The following table sets forth information with respect to Common Shares beneficially owned by directors, director nominees and our NEOs (those persons listed in the Summary Compensation Table on page 65 of this Proxy Statement) as of March 8, 2016:

will automatically vest, if, prior to March 3, 2019, the award recipient’s employment is terminated in connection with a change of control of the Company. These Common Shares are also subject to restrictions on transfer until March 3, 2019.

~~(6)~~

~~Messrs. Restrepo, Fitch, Hunckler and Yano are no longer employees of the Company, and the Company does not have beneficial ownership information on any of them as of the record date.~~

~~(7)~~

Includes restricted stock awards made to the Named Executive Officers and other officers on March 5, 2015. On that date, the Compensation Committee made the following restricted stock awards to the Named Executive Officers: Mr. English—2,471 Common Shares; Ms. Clark—2,192 Common Shares; and Officers as a group—8,892 Common Shares. The Common Shares are subject to a risk of forfeiture if, prior to March 5, 2018, the award recipient’s employment is terminated or he or she violates any provision of the restricted stock agreement applicable to these Common Shares. However, these Common Shares will not be forfeited, and will automatically vest, if, prior to March 5, 2018, the award recipient’s employment is terminated in connection with a change of control of the Company. These Common Shares are also subject to restrictions on transfer until March 5, 2018.

~~(8)~~

Includes restricted stock awards made to the Named Executive Officers and other officers on March 6, 2014. On that date, the Compensation Committee made the following restricted stock awards to the Named Executive Officers: Mr. English—2,572 Common Shares; Ms. Clark—1,857 Common Shares; and Officers as a group—8,830 Common Shares. The Common Shares are subject to a risk of forfeiture if, prior to March 6, 2017, the award recipient’s employment is terminated or he or she violates any provision of the restricted stock agreement applicable to these Common Shares. However, these Common Shares will not be forfeited, and will automatically vest, if, prior to March 6, 2017, the award recipient’s employment is terminated in connection with a change of control of the Company. These Common Shares are also subject to restrictions on transfer until March 6, 2017.

~~(9)~~

Includes restricted stock awards of 2,214 and 2,192 Common Shares, which are subject to a risk of forfeiture if, prior to August 24, 2018, Mr. Garland’s employment is terminated or he violates any provision of the restricted stock agreement applicable to these Common Shares. However, these Common Shares will not be forfeited, and will automatically vest, if, prior to August 24, 2018, Mr. Garland’s employment is terminated in connection with a change of control of the Company. These Common Shares are also subject to restrictions on transfer until August 24, 2018.

~~(10)~~

~~Does not include RSUs.~~

PROPOSAL TWO: ~~AMENDMENT TO THE COMPANY’S CODE OF REGULATIONS~~

At the Annual Meeting, shareholders will be asked to consider and vote upon a proposal to approve an amendment to the Amended and Restated Code of Regulations, as amended, of the Company, which we refer to as the “Current Regulations.” A copy of the proposed amendment to the Current Regulations, which we refer to as the “Proposed Amendment,” is attached to this Proxy Statement as Exhibit A.

~~Summary of Proposed Amendment~~

The Board of Directors approved the Proposed Amendment on November 6, 2015. The Proposed Amendment would add a new provision to the Current Regulations which would provide that, unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Company to the Company or the Company’s shareholders, (c) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of Chapter 1701 of the Ohio Revised Code or the Company’s articles of incorporation or code of regulations, or (d) any action asserting a claim against the Company or any director or officer or other employee of the Company governed by the internal affairs doctrine shall be (i) the Court of Common Pleas of Franklin County, Ohio, or (ii) if that court does not have jurisdiction, then the United States District Court for the Southern District of Ohio, Eastern Division sitting in Columbus, Ohio, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.

The Board of Directors believes the Proposed Amendment is in the best interests of the Company and its shareholders for the following reasons, among others, as further discussed below: (i) the benefits of allowing the Company to have its internal corporate claims resolved by state and federal courts situated in Columbus, Ohio (the “Designated Courts”), the courts most familiar with Ohio law; (ii) the cost savings associated with legal fees and other expenses that would otherwise be incurred if the Company was required to defend itself against the same allegations in multiple lawsuits filed in courts in multiple states; and (iii) the risks to the Company of being subjected to conflicting outcomes by courts in multiple states.

The State Auto Group markets its insurance products throughout the United States. Plaintiffs seeking to bring claims against the Company for the matters to which the Proposed Amendment relates could use the Company’s diverse operations to bring duplicative suits in multiple jurisdictions, or to choose a forum state that may not apply Ohio law to the Company’s internal affairs in the same manner as the Designated Courts would be expected to do so. The Board of Directors believes that the Designated Courts are best suited to address disputes involving the Company, given that the Company is incorporated in Ohio, has its headquarters in Columbus, Ohio, and the Designated Courts have expertise in matters involving Ohio law. Although some plaintiffs might prefer to litigate matters in a forum outside of Ohio because another court may be viewed as being more convenient and/or favorable to them, the Board of Directors believes that the benefits to the Company and its shareholders, including more efficient litigation, outweigh these concerns. In addition, adoption of the Proposed Amendment helps to reduce the risk that the Company could be involved in duplicative litigation in more than one forum, as well as the risk that the outcome of cases in multiple forums could be inconsistent even though each forum purports to follow Ohio law. The Proposed Amendment still gives the Board of Directors the flexibility to consent to an alternative forum in instances when the Board deems it appropriate.

The Board of Directors is aware of certain other potential burdens and disadvantages to shareholders in connection with the adoption of the Proposed Amendment, including that plaintiffs who wish to file actions in multiple jurisdictions against the Company and/or its directors, officers and/or employees to increase the settlement value of their actions by increasing the Company’s costs to defend against multiple actions would prefer to be able to file actions in multiple jurisdictions. It is also possible that the Proposed Amendment could reduce the likelihood of litigation against the Company and its directors, officers and employees, which litigation

may be in pursuit of matters beneficial to the Company and its shareholders if successful. Lastly, the Board of Directors is aware that certain proxy advisors and institutional holders may not support the adoption of the Proposed Amendment unless it can be shown that the Company has already suffered material harm as a result of multiple actions in different jurisdictions regarding the same matter.

However, the Company and the Board of Directors have reviewed these potential burdens and disadvantages and believe that the adoption of the Proposed Amendment is in the best interests of the Company and its shareholders. The Company and the Board of Directors have maintained strong governance standards based on best practices, many of which are described in this Proxy Statement. Accordingly, from a governance perspective, the Board of Directors believes that it is more beneficial to the Company and its shareholders to take preventative action before the Company and shareholders are harmed by the practice of actions being filed in plaintiff’s favorite jurisdiction or multiple jurisdictions.

If approved, this provision would require that state courts in which applicable claims are asserted in contravention of the Proposed Amendment be willing to enforce its terms. It cannot be assured that all state courts will determine the Proposed Amendment to be enforceable or will be willing to force the transfer of such proceedings to the Designated Courts.

The Proposed Amendment would amend the Current Regulations to add a new Article 10, the full text of which is attached to this Proxy Statement as Exhibit A. You should read Exhibit A in its entirety before making a decision as to how to vote your Common Shares in connection with Proposal Two.

~~Reasons for Shareholder Approval; Board Recommendation~~

The Current Regulations require shareholder approval for an amendment in the nature of the Proposed Amendment. The favorable vote of a majority of the outstanding Common Shares is required to approve Proposal Two. Abstentions on this Proposal will have the same effect as a vote against it. Broker non-votes will be counted for purposes of Proposal Two since this Proposal is considered a routine matter on which a broker or other nominee has discretionary authority to vote.

~~THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL TWO TO AMEND THE CURRENT REGULATIONS.~~

~~PROPOSAL THREE: AMENDMENT TO THE 2009 EQUITY INCENTIVE COMPENSATION PLAN~~

~~Proposal~~

At the Annual Meeting, shareholders will be asked to consider and vote upon a proposal to amend the Company’s 2009 Equity Incentive Compensation Plan (the “2009 Equity Plan” or the “Plan”). This amendment, hereinafter referred to as the “Fourth Amendment,” would modify the Plan to: (i) authorize an additional 2,000,000 Common Shares for awards under the Plan; and (ii) add “policies in force” as a performance goal under the Plan. This modification is proposed to enable the Plan to continue to provide appropriate and meaningful awards and maintain the Plan on a competitive basis.

At the 2009 annual meeting, shareholders first approved the Plan. Shareholders approved the first and second amendments to the Plan at the 2011 and 2013 annual meetings, respectively. The third amendment was approved by the Board of Director in 2014, but shareholder approval was not required for that amendment.

~~Shares Available for Issuance under the Plan~~

A total of 3,000,000 Common Shares were reserved for awards under the Plan, 294,735 of which remain available for issuance as of March 8, 2016. Under the Fourth Amendment, an additional 2,000,000 Common Shares would be made available for awards under the Plan.

Each Common Share issued or transferred pursuant to an award of stock options will reduce the aggregate Plan limit of available Common Shares by one Common Share and each Common Share issued or transferred (and in the case of restricted shares, released from all substantial risk of forfeiture) pursuant to an award other than stock options will reduce the aggregate Plan limit of available Common Shares by (i) one Common Share if issued or transferred pursuant to an award granted prior to May 3, 2013; and (ii) three Common Shares if issued or transferred pursuant to an award granted on or after May 3, 2013.

No more than 33% of the Common Shares authorized for issuance under the Plan may be granted in the form of awards other than stock options. The maximum number of Common Shares subject to awards of options, restricted shares and performance shares that may be granted in any calendar year to any individual is 250,000 shares. The maximum number of performance units that may be granted in any calendar year to any individual is 100,000 performance units.

~~Summary of the Plan~~

The following discussion describes the important aspects of the Plan. This discussion is intended to be a summary of the material provisions of the Plan and is qualified in its entirety by reference to the full text of the Plan, including the proposed Fourth Amendment, which is attached to this Proxy Statement as Exhibit B. This summary may not include some details that may be important to you. For this reason, you are encouraged to read the Plan in its entirety.

~~Purpose~~

The purpose of the Plan is to advance the interests of the Company and its shareholders by enhancing the Company’s ability to attract and retain highly qualified key employees and by providing such employees with additional incentives and compensation to achieve the Company’s long-term business plans and objectives. The Plan is also intended to encourage and enable key employees to participate in the Company’s future prosperity and growth by providing the participants with incentives and compensation based on the Company’s performance, development and financial success. These purposes will be achieved by granting to key employees equity-based awards, including stock options, restricted shares, performance shares, performance units and other stock-based awards.

~~Eligibility~~

Only employees of the Company or its parent or one of the Company’s or its parent’s subsidiaries or affiliates who perform services in an executive, administrative, professional or technical capacity and who, in the opinion of the committee administering the Plan, have responsibilities affecting the management, development or financial success of the Company or one of its subsidiaries or other affiliated entities are eligible to participate in the Plan. As of the date of this Proxy Statement, there were approximately 92 eligible employees.

~~Administration~~

The Plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Committee”). The Committee’s authority to administer the Plan includes, among other things, the authority to grant awards, including the number and type of awards, the frequency of award grants, the terms and conditions of the awards, the number of shares subject to each award and the expiration date of each award. Each award grant must be evidenced by a written award agreement between the employee to whom the award was granted and the Company. In granting awards, the Committee is required to consider the level and responsibility of an employee’s position, the employee’s performance, level of compensation and assessed potential, as well as any other factors deemed relevant by the Committee. The Committee is also authorized to determine the vesting requirements, if any, that will apply to award grants and to interpret the provisions of the Plan. The Committee has the authority to grant options that are intended to qualify as incentive stock options under the Internal Revenue Code of 1986, as amended (the “Code”), options that do not qualify as incentive stock options under the Code (these options are sometimes referred to as “non-qualified stock options”), restricted shares, performance shares, performance units and other stock-based awards. Awards may be granted alone or in addition to other awards granted under the Plan. No consideration is received by the Company or its subsidiaries for the granting of awards under the Plan.

