide to terminate this Agreement as provided in this Section, State Auto will give Executive 30 days’ advance written notice of its intention to terminate this Agreement. In the event of a termination for Cause, Executive’s service shall terminate upon the expiration of the notice period; provided, however, Executive may be relieved of his duties at the discretion of the Boards on the date the above described notice is delivered to Executive. It is further understood and agreed that should Executive dispute the fact that Cause, as defined herein, exists for such termination, Executive has the right to pursue a claim in Arbitration under Article X of the Executive Agreement for such benefits that would otherwise have been due to him under Section (E) of this Article V had he not been terminated for Cause.

(2) For purposes of this Section D of Article V, it is understood and agreed that Cause shall mean the following: (a) the willful and continued failure of Executive to perform Executive’s duties with State Auto (other than any such failure resulting from incapacity due to a Disability), after a written demand for performance is delivered to the Executive by the Boards which specifically identifies the manner in which the Boards believe that Executive has not performed Executive’s duties: (b) the willful engaging by Executive in illegal conduct or gross misconduct which has a material adverse effect on State Auto, as determined by the Boards; (c) the breach of any provision of Article VII hereof as determined by the Boards; or (d) the willful failure to comply with any State Auto code of conduct or code of ethics applicable to Executive, as determined by the Boards. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of State Auto. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Boards or upon the advice of counsel for State Auto, shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of State Auto.

(E)    Involuntary Termination Without Cause.

In the event that the Boards determine that this Agreement and the employment of Executive should be terminated before the end of the Employment Term for a reason other than death, Disability, voluntary separation from service by Executive, or for Cause (such reason is hereafter referred to as a “Termination Without Cause”), subject to the provisions of Section (I) below:

(1) Executive, or the Beneficiary, shall be entitled to continue to receive the Base Salary Executive otherwise would have been entitled to receive (including but not limited to amounts earned but not paid) had he remained employed for a period of twenty-four (24) months. Such amounts shall begin to be paid as soon as practicable after Executive’s separation from service and shall continue for a period of twenty-four (24) months. Notwithstanding the preceding provisions of this paragraph (1), in the event that Executive’s Termination Without Cause occurs less than twenty-four (24) months prior to the end of the calendar year in which Executive attains age 65, the payments required hereunder will end on the last day of the calendar year in which Executive attains age 65.

(2) Executive, or the Beneficiary, shall be entitled to receive a one-year bonus payment equal to the average of the amount earned under the LBP and the LTIP in place for each of the two calendar years immediately preceding the calendar year in which the Termination Without Cause occurs, payable in the form and at the time specified in such plans.

(3) Any stock options granted to Executive shall vest on the termination date, notwithstanding any vesting schedule set forth in any outstanding option agreements with Executive, and shall be exercisable under the terms of the plan.

(4) Executive shall be entitled to receive from State Auto an amount equal to the then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by twenty-four (24) months, payable as a single lump sum payment as soon as practicable after separation from service.

Notwithstanding any provision to the contrary, the payments and benefits due to Executive under this Section (E) of Article V shall be contingent upon Executive’s execution of a valid release of State Auto and their respective officers, directors, agents and employees, from any and all actions, suits, proceedings, claims and demands relating to Executive’s employment and Termination Without Cause. Provided such release is executed and not revoked within any revocation period provided by applicable law, the payment and benefits due under this Section (E) of Article V shall commence no later than 90 days after Executive’s Termination Without Cause. In the event that the time period required by applicable law to obtain a valid release (including the expiration of any revocation period) begins in one calendar year and ends in another calendar year, notwithstanding the provisions of the previous sentence, payments and benefits due to Executive under this Section (E) of Article V shall commence in the second calendar year.

(F)    Change of Control.

In the event that State Auto shall undergo a Change of Control, as defined in the Executive Agreement, and Executive either incurs a Termination Without Cause or terminates his employment for Good Reason, as defined in the Executive Agreement, in lieu of any compensation otherwise provided under this Agreement, Executive shall be entitled to the benefits described in the Executive Agreement.

(G)    Expiration of Employment Term.

In the event that the Employment Term expires and is not extended by the parties, Executive’s employment will terminate at the end of such Employment Term. In such event, in addition to any other benefits to which Executive would be entitled, State Auto shall be obligated to pay Executive his full compensation pursuant to Sections (A), (B) and (C) of Article IV hereof accruing through the date of such separation from service and per the terms of the applicable plan or program.

(H)    Mitigation.

In the event that Executive voluntarily terminates his employment, as set forth in Article V Section (C) herein, or Executive incurs a Termination Without Cause, as set forth in Article V Section (E) herein, or Executive is terminated pursuant to a Change of Control, as set forth in Article V Section (F) herein, Executive shall have no duty

to mitigate his damages by seeking other employment, and State Auto shall not be entitled to set off against amounts payable hereunder any compensation which he may receive from future employment.

(I)    Specified Employee Delay.

In the event that the sum of any payments under this Agreement, from the date of separation from service until December 31st of the second year after the year of separation from service, exceeds an amount equal to two times the limit under Section 401(a)(17) of the Code, and the Executive is a Specified Employee as defined in Section 409A of the Code, any payments under this Agreement due to a separation from service (as defined in Section 409A of the Code) and subject to Section 409A of the Code shall be delayed until a date that is six months after the date of separation from service (or, if earlier, the date of death of the Specified Employee). Payments to which a Specified Employee would otherwise be entitled during the first six months following the date of separation from service shall be accumulated and paid as of the first date of the seventh month following the date of separation from service.

(J)    Resignation from Boards and Offices.

Executive agrees that, upon termination of Executive’s employment for any reason set forth in this Article V or, if applicable, upon expiration of the Employment Term, Executive shall immediately resign as a director and officer from all State Auto companies or their respective successor(s). In addition, in the event that this Agreement remains in effect during the calendar year in which Executive attains age 65, at any time during such calendar year, State Auto reserves the right to alter all of the Executive’s then current job titles, including Chief Executive Officer and/or President, as it deems necessary and that he resigns as a director from any and all State Auto company Boards. In the event that State Auto elects to alter Executive’s job title in accordance with the preceding sentence, Executive will resign immediately from any office, as so requested by State Auto. Any such alteration in job title and subsequent resignation as a director or officer as described herein will not constitute grounds for a claim by Executive that he has suffered an involuntary Termination Without Cause.

Article VI    Executive’s Rights Under Certain Plans.

Notwithstanding anything contained herein, State Auto agrees that the benefits provided to Executive herein are not in lieu of any rights and privileges to which Executive may be entitled as an employee of State Auto under any retirement, pension, insurance, hospitalization, or other plan which may now or hereafter be in effect, it being understood that, except to the extent currently provided in such plans, Executive shall have the same rights and privileges to participate in such plans or benefits as any other employee of State Auto.

Article VII    Confidentiality Information; Noncompetition Agreement; Clawback

(A)    Confidential Information.

Executive agrees to receive Confidential Information (as defined below) of State Auto in confidence, and not to disclose to others, assist others in the application of, or use for his own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such other or others by legal and equitable means and other than as a result of disclosure by Executive. Executive further agrees that, upon separation from service with State Auto, all documents, records, notebooks, and similar repositories (including electronic formats) containing Confidential Information, including copies thereof, then in Executive’s possession, whether prepared by him or others, will be left with State Auto. For purposes of this Article VII, “Confidential Information” means information disclosed to Executive or known by State Auto, which is not generally known in the business in which State Auto is or may become engaged, including, but not limited to, information about State Auto’s services, trade secrets, financial information, customer lists, books, records, memoranda, other proprietary information of State Auto and any other information deemed to be Confidential Information as determined by the State Auto Mutual Board of Directors Corporate Governance Guidelines, the State Auto Code of Business Conduct and/or any other applicable State Auto policy. Executive further agrees that the obligation to maintain confidentiality created by this Article VII shall continue in effect for the duration of this Agreement and following the termination of Executive’s service with State Auto.

(B)    Devotion of Time to Performance of Duties.

Executive further agrees that during the Employment Term he will devote substantially all of his time and effort to the performance of his duties hereunder and will refrain from engaging on his own behalf or on the behalf of

a third party in any line of activities or business in which State Auto is or may become engaged. With the concurrence of the Boards, and subject to the applicable provisions of the State Auto Mutual Board of Directors Corporate Governance Guidelines, the State Auto Code of Business Conduct and/or any other applicable State Auto policy, Executive may serve on the board of directors of another public company, in addition to the board of directors of State Auto Financial, if that opportunity presents itself.

(C)    Noncompetition Agreement.

(1) Executive further agrees that for a period of two years following a separation from service with State Auto, Executive will not directly or indirectly engage in the property, casualty or specialty insurance underwriting business or any other line(s) of business in which State Auto is operating at the time of Executive’s separation from service as an officer, director, consultant or employee of an insurer which (i) has direct written premium in excess of $1 billion nationally as of the end of the calendar year immediately preceding Executive’s separation from service with State Auto, and (ii) operates in any state where State Auto operates.

(2) Executive also agrees that for a period of two years following a separation from service, he shall not directly or indirectly hire, solicit for hiring or otherwise induce any employee of State Auto to leave State Auto’s employment.

(3) Nothing in this Section (C) shall be construed to prohibit Executive from owning, directly or indirectly, less than five percent of the securities of any class of any company listed on a national securities exchange or traded in the over-the-counter securities market.

(4) The noncompetition period shall be tolled (i.e., temporarily suspended) during the period of any violation or attempted violation of this Section by Executive. State Auto shall provide written notice to Executive of any tolling of the noncompetition period.

(5) Notwithstanding the foregoing provisions, in the event Executive voluntarily separates from service as provided in Section (C) of Article V of the Agreement above, the provisions of Section (C)(1) of this Article VII shall be limited to a period of one year following such separation from service.

(D) Enforcement.

Executive understands that the provisions of Sections (A) and (C) of this Article VII are an essential element of this Agreement and that State Auto would not have entered into this Agreement without such Sections being included in it. Executive acknowledges that Sections (A) and (C) are reasonable and appropriate in all respects. In the event of any violation or attempted violation of these Sections, Executive agrees that money damages would not be a sufficient remedy for State Auto. Accordingly, State Auto shall be entitled to specific performance and injunctive and other equitable relief for any breach by Executive of Sections (A) or (C), without any showing of irreparable harm or damage or the posting of any bond. Such remedies shall not be deemed to be the exclusive remedies for a breach of these Sections, but shall be in addition to all other remedies available at law or equity. If any of the provisions of Sections (A) or (C) shall be held to be unenforceable because of the duration of such provision, the area covered thereby, or the type of conduct restricted therein, the parties agree that the court or arbitral body making such determination shall have the power to modify the duration, geographic area and/or other terms of such provision to the maximum extent permitted by law and, as so modified, said provision shall then be enforceable to the maximum extent permitted by law.

(E)    Forfeiture Events; Clawback Rights.

(1) The Boards may, in their discretion, require Executive to repay State Auto all or any portion of the amounts paid as termination benefits provided under Article V (collectively, the “Termination Benefits”) if:

(i) Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to Executive and for the benefit of State Auto, including such covenants included in this Agreement;

(ii) It is later discovered that Executive engaged in conduct detrimental to State Auto during the Employment Term which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its discretion. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “detrimental to State Auto” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of State Auto; or

(iii) (A) The amount of any of the Termination Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto; and

(B)    The amount of Executive’s Termination Benefits would have been lower than the amount actually awarded to Executive had the financial results been properly reported.

Notwithstanding the foregoing, if the Boards determine that Executive engaged in fraudulent conduct, then the Boards will seek repayment of all Termination Benefits. This provision shall not be the exclusive remedy of State Auto with respect to such matters.

(2) The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.

Article VIII    Successors.

(A)    As to State Auto.

This Agreement shall inure to the benefit of and be binding upon State Auto, its successors and assigns, including without limitation, any person, partnership, or corporation which may acquire voting control of State Auto Financial or all or substantially all of its assets and business, or which may be a party to any consolidation, merger, or other transaction that results in a Change of Control of State Auto Financial or State Auto Mutual.

(B)    As to Executive.

This Agreement shall also inure to the benefit of and be binding on Executive, the Beneficiary, Executive’s heirs, successors, and legal representatives.

Article IX    Indemnification.

State Auto, as provided for in its Amended and Restated Articles of Incorporation, its Amended and Restated Bylaws, and its Indemnification Agreement with Executive, shall indemnify Executive to the full extent of the general laws of the State of Ohio, now or hereafter in force, including the advance of expenses under procedures provided by such laws.

Article X    General Provisions.

(A)    Entire Agreement.

This Agreement, together with the Executive Agreement, contains the entire agreement of the parties hereto with respect to the employment of Executive by State Auto, and completely supersedes any prior agreements or arrangements between the parties hereto. The parties hereto agree that this Agreement cannot be hereafter amended, modified, or supplemented in any respect, except by a subsequent written agreement signed by both parties hereto. The parties also agree that this Agreement shall be amended and/or modified as necessary to comply with Section 409A of the Code or regulations issued thereunder.

(B)    Applicable Law.

This Agreement shall be governed in all respects by the laws of the State of Ohio, without giving effect to any of its conflict of law provisions.

(C)    Venue.

State Auto and Executive designate the U.S. District Court in Columbus, Ohio as the exclusive venue for any actions or proceedings relating to this Agreement and hereby irrevocably consent to such designation and venue; provided such District Court has jurisdiction with respect to the applicable action or proceeding. In the event that the U.S. District Court in Columbus, Ohio does not have jurisdiction with respect to an action or proceeding relating to this Agreement, State Auto and Executive designate the Court of Common Pleas of Franklin County, Ohio as the exclusive venue with respect to such action or proceeding.

(D)    Notices.

All notices under this Agreement shall be in writing and will be duly given if sent by registered or certified mail to the respective parties to the addresses set forth below or such other addresses as the parties may hereafter designate in writing for such purpose:

(1) If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: General Counsel; and

(2) If to Executive, to the last address on file with State Auto.

(E)     Assignment.

Except as expressly provided herein, neither this Agreement nor any rights, benefits, or obligations hereunder may be assigned by Executive without the prior written consent of State Auto Mutual and State Auto Financial.

(F)    Capacity.

(1) State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant, or otherwise.

(2) Except for restrictions set forth in the Employment Agreement dated September 1, 2013, between Executive and BID of Wisconsin, LLC, and the Separation Agreement dated June 30, 2014 between Executive and AssureStart, complete copies of which have been provided by Executive to State Auto, Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of his services and other obligations under this Agreement without any restriction by any agreement, document, restrictive covenant, or otherwise.

(G)     Waiver.

The failure by a party to exercise or enforce any of the terms or conditions of this Agreement will not constitute or be deemed a waiver of that party’s rights hereunder to enforce each and every term of this Agreement. The failure by a party to insist upon strict performance of any of the terms and provisions herein will not be deemed a waiver of any subsequent default in the terms or provisions herein.

(H)    Rights and Remedies Cumulative.

All rights and remedies of the parties hereunder are cumulative.

(I)    Divisibility.

The provisions of this Agreement are divisible. If any such provision shall be deemed invalid or unenforceable, it shall not affect the applicability or validity of any other provision of this Agreement, and if any such provision shall be deemed invalid or unenforceable as to any periods of time, territory, or business activities, such provision shall be deemed limited to the extent necessary to render it valid and enforceable,

(J)    Captions and Titles.

Captions and titles have been used in this Agreement only for convenience and in no way define, limit, or describe the meaning of any Article or any part thereof.

(K)    Counterparts.

This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

(L)    Section 409A of the Code.

