“2014 was a transformative year for State Auto Financial Corporation.  We have the people, earnings momentum, balance sheet strength, risk  management plans, and technology initiatives to make solid progress in  2015 and beyond.”  Dear  Shareholders, 2014 was a transformative year for State Auto Financial Cor- poration. Our 2014 results demonstrated that we’ve addressed  a myriad of issues that masked underlying improvements in our  underwriting profi tability. For the year, STFC produced net income of $107.4 million or  $2.60 per diluted share and a combined ratio of 105.5%. Setting  aside the fi nancial impact from the expired homeowners quota  share treaty and the reserve strengthening for the terminated Risk  Evaluation & Design LLC (RED) program business, our 2014 com- bined ratio was a strong 95.4% (1) . Similar to 2013, we benefi ted  from below average catastrophe losses, price increases in all lines  and segments, superior claim performance, and strong agency  relations. With the announcement of year-end results, we reversed  the deferred tax assets valuation allowance, which has been in  place since the second quarter of 2011. This improved our  capital position and helped elevate our return on equity to 13%. With these changes behind us, we can now focus on execut- ing our strategy to produce underwriting profi ts on a consistent  basis and to grow investment income from our conservatively  managed portfolio.  Looking forward, we remain a company focused on the  property and casualty insurance business, committed to dis- tributing our products through independent agents and brokers,  and positioned to enhance the security and fi nancial interests of  our policyholders and shareholders by growing book value and  surplus through top quartile underwriting performance. We defi ne top quartile underwriting performance as above  average profi tability and growth for each segment and in each  line of business. Presently, we’re not achieving our top quar- tile vision in all segments and lines. But we have the people,  earnings momentum, balance sheet strength, risk management  plans, and technology initiatives to make solid progress in 2015  and beyond.  z In reversing the deferred tax assets valuation allowance, as mentioned above, we increased our return on equity,  improved our capital position and enhanced book value.  Going forward, we expect to grow book value the old  fashioned way – earnings resulting from underwriting  profi tability and stable investment income. z In 2014 we strengthened RED reserves by $96.7 million and entered into an adverse development cover (ADC) reinsur- ance arrangement with Munich Reinsurance America Inc. This reserve strengthening, supplemented by the ADC, increased our confidence that this business will not be a  drag on future earnings. z We replaced the expired homeowners quota share reinsur- ance arrangement with a new one-year property aggregate excess catastrophe reinsurance agreement, effective Jan. 1, 2015, covering property business underwritten in our  personal and business insurance segments, including auto- mobile physical damage. Homeowners is becoming one of  our most profi table lines, and by retaining more of the risk associated with our homeowners business and returning to a more traditional reinsurance approach, we expect this business to contribute substantially to improved results in 2015 and beyond. The new aggregate excess treaty is intended to provide protection against excessive catastro- phe losses, minimize earnings volatility and preserve capital. There were many moving pieces embedded in our 2014 results . Page 1 State Auto Financial Corporation  Robert P. Restrepo Jr. President, Chairman of the Board and Chief Executive Officer