~~Change in Control~~

Under the Plan, a “change in control” or “potential change in control” of the Company is generally defined by reference to the acquisition of a specified percentage of voting power, or a change in the composition of the Board of Directors, or an acquisition of the Company that requires shareholder approval, or a transaction involving the Company or its affiliates that requires shareholder approval and has the effect of causing the Company to cease to be a public company. If a participant incurs a termination of employment with the Company and any related entity within one year of the change in control or potential change in control or if the change in control or potential change in control involves a change in the ownership of the Company and the successor entity does not provide benefits of equal or greater value at the time of the transaction, all of the participant’s stock options which are not otherwise vested automatically vest and become exercisable in full and all restrictions applicable to any restricted stock, performance shares or performance units automatically lapse such that those awards become fully vested.

Within 30 days following a “change in control” or “potential change in control” of the Company, all outstanding options may be terminated by the Company upon the payment of cash in an amount equal to the difference between the exercise price of the option and the “change in control price” (generally defined to mean the highest fair market value of the Common Shares underlying the options at any time during the sixty-day period preceding the event that triggered the change in control or potential change in control provisions). If the change in control price is less than the exercise price, the option may be terminated without any payment.

~~Amendment and Termination~~

The Board of Directors may at any time suspend, amend or terminate the Plan. However, except as otherwise provided in the Plan, the Board of Directors may not take any action that materially and adversely affects any outstanding awards granted under the Plan without obtaining the consent of the individuals who have

been granted such awards and certain amendments may require shareholder approval. In addition, no amendment may be made by the Board of Directors without shareholder approval if the amendment would effect any change which requires shareholder approval under any applicable laws or regulations, such as the Nasdaq Marketplace Rules.

~~By its terms, the Plan will automatically terminate in 2019.~~

~~Stock Options~~

~~Exercise Price~~. The exercise price of either incentive stock options or non-qualified stock options granted under the Plan may not be less than the fair market value of the Common Shares underlying the option at the time the option is granted. Fair market value is currently based upon the last sale price of the Common Shares as reported on the Nasdaq Stock Market as of the close of the trading day the option is granted. However, if a participant owns more than 10% of the combined voting power of all classes of stock issued by the Company, the exercise price of an incentive stock option granted to such person may not be less than 110% of such fair market value. The exercise price of any stock option granted under the Plan may not be changed or modified after the time of grant unless such change or modification is made with the prior approval of the Company’s shareholders. Except in connection with a corporate transaction involving the Company, the Company will not reduce the exercise price of outstanding stock options or cancel outstanding stock options in exchange for cash, other awards, or stock options with an exercise price that is less than the exercise price of the original stock option without shareholder approval.

~~Term~~. No stock option may be exercised more than ten years after the date of grant (five years with respect to an incentive stock option granted to a participant who owns more than 10% of the combined voting power of all classes of stock issued by the Company). Each stock option is subject to a minimum three-year vesting period. Participants whose employment is terminated for reasons other than retirement, disability or death must exercise all of their vested options within the earlier of 90 days of such termination or the expiration date of the option (options which are not vested immediately lapse). If a participant’s employment is terminated due to illegal conduct, all of such participant’s options, whether or not vested, immediately lapse without any further force or effect as of such termination). If the participant’s employment is terminated as a result of retirement, disability or death, all of such participant’s options, whether or not vested, become exercisable immediately and must be exercised by the following dates:


~~Reason for Termination~~ ~~of Employment~~	~~Incentive Stock Options~~	~~Non-Qualified Stock Options~~
~~• Retirement~~	~~• within the earlier of 90 days of such termination or the expiration date of the option~~	• on or before the expiration date of the option or, in the case of options granted on or after January 1, 2015, within the earlier of five years from retirement or the expiration date of the option

~~• Disability~~	~~• within the earlier of one year of such termination or the expiration date of the option~~	~~• on or before the expiration date~~

~~• Death~~	~~• within the earlier of one year of such termination or the expiration date of the option~~	~~• on or before the expiration date of the option or, in the case of termination within 90 days of the expiration date, within 180 days from the date of termination~~

~~Non-Transferability of Options~~. Options may be transferred only by will or the laws of descent and distribution except that the Committee may authorize gifts of options (provided that they are not incentive stock options) to a grantee’s parents, spouse, children, grandchildren, nieces or nephews, or to the trustee of a trust for the principal benefit of one or more of these persons or to a partnership whose only partners are one or more of these persons. In addition, non-qualified stock options and, if permitted by applicable law, incentive stock options may be transferred pursuant to “qualified domestic relations orders” to a grantee’s former spouse. Options may be exercised only by a grantee or his or her legal representative or, if gifted or otherwise transferred, by the permitted transferee or the transferee’s legal representative.

~~Restricted Shares~~

Restricted shares are Common Shares that are subject to a vesting schedule and other restrictions. The vesting schedule and the lapsing, if any, of the restrictions, are determined by the Committee. Each restricted share has a minimum three-year vesting period, except that restricted shares issued on or after January 1, 2014, shall immediately vest upon the participant’s death or retirement. Unless otherwise determined by the Committee, upon the voluntary or involuntary termination of the participant’s employment for any other reason, including disability, any shares still subject to restrictions will be forfeited. The Committee has the authority to determine the voting rights (which may be full or limited), dividend rights (which may be full or limited) and other shareholder rights associated with the restricted shares during the restriction period.

~~Performance Shares and Units~~

Performance shares and performance units are awards that will result in a payment to a participant only if the performance goals established by the Committee are achieved during the performance period established by the Committee. In making such awards, the Committee establishes organizational performance goals, including, without limitation, earnings, return on capital, revenue, premiums, net income, earnings per share, combined ratio, loss ratio, expense ratio, assets, equity, cash flows, stock price, total shareholders’ return or any other performance goal approved by the shareholders of the Company in accordance with Code Section 162(m), which, depending on the extent to which they are met, determines the number and/or the value of performance shares and performance units to be paid out to participants. If the shareholders approve the Fourth Amendment, “policies in force” as defined in the Fourth Amendment, will be added to the list of organizational performance goals. The Committee also establishes the performance period for each award, which period may not be less than one calendar year.

The purchase price of performance shares will be established by the Committee, and may be zero. The maximum number of performance shares that may be granted in any calendar year to any individual is 250,000 shares. Because (i) the maximum number of performance shares that may be granted in any calendar year to any individual is 250,000 shares, and (ii) the minimum performance period is one calendar year, the maximum amount of compensation that could be paid to a participant for a one-year performance period would be equal to 250,000 shares multiplied by the fair market value of such performance shares.

Performance units will have an initial dollar value established by the Committee at the time of the award, but will not be less than a value per unit equal to the fair market value of a Common Share of the Company. The maximum number of performance units that may be granted in any calendar year to any individual will be 100,000 performance units. Because (i) the maximum number of performance units that may be granted in any calendar year to any individual is 100,000 units, and (ii) the minimum performance period is one calendar year, the maximum amount of compensation that could be paid to a participant for a one-year performance period would be equal to 100,000 multiplied by the fair market value of the Common Shares.

Upon the termination of employment before the end of any performance period due to death, disability or change in control, the Committee, taking into consideration the performance of the participant and the performance of the Company over the performance period, may authorize the payment of all or a portion of the

amount which would have been paid to the participant had such participant’s employment continued to the end of the performance period. If the participant’s employment terminates for any other reason, all performance shares and performance units are forfeited. The Committee will have the authority to determine the voting rights (which may be full or limited), dividend rights (which may be full or limited) and other shareholder rights associated with the performance shares during the performance period. However, dividends and/or dividend rights may not be granted in connection with unearned performance shares.

~~Other Stock-Based Awards~~

The Committee is authorized, subject to limitations under applicable law, to grant such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, the Common Shares and factors that may influence the value of Common Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Common Shares, purchase rights for Common Shares, awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee and awards valued by reference to the book value of Common Shares or the value of securities of or the performance of specified subsidiaries of the Company. The Committee determines the terms and conditions of such awards.

~~Non-Transferability of Awards Other than Options~~

Awards other than options granted under the Plan generally may not be sold, pledged, transferred or assigned. If the Committee makes an award under the Plan transferable, such award may contain such additional terms and conditions as the Committee deems appropriate.

~~Forfeiture Events~~

The Board may require that all or a portion of the value of the awards, as well as any gain on the exercise of awards, is subject to a repayment obligation upon (i) the violation of any non-competition and/or confidentiality obligations applicable to the participant, (ii) a financial restatement where the amount of the participant’s award was calculated based on the achievement of certain financial results which were the subject of a subsequent financial restatement and in which the participant engaged in fraudulent misconduct that caused or substantially contributed to the need for the restatement (if the participant’s award would have been lower if the financials had been properly reported); or (iii) the participant engages in any wrongful conduct during the participant’s employment with the Company or its parent or the Company’s or its parent’s subsidiary corporations or affiliates which has a material adverse effect on the Company or such entity.

~~Stock Price~~

~~On March 8, 2016, the closing price of the Common Shares as reported by the Nasdaq Stock Market was $21.50.~~

~~Number of Awards~~

~~The number of awards that an employee may receive under the Plan is at the discretion of the Committee and therefore cannot be determined in advance.~~

~~Federal Income Tax Information~~

The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and the Company and its affiliates of awards granted under the Plan. Tax consequences for any particular individual may be different.

~~Stock Options~~

Federal income taxation of the various events related to the options (option grant, option exercise and sale of shares) under the Plan is different for incentive stock options and non-qualified stock options.

~~Non-Qualified Stock Options~~~~. In general, for federal income tax purposes under present law:~~

~~(a)~~

~~The grant of a non-qualified stock option, by itself, will not result in income to the optionee.~~

~~(b)~~

Except as provided in (e) below, the exercise of a non-qualified stock option (in whole or in part, according to its terms) will result in ordinary income to the optionee at that time in an amount equal to the excess (if any) of the fair market value of the shares underlying the option on the date of exercise over the exercise price.

~~(c)~~

Except as provided in (e) below, the optionee’s tax basis of shares acquired upon the exercise of a non-qualified stock option, which will be used to determine the amount of any capital gain or loss on a future taxable disposition of such shares, will be the fair market value of the shares on the date of exercise.

~~(d)~~

No deduction will be allowable to the Company upon the grant of a non-qualified stock option, but upon the exercise of a non-qualified stock option, a deduction will be allowable to the Company at that time in an amount equal to the amount of ordinary income realized by the optionee exercising the option if the Company withholds appropriate federal income tax and provided that the deduction is not otherwise disallowed under the Code.

~~(e)~~

With respect to the exercise of a non-qualified stock option and the payment of the exercise price by the delivery of shares, to the extent that the number of shares received does not exceed the number of shares surrendered, no taxable income will be realized by the optionee at that time, the tax basis of shares received will be the same as the tax basis of shares surrendered and the holding period of the optionee in shares received will include his or her holding period in shares surrendered. To the extent that the number of shares received exceeds the number of shares surrendered, ordinary income will be realized by the optionee at that time in the amount of the fair market value of such excess shares, the tax basis of such shares will be equal to the fair market value of such shares at the time of exercise and the holding period of the optionee in such shares will begin on the date such shares are transferred to the optionee.