It is intended that this Agreement shall comply with the provisions of Section 409A of the Code and the Treasury regulations relating thereto, or an exemption to Section 409A of the Code, and payments, rights and benefits may only be made, satisfied or provided under this Agreement upon an event and in a manner permitted by Section 409A of the Code, to the extent applicable, so as not to subject Executive to the payment of taxes and interest under Section 409A of the Code. In furtherance of this intent, this Agreement shall be interpreted, operated and administered in a manner consistent with these intentions. Terms defined in this Agreement shall have the meanings given to such terms under Section 409A of the Code if and to the extent required in order to comply with Section 409A of the Code. No payments to be made under this Agreement may be accelerated or deferred except as specifically permitted under Section 409A of the Code. To the extent that any regulations or other guidance issued under Section 409A of the Code would result in the Executive being subject to payment of additional income taxes or interest under Section 409A of the Code, the parties agree to amend this Agreement to maintain to the maximum extent practicable the original intent of this Agreement while avoiding the application of such taxes or interest under Section 409A of the Code. Any payments that qualify for the “short-term deferral” exception or another exception under Section 409A of the Code shall be paid under the applicable exception. For purposes of the limitations on nonqualified deferred compensation under Section 409A of the Code, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A of the Code deferral election rules and the exclusion under Section 409A of the Code for certain short-term deferral amounts. Any amounts payable solely on account of an involuntary termination shall be excludable from the requirements of Section 409A of the Code, either as separation pay or as short-term deferrals to the maximum possible extent. In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement.

IN WITNESS WHEREOF, the parties have signed this Agreement which is effective as of the Commencement Date.

	State Auto Financial Corporation
By	/s/ Robert E. Baker
	Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
	State Auto Property and Casualty Insurance Company
By	/s/ Robert E. Baker
	Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
	State Automobile Mutual Insurance Company
By	/s/ Dwight E. Smith
	Dwight E. Smith, Chair of the State Automobile Mutual Insurance Company Compensation Committee
	Executive
By	/s/ Michael E. LaRocco
	Michael E. LaRocco

Exhibit A

Executive Agreement

Exhibit B

Beneficiary Designation

In the event of my death, I direct that any amounts due me under this Agreement, to which this Beneficiary Designation is attached, shall be distributed to the person designated below. If no beneficiary shall be living to receive such assets, they shall be paid to the administrator or executor of my estate.            

Executive:
/s/ Michael E. LaRocco
Michael E. LaRocco
Beneficiary:	Ann LaRocco
Relationship to Executive:	Spouse

EX-10.02

EXHIBIT 10.02

EXECUTIVE CHANGE OF CONTROL AGREEMENT

This Executive Change of Control Agreement (this “Agreement”) is made as of March 27, 2015 to be effective as of April 27, 2015 (the “Effective Date”), by and among State Auto Financial Corporation, an Ohio corporation (“State Auto Financial”), State Auto Property and Casualty Insurance Company, an Iowa-domiciled insurance company (“State Auto P&C”), State Automobile Mutual Insurance Company, an Ohio-domiciled mutual insurance company (“State Auto Mutual”), and Michael E. LaRocco (“Executive”). State Auto Financial, State Auto P&C, State Auto Mutual and each of their respective insurer subsidiaries and affiliates, present and future, are hereinafter collectively referred to as “State Auto.”

Background Information

A. State Auto P&C is the principal operating subsidiary of State Auto Financial and the employer of record of all employees of State Auto. State Auto Financial is a majority-owned, publicly-traded holding company subsidiary of State Auto Mutual. State Auto Mutual is the ultimate controlling person in the State Auto holding company system.

B. State Auto desires to establish and maintain a sound and vital management team as an important part of State Auto’s overall corporate strategy and as an essential means of protecting and enhancing the interests of State Auto, the Boards of State Auto Financial and State Auto Mutual (collectively, the “Boards”), and their shareholders and policyholders, respectively. As part of this corporate strategy, State Auto desires to act in the best interests of State Auto to address Executive’s continued service to State Auto and available benefits in the event of an actual or threatened Change of Control (as defined herein) of State Auto Financial or State Auto Mutual.

C. Executive is a party to an Employment Agreement with State Auto dated as of the same date as this Agreement, as it may be amended from time to time (the “Employment Agreement”). The Employment Agreement does not address the impact of a Change in Control, except to incorporate by reference the provisions of this Agreement. Therefore, in the event of a Change of Control and the termination of Executive’s employment, as described in Section 2.2 of this Agreement within the time period described therein, the payments and benefits provided to Executive under this Agreement will be in lieu of any payments or benefits that might otherwise be payable under the Employment Agreement.

Statement of Agreement

The parties hereby acknowledge the accuracy of the foregoing Background Information and hereby agree as follows:

Article IDefinitions.

As used in this Agreement, the following defined terms shall have the meanings set forth below:

1.1 Annual Base Salary means the greater of (a) the highest annual rate of base salary in effect for Executive during the 12-month period immediately prior to a Change of Control, or (b) the annual rate of base salary in effect on the date Executive’s employment is terminated.

1.2 Average Annual Award means the average of the annual aggregate bonus under the Short Term Incentive Plans (or its successors) earned by Executive in each of the three calendar years immediately preceding the calendar year in which the Change of Control occurs.

1.3    Cause shall be given the meaning used in the Employment Agreement.

1.4    Change of Control means the occurrence of any of the following:

(a) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of State Auto Financial representing 30% or more of the combined voting power of State Auto Financial’s then outstanding securities, excluding (i) any acquisition by State Auto Financial or any Subsidiary; (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by State Auto Financial, a Subsidiary or State Auto Mutual; or (iii) any acquisition by State Auto Mutual; or

(b) A majority of the Board of Directors of State Auto Financial at any time is comprised of other than Continuing Directors; or

(c) Any event or transaction State Auto Financial would be required to report in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; or

(d)    Any of the following occurs:

(i) a merger or consolidation of State Auto Financial, other than a merger or consolidation in which the voting securities of State Auto Financial immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) more than 50% of the combined voting power of State Auto Financial or surviving entity immediately after the merger or consolidation with another entity;

(ii) a sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in a single transaction or a series of related transactions) of all or substantially all of the assets of State Auto Financial which shall include, without limitation, the sale of assets or earning power aggregating more than 50% of the assets or earning power of State Auto Financial on a consolidated basis;

(iii) a reorganization, reverse stock split, or recapitalization of State Auto Financial which would result in any of the foregoing; or

(iv) a transaction or series of related transactions having, directly or indirectly. the same effect as any of the foregoing.

(e)    As respects State Auto Mutual, any of the following occurs:

(i) State Auto Mutual affiliates with or is merged into or consolidated with a third party and as a result, a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors; or

(ii) State Auto Mutual completes a conversion to a stock insurance company and as a result of which a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than Continuing Directors.

Notwithstanding the foregoing, for purposes of this Change of Control definition, the percentage of securities ownership listed under subsection (a) above (i.e., 30%) shall increase or decrease, as the case may be, such that the percentage of securities ownership is consistent with any future changes to the percentage of securities ownership represented in the Change of Control definition in Section 11(B)(2)(a) (or any successor Section) of the State Auto Financial Corporation 2009 Equity Incentive Compensation Plan, as amended from time to time, or any similar provision in any successor plan.

1.5    Code means the Internal Revenue Code of 1986, as amended.

1.6 Confidential Information shall be given the meaning used in the Employment Agreement.

1.7 Continuing Director of State Auto Financial or State Auto Mutual, as the case may be, means a director who was either:

(a) first elected or appointed as a director on or prior to the Effective Date; or

(b) subsequent to the Effective Date was elected or appointed as a director if such director was first nominated by the Nominating Committee of State Auto Financial or State Auto Mutual, as the case may be, or appointed by at least two-thirds of the total number of the then Continuing Directors of State Auto Financial or State Auto Mutual, as the case may be.

1.8 Directly or Indirectly means on Executive’s own behalf, or as an officer, director, shareholder, member, partner, owner, agent, consultant, advisor, coach or employee of any corporation, partnership, limited liability company or other entity.

1.9 Disability shall be given the meaning used in the Employment Agreement.

1.10 Employee Benefits means the benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital, or other insurance (whether funded by actual insurance or self-insured by State Auto), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist (and as may be modified from time to time) or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter (and as may be modified from time to time), providing benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change of Control.

1.11    Good Reason means the occurrence of any one or more of the following:

(a) The assignment to Executive of duties which are materially and adversely different from or inconsistent with the duties, responsibilities and status of Executive’s position at any time during the 12-month period prior to a Change of Control, or which result in a significant reduction in Executive’s authority and responsibility as the Chief Executive Officer of State Auto;

(b) Except as may be required due to Exigent Circumstances, as defined in the Employment Agreement, (i) a reduction by State Auto in Executive’s Annual Base Salary in place as of the day immediately prior to a Change of Control; (ii) after a Change of Control the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of State Auto; or (iii) a reduction of Executive’s most recent Average Annual Award prior to a Change of Control;

(c) After a Change of Control, a demand by State Auto that Executive relocate to a location in excess of 35 miles from the location where Executive is based as of the day immediately prior to a Change of Control, or in the event of any such relocation with Executive’s express written consent, the failure of State Auto or a Subsidiary to pay (or reimburse Executive for) all reasonable moving expenses incurred by Executive relating to a change of principal residence in connection with such relocation and to indemnify Executive against any loss in the sale of Executive’s principal residence in connection with any such change of residence and any reasonable expenses incurred by Executive that are directly attributable to such sale (for purposes of this provision, “loss” is understood to mean a sale of such principal residence at a price less than the adjusted basis in such residence);

(d) The failure of State Auto to obtain a satisfactory agreement from any successor to State Auto to assume and agree to perform this Agreement, as contemplated in Section 5.1 of this Agreement;

(e) The failure of State Auto to provide Executive with substantially the same Employee Benefits that were provided to him immediately prior to the Change of Control, or with a package of Employee Benefits that, though one or more of such benefits may vary from those in effect immediately prior to a Change of Control, is substantially comparable in all material respects to such Employee Benefits taken as a whole; or

(f) Any material reduction in Executive’s compensation or benefits or a material adverse change in Executive’s location or duties, if such material reduction or material adverse change occurs at any time after the commencement of any discussion with a third party relating to a possible Change of Control of State Auto involving such third party, if such material reduction or material adverse change is in contemplation of such possible Change of Control and such Change of Control is actually consummated within 12 months after the date of such material reduction or material adverse change.

The existence of Good Reason shall not be affected by Executive’s subsequent incapacity due to physical or mental illness. Executive’s continued employment shall not constitute a waiver of Executive’s rights with respect to any circumstance constituting Good Reason under this Agreement. Executive shall provide State Auto with written notice of his intent to terminate with Good Reason within a period not to exceed 90 calendar days of the initial existence of the condition constituting Good Reason. State Auto shall have a period of 30 calendar days in which it may remedy the condition and prevent Executive’s termination for Good Reason.

1.12 LBP means the State Auto Financial Corporation Leadership Bonus Plan, as may be amended.

1.13 Severance Benefits means the benefits described in Section 2.1 of this Agreement, as adjusted by the applicable provisions of Section 9.1 of this Agreement.

1.14 Short Term Incentive Plans means the LBP and any successor short term incentive compensation plan of State Auto.

1.15 Subsidiary means any corporation, insurance company or other entity a majority of the voting control of which is directly or indirectly owned or controlled at the time by State Auto Financial.

1.16 Term means the period commencing on the Effective Date of this Agreement and ending on December 31, 2018, both dates inclusive; provided, however, that if a Change of Control occurs during the Term of this Agreement, the Term of this Agreement will be extended for the lesser of 36 months beyond the end of the month in which any such Change of Control occurs or the number of months beyond the end of the month in which any such Change of Control occurs until Executive attains age 65. Notwithstanding the foregoing, this Agreement shall terminate upon the termination of the Employment Agreement; provided, however, that Sections 2.3 and 2.4, Articles IV, VII through X, and Sections 11.3, 11.6 and 11.8 of the Agreement shall survive Executive’s termination of employment.

Article IIChange of Control.

2.1Severance Benefits. In the event that State Auto shall undergo a Change of Control, and if Executive then becomes entitled to receive Severance Benefits, State Auto or its respective successor, shall pay or provide to Executive the following Severance Benefits, adjusted by the applicable provisions of Section 9.1:

(a) Annual Base Salary. In addition to any accrued compensation payable as of Executive’s termination of employment, a lump sum cash amount equal to Executive’s Annual Base Salary multiplied by 2.99, unless at the time of such employment termination Executive is within two years of age 65, in which case the benefit due under this subsection (a) shall not exceed Executive’s Annual Base Salary multiplied by a factor equal to the number of months remaining until Executive attains age 65 presented as a whole integer and a fraction of a partial year (e.g., 15 months equals 1.25).

(b) Annual Incentive Compensation. In addition to any compensation otherwise payable pursuant to Executive’s bonus arrangements, a lump sum cash amount equal to Executive’s Average Annual Award multiplied by 2.99, unless at the time of such employment termination Executive is within two years of age 65, in which case the benefit due under this subsection (b) shall not exceed Executive’s Average Annual Award multiplied by a factor equal to the number of months remaining until Executive attains age 65 presented as a whole integer and a fraction of a partial year (e.g., 15 months equals 1.25). In addition, Executive shall be entitled to receive a prorated annual incentive payment for the year in which the Change of Control occurred, if otherwise eligible for such annual incentive. Such prorated annual incentive amount, if any, will be determined based on the target award levels established for the year in which the Change of Control occurred.

(c) Stock Options and Other Equity Awards. Stock options and any other types of equity awards (e.g., restricted shares, performance shares, performance units, etc.) held by Executive become exercisable upon a Change of Control according to the terms of the applicable stock option or equity plan and related agreement (if any) under which such stock options or other equity awards were granted.

(d) Outplacement. State Auto shall pay all fees for outplacement services incurred by Executive up to a maximum of $35,000, plus provide a travel expense account of up to $5,000 to reimburse job search travel. Such expenses and reimbursements shall be limited to those expenses incurred within the two calendar years following the calendar year of Executive’s separation from service or prior to Executive’s attainment of age 65, if Executive is within two years of age 65 at the time of the Change in Control. Such expenses shall be paid no later than December 31^st of the calendar year following the applicable calendar year in which such reimbursable expense was incurred.

(e) Health Insurance Reimbursement. State Auto shall pay Executive an amount equal to State Auto’s then current monthly per employee cost of providing State Auto’s health insurance benefit multiplied by 36, unless at the time of the Change in Control Executive is within two years of age 65, in which case the health insurance reimbursement provided in this Section 2.1(e) shall be multiplied by the number of months remaining until Executive attains age 65.

In computing and determining Severance Benefits under subsections (a) and (b), above, a decrease in Executive’s salary or incentive bonus potential shall be disregarded if such decrease occurs within six months before a Change of Control, is in contemplation of such Change of Control, and is taken to avoid the effect of this Agreement should such action be taken after such Change of Control. In such event, the salary and incentive bonus potential used to determine Severance Benefits shall be that in effect immediately before the decrease that is disregarded pursuant to this Section 2.1.

The Severance Benefits provided in subsections (a), (b) and (e) above shall be contingent upon Executive’s execution of a valid release of State Auto or its successors and their respective officers, directors, agents and employees, from any and all actions, suits, proceedings, claims and demands relating to Executive’s employment. Provided such release is executed and enforceable, the payment of Severance Benefits shall commence no later than 90 days after Executive’s termination of employment. In the event that the time period required by applicable law to obtain a valid and enforceable release (including the expiration of any revocation period) begins in one calendar year and ends in another calendar year, notwithstanding the provisions of the previous sentence, Severance Benefits due to Executive shall commence in the second calendar year. Notwithstanding the foregoing, if Executive is a “specified employee” as defined in Code Section 409A, such payment shall be subject to and paid according to the provisions of Section 2.4, as described below.

Executive acknowledges and agrees that the Severance Benefits provided in this Section 2.1 shall be the sole severance benefits payable to Executive in the event of any “change of control” (under any definition) of State Auto, and Executive hereby waives and relinquishes any and all rights or severance benefits under any other “change of control” provision applicable to Executive with respect to his employment by State Auto.

