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, 2016

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 April 29, 2016, the Registrant had 41,572,190 Common Shares outstanding.

Index to Form 10-Q Quarterly Report for the three month period ended March 31, 2016

	Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed consolidated balance sheets – March 31, 2016 and December 31, 2015	1
	Condensed consolidated statements of income – Three months ended March 31, 2016 and 2015	2
	Condensed consolidated statements of comprehensive income – Three months ended March 31, 2016 and 2015	3
	Condensed consolidated statements of cash flows – Three months ended March 31, 2016 and 2015	4
	Notes to condensed consolidated financial statements – March 31, 2016	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
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, 2016			December 31, 2015
	(unaudited)
Assets
Fixed maturities, available-for-sale, at fair value (amortized cost $1,991.5 and $1,972.9, respectively)	$	2,055.5		$	2,000.7
Equity securities, available-for-sale, at fair value (cost $274.5 and $265.2, respectively)	318.9			310.6
Other invested assets, available-for-sale, at fair value (cost $57.1 and $56.9, respectively)	85.8			85.1
Other invested assets	5.3			5.3
Notes receivable from affiliate	70.0			70.0
Total investments	2,535.5			2,471.7
Cash and cash equivalents	47.7			58.1
Accrued investment income and other assets	39.3			35.7
Deferred policy acquisition costs (affiliated net assumed $50.2 and $49.3, respectively)	127.5			129.1
Reinsurance recoverable on losses and loss expenses payable	6.5			5.9
Prepaid reinsurance premiums	6.3			6.8
Due from affiliate	4.3			5.9
Current federal income taxes	4.9			4.9
Net deferred federal income taxes	89.0			102.5
Property and equipment, at cost	7.5			7.6
Total assets	$	2,868.5		$	2,828.2
Liabilities and Stockholders’ Equity
Losses and loss expenses payable (affiliated net assumed $554.3 and $532.4, respectively)	$	1,083.5		$	1,053.0
Unearned premiums (affiliated net assumed $212.1 and $214.2, respectively)	600.8			616.3
Notes payable (affiliates $15.2 and $15.2, respectively)	100.5			100.5
Postretirement and pension benefits (affiliated net ceded $54.6 and $56.0, respectively)	101.5			104.0
Other liabilities (affiliated net assumed $7.1 and affiliated net ceded $8.4, respectively)	73.3			69.8
Total liabilities	1,959.6			1,943.6
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; 48.2 and 48.1 shares issued, respectively, at stated value of $2.50 per share	120.6			120.4
Treasury stock, 6.8 and 6.8 shares, respectively, at cost	(116.5		)	(116.3		)
Additional paid-in capital	155.1			153.5
Accumulated other comprehensive income (affiliated net ceded $55.6 and $56.7, respectively)	61.4			37.6
Retained earnings	688.3			689.4
Total stockholders’ equity	908.9			884.6
Total liabilities and stockholders’ equity	$	2,868.5		$	2,828.2

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)	2016			2015
Earned premiums (affiliated net assumed $113.4 and $105.4, respectively)	$	319.9		$	315.3
Net investment income (affiliated $1.2 and $1.2, respectively)	17.4			15.4
Net realized gains on investments:
Total other-than-temporary impairment losses	(3.7		)	(0.5		)
Portion of loss recognized in other comprehensive income	—			—
Other net realized investment gains	5.0			4.3
Total net realized gains on investments	1.3			3.8
Other income from affiliates	0.6			0.4
Total revenues	339.2			334.9
Losses and loss expenses (affiliated net assumed $93.7 and $74.1, respectively)	225.0			195.0
Acquisition and operating expenses (affiliated net assumed $70.6 and $77.3, respectively)	107.5			103.4
Interest expense (affiliated $0.2 and $0.2, respectively)	1.3			1.3
Other expenses	1.6			2.0
Total expenses	335.4			301.7
Income before federal income taxes	3.8			33.2
Federal income tax expense:
Current	—			0.4
Deferred	0.8			8.1
Total federal income tax expense	0.8			8.5
Net income	$	3.0		$	24.7
Earnings per common share:
Basic	$	0.07		$	0.60
Diluted	$	0.07		$	0.60
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)	2016			2015
Net income	$	3.0		$	24.7
Other comprehensive income, net of tax:
Net unrealized holding gains on investments:
Unrealized holding gains	37.0			17.0
Reclassification adjustments for gains realized in net income	(1.3		)	(4.2		)
Income tax expense	(12.5		)	(4.5		)
Total net unrealized holding gains on investments	23.2			8.3
Net unrecognized benefit plan obligations:
Reclassification adjustments for amortization to statements of income:
Negative prior service cost	(1.4		)	(1.4		)
Net actuarial loss	2.4			2.9
Income tax expense	(0.4		)	(0.5		)
Total net unrecognized benefit plan obligations	0.6			1.0
Other comprehensive income	23.8			9.3
Comprehensive income	$	26.8		$	34.0

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)	2016			2015
Cash flows from operating activities:
Net income	$	3.0		$	24.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, net	4.4			5.5
Share-based compensation	1.4			1.0
Net realized gains on investments	(1.3		)	(3.8		)
Changes in operating assets and liabilities:
Deferred policy acquisition costs (benefits)	1.6			(0.9		)
Accrued investment income and other assets	(3.7		)	(2.0		)
Postretirement and pension benefits	(1.8		)	(0.7		)
Other liabilities and due to/from affiliates, net	4.9			(49.6		)
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums	(0.1		)	1.6
Losses and loss expenses payable	30.5			14.5
Unearned premiums	(15.5		)	(8.2		)
Federal income taxes	1.1			9.0
Cash provided from December 31, 2014 unearned premium transfer related to the homeowners quota share arrangement	—			63.5
Net cash provided by operating activities	24.5			54.6
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale	(160.6		)	(212.8		)
Purchases of equity securities available-for-sale	(30.8		)	(19.7		)
Purchases of other invested assets	(0.4		)	(3.9		)
Maturities, calls and pay downs of fixed maturities available-for-sale	60.8			83.2
Sales of fixed maturities available-for-sale	75.8			62.5
Sales of equity securities available-for-sale	23.6			21.5
Sales of other invested assets available-for-sale	0.2			0.2
Net cash used in investing activities	(31.4		)	(69.0		)
Cash flows from financing activities:
Proceeds from issuance of common stock	0.8			0.7
Payments to acquire treasury stock	(0.2		)	(0.1		)
Payment of dividends	(4.1		)	(4.1		)
Net cash used in financing activities	(3.5		)	(3.5		)
Net decrease in cash and cash equivalents	(10.4		)	(17.9		)
Cash and cash equivalents at beginning of period	58.1			86.3
Cash and cash equivalents at end of period	$	47.7		$	68.4
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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The balance sheet at December 31, 2015 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, 2015 (the “2015 Form 10-K”). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the 2015 Form 10-K.

Adoption of Recent Accounting Pronouncements

Simplifying the Presentation of Debt Issuance Costs

The amendments in this guidance simplify the presentation of debt issuance costs by requiring them to be presented in the balance sheet as a direct deduction from the carrying amount of the related recognized debt liability, consistent with debt discounts. The Company adopted this guidance at January 1, 2016 on a retrospective basis and it resulted in a $0.3 million decrease to notes payable and accrued investment income and other assets at December 31, 2015.

Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

The amendments in this guidance remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and should be applied retrospectively to all periods presented. The Company adopted this guidance at January 1, 2016 and it did not have a material impact on the condensed consolidated financial statements.

Pending Adoption of Recent Accounting Pronouncements

Improvements to Employee Share-Based Payment Accounting

The amendments in this guidance simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities, classification of excess tax benefits, and classification on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the requirements of the guidance and has not yet determined its effect on the Company’s results of operations, financial position or liquidity.

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, 2016 and December 31, 2015:

($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	223.6	$	13.0	$	(0.5	)	$	236.1
Obligations of states and political subdivisions	730.7		28.6		(0.6		)	758.7
Corporate securities	575.3		11.1		(6.7		)	579.7
U.S. government agencies mortgage-backed securities	461.9		19.8		(0.7		)	481.0
Total fixed maturities	1,991.5		72.5		(8.5		)	2,055.5
Equity securities:
Large-cap securities	221.1		33.5		(4.8		)	249.8
Small-cap securities	53.4		15.9		(0.2		)	69.1
Total equity securities	274.5		49.4		(5.0		)	318.9
Other invested assets	57.1		28.7		—			85.8
Total available-for-sale securities	$	2,323.1	$	150.6	$	(13.5	)	$	2,460.2
($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	219.8	$	6.6	$	(2.0	)	$	224.4
Obligations of states and political subdivisions	804.0		22.5		(1.7		)	824.8
Corporate securities	500.3		5.8		(11.7		)	494.4
U.S. government agencies mortgage-backed securities	448.8		11.5		(3.2		)	457.1
Total fixed maturities	1,972.9		46.4		(18.6		)	2,000.7
Equity securities:
Large-cap securities	211.9		34.2		(5.1		)	241.0
Small-cap securities	53.3		16.5		(0.2		)	69.6
Total equity securities	265.2		50.7		(5.3		)	310.6
Other invested assets	56.9		28.3		(0.1		)	85.1
Total available-for-sale securities	$	2,295.0	$	125.4	$	(24.0	)	$	2,396.4

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, 2016 and December 31, 2015:

($ millions, except # of positions)	Less than 12 months						12 months or more						Total
	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	7.7	$	(0.1	)	4	$	9.2	$	(0.4	)	2	$	16.9	$	(0.5	)	6
Obligations of states and political subdivisions	6.6		(0.1		)	1	33.1		(0.5		)	3	39.7		(0.6		)	4
Corporate securities	73.5		(3.0		)	11	64.9		(3.7		)	10	138.4		(6.7		)	21
U.S. government agencies mortgage-backed securities	47.9		(0.1		)	5	40.0		(0.6		)	12	87.9		(0.7		)	17
Total fixed maturities	135.7		(3.3		)	21	147.2		(5.2		)	27	282.9		(8.5		)	48
Equity securities:
Large-cap equity securities	62.5		(4.4		)	23	3.0		(0.4		)	1	65.5		(4.8		)	24
Small-cap equity securities	4.4		(0.2		)	1	—		—			—	4.4		(0.2		)	1
Total equity securities	66.9		(4.6		)	24	3.0		(0.4		)	1	69.9		(5.0		)	25
Total temporarily impaired securities	$	202.6	$	(7.9	)	45	$	150.2	$	(5.6	)	28	$	352.8	$	(13.5	)	73
($ millions, except # of positions)	Less than 12 months						12 months or more						Total
	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	68.6	$	(1.6	)	15	$	13.5	$	(0.4	)	4	$	82.1	$	(2.0	)	19
Obligations of states and political subdivisions	137.5		(1.7		)	16	—		—			—	137.5		(1.7		)	16
Corporate securities	246.9		(5.3		)	36	63.9		(6.4		)	11	310.8		(11.7		)	47
U.S. government agencies mortgage-backed securities	132.2		(2.3		)	18	33.0		(0.9		)	11	165.2		(3.2		)	29
Total fixed maturities	585.2		(10.9		)	85	110.4		(7.7		)	26	695.6		(18.6		)	111
Equity securities:
Large-cap equity securities	65.8		(5.1		)	24	—		—			—	65.8		(5.1		)	24
Small-cap equity securities	3.4		(0.2		)	1	—		—			—	3.4		(0.2		)	1
Total equity securities	69.2		(5.3		)	25	—		—			—	69.2		(5.3		)	25
Other invested assets	8.1		(0.1		)	1	—		—			—	8.1		(0.1		)	1
Total temporarily impaired securities	$	662.5	$	(16.3	)	111	$	110.4	$	(7.7	)	26	$	772.9	$	(24.0	)	137

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 reviewed its investments at March 31, 2016, 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, 2016 and 2015:

($ millions)	2016			2015
Equity securities:
Large-cap securities	$	(0.2	)	$	—
Small-cap securities	(1.2		)	(0.5		)
Fixed maturities:	(2.3		)	—
Total other-than-temporary impairments	$	(3.7	)	$	(0.5	)

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, 2016:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	39.5	$	40.2
Due after 1 year through 5 years	532.1		545.7
Due after 5 years through 10 years	292.7		299.5
Due after 10 years	665.3		689.1
U.S. government agencies mortgage-backed securities	461.9		481.0
Total	$	1,991.5	$	2,055.5

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, 2016, 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 $9.1 million and $8.8 million were on deposit with insurance regulators as required by law at March 31, 2016 and December 31, 2015, respectively. The Company retains all rights regarding these securities.

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)

The following table sets forth the components of net investment income for the three months ended March 31, 2016 and 2015:

($ millions)	2016		2015
Fixed maturities	$	14.9	$	12.9
Equity securities	1.5		1.6
Cash and cash equivalents, and other	1.4		1.4
Investment income	17.8		15.9
Investment expenses	0.4		0.5
Net investment income	$	17.4	$	15.4

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 $99.6 million and $84.2 million for the three months endedMarch 31, 2016 and 2015, respectively.

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, 2016 and 2015:

($ millions)	2016			2015
Realized gains:
Fixed maturities	$	1.5		$	1.1
Equity securities	4.1			4.1
Total realized gains	5.6			5.2
Realized losses:
Equity securities:
Sales	(0.6		)	(0.5		)
OTTI	(1.4		)	(0.5		)
Fixed maturities:
OTTI	(2.3		)	—
Total realized losses	(4.3		)	(1.0		)
Net realized gains on investments	$	1.3		$	4.2
Change in unrealized holding gains, net of tax:
Fixed maturities	$	36.2		$	9.4
Equity securities	(1.0		)	(1.0		)
Other invested assets	0.5			4.4
Deferred federal income tax liability	(12.5		)	(4.5		)
Change in net unrealized holding gains, net of tax	$	23.2		$	8.3

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, 2016 and December 31, 2015, 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, 2016 and 2015.

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 $77.4 million and $77.0 million at March 31, 2016 and December 31, 2015, 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. In accordance with Accounting Standard Codification 820-10, these investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. Fair values presented here are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.

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, 2016 and December 31, 2015:

($ millions)	Total		Level 1		Level 2		Level 3
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	236.1	$	—	$	236.1	$	—
Obligations of states and political subdivisions	758.7		—		758.7		—
Corporate securities	579.7		—		576.3		3.4
U.S. government agencies mortgage-backed securities	481.0		—		481.0		—
Total fixed maturities	2,055.5		—		2,052.1		3.4
Equity securities:
Large-cap securities	249.8		249.8		—		—
Small-cap securities	69.1		69.1		—		—
Total equity securities	318.9		318.9		—		—
Other invested assets	8.4		8.4		—		—
Total available-for-sale investments	$	2,382.8	$	327.3	$	2,052.1	$	3.4
($ millions)	Total		Level 1		Level 2		Level 3
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	224.4	$	—	$	224.4	$	—
Obligations of states and political subdivisions	824.8		—		824.8		—
Corporate securities	494.4		—		491.1		3.3
U.S. government agencies mortgage-backed securities	457.1		—		457.1		—
Total fixed maturities	2,000.7		—		1,997.4		3.3
Equity securities:
Large-cap securities	241.0		241.0		—		—
Small-cap securities	69.6		69.6		—		—
Total equity securities	310.6		310.6		—		—
Other invested assets	8.1		8.1		—		—
Total available-for-sale investments	$	2,319.4	$	318.7	$	1,997.4	$	3.3

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, 2016 and the year ended December 31, 2015, separately for each major category of assets:

($ millions)	Fixed maturities
Balance at January 1, 2016	$	3.3
Total realized gains – included in earnings	—
Total unrealized losses – included in other comprehensive income	—
Purchases	0.1
Sales	—
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2016	$	3.4
($ millions)	Fixed maturities
Balance at January 1, 2015	$	9.4
Total realized gains – included in earnings	—
Total unrealized gains – included in other comprehensive income	(0.2		)
Purchases	—
Sales	(5.9		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at December 31, 2015	$	3.3

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, 2016 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, 2016						December 31, 2015
	Carrying value		Fair value		Interest rate		Carrying value		Fair value		Interest rate
Notes receivable from affiliate	$	70.0	$	76.2	7.00	%	$	70.0	$	74.1	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, 2016						December 31, 2015
	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	$	85.4	5.03	%	$	85.3	$	85.5	5.03	%
Affiliate Subordinated Debentures due 2033: issued $15.5, May 2003 with variable interest	15.2		15.2		4.61	%	15.2		15.2		4.61	%
Total notes payable	$	100.5	$	100.6			$	100.5	$	100.7

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, 2016 and 2015:

($ millions)	2016			2015
Premiums earned:
Assumed from external insurers and reinsurers	$	1.4		$	1.1
Assumed under Pooling Arrangement	319.9			315.3
Ceded to external insurers and reinsurers	(6.8		)	(8.9		)
Ceded under Pooling Arrangement	(206.5		)	(209.9		)
Net assumed premiums earned	$	108.0		$	97.6
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	$	1.1		$	0.8
Assumed under Pooling Arrangement	225.4			195.3
Ceded to external insurers and reinsurers	(1.9		)	0.1
Ceded under Pooling Arrangement	(131.7		)	(121.2		)
Net assumed losses and loss expenses incurred	$	92.9		$	75.0

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, 2016 and 2015:

($ millions)	2016					2015
Amount at statutory rate	$	1.3		35.0	%	$	11.6		35.0	%
Tax-exempt interest and dividends received deduction	(2.0		)	(52.8	)	(2.2		)	(6.7	)
Other, net	1.5			37.8		(0.9		)	(2.7	)
Federal income tax expense and effective rate	$	0.8		20.0	%	$	8.5		25.6	%

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, 2016 and 2015:

($ millions)	Pension						Postretirement
	2016			2015			2016			2015
Service cost	$	1.6		$	2.0		$	—		$	—
Interest cost	2.9			2.8			0.2			0.2
Expected return on plan assets	(3.7		)	(3.4		)	—			—
Amortization of:
Negative prior service cost	—			—			(1.4		)	(1.4		)
Net actuarial loss	2.3			2.7			0.1			0.2
Net periodic cost (benefit)	$	3.1		$	4.1		$	(1.1	)	$	(1.0	)

The Company's share of contributions to its pension plan for the three months endedMarch 31, 2016 were $3.3 million. The Company expects to contribute an additional $9.7 million during 2016.