~~Incentive Stock Options~~~~. In general, for federal income tax purposes under present law:~~

~~(a)~~

Neither the grant nor the exercise of an incentive stock option, by itself, will result in income to the optionee; however, the excess of the fair market value of the shares underlying the option at the time of exercise over the exercise price is (unless there is a disposition of shares acquired upon exercise of an incentive stock option in the taxable year of exercise) includable in alternative minimum taxable income which may, under certain circumstances, result in an alternative minimum tax liability to the optionee.

~~(b)~~

If shares acquired upon the exercise of an incentive stock option are disposed of in a taxable transaction after the later of two years from the date on which the incentive stock option is granted or one year from the date on which such shares are transferred to the optionee, long-term capital gain or loss will be realized by the optionee in an amount equal to the difference between the amount realized by the optionee and the optionee’s basis which, except as provided in (e) below, is the exercise price.

~~(c)~~

Except as provided in (e) below, if the shares acquired upon the exercise of an incentive stock option are disposed of within the two-year period from the date of grant or the one-year period after the transfer of the shares to the optionee upon exercise of the incentive stock option (a “disqualifying disposition”):

~~(i)~~

Ordinary income will be realized by the optionee at the time of the disqualifying disposition in the amount of the excess, if any, of the fair market value of the shares at the time of such exercise over the exercise price, but not in an amount exceeding the excess, if any, of the amount realized by the optionee over the exercise price.

~~(ii)~~
Short-term or long-term capital gain will be realized by the optionee at the time of the disqualifying disposition in an amount equal to the excess, if any, of the amount realized over the fair market value of the shares at the time of such exercise.

~~(iii)~~

Short-term or long-term capital loss will be realized by the optionee at the time of the disqualifying disposition in an amount equal to the excess, if any, of the exercise price over the amount realized.

~~(d)~~

No deduction will be allowed to the Company with respect to incentive stock options granted or shares transferred upon exercise thereof, except that if a disposition is made by the optionee within the two-year period referred to above, the Company will be entitled to a deduction in the taxable year in which the disposition occurred in an amount equal to the amount of ordinary income realized by the optionee making the disposition, provided that the deduction is not otherwise disallowed under the Code.

~~(e)~~

With respect to the exercise of an incentive stock option and the payment of the option price by the delivery of shares to the extent that the number of shares received does not exceed the number of shares surrendered, no taxable income will be realized by the optionee at that time, the tax basis of the shares received will be the same as the tax basis of the shares surrendered and the holding period (except for purposes of the one-year period referred to in (c) above) of the optionee in the shares received will include his or her holding period in the shares surrendered. To the extent that the number of shares received exceeds the number of shares surrendered, no taxable income will be realized by the optionee at that time, such excess shares will be considered incentive stock option stock with a zero basis and the holding period of the optionee in such shares will begin on the date such shares are transferred to the optionee. If the shares surrendered were acquired as the result of the exercise of an incentive stock option and the surrender takes place within two years from the date the option relating to the surrendered shares was granted or within one year from the date of such exercise, the surrender will result in a disqualifying disposition and the optionee will realize ordinary income at the time of exercise of the shares surrendered over the basis of such shares. If any of the shares received are disposed of within one year after the shares are transferred to the optionee, the optionee will be treated as first disposing of the shares with a zero basis.

~~Restricted Shares, Performance Shares and Performance Units~~

A participant generally will not have taxable income at the time an award of restricted shares, performance shares or performance units is granted. Instead, he or she will recognize as ordinary income at the time of the lapse of the applicable restrictions an amount equal to the fair market value of the restricted shares, performance shares or performance units at the time of such lapse. However, the recipient of a restricted shares, performance shares or performance units award may elect to recognize income at the time he or she receives the award in an amount equal to the fair market value of the shares underlying the award (less any cash paid for the shares) on the date the award is granted. The Company generally will be entitled to a tax deduction in connection with an award under the Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income, provided that the Company satisfies applicable withholding requirements and the deduction is not otherwise disallowed under the Code.

~~Reasons for Shareholder Approval; Board Recommendation~~

Under the Nasdaq Marketplace Rules, the Company is required to receive shareholder approval for modifications to the material terms of stock option and purchase plans in which officers or employees participate. For this reason, the Company’s shareholders are being asked to approve the Fourth Amendment.

The favorable vote of a majority of the outstanding Common Shares voted on this Proposal is required to approve the Fourth Amendment. Abstentions will have the same effect as not voting or expressing a preference, as the case may be. Abstentions and broker non-votes will not have a positive or negative effect on the outcome of this Proposal.

~~THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE FOURTH AMENDMENT.~~

~~PROPOSAL FOUR: APPROVAL OF MATERIAL TERMS~~

~~OF THE OUTSIDE DIRECTORS RESTRICTED SHARE UNIT PLAN~~

~~Proposal~~

At the Annual Meeting, shareholders will be asked to consider and vote upon a proposal to approve the material terms of the State Auto Financial Corporation Outside Directors Restricted Share Unit Plan (the “Proposed RSU Plan”). The Board of Directors approved the terms of the Proposed RSU Plan on March 4, 2016. Many terms of the Proposed RSU Plan are substantially the same as the Company’s previous outside directors restricted share unit plan approved by the shareholders on May 11, 2005, which plan terminated by its own terms on May 31, 2015. One difference is an increase in the maximum numbers of Restricted Share Units that can be awarded under the Proposed RSU Plan.

~~Restricted Share Units to be Granted under the Proposed RSU Plan~~

Promptly following each annual meeting of the shareholders of the Company on and after the date of approval of the Proposed RSU Plan by the shareholders of the Company, each non-employee member of the Board of Directors (an “Outside Director”) shall be automatically granted an award of restricted share units (“Restricted Share Units”) in such number as determined by the administrative committee in accordance with the terms of the Proposed RSU Plan. The administrative committee of the Proposed RSU Plan has the power to increase or decrease the number of Restricted Share Units to be awarded to each Outside Director not to exceed a maximum annual award of 10,000 Restricted Share Units, without shareholder approval, if the administrative committee believes the increase or decrease is warranted to maintain director compensation at an appropriate level.

~~Summary of the Proposed RSU Plan~~

~~The following discussion of the Proposed RSU Plan is qualified in its entirety by reference to the full text of the plan, which is attached to this Proxy Statement as Exhibit C.~~

~~Purpose and Eligibility~~

The purpose of the Proposed RSU Plan is to advance the interests of the Company and its shareholders by aligning and strengthening the interests of Outside Directors with the interests of the Company’s shareholders. This purpose will be achieved by annually granting to Outside Directors Restricted Share Units. As of the date of this Proxy Statement, there were seven incumbent Outside Directors.

The Proposed RSU Plan is intended to comply with the requirements of Section 409A of the Code and applicable regulations. To the extent inconsistent with Section 409A or regulations issued thereunder, the Proposed RSU Plan shall be subsequently amended, subject to any required shareholder approval, to conform to such requirements within the applicable time limitations established by the Internal Revenue Service (“IRS”).

~~Administration~~

The Proposed RSU Plan is to be administered by the Compensation Committee of the Company’s Board of Directors or such other individuals designated by the Compensation Committee to oversee administration of the Proposed RSU Plan (the “Administrator”). The Committee’s authority to administer the Proposed RSU Plan includes, among other things, the discretionary authority to interpret the Proposed RSU Plan, the discretionary authority to determine all questions relating to the rights and status of participants, the discretionary authority to make such rules and regulations for the administration of the Proposed RSU Plan as are not inconsistent with the terms and provisions of the Proposed RSU Plan or applicable law and the authority to change or waive any requirements of the Proposed RSU Plan to conform with the law or to meet special circumstances not anticipated

or covered under the Proposed RSU Plan. The Committee also has the power to increase or decrease the number of Restricted Share Units to be awarded to each of the Outside Directors not to exceed a maximum annual award of 10,000 Restricted Share Units. Any such increase or decrease may be made without further shareholder approval if, in the Committee’s discretion, such an increase is warranted to maintain Outside Director compensation at a competitive level. Each award grant must be evidenced by a written Restricted Share Unit Agreement between the Outside Director to whom the award was granted and the Company.

~~No consideration is received by the Company or its subsidiaries for the granting of awards under the Proposed RSU Plan.~~

~~Recapitalization, Reorganization, Consolidation, Merger or Asset Sale~~

In the event of (a) a recapitalization, reorganization, reclassification, consolidation, or merger of the Company, or any sale of all or substantially all of the Company’s assets to another person or entity, or any other transaction which is effected in such a way that holders of Common Shares are entitled to receive (either directly or upon subsequent liquidation) other stock, securities, or assets with respect to or in exchange for Common Shares of the Company or (b) a change in the Company’s outstanding Common Shares by reason of stock splits, stock dividends, or any other increase or reduction of the number of outstanding Common Shares without receiving consideration in the form of money, services, or property deemed appropriate by the Board (an “Organic Change”), the value of each participant’s Restricted Share Units shall be adjusted so as to contain a value equivalent to such shares of stock, securities or assets (including cash) as would have been issued or payable with respect to or in exchange for the number of Common Shares credited to such participant’s account immediately before such Organic Change, as if such Common Shares had been outstanding.

~~Amendment and Termination~~

The Board of Directors may at any time amend, modify, suspend, discontinue or terminate the Proposed RSU Plan. However, no amendment shall operate retroactively so as to affect adversely any rights to which a participant may be entitled under the provisions of the Proposed RSU Plan as in effect prior to such action and no amendment may be made by the Board of Directors without shareholder approval if the amendment would effect any change which requires shareholder approval under any applicable laws or regulations, such as the Nasdaq Marketplace Rules. Additionally, any suspension, discontinuance or termination of the Proposed RSU Plan shall not (a) accelerate the obligation to make payments to any person not otherwise currently entitled to payments under the Proposed RSU Plan, unless otherwise specifically so determined by the Company and permitted by applicable law, (b) relieve the Company of its obligations to make payments to any person then entitled to payments under the Proposed RSU Plan, or (c) reduce the balance of any participant’s existing account under the Proposed RSU Plan.

~~Funding~~

All benefits under the Proposed RSU Plan are unfunded and the Company shall not be required to establish any special or separate fund or to make any other segregation of assets in order to assure the payment of any amounts under the Proposed RSU Plan; provided, however, that in order to provide a source of payment for its obligations under the Proposed RSU Plan, the Company may establish a trust fund. The right of a participant or his beneficiary to receive a distribution under the Proposed RSU Plan shall be an unsecured claim against the general assets of the Company, and neither the participant nor his beneficiary shall have any rights in or against any amounts credited under the Proposed RSU Plan or any other specific assets of the Company. All amounts credited under the Proposed RSU Plan to the benefit of a participant shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate.

~~Restricted Share Units~~

A Restricted Share Unit is a unit representing one Common Share. The number of Restricted Share Units awarded to participants under the Proposed RSU Plan and their corresponding value will be maintained in a separate bookkeeping account of the Company until the time of distribution of the Restricted Share Units in a form and at such time as are provided under the Proposed RSU Plan.

~~Annual Awards~~. Promptly following each annual meeting of the shareholders of the Company on and after the date of approval of the Proposed RSU Plan by the shareholders of the Company, each Outside Director shall be automatically granted an award of Restricted Share Units under the Proposed RSU Plan in such number as determined by the administrative committee in accordance with the terms of the Proposed RSU Plan. The Committee has the power to increase or decrease the number of Restricted Share Units to be awarded to each of the Outside Directors not to exceed a maximum annual award of 10,000 Restricted Share Units. Each Outside Director will be one hundred percent vested in an award upon the completion of six months of service as an Outside Director from the date of grant, provided that in the event of the Outside Director’s death or disability, he or she will be one hundred percent vested in the total amount credited to his or her account. For each award of Restricted Share Units, the Outside Director will select the form of payment upon distribution of awarded Restricted Share Units. The form of payment will be either in cash or Common Shares.