2.2Eligibility for Severance Benefits. State Auto, or its respective successor, shall pay or provide to Executive the Severance Benefits as defined above, in the event that Executive becomes eligible for such Severance Benefits because, during the Term of this Agreement:

(a) Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive, within 24 months after a Change of Control; or

(b) Executive terminates employment for Good Reason within 24 months after a Change of Control; or

(c) Executive’s employment is terminated from all State Auto companies for any reason other than for Cause or the death or Disability of Executive after an agreement has been reached with an unaffiliated third party, the performance of which agreement would result in a Change of Control involving such third party, if such Change of Control is actually consummated within 12 months after the date of such termination.

Executive’s termination of employment for all purposes under this Agreement shall be determined to have occurred in accordance with the “separation from service” requirements of Code Section 409A and applicable Treasury Regulations and guidance issued thereunder.

2.3Liquidated Damages; Mitigation. State Auto hereby acknowledges that it will be difficult and may be impossible for Executive to find reasonably comparable employment, or to measure the amount of damages which Executive may suffer as a result of termination of employment hereunder. Accordingly, the payment of the Severance Benefits by State Auto to Executive in accordance with the terms of this Agreement is hereby acknowledged by State Auto to be reasonable and will be liquidated damages, and Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of Executive hereunder or otherwise. State Auto shall not be entitled to set off or counterclaim against amounts payable hereunder with respect to any claim, debt or obligation of Executive.

2.4Specified Employee Delay. In the event Executive is a “specified employee” as defined in Code Section 409A, any payments under this Agreement due to a separation from service and subject to Code Section 409A shall be delayed until a date that is six months after the date of separation from service (or, if earlier, the date of death of Executive). Payments to which a “specified employee” would otherwise be entitled during the first six months following the date of separation shall be accumulated and paid as of the first date of the seventh month following the date of separation from service. Interest shall be paid on any such delayed payment at the applicable federal rate under Code Section 7872(f)(2)(A).

Article IIIExecutive’s Rights Under Certain Plans.

Any references to specific employee benefits arrangements in this Agreement are not intended to exclude Executive from participation in other benefits available to executive personnel generally or to preclude Executive’s right to other compensation or benefits as may be authorized by the Boards at any time; provided that such other compensation or benefits are not severance benefits payable upon a Change in Control. The provisions of this Agreement and any payments provided for hereunder shall not reduce any amounts otherwise payable, or in any way diminish Executive’s existing rights, or rights which would accrue solely as the result of the passage of time under any compensation plan, benefit plan, incentive plan, stock option plan, employment agreement or other contract, plan or arrangement except as may be specified in such contract, plan or arrangement. Notwithstanding anything contained herein, State Auto agrees that the severance benefits provided to Executive herein are in addition to any rights

and privileges to which Executive may be entitled as an employee of State Auto under any retirement, insurance, hospitalization or other plan which may now or hereafter be in effect, it being understood that, except to the extent currently provided in such plans, Executive shall have the same rights and privileges to participate in such plans or benefits as any other employee of State Auto.

Article IVConfidential Information; Forfeiture Events.

4.1Confidential Information. Executive agrees to receive Confidential Information of State Auto in confidence, and not to disclose to others, assist others in the application of, or use for his own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such other or others by legal and equitable means and other than as a result of disclosure by Executive. Executive further agrees that, upon termination of his employment with State Auto, all documents, records, notebooks and similar repositories (including electronic formats) containing Confidential Information, including copies thereof, then in Executive’s possession, whether prepared by him or others, will be left with and/or returned to State Auto. Executive further agrees that the obligation to maintain confidentiality created by this Article IV shall continue in effect for the duration of this Agreement and following the termination of Executive’s employment with State Auto for any reason.

4.2Forfeiture Events; Clawback Rights.

(a) The Board may, in its discretion, require Executive to repay to State Auto all or any portion of the amounts paid as Severance Benefits if:

(i) Executive violates any non-competition, non-solicitation or confidentiality covenant applicable to the Executive and for the benefit of State Auto, including such covenants included in the Employment Agreement;

(ii) It is later discovered that Executive engaged in conduct detrimental to State Auto during the Employment Term (as defined in the Employment Agreement) which has a material adverse effect on State Auto as determined by the Board of Directors of State Auto Mutual, in its discretion. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered “detrimental to State Auto” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of State Auto; or

(iii) (A)    The amount of any of the Severance Benefits was calculated based upon the achievement of certain financial results of State Auto that were subsequently the subject of a financial statement restatement by State Auto; and

(B)    The amount of Executive’s Severance Benefits would have been lower than the amount actually awarded to Executive had the financial results been properly reported.

Notwithstanding the foregoing, if the Boards determine that Executive engaged in fraudulent conduct, then the Boards will seek repayment of all Severance Benefits.

This provision shall not be the exclusive remedy of State Auto with respect to such matters.

(b) The terms of any compensation recovery or recoupment policy heretofore or hereafter adopted by the Boards, including any and all amendments thereto (a “clawback policy”), are hereby incorporated into this Agreement by reference. In addition to the terms and conditions set forth in this Agreement and the Employment Agreement, Executive agrees that any amounts payable or paid to Executive under this Agreement shall be subject to the terms of any clawback policy of the Boards.

Article VSuccessors; Binding Agreement.

5.1As to State Auto. This Agreement shall inure to the benefit of and be binding upon State Auto, its successors and assigns, including without limitation, any person, partnership or corporation which may acquire voting control of State Auto Financial or all or substantially all of its assets and business, or which may be a party to any consolidation, merger or other transaction that results in a Change of Control of State Auto Financial or State Auto Mutual. State Auto will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of State Auto to expressly assume and agree to perform this Agreement in the same manner and to the same extent that State Auto would be required to perform it if no such succession had taken place. Failure of State Auto to obtain such assumption and agreement prior

to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from State Auto in the same amount and on the same terms to which Executive would be entitled hereunder if Executive terminated employment for Good Reason following a Change of Control.

5.2As to Executive. This Agreement shall also inure to the benefit of and be binding on Executive, his heirs, successors and legal representatives. This Agreement shall be enforceable by Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Executive’s rights and benefits under this Agreement may not be assigned, except that if Executive dies while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid to the beneficiary indicated on the Beneficiary Designation attached as Exhibit A or, if there is no such beneficiary, to Executive’s estate. Such payments, if any, shall be made in the same form and at the same time, as such payment would have been made to Executive.

Article VICOBRA Continuation Coverage.

Notwithstanding any provision of this Agreement to the contrary, in the event of any “qualifying event,” as defined in Code Section 4980B, Executive and his qualifying beneficiaries shall be entitled to continuation of health care coverage, as provided under Code Section 4980B(f). The foregoing is intended as a statement of Executive’s continuation coverage rights and is in no way intended to limit any greater rights of Executive or his qualified beneficiaries.

Article VIIIndemnification; Enforcement Costs; Interest.

7.1Indemnification. State Auto, as provided for in its Amended and Restated Articles of Incorporation and its Amended and Restated Bylaws, shall indemnify Executive to the full extent of the general laws of the State of Ohio, now or hereafter in force, including the advance of expenses under procedures provided by such laws. From the date of a Change of Control, State Auto shall (a) for a period of five years after such Change of Control, provide Executive (including Executive’s heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at State Auto’s expense, and (b) indemnify and hold harmless Executive, to the fullest extent permitted or authorized by the law of the State of Ohio as it may from time to time be amended, if Executive is (whether before or after the Change of Control) made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was a director, officer or employee of State Auto or any Subsidiary, or is or was serving at the request of State Auto or any Subsidiary, as a director, trustee, officer or employee of an insurance company, corporation, partnership, joint venture, trust, or other enterprise. The indemnification provided by this Section 7.1 shall not be deemed exclusive of any other rights to which Executive may be entitled under the charter or bylaws of State Auto or of any Subsidiary, or any agreement (including the Employment Agreement), vote of shareholders or disinterested directors, or otherwise, both as to action in Executive’s official capacity and as to action in another capacity while holding such office, and shall continue as to Executive after Executive has ceased to be a director, trustee, officer or employee and shall inure to the benefit of the heirs, executors and administrators of Executive.

7.2Enforcement Cost. State Auto is aware that, upon the occurrence of a Change of Control, the Board or a shareholder or policyholder of State Auto, as the case may be, may then cause or attempt to cause State Auto to refuse to comply with their obligations under this Agreement, or may cause or attempt to cause State Auto to institute, or may institute, litigation, arbitration or other legal action seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of State Auto that Executive not be required to incur the expenses associated with the enforcement of Executive’s rights under this Agreement by litigation, arbitration or other legal action nor be bound to negotiate any settlement of Executive’s rights hereunder under threat of incurring such expenses because the cost and expense thereof would substantially detract from the benefits intended to be extended to Executive under this Agreement. Accordingly, if following a Change of Control it should appear to Executive that State Auto has failed to comply with any of their obligations under this Agreement, or in the event that State Auto or any other person takes any action to declare this Agreement void or unenforceable, or institute any litigation or other legal action designed to deny, diminish or to recover from Executive, the benefits intended to be provided to Executive hereunder, State Auto irrevocably authorizes Executive from time to time to retain counsel (legal and accounting) of Executive’s choice at the expense of State Auto as provided in this Section 7.2 to represent Executive in connection with the calculation of the Code Section 280G reduction, or the initiation or defense of any litigation or other legal action, whether by or against State Auto or any director, officer, stockholder or other person affiliated with State Auto. Notwithstanding any existing or prior attorney-client relationship between State Auto and such counsel, State Auto irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection State Auto and Executive agree that a confidential relationship shall exist between Executive and such counsel. The reasonable fees and expenses of counsel selected from time to time by Executive as provided in this Section 7.2 shall be paid or reimbursed to Executive by State Auto on a regular, periodic basis upon presentation by Executive of a statement or statements prepared by such counsel in accordance with their customary practices.

7.3Interest. In any action involving this Agreement, Executive shall be entitled to prejudgment interest on any amounts found to be due him from the date such amounts would have been payable to Executive pursuant to this Agreement at an annual rate of interest equal to the prime commercial rate in effect at the corporation’s principal bank or their successor from time to time during the prejudgment period plus four percent.

Article VIIICooperation with Regard to Litigation.

Executive agrees to cooperate with State Auto for a period of two years following Executive’s termination of employment by making himself reasonably available to testify on behalf of State Auto in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and to assist State Auto in any such action, suit or proceeding by providing information and meeting and consulting with the Boards or their counsel or counsel to State Auto as reasonably requested by the Boards or such counsel. Executive shall be reimbursed by State Auto for any expenses (including, but not limited to, legal fees) reasonably incurred by Executive in connection with his compliance with the foregoing covenant.

Article IXPayment of Taxes and Timing.

9.1Excess Severance Payment. If any Severance Benefit or other benefit paid or provided under Section 2.1, or the acceleration of stock option vesting, would be subject to excise tax pursuant to Code Section 4999 (or any similar federal or state excise tax), but would not be so subject if the total of such payments would be reduced by 10% or less, then such payment shall be reduced by the minimum amount necessary so as not to cause State Auto to have paid an Excess Severance Payment as defined in Code Section 280G(b)(1) and so Executive will not be subject to Excise Tax pursuant to Code Section 4999. The calculation of the Code Section 280G reduction shall be approved by State Auto’s independent certified public accounting firm engaged by State Auto immediately prior to the Change of Control and the calculation shall be provided to Executive in writing. Executive shall then be given 15 days; or such longer period as Executive reasonably requests and to which State Auto agrees, such agreement not to be unreasonably withheld, to accept or reject the calculation of the Code Section 280G reduction. If Executive rejects the Code Section 280G reduction calculation and the parties are thereafter unable to agree within an additional 45 days, the arbitration provisions of Section 10.1 shall control. State Auto shall reimburse Executive for all reasonable legal and accounting fees incurred with respect to the calculation of the Code Section 280G reduction and any disputes related thereto. Any payments owed to Executive under this Section 9.1, which are subject to the rules under Code Section 409A and related regulations, shall be made to Executive no later than the end of the calendar year following the calendar year in which the taxes are remitted to the taxing authority. In the event that the amount of any Severance Benefit that would be payable to or for the benefit of Executive under this Agreement must be modified or reduced to comply with this provision, it shall be modified or reduced on a pro-rata basis. In no event shall the total payments be reduced by more than 10% in order to avoid treatment as an Excess Severance Payment.

9.2Withholding of Taxes. State Auto may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as required by law; provided, however, that such payment may not exceed the amount of such taxes due as a result of the payments due under this Agreement.

In accordance with Code Section 409A and the regulations issued thereunder, this Agreement shall permit the payment of amounts necessary to (a) satisfy the employment tax withholding obligations that arise under this Agreement prior to the date that payment may otherwise be made under this Agreement and/or (b) satisfy the excise tax or underpayment penalties owed under Code Section 409A in the event of a violation of Code Section 409A under this Agreement.

9.3Delayed Payments. In the event of a genuine dispute between State Auto or any Subsidiary and Executive regarding the amount or timing of benefits under this Agreement, a delay in the payment of amounts under this Agreement shall not cause Executive to violate Code Section 409A to the extent that such delay satisfies the conditions set forth in Code Section 409A and applicable regulations thereunder.

9.4Savings Clause. If any payments otherwise payable to Executive under this Agreement are prohibited or limited by any statute or regulation in effect at the time the payments would otherwise be payable (any such limiting statute or regulation a “Limiting Rule”):

(a) State Auto will use its best efforts to obtain the consent of the appropriate governmental agency to the payment by State Auto to Executive of the maximum amount that is permitted (up to the amounts that would be due to Executive absent the Limiting Rule); and

(b) Executive will be entitled to elect to have apply, and therefore to receive benefits directly under, either (i) this Agreement (as limited by the Limiting Rule) or (ii) any generally applicable State Auto severance, separation pay and/or salary continuation plan that may be in effect at the time of Executive’s termination.

Following any such election, Executive will be entitled to receive benefits under this Agreement or plan elected only if and to the extent the Agreement or plan is applicable and subject to its specific terms.

Article XArbitration.

10.1Arbitration. The method for resolving any dispute arising out of this Agreement shall be binding arbitration in accordance with this Section 10.1. Except as provided otherwise in this Section 10.1, arbitration pursuant to this Section 10.1 shall be governed by the Commercial Arbitration Rules of the American Arbitration Association. A party wishing to obtain arbitration of an issue shall deliver written notice to the other party, including a description of the issue to be arbitrated. Within 15 days after either party demands arbitration, State Auto and Executive shall each appoint an arbitrator. The fees and expenses of these arbitrators shall be paid by State Auto. Within 15 additional days, these two arbitrators shall appoint the third arbitrator by mutual agreement; if they fail to agree within this 15 day period, then the third arbitrator shall be selected promptly pursuant to the rules of the American Arbitration Association for Commercial Arbitration. The arbitration panel shall hold a hearing in Columbus, Ohio, within 90 days after the appointment of the third arbitrator. The fees and expenses of the third arbitrator, and any American Arbitration Association fees, shall be paid by State Auto. Both State Auto and Executive may be represented by counsel (legal and accounting) and may present testimony and other evidence at the hearing. Each party shall be responsible for the legal fees and other expenses incurred by each party. Within 90 days after commencement of the hearing, the arbitration panel will issue a written decision; the majority vote of two of the three arbitrators shall control. The majority decision of the arbitrators shall be binding on the parties. Executive shall be entitled to seek specific performance of Executive’s rights under this Agreement during the period of time that any dispute or controversy arising under or in connection with this Agreement is pending.

Article XIGeneral Provisions.

11.1Entire Agreement. This Agreement contains the entire agreement of the parties hereto with respect to the impact of a Change of Control on Executive, and completely supersedes any prior verbal or written agreements or arrangements between the parties hereto, if any, related to a Change of Control. The parties hereto agree that this Agreement cannot be hereafter amended, modified or supplemented in any respect, except by a subsequent written agreement signed by both parties hereto. The parties also agree that this Agreement shall be amended and/or modified as necessary to comply with Code Section 409A or regulations issued thereunder as well as requirements or regulations issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as applicable.

11.2Applicable Law. This Agreement shall be governed in all respects by the laws of the State of Ohio, without giving effect to any of its conflict of law provisions.