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)

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, 2016 and 2015:

($ millions)		Unrealized Gains and Losses on Available-for-Sale  Securities			Benefit Plan Items			Total
Beginning balance at January 1, 2016		$	68.5		$	(30.9	)	$	37.6
Other comprehensive income before reclassifications		24.0			—			24.0
Amounts reclassified from AOCI (a)		(0.8		)	0.6			(0.2		)
Net current period other comprehensive income		23.2			0.6			23.8
Ending balance at March 31, 2016		$	91.7		$	(30.3	)	$	61.4
Beginning balance at January 1, 2015		$	110.0		$	(38.3	)	$	71.7
Other comprehensive income before reclassifications		11.0			—			11.0
Amounts reclassified from AOCI (a)		(2.7		)	1.0			(1.7		)
Net current period other comprehensive income		8.3			1.0			9.3
Ending balance at March 31, 2015		$	118.3		$	(37.3	)	$	81.0
(a)	See separate table below for details about these reclassifications

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)

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, 2016 and 2015:

($ millions)
Details about Accumulated Other		Three months ended						Affected line item in the Condensed
Comprehensive Income Components		March 31						Consolidated Statements of Income
		2016			2015
Unrealized gains on available for sale securities		$	1.3		$	4.2		Realized gain on sale of securities
		1.3			4.2			Total before tax
		(0.5		)	(1.5		)	Tax expense
		0.8			2.7			Net of tax
Amortization of benefit plan items
Negative prior service cost		1.4			1.4			(a)
Net actuarial loss		(2.4		)	(2.9		)	(a)
		(1.0		)	(1.5		)	Total before tax
		0.4			0.5			Tax benefit
		(0.6		)	(1.0		)	Net of tax
Total reclassifications for the period		$	0.2		$	1.7
(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).

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, 2016 and 2015:

($ and shares in millions, except per share amounts)	2016		2015
Numerator:
Net income for basic earnings per common share	$	3.0	$	24.7
Denominator:
Weighted average shares for basic net earnings per common share	41.4		41.0
Effect of dilutive share-based awards	0.4		0.4
Adjusted weighted average shares for diluted net earnings per common share	41.8		41.4
Basic net earnings per common share	$	0.07	$	0.60
Diluted net earnings per common share	$	0.07	$	0.60

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, 2016 and 2015.

(shares in millions)	2016	2015
Total number of antidilutive options and awards	1.7	1.7

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)

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, general liability, and workers' compensation insurance covering small-to-medium sized commercial exposures. 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.

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.

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)

The following table sets forth financial information regarding the Company’s reportable segments for the three months ended March 31, 2016 and 2015:

($ millions)	2016			2015
Revenue from external sources:
Insurance segments
Personal insurance	$	145.6		$	150.0
Business insurance	119.3			117.3
Specialty insurance	55.0			48.0
Total insurance segments	319.9			315.3
Investment operations segment
Net investment income	17.4			15.4
Net realized capital gains	1.3			4.2
Total investment operations segment	18.7			19.6
All other	0.6			—
Total revenue from external sources	339.2			334.9
Intersegment revenue	1.4			1.4
Total revenue	340.6			336.3
Reconciling items:
Eliminate intersegment revenues	(1.4		)	(1.4		)
Total consolidated revenues	$	339.2		$	334.9
Segment income before federal income tax:
Insurance segments SAP underwriting income (loss)
Personal insurance	$	3.9		$	17.4
Business insurance	(7.7		)	(0.3		)
Specialty insurance	(7.9		)	(1.9		)
Total insurance segments	(11.7		)	15.2
Investment operations segment
Net investment income	17.4			15.4
Net realized capital gains	1.3			4.2
Total investment operations segment	18.7			19.6
All other	0.1			(0.4		)
Total segment income before tax expense	7.1			34.4
Reconciling items:
GAAP expense adjustments	(1.2		)	1.2
Interest expense on corporate debt	(1.3		)	(1.3		)
Corporate expenses	(0.8		)	(1.1		)
Total reconciling items	(3.3		)	(1.2		)
Total consolidated income before federal income tax expense	$	3.8		$	33.2

Investable assets attributable to the Company’s investment operations segment totaled $2,583.2 million and $2,529.8 million at March 31, 2016 and December 31, 2015, respectively.

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)

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.

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, results of operations 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 consolidated financial position, results of operations or cash flows.

20

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, 2015 (the “2015 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, 2016 and December 31, 2015, and for the consolidated statements of income for the three month periods ended March 31, 2016 and 2015. This discussion and analysis should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2015 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 2015 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 2015 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, general liability, and workers' compensation insurance covering small-to-medium sized commercial exposures. 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 2015 Form 10-K for more information about our insurance segments. Financial information about our reportable segments for 2016 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.

21

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	%

22

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, 2016 was $3.8 million compared to $33.2 million in 2015. The decrease was primarily due to an increase in losses, both catastrophe and non-catastrophe, when compared to the same 2015 period. For the three months ended March 31, 2016, we reported net realized gains on investments of $1.3 million compared to $3.8 million in 2015.

The following table sets forth certain key performance indicators we use to monitor our operations for the three months ended March 31, 2016 and 2015:

($ millions, except per share amounts)	2016			2015
GAAP Basis:
Total revenues	$	339.2		$	334.9
Income before federal income taxes	$	3.8		$	33.2
Net income	$	3.0		$	24.7
Basic earnings per share	$	0.07		$	0.60
Diluted earnings per share	$	0.07		$	0.60
Stockholders’ equity	$	908.9		$	904.2
Return on average equity (LTM)	3.3		%	12.2		%
Book value per share	$	21.95		$	22.05
Debt to capital ratio	10.0		%	10.0		%
Cat loss and ALAE ratio	4.7		%	1.4		%
Non-cat loss and LAE ratio	65.6		%	60.4		%
Loss and LAE ratio	70.3		%	61.8		%
Expense ratio	33.6		%	32.8		%
Combined ratio	103.9		%	94.6		%
Premium written growth	(0.7		)%	15.7		%
Investment yield	2.9		%	2.8		%
SAP Basis:
Cat loss and ALAE ratio	4.7		%	1.4		%
Non-cat loss and ALAE ratio	59.2		%	54.2		%
ULAE ratio	6.6		%	6.4		%
Loss and LAE ratio	70.5		%	62.0		%
Expense ratio	34.8		%	34.1		%
Combined ratio	105.3		%	96.1		%

($ millions)	Twelve months ended March 31
	2016	2015
Net premiums written to surplus	1.6	1.5

23

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

Insurance Segments

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 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 2015 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 tables set forth our insurance segments’ SAP underwriting gain (loss) and SAP combined ratios for the three months ended March 31, 2016 and 2015:

($ millions)	Three months ended
	March 31, 2016
	Personal		% Ratio	Business			% Ratio	Specialty			% Ratio	Total			% Ratio
Net written premiums	$	135.0		$	109.4			$	60.4			$	304.8
Earned premiums	145.6			119.3				55.0				319.9
Cat loss and ALAE	12.3		8.5	2.2			1.9	0.5			0.9	15.0			4.7
Non-cat loss and ALAE	77.2		53.0	74.5			62.3	37.8			68.9	189.5			59.2
ULAE	10.5		7.2	8.0			6.7	2.4			4.4	20.9			6.6
Underwriting expenses	41.7		30.9	42.3			38.6	22.2			36.8	106.2			34.8
SAP underwriting gain (loss)  and SAP combined ratio	$	3.9	99.6	$	(7.7	)	109.5	$	(7.9	)	111.0	$	(11.7	)	105.3
($ millions)	Three months ended
	March 31, 2015
	Personal		% Ratio	Business			% Ratio	Specialty			% Ratio	Total			% Ratio
Net written premiums	$	137.1		$	115.5			$	54.4			$	307.0
Earned premiums	150.0			117.3				48.0				315.3
Cat loss and ALAE	3.1		2.1	1.4			1.2	—			—	4.5			1.4
Non-cat loss and ALAE	77.4		51.6	66.9			57.1	26.6			55.4	170.9			54.2
ULAE	12.7		8.5	5.4			4.6	1.8			3.7	19.9			6.4
Underwriting expenses	39.4		28.7	43.9			38.0	21.5			39.5	104.8			34.1
SAP underwriting gain (loss)  and SAP combined ratio	$	17.4	90.9	$	(0.3	)	100.9	$	(1.9	)	98.6	$	15.2		96.1

24

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, 2016 and 2015:

Table 1

($ millions)	Net Written Premiums
Personal insurance segment:	2016		2015		% Change
Personal auto	$	80.5	$	82.4	(2.3	)
Homeowners	46.2		46.5		(0.6	)
Other personal	8.3		8.2		1.2
Total personal	$	135.0	$	137.1	(1.5	)

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, 2016 and 2015:

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
2016
Personal insurance segment:
Personal auto	$	82.3	$	1.3	$	56.0	$	57.3	1.6	68.0	69.6
Homeowners	55.0		10.6		18.1		28.7		19.3	32.8	52.1
Other personal	8.3		0.4		3.1		3.5		4.6	37.7	42.3
Total personal	145.6		12.3		77.2		89.5		8.5	53.0	61.5
ULAE	—		—		—		10.5		—	—	7.2
Total Loss and LAE	$	145.6	$	12.3	$	77.2	$	100.0	8.5	53.0	68.7
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

25

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

The personal insurance segment's net written premiums for the three months ended March 31, 2016 decreased 1.5% when compared to the same 2015 period (Table 1). During the second half of 2015, the Company implemented various underwriting actions, which included pricing reviews and non-technology process improvements, designed to improve personal lines production and future profitability. While total policies in force continued to decline in the first quarter 2016, we believe that these underwriting actions are improving retention and new business as first quarter of 2016 personal auto and homeowners new business premium and new policy counts were up compared to the same 2015 period.

The personal insurance segment's SAP catastrophe loss ratio for the three months ended March 31, 2016 was 8.5% compared to 2.1% in 2015 (Table 2). The 6.4 point increase in the 2016 ratio when compared to 2015 (Table 2), was primarily due to severe weather in Texas, including wind and hail.

The personal insurance segment’s SAP non-catastrophe loss and ALAE ratio for the three months ended March 31, 2016 was 53.0% compared to 51.6% in 2015 (Table 2). The 1.4 point increase in the first quarter 2016 ratio when compared to 2015 (Table 2), was primarily due to a 4.0 point increase in the personal auto ratio when compared to 2015 (Table 2), attributable to increased bodily injury severity trends which have resulted in higher ultimate loss and ALAE estimates for prior accident years, primarily 2014 and 2015. The personal auto ratio increase was partially offset by a decrease in the homeowners ratio of 4.7 points for the first quarter 2016 when compared to 2015 (Table 2), reflecting improvement in the current accident year.

26

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, 2016 and 2015:

Table 3

($ millions)	Net Written Premiums
Business insurance segment:	2016		2015		% Change
Commercial auto	$	21.5	$	23.4	(8.1	)
Commercial multi-peril	29.2		30.0		(2.7	)
Fire & allied lines	16.5		17.4		(5.2	)
Other & product liability	15.5		17.8		(12.9	)
Workers’ compensation	22.8		22.9		(0.4	)
Other commercial	3.9		4.0		(2.5	)
Total business	$	109.4	$	115.5	(5.3	)

27

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

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, 2016 and 2015:

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
2016
Business insurance segment:
Commercial auto	$	25.3	$	0.1	$	17.0	$	17.1	0.6		67.2	67.8
Commercial multi-peril	30.1		1.2		18.7		19.9		4.1		61.9	66.0
Fire & allied lines	18.7		0.9		12.3		13.2		4.6		65.8	70.4
Other & product liability	18.1		—		10.7		10.7		—		59.3	59.3
Workers’ compensation	23.0		—		14.5		14.5		—		62.9	62.9
Other commercial	4.1		—		1.3		1.3		(0.2	)	30.9	30.7
Total business	119.3		2.2		74.5		76.7		1.9		62.3	64.2
ULAE	—		—		—		8.0		—		—	6.7
Total Loss and LAE	$	119.3	$	2.2	$	74.5	$	84.7	1.9		62.3	70.9
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
Workers’ compensation	21.2		—		13.4		13.4		—		63.3	63.3
Other commercial	4.3		—		1.1		1.1		(0.1	)	26.6	26.5
Total business	117.3		1.4		66.9		68.3		1.2		57.1	58.3
ULAE	—		—		—		5.4		—		—	4.6
Total Loss and LAE	$	117.3	$	1.4	$	66.9	$	73.7	1.2		57.1	62.9

Net written premiums for the business insurance segment for the three months ended March 31, 2016 decreased 5.3% compared to the same 2015 period (Table 3). The decrease was primarily due to (i) our decision to exit our larger account business, and (ii) changing our regional sales teams due to field restructuring, including staff reductions and reassignment of agency relationships among remaining staff, that was completed during the first quarter 2016.

The business insurance segment’s SAP non-catastrophe loss and ALAE ratio for the three months ended March 31, 2016 was 62.3% compared to 57.1% in 2015. The 5.2 point increase in the first quarter 2016 when compared to 2015 (Table 4) was due to commercial multi-peril, fire & allied lines and other & product liability lines ratio increases of 9.7 points, 10.3 points and 4.6 points, respectively. The increase in the commercial multi-peril ratio was due to adverse development of prior accident year losses during the first quarter 2016 compared to favorable development of prior accident year losses during 2015. The increase in the other & product liability ratio was primarily due to an increase in the severity of losses during the current accident year when compared to 2015. The increase in the fire & allied lines ratio was due to two large fire losses, one related to the 2015 accident year, which developed adversely, and the other being a 2016 accident year loss. Both losses occurred within our larger account business, which we have exited.

28

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

Specialty Insurance Segment

Certain business previously included in the programs unit has been reclassified to the E&S property unit. Prior reporting periods have been restated to conform to the new presentation.

The following table sets forth the net written premiums by unit for our specialty insurance segment for the three months ended March 31, 2016 and 2015.

Table 5

($ millions)	Net Written Premiums
Specialty insurance segment:	2016		2015		% Change
E&S property	$	6.3	$	12.4	(49.2	)
E&S casualty	22.1		17.4		27.0
Programs	32.0		24.6		30.1
Total specialty	$	60.4	$	54.4	11.0

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, 2016 and 2015:

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
2016
Specialty insurance segment:
E&S property	$	9.8	$	0.4	$	3.0	$	3.4	4.4		30.5	34.9
E&S casualty	20.2		—		12.5		12.5		—		62.2	62.2
Programs	25.0		0.1		22.3		22.4		0.2		89.6	89.8
Total specialty	55.0		0.5		37.8		38.3		0.9		68.9	69.8
ULAE	—		—		—		2.4		—		—	4.4
Total Loss and LAE	$	55.0	$	0.5	$	37.8	$	40.7	0.9		68.9	74.2
2015
Specialty insurance segment:
E&S property	$	13.0	$	—	$	3.7	$	3.7	0.1		28.5	28.6
E&S casualty	15.6		—		9.0		9.0		—		57.8	57.8
Programs	19.4		—		13.9		13.9		(0.1	)	71.5	71.4
Total specialty	48.0		—		26.6		26.6		—		55.4	55.4
ULAE	—		—		—		1.8		—		—	3.7
Total Loss and LAE	$	48.0	$	—	$	26.6	$	28.4	—		55.4	59.1

Net written premiums for the specialty insurance segment for the three months ended March 31, 2016 increased 11.0% compared to the same 2015 period (Table 5). The year over year increase was driven by new programs added during the second quarter 2015, and new business growth in the E&S casualty unit. Partially offsetting the 2016 growth was a decline in E&S property unit premiums due to continued intense competition within the catastrophe-exposed property marketplace, which has contributed to less favorable pricing opportunities.

The specialty insurance segment’s SAP non-catastrophe loss and ALAE ratio for the three months ended March 31, 2016 was 68.9% compared to 55.4% in 2015 (Table 6). The 13.5 point increase in the first quarter 2016 ratio when compared to 2015 (Table 6) was primarily due to the programs and E&S casualty units ratio increases of 18.1 points and 4.4 points, respectively

29

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

(Table 6). The increase in the programs unit loss ratio was due to (i) higher current accident year losses resulting from increased severity in programs with commercial auto exposures, and (ii) adverse development of prior accident year losses for certain programs, including those programs in runoff. The increase in the E&S casualty unit loss ratio was primarily due to higher current accident year losses as a result of (i) a change in mix, and (ii) higher ultimate loss and ALAE estimates for our healthcare business, which we exited in the first quarter 2016.

30

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

Losses and LAE Development

Losses and loss expenses represent the combined estimated ultimate liability for claims occurring in a period, along with any change in the estimated ultimate liability for claims occurring in prior periods.