~~Value~~. The value of each Restricted Share Unit, on any particular day, shall be: (a) the last reported sale price of a Common Share on the Nasdaq National Market System on the most recent previous trading day (or if there was no trading in the Common Shares on that day, then on the next preceding trading day in which there was trading in the Common Shares), or (b) the mean between the high and low bid and ask price of a Common Share as reported by the National Association of Securities Dealers on the most recent previous trading day, or (c) the last reported sale price of a Common Share on any stock exchange on which the Common Shares are listed on the most recent previous trading day (or if there was no trading in the Common Shares on that day, then on the next preceding trading day on which there was trading in the Common Shares).

~~Dividends.~~ Whenever a dividend is made with respect to the Common Shares, participants under the Proposed RSU Plan shall receive, with respect to each Restricted Share Unit held in the account of the participant on the dividend record date, additional Restricted Share Units in an amount equal to the value of the dividend.

~~Distribution of Benefits~~. Other than withdrawals for an unforeseeable emergency, a participant under the Proposed RSU Plan will not receive payment with respect to the vested Restricted Share Units until his or her termination from membership on the Board of Directors due to death, disability, or any other reason. With respect to terminations of membership on the Board of Directors other than due to death or disability, the participant may elect to receive the distribution either (i) in a single lump sum payment approximately six months following the termination, or (ii) in annual installment payments over a period of five or ten years, as selected by the participant. In the event of death or disability, the distribution shall be made as soon as practicable following the termination from membership on the Board of Directors. Upon the occurrence of an unforeseeable emergency, the participant shall be eligible to receive payment of the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the participant’s assets (to the extent such liquidation would not itself cause severe financial hardship). The amount determined to be properly distributable under applicable regulations under Code Section 409A shall be payable in a single lump sum only. An “unforeseeable emergency” means a severe financial hardship to the participant resulting from an illness or accident of the participant, the participant’s spouse, or a dependent of the participant (as defined in Code Section 152(a)); loss of the participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.

~~Non-Transferability~~

Generally no rights or benefits under the Proposed RSU Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge; and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit shall be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefits.

~~Federal Income Tax Information~~

The following is a summary of the general federal income tax consequences to U.S. taxpayers and the Company of awards of Restricted Share Units under the Proposed RSU Plan. Tax consequences for any particular individual may be different.

As a deferred compensation plan, a participant generally will not have taxable income at the time of an award of Restricted Shares Units. Instead, at the time of receipt of the deferred compensation plan benefits, he or she will recognize as ordinary income an amount equal to (i) the fair market value of the Common Shares received, if that payment distribution method is elected, or (ii) the cash received, if that payment method is elected. The Company generally will be entitled to a tax deduction in connection with an award of Restricted Shares Units under the Proposed RSU Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income, provided that the Company satisfies applicable withholding requirements and the deduction is not otherwise disallowed under the Code.

~~Reasons for Shareholder Approval; Board Recommendation~~

Under the Nasdaq Marketplace Rules, the Company is required to receive shareholder approval of any new equity compensation plan. The Proposed RSU Plan constitutes a new equity compensation plan. For this reason, the Company’s shareholders are being asked to approve the Proposed RSU Plan.

The favorable vote of a majority of the outstanding Common Shares voted on this Proposal is required to approve the material terms of the Outside Directors Restricted Share Unit Plan. Abstentions on this Proposal will have the same effect as not voting or expressing a preference, as the case may be. Abstentions and broker non-votes will not have a positive or negative effect on the outcome of this Proposal.

~~THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE MATERIAL TERMS OF THE OUTSIDE DIRECTORS RESTRICTED SHARE UNIT PLAN.~~

~~PROPOSAL FIVE: APPROVAL OF MATERIAL TERMS OF THE ONE TEAM INCENTIVE PLAN~~

~~Proposal~~

At the Annual Meeting, shareholders will be asked to consider and vote upon a proposal to approve the material terms of the State Auto Financial Corporation One Team Incentive Plan or “OTIP.” The Board of Directors approved the terms of the One Team Incentive Plan on March 4, 2016.

~~Reason for One Team Incentive Plan~~

The One Team Incentive Plan provides for an annual cash incentive bonus opportunity for all of the Company’s regular, active employees based upon the achievement of stated corporate performance goals in relation to the Company’s achievement of its annual plan goals. The Board of Directors implemented the OTIP to advance the interests of the Company and its shareholders by providing employees with an incentive bonus for achieving the strategic objectives of the Company. The One Team Incentive Plan is also intended, in part, to provide for “performance-based compensation” which will not be subject to the deduction limitation rules under Section 162(m) of the Code as applicable to “covered employees” of the Company.

The One Team Incentive Plan has been designed, in part, to take into account certain limits on the ability of a public corporation to claim tax deductions for compensation paid to certain highly compensated executives. Section 162(m) of the Code generally denies a corporate tax deduction for annual compensation exceeding $1.0 million paid to any person who is considered a “covered employee” under Section 162(m) of the Code. However, qualified performance-based compensation paid to covered employees is exempt from this limitation. Covered employees are executive officers and other persons listed in a public corporation’s summary compensation table. These executive officers and other persons are also known as “NEOs.” For the Company, its covered employees, or NEOs, are those persons listed in the Summary Compensation Table found on page 65 of this Proxy Statement. Qualified performance-based compensation is compensation paid based solely upon the achievement of objective performance goals, the materials terms of which are approved by the shareholders of the paying corporation.

~~Description of One Team Incentive Plan~~

The following discussion describes the important aspects of the One Team Incentive Plan. This discussion is intended to be a summary of the material provisions of the OTIP. Because it is a summary, some details that may be important to you are not included. For this reason, the entire One Team Incentive Plan is attached as Exhibit D to this Proxy Statement. You are encouraged to read the OTIP in its entirety.

~~Purpose~~

The purposes of the One Team Incentive Plan are (a) to further our long-term profitable growth and earnings by providing incentives and rewards to all employees who achieve the stated performance goals and strategic objectives which contribute significantly to the achievement of that profitable growth; (b) to focus employees on the key measures that align and drive superior performance and value over the long term; and (c) to assist us in recruiting and maintaining highly talented associates by providing competitive total rewards.

~~Administration~~

The Compensation Committee of the Company’s Board of Directors (the “Committee”) will administer the One Team Incentive Plan. Among other things, the Committee will approve the performance goals, bonus amounts and other terms and conditions of awards under the OTIP (subject to the terms of the OTIP). The Committee will also have the authority to establish and amend rules and administrative processes relating to the OTIP and to make all other determinations necessary and advisable for the administration of the OTIP. The Committee may, within its discretion, designate other individuals to assist in the administration of the OTIP;

provided that such individuals may not exercise any discretion regarding awards for covered employees. All decisions made by the Committee pursuant to the OTIP will be made in the Committee’s sole discretion and will be final and binding. Notwithstanding any other provision of the OTIP, the Committee shall not have any discretion or authority to make changes to any award that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code to the extent that the exercise of such discretion or authority would cause such award not to so qualify.

~~Eligibility~~

In general, every regular, active employee of the Company is eligible to be granted awards under the One Team Incentive Plan. Only the Committee may determine the eligibility of employees who are covered employees. An employee who becomes eligible after the beginning of a performance period may participate on a pro-rated basis for that performance period, as determined by the Committee in its sole discretion.

~~Terms of Awards~~

Awards under the One Team Incentive Plan will consist of cash amounts payable upon the achievement of specified objective performance goals (a “performance bonus award”) during a specified performance period. It is anticipated that most performance periods will begin on the first day of the Company’s fiscal year and end on the last day of that year. At the beginning of a performance period for a given award, the Committee will approve the performance goal(s) and the amount of the award, each as recommended by executive management, which will be earned if the performance goal(s) are achieved in full, together with any lesser amount that will be earned if the performance goal(s) are only partially achieved. After the end of the performance period, the Committee will certify the extent to which the performance goals are achieved and determine the amount of the award that is payable; provided, however, that the Committee will have the discretion to determine that the actual amount paid with respect to an award will be less than (but not greater than) the amount earned with respect to covered employees.

The One Team Incentive Plan also provides for cash bonus awards that can be issued by members of senior leadership to associates who achieve exemplary performance results. A cash bonus award is a “spot” award of cash or a cash equivalency, such as a gift card, paid on an immediate basis. Cash bonus awards are not intended to qualify as performance-based compensation as defined in Section 162(m) of the Code. In addition, covered employees are not eligible for cash bonus awards.

~~Performance Goals; Maximum Award~~

The performance goals for awards will be based upon the achievement of one or more of the following performance measures of the Company (and/or one or more business segments or sub-groups of the Company) over the performance period: (i) combined ratio; (ii) premium growth; and (iii) policies in force.

~~The maximum award that may be paid to any participant for any performance period is $3 million.~~

~~Termination of Employment~~

A participant whose employment terminates during the performance period because of death or disability, will receive a bonus equal to 100% of the participant’s target bonus, pro-rated based upon the length of time that the participant was employed by the Company during the performance period, unless the Committee determines otherwise. A participant whose employment terminates during the performance period as a result of retirement (as defined in the OTIP) will receive a bonus based on the achievement of the performance criteria during the performance period, pro-rated based upon the length of time the participant was employed by the Company during the performance period, unless the Committee determines otherwise. Except for terminations due to retirement, death or disability, only participants who are, as of the date an award is paid, either current, active employees or current employees on a leave of absence authorized by the Company shall be entitled to any award

~~earned for the performance period, unless otherwise determined by the Committee.~~

~~Amendment and Termination~~

The One Team Incentive Plan may be amended, modified, suspended or terminated by the Committee at any time, but no such amendment, modification, suspension or termination will affect the payment of any award for a performance period that has already ended or increase the amount of any award. No new awards may be granted during any period of suspension of the One Team Incentive Plan or after its termination.

~~Reasons for Shareholder Approval; Board Recommendation~~

The Company’s shareholders are being asked to approve the material terms of the One Team Incentive Plan so that compensation paid by the Company under the One Team Incentive Plan to certain of its highly compensated executive officers qualifies as performance-based compensation under Section 162(m) of the Code, which will then permit the Company to claim tax deductions for the payment of this compensation without the limitations imposed by Section 162(m) of the Code.

The favorable vote of a majority of the outstanding Common Shares voted on this Proposal at the Annual Meeting is required to approve the material terms of the One Team Incentive Plan. Abstentions on this Proposal have the same effect as not voting or expressing a preference, as the case may be. Abstentions and broker non-votes will not have a positive or negative effect on the outcome of this Proposal.

~~THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE MATERIAL TERMS OF THE ONE TEAM INCENTIVE PLAN.~~

~~PROPOSAL SIX:~~ RATIFICATION OF SELECTION OF

ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

A Board composed entirely of independent directors as determined under the Nasdaq listing rules, other than the ~~Company’s~~Company's chief executive officer;

A Board composed of a majority of directors independent from State Auto Mutual;

An Independent Committee composed entirely of directors independent from State Auto Mutual and as determined under the Nasdaq listing rules;

Audit and Compensation Committees composed entirely of independent directors as determined under the Nasdaq listing rules; and

Established governance structures, ~~and~~ processes and ethics guidelines.

