State Auto Reacts to Shareholder Proposal, Declares 47th Consecutive Dividend

    COLUMBUS, Ohio--March 10, 2003--On Friday, March 7, the board of directors of State Auto Financial Corporation declared a quarterly cash dividend of $0.035 per share, payable March 31, 2003, to shareholders of record at the close of business on March 17, 2003.
    This is the 47th consecutive cash dividend declared by the company's board since STFC had its initial public offering of common stock on June 28, 1991.
    Also on Friday, the STFC board unanimously accepted the recommendation of its special committee of independent directors urging shareholders to vote against a shareholder proposal, described below, to be included in STFC's 2003 proxy statement. The STFC board opposes the shareholder proposal on the grounds that the company's current business strategies best serve the interests of shareholders. Furthermore, this shareholder proposal, which requests that the STFC board initiate a process for soliciting and evaluating merger proposals for STFC's controlling shareholder, State Auto Mutual, is beyond STFC's legal power or authority to complete. The board of directors of State Auto Mutual also unanimously accepted the recommendation of its special committee of independent directors to vote State Auto Mutual's shares of STFC against the shareholder proposal.
    Robert H. Moone, President and CEO of STFC and State Auto Mutual, stated "I consider the actions by our respective boards to be an affirmation of the independence of our companies." Mr. Moone went on to say, "These actions also confirm that our business strategies, which seek to maximize shareholder value through sustainable underwriting profit, adherence to cost-based pricing, controlled growth, efficiency of production, extraordinary service to policyholders and agents, strong agent relationships and keeping employees focused on the bottom line, best serve the interests of shareholders over the long term."
    The STFC annual meeting of shareholders is scheduled for May 23, 2003.
    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, general liability, workers' compensation and fire insurance. The company currently markets its products through more than 22,000 independent agents associated with approximately 3,500 agencies in 26 states and the District of Columbia. Products are marketed primarily in the central and eastern United States, excluding New York, New Jersey and the New England states.

    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.