The following table sets forth a tabular presentation of the development of the prior accident years ultimate liability by line of business for the three months ended March 31, 2016 and 2015:

($ millions)	2016			2015			$ Change
	Redundancy /(Deficiency)
Non-cat loss and ALAE:
Personal insurance segment:
Personal auto	$	(3.2	)	$	0.9		$	(4.1	)
Homeowners	0.1			1.2			(1.1		)
Other personal	(0.4		)	0.6			(1.0		)
Personal segment	(3.5		)	2.7			(6.2		)
Business insurance segment:
Commercial auto	0.2			(0.6		)	0.8
Commercial multi-peril	(1.5		)	2.1			(3.6		)
Fire & allied lines	(1.8		)	(0.2		)	(1.6		)
Other & product liability	1.7			1.6			0.1
Workers' compensation	0.9			0.9			—
Other commercial	0.2			0.6			(0.4		)
Business segment	(0.3		)	4.4			(4.7		)
Specialty insurance segment:
E&S property	(0.3		)	(0.1		)	(0.2		)
E&S casualty	(0.7		)	(0.6		)	(0.1		)
Programs	(3.9		)	(1.7		)	(2.2		)
Specialty segment	(4.9		)	(2.4		)	(2.5		)
Cat loss and ALAE	0.7			0.2			0.5
ULAE	(1.6		)	(0.3		)	(1.3		)
Total	$	(9.6	)	$	4.6		$	(14.2	)

For further information, see the "Personal Insurance Segment", "Business Insurance Segment" and "Specialty Insurance Segment" discussions included in this Item 2.

31

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, 2016 and December 31, 2015:

($ millions)	March 31, 2016		December 31, 2015		$ Change
Personal insurance segment:
Personal auto	$	180.5	$	182.1	$	(1.6	)
Homeowners	46.6		37.2		9.4
Other personal	9.1		7.7		1.4
Total personal	236.2		227.0		9.2
Business insurance segment:
Commercial auto	93.4		97.1		(3.7		)
Commercial multi-peril	114.5		109.1		5.4
Fire & allied lines	23.2		17.4		5.8
Other & product liability	163.4		161.2		2.2
Workers’ compensation	171.8		167.3		4.5
Other commercial	1.9		1.5		0.4
Total business	568.2		553.6		14.6
Specialty insurance segment:
E&S property	21.9		21.4		0.5
E&S casualty	104.5		96.6		7.9
Programs	146.2		148.5		(2.3		)
Total specialty	272.6		266.5		6.1
Total losses and loss expenses payable, net of reinsurance  recoverable on losses and loss expenses payable	$	1,077.0	$	1,047.1	$	29.9

Losses and loss expenses payable increased $29.9 million since December 31, 2015. The increase in the personal insurance segment's losses and loss expenses payable was primarily due to an increase in catastrophe losses in the homeowners line. The increase in losses and loss expenses payable in the business insurance segment was primarily the result of adverse development within the commercial multi-peril line and two large fire losses in the fire & allied line. The increase in losses and loss expenses payable in the specialty insurance segment was primarily attributable to an increase in the volume of business in the E&S casualty unit.

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, 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 2015 Form 10-K.

32

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 ratio was 33.6% for the three months ended March 31, 2016 compared to 32.8% in 2015. The 0.8 point increase in the first quarter 2016 when compared to 2015 was primarily due to employee severance expenses incurred in the first quarter 2016 and a decrease in profit commission recognized in connection with the expired HO QS Arrangement.

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 by a recognized rating service at the time of purchase. Our fixed maturity portfolio is composed of high quality, investment grade issues, consisting 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, 2016, there were three 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 2015 Form 10-K.

Composition of Investment Portfolio

The following table sets forth the composition of our investment portfolio at carrying value at March 31, 2016 and December 31, 2015:

($ millions)		March 31, 2016		% of Total	December 31, 2015		% of Total
Cash and cash equivalents		$	47.7	1.8	$	58.1	2.3
Fixed maturities, at fair value:
Fixed maturities		1,911.9		74.0	1,856.7		73.4
Treasury inflation-protected securities		143.6		5.6	144.0		5.7
Total fixed maturities		2,055.5		79.6	2,000.7		79.1
Notes receivable from affiliate (a)		70.0		2.7	70.0		2.8
Equity securities, at fair value:
Large-cap securities		249.8		9.7	241.0		9.5
Small-cap securities		69.1		2.7	69.6		2.8
Total equity securities		318.9		12.4	310.6		12.3
Other invested assets, at fair value:
International funds		77.4		3.0	77.0		3.0
Other invested assets		8.4		0.3	8.1		0.3
Total other invested assets, at fair value		85.8		3.3	85.1		3.3
Other invested assets, at cost		5.3		0.2	5.3		0.2
Total portfolio		$	2,583.2	100.0	$	2,529.8	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.

33

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, 2016:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	39.5	$	40.2
Due after 1 year through 5 years	532.1		545.7
Due after 5 years through 10 years	292.7		299.5
Due after 10 years	665.3		689.1
U.S. government agencies mortgage-backed securities	461.9		481.0
Total	$	1,991.5	$	2,055.5

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 4.50 and 4.85 as of March 31, 2016 and December 31, 2015, respectively.

Investment Operations Revenue

The following table sets forth the components of net investment income for the three months ended March 31, 2016 and 2015:

($ millions)	2016			2015
Gross investment income:
Fixed maturities	$	14.9		$	12.9
Equity securities	1.5			1.6
Other	1.4			1.4
Total gross investment income	17.8			15.9
Less: Investment expenses	0.4			0.5
Net investment income	$	17.4		$	15.4
Average invested assets (at cost)	$	2,384.1		$	2,226.0
Annualized investment yield	2.9		%	2.8		%
Annualized investment yield, after tax	2.2		%	2.2		%
Net investment income, after tax	$	13.3		$	12.2
Effective tax rate	23.5		%	20.5		%

34

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 from the sale of our investment portfolio for the three months ended March 31, 2016 and 2015:

($ in millions)	2016					2015
	Realized gains (losses)			Proceeds received on sale		Realized gains (losses)			Proceeds received on sale
Realized gains:
Fixed maturities	$	1.5		$	75.8	$	1.1		$	62.5
Equity securities	4.1			20.4		4.1			19.0
Other invested assets	—			0.2		—			0.2
Total realized gains	5.6			96.4		5.2			81.7
Realized losses:
Equity securities:
Sales	(0.6		)	3.2		(0.5		)	2.5
OTTI	(1.4		)	—		(0.5		)	—
Fixed maturities
OTTI	(2.3		)	—		—			—
Total realized losses	(4.3		)	3.2		(1.0		)	2.5
Net realized gain on investments	$	1.3		$	99.6	$	4.2		$	84.2

Net realized gains decreased $2.9 million in the first quarter 2016 when compared to 2015, primarily due to OTTI recognized on our fixed maturity portfolio.

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 2015 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 recognized $2.3 million of OTTI on our fixed maturity portfolio for the three months ended March 31, 2016, while we did not recognize any OTTI on our fixed maturity portfolio for the three months ended March 31, 2015.

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 2015 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, 2016 and 2015:

($ millions, except # of positions)	2016				2015
	Number of positions	Total impairment			Number of positions	Total impairment
Equity securities:
Large-cap securities	1	$	(0.2	)	—	$	—
Small-cap securities	10	(1.2		)	7	(0.5		)
Fixed maturities	1	(2.3		)	—	—
Total other-than-temporary impairments	12	$	(3.7	)	7	$	(0.5	)

35

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, 2016, 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, 2016:

($ 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	$	223.6	$	13.0	33	$	(0.5	)	6	$	236.1
Obligations of states and political subdivisions	730.7		28.6		208	(0.6		)	4	758.7
Corporate securities	575.3		11.1		79	(6.7		)	21	579.7
U.S. government agencies mortgage-backed securities	461.9		19.8		65	(0.7		)	17	481.0
Total fixed maturities	1,991.5		72.5		385	(8.5		)	48	2,055.5
Equity securities:
Large-cap securities	221.1		33.5		40	(4.8		)	24	249.8
Small-cap securities	53.4		15.9		69	(0.2		)	1	69.1
Total equity securities	274.5		49.4		109	(5.0		)	25	318.9
Other invested assets	57.1		28.7		2	—			—	85.8
Total available-for-sale investments	$	2,323.1	$	150.6	496	$	(13.5	)	73	$	2,460.2

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, 2016 and December 31, 2015, and the change in unrealized holding gains, net of deferred tax, for the three months ended March 31, 2016:

($ millions)	March 31, 2016			December 31, 2015			$ Change
Available-for-sale investments:
Unrealized holding gains:
Fixed maturities	$	64.0		$	27.8		$	36.2
Equity securities	44.4			45.4			(1.0		)
Other invested assets	28.7			28.2			0.5
Unrealized gains	137.1			101.4			35.7
Net deferred federal income tax liability	(45.4		)	(32.9		)	(12.5		)
Unrealized gains, net of tax	$	91.7		$	68.5		$	23.2

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, 2016 and December 31, 2015.

As of March 31, 2016, Level 3 assets as a percentage of total assets were 0.1% which we have determined to be insignificant.

36

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, 2016 and 2015, respectively.

($ millions)	2016		2015
Income before federal income taxes	$	3.8	$	33.2
Current tax expense	—		0.4
Deferred tax expense	0.8		8.1
Total federal income tax expense	0.8		8.5
Net income	$	3.0	$	24.7

Effective tax rates were 20.0% and 25.6% for the three months ended March 31, 2016 and 2015, respectively. See Note 5 of our condensed consolidated financial statements included in Item 1 of this Form 10-Q.

37

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 2.

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, 2016.

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, 2016 and December 31, 2015, we had $47.7 million and $58.1 million, respectively, in cash and cash equivalents, and $2,460.2 million and $2,396.4 million, respectively, of total available-for-sale investments. Our fixed maturities available-for-sale included $9.1 million and $8.8 million of securities on deposit with insurance regulators as required by law at March 31, 2016 and December 31, 2015; 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 $24.5 million and $54.6 million for the three months ended March 31, 2016 and 2015, respectively. The decrease in net cash provided by operating activities was due to the expiration of the HO QS Arrangement at December 31, 2014, which resulted in STFC receiving a return of $63.5 million of premiums during the three months ended March 31, 2015. 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.

38

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

Net cash used in investing activities was $31.4 million and $69.0 million for the three months ended March 31, 2016 and 2015, respectively. The change was primarily due to the reinvestment of the premiums received from the expiration of the HO QS Arrangement.

Net cash used in financing activities was $3.5 million for the three months ended March 31, 2016 and 2015, 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, 2016, 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, 2016 and 2015 were 4.61% and 4.46%, 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. 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.

39

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

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 2015 Form 10-K.

Regulatory Considerations

At March 31, 2016, all of our insurance subsidiaries were in compliance with statutory requirements relating to capital adequacy.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

Simplifying the Presentation of Debt Issuance Costs

The amendments in this guidance simplify the presentation of debt issuance costs by requiring them to be presented in the balance sheet as a direct deduction from the carrying amount of the related recognized debt liability, consistent with debt discounts. We adopted this guidance at January 1, 2016 on a retrospective basis and it resulted in a $0.3 million decrease to notes payable and accrued investment income and other assets at December 31, 2015.

Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

The amendments in this guidance remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and should be applied retrospectively to all periods presented. We adopted this guidance at January 1, 2016 and it did not have a material impact on the condensed consolidated financial statements.

CREDIT AND FINANCIAL STRENGTH RATINGS

On April 26, 2016, A.M. Best reaffirmed the State Auto Group’s financial strength rating of A- (Excellent) with a stable 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 2015 Form 10-K. There have been no material changes from the information reported regarding Market Risk in the 2015 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.

40

STATE AUTO FINANCIAL CORPORATION AND SUBSIDIARIES

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

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

None.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in the 2015 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	Restricted Stock Agreement under the 2009 Equity Incentive Compensation Plan dated March 3, 2016, between State Auto Financial Corporation and Michael E. LaRocco
10.02	Restricted Stock Agreement under the 2009 Equity Incentive Compensation Plan dated March 3, 2016, between State Auto Financial Corporation and Steven E. English
10.03	Restricted Stock Agreement under the 2009 Equity Incentive Compensation Plan dated March 3, 2016, between State Auto Financial Corporation and Jessica E. Clark
10.04	Restricted Stock Agreement under the 2009 Equity Incentive Compensation Plan dated August 24, 2015, between State Auto Financial Corporation and Kim B. Garland
10.05	Restricted Stock Agreement under the 2009 Equity Incentive Compensation Plan dated August 24, 2015, between State Auto Financial Corporation and Kim B. Garland
10.06	Restricted Stock Agreement under the 2009 Equity Incentive Compensation Plan dated March 3, 2016, between State Auto Financial Corporation and Kim B. Garland
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 4, 2016	/s/ Steven E. English
	Steven E. English
	Chief Financial Officer
	(Duly Authorized Officer and
	Principal Financial Officer)

44

EX-10.01

EXHIBIT 10.01

STATE AUTO FINANCIAL CORPORATION

RESTRICTED STOCK AGREEMENT

UNDER THE

2009 EQUITY INCENTIVE COMPENSATION PLAN

This Restricted Stock Agreement (this “Agreement”) is made as of March 3, 2016 (the “Award Date”). The Compensation Committee of the Board of Directors of State Auto Financial Corporation, an Ohio corporation (the “Company”), hereby awards to Michael E. LaRocco (the “Awardee”) 7,461 common shares, without par value, of the Company (the “Restricted Shares”). The Restricted Shares are awarded pursuant to the terms of the Company’s 2009 Equity Incentive Compensation Plan (the “Plan”) and shall be subject to all of the provisions of the Plan, which are hereby incorporated herein by reference, and shall be subject to the following provisions of this Agreement. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

§1.    Award of Restricted Shares. The purchase price for the Restricted Shares shall be zero. Following the execution and delivery of this Agreement by the Awardee, the Company shall cause a share certificate evidencing the Restricted Shares to be issued in the Awardee’s name (the “Share Certificate”).

§2.    Forfeiture. The Restricted Shares shall be forfeited to the Company if the Awardee’s employment with the Company terminates for any reason prior to the third anniversary of the Award Date (the “Lapse Date”), or if the Awardee violates any provision of this Agreement.

§3.    Transfer Restrictions. None of the Restricted Shares, nor any beneficial interest therein, shall be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, prior to the Lapse Date. Thereafter, the Restricted Shares may be transferred only in compliance with all applicable federal and state securities laws. Any transfer or attempted transfer in violation of the foregoing restrictions shall be null and void.

§4.    Acceptance of Award. The award of the Restricted Shares must be accepted by the Awardee within 30 days after the Award Date by executing this Agreement. The Awardee shall not have any rights with respect to the Restricted Shares awarded under this Agreement unless and until the Awardee has executed this Agreement, delivered a fully executed copy thereof to the Secretary of the Company, and otherwise complied with the applicable terms and conditions of the award of the Restricted Shares.

§5.     Rights As Shareholder. Subject to the terms of this Agreement, on and after the issuance of the Share Certificate to the Awardee, the Awardee shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares, including the right to vote the Restricted Shares and the right to receive any dividends or other distributions with respect to the Restricted Shares, but subject, however, to the restrictions on transfer set forth in this Agreement. Notwithstanding the foregoing, any cash dividends or other cash distributions paid on the Restricted Shares prior to the Lapse Date shall be automatically reinvested in common shares of the Company (the “Dividend Shares”) pursuant to the terms of the Company’s dividend reinvestment and stock purchase plan and shall be held in an account with Fidelity, or its successor, under the Awardee’s name. Until the Lapse Date, the Dividend Shares shall be subject to the restrictions on transfer set forth in §3, above. However, the Dividend Shares shall not be subject to any risk of forfeiture.

§6.    Escrow of Shares. The Share Certificate shall be held by the Company until the earlier of the Lapse Date or the termination of the Awardee’s employment with the Company. If the Restricted Shares are forfeited to the Company under §2, above, then the Company shall cause the Restricted Shares to be transferred to the Company. If the Restricted Shares are not forfeited to the Company, then the Company shall deliver the Shares to the Awardee.

§7.    Tax Consequences. The Awardee understands that the Awardee (and not the Company) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences that may arise as a result of the transactions

contemplated by this Agreement, including without limitation filing an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “83(b) Election” and the “Code”, respectively), if the Awardee deems it to be appropriate. The Awardee shall rely solely on the determinations of the Awardee’s tax advisors or the Awardee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. The Awardee shall notify the Company in writing if the Awardee files the 83(b) Election with the Internal Revenue Service within 30 days from the date of the execution of this Agreement. The Company intends, in the event it does not receive from the Awardee evidence of the 83(b) Election filing by the Awardee, to claim a tax deduction for any amount which would be taxable to the Awardee in the absence of such an election. If the Company is required to withhold or pay any taxes with respect to the issuance or vesting of the Restricted Shares, the Awardee shall pay to the Company the amount of such required withholding or payment promptly following the Company's request.

§8.    Compliance with Securities Laws. No Restricted Shares shall be deliverable under this Agreement or the Plan except in compliance with all applicable federal and state securities laws and regulations. The Company may require the Awardee to (a) represent and warrant to and agree with the Company in writing that the Awardee is acquiring the Restricted Shares without a view to distribution thereof, and (b) make such additional representations, warranties and agreements with respect to the investment intent of the Awardee as the Company may reasonably request.

The Share Certificate shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company’s common shares are then listed, and any applicable federal or state securities laws, and the Company may cause a legend or legends to be put on the Share Certificate to make appropriate reference to such restrictions.