"combined ratio" is a measure of the State Auto ~~Group; (ii) are among~~Group's underwriting profitability and is equal to the ~~most important drivers~~sum of ~~a long-term increase in~~(i) the ~~price of our Common Shares;~~State Auto Group's loss and ~~(iii) reward our NEOs for performance or results that are within their control or subject to their influence.~~

•

loss adjustment expense ratio (i.e.“LBP Combined Ratio” or “combined ratio” is a measure of the State Auto Group’s underwriting profitability and is equal to the sum of (i) the State Auto Group’s loss and loss adjustment expense ratio (~~i.e.~~, losses and loss expenses ~~as a percentage of net earned premium) and (ii) the State Auto Group’s expense ratio (~~~~i.e.~~, underwriting expenses and miscellaneous expenses offset by miscellaneous income), in each case based upon statutory accounting principles. The LBP Combined Ratio includes positive or negative catastrophe development from the prior year. LBP Combined Ratio is expressed as a percentage, and a LBP Combined Ratio of less than 100% indicates underwriting profitability. “Adjusted LBP Combined Ratio” is the LBP Combined Ratio excluding, for 2015, $15.3 million in severance and retirement expenses.

“Return on equity” is the percentage determined by dividing the Company’s net income by the Company’s average shareholders’ equity, based upon generally accepted accounting principles. “Adjusted Return on Equity” is the return on equity excluding, for 2015, $15.3 million in severance and retirement expenses.

~~“Non-Catastrophe Loss Ratio” is a measure for all lines of business of the State Auto Group of the total losses and loss adjustment expenses (“LAE”) incurred~~ as a percentage of ~~the~~ net earned ~~premium. LAE~~

premium) and (ii) the State Auto Group's expense ratio (i.e., underwriting expenses and miscellaneous expenses offset by miscellaneous income as a percentage of net written premium), in each case based upon statutory accounting principles. Combined ratio includes positive or negative reserve development from prior years. Combined ratio is expressed as a percentage, and a combined ratio of less than 100% indicates underwriting profitability.

are comprised of the allocated loss adjustment expenses (“ALAE”), or the costs that can be related to a specific claim, for all of the State Auto Group’s lines of business and the unallocated loss adjustment expenses (“ULAE”), or the costs incurred in the process of settling claims that cannot be attributed to a specific claim, in each case based upon statutory accounting principles.

"net written premium growth" is a measure of the growth in the State Auto Group's total direct written premium volume from existing sources and merger and acquisitions.

The ~~following table shows~~target performance goals applicable to the combined ratio and net written premium growth performance measures for the 2017 OTIP performance bonus awards were 96% and 3%, respectively. The performance matrix for the 2017 OTIP performance bonus awards provides no bonus will be payable if we achieve a combined ratio of more than 102% or net written premium growth of less than -5%. If we achieve the threshold ~~target and~~combined ratio required to earn a maximum ~~payout percentages and~~bonus (i.e., 96%), the performance matrix requires that we also achieve net written premium growth of no less than 19% to earn the maximum bonus. If we achieve the threshold net written premium growth required to earn a maximum bonus (i.e., 12%), the performance matrix requires that we also achieve a combined ratio of no more than 90% to earn the maximum bonus.

Target performance represents the Compensation Committee's anticipated median levels of performance in our industry during 2017. Given our recent performance, the target performance goals ~~established for each performance measure applicable to our NEOs’ 2015 Company performance LBP bonus opportunities:~~

   Adjusted LBP Combined
Ratio    Adjusted Return on
Equity    Non-Catastrophe Loss
Ratio
   Payout
as (%)
of Target    Performance
Goal
(%)    Payout
as (%)
of Target    Performance
Goal
(%)    Payout
as (%)
of Target    Performance
Goal
(%)
Threshold
   10       102.0       10       4.8       10       63.0 ��
Target
   100       97.5       100       8.0       100       57.3
Maximum
   200       94.0       200       11.0       200       54.0

Target performance is equal to the goal for the financial measure set forth in the 2015 business plan presented by management and approved by the Board in March 2015 following review and discussion of the business plan with the Board of Directors of State Auto Mutual. The Committee believes that target performance is reasonable to attain but includesinclude an element of ~~“stretch”~~"stretch" performance. ~~Maximum~~The performance goals which would result in a maximum bonus if achieved represent exceptional levels of performance the Compensation Committee believes are ~~intended to reflect superior performance and, although~~ possible but may be extremely difficult to attain. ~~Threshold~~The performance ~~which~~goals would result in a minimum bonus if achieved represent the ~~Committee views as a minimally acceptable level~~lowest levels of performance is the ~~lowest level of performance meriting~~Compensation Committee believes would merit any form of financial reward. The Compensation Committee recognizes ~~that~~ target performance may not be attained and believes ~~that~~ providing for payments to be made for ~~threshold performance~~attaining minimum levels of profitability mitigates the incentive for NEOs and others to take excessive risks to achieve the target ~~level~~levels of performance.

The Compensation Committee retains the power to reduce, but not increase, the ~~amount of any Company~~amounts payable to the NEOs pursuant to OTIP performance bonus ~~payable to an NEO subject to Section 162(m) of~~awards. The Compensation Committee can also award discretionary bonuses under the ~~Code.~~OTIP. (See “—below "Tax Deductibility of Executive ~~Compensation” on page 63~~Compensation"). In 2017, we achieved a combined ratio of ~~this Proxy Statement.)~~

~~The following table shows (i) the~~107.6% and net written premium growth of 1.9%. As a result ~~achieved for each Company~~of our performance, measure applicable to our NEOs’ 2015 Company performance LBP bonus opportunities, (ii) the percentage payout for that result relative to the target payout for that performance measure, (iii) the weight of each such performance measure within the Company performance component of LBP and (iv) the value of the actual payout for the result achieved as a percentage of the NEO’s target bonus for the Company performance component of the LBP. The Committee assigned each of the performance measures an equal weight to balance profitability, shareholder return and growth.

Performance Measure
   2015
Result    % of Target
Payout
for Result    Weight    Payout Value
(% of Target)
Adjusted LBP Combined Ratio
   101.3       24.00       .3333       8.00
Adjusted Return on Equity
   6.5       57.14       .3333       19.05
Non-Catastrophe Loss Ratio
   64.5       0       .3333       0

~~LBP Bonus—2015 Individual Performance Component~~

~~The following table shows the 2015 threshold, target and maximum payouts, both as a percentage of salary and as a dollar amount, for each~~none of the NEOs ~~assuming attainment of each respective level of the individual performance goals.~~

Named Executive Officer
   Individual Performance
Bonus Threshold    Individual Performance
Bonus Target    Individual Performance
Bonus Maximum
   % of
Salary    Dollar
Amount    % of
Salary    Dollar
Amount    % of
Salary    Dollar
Amount
Michael E. LaRocco
   2.5       21,250       25       212,500       50       425,000
Steven E. English
   2.625       12,206       26.25       122,063       52.5       244,125
Jessica E. Clark
   2.625       11,550       26.25       115,500       52.5       231,000
Kim B. Garland(1)
         18.75       82,500
Clyde H. Fitch
   2.625       9,713       26.25       97,125       52.5       194,250
Robert P. Restrepo, Jr.
   2.0       17,047       20.0       170,465       40.0       340,931
James A. Yano
   1.925       7,142       19.25       71,418       38.5       142,835
Stephen P. Hunckler
   1.925       6,256       19.25       62,563       38.5       125,125

~~(1)~~

~~Mr. Garland’s individual performance bonus was paid at target in accordance with the terms of his hiring arrangement.~~

~~The following table shows (i) the amount~~ earned by each NEO for the individual performance component of the LBP for 2015 and (ii) the value of the amount earned as a percentage of the NEO’s 2015 target bonus for the individual performance component of the LBP:

Named Executive Officer
   2015
Individual
Performance
LBP Bonus($)    Payout Value
(% of Target)
Michael E. LaRocco(1)
   202,300       140
Steven E. English
   140,372       115
Jessica E. Clark
   173,250       150
Kim B. Garland(2)
   82,500       100
Clyde H. Fitch
   87,413       90
Robert P. Restrepo, Jr.
   213,081       125
James A. Yano(1)
   49,993       100
Stephen P. Hunckler
   62,563       100

~~(1)~~

~~Messrs. LaRocco’s and Yano’s respective individual performance bonuses were prorated to reflect the portions of the year during which they were employed by the Company.~~

~~(2)~~

~~Mr. Garland’s individual performance bonus was paid at target in accordance with the terms of his hiring arrangement.~~

~~For 2015, the Committee awarded Mr. LaRocco~~ an ~~individual~~annual performance bonus ~~for the following accomplishments from his start date through the end of the year:~~

~~acting quickly to bring a greater sense of urgency to building a culture of solid business achievement;~~

~~establishing a senior team of high quality insurance professionals who are aligned and focused on a simple objective—profitable growth;~~

~~accelerating the Company’s focus on technology improvements and improving our customer/consumer experience; and~~

~~demonstrating passionate leadership and communicating openly and candidly to all stakeholders.~~

~~Mr. LaRocco recommended, and the Committee approved, individual performance bonuses for the other NEOs based primarily on the following accomplishments during 2015:~~

Mr. English met his goals for the year. He led our effort to transition to a more transparent and detailed planning and reporting process. Mr. English worked effectively with regulators, rating agencies and analysts during this transition process. Mr. English and his team also led an expense review that resulted in significant and ongoing savings for the Company. We were also able to continue to reduce our reinsurance costs while maintaining appropriate levels of capital protection. Mr. English worked effectively with regulators, rating agencies and analysts during this transition process.

Ms. Clark somewhat exceeded her goals for the year. Our Specialty division, including workers compensation, achieved profitable growth for the year, despite a lack of pricing discipline in the industry that we were able to avoid. In addition, Ms. Clark took on the additional responsibility for our commercial lines of business in the second half of the year. In that short period of time, Ms. Clark and her team identified gaps and developed plans to correct those gaps.

Mr. Garland joined the company in the middle of the year and, accordingly, his individual performance bonus was paid at target in accordance with the terms of his hiring arrangement. After joining the Company, Mr. Garland led an effort to understand why the results of our auto business were failing to meet expectations. Mr. Garland and his team also identified the causes of the results of our auto business and developed a plan to correct those issues.

Mr. Fitch met his goals for the year. While we continued to experience a loss in customers, the rate of decline dropped consistently throughout the year. In addition, in the second half of the year, our new business across most product lines consistently increased versus prior months and prior year. Mr. Fitch was thorough and professional as he helped with the transition of his responsibilities in preparation for his pending retirement.

~~2016 Annual Performance Bonuses~~

~~On March 4, 2016, the Board of Directors approved the terms of the State Auto Financial Corporation One Team Incentive Plan or “OTIP.” If approved by shareholders at the Annual Meeting,~~under the OTIP ~~will replace the LBP as the Company annual cash incentive plan. The OTIP provides~~ for an annual cash incentive bonus opportunity for all of the Company’s regular, active employees based upon the achievement of stated corporate performance goals in relation to the Company’s achievement of its annual plan goals. The Board of Directors implemented the OTIP to advance the interests of the Company and its shareholders by providing employees with an incentive bonus for achieving the strategic objectives of the Company. The purposes of the OTIP are: (a) to further our long-term profitable growth and earnings by providing incentives and rewards to all employees who achieve the stated performance goals and strategic objectives which contribute significantly to the achievement of profitable growth; (b) to focus employees on the key measures that align and drive superior performance and value over the long term; and (c) to assist us in recruiting and maintaining highly talented associates by providing competitive total rewards. For more information regarding the OTIP, see Proposal Five (approval of adoption of the Company’s One Team Incentive Plan).

2017.