11.3Notices. All notices under this Agreement shall be in writing and will be duly given if sent by United States registered or certified mail, return receipt requested, to the respective parties to the addresses set forth below or such other addresses as the parties may hereafter designate in writing for such purpose:

(a) If to either State Auto Financial, State Auto P&C or State Auto Mutual, to 518 East Broad Street, Columbus, Ohio 43215, Attention: Corporate Secretary; and

(b) If to Executive, to the last address on file with State Auto.

If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement. Notice sent by certified or registered mail shall be effective two days after deposit by delivery to the U.S. Post Office.

11.4Assignment. Except as expressly provided herein, neither this Agreement nor any rights, benefits or obligations hereunder may be assigned by Executive without the prior written consent of State Auto Mutual and State Auto Financial.

11.5Capacity.

(a) State Auto Financial, State Auto P&C and State Auto Mutual represent and warrant to Executive that they have the capacity and right to enter into this Agreement and perform all of their obligations under this Agreement without any restriction by any agreement, document, restrictive covenant or otherwise.

(b) Executive represents and warrants to State Auto Financial, State Auto P&C and State Auto Mutual that he has the capacity and right to enter into this Agreement and perform all of his services and other obligations under this Agreement without

any restriction by any agreement, document, restrictive covenant or otherwise, except as provided in Section (E)(2) of Article XI of the Employment Agreement.

11.6Waiver. The failure by a party to exercise or enforce any of the terms or conditions of this Agreement will not constitute or be deemed a waiver of that party’s rights hereunder to enforce each and every term of this Agreement. The failure by a party to insist upon strict performance of any of the terms and provisions herein will not be deemed a waiver of any subsequent default in the terms or provisions herein.

11.7Rights and Remedies Cumulative. All rights and remedies of the parties hereunder are cumulative.

11.8Divisibility. The provisions of this Agreement are divisible. If any such provision shall be deemed invalid or unenforceable, it shall not affect the applicability or validity of any other provision of this Agreement, and if any such provision shall be deemed invalid or unenforceable as to any periods of time, territory or business activities, such provision shall be deemed limited to the extent necessary to render it valid and enforceable.

11.9Captions and Titles. Captions and titles have been used in this Agreement only for convenience and in no way define, limit or describe the meaning of any Article or any part thereof.

11.10Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

11.11Code Section 409A Compliance. It is the intention of both Executive and State Auto that the benefits and rights to which Executive could be entitled to under this Agreement be exempt from or, to the extent that the requirements of Code Section 409A apply, comply with Code Section 409A and the Treasury Regulations thereunder, and the provisions of this Agreement shall be construed in a manner consistent with that intention. If Executive or State Auto believes, at any time, that any such benefit or right that is subject to Code Section 409A does not so comply, it shall promptly advise the other and shall negotiate reasonably and in good faith to amend the terms of such benefits and rights so that they comply with Code Section 409A (with the most limited possible economic effect on Executive and State Auto).

SIGNATURES APPEAR ON NEXT PAGE

IN WITNESS WHEREOF, the parties have signed this Agreement which is effective as of the Effective Date.

	State Auto Financial Corporation
By	/s/ Robert E. Baker
	Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
	State Auto Property and Casualty Insurance Company
By	/s/ Robert E. Baker
	Robert E. Baker, Chair of the State Auto Financial Corporation Compensation Committee
	State Automobile Mutual Insurance Company
By	/s/ Dwight E. Smith
	Dwight E. Smith, Chair of the State Automobile Mutual Insurance Company Compensation Committee
	Executive
By	/s/ Michael E. LaRocco
	Michael E. LaRocco

Exhibit A

Beneficiary Designation and Notice Form

Beneficiary Designation

In the event of my death, I direct that any amounts due me under this Agreement to which this Beneficiary Designation is attached shall be distributed to the person designated below. If no beneficiary shall be living to receive such assets they shall be paid to the administrator or executor of my estate.

Beneficiary:	Ann LaRocco
Relationship to Executive:	Spouse
Date:	3/27/2015	EXECUTIVE
		/s/ Michael E. LaRocco
		Michael E. LaRocco

EX-31.01

Exhibit 31.01

CERTIFICATION

I, Robert P. Restrepo, Jr., certify that:

1.    I have reviewed this Form 10-Q of State Auto Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2015	/s/ Robert P. Restrepo, Jr.
	Robert P. Restrepo, Jr., Chief Executive Officer
	(Principal executive officer)

EX-31.02

Exhibit 31.02

CERTIFICATION

I, Steven E. English, certify that:

1.    I have reviewed this Form 10-Q of State Auto Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2015	/s/ Steven E. English
	Steven E. English, Chief Financial Officer
	(Principal financial officer)

EX-32.01

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of State Auto Financial Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert P. Restrepo, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Robert P. Restrepo, Jr.

Robert P. Restrepo, Jr.

Chief Executive Officer

May 6, 2015

A signed original of this written statement required by Section 906 has been provided to State Auto Financial Corporation and will be retained by State Auto Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

Exhibit 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of State Auto Financial Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven E. English, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Steven E. English

Steven E. English

Chief Financial Officer

May 6, 2015

A signed original of this written statement required by Section 906 has been provided to State Auto Financial Corporation and will be retained by State Auto Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Reinsurance - Summary of External Reinsurance Transactions, as well as reinsurance transactions with State Auto Mutual Under the Pooling Arrangement (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Insurance [Abstract]
Reinsurance arrangement, participating reinsurers' margin	9.00%
Profit Commission	$ 1.3
Premiums earned:
Assumed from external insurers and reinsurers	1.1	1.0
Assumed under Pooling Arrangement	315.3	262.5
Ceded to external insurers and reinsurers	(8.9)	(6.0)
Ceded under Pooling Arrangement	(209.9)	(215.4)
Net assumed premiums earned	97.6	42.1
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	0.8	0.7
Assumed under Pooling Arrangement	195.3	172.6
Ceded to external insurers and reinsurers	0.1	(2.4)
Ceded under Pooling Arrangement	(121.2)	(142.2)
Net assumed losses and loss expenses incurred	$ 75.0	$ 28.7

XML

Segment Information - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 Segment	Dec. 31, 2014
Segment Reporting [Abstract]
Number of reportable segments (segments)	4
Investable assets	$ 2,506.9	$ 2,444.2

XML

Earnings Per Common Share - Options to Purchase Shares of Common Stock (Detail) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Earnings Per Share [Abstract]
Number of antidilutive options and awards	1.7	1.7

XML

Investments - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities fair value of deposit with insurance regulators	$ 8.8		$ 8.8
Proceeds on sale of available-for-sale securities	84.2	106.1
Federal Home Loan Bank of Cincinnati [Member]
Schedule of Available-for-sale Securities [Line Items]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	$ 85.0

XML

Earnings per Common Share (Tables)

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Compilation of Basic and Diluted Earnings Per Common Share

The following table sets forth the compilation of basic and diluted earnings per common share for the three months ended March 31, 2015 and 2014:

($ and shares in millions, except per share amounts)	2015		2014
Numerator:
Net income for basic earnings per common share	$	24.7	$	27.1
Denominator:
Weighted average shares for basic net earnings per common share	41.0		40.8
Effect of dilutive share-based awards	0.4		0.3
Adjusted weighted average shares for diluted net earnings per common share	41.4		41.1
Basic net earnings per common share	$	0.60	$	0.67
Diluted net earnings per common share	$	0.60	$	0.66

Options to Purchase Shares of Common Stock

The following table sets forth common stock options and restricted share units ("RSU award") provided to each outside director of the Company that were not included in the computation of diluted earnings per common share because the exercise price of the options, or awards, was greater than the average market price or their inclusion would have been antidilutive for the three months ended March 31, 2015 and 2014.

(shares in millions)	2015	2014
Total number of antidilutive options and awards	1.7	1.7

XML

Pension and Postretirement Benefit Plans - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Compensation and Retirement Disclosure [Abstract]
Contributions by employer	$ 3.3
Contributions by employer for fiscal year	$ 9.7

XML

Fair Value of Financial Instruments - Included in Notes Payable are the FHLB loan and Subordinated Debentures (Detail) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Carrying Value [Member]
Debt Instrument [Line Items]
Total notes payable	$ 100,800,000	$ 100,800,000
Fair Value [Member]
Debt Instrument [Line Items]
Total notes payable	102,000,000	101,900,000
Federal Home Loan Bank Advances [Member]
Debt Instrument [Line Items]
Interest rate (percent)	5.03%	5.03%
FHLB loan due and issued with fixed interest, Senior notes due and issued with fixed interest and Affiliate subordinated debentures due with variable interest	85,000,000
Federal Home Loan Bank Advances [Member] | Carrying Value [Member]
Debt Instrument [Line Items]
Total notes payable	85,300,000	85,300,000
Federal Home Loan Bank Advances [Member] | Fair Value [Member]
Debt Instrument [Line Items]
Total notes payable	86,500,000	86,400,000
Affiliate Subordinated Debentures Due 2033 [Member]
Debt Instrument [Line Items]
Interest rate (percent)	4.46%	4.44%
FHLB loan due and issued with fixed interest, Senior notes due and issued with fixed interest and Affiliate subordinated debentures due with variable interest	15,500,000.0
Affiliate Subordinated Debentures Due 2033 [Member] | Carrying Value [Member]
Debt Instrument [Line Items]
Total notes payable	15,500,000	15,500,000
Affiliate Subordinated Debentures Due 2033 [Member] | Fair Value [Member]
Debt Instrument [Line Items]
Total notes payable	$ 15,500,000	$ 15,500,000

XML

Segment Information - Financial Information Regarding Company's Reportable Segments (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenues from external sources:
Revenue	$ 334.9	$ 291.3
Net Investment Income	15.4	17.6
Segment income before federal income tax:
Interest expense on corporate debt	(1.3)	(1.3)
Income before federal income taxes	33.2	27.7
Operating Segments [Member]
Revenues from external sources:
Revenue	334.9	291.3
Segment income before federal income tax:
Income before federal income taxes	34.4	24.5
Operating Segments [Member] | Personal Insurance Segments [Member]
Revenues from external sources:
Revenue	150.0	114.3
Operating Segments [Member] | Business Insurance Segments [Member]
Revenues from external sources:
Revenue	96.1	93.5
Operating Segments [Member] | Specialty Insurance Segment [Member]
Revenues from external sources:
Revenue	69.2	54.7
Operating Segments [Member] | Total Insurance Segments [Member]
Revenues from external sources:
Revenue	315.3	262.5
Segment income before federal income tax:
Income before federal income taxes	15.2	(3.9)
Operating Segments [Member] | Net Investment Income [Member]
Revenues from external sources:
Net Investment Income	15.4	17.6
Operating Segments [Member] | Total Investment Operations [Member]
Revenues from external sources:
Revenue	19.6	28.3
Segment income before federal income tax:
Income before federal income taxes	19.6	28.3
Operating Segments [Member] | Total Investment Operations [Member] | Net Realized Capital Gains [Member]
Revenues from external sources:
Revenue	4.2	10.7
Segment income before federal income tax:
Income before federal income taxes	4.2	10.7
Operating Segments [Member] | All Other Segments [Member]
Segment income before federal income tax:
Income before federal income taxes	(0.4)	0.1
Operating Segments [Member] | Personal Insurance [Member]
Segment income before federal income tax:
Income before federal income taxes	17.4	5.1
Operating Segments [Member] | Business Insurance [Member]
Segment income before federal income tax:
Income before federal income taxes	(1.4)	(8.5)
Operating Segments [Member] | Specialty Insurance [Member]
Segment income before federal income tax:
Income before federal income taxes	(0.8)	(0.5)
Corporate and Other [Member] | All Other Segments [Member]
Revenues from external sources:
Revenue	0	0.5
Corporate and Other [Member] | Gaap Adjustments [Member]
Segment income before federal income tax:
Gaap Expense Adjustments	1.2	5.4
Corporate and Other [Member] | Corporate Segment [Member]
Segment income before federal income tax:
Corporate Expenses	(1.1)	(0.9)
Corporate and Other [Member] | Segment Reconciling Items [Member]
Segment income before federal income tax:
Interest expense on corporate debt	(1.3)	(1.3)
Eliminate Intersegment Revenues [Member]
Revenues from external sources:
Revenue	(1.4)	(1.3)
Eliminate Intersegment Revenues [Member] | Intersegment [Member]
Revenues from external sources:
Revenue	1.4	1.3
External and Intersegment Sources [Member]
Revenues from external sources:
Revenue	336.3	292.6
Total Consolidated [Member]
Revenues from external sources:
Revenue	334.9	291.3
Segment Reconciling Items [Member]
Segment income before federal income tax:
Income before federal income taxes	$ (1.2)	$ 3.2

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of State Auto Financial Corporation and Subsidiaries (“State Auto Financial” or the “Company”) have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the 2014 Form 10-K.

XML

Other Comprehensive Income and Accumulated Other Comprehensive Income - Schedule of Changes in Accumulated Other Comprehensive Income by Component, Net of Tax (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Beginning balance	$ 71.7	$ 80.8
Other comprehensive income before reclassifications	12.5	18.8
Amounts reclassified from AOCI	(3.2)	(10.5)
Other comprehensive income	9.3	8.3
Ending balance	81.0	89.1
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Beginning balance	110.0	84.6
Other comprehensive income before reclassifications	12.5	18.8
Amounts reclassified from AOCI	(4.2)	(10.7)
Other comprehensive income	8.3	8.1
Ending balance	118.3	92.7
Benefit Plan Items [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Beginning balance	(38.3)	(3.8)
Other comprehensive income before reclassifications	0	0
Amounts reclassified from AOCI	1.0	0.2
Other comprehensive income	1.0	0.2
Ending balance	$ (37.3)	$ (3.6)

XML

Investments - Realized Losses Related to Other-than-Temporary Impairments (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairments	$ (0.5)	$ (0.8)
Large-Cap Equity Securities [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairments	0	(0.2)
Small-Cap Securities [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairments	$ (0.5)	$ (0.6)

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Investments - Gross Unrealized Losses and Fair Value on its Investments (Detail) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015 position	Dec. 31, 2014 position
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 254.4	$ 120.7
Less than 12 months, Unrealized losses	(5.0)	(2.1)
Less than 12 months, Number of positions (positions)	44	27
12 months or more, Fair value	120.9	176.5
12 months or more, Unrealized losses	(3.0)	(5.2)
12 months or more, Number of positions (positions)	33	50
Total, Fair value	375.3	297.2
Total, Unrealized losses	(8.0)	(7.3)
Total, Number of positions	77	77
Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	14.0	7.2
Less than 12 months, Unrealized losses	(1.3)	(0.6)
Less than 12 months, Number of positions (positions)	4	2
12 months or more, Fair value	0	0
12 months or more, Unrealized losses	0	0
12 months or more, Number of positions (positions)	0	0
Total, Fair value	14.0	7.2
Total, Unrealized losses	(1.3)	(0.6)
Total, Number of positions	4	2
Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	240.4	113.5
Less than 12 months, Unrealized losses	(3.7)	(1.5)
Less than 12 months, Number of positions (positions)	40	25
12 months or more, Fair value	120.9	176.5
12 months or more, Unrealized losses	(3.0)	(5.2)
12 months or more, Number of positions (positions)	33	50
Total, Fair value	361.3	290.0
Total, Unrealized losses	(6.7)	(6.7)
Total, Number of positions	73	75
Fixed Maturities [Member] | U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	41.1	19.9
Less than 12 months, Unrealized losses	(0.3)	(0.3)
Less than 12 months, Number of positions (positions)	7	4
12 months or more, Fair value	24.1	52.0
12 months or more, Unrealized losses	(0.7)	(1.2)
12 months or more, Number of positions (positions)	7	17
Total, Fair value	65.2	71.9
Total, Unrealized losses	(1.0)	(1.5)
Total, Number of positions	14	21
Fixed Maturities [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	117.7	6.1
Less than 12 months, Unrealized losses	(1.5)	0
Less than 12 months, Number of positions (positions)	23	5
12 months or more, Fair value	6.8	30.9
12 months or more, Unrealized losses	0	(0.4)
12 months or more, Number of positions (positions)	3	9
Total, Fair value	124.5	37.0
Total, Unrealized losses	(1.5)	(0.4)
Total, Number of positions	26	14
Fixed Maturities [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	33.3	43.5
Less than 12 months, Unrealized losses	(1.2)	(0.9)
Less than 12 months, Number of positions (positions)	5	8
12 months or more, Fair value	50.6	56.1
12 months or more, Unrealized losses	(1.3)	(2.1)
12 months or more, Number of positions (positions)	10	11
Total, Fair value	83.9	99.6
Total, Unrealized losses	(2.5)	(3.0)
Total, Number of positions	15	19
Fixed Maturities [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	48.3	44.0
Less than 12 months, Unrealized losses	(0.7)	(0.3)
Less than 12 months, Number of positions (positions)	5	8
12 months or more, Fair value	39.4	37.5
12 months or more, Unrealized losses	(1.0)	(1.5)
12 months or more, Number of positions (positions)	13	13
Total, Fair value	87.7	81.5
Total, Unrealized losses	$ (1.7)	$ (1.8)
Total, Number of positions	18	21