STATE AUTO FINANCIAL CORPORATION

By: /s/ Melissa Centers

Melissa Centers, Senior Vice President, Secretary and General

Counsel (as authorized and approved by the Compensation

Committee of the Board of Directors)

Acceptance of Agreement

Michael E. LaRocco, the Awardee, hereby: (a) acknowledges receiving a copy of the Plan and represents that the Awardee is familiar with all provisions of the Plan; and (b) accepts this Agreement and the award of the Restricted Shares under this Agreement subject to all terms, provisions and restrictions of both the Plan and this Agreement.            

/s/ Michael E. LaRocco

Michael E. LaRocco

Accepted as of: March 29, 2016

EX-10.02

EXHIBIT 10.02

STATE AUTO FINANCIAL CORPORATION

RESTRICTED STOCK AGREEMENT

UNDER THE

2009 EQUITY INCENTIVE COMPENSATION PLAN

This Restricted Stock Agreement (this “Agreement”) is made as of March 3, 2016 (the “Award Date”). The Compensation Committee of the Board of Directors of State Auto Financial Corporation, an Ohio corporation (the “Company”), hereby awards to Steven E. English (the “Awardee”) 2,334 common shares, without par value, of the Company (the “Restricted Shares”). The Restricted Shares are awarded pursuant to the terms of the Company’s 2009 Equity Incentive Compensation Plan (the “Plan”) and shall be subject to all of the provisions of the Plan, which are hereby incorporated herein by reference, and shall be subject to the following provisions of this Agreement. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

§1.    Award of Restricted Shares. The purchase price for the Restricted Shares shall be zero. Following the execution and delivery of this Agreement by the Awardee, the Company shall cause a share certificate evidencing the Restricted Shares to be issued in the Awardee’s name (the “Share Certificate”).

§2.    Forfeiture. The Restricted Shares shall be forfeited to the Company if the Awardee’s employment with the Company terminates for any reason prior to the third anniversary of the Award Date (the “Lapse Date”), or if the Awardee violates any provision of this Agreement.

§3.    Transfer Restrictions. None of the Restricted Shares, nor any beneficial interest therein, shall be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, prior to the Lapse Date. Thereafter, the Restricted Shares may be transferred only in compliance with all applicable federal and state securities laws. Any transfer or attempted transfer in violation of the foregoing restrictions shall be null and void.

§4.    Acceptance of Award. The award of the Restricted Shares must be accepted by the Awardee within 30 days after the Award Date by executing this Agreement. The Awardee shall not have any rights with respect to the Restricted Shares awarded under this Agreement unless and until the Awardee has executed this Agreement, delivered a fully executed copy thereof to the Secretary of the Company, and otherwise complied with the applicable terms and conditions of the award of the Restricted Shares.

§5.     Rights As Shareholder. Subject to the terms of this Agreement, on and after the issuance of the Share Certificate to the Awardee, the Awardee shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares, including the right to vote the Restricted Shares and the right to receive any dividends or other distributions with respect to the Restricted Shares, but subject, however, to the restrictions on transfer set forth in this Agreement. Notwithstanding the foregoing, any cash dividends or other cash distributions paid on the Restricted Shares prior to the Lapse Date shall be automatically reinvested in common shares of the Company (the “Dividend Shares”) pursuant to the terms of the Company’s dividend reinvestment and stock purchase plan and shall be held in an account with Fidelity, or its successor, under the Awardee’s name. Until the Lapse Date, the Dividend Shares shall be subject to the restrictions on transfer set forth in §3, above. However, the Dividend Shares shall not be subject to any risk of forfeiture.

§6.    Escrow of Shares. The Share Certificate shall be held by the Company until the earlier of the Lapse Date or the termination of the Awardee’s employment with the Company. If the Restricted Shares are forfeited to the Company under §2, above, then the Company shall cause the Restricted Shares to be transferred to the Company. If the Restricted Shares are not forfeited to the Company, then the Company shall deliver the Shares to the Awardee.

§7.    Tax Consequences. The Awardee understands that the Awardee (and not the Company) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences that may arise as a result of the transactions

contemplated by this Agreement, including without limitation filing an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “83(b) Election” and the “Code”, respectively), if the Awardee deems it to be appropriate. The Awardee shall rely solely on the determinations of the Awardee’s tax advisors or the Awardee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. The Awardee shall notify the Company in writing if the Awardee files the 83(b) Election with the Internal Revenue Service within 30 days from the date of the execution of this Agreement. The Company intends, in the event it does not receive from the Awardee evidence of the 83(b) Election filing by the Awardee, to claim a tax deduction for any amount which would be taxable to the Awardee in the absence of such an election. If the Company is required to withhold or pay any taxes with respect to the issuance or vesting of the Restricted Shares, the Awardee shall pay to the Company the amount of such required withholding or payment promptly following the Company's request.

§8.    Compliance with Securities Laws. No Restricted Shares shall be deliverable under this Agreement or the Plan except in compliance with all applicable federal and state securities laws and regulations. The Company may require the Awardee to (a) represent and warrant to and agree with the Company in writing that the Awardee is acquiring the Restricted Shares without a view to distribution thereof, and (b) make such additional representations, warranties and agreements with respect to the investment intent of the Awardee as the Company may reasonably request.

The Share Certificate shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company’s common shares are then listed, and any applicable federal or state securities laws, and the Company may cause a legend or legends to be put on the Share Certificate to make appropriate reference to such restrictions.

STATE AUTO FINANCIAL CORPORATION

By: /s/ Melissa Centers

Melissa Centers, Senior Vice President, Secretary and General

Counsel (as authorized and approved by the Compensation

Committee of the Board of Directors)

Acceptance of Agreement

Steven E. English, the Awardee, hereby: (a) acknowledges receiving a copy of the Plan and represents that the Awardee is familiar with all provisions of the Plan; and (b) accepts this Agreement and the award of the Restricted Shares under this Agreement subject to all terms, provisions and restrictions of both the Plan and this Agreement.            

/s/Steven E. English

Steven E. English

Accepted as of: March 15, 2016

EX-10.03

EXHIBIT 10.03

STATE AUTO FINANCIAL CORPORATION

RESTRICTED STOCK AGREEMENT

UNDER THE

2009 EQUITY INCENTIVE COMPENSATION PLAN

This Restricted Stock Agreement (this “Agreement”) is made as of March 3, 2016 (the “Award Date”). The Compensation Committee of the Board of Directors of State Auto Financial Corporation, an Ohio corporation (the “Company”), hereby awards to Jessica E. Clark (the “Awardee”) 2,079 common shares, without par value, of the Company (the “Restricted Shares”). The Restricted Shares are awarded pursuant to the terms of the Company’s 2009 Equity Incentive Compensation Plan (the “Plan”) and shall be subject to all of the provisions of the Plan, which are hereby incorporated herein by reference, and shall be subject to the following provisions of this Agreement. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

§1.    Award of Restricted Shares. The purchase price for the Restricted Shares shall be zero. Following the execution and delivery of this Agreement by the Awardee, the Company shall cause a share certificate evidencing the Restricted Shares to be issued in the Awardee’s name (the “Share Certificate”).

§2.    Forfeiture. The Restricted Shares shall be forfeited to the Company if the Awardee’s employment with the Company terminates for any reason prior to the third anniversary of the Award Date (the “Lapse Date”), or if the Awardee violates any provision of this Agreement.

§3.    Transfer Restrictions. None of the Restricted Shares, nor any beneficial interest therein, shall be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, prior to the Lapse Date. Thereafter, the Restricted Shares may be transferred only in compliance with all applicable federal and state securities laws. Any transfer or attempted transfer in violation of the foregoing restrictions shall be null and void.

§4.    Acceptance of Award. The award of the Restricted Shares must be accepted by the Awardee within 30 days after the Award Date by executing this Agreement. The Awardee shall not have any rights with respect to the Restricted Shares awarded under this Agreement unless and until the Awardee has executed this Agreement, delivered a fully executed copy thereof to the Secretary of the Company, and otherwise complied with the applicable terms and conditions of the award of the Restricted Shares.

§5.     Rights As Shareholder. Subject to the terms of this Agreement, on and after the issuance of the Share Certificate to the Awardee, the Awardee shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares, including the right to vote the Restricted Shares and the right to receive any dividends or other distributions with respect to the Restricted Shares, but subject, however, to the restrictions on transfer set forth in this Agreement. Notwithstanding the foregoing, any cash dividends or other cash distributions paid on the Restricted Shares prior to the Lapse Date shall be automatically reinvested in common shares of the Company (the “Dividend Shares”) pursuant to the terms of the Company’s dividend reinvestment and stock purchase plan and shall be held in an account with Fidelity, or its successor, under the Awardee’s name. Until the Lapse Date, the Dividend Shares shall be subject to the restrictions on transfer set forth in §3, above. However, the Dividend Shares shall not be subject to any risk of forfeiture.

§6.    Escrow of Shares. The Share Certificate shall be held by the Company until the earlier of the Lapse Date or the termination of the Awardee’s employment with the Company. If the Restricted Shares are forfeited to the Company under §2, above, then the Company shall cause the Restricted Shares to be transferred to the Company. If the Restricted Shares are not forfeited to the Company, then the Company shall deliver the Shares to the Awardee.

§7.    Tax Consequences. The Awardee understands that the Awardee (and not the Company) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences that may arise as a result of the transactions

contemplated by this Agreement, including without limitation filing an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “83(b) Election” and the “Code”, respectively), if the Awardee deems it to be appropriate. The Awardee shall rely solely on the determinations of the Awardee’s tax advisors or the Awardee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. The Awardee shall notify the Company in writing if the Awardee files the 83(b) Election with the Internal Revenue Service within 30 days from the date of the execution of this Agreement. The Company intends, in the event it does not receive from the Awardee evidence of the 83(b) Election filing by the Awardee, to claim a tax deduction for any amount which would be taxable to the Awardee in the absence of such an election. If the Company is required to withhold or pay any taxes with respect to the issuance or vesting of the Restricted Shares, the Awardee shall pay to the Company the amount of such required withholding or payment promptly following the Company's request.

§8.    Compliance with Securities Laws. No Restricted Shares shall be deliverable under this Agreement or the Plan except in compliance with all applicable federal and state securities laws and regulations. The Company may require the Awardee to (a) represent and warrant to and agree with the Company in writing that the Awardee is acquiring the Restricted Shares without a view to distribution thereof, and (b) make such additional representations, warranties and agreements with respect to the investment intent of the Awardee as the Company may reasonably request.

The Share Certificate shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company’s common shares are then listed, and any applicable federal or state securities laws, and the Company may cause a legend or legends to be put on the Share Certificate to make appropriate reference to such restrictions.

STATE AUTO FINANCIAL CORPORATION

By: /s/ Melissa Centers

Melissa Centers, Senior Vice President, Secretary and General

Counsel (as authorized and approved by the Compensation

Committee of the Board of Directors)

Acceptance of Agreement

Jessica E. Clark, the Awardee, hereby: (a) acknowledges receiving a copy of the Plan and represents that the Awardee is familiar with all provisions of the Plan; and (b) accepts this Agreement and the award of the Restricted Shares under this Agreement subject to all terms, provisions and restrictions of both the Plan and this Agreement.            

/s/ Jessica E. Clark

Jessica E. Clark

Accepted as of: March 17, 2016

EX-10.04

EXHIBIT 10.04

STATE AUTO FINANCIAL CORPORATION

RESTRICTED STOCK AGREEMENT

UNDER THE

2009 EQUITY INCENTIVE COMPENSATION PLAN

This Restricted Stock Agreement (this “Agreement”) is made as of August 24, 2015 (the “Award Date”). The Compensation Committee of the Board of Directors of State Auto Financial Corporation, an Ohio corporation (the “Company”), hereby awards to Kim B. Garland (the “Awardee”) 2,214 common shares, without par value, of the Company (the “Restricted Shares”). The Restricted Shares are awarded pursuant to the terms of the Company’s 2009 Equity Incentive Compensation Plan (the “Plan”) and shall be subject to all of the provisions of the Plan, which are hereby incorporated herein by reference, and shall be subject to the following provisions of this Agreement. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

§1.    Award of Restricted Shares. The purchase price for the Restricted Shares shall be zero. Following the execution and delivery of this Agreement by the Awardee, the Company shall cause a share certificate evidencing the Restricted Shares to be issued in the Awardee’s name (the “Share Certificate”).

§2.    Forfeiture. The Restricted Shares shall be forfeited to the Company if the Awardee’s employment with the Company terminates for any reason prior to the third anniversary of the Award Date (the “Lapse Date”), or if the Awardee violates any provision of this Agreement.

§3.    Transfer Restrictions. None of the Restricted Shares, nor any beneficial interest therein, shall be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, prior to the Lapse Date. Thereafter, the Restricted Shares may be transferred only in compliance with all applicable federal and state securities laws. Any transfer or attempted transfer in violation of the foregoing restrictions shall be null and void.

§4.    Acceptance of Award. The award of the Restricted Shares must be accepted by the Awardee within 30 days after the Award Date by executing this Agreement. The Awardee shall not have any rights with respect to the Restricted Shares awarded under this Agreement unless and until the Awardee has executed this Agreement, delivered a fully executed copy thereof to the Secretary of the Company, and otherwise complied with the applicable terms and conditions of the award of the Restricted Shares.

§5.     Rights As Shareholder. Subject to the terms of this Agreement, on and after the issuance of the Share Certificate to the Awardee, the Awardee shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares, including the right to vote the Restricted Shares and the right to receive any dividends or other distributions with respect to the Restricted Shares, but subject, however, to the restrictions on transfer set forth in this Agreement. Notwithstanding the foregoing, any cash dividends or other cash distributions paid on the Restricted Shares prior to the Lapse Date shall be automatically reinvested in common shares of the Company (the “Dividend Shares”) pursuant to the terms of the Company’s dividend reinvestment and stock purchase plan and shall be held in an account with Fidelity, or its successor, under the Awardee’s name. Until the Lapse Date, the Dividend Shares shall be subject to the restrictions on transfer set forth in §3, above. However, the Dividend Shares shall not be subject to any risk of forfeiture.

§6.    Escrow of Shares. The Share Certificate shall be held by the Company until the earlier of the Lapse Date or the termination of the Awardee’s employment with the Company. If the Restricted Shares are forfeited to the Company under §2, above, then the Company shall cause the Restricted Shares to be transferred to the Company. If the Restricted Shares are not forfeited to the Company, then the Company shall deliver the Shares to the Awardee.

§7.    Tax Consequences. The Awardee understands that the Awardee (and not the Company) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences that may arise as a result of the transactions

contemplated by this Agreement, including without limitation filing an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “83(b) Election” and the “Code”, respectively), if the Awardee deems it to be appropriate. The Awardee shall rely solely on the determinations of the Awardee’s tax advisors or the Awardee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. The Awardee shall notify the Company in writing if the Awardee files the 83(b) Election with the Internal Revenue Service within 30 days from the date of the execution of this Agreement. The Company intends, in the event it does not receive from the Awardee evidence of the 83(b) Election filing by the Awardee, to claim a tax deduction for any amount which would be taxable to the Awardee in the absence of such an election. If the Company is required to withhold or pay any taxes with respect to the issuance or vesting of the Restricted Shares, the Awardee shall pay to the Company the amount of such required withholding or payment promptly following the Company's request.

§8.    Compliance with Securities Laws. No Restricted Shares shall be deliverable under this Agreement or the Plan except in compliance with all applicable federal and state securities laws and regulations. The Company may require the Awardee to (a) represent and warrant to and agree with the Company in writing that the Awardee is acquiring the Restricted Shares without a view to distribution thereof, and (b) make such additional representations, warranties and agreements with respect to the investment intent of the Awardee as the Company may reasonably request.

The Share Certificate shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company’s common shares are then listed, and any applicable federal or state securities laws, and the Company may cause a legend or legends to be put on the Share Certificate to make appropriate reference to such restrictions.

STATE AUTO FINANCIAL CORPORATION

By: /s/ Lorraine M. Siegworth

Lori Siegworth, Senior Vice President and Chief Strategy and

Organization Effectiveness Officer (as authorized and approved

by the Compensation Committee of the Board of Directors)

Acceptance of Agreement

Kim B. Garland, the Awardee, hereby: (a) acknowledges receiving a copy of the Plan and represents that the Awardee is familiar with all provisions of the Plan; and (b) accepts this Agreement and the award of the Restricted Shares under this Agreement subject to all terms, provisions and restrictions of both the Plan and this Agreement.            

/s/ Kim B. Garland

Kim B. Garland

Accepted as of: September 21, 2015

EX-10.05

EXHIBIT 10.05

STATE AUTO FINANCIAL CORPORATION

RESTRICTED STOCK AGREEMENT

UNDER THE

2009 EQUITY INCENTIVE COMPENSATION PLAN

This Restricted Stock Agreement (this “Agreement”) is made as of August 24, 2015 (the “Award Date”). The Compensation Committee of the Board of Directors of State Auto Financial Corporation, an Ohio corporation (the “Company”), hereby awards to Kim B. Garland (the “Awardee”) 2,192 common shares, without par value, of the Company (the “Restricted Shares”). The Restricted Shares are awarded pursuant to the terms of the Company’s 2009 Equity Incentive Compensation Plan (the “Plan”) and shall be subject to all of the provisions of the Plan, which are hereby incorporated herein by reference, and shall be subject to the following provisions of this Agreement. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

§1.    Award of Restricted Shares. The purchase price for the Restricted Shares shall be zero. Following the execution and delivery of this Agreement by the Awardee, the Company shall cause a share certificate evidencing the Restricted Shares to be issued in the Awardee’s name (the “Share Certificate”).

§2.    Forfeiture. The Restricted Shares shall be forfeited to the Company if the Awardee’s employment with the Company terminates for any reason prior to the third anniversary of the Award Date (the “Lapse Date”), or if the Awardee violates any provision of this Agreement.