Long-Term Equity and Cash Incentive Compensation

~~The~~

2017 Long-Term Equity and Cash Incentive Compensation Awards

In 2017, the Compensation Committee ~~awards~~awarded long-term incentive compensation to our NEOs in the form of ~~stock options and restricted common shares under the 2009 Equity Plan~~performance units and PAUs under the ~~LTIP. The Committee targets these long-term incentive compensation awards to~~2017 Long-Term Incentive Plan. For 2017, the ~~NEOs at the median of long-term incentive compensation awards in our competitive market. For 2015 and 2016, the~~Compensation Committee provided ~~20%~~50% of each ~~NEO’s~~NEO's total long-term incentive compensation opportunity in the form of ~~stock options, 65%~~target performance units and 50% in the form of target ~~PAUs and 15% in the form of restricted common shares, except for Mr. Garland whose long-term incentive compensation award was independently negotiated and determined in connection with his hiring.~~PAUs. The Compensation Committee established this allocation to effectively manage share usage and control the dilution of the interests of our ~~shareholders.~~

~~Stock Options~~

~~Basis for Stock Option Awards~~

We believe that issuing stock options to our executives (i) encourages business behaviors that drive appreciation in the price of our Common Shares over the long-term because the stock options we award have no value unless the price of the underlying Common Shares increases from the date of grant and (ii) helps align the interests of our executives who hold stock options,shareholders, including our ~~NEOs, with the interests~~largest shareholder State Auto Mutual.

2017 Performance Award Unit Awards

The Compensation Committee annually awards a target number of our shareholders. Stock options also represent a significant element of the compensation paid to executives at many peer companies that we compete with for executive talent and build appropriate levels of Common Share ownership among our executive team. The Company has not and will not reprice or replace underwater stock options without first obtaining shareholder approval.

~~Stock Option Award Process~~

~~In 2015 and 2016, the Committee granted stock options~~PAUs to our NEOs, representing the number of Common Shares set forth in the table below. Each grant of options consisted of non-qualified stock options with a ten-year exercise period, a three-year graduated vesting schedule (~~i.e.~~~~, one third of the total options granted vests on each anniversary of the grant date for three years) and an option exercise price equal to the closing price of our Common Shares on the grant date.~~

Named Executive Officer
   2015
Stock
Option
Awards
(# of
Common
Shares)    Exercise
Price ($)    2016
Stock
Option
Awards
(# of
Common
Shares)    Exercise
Price ($)
Michael E. LaRocco
   33,380       23.01       32,494       21.54
Steven E. English
   10,435       22.72       10,164       21.54
Jessica E. Clark
   9,257       22.72       9,054       21.54
Kim B. Garland
   9,257       22.60       9,054       21.54
Clyde H. Fitch(1)
   6,747       22.72       —       —
Robert P. Restrepo, Jr.(1)
   33,472       22.72       —       —
James A. Yano(1)
   6,765       22.72       —       —
Stephen P. Hunckler(1)
   5,926       22.72       —       —

~~(1)~~

Messrs Fitch, Restrepo, Yano and Hunckler did not receive a stock option award for 2016 because their respective employment with the Company and the State Auto Group terminated prior to the grant date.

~~The Committee grants stock options at the same time other annual awards are determined based on the CEO’s recommendations to the Committee,~~ which the CEO determines using competitive market data. Although the Committee retains the discretion to set the terms of any options granted, including the number of options granted to any optionee, the Committee did not exercise such discretion for the 2015 or 2016 stock option grants and instead implemented the CEO’s recommendations. The Committee also granted stock options to Messrs. LaRocco and Garland in connection with their hires, which occurred after the date on which the Committee granted stock options to the other NEOs.

The Committee determined the number of stock options granted by multiplying (i) the average daily closing price of our Common Shares for the prior fiscal year (ii) by a “Black-Scholes” factor. The “Black-Scholes” factor is a financial model used to determine the current value of stock options and was provided to the Company by Pay Governance, LLC. Pay Governance, LLC advised the Committee that this method, which is consistent with the practice the Committee used in prior years, provides stability in option grants, is similar to the practices of other companies and prevents significant fluctuation in the number of options granted that may be caused by short-term swings in stock price associated with focusing on the closing stock price for a particular day.

~~Restricted Common Shares~~

~~Basis for Restricted Common Share Awards~~

We believe that issuing restricted common shares to our executives (i) reduces our usage of Common Shares under our equity compensation plans, (ii) aligns the interests of the NEOs with the interests of our shareholders and (iii) encourages retention. Restricted stock also represents a significant element of the compensation paid to executives at many peer companies that we compete with for executive talent and builds appropriate levels of Common Share ownership among our executive team.

~~Restricted Common Share Award Process~~

In 2015 and 2016, the Committee granted restricted common shares to our NEOs representing the number of Common Shares set forth in the table below. These restricted common shares vest on the third anniversary of the grant date, which enhances their encouragement of retention.

Named Executive Officer
   2015 Restricted
Common Share Awards
(# of Common Shares)    2016 Restricted
Common Share Awards
(# of Common Shares)
Michael E. LaRocco
   7,902       7,461
Steven E. English
   2,471       2,334
Jessica E. Clark
   2,192       2,079
Kim B. Garland
   4,406       2,079
Clyde H. Fitch(1)
   1,597       —
Robert P. Restrepo, Jr.(1)
   7,924       —
James A. Yano(1)
   1,602       —
Stephen P. Hunckler(1)
   1,403       —

~~(1)~~

Messrs Fitch, Restrepo, Yano and Hunckler did not receive a restricted stock award for 2016 because their respective employment with the Company and the State Auto Group terminated prior to the grant date.

The Committee grants restricted common shares at the same time other annual awards are determined based on the CEO’s recommendations to the Committee, which the CEO determines using competitive market data. Although the Committee retains the discretion to set the terms of any restricted common shares granted, including the number of restricted common shares granted, the Committee did not exercise such discretion for the 2015 or 2016 restricted common share grants and instead implemented the CEO’s recommendations. The Committee also granted restricted common shares to Messrs. LaRocco and Garland in connection with their hires, which occurred after the date on which the Committee granted restricted common shares to the other NEOs.

The Committee determined the number of restricted common shares granted by dividing the portion of the NEO’s target long-term incentive opportunity awarded in restricted common shares by the sum of (i) the average daily trading price of our Common Shares during the immediately preceding year and (ii) the estimated value of three years of anticipated cash dividends. Pay Governance, LLC advised the Committee that this method, which is consistent with the practice the Committee used in prior years, provides stability in restricted common share grants, is similar to the practices of other companies and prevents significant fluctuation in the number of restricted common shares granted that may be caused by short-term swings in stock price associated with focusing on the closing stock price for a particular day.

~~Performance Award Units~~

~~Basis for PAU Awards~~

PAUs reward participants for achieving sustained financial results that we believe should increase the price of our Common Shares over the long term. The Committee also believes that PAUs balance the focus of our

annual operating plan by rewarding participants for our financial results relative to the results of other property and casualty insurers, which is consistent with our executive compensation program objective to provide compensation relative to our performance as compared to the performance of our peers. In addition, PAUs minimize shareholder dilution as they are paid in cash.

~~PAU Award Process~~

~~PAUs are awarded annually by the Committee to the NEOs and~~ are paid in cash at the end of a three-year performance period. The ~~amount payable~~Compensation Committee restructured the PAU awards made to our NEOs in 2017 compared to the PAU awards made to the NEOs in previous years to: (i) more effectively incentivize our NEOs by providing significant upside potential to our NEOs if they deliver exceptional results; (ii) better focus our NEOs on achieving profitable growth, which the Compensation Committee believes to represent the most critical result for delivering long-term success and shareholder value; and (iii) be more consistent with the structure of the OTIP performance bonus awards and the performance unit awards, which the Compensation Committee believes will solidify our One Team structure. PAUs continue to also serve the purpose of limiting shareholder dilution as they are paid in cash.

The PAUs awarded to the NEOs in 2017 will vest and be earned, if at all, after the completion of the performance period, which is the three-year period from January 1, 2017, through December 31, 2019, based on net written premium growth and combined ratio during the performance period. The Compensation Committee selected these performance measures as representative of the most critical results for delivering long-term success and shareholder value and to align the performance measures applicable to the 2017 PAU awards with the performance measures applicable to the 2017 OTIP performance bonus awards and the 2017 performance unit awards. The payout structure established by the Compensation Committee for the 2017 PAU awards provides the actual number of PAUs that will vest and be earned will range from 0% to 500% of the target number of PAUs awarded based on the extent to which we achieve the performance goals for the performance measures as set forth in a performance matrix established by the Compensation Committee. Each vested and earned PAU will be settled in cash for $1.00. The same performance goals apply to each NEO. The Compensation Committee believes this payout structure more effectively incentivizes our NEOs than the structure applicable to the PAUs awarded in previous years because of the significant upside potential it provides to our NEOs if they deliver sustained exceptional results during the performance period.

The performance goals which would result in the vesting of the target number of PAUs if achieved represent the Compensation Committee's anticipated median levels of performance in our industry during the performance period. Given our recent performance, the target performance goals include an element of "stretch" performance. The performance goals would result in the vesting of the maximum number of PAUs if achieved represent exceptional levels of performance the Compensation Committee believes are possible but may be extremely difficult to attain. The performance goals would result in the vesting of the minimum number of PAUs if achieved represent the lowest levels of performance the Compensation Committee believes would merit any form of financial reward. The Compensation Committee recognizes target performance may not be attained and believes providing for payments to be made for attaining minimum levels of profitability mitigates the incentive for NEOs and others to take excessive risks to achieve the target levels of performance.

Additionally, the NEO must remain employed by us through the end of the performance period ~~is determined by multiplying~~for the ~~number~~PAUs to vest and be earned, except in the case of ~~PAUs by~~termination due to death, disability, retirement or through a reduction in force. In the ~~“value”~~event of the ~~PAU at~~NEO's termination due to death or disability before the end of the performance ~~period.~~period, the target number of PAUs ~~are granted with~~will vest and be earned, prorated to the date of death or disability. If the NEO retires or is terminated through a target value of $1.00, although the final value of each PAU can range from $0.00 to $2.00 depending on our performance. The final value of a PAU depends on the State Auto Group’s performance relative to a peer group of other property and casualty insurers during the performance period (the “LTIP Peer Group”). The peer-comparison approach reduces the subjectivity involvedreduction in ~~setting performance goals for a three-year period.~~

PAUs are valued based on the State Auto Group’s achievement of performance goals selected by the Committee compared against the results of the LTIP Peer Group during the three-year period. Each goal has threshold, target and maximum levels of performance. The target level for each performance measure is achieved if the State Auto Group’s performance equals the median level of performance of the companies in the LTIP Peer Group for such performance measure. The maximum level for each performance measure is achieved if the State Auto Group performs at or above the 80^th ~~percentile of the LTIP Peer Group. The threshold level of performance is achieved if the State Auto Group performs at the 20~~^th ~~percentile. No amount is payable for a performance measure if the State Auto Group performs below the 20~~^th ~~percentile.~~

~~For example, if at~~force before the end of the ~~2015–2017~~ performance period, ~~there are 60 insurance companies in the LTIP Peer Group, and if such companies are ranked 1 – 60 (best to worst) in average statutory combined ratio, each NEO will receive~~ a ~~target award if the State Auto Group’s three-year average statutory combined ratio is between the 30/31~~^st ~~ranked companies. A maximum award will be received if our three-year average statutory combined ratio equals or exceeds the 12~~^th ~~ranked company (equal to the group’s 80~~^th ~~percentile). Finally, a threshold award will be received if our three-year statutory combined ratio equals the 48~~^th ~~ranked company (or the group’s 20~~^th ~~percentile). The same comparison is performed for the other performance measures, with the results equally weighted to determine the final PAU value awarded to each NEO.~~

~~PAU Awards—2013-2015 Performance Period~~

~~PAUs awarded to each~~prorated portion of the ~~NEOs other than Ms. Clark for~~PAUs which would have vested (based on actual performance as of the ~~2013-2015~~end of the performance ~~period are valued~~period) will vest and be earned. The prorated amount will be based on the ~~achievement~~number of ~~three equally-weighted~~days the NEO remained employed during the performance measures: (i) direct statutory combined ratio for the State Auto Group; (ii) the State Auto Group’s direct written premium growth; and (iii) the State Auto Group’s surplus growth. PAUs awarded to Ms. Clark for the 2013-2015 performance period are valued based on the achievement of three equally-weighted performance measures: (i) direct statutory combined ratio for our Specialty Group; (ii) direct written premium growth for our Specialty Group; and (iii) the State Auto Group’s surplus growth.