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Other Comprehensive Income and Accumulated Other Comprehensive Income - Schedule of Reclassifications Out of Accumulated Other Comprehensive Income by Component (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Realized gain/(loss) on sale of securities	$ 3.8	$ 10.7
Tax (expense) benefit	(8.5)	(0.6)
Total reclassifications for the period	3.2	10.5
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period	4.2	10.7
Benefit Plan Items [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period	(1.0)	(0.2)
Reclassification Out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period	1.7	10.5
Reclassification Out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Realized gain/(loss) on sale of securities	4.2	10.7
Total before tax	4.2	10.7
Tax (expense) benefit	(1.5)	0
Net of tax	2.7	10.7
Reclassification Out of Accumulated Other Comprehensive Income [Member] | Benefit Plan Items [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Accumulated other comprehensive income components/Negative prior-service costs	1.4	1.4
Accumulated other comprehensive income components/Net actuarial loss	(2.9)	(1.6)
Total before tax	(1.5)	(0.2)
Tax (expense) benefit	0.5	0
Net of tax	$ (1.0)	$ (0.2)

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Investments - Amortized Cost and Fair Value of Available-for-Sale Fixed Maturities by Contractual Maturity (Detail) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Amortized cost
Due in 1 year or less, Amortized cost	$ 38.6
Due after 1 year through 5 years, Amortized cost	329.3
Due after 5 years through 10 years, Amortized cost	278.9
Due after 10 years, Amortized cost	777.3
U.S. government agencies mortgage-backed securities, Amortized cost	469.9
Total, Amortized cost	1,894.0	1,831.3
Fair value
Due in 1 year or less, Fair value	39.4
Due after 1 year through 5 years, Fair value	343.4
Due after 5 years through 10 years, Fair value	293.1
Due after 10 years, Fair value	799.4
U.S. government agencies mortgage-backed securities, Fair value	488.7
Total, Fair value	$ 1,964.0	$ 1,891.9

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Investments - Components of Net Investment Income (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net Investment Income [Line Items]
Investment income	$ 15.9	$ 18.1
Investment expenses	0.5	0.5
Net investment income	15.4	17.6
Fixed Maturities [Member]
Net Investment Income [Line Items]
Investment income	12.9	15.4
Equity Securities [Member]
Net Investment Income [Line Items]
Investment income	1.6	1.4
Cash and Cash Equivalents, and Other [Member]
Net Investment Income [Line Items]
Investment income	$ 1.4	$ 1.3

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Condensed Consolidated Statements of Cash Flows (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Statement of Cash Flows [Abstract]
Interest paid, affiliates	$ 0.2	$ 0.2

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Investments - Realized and Unrealized Holding Gains (Losses) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Realized gains:
Total realized gains	$ 5.2	$ 11.6
Realized losses:
Total realized losses	(1.0)	(0.9)
Net realized gain on investments	4.2	10.7
Change in unrealized holding gains (losses), net of tax:
Deferred federal income tax liability	(4.5)	(4.3)
Valuation allowance	0	0.1
Change in net unrealized holding (losses) gains, net of tax	8.3	8.1
Fixed Maturities [Member]
Realized gains:
Total realized gains	1.1	2.1
Change in unrealized holding gains (losses), net of tax:
Change in net unrealized holding (losses) gains, net of tax	9.4	14.4
Equity Securities [Member]
Realized gains:
Total realized gains	4.1	9.4
Change in unrealized holding gains (losses), net of tax:
Change in net unrealized holding (losses) gains, net of tax	(1.0)	(4.5)
Equity Securities [Member] | Sales [Member]
Realized losses:
Total realized losses	(0.5)	(0.1)
Equity Securities [Member] | OTTI [Member]
Realized losses:
Total realized losses	(0.5)	(0.8)
Other Invested Assets [Member]
Realized gains:
Total realized gains	0	0.1
Change in unrealized holding gains (losses), net of tax:
Change in net unrealized holding (losses) gains, net of tax	$ 4.4	$ 2.4

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Income Taxes - Reconciliation Between Actual Federal Income Tax Expense (Benefit) and Amount Computed at Indicated Statutory Rate (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Amount at statutory rate	$ 11.6	$ 9.7
Tax-exempt interest and dividends received deduction	(2.2)	(2.1)
Other, net	(0.9)	0.2
Valuation allowance	0	(7.2)
Federal income tax expense and effective rate	$ 8.5	$ 0.6
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Amount at statutory rate (percent)	35.00%	35.00%
Tax-exempt interest and dividends received deduction (percent)	(7.00%)	(8.00%)
Other, net (percent)	(3.00%)	1.00%
Valuation allowance (percent)	0.00%	(26.00%)
Federal income tax expense (benefit) and effective rate (percent)	25.00%	2.00%

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Condensed Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Assets
Fixed maturities, available-for-sale, at fair value (amortized cost $1,894.0 and $1,831.3, respectively)	$ 1,964.0	$ 1,891.9
Equity securities, available-for-sale, at fair value (cost $236.7 and $235.5, respectively)	310.6	310.4
Other invested assets, available-for-sale, at fair value (cost $54.4 and $50.5, respectively)	88.6	80.3
Other invested assets	5.3	5.3
Notes receivable from affiliate	70.0	70.0
Total investments	2,438.5	2,357.9
Cash and cash equivalents	68.4	86.3
Accrued investment income and other assets	36.1	33.8
Deferred policy acquisition costs (affiliated net assumed $49.6 and $46.8, respectively)	127.4	126.5
Reinsurance recoverable on losses and loss expenses payable	7.9	9.6
Prepaid reinsurance premiums	6.2	6.1
Due from affiliate	0	40.1
Current federal income taxes	0.7	1.1
Net deferred federal income taxes	84.3	97.4
Property and equipment, at cost	7.6	8.1
Total assets	2,777.1	2,766.9
Liabilities and Stockholders’ Equity
Losses and loss expenses payable (affiliated net assumed $504.8 and $494.3, respectively)	997.7	983.2
Unearned premiums (affiliated net assumed $205.4 and $201.7, respectively)	604.2	612.4
Notes payable (affiliates $15.5 and $15.5, respectively)	100.8	100.8
Postretirement and pension benefits (affiliated net ceded $62.3 and $63.2, respectively)	115.6	117.3
Due to affiliate	6.2	0
Other liabilities (affiliated net ceded $2.8 and $5.1, respectively)	48.4	80.3
Total liabilities	1,872.9	1,894.0
Stockholders’ equity:
Common stock, without par value. Authorized 100.0 shares; 47.8 and 47.7 shares issued, respectively, at stated value of $2.50 per share	119.5	119.3
Treasury stock, 6.8 and 6.8 shares, respectively, at cost	(116.1)	(116.0)
Additional paid-in capital	144.5	143.2
Accumulated other comprehensive income (affiliated net ceded $63.7 and $65.1, respectively)	81.0	71.7
Retained earnings	675.3	654.7
Total stockholders’ equity	904.2	872.9
Total liabilities and stockholders’ equity	2,777.1	2,766.9
Class A Preferred Stock [Member]
Stockholders’ equity:
Preferred stock value	0	0
Class B Preferred Stock [Member]
Stockholders’ equity:
Preferred stock value	$ 0	$ 0

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Earnings Per Common Share - Compilation of Basic and Diluted Earnings (Loss) Per Common Share (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Numerator:
Net income for basic earnings per common share	$ 24.7	$ 27.1
Denominator:
Weighted average shares for basic net earnings per common share (shares)	41.0	40.8
Effect of dilutive share-based awards (shares)	0.4	0.3
Adjusted weighted average shares for diluted net earnings per common share (shares)	41.4	41.1
Basic net earnings per common share (usd per share)	$ 0.60	$ 0.67
Diluted net earnings per common share (usd per share)	$ 0.60	$ 0.66

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Consolidated Statements of Comprehensive Income (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 24.7	$ 27.1
Net unrealized holding gains on investments:
Unrealized holding gains	17.0	23.0
Reclassification adjustments for gains realized in net income	(4.2)	(10.7)
Income tax expense	(4.5)	(4.2)
Total net unrealized holding gains on investments	8.3	8.1
Reclassification adjustments for amortization to statements of income:
Negative prior service cost	(1.4)	(1.4)
Net actuarial loss	2.9	1.6
Income tax expense	(0.5)	0
Total net unrecognized benefit plan obligations	1.0	0.2
Other comprehensive income	9.3	8.3
Comprehensive income	$ 34.0	$ 35.4

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Fair Value of Financial Instruments - Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3) (Detail) (Available-for-Sale Securities [Member], Fair Value, Measurements, Recurring [Member], USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Available-for-Sale Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance	$ 9.4	$ 8.9
Total realized gains (losses) - included in earnings	0.2	0
Total unrealized gains (losses) - included in other comprehensive income	(0.2)	0.2
Purchases	0	0.3
Sales	(5.9)	0
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Ending Balance	$ 3.5	$ 9.4

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

Reconciliation Between Actual Federal Income Tax Benefit and Amount Computed at Indicated Statutory Rate

The following table sets forth the reconciliation between actual federal income tax expense and the amount computed at the indicated statutory rate for the three months ended March 31, 2015 and 2014:

($ millions)	2015					2014
Amount at statutory rate	$	11.6		35	%	$	9.7		35	%
Tax-exempt interest and dividends received deduction	(2.2		)	(7	)	(2.1		)	(8	)
Other, net	(0.9		)	(3	)	0.2			1
Valuation allowance	—			—		(7.2		)	(26	)
Federal income tax expense and effective rate	$	8.5		25	%	$	0.6		2	%

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Fair Value of Financial Instruments - Company Estimates Receivable from Affiliate using Market Quotations for U.S. Treasury Securities (Detail) (Affiliated Entity [Member], Level 2 [Member], USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable interest rate (percent)	7.00%	7.00%
Carrying Value [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable from affiliate	70.0	70.0
Fair Value [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable from affiliate	76.4	74.6

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Other Comprehensive Income and Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

Changes in Accumulated Other Comprehensive Income by Component, Net of Tax

The following table sets forth the changes in the Company’s accumulated other comprehensive income component (AOCI), net of tax, for the three months ended March 31, 2015 and 2014:

($ millions)		Unrealized Gains and Losses on Available-for-Sale Securities			Benefit Plan Items			Total
Beginning balance at January 1, 2015		$	110.0		$	(38.3	)	$	71.7
Other comprehensive income before reclassifications		12.5			—			12.5
Amounts reclassified from AOCI (a)		(4.2		)	1.0			(3.2		)
Net current period other comprehensive income		8.3			1.0			9.3
Ending balance at March 31, 2015		$	118.3		$	(37.3	)	$	81.0
Beginning balance at January 1, 2014		$	84.6		$	(3.8	)	$	80.8
Other comprehensive income before reclassifications		18.8			—			18.8
Amounts reclassified from AOCI (a)		(10.7		)	0.2			(10.5		)
Net current period other comprehensive income		8.1			0.2			8.3
Ending balance at March 31, 2014		$	92.7		$	(3.6	)	$	89.1
(a)	See separate table below for details about these reclassifications

Schedule of Reclassifications Out of Accumulated Other Comprehensive Income by Component

The following table sets forth the reclassifications out of accumulated other comprehensive income, by component, to the Company’s condensed consolidated statement of income for the three months ended March 31, 2015 and 2014:

($ millions)
Details about Accumulated Other		Three months ended						Affected line item in the Condensed
Comprehensive Income Components		March 31						Consolidated Statements of Income
		2015			2014
Unrealized gains on available for sale securities		$	4.2		$	10.7		Realized gain on sale of securities
		4.2			10.7			Total before tax
		(1.5		)	—			Tax expense
		2.7			10.7			Net of tax
Amortization of benefit plan items
Negative prior service cost		1.4			1.4			(a)
Net actuarial loss		(2.9		)	(1.6		)	(a)
		(1.5		)	(0.2		)	Total before tax
		0.5			—			Tax benefit
		(1.0		)	(0.2		)	Net of tax
Total reclassifications for the period		$	1.7		$	10.5
(a)	These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see pension and postretirement benefit plans footnote for additional details).

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Condensed Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net income	$ 24.7	$ 27.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, net	5.5	3.4
Share-based compensation	1.0	1.0
Net realized gains on investments	(3.8)	(10.7)
Changes in operating assets and liabilities:
Deferred policy acquisition costs	(0.9)	(2.9)
Accrued investment income and other assets	(2.0)	(1.5)
Postretirement and pension benefits	(0.7)	1.7
Other liabilities and due to/from affiliates, net	(49.6)	(10.6)
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums	1.6	(0.6)
Losses and loss expenses payable	14.5	(8.2)
Unearned premiums	(8.2)	2.9
Federal income taxes	9.0	0.7
Cash provided from December 31, 2014 unearned premium transfer related to the homeowners quota share arrangement	63.5	0
Net cash provided by operating activities	54.6	2.3
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale	(212.8)	(137.2)
Purchases of equity securities available-for-sale	(19.7)	(38.0)
Purchases of other invested assets	(3.9)	(0.4)
Maturities, calls and pay downs of fixed maturities available-for-sale	83.2	68.9
Sales of fixed maturities available-for-sale	62.5	71.3
Sales of equity securities available-for-sale	21.5	34.6
Sales of other invested assets available-for-sale	0.2	0.2
Net cash used in investing activities	(69.0)	(0.6)
Cash flows from financing activities:
Proceeds from issuance of common stock	0.7	0.6
Payments to acquire treasury stock	(0.1)	(0.1)
Payment of dividends	(4.1)	(4.2)
Net cash used in financing activities	(3.5)	(3.7)
Net decrease in cash and cash equivalents	(17.9)	(2.0)
Cash and cash equivalents at beginning of period	86.3	80.3
Cash and cash equivalents at end of period	68.4	78.3
Supplemental disclosures:
Interest paid (affiliates $0.2 and $0.2, respectively)	$ 1.3	$ 1.3

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fixed maturities, available-for-sale, amortized cost	$ 1,894.0	$ 1,831.3
Equity securities, available-for-sale, cost	236.7	235.5
Other invested assets, available-for-sale, cost	54.4	50.5
Deferred policy acquisitions costs from affiliates	49.6	46.8
Losses and loss expenses payable, affiliates	504.8	494.3
Unearned premiums, affiliates	205.4	201.7
Notes payable, affiliates	15.5	15.5
Net Postretirement and Pension Benefits	(62.3)	(63.2)
Net Other Liabilities from Affiliates	(2.8)	(5.1)
Common stock, no par value (usd per share)	$ 0	$ 0
Common stock, shares authorized (shares)	100,000,000	100,000,000
Common stock, shares issued (shares)	47,800,000	47,700,000
Common stock, stated value per share (usd per share)	$ 2.5	$ 2.5
Treasury stock (shares)	6,800,000	6,800,000
Net Accumulated Other Comprehensive Income	$ (63.7)	$ (65.1)
Class A Preferred Stock [Member]
Preferred stock, no par value (usd per share)	$ 0	$ 0
Preferred stock, shares authorized (shares)	2,500,000	2,500,000
Preferred stock, shares issued (shares)	0	0
Class B Preferred Stock [Member]
Preferred stock, no par value (usd per share)	$ 0	$ 0
Preferred stock, shares authorized (shares)	2,500,000	2,500,000
Preferred stock, shares issued (shares)	0	0

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Segment Information

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company has four reportable segments: personal insurance, business insurance, specialty insurance and investment operations. The reportable insurance segments are business units managed separately because of the differences in the type of customers they serve, the products they provide or services they offer. The insurance segments market a broad line of property and casualty insurance products throughout the United States through independent insurance agencies, which include retail agents and wholesale brokers. The personal insurance segment provides primarily personal automobile and homeowners to the personal insurance market. The business insurance segment provides primarily commercial automobile, commercial multi-peril, fire & allied and general liability insurance covering small-to-medium sized commercial exposures. The specialty insurance segment provides commercial coverages, including workers’ compensation for both the legacy State Auto Group and RTW's insurance subsidiaries, that require specialized product underwriting, claims handling or risk management services through a distribution channel of retail agents and wholesale brokers, which may include program administrators and other specialty sources. The investment operations segment, managed by Stateco, provides investment services.