§3.    Transfer Restrictions. None of the Restricted Shares, nor any beneficial interest therein, shall be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, prior to the Lapse Date. Thereafter, the Restricted Shares may be transferred only in compliance with all applicable federal and state securities laws. Any transfer or attempted transfer in violation of the foregoing restrictions shall be null and void.

§4.    Acceptance of Award. The award of the Restricted Shares must be accepted by the Awardee within 30 days after the Award Date by executing this Agreement. The Awardee shall not have any rights with respect to the Restricted Shares awarded under this Agreement unless and until the Awardee has executed this Agreement, delivered a fully executed copy thereof to the Secretary of the Company, and otherwise complied with the applicable terms and conditions of the award of the Restricted Shares.

§5.     Rights As Shareholder. Subject to the terms of this Agreement, on and after the issuance of the Share Certificate to the Awardee, the Awardee shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares, including the right to vote the Restricted Shares and the right to receive any dividends or other distributions with respect to the Restricted Shares, but subject, however, to the restrictions on transfer set forth in this Agreement. Notwithstanding the foregoing, any cash dividends or other cash distributions paid on the Restricted Shares prior to the Lapse Date shall be automatically reinvested in common shares of the Company (the “Dividend Shares”) pursuant to the terms of the Company’s dividend reinvestment and stock purchase plan and shall be held in an account with Fidelity, or its successor, under the Awardee’s name. Until the Lapse Date, the Dividend Shares shall be subject to the restrictions on transfer set forth in §3, above. However, the Dividend Shares shall not be subject to any risk of forfeiture.

§6.    Escrow of Shares. The Share Certificate shall be held by the Company until the earlier of the Lapse Date or the termination of the Awardee’s employment with the Company. If the Restricted Shares are forfeited to the Company under §2, above, then the Company shall cause the Restricted Shares to be transferred to the Company. If the Restricted Shares are not forfeited to the Company, then the Company shall deliver the Shares to the Awardee.

§7.    Tax Consequences. The Awardee understands that the Awardee (and not the Company) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences that may arise as a result of the transactions

contemplated by this Agreement, including without limitation filing an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “83(b) Election” and the “Code”, respectively), if the Awardee deems it to be appropriate. The Awardee shall rely solely on the determinations of the Awardee’s tax advisors or the Awardee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. The Awardee shall notify the Company in writing if the Awardee files the 83(b) Election with the Internal Revenue Service within 30 days from the date of the execution of this Agreement. The Company intends, in the event it does not receive from the Awardee evidence of the 83(b) Election filing by the Awardee, to claim a tax deduction for any amount which would be taxable to the Awardee in the absence of such an election. If the Company is required to withhold or pay any taxes with respect to the issuance or vesting of the Restricted Shares, the Awardee shall pay to the Company the amount of such required withholding or payment promptly following the Company's request.

§8.    Compliance with Securities Laws. No Restricted Shares shall be deliverable under this Agreement or the Plan except in compliance with all applicable federal and state securities laws and regulations. The Company may require the Awardee to (a) represent and warrant to and agree with the Company in writing that the Awardee is acquiring the Restricted Shares without a view to distribution thereof, and (b) make such additional representations, warranties and agreements with respect to the investment intent of the Awardee as the Company may reasonably request.

The Share Certificate shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company’s common shares are then listed, and any applicable federal or state securities laws, and the Company may cause a legend or legends to be put on the Share Certificate to make appropriate reference to such restrictions.

STATE AUTO FINANCIAL CORPORATION

By: /s/ Lorraine M. Siegworth

Lori Siegworth, Senior Vice President and Chief Strategy and

Organization Effectiveness Officer (as authorized and approved

by the Compensation Committee of the Board of Directors)

Acceptance of Agreement

Kim B. Garland, the Awardee, hereby: (a) acknowledges receiving a copy of the Plan and represents that the Awardee is familiar with all provisions of the Plan; and (b) accepts this Agreement and the award of the Restricted Shares under this Agreement subject to all terms, provisions and restrictions of both the Plan and this Agreement.            

/s/ Kim B. Garland

Kim B. Garland

Accepted as of: September 21, 2015

EX-10.06

EXHIBIT 10.06

STATE AUTO FINANCIAL CORPORATION

RESTRICTED STOCK AGREEMENT

UNDER THE

2009 EQUITY INCENTIVE COMPENSATION PLAN

This Restricted Stock Agreement (this “Agreement”) is made as of March 3, 2016 (the “Award Date”). The Compensation Committee of the Board of Directors of State Auto Financial Corporation, an Ohio corporation (the “Company”), hereby awards to Kim B. Garland (the “Awardee”) 2,079 common shares, without par value, of the Company (the “Restricted Shares”). The Restricted Shares are awarded pursuant to the terms of the Company’s 2009 Equity Incentive Compensation Plan (the “Plan”) and shall be subject to all of the provisions of the Plan, which are hereby incorporated herein by reference, and shall be subject to the following provisions of this Agreement. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

§1.    Award of Restricted Shares. The purchase price for the Restricted Shares shall be zero. Following the execution and delivery of this Agreement by the Awardee, the Company shall cause a share certificate evidencing the Restricted Shares to be issued in the Awardee’s name (the “Share Certificate”).

§2.    Forfeiture. The Restricted Shares shall be forfeited to the Company if the Awardee’s employment with the Company terminates for any reason prior to the third anniversary of the Award Date (the “Lapse Date”), or if the Awardee violates any provision of this Agreement.

§3.    Transfer Restrictions. None of the Restricted Shares, nor any beneficial interest therein, shall be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, prior to the Lapse Date. Thereafter, the Restricted Shares may be transferred only in compliance with all applicable federal and state securities laws. Any transfer or attempted transfer in violation of the foregoing restrictions shall be null and void.

§4.    Acceptance of Award. The award of the Restricted Shares must be accepted by the Awardee within 30 days after the Award Date by executing this Agreement. The Awardee shall not have any rights with respect to the Restricted Shares awarded under this Agreement unless and until the Awardee has executed this Agreement, delivered a fully executed copy thereof to the Secretary of the Company, and otherwise complied with the applicable terms and conditions of the award of the Restricted Shares.

§5.     Rights As Shareholder. Subject to the terms of this Agreement, on and after the issuance of the Share Certificate to the Awardee, the Awardee shall have all of the rights of a shareholder of the Company with respect to the Restricted Shares, including the right to vote the Restricted Shares and the right to receive any dividends or other distributions with respect to the Restricted Shares, but subject, however, to the restrictions on transfer set forth in this Agreement. Notwithstanding the foregoing, any cash dividends or other cash distributions paid on the Restricted Shares prior to the Lapse Date shall be automatically reinvested in common shares of the Company (the “Dividend Shares”) pursuant to the terms of the Company’s dividend reinvestment and stock purchase plan and shall be held in an account with Fidelity, or its successor, under the Awardee’s name. Until the Lapse Date, the Dividend Shares shall be subject to the restrictions on transfer set forth in §3, above. However, the Dividend Shares shall not be subject to any risk of forfeiture.

§6.    Escrow of Shares. The Share Certificate shall be held by the Company until the earlier of the Lapse Date or the termination of the Awardee’s employment with the Company. If the Restricted Shares are forfeited to the Company under §2, above, then the Company shall cause the Restricted Shares to be transferred to the Company. If the Restricted Shares are not forfeited to the Company, then the Company shall deliver the Shares to the Awardee.

§7.    Tax Consequences. The Awardee understands that the Awardee (and not the Company) shall be responsible for the federal, state, local or foreign tax liability and any other tax consequences that may arise as a result of the transactions

contemplated by this Agreement, including without limitation filing an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “83(b) Election” and the “Code”, respectively), if the Awardee deems it to be appropriate. The Awardee shall rely solely on the determinations of the Awardee’s tax advisors or the Awardee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters. The Awardee shall notify the Company in writing if the Awardee files the 83(b) Election with the Internal Revenue Service within 30 days from the date of the execution of this Agreement. The Company intends, in the event it does not receive from the Awardee evidence of the 83(b) Election filing by the Awardee, to claim a tax deduction for any amount which would be taxable to the Awardee in the absence of such an election. If the Company is required to withhold or pay any taxes with respect to the issuance or vesting of the Restricted Shares, the Awardee shall pay to the Company the amount of such required withholding or payment promptly following the Company's request.

§8.    Compliance with Securities Laws. No Restricted Shares shall be deliverable under this Agreement or the Plan except in compliance with all applicable federal and state securities laws and regulations. The Company may require the Awardee to (a) represent and warrant to and agree with the Company in writing that the Awardee is acquiring the Restricted Shares without a view to distribution thereof, and (b) make such additional representations, warranties and agreements with respect to the investment intent of the Awardee as the Company may reasonably request.

The Share Certificate shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company’s common shares are then listed, and any applicable federal or state securities laws, and the Company may cause a legend or legends to be put on the Share Certificate to make appropriate reference to such restrictions.

STATE AUTO FINANCIAL CORPORATION

By: /s/ Melissa Centers

Melissa Centers, Senior Vice President, Secretary and General

Counsel (as authorized and approved by the Compensation

Committee of the Board of Directors)

Acceptance of Agreement

Kim B. Garland, the Awardee, hereby: (a) acknowledges receiving a copy of the Plan and represents that the Awardee is familiar with all provisions of the Plan; and (b) accepts this Agreement and the award of the Restricted Shares under this Agreement subject to all terms, provisions and restrictions of both the Plan and this Agreement.            

/s/ Kim B. Garland

Kim B. Garland

Accepted as of: March 27, 2016

EX-31.01

Exhibit 31.01

CERTIFICATION

I, Michael E. LaRocco, 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 4, 2016	/s/ Michael E. LaRocco
	Michael E. LaRocco, 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 4, 2016	/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, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael E. LaRocco, 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/ Michael E. LaRocco

Michael E. LaRocco

Chief Executive Officer

May 4, 2016

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, 2016, 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 4, 2016

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

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
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)		41,572,190

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Assets
Fixed maturities, available-for-sale, at fair value (amortized cost $1,991.5 and $1,972.9, respectively)	$ 2,055.5	$ 2,000.7
Equity securities, available-for-sale, at fair value (cost $274.5 and $265.2, respectively)	318.9	310.6
Other invested assets, available-for-sale, at fair value (cost $57.1 and $56.9, respectively)	85.8	85.1
Other invested assets	5.3	5.3
Notes receivable from affiliate	70.0	70.0
Total investments	2,535.5	2,471.7
Cash and cash equivalents	47.7	58.1
Accrued investment income and other assets	39.3	35.7
Deferred policy acquisition costs (affiliated net assumed $50.2 and $49.3, respectively)	127.5	129.1
Reinsurance recoverable on losses and loss expenses payable	6.5	5.9
Prepaid reinsurance premiums	6.3	6.8
Due from affiliate	4.3	5.9
Current federal income taxes	4.9	4.9
Net deferred federal income taxes	89.0	102.5
Property and equipment, at cost	7.5	7.6
Total assets	2,868.5	2,828.2
Liabilities and Stockholders’ Equity
Losses and loss expenses payable (affiliated net assumed $554.3 and $532.4, respectively)	1,083.5	1,053.0
Unearned premiums (affiliated net assumed $212.1 and $214.2, respectively)	600.8	616.3
Notes payable (affiliates $15.2 and $15.2, respectively)	100.5	100.5
Postretirement and pension benefits (affiliated net ceded $54.6 and $56.0, respectively)	101.5	104.0
Other liabilities (affiliated net assumed $7.1 and affiliated net ceded $8.4, respectively)	73.3	69.8
Total liabilities	1,959.6	1,943.6
Stockholders’ equity:
Common stock, without par value. Authorized 100.0 shares; 48.2 and 48.1 shares issued, respectively, at stated value of $2.50 per share	120.6	120.4
Treasury stock, 6.8 and 6.8 shares, respectively, at cost	(116.5)	(116.3)
Additional paid-in capital	155.1	153.5
Accumulated other comprehensive income (affiliated net ceded $55.6 and $56.7, respectively)	61.4	37.6
Retained earnings	688.3	689.4
Total stockholders’ equity	908.9	884.6
Total liabilities and stockholders’ equity	2,868.5	2,828.2
Class A Preferred Stock [Member]
Stockholders’ equity:
Preferred stock value	0.0	0.0
Class B Preferred Stock [Member]
Stockholders’ equity:
Preferred stock value	$ 0.0	$ 0.0

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Fixed maturities, available-for-sale, amortized cost	$ 1,991.5	$ 1,972.9
Equity securities, available-for-sale, cost	274.5	265.2
Other invested assets, available-for-sale, cost	57.1	56.9
Deferred policy acquisitions costs from affiliates	50.2	49.3
Losses and loss expenses payable, affiliates	554.3	532.4
Unearned premiums, affiliates	212.1	214.2
Notes payable, affiliates	15.2	15.2
Net Postretirement and Pension Benefits	(54.6)	(56.0)
Net Other Liabilities from Affiliates	$ 7.1	$ (8.4)
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)	48,200,000	48,100,000
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	$ (55.6)	$ (56.7)
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

XML

Condensed Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Earned premiums (affiliated net assumed $112.2 and $55.0, respectively, and $320.5 and $153.6, respectively)	$ 319.9	$ 315.3
Net investment income (affiliate $1.3 and $1.3, respectively, and $3.7 and $3.7, respectively)	17.4	15.4
Net realized gains on investments:
Total other-than-temporary impairment losses	(3.7)	(0.5)
Portion of loss recognized in other comprehensive income	0.0	0.0
Other net realized investment gains	5.0	4.3
Total net realized gains on investments	1.3	3.8
Other income from affiliates	0.6	0.4
Total revenues	339.2	334.9
Losses and loss expenses (affiliated net assumed $67.4 and $53.6, respectively, and $200.9 and $131.6, respectively)	225.0	195.0
Acquisition and operating expenses (affiliated net assumed $52.8 and $36.3, respectively, and $188.9 and $117.5, respectively)	107.5	103.4
Interest expense (affiliates $0.1 and $0.2, respectively, and $0.5 and $0.5, respectively)	1.3	1.3
Other expenses	1.6	2.0
Total expenses	335.4	301.7
Income before federal income taxes	3.8	33.2
Current Income Tax Expense (Benefit)	0.0	0.4
Deferred Income Tax Expense (Benefit)	0.8	8.1
Federal income tax expense	0.8	8.5
Net income	$ 3.0	$ 24.7
Earnings per common share:
Basic (usd per share)	$ 0.07	$ 0.60
Diluted (usd per share)	0.07	0.60
Dividends paid per common share (usd per share)	$ 0.1	$ 0.1

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Condensed Consolidated Statements of Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Earned premiums, from affiliates	$ 113.4	$ 105.4
Net investment income, from affiliate	1.2	1.2
Losses and loss expenses, from affiliates	93.7	74.1
Net Acquisition and Operating Expenses, from affiliates	70.6	77.3
Interest Expense Debt To Affiliates	0.2	0.2
Interest Paid To Affiliates	$ 0.2	$ 0.2

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 3.0	$ 24.7
Net unrealized holding (losses) gains on investments:
Unrealized holding (losses) gains	37.0	17.0
Reclassification adjustments for gains realized in net income	(1.3)	(4.2)
Income tax benefit (expense)	(12.5)	(4.5)
Total net unrealized holding (losses) gains on investments	23.2	8.3
Reclassification adjustments for amortization to statements of income:
Negative prior service cost	(1.4)	(1.4)
Net actuarial loss	2.4	2.9
Income tax expense	(0.4)	(0.5)
Total net unrecognized benefit plan obligations	0.6	1.0
Other comprehensive (loss) income	23.8	9.3
Comprehensive income	$ 26.8	$ 34.0

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net income	$ 3.0	$ 24.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, net	4.4	5.5
Share-based compensation	1.4	1.0
Net realized gains on investments	(1.3)	(3.8)
Changes in operating assets and liabilities:
Deferred policy acquisition costs (benefits)	1.6	(0.9)
Accrued investment income and other assets	(3.7)	(2.0)
Postretirement and pension benefits	(1.8)	(0.7)
Other liabilities and due to/from affiliates, net	4.9	(49.6)
Reinsurance recoverable on losses and loss expenses payable and prepaid reinsurance premiums	(0.1)	1.6
Losses and loss expenses payable	30.5	14.5
Unearned premiums	(15.5)	(8.2)
Federal income taxes	1.1	9.0
Cash provided from December 31, 2014 unearned premium transfer related to the homeowners quota share arrangement	0.0	63.5
Net cash provided by operating activities	24.5	54.6
Cash flows from investing activities:
Purchases of fixed maturities available-for-sale	(160.6)	(212.8)
Purchases of equity securities available-for-sale	(30.8)	(19.7)
Purchases of other invested assets	(0.4)	(3.9)
Maturities, calls and pay downs of fixed maturities available-for-sale	60.8	83.2
Sales of fixed maturities available-for-sale	75.8	62.5
Sales of equity securities available-for-sale	23.6	21.5
Sales of other invested assets available-for-sale	0.2	0.2
Net cash used in investing activities	(31.4)	(69.0)
Cash flows from financing activities:
Proceeds from issuance of common stock	0.8	0.7
Payments to acquire treasury stock	(0.2)	(0.1)
Payment of dividends	(4.1)	(4.1)
Net cash used in financing activities	(3.5)	(3.5)
Net decrease in cash and cash equivalents	(10.4)	(17.9)
Cash and cash equivalents at beginning of period	58.1	86.3
Cash and cash equivalents at end of period	47.7	68.4
Supplemental disclosures:
Interest paid (affiliates $0.2 and $0.2, respectively)	$ 1.3	$ 1.3

XML

Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Cash Flows [Abstract]
Interest Expense Debt To Affiliates	$ 0.2	$ 0.2

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Basis of Presentation

3 Months Ended

Mar. 31, 2016

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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The balance sheet at December 31, 2015 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, 2015 (the “2015 Form 10-K”). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the 2015 Form 10-K.