~~We have not determined the value~~period. Any portion of the PAUs ~~awarded for the 2013-2015~~not vested due to inadequate Company performance ~~period because the final LTIP Peer Group data for the 2013-2015 performance period has not been released as~~or termination of the date of this Proxy Statement. However, based on preliminary performance information for the 2013-2015 performance period, we currently expect that the PAUs awarded for the 2013-2015 performance periodemployment will be valued significantly below target for all of the NEOs, except for Ms. Clark. We currently expect that the PAUs awarded to Ms. Clark for the 2013-2015 performance period will be valued significantly above target. We will determine the value of the PAUs awarded to our NEOs for the 2013-2015 performance period (and pay such amount to our NEOs) in May 2016 after the final LTIP Peer Group data for the 2013-2015 performance period is released.

~~PAU Awards—2015~~

PAUs awarded to each of the NEOs (except for Ms. Clark) for the 2015-2017 performance period are valued based on the achievement of target results for three equally-weighted performance measures: (i) statutory combined ratio for the State Auto Group; (ii) the State Auto Group’s net written premium growth (excluding the impact of the quota share reinsurance agreement entered into by the State Auto Group on December 31, 2011 relating to its homeowners book of business(the “Quota Share Agreement”)); and (iii) the State Auto Group’s surplus growth. PAUs awarded to Ms. Clark for the 2015-2017 performance period are valued based on the achievement of three equally-weighted performance measures: (i) statutory combined ratio for our Specialty Group; (ii) direct or gross premium growth for our Specialty Group; and (iii) surplus growth for the State Auto Group. The performance measures selected by the Committee focus on our ability to appropriately price and underwrite business, control expenses, develop new products and services, invest in assets that best balance risks and rewards and enter new markets. They also assess long-term profitability and the capital we need to underwrite future business. We believe sustained, high levels of performance in each of these areas should create value for our shareholders.

The LTIP Peer Group used to determine our achievement of (i) the surplus growth performance measure applicable to PAUs awarded to our NEOs in 2015 and (ii) the net written premium growth and direct, statutory combined ratio performance measures applicable to PAUs awarded to all of our NEOs in 2015 except for Ms. Clark initially consisted of 43 insurance companies included in the A.M. Best Total U.S. P&C Agency Companies Composite with net written premiums ranging from $0.5 billion to $5.0 billion. The LTIP Peer Group used to determine our achievement of the performance measures applicable to PAUs awarded to Ms. Clark in 2015 initially consisted of 48 excess and surplus lines peers with annualized gross written premiums ranging from $165 million to $750 million and 55 workers compensation peers with annualized gross written premiums ranging from $65 million to $290 million. For Ms. Clark, the results of the surplus lines group of our Specialty Group will be compared against the results of the surplus lines peers, and the results of the workers compensation group of our Specialty Group will be compared against the results of the workers compensation peers. The total performance of the Specialty Group will be determined by weighting the results of its surplus lines and workers compensation groups based on their respective gross written premium contribution.

forfeited.

For the ~~2015-2017~~2017-2019 performance period, our NEOs received PAUs in the number and with the target ~~threshold~~ and maximum values described below:

Named Executive Officer
   2015 Target
Units(#)    Target Award
Value($)(1)    Threshold Award
Value($)(1)    Maximum Award
Value($)(1)
Michael E. LaRocco
   773,500       773,500       309,400       1,547,000
Steven E. English
   241,800       241,800       96,720       483,600
Jessica E. Clark
   214,500       214,500       85,800       429,000
Kim B. Garland
   214,500       214,500       85,800       429,000
Clyde H. Fitch
   156,325       156,325       62,530       312,650
Robert P. Restrepo Jr.
   775,618       775,618       310,247       1,551,236
James A. Yano
   156,748       156,748       62,699       313,496
Stephen P. Hunckler
   137,313       137,313       54,925       274,626

~~(1)~~

~~Units have a target value equal to $1.00, a threshold value of $0.40 and a maximum value of $2.00.~~



	2017 Target Units (#)	Target Award Value ($)	Maximum Award Value ($)
Michael E. LaRocco	763,125	763,125	3,815,625
Steven E. English	196,849	196,849	984,245
Kim B. Garland	175,346	175,346	876,730
Paul M. Stachura	129,142	129,142	645,710
Gregory A. Tacchetti	131,382	131,382	656,910

2017 Performance Unit Awards

In 2017, the Compensation Committee replaced the stock option and restricted common shares awards it historically granted to our NEOs as long-term equity compensation with performance unit awards to: (i) more effectively incentivize our NEOs by providing significant upside potential to our NEOs if they deliver sustained exceptional results during the performance period; (ii) better focus our NEOs on achieving profitable growth, which the Compensation Committee believes to represent the most critical result for delivering long-term success and shareholder value; (iii) be more consistent with structure of the OTIP performance bonus awards and the PAU ~~Awards—2016~~

~~PAUs~~awards, which the Compensation Committee believes will solidify our One Team structure; and (iv) further our focus on pay-for-performance.

The performance units awarded to the NEOs in 2017 will vest and be earned, if at all, after the completion of the performance period, which is the three-year period from January 1, 2017, through December 31, 2019, based on net written premium growth and combined ratio during the performance period. The Compensation Committee selected these performance measures because it believes they represent the most critical results for delivering long-term success and shareholder value and to align the performance measures applicable to the 2017 performance unit awards with the performance measures applicable to the 2017 OTIP performance bonus awards and the 2017 PAU awards. The payout structure established by the Compensation Committee for the ~~2016-2018~~2017 performance ~~period are valued~~unit awards provides the actual number of performance units that will vest and be earned will range from 0% to 500% of the target number of performance units awarded based on the ~~achievement of three equally-weighted~~extent to which we achieve the performance ~~measures.~~goals for the performance measures as set forth in a performance matrix established by the Compensation Committee. The ~~Committee selected the~~ same performance ~~measures~~goals apply to each NEO.

The performance goals which would result in the vesting of the target number of performance units if achieved represent the Compensation Committee's anticipated median levels of performance in our industry during the performance period. Given our recent performance, the target performance goals include an element of "stretch" performance. The performance goals which would result in the vesting of the maximum number of performance units if achieved represent exceptional levels of performance the Compensation Committee believes are possible but may be extremely difficult to attain. The performance goals which would result in the vesting of the minimum number of performance units if achieved represent the lowest levels of performance the Compensation Committee believes would merit any form of financial reward. The Compensation Committee recognizes target performance may not be attained and believes providing for payments to be made for attaining minimum levels of profitability mitigates the ~~2016-2018~~incentive for NEOs and others to take excessive risks to achieve the target levels of performance.

The Company intends to settle vested performance ~~period as it did for~~units in whole common shares, but reserves the ~~2015-2017~~right to settle in cash if appropriate. The performance units have no dividend or voting rights. Additionally, the NEO must remain employed by us through the end of the performance period for the ~~reasons discussed above~~performance units to vest and be earned, except in ~~“—PAU Awards—2015.”~~ the case of termination due to death, disability, retirement or through a reduction in force. In the event of the NEO's termination due to death or disability before the end of the performance period, the target number of performance units will vest and be earned. If the NEO retires before the end of the performance period, the performance units will vest at the end of the performance period and be earned as if the NEO had remained employed with the Company during the entire performance period. In the event of the NEO's termination through a reduction in force before the end of the performance period, a prorated portion of the performance units that would have vested (based on actual performance as of the end of the performance period) will vest and be earned. The prorated amount will be based on the number of days the NEO remained employed during the performance period. Any portion of the performance units not vested due to inadequate performance or termination of employment will be forfeited.

For the ~~2016-2018~~2017-2019 performance period, our NEOs received ~~PAUs in~~ the following target number ~~and with the target, threshold and maximum values described below:~~

Named Executive Officer
   2016 Target
Units(#)    Target Award
Value($)(1)    Threshold Award
Value($)(1)    Maximum Award
Value($)(1)
Michael E. LaRocco
   796,250       796,250       318,500       1,592,500
Steven E. English
   249,054       249,054       99,622       498,108
Jessica E. Clark
   221,857       221,857       88,743       443,714
Kim B. Garland
   221,848       221,848       88,739       443,696
Clyde H. Fitch(2)
   —       —       —       —

of performance units:

~~(1)~~

		2017 Target Units ~~have a target value equal to $1.00, a threshold value of $0.40 and a maximum value of $2.00.~~ (#)
Michael E. LaRocco		28,056
Steven E. English		7,237
Kim B. Garland		6,446
Paul M. Stachura		4,747
Gregory A. Tacchetti		4,830

~~(2)~~

~~Mr. Fitch did not receive a PAU award for 2016 because his employment with the Company and the State Auto Group terminated prior to the grant date.~~

Retirement and Deferred Compensation

Retirement Plans

We maintain a defined benefit pension plan, referred to as our ~~“Retirement~~"Retirement Plan,”" to recognize the career contributions and service of our ~~employees,~~associates, assist in the retention of our ~~employees~~associates and provide our ~~employees~~associates with income continuity into retirement. We also maintain a non-qualified Supplemental Executive Retirement Plan, referred to as our ~~“SERP,”~~"SERP," to offset the impact of limitations imposed by tax laws on the amount of income or wages that can be considered in calculating benefits under traditional defined benefit pension plans, such as our Retirement Plan. ~~All of our~~Mr. English is the only current ~~NEOs are~~NEO who is eligible to participate in the Retirement Plan and ~~SERP except for Ms. Clark and Messrs. LaRocco and Garland.~~SERP. The SERP enables highly compensated officers to achieve the same percentage of salary replacement as other ~~employees~~associates upon retirement. An NEO is automatically enrolled in the SERP when his or her annual base salary exceeds the limit that can be considered in calculating benefits under the Retirement Plan. Under the Retirement Plan, an ~~employee’s~~associate's period of service has a significant impact on the amount of retirement benefits they would be eligible to receive. Under the SERP, the amount of retirement benefits ~~that~~ an ~~employee~~associate would be eligible to receive is determined solely by the ~~employee’s~~associate's actual period of service.

