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State Auto Financial reports record annual earnings for 2003


COLUMBUS, Ohio -- February 24, 2004 -- State Auto Financial Corporation (NASDAQ: STFC) today reported fourth quarter 2003 net income of $18,677,000, or $0.46 per diluted share, versus $19,331,000 or $0.49 per diluted share for the same period 2002. Net operating earnings* per diluted share were a fourth quarter record, $0.44 versus $0.40, for the same period in 2002.

STFC's GAAP combined ratio for the fourth quarter was 95.9 versus 98.5 for the fourth quarter of 2002. Catastrophe losses were extremely light, contributing only 0.5 points to the loss ratio in the fourth quarter 2003, versus 2.8 points in the fourth quarter 2002. STFC's fourth quarter revenue was $260,074,000, up from $254,335,000 for the same period in 2002

Revenue for the year 2003 was also a record $1,041,696,000, up 7.7% from $967,479,000 for 2002. For the year 2003, net income was $63,622,000, or $1.58 per diluted share, compared with $36,995,000 or $0.93 per diluted share for 2002. Annual GAAP combined ratio for 2003 was 98.2 compared to 102.4 for 2002. STFC shareholders' book value per share increased 15.3% during 2003 to $13.71 per share.

STFC Chairman and CEO Bob Moone stated, "Our strong fourth quarter results capped an extremely gratifying year for State Auto Financial. Three of the four quarters during 2003 set all-time highs in quarterly operating earnings* per share. The second quarter, the only one that did not set a new quarterly earnings record, was impacted significantly by Cat 88, the single largest catastrophe in the company's history. For the year 2003, we incurred a record $65.4 million in catastrophe losses. It is a testimony to our disciplined pricing and underwriting philosophies that we were able to generate consistently strong results for the year while absorbing such significant catastrophe losses.

"STFC has more than doubled its size since year-end 2000 in total revenue and assets. We have returned to a profitable underwriting position more in line with historic State Auto results, as evidenced by our 98.2 combined ratio for 2003. The Meridian business acquired in 2001 has been successfully integrated to the point that it will no longer be reported as a separate business segment in 2004. We look forward to the challenge in 2004 to perform at a level that will continue to produce profitable business and add to shareholder value," said STFC Chairman and CEO Bob Moone.

State Auto Financial Corporation is a regional property and casualty insurance holding company engaged primarily in writing both personal and commercial lines of insurance. The company markets its policies through more than 22,000 independent insurance agents associated with approximately 3,400 agencies in 26 central and eastern states, excluding New York, New Jersey and the New England states. The State Auto Insurance Companies' pool carries an A+ (Superior) rating from A.M. Best Co.

* Net operating earnings, a non-GAAP financial measure which management believes is informative to Company management and investors, differ from GAAP net earnings only by the exclusion of realized capital gains and losses, net of applicable taxes, on investment activity for the period being reported. For STFC, this amounts to $0.02 per diluted share for the fourth quarter and $0.17 per diluted share for the year 2003 versus $0.09 and $0.10 for the same 2002 periods respectively.

Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in State Auto Financial's Form 10-K and Form 10-Q reports and exhibits to those reports, and include (but are not limited to) legislative changes at both the state and federal level, state and federal regulatory rule making promulgations and adjudications, class action litigation involving the insurance industry and judicial decisions affecting claims, policy coverages and the general costs of doing business, the impact of competition on products and pricing, inflation in the costs of the products and services insurance pays for, product development, geographic spread of risk, weather and weather-related events, and other types of catastrophic events. State Auto Financial undertakes no obligation to update or revise any forward-looking statements.


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