Adoption of Recent Accounting Pronouncements

Simplifying the Presentation of Debt Issuance Costs

The amendments in this guidance simplify the presentation of debt issuance costs by requiring them to be presented in the balance sheet as a direct deduction from the carrying amount of the related recognized debt liability, consistent with debt discounts. The Company adopted this guidance at January 1, 2016 on a retrospective basis and it resulted in a $0.3 million decrease to notes payable and accrued investment income and other assets at December 31, 2015.

Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

The amendments in this guidance remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and should be applied retrospectively to all periods presented. The Company adopted this guidance at January 1, 2016 and it did not have a material impact on the condensed consolidated financial statements.

Pending Adoption of Recent Accounting Pronouncements

Improvements to Employee Share-Based Payment Accounting

The amendments in this guidance simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities, classification of excess tax benefits, and classification on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the requirements of the guidance and has not yet determined its effect on the Company’s results of operations, financial position or liquidity.

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Investments

3 Months Ended

Mar. 31, 2016

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, 2016 and December 31, 2015:

($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	223.6	$	13.0	$	(0.5	)	$	236.1
Obligations of states and political subdivisions	730.7		28.6		(0.6		)	758.7
Corporate securities	575.3		11.1		(6.7		)	579.7
U.S. government agencies mortgage-backed securities	461.9		19.8		(0.7		)	481.0
Total fixed maturities	1,991.5		72.5		(8.5		)	2,055.5
Equity securities:
Large-cap securities	221.1		33.5		(4.8		)	249.8
Small-cap securities	53.4		15.9		(0.2		)	69.1
Total equity securities	274.5		49.4		(5.0		)	318.9
Other invested assets	57.1		28.7		—			85.8
Total available-for-sale securities	$	2,323.1	$	150.6	$	(13.5	)	$	2,460.2
($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	219.8	$	6.6	$	(2.0	)	$	224.4
Obligations of states and political subdivisions	804.0		22.5		(1.7		)	824.8
Corporate securities	500.3		5.8		(11.7		)	494.4
U.S. government agencies mortgage-backed securities	448.8		11.5		(3.2		)	457.1
Total fixed maturities	1,972.9		46.4		(18.6		)	2,000.7
Equity securities:
Large-cap securities	211.9		34.2		(5.1		)	241.0
Small-cap securities	53.3		16.5		(0.2		)	69.6
Total equity securities	265.2		50.7		(5.3		)	310.6
Other invested assets	56.9		28.3		(0.1		)	85.1
Total available-for-sale securities	$	2,295.0	$	125.4	$	(24.0	)	$	2,396.4

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, 2016 and December 31, 2015:

($ millions, except # of positions)	Less than 12 months						12 months or more						Total
	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	7.7	$	(0.1	)	4	$	9.2	$	(0.4	)	2	$	16.9	$	(0.5	)	6
Obligations of states and political subdivisions	6.6		(0.1		)	1	33.1		(0.5		)	3	39.7		(0.6		)	4
Corporate securities	73.5		(3.0		)	11	64.9		(3.7		)	10	138.4		(6.7		)	21
U.S. government agencies mortgage-backed securities	47.9		(0.1		)	5	40.0		(0.6		)	12	87.9		(0.7		)	17
Total fixed maturities	135.7		(3.3		)	21	147.2		(5.2		)	27	282.9		(8.5		)	48
Equity securities:
Large-cap equity securities	62.5		(4.4		)	23	3.0		(0.4		)	1	65.5		(4.8		)	24
Small-cap equity securities	4.4		(0.2		)	1	—		—			—	4.4		(0.2		)	1
Total equity securities	66.9		(4.6		)	24	3.0		(0.4		)	1	69.9		(5.0		)	25
Total temporarily impaired securities	$	202.6	$	(7.9	)	45	$	150.2	$	(5.6	)	28	$	352.8	$	(13.5	)	73
($ millions, except # of positions)	Less than 12 months						12 months or more						Total
	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	68.6	$	(1.6	)	15	$	13.5	$	(0.4	)	4	$	82.1	$	(2.0	)	19
Obligations of states and political subdivisions	137.5		(1.7		)	16	—		—			—	137.5		(1.7		)	16
Corporate securities	246.9		(5.3		)	36	63.9		(6.4		)	11	310.8		(11.7		)	47
U.S. government agencies mortgage-backed securities	132.2		(2.3		)	18	33.0		(0.9		)	11	165.2		(3.2		)	29
Total fixed maturities	585.2		(10.9		)	85	110.4		(7.7		)	26	695.6		(18.6		)	111
Equity securities:
Large-cap equity securities	65.8		(5.1		)	24	—		—			—	65.8		(5.1		)	24
Small-cap equity securities	3.4		(0.2		)	1	—		—			—	3.4		(0.2		)	1
Total equity securities	69.2		(5.3		)	25	—		—			—	69.2		(5.3		)	25
Other invested assets	8.1		(0.1		)	1	—		—			—	8.1		(0.1		)	1
Total temporarily impaired securities	$	662.5	$	(16.3	)	111	$	110.4	$	(7.7	)	26	$	772.9	$	(24.0	)	137

The Company reviewed its investments at March 31, 2016, 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, 2016 and 2015:

($ millions)	2016			2015
Equity securities:
Large-cap securities	$	(0.2	)	$	—
Small-cap securities	(1.2		)	(0.5		)
Fixed maturities:	(2.3		)	—
Total other-than-temporary impairments	$	(3.7	)	$	(0.5	)

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, 2016:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	39.5	$	40.2
Due after 1 year through 5 years	532.1		545.7
Due after 5 years through 10 years	292.7		299.5
Due after 10 years	665.3		689.1
U.S. government agencies mortgage-backed securities	461.9		481.0
Total	$	1,991.5	$	2,055.5

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, 2016, 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 $9.1 million and $8.8 million were on deposit with insurance regulators as required by law at March 31, 2016 and December 31, 2015, respectively. 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, 2016 and 2015:

($ millions)	2016		2015
Fixed maturities	$	14.9	$	12.9
Equity securities	1.5		1.6
Cash and cash equivalents, and other	1.4		1.4
Investment income	17.8		15.9
Investment expenses	0.4		0.5
Net investment income	$	17.4	$	15.4

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 $99.6 million and $84.2 million for the three months endedMarch 31, 2016 and 2015, respectively.

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, 2016 and 2015:

($ millions)	2016			2015
Realized gains:
Fixed maturities	$	1.5		$	1.1
Equity securities	4.1			4.1
Total realized gains	5.6			5.2
Realized losses:
Equity securities:
Sales	(0.6		)	(0.5		)
OTTI	(1.4		)	(0.5		)
Fixed maturities:
OTTI	(2.3		)	—
Total realized losses	(4.3		)	(1.0		)
Net realized gains on investments	$	1.3		$	4.2
Change in unrealized holding gains, net of tax:
Fixed maturities	$	36.2		$	9.4
Equity securities	(1.0		)	(1.0		)
Other invested assets	0.5			4.4
Deferred federal income tax liability	(12.5		)	(4.5		)
Change in net unrealized holding gains, net of tax	$	23.2		$	8.3

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2016

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, 2016 and December 31, 2015, 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, 2016 and 2015.

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 $77.4 million and $77.0 million at March 31, 2016 and December 31, 2015, 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. In accordance with Accounting Standard Codification 820-10, these investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. Fair values presented here are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.

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, 2016 and December 31, 2015:

($ millions)	Total		Level 1		Level 2		Level 3
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	236.1	$	—	$	236.1	$	—
Obligations of states and political subdivisions	758.7		—		758.7		—
Corporate securities	579.7		—		576.3		3.4
U.S. government agencies mortgage-backed securities	481.0		—		481.0		—
Total fixed maturities	2,055.5		—		2,052.1		3.4
Equity securities:
Large-cap securities	249.8		249.8		—		—
Small-cap securities	69.1		69.1		—		—
Total equity securities	318.9		318.9		—		—
Other invested assets	8.4		8.4		—		—
Total available-for-sale investments	$	2,382.8	$	327.3	$	2,052.1	$	3.4
($ millions)	Total		Level 1		Level 2		Level 3
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	224.4	$	—	$	224.4	$	—
Obligations of states and political subdivisions	824.8		—		824.8		—
Corporate securities	494.4		—		491.1		3.3
U.S. government agencies mortgage-backed securities	457.1		—		457.1		—
Total fixed maturities	2,000.7		—		1,997.4		3.3
Equity securities:
Large-cap securities	241.0		241.0		—		—
Small-cap securities	69.6		69.6		—		—
Total equity securities	310.6		310.6		—		—
Other invested assets	8.1		8.1		—		—
Total available-for-sale investments	$	2,319.4	$	318.7	$	1,997.4	$	3.3

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, 2016 and the year ended December 31, 2015, separately for each major category of assets:

($ millions)	Fixed maturities
Balance at January 1, 2016	$	3.3
Total realized gains – included in earnings	—
Total unrealized losses – included in other comprehensive income	—
Purchases	0.1
Sales	—
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2016	$	3.4
($ millions)	Fixed maturities
Balance at January 1, 2015	$	9.4
Total realized gains – included in earnings	—
Total unrealized gains – included in other comprehensive income	(0.2		)
Purchases	—
Sales	(5.9		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at December 31, 2015	$	3.3

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, 2016 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, 2016						December 31, 2015
	Carrying value		Fair value		Interest rate		Carrying value		Fair value		Interest rate
Notes receivable from affiliate	$	70.0	$	76.2	7.00	%	$	70.0	$	74.1	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, 2016						December 31, 2015
	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	$	85.4	5.03	%	$	85.3	$	85.5	5.03	%
Affiliate Subordinated Debentures due 2033: issued $15.5, May 2003 with variable interest	15.2		15.2		4.61	%	15.2		15.2		4.61	%
Total notes payable	$	100.5	$	100.6			$	100.5	$	100.7

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Reinsurance

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)	2016			2015
Premiums earned:
Assumed from external insurers and reinsurers	$	1.4		$	1.1
Assumed under Pooling Arrangement	319.9			315.3
Ceded to external insurers and reinsurers	(6.8		)	(8.9		)
Ceded under Pooling Arrangement	(206.5		)	(209.9		)
Net assumed premiums earned	$	108.0		$	97.6
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	$	1.1		$	0.8
Assumed under Pooling Arrangement	225.4			195.3
Ceded to external insurers and reinsurers	(1.9		)	0.1
Ceded under Pooling Arrangement	(131.7		)	(121.2		)
Net assumed losses and loss expenses incurred	$	92.9		$	75.0

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Income Taxes

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)	2016					2015
Amount at statutory rate	$	1.3		35.0	%	$	11.6		35.0	%
Tax-exempt interest and dividends received deduction	(2.0		)	(52.8	)	(2.2		)	(6.7	)
Other, net	1.5			37.8		(0.9		)	(2.7	)
Federal income tax expense and effective rate	$	0.8		20.0	%	$	8.5		25.6	%

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Pension and Postretirement Benefit Plans

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)	Pension						Postretirement
	2016			2015			2016			2015
Service cost	$	1.6		$	2.0		$	—		$	—
Interest cost	2.9			2.8			0.2			0.2
Expected return on plan assets	(3.7		)	(3.4		)	—			—
Amortization of:
Negative prior service cost	—			—			(1.4		)	(1.4		)
Net actuarial loss	2.3			2.7			0.1			0.2
Net periodic cost (benefit)	$	3.1		$	4.1		$	(1.1	)	$	(1.0	)

The Company's share of contributions to its pension plan for the three months endedMarch 31, 2016 were $3.3 million. The Company expects to contribute an additional $9.7 million during 2016.

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Other Comprehensive Income and Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)		Unrealized Gains and Losses on Available-for-Sale  Securities			Benefit Plan Items			Total
Beginning balance at January 1, 2016		$	68.5		$	(30.9	)	$	37.6
Other comprehensive income before reclassifications		24.0			—			24.0
Amounts reclassified from AOCI (a)		(0.8		)	0.6			(0.2		)
Net current period other comprehensive income		23.2			0.6			23.8
Ending balance at March 31, 2016		$	91.7		$	(30.3	)	$	61.4
Beginning balance at January 1, 2015		$	110.0		$	(38.3	)	$	71.7
Other comprehensive income before reclassifications		11.0			—			11.0
Amounts reclassified from AOCI (a)		(2.7		)	1.0			(1.7		)
Net current period other comprehensive income		8.3			1.0			9.3
Ending balance at March 31, 2015		$	118.3		$	(37.3	)	$	81.0
(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, 2016 and 2015:

($ millions)
Details about Accumulated Other		Three months ended						Affected line item in the Condensed
Comprehensive Income Components		March 31						Consolidated Statements of Income
		2016			2015
Unrealized gains on available for sale securities		$	1.3		$	4.2		Realized gain on sale of securities
		1.3			4.2			Total before tax
		(0.5		)	(1.5		)	Tax expense
		0.8			2.7			Net of tax
Amortization of benefit plan items
Negative prior service cost		1.4			1.4			(a)
Net actuarial loss		(2.4		)	(2.9		)	(a)
		(1.0		)	(1.5		)	Total before tax
		0.4			0.5			Tax benefit
		(0.6		)	(1.0		)	Net of tax
Total reclassifications for the period		$	0.2		$	1.7
(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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Earnings per Common Share

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ and shares in millions, except per share amounts)	2016		2015
Numerator:
Net income for basic earnings per common share	$	3.0	$	24.7
Denominator:
Weighted average shares for basic net earnings per common share	41.4		41.0
Effect of dilutive share-based awards	0.4		0.4
Adjusted weighted average shares for diluted net earnings per common share	41.8		41.4
Basic net earnings per common share	$	0.07	$	0.60
Diluted net earnings per common share	$	0.07	$	0.60

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, 2016 and 2015.

(shares in millions)	2016	2015
Total number of antidilutive options and awards	1.7	1.7

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Segment Information

3 Months Ended

Mar. 31, 2016

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, general liability, and workers' compensation insurance covering small-to-medium sized commercial exposures. 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.

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, 2016 and 2015:

($ millions)	2016			2015
Revenue from external sources:
Insurance segments
Personal insurance	$	145.6		$	150.0
Business insurance	119.3			117.3
Specialty insurance	55.0			48.0
Total insurance segments	319.9			315.3
Investment operations segment
Net investment income	17.4			15.4
Net realized capital gains	1.3			4.2
Total investment operations segment	18.7			19.6
All other	0.6			—
Total revenue from external sources	339.2			334.9
Intersegment revenue	1.4			1.4
Total revenue	340.6			336.3
Reconciling items:
Eliminate intersegment revenues	(1.4		)	(1.4		)
Total consolidated revenues	$	339.2		$	334.9
Segment income before federal income tax:
Insurance segments SAP underwriting income (loss)
Personal insurance	$	3.9		$	17.4
Business insurance	(7.7		)	(0.3		)
Specialty insurance	(7.9		)	(1.9		)
Total insurance segments	(11.7		)	15.2
Investment operations segment
Net investment income	17.4			15.4
Net realized capital gains	1.3			4.2
Total investment operations segment	18.7			19.6
All other	0.1			(0.4		)
Total segment income before tax expense	7.1			34.4
Reconciling items:
GAAP expense adjustments	(1.2		)	1.2
Interest expense on corporate debt	(1.3		)	(1.3		)
Corporate expenses	(0.8		)	(1.1		)
Total reconciling items	(3.3		)	(1.2		)
Total consolidated income before federal income tax expense	$	3.8		$	33.2

Investable assets attributable to the Company’s investment operations segment totaled $2,583.2 million and $2,529.8 million at March 31, 2016 and December 31, 2015, respectively.

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Contingencies and Litigation

3 Months Ended

Mar. 31, 2016

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.

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, results of operations 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 consolidated financial position, results of operations or cash flows.

