---

S&P Rates State Automobile Mutual Insurance as 'API'

22 September 1998

S&P Asgns State Automobile Mutual Insurance 'Api' Rtg

    NEW YORK--S&P's CreditWire 9/22/98--Standard & Poor's today assigned its single-'Api' insurer financial strength rating to State Automobile Mutual Insurance Co..
    State Automobile Mutual Insurance is licensed in 29 states. Its major line of business is private passenger auto liability, and it is a member of state auto insurance companies, a large insurance group, (surplus in excess of $100 million). The company commenced operations in 1921.
    The following factors were incorporated in the single-'Api' rating:

     --   Capital adequacy as measured by Standard & Poor's capital
          adequacy model is over 300%, which is superior.

     --   The rating is based on the interaffiliate pool consisting of
          State Automobile Mutual Insurance Co. (55.0%), State Auto
          Property & Casualty Insurance Co. (35.0%) and Milbank
          Insurance (10.0%).
 
     --   Operating performance as measured by return on revenue from
          1993-1997 has been strong.
 
     --   The company has demonstrated stable earnings usually
          associated with larger firms (pool surplus $762.9 million).
 
     --   The two-year development of reserves to surplus has
          displayed more volatility than for higher rated companies.
 

    'Pi' ratings, denoted with a pi subscript, are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript.
    Pi ratings are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a pi subscript are not subject to potential CreditWatch listings. Ratings with a pi subscript generally are not modified with 'plus' or 'minus' designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said.--CreditWire