The Company evaluates the performance of its insurance segments using industry financial measurements based on Statutory Accounting Practices (“SAP”), which include loss and loss adjustment expense ratios, underwriting expense ratios, combined ratios, statutory underwriting gain (loss), net premiums earned and net written premiums. One of the most significant differences between SAP and GAAP is that SAP requires all underwriting expenses to be expensed immediately and not deferred and amortized over the same period the premium is earned.

The investment operations segment is evaluated based on investment returns of assets managed by Stateco. Asset information by segment is not reported for the insurance segments because the Company does not produce such information internally.

The following table sets forth financial information regarding the Company’s reportable segments for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Revenue from external sources:
Insurance segments
Personal insurance	$	150.0		$	114.3
Business insurance	96.1			93.5
Specialty insurance	69.2			54.7
Total insurance segments	315.3			262.5
Investment operations segment
Net investment income	15.4			17.6
Net realized capital gains	4.2			10.7
Total investment operations segment	19.6			28.3
All other	—			0.5
Total revenue from external sources	334.9			291.3
Intersegment revenue	1.4			1.3
Total revenue	336.3			292.6
Reconciling items:
Eliminate intersegment revenues	(1.4		)	(1.3		)
Total consolidated revenues	$	334.9		$	291.3
Segment income before federal income tax:
Insurance segments SAP underwriting income (loss)
Personal insurance	$	17.4		$	5.1
Business insurance	(1.4		)	(8.5		)
Specialty insurance	(0.8		)	(0.5		)
Total insurance segments	15.2			(3.9		)
Investment operations segment
Net investment income	15.4			17.6
Net realized capital gains	4.2			10.7
Total investment operations segment	19.6			28.3
All other	(0.4		)	0.1
Total segment income before tax expense	34.4			24.5
Reconciling items:
GAAP expense adjustments	1.2			5.4
Interest expense on corporate debt	(1.3		)	(1.3		)
Corporate expenses	(1.1		)	(0.9		)
Total reconciling items	(1.2		)	3.2
Total consolidated income before federal income tax expense	$	33.2		$	27.7

Investable assets attributable to the Company’s investment operations segment totaled $2,506.9 million and $2,444.2 million at March 31, 2015 and December 31, 2014, respectively.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015	May 01, 2015
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Entity Registrant Name	State Auto Financial CORP
Entity Central Index Key	0000874977
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding (shares)		41,121,315

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Contingencies and Litigation

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Contingencies and Litigation

Contingencies and Litigation

In accordance with the Contingencies Topic of the Financial Accounting Standards Board's Accounting Standards Codification, the Company accrues for a litigation-related liability when it is probable that such a liability has been incurred and the amount can be reasonably estimated. The Company reviews all litigation on an ongoing basis when making accrual and disclosure decisions. For certain legal proceedings, the Company cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in their early stages of development or where the plaintiffs seek indeterminate damages. Various factors, including, but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated. If the loss contingency in question is not both probable and reasonably estimable, the Company does not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. Based on currently available information known to the Company, it believes that its reserves for litigation-related liabilities are reasonable. However, in the event that a legal proceeding results in a substantial judgment against, or settlement by, the Company, there can be no assurance that any resulting liability or financial commitment would not have a material adverse effect on the financial condition, results of operations or cash flows of the consolidated financial statements of the Company.

In April 2013, a putative class action lawsuit (Schumacher vs. State Automobile Mutual Insurance Company, et al.) was filed against State Auto Mutual, State Auto Financial and State Auto P&C ("State Auto Defendants") in Federal District Court in Ohio. Plaintiffs claimed that, in connection with the homeowners policies of various State Auto companies, the coverage limits and premiums were improperly increased as a result of an insurance to value (“ITV”) program and alleged that they purchased coverage in excess of that which was necessary to insure them in the event of loss. Plaintiffs’ claims included breach of good faith and fair dealing, negligent misrepresentation and fraud, violation of the Ohio Deceptive Trade Practices Act, and fraudulent inducement. Plaintiffs sought compensatory and punitive damages to be determined by the court, as well as class certification. On February 2, 2015, the Court struck the class allegations, and on March 13, 2015, Plaintiffs settled with the State Auto Defendants for a nominal amount and dismissed their remaining individual claims with prejudice, thereby terminating the litigation.

The Company is involved in lawsuits in the ordinary course of its business arising out of or otherwise related to its insurance policies. Additionally, from time to time the Company may be involved in lawsuits, including class actions, in the ordinary course of business but not arising out of or otherwise related to its insurance policies. These lawsuits are in various stages of development. The Company generally will contest these matters vigorously but may pursue settlement if appropriate. Based on currently available information, the Company does not believe it is reasonably possible that any such lawsuit or related lawsuits will be material to its results of operations or have a material adverse effect on its consolidated financial position or cash flows.

Additionally, the Company may be impacted by adverse regulatory actions and adverse court decisions where insurance coverages are expanded beyond the scope originally contemplated in its insurance policies. The Company believes that the effects, if any, of such regulatory actions and published court decisions are not likely to have a material adverse effect on its financial or cash flow position.

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Condensed Consolidated Statements of Income (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Earned premiums (affiliated net assumed $105.4 and $47.1, respectively)	$ 315.3	$ 262.5
Net investment income (affiliate $1.2 and $1.2, respectively)	15.4	17.6
Net realized gains on investments:
Total other-than-temporary impairment losses	(0.5)	(0.8)
Portion of loss recognized in other comprehensive income	0	0
Other net realized investment gains	4.3	11.5
Total net realized gains on investments	3.8	10.7
Other income from affiliates	0.4	0.5
Total revenues	334.9	291.3
Losses and loss expenses (affiliated net assumed $74.1 and $30.4, respectively)	195.0	171.8
Acquisition and operating expenses	103.4	88.5
Interest expense (affiliates $0.2 and $0.2, respectively)	1.3	1.3
Other expenses	2.0	2.0
Total expenses	301.7	263.6
Income before federal income taxes	33.2	27.7
Federal income tax expense	8.5	0.6
Net income	$ 24.7	$ 27.1
Earnings per common share:
Basic (usd per share)	$ 0.60	$ 0.67
Diluted (usd per share)	$ 0.60	$ 0.66
Dividends paid per common share (usd per share)	$ 0.1	$ 0.1

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Reinsurance

3 Months Ended

Mar. 31, 2015

Insurance [Abstract]

Reinsurance

Reinsurance

The insurance subsidiaries of State Auto Financial, including State Auto Property & Casualty Insurance Company (“State Auto P&C”), Milbank Insurance Company and State Auto Insurance Company of Ohio (collectively referred to as the “STFC Pooled Companies”) participate in a quota share reinsurance pooling arrangement (“the Pooling Arrangement”) with State Auto Mutual and its subsidiaries and affiliates, State Auto Insurance Company of Wisconsin, Meridian Security Insurance Company, Patrons Mutual Insurance Company of Connecticut, Rockhill Insurance Company, Plaza Insurance Company, American Compensation Insurance Company and Bloomington Compensation Insurance Company, (collectively referred to as the “Mutual Pooled Companies”).

The following table sets forth a summary of the Company’s external reinsurance transactions, as well as reinsurance transactions with State Auto Mutual under the Pooling Arrangement, for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Premiums earned:
Assumed from external insurers and reinsurers	$	1.1		$	1.0
Assumed under Pooling Arrangement	315.3			262.5
Ceded to external insurers and reinsurers	(8.9		)	(6.0		)
Ceded under Pooling Arrangement	(209.9		)	(215.4		)
Net assumed premiums earned	$	97.6		$	42.1
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	$	0.8		$	0.7
Assumed under Pooling Arrangement	195.3			172.6
Ceded to external insurers and reinsurers	0.1			(2.4		)
Ceded under Pooling Arrangement	(121.2		)	(142.2		)
Net assumed losses and loss expenses incurred	$	75.0		$	28.7

Subject to the terms and conditions of the expired Homeowners Quota Share Arrangement ("HO QS Arrangement"), the participating reinsurers’ margin was capped at 9.0%, with any excess returned to the State Auto Group in the form of profit commission. For the three months ended March 31, 2015, the Company recognized $1.3 million of profit commission, which was reflected as a reduction in acquisition and operating expenses on our consolidated statements of income.

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Below is the fair value hierarchy that categorizes into three levels the inputs to valuation techniques that are used to measure fair value:

• Level 1 includes observable inputs which reflect quoted prices for identical assets or liabilities in active markets at the measurement date.

• Level 2 includes observable inputs for assets or liabilities other than quoted prices included in Level 1, and it includes valuation techniques which use prices for similar assets and liabilities.

• Level 3 includes unobservable inputs which reflect the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

The Company utilizes one nationally recognized pricing service to estimate the majority of its available-for-sale investment portfolio’s fair value. The Company obtains one price per security and the processes and control procedures employed by the Company are designed to ensure the value is accurately recorded on an unadjusted basis. Through discussions with the pricing service, the Company gains an understanding of the methodologies used to price the different types of securities, that the data and the valuation methods utilized are appropriate and consistently applied, and that the assumptions are reasonable and representative of fair value. To validate the reasonableness of the valuations obtained from the pricing service, the Company compares to other fair value pricing information gathered from other independent pricing sources. At March 31, 2015 and December 31, 2014, the Company did not adjust any of the prices received from the pricing service.

Transfers between level categorizations may occur due to changes in the availability of market observable inputs. Transfers in and out of level categorizations are reported as having occurred at the beginning of the quarter in which the transfer occurred. There were no transfers between level categorizations during the three months ended March 31, 2015 and 2014.

The following sections describe the valuation methods used by the Company for each type of financial instrument it holds that are carried at fair value:

Fixed Maturities

The Company utilizes a third party pricing service to estimate fair value measurements for the majority of its fixed maturities. The fair value estimate of the Company’s fixed maturity investments are determined by evaluations that are based on observable market information rather than market quotes. Inputs to the evaluations include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, and other market-observable information. The fixed maturity portfolio pricing obtained from the pricing service is reviewed for reasonableness. The Company regularly selects a random sample of security prices which are compared to one or more alternative pricing sources for reasonableness. Any discrepancies with the pricing are returned to the pricing service for further explanation and, if necessary, adjustments are made. To date, the Company has not identified any significant discrepancies in the pricing provided by its third party pricing service. Investments valued using these inputs include U.S. treasury securities and obligations of U.S. government agencies, obligations of states and political subdivisions, corporate securities (except for a security discussed below), and U.S. government agencies mortgage-backed securities. All unadjusted estimates of fair value for fixed maturities priced by the pricing service are included in the amounts disclosed in Level 2 of the hierarchy. If market inputs are unavailable, then no fair value is provided by the pricing service. For these securities, fair value is determined either by requesting brokers who are knowledgeable about these securities to provide a quote; or the Company internally determines the fair values by employing widely accepted pricing valuation models, and depending on the level of observable market inputs, renders the fair value estimate as Level 2 or Level 3. The Company holds one fixed maturity corporate security included in Level 3 and estimates its fair value using the present value of the future cash flows. Due to the limited amount of observable market information for this security, the Company includes the fair value estimate in Level 3.

Equities

The fair value of each equity security is based on an observable market price for an identical asset in an active market and is priced by the same pricing service discussed above. All equity securities are recorded using unadjusted market prices and have been disclosed in Level 1.

Other Invested Assets

Included in other invested assets are two international funds (“the funds”) that invest in equity securities of foreign issuers and are managed by third party investment managers. The funds had a fair value of $80.5 million and $72.9 million at March 31, 2015 and December 31, 2014, respectively, which was determined using each fund’s net asset value. The Company employs procedures to assess the reasonableness of the fair value of the funds including obtaining and reviewing each fund’s audited financial statements. There are no unfunded commitments related to the funds. The Company may not sell its investment in the funds; however, the Company may redeem all or a portion of its investment in the funds at net asset value per share with the appropriate prior written notice. Due to the Company’s ability to redeem its investment in the funds at net asset value per share at the measurement date, the funds have been disclosed in Level 2.

The remainder of the Company’s other invested assets consist primarily of holdings in publicly-traded mutual funds. The Company believes that its prices for these publicly-traded mutual funds based on an observable market price for an identical asset in an active market reflect their fair values and consequently these securities have been disclosed in Level 1.

The following tables set forth the Company’s available-for-sale investments within the fair value hierarchy at March 31, 2015 and December 31, 2014:

($ millions)	Total		Level 1		Level 2		Level 3
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	305.0	$	—	$	305.0	$	—
Obligations of states and political subdivisions	859.3		—		859.3		—
Corporate securities	311.0		—		307.5		3.5
U.S. government agencies mortgage-backed securities	488.7		—		488.7		—
Total fixed maturities	1,964.0		—		1,960.5		3.5
Equity securities:
Large-cap securities	234.6		234.6		—		—
Small-cap securities	76.0		76.0		—		—
Total equity securities	310.6		310.6		—		—
Other invested assets	88.6		8.1		80.5		—
Total available-for-sale investments	$	2,363.2	$	318.7	$	2,041.0	$	3.5
($ millions)	Total		Level 1		Level 2		Level 3
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	309.3	$	—	$	309.3	$	—
Obligations of states and political subdivisions	769.5		—		769.5		—
Corporate securities	340.6		—		331.2		9.4
U.S. government agencies mortgage-backed securities	472.5		—		472.5		—
Total fixed maturities	1,891.9		—		1,882.5		9.4
Equity securities:
Large-cap securities	242.2		242.2		—		—
Small-cap securities	68.2		68.2		—		—
Total equity securities	310.4		310.4		—		—
Other invested assets	80.3		7.4		72.9		—
Total available-for-sale investments	$	2,282.6	$	317.8	$	1,955.4	$	9.4

For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following tables set forth a reconciliation of the beginning and ending balances for the three months ended March 31, 2015 and the year ended December 31, 2014, separately for each major category of assets:

($ millions)	Fixed maturities
Balance at January 1, 2015	$	9.4
Total realized gains – included in earnings	0.2
Total unrealized losses – included in other comprehensive income	(0.2		)
Purchases	—
Sales	(5.9		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2015	$	3.5
($ millions)	Fixed maturities
Balance at January 1, 2014	$	8.9
Total realized gains – included in earnings	—
Total unrealized gains – included in other comprehensive income	0.2
Purchases	0.3
Sales	—
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at December 31, 2014	$	9.4

The following sections describe the valuation methods used by the Company for each type of financial instrument it holds that is not measured at fair value but for which fair value is disclosed:

Financial Instruments Disclosed, But Not Carried, At Fair Value

Other Invested Assets

Included in other invested assets are common stock of the Federal Home Loan Bank of Cincinnati ("FHLB") and the Trust Securities. The Trust Securities and FHLB common stock are carried at cost, which approximates fair value. The fair value of the FHLB common stock at March 31, 2015 was $4.8 million and the fair value of the Trust Securities was $0.5 million. The investments have been placed in Level 3 of the fair value hierarchy.