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Investments (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and December 31, 2015:

($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	223.6	$	13.0	$	(0.5	)	$	236.1
Obligations of states and political subdivisions	730.7		28.6		(0.6		)	758.7
Corporate securities	575.3		11.1		(6.7		)	579.7
U.S. government agencies mortgage-backed securities	461.9		19.8		(0.7		)	481.0
Total fixed maturities	1,991.5		72.5		(8.5		)	2,055.5
Equity securities:
Large-cap securities	221.1		33.5		(4.8		)	249.8
Small-cap securities	53.4		15.9		(0.2		)	69.1
Total equity securities	274.5		49.4		(5.0		)	318.9
Other invested assets	57.1		28.7		—			85.8
Total available-for-sale securities	$	2,323.1	$	150.6	$	(13.5	)	$	2,460.2
($ millions)	Cost or amortized cost		Gross unrealized holding gains		Gross unrealized holding losses			Fair value
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	219.8	$	6.6	$	(2.0	)	$	224.4
Obligations of states and political subdivisions	804.0		22.5		(1.7		)	824.8
Corporate securities	500.3		5.8		(11.7		)	494.4
U.S. government agencies mortgage-backed securities	448.8		11.5		(3.2		)	457.1
Total fixed maturities	1,972.9		46.4		(18.6		)	2,000.7
Equity securities:
Large-cap securities	211.9		34.2		(5.1		)	241.0
Small-cap securities	53.3		16.5		(0.2		)	69.6
Total equity securities	265.2		50.7		(5.3		)	310.6
Other invested assets	56.9		28.3		(0.1		)	85.1
Total available-for-sale securities	$	2,295.0	$	125.4	$	(24.0	)	$	2,396.4

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, 2016 and December 31, 2015:

($ millions, except # of positions)	Less than 12 months						12 months or more						Total
	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	7.7	$	(0.1	)	4	$	9.2	$	(0.4	)	2	$	16.9	$	(0.5	)	6
Obligations of states and political subdivisions	6.6		(0.1		)	1	33.1		(0.5		)	3	39.7		(0.6		)	4
Corporate securities	73.5		(3.0		)	11	64.9		(3.7		)	10	138.4		(6.7		)	21
U.S. government agencies mortgage-backed securities	47.9		(0.1		)	5	40.0		(0.6		)	12	87.9		(0.7		)	17
Total fixed maturities	135.7		(3.3		)	21	147.2		(5.2		)	27	282.9		(8.5		)	48
Equity securities:
Large-cap equity securities	62.5		(4.4		)	23	3.0		(0.4		)	1	65.5		(4.8		)	24
Small-cap equity securities	4.4		(0.2		)	1	—		—			—	4.4		(0.2		)	1
Total equity securities	66.9		(4.6		)	24	3.0		(0.4		)	1	69.9		(5.0		)	25
Total temporarily impaired securities	$	202.6	$	(7.9	)	45	$	150.2	$	(5.6	)	28	$	352.8	$	(13.5	)	73
($ millions, except # of positions)	Less than 12 months						12 months or more						Total
	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions	Fair value		Unrealized losses			Number of positions
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	68.6	$	(1.6	)	15	$	13.5	$	(0.4	)	4	$	82.1	$	(2.0	)	19
Obligations of states and political subdivisions	137.5		(1.7		)	16	—		—			—	137.5		(1.7		)	16
Corporate securities	246.9		(5.3		)	36	63.9		(6.4		)	11	310.8		(11.7		)	47
U.S. government agencies mortgage-backed securities	132.2		(2.3		)	18	33.0		(0.9		)	11	165.2		(3.2		)	29
Total fixed maturities	585.2		(10.9		)	85	110.4		(7.7		)	26	695.6		(18.6		)	111
Equity securities:
Large-cap equity securities	65.8		(5.1		)	24	—		—			—	65.8		(5.1		)	24
Small-cap equity securities	3.4		(0.2		)	1	—		—			—	3.4		(0.2		)	1
Total equity securities	69.2		(5.3		)	25	—		—			—	69.2		(5.3		)	25
Other invested assets	8.1		(0.1		)	1	—		—			—	8.1		(0.1		)	1
Total temporarily impaired securities	$	662.5	$	(16.3	)	111	$	110.4	$	(7.7	)	26	$	772.9	$	(24.0	)	137

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, 2016 and 2015:

($ millions)	2016			2015
Equity securities:
Large-cap securities	$	(0.2	)	$	—
Small-cap securities	(1.2		)	(0.5		)
Fixed maturities:	(2.3		)	—
Total other-than-temporary impairments	$	(3.7	)	$	(0.5	)

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, 2016:

($ millions)	Amortized cost		Fair value
Due in 1 year or less	$	39.5	$	40.2
Due after 1 year through 5 years	532.1		545.7
Due after 5 years through 10 years	292.7		299.5
Due after 10 years	665.3		689.1
U.S. government agencies mortgage-backed securities	461.9		481.0
Total	$	1,991.5	$	2,055.5

Components of Net Investment Income

The following table sets forth the components of net investment income for the three months ended March 31, 2016 and 2015:

($ millions)	2016		2015
Fixed maturities	$	14.9	$	12.9
Equity securities	1.5		1.6
Cash and cash equivalents, and other	1.4		1.4
Investment income	17.8		15.9
Investment expenses	0.4		0.5
Net investment income	$	17.4	$	15.4

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, 2016 and 2015:

($ millions)	2016			2015
Realized gains:
Fixed maturities	$	1.5		$	1.1
Equity securities	4.1			4.1
Total realized gains	5.6			5.2
Realized losses:
Equity securities:
Sales	(0.6		)	(0.5		)
OTTI	(1.4		)	(0.5		)
Fixed maturities:
OTTI	(2.3		)	—
Total realized losses	(4.3		)	(1.0		)
Net realized gains on investments	$	1.3		$	4.2
Change in unrealized holding gains, net of tax:
Fixed maturities	$	36.2		$	9.4
Equity securities	(1.0		)	(1.0		)
Other invested assets	0.5			4.4
Deferred federal income tax liability	(12.5		)	(4.5		)
Change in net unrealized holding gains, net of tax	$	23.2		$	8.3

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and December 31, 2015:

($ millions)	Total		Level 1		Level 2		Level 3
March 31, 2016
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	236.1	$	—	$	236.1	$	—
Obligations of states and political subdivisions	758.7		—		758.7		—
Corporate securities	579.7		—		576.3		3.4
U.S. government agencies mortgage-backed securities	481.0		—		481.0		—
Total fixed maturities	2,055.5		—		2,052.1		3.4
Equity securities:
Large-cap securities	249.8		249.8		—		—
Small-cap securities	69.1		69.1		—		—
Total equity securities	318.9		318.9		—		—
Other invested assets	8.4		8.4		—		—
Total available-for-sale investments	$	2,382.8	$	327.3	$	2,052.1	$	3.4
($ millions)	Total		Level 1		Level 2		Level 3
December 31, 2015
Fixed maturities:
U.S. treasury securities and obligations of U.S. government agencies	$	224.4	$	—	$	224.4	$	—
Obligations of states and political subdivisions	824.8		—		824.8		—
Corporate securities	494.4		—		491.1		3.3
U.S. government agencies mortgage-backed securities	457.1		—		457.1		—
Total fixed maturities	2,000.7		—		1,997.4		3.3
Equity securities:
Large-cap securities	241.0		241.0		—		—
Small-cap securities	69.6		69.6		—		—
Total equity securities	310.6		310.6		—		—
Other invested assets	8.1		8.1		—		—
Total available-for-sale investments	$	2,319.4	$	318.7	$	1,997.4	$	3.3

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, 2016 and the year ended December 31, 2015, separately for each major category of assets:

($ millions)	Fixed maturities
Balance at January 1, 2016	$	3.3
Total realized gains – included in earnings	—
Total unrealized losses – included in other comprehensive income	—
Purchases	0.1
Sales	—
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2016	$	3.4
($ millions)	Fixed maturities
Balance at January 1, 2015	$	9.4
Total realized gains – included in earnings	—
Total unrealized gains – included in other comprehensive income	(0.2		)
Purchases	—
Sales	(5.9		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at December 31, 2015	$	3.3

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, 2016						December 31, 2015
	Carrying value		Fair value		Interest rate		Carrying value		Fair value		Interest rate
Notes receivable from affiliate	$	70.0	$	76.2	7.00	%	$	70.0	$	74.1	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, 2016						December 31, 2015
	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	$	85.4	5.03	%	$	85.3	$	85.5	5.03	%
Affiliate Subordinated Debentures due 2033: issued $15.5, May 2003 with variable interest	15.2		15.2		4.61	%	15.2		15.2		4.61	%
Total notes payable	$	100.5	$	100.6			$	100.5	$	100.7

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Reinsurance (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)	2016			2015
Premiums earned:
Assumed from external insurers and reinsurers	$	1.4		$	1.1
Assumed under Pooling Arrangement	319.9			315.3
Ceded to external insurers and reinsurers	(6.8		)	(8.9		)
Ceded under Pooling Arrangement	(206.5		)	(209.9		)
Net assumed premiums earned	$	108.0		$	97.6
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	$	1.1		$	0.8
Assumed under Pooling Arrangement	225.4			195.3
Ceded to external insurers and reinsurers	(1.9		)	0.1
Ceded under Pooling Arrangement	(131.7		)	(121.2		)
Net assumed losses and loss expenses incurred	$	92.9		$	75.0

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)	2016					2015
Amount at statutory rate	$	1.3		35.0	%	$	11.6		35.0	%
Tax-exempt interest and dividends received deduction	(2.0		)	(52.8	)	(2.2		)	(6.7	)
Other, net	1.5			37.8		(0.9		)	(2.7	)
Federal income tax expense and effective rate	$	0.8		20.0	%	$	8.5		25.6	%

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Pension and Postretirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)	Pension						Postretirement
	2016			2015			2016			2015
Service cost	$	1.6		$	2.0		$	—		$	—
Interest cost	2.9			2.8			0.2			0.2
Expected return on plan assets	(3.7		)	(3.4		)	—			—
Amortization of:
Negative prior service cost	—			—			(1.4		)	(1.4		)
Net actuarial loss	2.3			2.7			0.1			0.2
Net periodic cost (benefit)	$	3.1		$	4.1		$	(1.1	)	$	(1.0	)

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Other Comprehensive Income and Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)		Unrealized Gains and Losses on Available-for-Sale  Securities			Benefit Plan Items			Total
Beginning balance at January 1, 2016		$	68.5		$	(30.9	)	$	37.6
Other comprehensive income before reclassifications		24.0			—			24.0
Amounts reclassified from AOCI (a)		(0.8		)	0.6			(0.2		)
Net current period other comprehensive income		23.2			0.6			23.8
Ending balance at March 31, 2016		$	91.7		$	(30.3	)	$	61.4
Beginning balance at January 1, 2015		$	110.0		$	(38.3	)	$	71.7
Other comprehensive income before reclassifications		11.0			—			11.0
Amounts reclassified from AOCI (a)		(2.7		)	1.0			(1.7		)
Net current period other comprehensive income		8.3			1.0			9.3
Ending balance at March 31, 2015		$	118.3		$	(37.3	)	$	81.0
(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, 2016 and 2015:

($ millions)
Details about Accumulated Other		Three months ended						Affected line item in the Condensed
Comprehensive Income Components		March 31						Consolidated Statements of Income
		2016			2015
Unrealized gains on available for sale securities		$	1.3		$	4.2		Realized gain on sale of securities
		1.3			4.2			Total before tax
		(0.5		)	(1.5		)	Tax expense
		0.8			2.7			Net of tax
Amortization of benefit plan items
Negative prior service cost		1.4			1.4			(a)
Net actuarial loss		(2.4		)	(2.9		)	(a)
		(1.0		)	(1.5		)	Total before tax
		0.4			0.5			Tax benefit
		(0.6		)	(1.0		)	Net of tax
Total reclassifications for the period		$	0.2		$	1.7
(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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Earnings per Common Share (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ and shares in millions, except per share amounts)	2016		2015
Numerator:
Net income for basic earnings per common share	$	3.0	$	24.7
Denominator:
Weighted average shares for basic net earnings per common share	41.4		41.0
Effect of dilutive share-based awards	0.4		0.4
Adjusted weighted average shares for diluted net earnings per common share	41.8		41.4
Basic net earnings per common share	$	0.07	$	0.60
Diluted net earnings per common share	$	0.07	$	0.60

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, 2016 and 2015.

(shares in millions)	2016	2015
Total number of antidilutive options and awards	1.7	1.7

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and 2015:

($ millions)	2016			2015
Revenue from external sources:
Insurance segments
Personal insurance	$	145.6		$	150.0
Business insurance	119.3			117.3
Specialty insurance	55.0			48.0
Total insurance segments	319.9			315.3
Investment operations segment
Net investment income	17.4			15.4
Net realized capital gains	1.3			4.2
Total investment operations segment	18.7			19.6
All other	0.6			—
Total revenue from external sources	339.2			334.9
Intersegment revenue	1.4			1.4
Total revenue	340.6			336.3
Reconciling items:
Eliminate intersegment revenues	(1.4		)	(1.4		)
Total consolidated revenues	$	339.2		$	334.9
Segment income before federal income tax:
Insurance segments SAP underwriting income (loss)
Personal insurance	$	3.9		$	17.4
Business insurance	(7.7		)	(0.3		)
Specialty insurance	(7.9		)	(1.9		)
Total insurance segments	(11.7		)	15.2
Investment operations segment
Net investment income	17.4			15.4
Net realized capital gains	1.3			4.2
Total investment operations segment	18.7			19.6
All other	0.1			(0.4		)
Total segment income before tax expense	7.1			34.4
Reconciling items:
GAAP expense adjustments	(1.2		)	1.2
Interest expense on corporate debt	(1.3		)	(1.3		)
Corporate expenses	(0.8		)	(1.1		)
Total reconciling items	(3.3		)	(1.2		)
Total consolidated income before federal income tax expense	$	3.8		$	33.2

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Basis of Presentation Adoption of Recent Accounting Pronouncements (Details) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($)
Accounting Changes and Error Corrections [Abstract]
Debt Issuance Cost	$ 0.3

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Investments - Cost or Amortized Cost and Fair Value of Available-for-Sale Securities (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	$ 2,323.1	$ 2,295.0
Gross unrealized holding gains	150.6	125.4
Gross unrealized holding losses	(13.5)	(24.0)
Fair value	2,460.2	2,396.4
Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	1,991.5	1,972.9
Gross unrealized holding gains	72.5	46.4
Gross unrealized holding losses	(8.5)	(18.6)
Fair value	2,055.5	2,000.7
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	223.6	219.8
Gross unrealized holding gains	13.0	6.6
Gross unrealized holding losses	(0.5)	(2.0)
Fair value	236.1	224.4
Fixed Maturities [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	730.7	804.0
Gross unrealized holding gains	28.6	22.5
Gross unrealized holding losses	(0.6)	(1.7)
Fair value	758.7	824.8
Fixed Maturities [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	575.3	500.3
Gross unrealized holding gains	11.1	5.8
Gross unrealized holding losses	(6.7)	(11.7)
Fair value	579.7	494.4
Fixed Maturities [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	461.9	448.8
Gross unrealized holding gains	19.8	11.5
Gross unrealized holding losses	(0.7)	(3.2)
Fair value	481.0	457.1
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	274.5	265.2
Gross unrealized holding gains	49.4	50.7
Gross unrealized holding losses	(5.0)	(5.3)
Fair value	318.9	310.6
Equity Securities [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	221.1	211.9
Gross unrealized holding gains	33.5	34.2
Gross unrealized holding losses	(4.8)	(5.1)
Fair value	249.8	241.0
Equity Securities [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	53.4	53.3
Gross unrealized holding gains	15.9	16.5
Gross unrealized holding losses	(0.2)	(0.2)
Fair value	69.1	69.6
Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost or amortized cost	57.1	56.9
Gross unrealized holding gains	28.7	28.3
Gross unrealized holding losses	0.0	(0.1)
Fair value	$ 85.8	$ 85.1

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Investments - Gross Unrealized Losses and Fair Value on its Investments (Detail) $ in Millions	Mar. 31, 2016 USD ($) position	Dec. 31, 2015 USD ($) position
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 202.6	$ 662.5
Less than 12 months, Unrealized losses	$ (7.9)	$ (16.3)
Less than 12 months, Number of positions | position	45	111
12 months or more, Fair value	$ 150.2	$ 110.4
12 months or more, Unrealized losses	$ (5.6)	$ (7.7)
12 months or more, Number of positions | position	28	26
Total, Fair value	$ 352.8	$ 772.9
Total, Unrealized losses	$ (13.5)	$ (24.0)
Total, Number of positions | position	73	137
Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 62.5	$ 65.8
Less than 12 months, Unrealized losses	$ (4.4)	$ (5.1)
Less than 12 months, Number of positions | position	23	24
12 months or more, Fair value	$ 3.0	$ 0.0
12 months or more, Unrealized losses	$ (0.4)	$ 0.0
12 months or more, Number of positions | position	1	0
Total, Fair value	$ 65.5	$ 65.8
Total, Unrealized losses	$ (4.8)	$ (5.1)
Total, Number of positions | position	24	24
Small Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 4.4	$ 3.4
Less than 12 months, Unrealized losses	$ (0.2)	$ (0.2)
Less than 12 months, Number of positions | position	1	1
12 months or more, Fair value	$ 0.0	$ 0.0
12 months or more, Unrealized losses	$ 0.0	$ 0.0
12 months or more, Number of positions | position	0	0
Total, Fair value	$ 4.4	$ 3.4
Total, Unrealized losses	$ (0.2)	$ (0.2)
Total, Number of positions | position	1	1
Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 135.7	$ 585.2
Less than 12 months, Unrealized losses	$ (3.3)	$ (10.9)
Less than 12 months, Number of positions | position	21	85
12 months or more, Fair value	$ 147.2	$ 110.4
12 months or more, Unrealized losses	$ (5.2)	$ (7.7)
12 months or more, Number of positions | position	27	26
Total, Fair value	$ 282.9	$ 695.6
Total, Unrealized losses	$ (8.5)	$ (18.6)
Total, Number of positions | position	48	111
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	$ 7.7	$ 68.6
Less than 12 months, Unrealized losses	$ (0.1)	$ (1.6)
Less than 12 months, Number of positions | position	4	15
12 months or more, Fair value	$ 9.2	$ 13.5
12 months or more, Unrealized losses	$ (0.4)	$ (0.4)
12 months or more, Number of positions | position	2	4
Total, Fair value	$ 16.9	$ 82.1
Total, Unrealized losses	$ (0.5)	$ (2.0)
Total, Number of positions | position	6	19
Fixed Maturities [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 6.6	$ 137.5
Less than 12 months, Unrealized losses	$ (0.1)	$ (1.7)
Less than 12 months, Number of positions | position	1	16
12 months or more, Fair value	$ 33.1	$ 0.0
12 months or more, Unrealized losses	$ (0.5)	$ 0.0
12 months or more, Number of positions | position	3	0
Total, Fair value	$ 39.7	$ 137.5
Total, Unrealized losses	$ (0.6)	$ (1.7)
Total, Number of positions | position	4	16
Fixed Maturities [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 73.5	$ 246.9
Less than 12 months, Unrealized losses	$ (3.0)	$ (5.3)
Less than 12 months, Number of positions | position	11	36
12 months or more, Fair value	$ 64.9	$ 63.9
12 months or more, Unrealized losses	$ (3.7)	$ (6.4)
12 months or more, Number of positions | position	10	11
Total, Fair value	$ 138.4	$ 310.8
Total, Unrealized losses	$ (6.7)	$ (11.7)
Total, Number of positions | position	21	47
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	$ 47.9	$ 132.2
Less than 12 months, Unrealized losses	$ (0.1)	$ (2.3)
Less than 12 months, Number of positions | position	5	18
12 months or more, Fair value	$ 40.0	$ 33.0
12 months or more, Unrealized losses	$ (0.6)	$ (0.9)
12 months or more, Number of positions | position	12	11
Total, Fair value	$ 87.9	$ 165.2
Total, Unrealized losses	$ (0.7)	$ (3.2)
Total, Number of positions | position	17	29
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value	$ 66.9	$ 69.2
Less than 12 months, Unrealized losses	$ (4.6)	$ (5.3)
Less than 12 months, Number of positions | position	24	25
12 months or more, Fair value	$ 3.0	$ 0.0
12 months or more, Unrealized losses	$ (0.4)	$ 0.0
12 months or more, Number of positions | position	1	0
Total, Fair value	$ 69.9	$ 69.2
Total, Unrealized losses	$ (5.0)	$ (5.3)
Total, Number of positions | position	25	25
Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair value		$ 8.1
Less than 12 months, Unrealized losses		$ (0.1)
Less than 12 months, Number of positions | position		1
12 months or more, Fair value		$ 0.0
12 months or more, Unrealized losses		$ 0.0
12 months or more, Number of positions | position		0
Total, Fair value		$ 8.1
Total, Unrealized losses		$ (0.1)
Total, Number of positions | position		1

