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State Auto Financial Corporation announces fourth quarter results


COLUMBUS, Ohio -- February 27, 2002 -- State Auto Financial Corporation (Nasdaq:STFC) announced a net reported loss per share of $0.27, $0.27 diluted, for the fourth quarter ending December 31, 2001, compared to net reported earnings per share of $0.35, $0.34 diluted, for same period last year. Net losses for the 2001 fourth quarter were $10,635,000, compared to net earnings of $13,531,000 for the 2000 fourth quarter. STFC's fourth quarter 2001 GAAP combined loss and expense ratio was 115.8, compared to 96.4 for the fourth quarter 2000.

For the year ending December 31, 2001, STFC's GAAP combined ratio was 107.0, compared to 98.4 for the year ending December 31, 2000. Total net earnings for 2001 were $20,615,000, or $0.53 per share, $0.52 diluted, compared to $1.24 per share, $1.21 diluted, for 2000. The company's total revenue for 2001 was $623,287,000, a 34.7% increase over 2000's $462,774,000 total.

"As we reported on January 25, our fourth quarter results were significantly impacted by loss reserve adjustments on claims for the former Meridian Mutual Insurance Company (Meridian) occurring prior to October 1, 2001," stated STFC Chairman and CEO Robert H. Moone. "These adjustments added 14.5 loss ratio points to STFC's fourth quarter combined ratio and reduced fourth quarter earnings per basic share by $0.51. The historical core STFC book (excluding Meridian) continued to perform extremely well, posting a fourth quarter 93.8 GAAP combined ratio.

"We are convinced the case reserve deficiencies are now behind us. This assessment is based on the fact that our Indianapolis-based claims handlers completed reviews of virtually every open loss before year end and on the lack of notable case reserve adjustments since the beginning of the new year. As is our custom, we immediately faced this difficult problem and brought it to a quick resolution." Moone added, "In the absence of loss ratio distortions caused by the reserve strengthening, we see early evidence of progress resulting from the implementation of our underwriting and pricing initiatives."

State Auto Financial Corporation is a regional property and casualty insurance holding company engaged primarily in writing personal and commercial automobile, homeowners, commercial multi-peril, workers' compensation and fire insurance. The company currently markets its products through more than 22,000 agents associated with approximately 3,800 agencies in 26 states. Products are marketed primarily in the Midwest and Eastern United States, excluding New York, New Jersey and the New England states.

STFC has scheduled a conference call with industry analysts for Wednesday, February 27, 10 AM, to discuss the company's 2001 fourth quarter performance. A replay of this conversation, in its entirety, can be heard beginning at noon today by dialing 800-284-5340. The replay will be available through April 26, 2002. Live and archived broadcasts of the conference can be accessed via links on www.STFC.com and www.STATEAUTO.com.

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, insurance department rate and form filing decision making, 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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