Notes Receivable from Affiliate

In May 2009, the Company entered into two separate credit agreements with State Automobile Mutual Insurance Company (“State Auto Mutual") pursuant to which it loaned State Auto Mutual a total of $70.0 million. The Company estimates the fair value of the notes receivable from affiliate using market quotations for U.S. treasury securities with similar maturity dates and applies an appropriate credit spread. Consequently this has been placed in Level 2 of the fair value hierarchy.

($ millions, except interest rates)	March 31, 2015						December 31, 2014
	Carrying value		Fair value		Interest rate		Carrying value		Fair value		Interest rate
Notes receivable from affiliate	$	70.0	$	76.4	7.00	%	$	70.0	$	74.6	7.00	%

Notes Payable

Included in notes payable are the FHLB Loan and Subordinated Debentures. The Company estimates the fair value of the FHLB Loan by discounting cash flows using a borrowing rate currently available to the company for a loan with similar terms. This has been placed in Level 3 of the fair value hierarchy. The carrying amount of the Subordinated Debentures approximates its fair value as the interest rate adjusts quarterly and has been disclosed in Level 3.

($ millions, except interest rates)	March 31, 2015						December 31, 2014
	Carrying value		Fair Value		Interest rate		Carrying value		Fair value		Interest rate
FHLB Loan due 2033: issued $85.0, July 2013 with fixed interest	$	85.3	$	86.5	5.03	%	$	85.3	$	86.4	5.03	%
Affiliate Subordinated Debentures due 2033: issued $15.5, May 2003 with variable interest	15.5		15.5		4.46	%	15.5		15.5		4.44	%
Total notes payable	$	100.8	$	102.0			$	100.8	$	101.9

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Pension and Postretirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Company's Share of Net Periodic Cost Components

The following table sets forth the components of net periodic cost for the Company’s pension and postretirement benefit plans for the three months ended March 31, 2015 and 2014:

($ millions)	Pension						Postretirement
	Three months ended March 31
	2015			2014			2015			2014
Service cost	$	2.0		$	1.3		$	—		$	—
Interest cost	2.8			2.8			0.2			0.3
Expected return on plan assets	(3.4		)	(3.2		)	—			—
Amortization of:
Negative prior service cost	—			—			(1.4		)	(1.4		)
Net actuarial loss	2.7			1.4			0.2			0.2
Net periodic cost (benefit)	$	4.1		$	2.3		$	(1.0	)	$	(0.9	)

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Investments (Tables)

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Cost or Amortized Cost and Fair Value of Available-for-Sale Securities

The following tables set forth the cost or amortized cost and fair value of available-for-sale securities by lot at March 31, 2015 and December 31, 2014:

($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	287.0	$	19.0	$	(1.0	)	$	305.0
Obligations of states and political subdivisions	834.2		26.6		(1.5		)	859.3
Corporate securities	302.9		10.6		(2.5		)	311.0
U.S. government agencies mortgage-backed securities	469.9		20.5		(1.7		)	488.7
Total fixed maturities	1,894.0		76.7		(6.7		)	1,964.0
Equity securities:
Large-cap securities	181.6		54.3		(1.3		)	234.6
Small-cap securities	55.1		20.9		—			76.0
Total equity securities	236.7		75.2		(1.3		)	310.6
Other invested assets	54.4		34.2		—			88.6
Total available-for-sale securities	$	2,185.1	$	186.1	$	(8.0	)	$	2,363.2
($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	296.7	$	14.1	$	(1.5	)	$	309.3
Obligations of states and political subdivisions	742.5		27.4		(0.4		)	769.5
Corporate securities	333.4		10.2		(3.0		)	340.6
U.S. government agencies mortgage-backed securities	458.7		15.6		(1.8		)	472.5
Total fixed maturities	1,831.3		67.3		(6.7		)	1,891.9
Equity securities:
Large-cap securities	185.5		57.3		(0.6		)	242.2
Small-cap securities	50.0		18.2		—			68.2
Total equity securities	235.5		75.5		(0.6		)	310.4
Other invested assets	50.5		29.8		—			80.3
Total available-for-sale securities	$	2,117.3	$	172.6	$	(7.3	)	$	2,282.6

Gross Unrealized Losses and Fair Value on its Investments

The following tables set forth the Company’s gross unrealized losses and fair value on its investments by lot, aggregated by investment category and length of time for individual securities that have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014:

	Less than 12 months						12 months or more						Total
($ millions, except # of positions)	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	41.1	$	(0.3	)	7	$	24.1	$	(0.7	)	7	$	65.2	$	(1.0	)	14
Obligations of states and political subdivisions	117.7		(1.5		)	23	6.8		—			3	124.5		(1.5		)	26
Corporate securities	33.3		(1.2		)	5	50.6		(1.3		)	10	83.9		(2.5		)	15
U.S. government agencies mortgage-backed securities	48.3		(0.7		)	5	39.4		(1.0		)	13	87.7		(1.7		)	18
Total fixed maturities	240.4		(3.7		)	40	120.9		(3.0		)	33	361.3		(6.7		)	73
Large-cap equity securities	14.0		(1.3		)	4	—		—			—	14.0		(1.3		)	4
Total temporarily impaired securities	$	254.4	$	(5.0	)	44	$	120.9	$	(3.0	)	33	$	375.3	$	(8.0	)	77
	Less than 12 months						12 months or more						Total
($ millions, except # of positions)	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	19.9	$	(0.3	)	4	$	52.0	$	(1.2	)	17	$	71.9	$	(1.5	)	21
Obligations of states and political subdivisions	6.1		—			5	30.9		(0.4		)	9	37.0		(0.4		)	14
Corporate securities	43.5		(0.9		)	8	56.1		(2.1		)	11	99.6		(3.0		)	19
U.S. government agencies mortgage-backed securities	44.0		(0.3		)	8	37.5		(1.5		)	13	81.5		(1.8		)	21
Total fixed maturities	113.5		(1.5		)	25	176.5		(5.2		)	50	290.0		(6.7		)	75
Large-cap equity securities	7.2		(0.6		)	2	—		—			—	7.2		(0.6		)	2
Total temporarily impaired securities	$	120.7	$	(2.1	)	27	$	176.5	$	(5.2	)	50	$	297.2	$	(7.3	)	77

Realized Losses Related to Other-than-Temporary Impairments

The following table sets forth the realized losses related to other-than-temporary impairments on the Company’s investment portfolio recognized for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Equity securities:
Large-cap securities	$	—		$	(0.2	)
Small-cap securities	(0.5		)	(0.6		)
Total other-than-temporary impairments	$	(0.5	)	$	(0.8	)

Amortized Cost and Fair Value of Available-for-Sale Fixed Maturities by Contractual Maturity

The following table sets forth the amortized cost and fair value of available-for-sale fixed maturities by contractual maturity at March 31, 2015:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	38.6	$	39.4
Due after 1 year through 5 years	329.3		343.4
Due after 5 years through 10 years	278.9		293.1
Due after 10 years	777.3		799.4
U.S. government agencies mortgage-backed securities	469.9		488.7
Total	$	1,894.0	$	1,964.0

Components of Net Investment Income

The following table sets forth the components of net investment income for the three months ended March 31, 2015 and 2014:

($ millions)	2015		2014
Fixed maturities	$	12.9	$	15.4
Equity securities	1.6		1.4
Cash and cash equivalents, and other	1.4		1.3
Investment income	15.9		18.1
Investment expenses	0.5		0.5
Net investment income	$	15.4	$	17.6

Realized and Unrealized Holding Gains (Losses)

The following table sets forth the realized and unrealized holding gains (losses) on the Company’s investment portfolio for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Realized gains:
Fixed maturities	$	1.1		$	2.1
Equity securities	4.1			9.4
Other invested assets	—			0.1
Total realized gains	5.2			11.6
Realized losses:
Equity securities:
Sales	(0.5		)	(0.1		)
OTTI	(0.5		)	(0.8		)
Total realized losses	(1.0		)	(0.9		)
Net realized gains on investments	$	4.2		$	10.7
Change in unrealized holding gains, net of tax:
Fixed maturities	$	9.4		$	14.4
Equity securities	(1.0		)	(4.5		)
Other invested assets	4.4			2.4
Deferred federal income tax liability	(4.5		)	(4.3		)
Valuation allowance	—			0.1
Change in net unrealized holding gains, net of tax	$	8.3		$	8.1

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Other Comprehensive Income and Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

Other Comprehensive Income and Accumulated Other Comprehensive Income

Other Comprehensive Income and Accumulated Other Comprehensive Income

The following table sets forth the changes in the Company’s accumulated other comprehensive income component (AOCI), net of tax, for the three months ended March 31, 2015 and 2014:

($ millions)		Unrealized Gains and Losses on Available-for-Sale Securities			Benefit Plan Items			Total
Beginning balance at January 1, 2015		$	110.0		$	(38.3	)	$	71.7
Other comprehensive income before reclassifications		12.5			—			12.5
Amounts reclassified from AOCI (a)		(4.2		)	1.0			(3.2		)
Net current period other comprehensive income		8.3			1.0			9.3
Ending balance at March 31, 2015		$	118.3		$	(37.3	)	$	81.0
Beginning balance at January 1, 2014		$	84.6		$	(3.8	)	$	80.8
Other comprehensive income before reclassifications		18.8			—			18.8
Amounts reclassified from AOCI (a)		(10.7		)	0.2			(10.5		)
Net current period other comprehensive income		8.1			0.2			8.3
Ending balance at March 31, 2014		$	92.7		$	(3.6	)	$	89.1
(a)	See separate table below for details about these reclassifications

The following table sets forth the reclassifications out of accumulated other comprehensive income, by component, to the Company’s condensed consolidated statement of income for the three months ended March 31, 2015 and 2014:

($ millions)
Details about Accumulated Other		Three months ended						Affected line item in the Condensed
Comprehensive Income Components		March 31						Consolidated Statements of Income
		2015			2014
Unrealized gains on available for sale securities		$	4.2		$	10.7		Realized gain on sale of securities
		4.2			10.7			Total before tax
		(1.5		)	—			Tax expense
		2.7			10.7			Net of tax
Amortization of benefit plan items
Negative prior service cost		1.4			1.4			(a)
Net actuarial loss		(2.9		)	(1.6		)	(a)
		(1.5		)	(0.2		)	Total before tax
		0.5			—			Tax benefit
		(1.0		)	(0.2		)	Net of tax
Total reclassifications for the period		$	1.7		$	10.5
(a)	These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see pension and postretirement benefit plans footnote for additional details).

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Income Taxes

3 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

The following table sets forth the reconciliation between actual federal income tax expense and the amount computed at the indicated statutory rate for the three months ended March 31, 2015 and 2014:

($ millions)	2015					2014
Amount at statutory rate	$	11.6		35	%	$	9.7		35	%
Tax-exempt interest and dividends received deduction	(2.2		)	(7	)	(2.1		)	(8	)
Other, net	(0.9		)	(3	)	0.2			1
Valuation allowance	—			—		(7.2		)	(26	)
Federal income tax expense and effective rate	$	8.5		25	%	$	0.6		2	%

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Pension and Postretirement Benefit Plans

3 Months Ended

Mar. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Pension and Postretirement Benefit Plans

Pension and Postretirement Benefit Plans

The following table sets forth the components of net periodic cost for the Company’s pension and postretirement benefit plans for the three months ended March 31, 2015 and 2014:

($ millions)	Pension						Postretirement
	Three months ended March 31
	2015			2014			2015			2014
Service cost	$	2.0		$	1.3		$	—		$	—
Interest cost	2.8			2.8			0.2			0.3
Expected return on plan assets	(3.4		)	(3.2		)	—			—
Amortization of:
Negative prior service cost	—			—			(1.4		)	(1.4		)
Net actuarial loss	2.7			1.4			0.2			0.2
Net periodic cost (benefit)	$	4.1		$	2.3		$	(1.0	)	$	(0.9	)

The Company's share of contributions were $3.3 million for the three months ended March 31, 2015 and expects its remaining share of contributions to be an additional $9.7 million to the pension plan during 2015.

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Earnings per Common Share

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Earnings (Loss) per Common Share

Net Earnings per Common Share

The following table sets forth the compilation of basic and diluted earnings per common share for the three months ended March 31, 2015 and 2014:

($ and shares in millions, except per share amounts)	2015		2014
Numerator:
Net income for basic earnings per common share	$	24.7	$	27.1
Denominator:
Weighted average shares for basic net earnings per common share	41.0		40.8
Effect of dilutive share-based awards	0.4		0.3
Adjusted weighted average shares for diluted net earnings per common share	41.4		41.1
Basic net earnings per common share	$	0.60	$	0.67
Diluted net earnings per common share	$	0.60	$	0.66

The following table sets forth common stock options and restricted share units ("RSU award") provided to each outside director of the Company that were not included in the computation of diluted earnings per common share because the exercise price of the options, or awards, was greater than the average market price or their inclusion would have been antidilutive for the three months ended March 31, 2015 and 2014.

(shares in millions)	2015	2014
Total number of antidilutive options and awards	1.7	1.7

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Fair Value of Financial Instruments - Company's Available-for-Sale Investments within Fair Value Hierarchy (Detail) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Fair value	$ 2,363.2	$ 2,282.6
U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	305.0	309.3
Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	859.3	769.5
Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	311.0	340.6
U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	488.7	472.5
Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	1,964.0	1,891.9
Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	234.6	242.2
Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	76.0	68.2
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	310.6	310.4
Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	88.6	80.3
Level 1 [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	318.7	317.8
Level 1 [Member] | U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 1 [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 1 [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 1 [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 1 [Member] | Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 1 [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	234.6	242.2
Level 1 [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	76.0	68.2
Level 1 [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	310.6	310.4
Level 1 [Member] | Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	8.1	7.4
Level 2 [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	2,041.0	1,955.4
Level 2 [Member] | U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	305.0	309.3
Level 2 [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	859.3	769.5
Level 2 [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	307.5	331.2
Level 2 [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	488.7	472.5
Level 2 [Member] | Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	1,960.5	1,882.5
Level 2 [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 2 [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 2 [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 2 [Member] | Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	80.5	72.9
Level 3 [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	3.5	9.4
Level 3 [Member] | U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 3 [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 3 [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	3.5	9.4
Level 3 [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 3 [Member] | Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	3.5	9.4
Level 3 [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 3 [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 3 [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0	0
Level 3 [Member] | Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	$ 0	$ 0

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Reinsurance (Tables)

3 Months Ended

Mar. 31, 2015

Insurance [Abstract]

Summary of External Reinsurance Transactions with State Auto Mutual Under Pooling Arrangement

The following table sets forth a summary of the Company’s external reinsurance transactions, as well as reinsurance transactions with State Auto Mutual under the Pooling Arrangement, for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Premiums earned:
Assumed from external insurers and reinsurers	$	1.1		$	1.0
Assumed under Pooling Arrangement	315.3			262.5
Ceded to external insurers and reinsurers	(8.9		)	(6.0		)
Ceded under Pooling Arrangement	(209.9		)	(215.4		)
Net assumed premiums earned	$	97.6		$	42.1
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	$	0.8		$	0.7
Assumed under Pooling Arrangement	195.3			172.6
Ceded to external insurers and reinsurers	0.1			(2.4		)
Ceded under Pooling Arrangement	(121.2		)	(142.2		)
Net assumed losses and loss expenses incurred	$	75.0		$	28.7

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Financial Information Regarding Company's Reportable Segments