XML

Investments - Realized Losses Related to Other-than-Temporary Impairments (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairments	$ (3.7)	$ (0.5)
Large-Cap Equity Securities [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairments	(0.2)	0.0
Small-Cap Securities [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairments	(1.2)	(0.5)
Fixed Maturities [Member] | Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairments	$ (2.3)	$ 0.0

XML

Investments - Amortized Cost and Fair Value of Available-for-Sale Fixed Maturities by Contractual Maturity (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Amortized cost
Due in 1 year or less, Amortized cost	$ 39.5
Due after 1 year through 5 years, Amortized cost	532.1
Due after 5 years through 10 years, Amortized cost	292.7
Due after 10 years, Amortized cost	665.3
U.S. government agencies mortgage-backed securities, Amortized cost	461.9
Total, Amortized cost	1,991.5	$ 1,972.9
Fair value
Due in 1 year or less, Fair value	40.2
Due after 1 year through 5 years, Fair value	545.7
Due after 5 years through 10 years, Fair value	299.5
Due after 10 years, Fair value	689.1
U.S. government agencies mortgage-backed securities, Fair value	481.0
Total, Fair value	$ 2,055.5	$ 2,000.7

XML

Investments - Components of Net Investment Income (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net Investment Income [Line Items]
Investment income	$ 17.8	$ 15.9
Investment expenses	0.4	0.5
Net investment income	17.4	15.4
Fixed Maturities [Member]
Net Investment Income [Line Items]
Investment income	14.9	12.9
Equity Securities [Member]
Net Investment Income [Line Items]
Investment income	1.5	1.6
Cash and Cash Equivalents, and Other [Member]
Net Investment Income [Line Items]
Investment income	$ 1.4	$ 1.4

XML

Investments - Realized and Unrealized Holding Gains (Losses) (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Realized gains:
Total realized gains	$ 5.6	$ 5.2
Realized losses:
Total realized losses	(4.3)	(1.0)
Net realized gain on investments	1.3	4.2
Change in unrealized holding gains (losses), net of tax:
Deferred federal income tax liability	(12.5)	(4.5)
Change in net unrealized holding (losses) gains, net of tax	23.2	8.3
Fixed Maturities [Member]
Realized gains:
Total realized gains	1.5	1.1
Change in unrealized holding gains (losses), net of tax:
Change in net unrealized holding (losses) gains, net of tax	36.2	9.4
Fixed Maturities [Member] | OTTI [Member]
Realized losses:
Total realized losses	(2.3)	0.0
Equity Securities [Member]
Realized gains:
Total realized gains	4.1	4.1
Change in unrealized holding gains (losses), net of tax:
Change in net unrealized holding (losses) gains, net of tax	(1.0)	(1.0)
Equity Securities [Member] | Sales [Member]
Realized losses:
Total realized losses	(0.6)	(0.5)
Equity Securities [Member] | OTTI [Member]
Realized losses:
Total realized losses	(1.4)	(0.5)
Other Invested Assets [Member]
Change in unrealized holding gains (losses), net of tax:
Change in net unrealized holding (losses) gains, net of tax	$ 0.5	$ 4.4

XML

Investments - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Fixed maturities fair value of deposit with insurance regulators	$ 9.1		$ 8.8
Proceeds on sale of available-for-sale securities	99.6	$ 84.2
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

Fair Value of Financial Instruments - Company's Available-for-Sale Investments within Fair Value Hierarchy (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Fair value	$ 2,460.2		$ 2,396.4
Investments, Fair Value Disclosure	2,382.8		2,319.4
Sales of other invested assets available-for-sale	0.2	$ 0.2
U.S. Treasury Securities and Obligations of U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	236.1		224.4
Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	758.7		824.8
Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	579.7		494.4
U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	481.0		457.1
Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	2,055.5		2,000.7
Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	249.8		241.0
Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	69.1		69.6
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	318.9		310.6
Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Investments, Fair Value Disclosure	8.4		8.1
Level 1 [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	327.3		318.7
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		0.0
Level 1 [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 1 [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		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		0.0
Level 1 [Member] | Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 1 [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	249.8		241.0
Level 1 [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	69.1		69.6
Level 1 [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	318.9		310.6
Level 1 [Member] | Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	8.4		8.1
Level 2 [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	2,052.1		1,997.4
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	236.1		224.4
Level 2 [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	758.7		824.8
Level 2 [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	576.3		491.1
Level 2 [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	481.0		457.1
Level 2 [Member] | Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	2,052.1		1,997.4
Level 2 [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 2 [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 2 [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 2 [Member] | Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 3 [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	3.4		3.3
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		0.0
Level 3 [Member] | Obligations of States and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 3 [Member] | Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	3.4		3.3
Level 3 [Member] | U.S. Government Agencies Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 3 [Member] | Fixed Maturities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	3.4		3.3
Level 3 [Member] | Large-Cap Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 3 [Member] | Small-Cap Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 3 [Member] | Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	0.0		0.0
Level 3 [Member] | Other Invested Assets [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair value	$ 0.0		$ 0.0

XML

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	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance	$ 3.3	$ 9.4
Total realized gains (losses) - included in earnings	0.0	0.0
Total unrealized gains (losses) - included in other comprehensive income	0.0	(0.2)
Purchases	0.1	0.0
Sales	0.0	(5.9)
Transfers into Level 3	0.0	0.0
Transfers out of Level 3	0.0	0.0
Ending Balance	$ 3.4	$ 3.3

XML

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	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable interest rate (percent)	7.00%	7.00%
Reported Value Measurement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable from affiliate	$ 70.0	$ 70.0
Estimate of Fair Value Measurement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable from affiliate	$ 76.2	$ 74.1

XML

Fair Value of Financial Instruments - Included in Notes Payable are the FHLB loan and Subordinated Debentures (Detail) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
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
Affiliate Subordinated Debentures Due 2033 [Member]
Debt Instrument [Line Items]
Interest rate (percent)	4.61%	4.61%
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
Reported Value Measurement [Member]
Debt Instrument [Line Items]
Total notes payable	100,500,000	$ 100,500,000
Reported Value Measurement [Member] | Federal Home Loan Bank Advances [Member]
Debt Instrument [Line Items]
Total notes payable	85,300,000	85,300,000
Reported Value Measurement [Member] | Affiliate Subordinated Debentures Due 2033 [Member]
Debt Instrument [Line Items]
Total notes payable	15,200,000	15,200,000
Estimate of Fair Value Measurement [Member]
Debt Instrument [Line Items]
Total notes payable	100,600,000	100,700,000
Estimate of Fair Value Measurement [Member] | Federal Home Loan Bank Advances [Member]
Debt Instrument [Line Items]
Total notes payable	85,400,000	85,500,000
Estimate of Fair Value Measurement [Member] | Affiliate Subordinated Debentures Due 2033 [Member]
Debt Instrument [Line Items]
Total notes payable	$ 15,200,000	$ 15,200,000

XML

Fair Value of Financial Instruments - Additional Information (Detail) $ in Millions	1 Months Ended
	May. 31, 2009 Agreement	Mar. 31, 2016 USD ($) security	Dec. 31, 2015 USD ($)
Fair Value Measurements Disclosure [Line Items]
Fair value		$ 2,460.2	$ 2,396.4
Other invested assets		5.3	5.3
Number of Credit Agreements | Agreement	2
Notes receivable from affiliate		70.0	70.0
Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value		3.4	3.3
Federal home loan bank stock		4.8
Other invested assets		$ 0.5
Corporate Securities [Member] | Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Number of fixed maturity corporate securities included in Level 3 (securities) | security		1
Fair value		$ 3.4	3.3
International funds [Member]
Fair Value Measurements Disclosure [Line Items]
Number of fixed maturity corporate securities included in Level 3 (securities) | security		2
Fair value		$ 77.4	$ 77.0
Affiliated Entity [Member]
Fair Value Measurements Disclosure [Line Items]
Notes receivable from affiliate		$ 70.0

XML

Reinsurance - Summary of External Reinsurance Transactions, as well as reinsurance transactions with State Auto Mutual Under the Pooling Arrangement (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Premiums earned:
Assumed from external insurers and reinsurers	$ 1.4	$ 1.1
Assumed under Pooling Arrangement	319.9	315.3
Ceded to external insurers and reinsurers	(6.8)	(8.9)
Ceded under Pooling Arrangement	(206.5)	(209.9)
Net assumed premiums earned	108.0	97.6
Losses and loss expenses incurred:
Assumed from external insurers and reinsurers	1.1	0.8
Assumed under Pooling Arrangement	225.4	195.3
Ceded to external insurers and reinsurers	(1.9)	0.1
Ceded under Pooling Arrangement	(131.7)	(121.2)
Net assumed losses and loss expenses incurred	$ 92.9	$ 75.0

XML

Income Taxes - Reconciliation Between Actual Federal Income Tax Expense (Benefit) and Amount Computed at Indicated Statutory Rate (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Amount at statutory rate	$ 1.3	$ 11.6
Tax-exempt interest and dividends received deduction	(2.0)	(2.2)
Other, net	1.5	(0.9)
Federal income tax expense and effective rate	$ 0.8	$ 8.5
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Amount at statutory rate (percent)	35.00%	35.00%
Tax-exempt interest and dividends received deduction (percent)	(52.80%)	(6.70%)
Other, net (percent)	37.80%	(2.70%)
Federal income tax expense (benefit) and effective rate (percent)	20.00%	25.60%

XML

Pension and Postretirement Benefit Plans - Company's Share of Net Periodic Cost Components (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Pension [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	$ 1.6	$ 2.0
Interest cost	2.9	2.8
Expected return on plan assets	(3.7)	(3.4)
Amortization of:
Negative prior service cost	0.0	0.0
Net actuarial loss	2.3	2.7
Net periodic cost (benefit)	3.1	4.1
Postretirement [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	0.0	0.0
Interest cost	0.2	0.2
Expected return on plan assets	0.0	0.0
Amortization of:
Negative prior service cost	(1.4)	(1.4)
Net actuarial loss	0.1	0.2
Net periodic cost (benefit)	$ (1.1)	$ (1.0)

XML

Pension and Postretirement Benefit Plans - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($)
Compensation and Retirement Disclosure [Abstract]
Contributions by employer	$ 3.3
Defined Benefit Plan, Expected Contributions in Current Fiscal Year	$ 9.7

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	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Beginning balance	$ 37.6	$ 71.7
Other comprehensive income before reclassifications	24.0	11.0
Amounts reclassified from AOCI	(0.2)	(1.7)
Other comprehensive (loss) income	23.8	9.3
Ending balance	61.4	81.0
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Beginning balance	68.5	110.0
Other comprehensive income before reclassifications	24.0	11.0
Amounts reclassified from AOCI	(0.8)	(2.7)
Other comprehensive (loss) income	23.2	8.3
Ending balance	91.7	118.3
Benefit Plan Items [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Beginning balance	(30.9)	(38.3)
Other comprehensive income before reclassifications	0.0	0.0
Amounts reclassified from AOCI	0.6	1.0
Other comprehensive (loss) income	0.6	1.0
Ending balance	$ (30.3)	$ (37.3)

XML

Other Comprehensive Income and Accumulated Other Comprehensive Income - Schedule of Reclassifications Out of Accumulated Other Comprehensive Income by Component (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Realized gain/(loss) on sale of securities	$ 1.3	$ 3.8
Tax (expense) benefit	(0.8)	(8.5)
Total reclassifications for the period	0.2	1.7
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	0.8	2.7
Benefit Plan Items [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period	(0.6)	(1.0)
Reclassification Out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period	0.2	1.7
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	1.3	4.2
Total before tax	1.3	4.2
Tax (expense) benefit	(0.5)	(1.5)
Net of tax	0.8	2.7
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	(2.4)	(2.9)
Total before tax	(1.0)	(1.5)
Tax (expense) benefit	0.4	0.5
Net of tax	$ (0.6)	$ (1.0)

XML

Earnings Per Common Share - Compilation of Basic and Diluted Earnings (Loss) Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator:
Net income for basic earnings per common share	$ 3.0	$ 24.7
Denominator:
Weighted average shares for basic net earnings per common share (shares)	41.4	41.0
Effect of dilutive share-based awards (shares)	0.4	0.4
Adjusted weighted average shares for diluted net earnings per common share (shares)	41.8	41.4
Basic net earnings per common share (usd per share)	$ 0.07	$ 0.60
Diluted net earnings per common share (usd per share)	$ 0.07	$ 0.60

XML

Earnings Per Common Share - Options to Purchase Shares of Common Stock (Detail) - shares shares in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Number of antidilutive options and awards	1.7	1.7

XML

Segment Information - Financial Information Regarding Company's Reportable Segments (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues from external sources:
Revenue	$ 339.2	$ 334.9
Net Investment Income	17.4	15.4
Segment income before federal income tax:
Interest expense on corporate debt	(1.3)	(1.3)
Income before federal income taxes	3.8	33.2
Operating Segments [Member]
Revenues from external sources:
Revenue	339.2	334.9
Segment income before federal income tax:
Income before federal income taxes	7.1	34.4
Operating Segments [Member] | Personal Insurance Segments [Member]
Revenues from external sources:
Revenue	145.6	150.0
Operating Segments [Member] | Business Insurance Segments [Member]
Revenues from external sources:
Revenue	119.3	117.3
Operating Segments [Member] | Specialty Insurance Segment [Member]
Revenues from external sources:
Revenue	55.0	48.0
Operating Segments [Member] | Total Insurance Segments [Member]
Revenues from external sources:
Revenue	319.9	315.3
Segment income before federal income tax:
Income before federal income taxes	(11.7)	15.2
Operating Segments [Member] | Net Investment Income [Member]
Revenues from external sources:
Net Investment Income	17.4	15.4
Operating Segments [Member] | Total Investment Operations [Member]
Revenues from external sources:
Revenue	18.7	19.6
Segment income before federal income tax:
Income before federal income taxes	18.7	19.6
Operating Segments [Member] | Total Investment Operations [Member] | Net Realized Capital Gains [Member]
Revenues from external sources:
Revenue	1.3	4.2
Segment income before federal income tax:
Income before federal income taxes	1.3	4.2
Operating Segments [Member] | All Other Segments [Member]
Segment income before federal income tax:
Income before federal income taxes	0.1	(0.4)
Operating Segments [Member] | Personal Insurance [Member]
Segment income before federal income tax:
Income before federal income taxes	3.9	17.4
Operating Segments [Member] | Business Insurance [Member]
Segment income before federal income tax:
Income before federal income taxes	(7.7)	(0.3)
Operating Segments [Member] | Specialty Insurance [Member]
Segment income before federal income tax:
Income before federal income taxes	(7.9)	(1.9)
Corporate and Other [Member] | All Other Segments [Member]
Revenues from external sources:
Revenue	0.6	0.0
Corporate and Other [Member] | Gaap Adjustments [Member]
Segment income before federal income tax:
Gaap Expense Adjustments	(1.2)	1.2
Corporate and Other [Member] | Corporate Segment [Member]
Segment income before federal income tax:
Corporate Expenses	(0.8)	(1.1)
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)	(1.4)
Eliminate Intersegment Revenues [Member] | Intersegment [Member]
Revenues from external sources:
Revenue	1.4	1.4
External and Intersegment Sources [Member]
Revenues from external sources:
Revenue	340.6	336.3
Total Consolidated [Member]
Revenues from external sources:
Revenue	339.2	334.9
Segment Reconciling Items [Member]
Segment income before federal income tax:
Income before federal income taxes	$ (3.3)	$ (1.2)

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Segment Information - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) Segment	Dec. 31, 2015 USD ($)
Segment Reporting [Abstract]
Number of reportable segments (segments) | Segment	4
Investable assets | $	$ 2,583.2	$ 2,529.8