Page 3 People Operations is better than industry averages and is among the best in the  business. We’ve completed the transformation of our claim operations  by redesigning business processes, restructuring the organiza- tion, reducing reliance on third-party vendors, and implementing  a new technology platform. We’re now positioned to capitalize  on these investments by using analytics to improve our fraud  detection, enhance fi rst notice of loss handling, and identify op- portunities to improve customer service and speed.  I’m very proud of what we’ve been able to accomplish in  claim and how we continue to innovate. One example is a new  early intervention narcotics management program. This new  program closely monitors the use of narcotic pain medicine. Our  nurse case managers begin working immediately on any claims  where narcotics are prescribed and consult with the treating  physician and/or our internal medical directors with the goal of  weaning the claimant from the highly addictive narcotics and  assisting them in their recovery, return to work and resumption  of a normal life.  “Last year, we made solid progress and, on  average, improved our customer service perfor- mance by almost 10%. We’ll continue to look for  ways to further improve our top quartile service  capability for all of our customers.” We maintain detailed metrics on customer service and ex- perience across the enterprise. We survey agents, policyholders  and claimants on a regular basis to assess our responsiveness  and reliability in meeting their expectations. Last year, we made  solid progress and, on average, improved our agent satisfaction  results by almost 10%. We’ll continue to look for ways to further  improve our top quartile service capability for all our customers. At the end of 2014, we successfully completed a new sourc- ing arrangement with a third party that assumed responsibility  for maintaining all legacy system applications. This sourc- ing arrangement has already increased our speed to market,  enhanced resource capacity and fl exibility, and broadened and  deepened our skill set. Most importantly, our IT associates are  now focused on the high priority and strategic initiatives under- way to replace all of our legacy policy administration and billing  systems. The initiative will take several years to complete, but  will begin this year with developing and deploying new agent  portals to further improve customer service, enhance productiv- ity and, over time, reduce our expense ratio. The quality of our people has sustained us through a diffi cult  period and now positions us for profi table growth and improved  shareholder returns. As a result, our agents, brokers and policyholders get the  service and support they need to be secure today and prepared  for tomorrow. With all the change and transformation State Auto has expe- rienced over the past several years, what has not changed is our  culture and the quality of our people. We are not a low cost provider, a product innovator or world  class in operational excellence. We expect to be competitive in  each of these three areas and we’re making the investments in  people, technology and risk management capability to succeed. What has always distinguished State Auto is customer inti- macy. We have a genuine understanding of the people and com- munities we serve and provide relevant information and expert  guidance that leads to better decisions.  We know that agents, brokers and policyholders want to  be treated as individuals and respected for who they are. We  know them, we know what they expect, and we deliver. All of  this comes from a culture built around a consistent set of values  that has been ingrained for many years. We recruit, develop and  retain smart, sincere and supportive associates who: z Do what’s necessary to grow surplus and preserve our  fi nancial strength, which is critical to preserving agency and broker partnerships and policyholder trust; z Uphold and strengthen the company’s platinum plus reputation in the market place;  z Build and sustain strong relationships with agents and brokers, policyholders and all of our constituencies; z Allow our company to provide reliable, stable and  predictable markets; and  z Respond to needs and requests that are often  characterized by behaviors as simple as answering the telephone, which is increasingly rare in our industry.  Robert P. Restrepo Jr. President, Chairman of the Board and Chief Executive O ffi cer State Auto Financial Corporation  Year ended December 31, 2014 As Reported Cession _________________ Cat Loss and ALAE ratio  3.0%  10.8%  4.1%  4.1%  Non-cat loss and LAE ratio 68.8% 38.1%  64.5% 56.7%  Loss and LAE ratio 71.8% 48.9%  68.6%  60.8%  Expense ratio 33.7%  39.8%  34.6%  34.6% Combined ratio 105.5% 88.7%  95.4% Pro Forma without HO QS Cession Pro Forma without  HO QS Cession and  RED HO QS 103.2% 1 Reconciliation of HO Quota Share Arrangement Cession and RED Underwriting Results to  As Reported Results