The following table sets forth financial information regarding the Company’s reportable segments for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Revenue from external sources:
Insurance segments
Personal insurance	$	150.0		$	114.3
Business insurance	96.1			93.5
Specialty insurance	69.2			54.7
Total insurance segments	315.3			262.5
Investment operations segment
Net investment income	15.4			17.6
Net realized capital gains	4.2			10.7
Total investment operations segment	19.6			28.3
All other	—			0.5
Total revenue from external sources	334.9			291.3
Intersegment revenue	1.4			1.3
Total revenue	336.3			292.6
Reconciling items:
Eliminate intersegment revenues	(1.4		)	(1.3		)
Total consolidated revenues	$	334.9		$	291.3
Segment income before federal income tax:
Insurance segments SAP underwriting income (loss)
Personal insurance	$	17.4		$	5.1
Business insurance	(1.4		)	(8.5		)
Specialty insurance	(0.8		)	(0.5		)
Total insurance segments	15.2			(3.9		)
Investment operations segment
Net investment income	15.4			17.6
Net realized capital gains	4.2			10.7
Total investment operations segment	19.6			28.3
All other	(0.4		)	0.1
Total segment income before tax expense	34.4			24.5
Reconciling items:
GAAP expense adjustments	1.2			5.4
Interest expense on corporate debt	(1.3		)	(1.3		)
Corporate expenses	(1.1		)	(0.9		)
Total reconciling items	(1.2		)	3.2
Total consolidated income before federal income tax expense	$	33.2		$	27.7

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Pension and Postretirement Benefit Plans - Company's Share of Net Periodic Cost Components (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Pension [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	$ 2.0	$ 1.3
Interest cost	2.8	2.8
Expected return on plan assets	(3.4)	(3.2)
Amortization of:
Prior service benefits	0	0
Net actuarial loss	2.7	1.4
Net periodic cost (benefit)	4.1	2.3
Postretirement [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	0	0
Interest cost	0.2	0.3
Expected return on plan assets	0	0
Amortization of:
Prior service benefits	(1.4)	(1.4)
Net actuarial loss	0.2	0.2
Net periodic cost (benefit)	$ (1.0)	$ (0.9)

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Condensed Consolidated Statements of Income (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Earned premiums, ceded to affiliates	$ 105.4	$ 47.1
Net investment income, from affiliate	1.2	1.2
Losses and loss expenses, ceded to affiliates	74.1	30.4
Net Acquisition and Operating Expenses	77.3	38.9
Interest expense, affiliates	$ 0.2	$ 0.2

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Investments

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

The following tables set forth the cost or amortized cost and fair value of available-for-sale securities by lot at March 31, 2015 and December 31, 2014:

($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	287.0	$	19.0	$	(1.0	)	$	305.0
Obligations of states and political subdivisions	834.2		26.6		(1.5		)	859.3
Corporate securities	302.9		10.6		(2.5		)	311.0
U.S. government agencies mortgage-backed securities	469.9		20.5		(1.7		)	488.7
Total fixed maturities	1,894.0		76.7		(6.7		)	1,964.0
Equity securities:
Large-cap securities	181.6		54.3		(1.3		)	234.6
Small-cap securities	55.1		20.9		—			76.0
Total equity securities	236.7		75.2		(1.3		)	310.6
Other invested assets	54.4		34.2		—			88.6
Total available-for-sale securities	$	2,185.1	$	186.1	$	(8.0	)	$	2,363.2
($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	296.7	$	14.1	$	(1.5	)	$	309.3
Obligations of states and political subdivisions	742.5		27.4		(0.4		)	769.5
Corporate securities	333.4		10.2		(3.0		)	340.6
U.S. government agencies mortgage-backed securities	458.7		15.6		(1.8		)	472.5
Total fixed maturities	1,831.3		67.3		(6.7		)	1,891.9
Equity securities:
Large-cap securities	185.5		57.3		(0.6		)	242.2
Small-cap securities	50.0		18.2		—			68.2
Total equity securities	235.5		75.5		(0.6		)	310.4
Other invested assets	50.5		29.8		—			80.3
Total available-for-sale securities	$	2,117.3	$	172.6	$	(7.3	)	$	2,282.6

The following tables set forth the Company’s gross unrealized losses and fair value on its investments by lot, aggregated by investment category and length of time for individual securities that have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014:

	Less than 12 months						12 months or more						Total
($ millions, except # of positions)	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	41.1	$	(0.3	)	7	$	24.1	$	(0.7	)	7	$	65.2	$	(1.0	)	14
Obligations of states and political subdivisions	117.7		(1.5		)	23	6.8		—			3	124.5		(1.5		)	26
Corporate securities	33.3		(1.2		)	5	50.6		(1.3		)	10	83.9		(2.5		)	15
U.S. government agencies mortgage-backed securities	48.3		(0.7		)	5	39.4		(1.0		)	13	87.7		(1.7		)	18
Total fixed maturities	240.4		(3.7		)	40	120.9		(3.0		)	33	361.3		(6.7		)	73
Large-cap equity securities	14.0		(1.3		)	4	—		—			—	14.0		(1.3		)	4
Total temporarily impaired securities	$	254.4	$	(5.0	)	44	$	120.9	$	(3.0	)	33	$	375.3	$	(8.0	)	77
	Less than 12 months						12 months or more						Total
($ millions, except # of positions)	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	19.9	$	(0.3	)	4	$	52.0	$	(1.2	)	17	$	71.9	$	(1.5	)	21
Obligations of states and political subdivisions	6.1		—			5	30.9		(0.4		)	9	37.0		(0.4		)	14
Corporate securities	43.5		(0.9		)	8	56.1		(2.1		)	11	99.6		(3.0		)	19
U.S. government agencies mortgage-backed securities	44.0		(0.3		)	8	37.5		(1.5		)	13	81.5		(1.8		)	21
Total fixed maturities	113.5		(1.5		)	25	176.5		(5.2		)	50	290.0		(6.7		)	75
Large-cap equity securities	7.2		(0.6		)	2	—		—			—	7.2		(0.6		)	2
Total temporarily impaired securities	$	120.7	$	(2.1	)	27	$	176.5	$	(5.2	)	50	$	297.2	$	(7.3	)	77

The Company reviewed its investments at March 31, 2015, and determined that no additional other-than-temporary impairment existed in the gross unrealized holding losses other than those listed in the table below. The following table sets forth the realized losses related to other-than-temporary impairments on the Company’s investment portfolio recognized for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Equity securities:
Large-cap securities	$	—		$	(0.2	)
Small-cap securities	(0.5		)	(0.6		)
Total other-than-temporary impairments	$	(0.5	)	$	(0.8	)

The Company regularly monitors its investments that have fair values less than cost or amortized cost for signs of other-than-temporary impairment, an assessment that requires significant management judgment regarding the evidence known. Such judgments could change in the future as more information becomes known, which could negatively impact the amounts reported. Among the factors that management considers for fixed maturity securities are the financial condition of the issuer including receipt of scheduled principal and interest cash flows, and intent to sell including if it is more likely than not that the Company will be required to sell the investments before recovery. When a fixed maturity has been determined to have an other-than-temporary impairment, the impairment charge is separated into an amount representing the credit loss, which is recognized in earnings as a realized loss, and the amount related to non-credit factors, which is recognized in accumulated other comprehensive income. Future increases or decreases in fair value, if not other-than-temporary, are included in accumulated other comprehensive income.

Among the factors that management considers for equity securities and other invested assets are the length of time and/or the significance of decline below cost, the Company’s ability and intent to hold these securities through their recovery periods, the current financial condition of the issuer and its future business prospects, and the ability of the market value to recover to cost in the near term. When an equity security or other invested asset has been determined to have a decline in fair value that is other-than-temporary, the cost basis of the security is adjusted to fair value. This results in a charge to earnings as a realized loss, which is not reversed for subsequent recoveries in fair value. Future increases or decreases in fair value, if not other-than-temporary, are included in accumulated other comprehensive income.

The following table sets forth the amortized cost and fair value of available-for-sale fixed maturities by contractual maturity at March 31, 2015:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	38.6	$	39.4
Due after 1 year through 5 years	329.3		343.4
Due after 5 years through 10 years	278.9		293.1
Due after 10 years	777.3		799.4
U.S. government agencies mortgage-backed securities	469.9		488.7
Total	$	1,894.0	$	1,964.0

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations with or without call or prepayment penalties.

At March 31, 2015, State Auto P&C had U.S. government agencies mortgage-backed fixed maturity securities, with a carrying value of approximately $85.0 million, that were pledged as collateral for the Federal Home Loan Bank of Cincinnati ("FHLB") Loan. In accordance with the terms of the FHLB Loan, State Auto P&C retains all rights regarding these securities.

Fixed maturities with fair values of $8.8 million were on deposit with insurance regulators as required by law at March 31, 2015 and December 31, 2014. The Company retains all rights regarding these securities.

The following table sets forth the components of net investment income for the three months ended March 31, 2015 and 2014:

($ millions)	2015		2014
Fixed maturities	$	12.9	$	15.4
Equity securities	1.6		1.4
Cash and cash equivalents, and other	1.4		1.3
Investment income	15.9		18.1
Investment expenses	0.5		0.5
Net investment income	$	15.4	$	17.6

The Company’s current investment strategy does not rely on the use of derivative financial instruments.

Proceeds on sales of available-for-sale securities were $84.2 million and $106.1 million for the three months ended March 31, 2015 and 2014.

The following table sets forth the realized and unrealized holding gains (losses) on the Company’s investment portfolio for the three months ended March 31, 2015 and 2014:

($ millions)	2015			2014
Realized gains:
Fixed maturities	$	1.1		$	2.1
Equity securities	4.1			9.4
Other invested assets	—			0.1
Total realized gains	5.2			11.6
Realized losses:
Equity securities:
Sales	(0.5		)	(0.1		)
OTTI	(0.5		)	(0.8		)
Total realized losses	(1.0		)	(0.9		)
Net realized gains on investments	$	4.2		$	10.7
Change in unrealized holding gains, net of tax:
Fixed maturities	$	9.4		$	14.4
Equity securities	(1.0		)	(4.5		)
Other invested assets	4.4			2.4
Deferred federal income tax liability	(4.5		)	(4.3		)
Valuation allowance	—			0.1
Change in net unrealized holding gains, net of tax	$	8.3		$	8.1

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Investments - Cost or Amortized Cost and Fair Value of Available-for-Sale Securities (Detail) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	$ 2,185.1	$ 2,117.3
Gross unrealized holding gains	186.1	172.6
Gross unrealized holding losses	(8.0)	(7.3)
Fair value	2,363.2	2,282.6
U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	305.0	309.3
Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	859.3	769.5
Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	311.0	340.6
U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	488.7	472.5
Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	234.6	242.2
Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	76.0	68.2
Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	1,894.0	1,831.3
Gross unrealized holding gains	76.7	67.3
Gross unrealized holding losses	(6.7)	(6.7)
Fair value	1,964.0	1,891.9
Fixed Maturities [Member] | U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	287.0	296.7
Gross unrealized holding gains	19.0	14.1
Gross unrealized holding losses	(1.0)	(1.5)
Fair value	305.0	309.3
Fixed Maturities [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	834.2	742.5
Gross unrealized holding gains	26.6	27.4
Gross unrealized holding losses	(1.5)	(0.4)
Fair value	859.3	769.5
Fixed Maturities [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	302.9	333.4
Gross unrealized holding gains	10.6	10.2
Gross unrealized holding losses	(2.5)	(3.0)
Fair value	311.0	340.6
Fixed Maturities [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	469.9	458.7
Gross unrealized holding gains	20.5	15.6
Gross unrealized holding losses	(1.7)	(1.8)
Fair value	488.7	472.5
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	236.7	235.5
Gross unrealized holding gains	75.2	75.5
Gross unrealized holding losses	(1.3)	(0.6)
Fair value	310.6	310.4
Equity Securities [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	181.6	185.5
Gross unrealized holding gains	54.3	57.3
Gross unrealized holding losses	(1.3)	(0.6)
Fair value	234.6	242.2
Equity Securities [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	55.1	50.0
Gross unrealized holding gains	20.9	18.2
Gross unrealized holding losses	0	0
Fair value	76.0	68.2
Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	54.4	50.5
Gross unrealized holding gains	34.2	29.8
Gross unrealized holding losses	0	0
Fair value	$ 88.6	$ 80.3

XML

Fair Value of Financial Instruments - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended
	May 31, 2009 Agreement	Mar. 31, 2015	Dec. 31, 2014
Fair Value Measurements Disclosure [Line Items]
Fair value		$ 2,363.2	$ 2,282.6
Other invested assets		5.3	5.3
Number of Credit Agreements	2
Notes receivable from affiliate		70.0	70.0
Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value		3.5	9.4
Federal home loan bank stock		4.8
Other invested assets		0.5
Corporate Securities [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value		311.0	340.6
Corporate Securities [Member] | Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Number of fixed maturity corporate securities included in Level 3 (securities)		1
Fair value		3.5	9.4
International funds [Member]
Fair Value Measurements Disclosure [Line Items]
Number of fixed maturity corporate securities included in Level 3 (securities)		2
Fair value		80.5	72.9
Affiliated Entity [Member]
Fair Value Measurements Disclosure [Line Items]
Notes receivable from affiliate		$ 70.0

XML

Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Company's Available-for-Sale Investments within Fair Value Hierarchy

The following tables set forth the Company’s available-for-sale investments within the fair value hierarchy at March 31, 2015 and December 31, 2014:

($ millions)	Total		Level 1		Level 2		Level 3
March 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	305.0	$	—	$	305.0	$	—
Obligations of states and political subdivisions	859.3		—		859.3		—
Corporate securities	311.0		—		307.5		3.5
U.S. government agencies mortgage-backed securities	488.7		—		488.7		—
Total fixed maturities	1,964.0		—		1,960.5		3.5
Equity securities:
Large-cap securities	234.6		234.6		—		—
Small-cap securities	76.0		76.0		—		—
Total equity securities	310.6		310.6		—		—
Other invested assets	88.6		8.1		80.5		—
Total available-for-sale investments	$	2,363.2	$	318.7	$	2,041.0	$	3.5
($ millions)	Total		Level 1		Level 2		Level 3
December 31, 2014
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	309.3	$	—	$	309.3	$	—
Obligations of states and political subdivisions	769.5		—		769.5		—
Corporate securities	340.6		—		331.2		9.4
U.S. government agencies mortgage-backed securities	472.5		—		472.5		—
Total fixed maturities	1,891.9		—		1,882.5		9.4
Equity securities:
Large-cap securities	242.2		242.2		—		—
Small-cap securities	68.2		68.2		—		—
Total equity securities	310.4		310.4		—		—
Other invested assets	80.3		7.4		72.9		—
Total available-for-sale investments	$	2,282.6	$	317.8	$	1,955.4	$	9.4

Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following tables set forth a reconciliation of the beginning and ending balances for the three months ended March 31, 2015 and the year ended December 31, 2014, separately for each major category of assets:

($ millions)	Fixed maturities
Balance at January 1, 2015	$	9.4
Total realized gains – included in earnings	0.2
Total unrealized losses – included in other comprehensive income	(0.2		)
Purchases	—
Sales	(5.9		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2015	$	3.5
($ millions)	Fixed maturities
Balance at January 1, 2014	$	8.9
Total realized gains – included in earnings	—
Total unrealized gains – included in other comprehensive income	0.2
Purchases	0.3
Sales	—
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at December 31, 2014	$	9.4

Company Estimates Receivable from Affiliate using Market Quotations for U.S. Treasury Securities

Consequently this has been placed in Level 2 of the fair value hierarchy.

($ millions, except interest rates)	March 31, 2015						December 31, 2014
	Carrying value		Fair value		Interest rate		Carrying value		Fair value		Interest rate
Notes receivable from affiliate	$	70.0	$	76.4	7.00	%	$	70.0	$	74.6	7.00	%

Included in Notes Payable are Senior Notes and Subordinated Debentures

The carrying amount of the Subordinated Debentures approximates its fair value as the interest rate adjusts quarterly and has been disclosed in Level 3.

($ millions, except interest rates)	March 31, 2015						December 31, 2014
	Carrying value		Fair Value		Interest rate		Carrying value		Fair value		Interest rate
FHLB Loan due 2033: issued $85.0, July 2013 with fixed interest	$	85.3	$	86.5	5.03	%	$	85.3	$	86.4	5.03	%
Affiliate Subordinated Debentures due 2033: issued $15.5, May 2003 with variable interest	15.5		15.5		4.46	%	15.5		15.5		4.44	%
Total notes payable	$	100.8	$	102.0			$	100.8	$	101.9