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State Auto Financial Corporation Announces First Quarter Earnings

29 April 1999

State Auto Financial Corporation Announces First Quarter Earnings

    COLUMBUS, Ohio--April 29, 1999--State Auto Financial Corporation reported net earnings per share of $0.25 ($0.25 diluted) for the first quarter ending March 31, 1999, compared to $0.27 per share ($0.27 diluted) for the same 1998 period. Net operating earnings per share were $0.24 ($0.24 diluted), compared to $0.26 per share ($0.26 diluted) for the same 1998 period.
    1998 results have been restated to include the financial position and operations of Milbank Insurance Company, which was acquired by STFC from an affiliated company in July 1998. Accounting for this transaction was handled similarly to the pooling of interests method.
    For the quarter ending March 31, 1999, net earnings were $10,880,000, compared to $11,531,000, for same period last year. The company's total revenue for the first quarter was $110,931,000, an increase of 11.6% over the previous year's revenue of $99,361,000. First quarter 1999 marked the first time that Farmers Casualty Insurance Company's results have been included in STFC's results of operations. Farmers Casualty was acquired January 1, 1999. Concurrent with the acquisition of Farmers Casualty, STFC's share of the State Auto Insurance Companies' reinsurance pool increased from 47% to 50%.
    "We continue to hold steadfast on responsible underwriting and pricing as the proven method of sustaining profitability. This allowed us to produce a GAAP combined loss and expense ratio of 96.1, despite absorbing almost $7,500,000 in catastrophe losses during the first quarter," said Robert L. Bailey, Chairman and CEO.
    STFC 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 12,500 agents associated with approximately 2,200 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.


                 Consolidated Statements of Earnings
           (Figures in thousands, except per-share amounts)
                             (unaudited)

                                           Quarter Ended
                                              March 31
                                          1999       1998
                                          ----       ----
                                                  (Restated
                                                   see Note)

Net premiums written                  $102,377(a)  $95,870(a)
                                      --------    -------- 
Earned premiums                         98,477      88,142
Net investment income                    8,451       8,011
Management services income               2,184       1,972
Net realized gains on investments        1,054         726
Other income                               765         510
                                      --------    -------- 
  Total revenue                        110,931      99,361
                                      --------    -------- 
Earnings before income taxes            14,661      15,874

Income taxes                             3,781       4,343
                                      --------    -------- 
Net earnings                           $10,880     $11,531
                                      --------    -------- 
                                      --------    -------- 
Net earnings per share:
 -basic                                  $0.25       $0.27
 -diluted                                $0.25       $0.27

Net earnings per share from operations(b):
 -basic                                  $0.24       $0.26
 -diluted                                $0.24       $0.26

Weighted average shares outstanding:
 -basic                                 42,054      41,828
 -diluted                               42,850      42,887

Book value per share                     $8.30       $7.40

Dividends paid per share                $0.025      $0.023

Total shares outstanding                42,058      41,838

GAAP ratios: 
 Loss ratio                               67.5        63.5
 Expense ratio                            28.6        29.7
                                      --------    -------- 
 Combined ratio                           96.1        93.2
                                      --------    -------- 
                                      --------    -------- 

Note: In July 1998, STFC acquired Milbank Insurance Company from an
      affiliated company. This transaction was accounted for similar 
      to a pooling of interests. Prior year's financial information 
      has been restated to include the financial position and 
      operations of Milbank.

(a)   Net premiums written for the three months ended March 31, 1999
      and 1998 includes $5,816,000 and $8,183,000 of unearned premiums
      transferred in connection with the 1/1/99 and 1/1/98 pooling
      changes, respectively.

(b)   Excludes net realized gains on Investments, less applicable
      federal income taxes.