Defined Contribution Plan/401(k) Plan

We maintain a defined contribution plan intended to be a qualified plan under Sections 401(a) and 401(k) of the Code, ~~that~~which we refer to as our ~~“Retirement Savings Plan” or “RSP.”~~"RSP." The RSP is intended to help ensure the long-term financial stability of our ~~employees.~~associates. Participation in the RSP is available on the same terms to all of our ~~employees,~~associates, including our NEOs. Each participant can elect to contribute from 1% to 50% of his or her base salary to the ~~RSP.~~RSP, subject to the limits imposed by the Internal Revenue Service. The Company may make a discretionary matching contribution of 100% of each ~~participant’s~~participant's RSP contributions for the first 1% of base salary, plus 50% of each ~~participant’s~~participant's RSP contribution between 2% and 6% of base salary, subject to limits imposed by the Internal Revenue Service. In 2010, all of our ~~employees~~associates hired before January 1, 2010, ~~including our NEOs,~~ made an election to either (i) continue participating in the Retirement Plan and RSP or (ii) cease participating in the Retirement Plan as of June 30, 2010, in favor of participating in an expanded benefit under the RSP beginning on July 1, 2010, under which the Company annually contributes to the RSP an additional amount equal to 5% of their annual base salary until the termination of their employment with the Company. If an ~~employee~~associate elected to participate in the expanded RSP benefit, they would continue to be eligible to receive upon retirement their accrued benefit under the Retirement Plan as of June 30, 2010. See ~~“Deferred~~"Deferred Compensation Plans—Defined Contribution Plan/401(k) ~~Plan” on page 61 of this Proxy Statement~~Plan" for more information regarding the RSP.

Non-Qualified Deferred Compensation Plan/Supplemental 401(k) Plan

We maintain a non-qualified, unfunded deferred compensation plan for eligible key ~~employees,~~associates, which we refer to as our ~~“Shadow~~"Shadow Plan.”" Non-qualified plans provide highly compensated ~~employees~~associates with the same retirement savings opportunities, on a relative basis, as other ~~employees.~~associates. Participants in non-qualified plans become unsecured creditors and incur the credit risk associated with that status. ~~Employees~~Associates eligible to participate in the Shadow Plan include those who are precluded by regulatory limitations from contributing a full 6% of salary to the RSP or who may choose to defer a portion of their salary beyond the amount matched by the RSP. Each ~~employee~~associate who is eligible to participate in the Shadow Plan is credited annually with his or her allocable share of Company matching contributions on the same basis ~~that~~ contributions are matched under the RSP, provided ~~that~~ no more than 6% of any ~~employee’s~~associate's base salary is subject to being matched in the aggregate under the RSP and the Shadow Plan. See ~~“Deferred~~below "Deferred Compensation Plans—Non-Qualified Deferred Compensation Plan/Supplemental 401(k) ~~Plan” on page 62 of this Proxy Statement~~Plan" for more information regarding the Shadow Plan.

Executive Perquisites and Other Compensation

We provide our executive officers certain minimal perquisites not tied to individual or Company performance. We believe these benefits are ~~well~~ below the typical practices of companies of comparable size, are highly valued by recipients, have limited cost and are part of a competitive reward program that helps us attract and retain the best executives. ~~Mr. Garland is~~Certain NEOs are also entitled under the terms of ~~his~~their hiring ~~arrangement~~arrangements to the reimbursement of certain travel expenses, and for the gross-up of related ~~taxes, he incurs~~taxes.



Looking Forward-2018 Executive Compensation

The Compensation Committee engaged Pay Governance LLC to serve as its independent outside compensation consultant for 2018. In the course of the engagement, Pay Governance LLC reviewed our executive compensation program as a whole and each principal element of the program.

After reviewing our executive compensation program, consulting with Pay Governance LLC and receiving input from our chief executive officer and other members of management, in ~~connection~~the first quarter of 2018, the Compensation Committee established our 2018 executive compensation program, the principal elements of which are summarized below.

2018 Base Salaries of NEOs

The Compensation Committee set the 2018 base salaries of the NEOs in December 2017. The adjustments were based on: (i) an evaluation of each individual’s skills, experience, performance and strategic importance to the State Auto Group; (ii) increases in the median base salaries for individuals in similar roles at peer companies and other insurers comparable in size to the State Auto Group; and (iii) the Company's overall merit increase budget and policies.



	2017 Base Salary ($)	2018 Base Salary ($)	Increase (%)
Michael E. LaRocco	925,000	1,040,000	12.4
Steven E. English	492,121	516,727	5.0
Kim B. Garland	467,588	495,643	6.0
Paul M. Stachura	397,359	440,000	10.7
Gregory A. Tacchetti	404,250	450,000	11.3

2018 OTIP Performance Bonus Awards

For 2018, each NEO is eligible to receive a cash performance bonus payable based upon the achievement of specified objective performance goals during 2018. The Compensation Committee selected combined ratio and net written premium growth as the performance measures for the OTIP performance bonus awards for each of the NEOs in 2018. The actual performance bonus payable to each NEO may be increased by up to 300% (from the target bonus) if we achieve the maximum performance levels for both of the performance measures and be decreased to zero if we fail to meet the minimum performance levels for the net written premium growth and/or combined ratio.

The following table shows the target and maximum amounts of the 2018 OTIP performance bonus awards, both as a percentage of the NEO's annual base salary and as a dollar amount, for each of the NEOs based on the potential achievement of the applicable performance goals.



	Target			Maximum
	% of Salary	Dollar Amount		% of Salary	Dollar Amount
Michael E. LaRocco	120	$	1,248,000	360	$	3,744,000
Steven E. English	75	$	387,545	225	$	1,162,636
Kim B. Garland	75	$	371,733	225	$	1,115,198
Paul M. Stachura	65	$	286,000	195	$	858,000
Gregory A. Tacchetti	65	$	292,500	195	$	877,500

2018 Performance Unit Awards

In March 2018, the Compensation Committee granted to each NEO a performance unit award under our 2017 Long-Term Incentive Plan. Under these performance unit awards, each NEO was granted the following target number of performance units:



		2018 Performance Unit Awards (Target # of Performance Units)
Michael E. LaRocco		33,851
Steven E. English		7,475
Kim B. Garland		6,722
Paul M. Stachura		5,171
Gregory A. Tacchetti		5,289

The performance units will vest and be earned, if at all, after the completion of the performance period, which is the three-year period from January 1, 2018, through December 31, 2020, based on net written premium growth and combined ratio during the performance period. The payout structure established by the Compensation Committee for the 2018 performance unit awards provides the actual number of performance units that will vest and be earned may increase to an amount equal to 500% of the target number of performance units awarded if we achieve the maximum performance goals for both of the performance measures and decrease to zero if we fail to meet the minimum performance levels for both of the performance measures. The same minimum, target and maximum performance levels apply to each NEO. The Company intends to settle vested performance units in whole common shares, but reserves the right to settle in cash if appropriate. The performance units have no dividend or voting rights.

The NEO must remain employed by us through the end of the performance period for the performance units to vest and be earned, except in the case of termination due to death, disability, retirement or through a reduction in force. In the event of the NEO's termination due to death or disability before the end of the performance period, the target number of performance units will vest and be earned. If the NEO retires before the end of the performance period, the performance units will vest at the end of the performance period and be earned as if the NEO had remained employed with the Company during the entire performance period. In the event of the NEO's termination through a reduction in force before the end of the performance period, a prorated portion of the performance units that would have vested (based on our actual performance as of the end of the performance period) will vest and be earned. The prorated amount will be based on the number of days the NEO remained employed during the performance period. Any portion of the performance units not vested due to inadequate performance or termination of employment will be forfeited.

2018 PAU Awards

In March 2018, the Compensation Committee granted to each NEO a PAU award under our 2017 Long-Term Incentive Plan. Under these PAU awards, each NEO was granted the following target number of PAUs:



		2018 PAU Awards (Target # of PAUs)
Michael E. LaRocco		936,000
Steven E. English		206,691
Kim B. Garland		185,866
Paul M. Stachura		143,000
Gregory A. Tacchetti		146,250

The PAUs will vest and be earned, if at all, after the completion of the performance period, which is the three-year period from January 1, 2018, through December 31, 2020, based on net written premium growth and combined ratio during the performance period. The payout structure established by the Compensation Committee for the 2018 PAU awards provides the actual number of PAUs that will vest and be earned may increase to an amount equal to 500% of the target number of PAUs awarded if we achieve the maximum performance goals for both of the performance measures and decrease to zero if we fail to meet the minimum performance levels for both of the performance measures. The same minimum, target and maximum performance levels apply to each NEO. Each vested and earned PAU will be settled in cash for $1.00.

The NEO must remain employed by us through the end of the performance period for the PAUs to vest and be earned, except in the case of termination due to death, disability, retirement or through a reduction in force. In the event of the NEO's termination due to death or disability before the end of the performance period, the target number of PAUs will vest and be earned, prorated to the date of death or disability. If the NEO retires or is terminated through a reduction in force before the end of the performance

period, a prorated portion of the PAUs which would have vested (based on our actual performance as of the end of the performance period) will vest and be earned. The prorated amount will be based on the number of days the NEO remained employed during the performance period. Any portion of the PAUs not vested due to inadequate Company performance or termination of employment will be forfeited.

2018 Restricted Common Share Awards

In March 2018, the Compensation Committee granted a retention award consisting of 10,000 time-based restricted common shares and 10,000 performance-based restricted common shares under our 2017 Long-Term Incentive Plan to each of Messrs. English, Garland, Stachura and Tacchetti. The time-based restricted common shares will vest equally in 25% increments over a four-year period beginning on December 31, 2018. All unvested time-based restricted common shares will vest immediately upon the NEO's death, disability or retirement. The performance-based restricted common shares will vest equally in 25% increments over a four-year period beginning on the first anniversary of the grant date based upon our achievement of the performance goals applicable to our annual performance bonus program for the calendar year prior to the vesting date. Accordingly, the 2,500 performance-based restricted common shares scheduled to vest on the first anniversary of the grant date will vest, if at all, based upon our combined ratio and net written premium growth in 2018 (i.e., the performance measures for the OTIP annual performance bonus awards for 2018). All unvested performance-based restricted common shares will vest immediately upon the NEO's death or disability. If the NEO retires before an applicable vesting date, one-quarter of the performance-based restricted common shares will vest and any remaining unvested performance-based restricted common shares will be forfeited. The NEO is entitled to receive dividend equivalents on both the time-based and performance-based restricted common shares, provided that such dividend equivalents are subject to the same vesting requirements that apply to the restricted common shares.

Also in March 2018, the Compensation Committee granted to each NEO an additional award of restricted common shares under our 2017 Long-Term Incentive Plan. Under these awards, each NEO was granted the following number of restricted common shares:



		2018 Restricted Common Share Awards
Michael E. LaRocco		8,363
Steven E. English		3,337
Kim B. Garland		3,171
Paul M. Stachura		2,335
Gregory A. Tacchetti		2,376

These restricted common shares will vest equally in 33% increments over a three-year period beginning on December 31, 2018. All unvested restricted common shares will vest immediately upon the NEO's death, disability or retirement. The NEO is entitled to receive dividend equivalents on the restricted common shares, provided that such dividend equivalents are subject to the same vesting requirements that apply to the restricted common shares.

2018 Deferred Stock Unit Awards

In March 2018, the Compensation Committee granted 20,000 time-based deferred stock units and 20,000 performance-based deferred stock units under our 2017 Long-Term Incentive Plan to Mr. LaRocco pursuant to his ~~relocation~~employment agreement. The time-based deferred stock units will vest equally in one-third increments over a three-year period beginning on the day preceding the first anniversary of the grant date. All unvested time-based deferred stock units will vest immediately upon Mr. LaRocco's death, disability or retirement. The performance-based deferred stock units will vest and be earned, if at all, based on our combined ratio during the three-year performance period from January 1, 2018, through December 31, 2020, and the compound annual growth rate of our stock price during the three-year performance period from March 1, 2018 through March 1, 2021. All unvested performance-based deferred stock units will vest immediately upon Mr. LaRocco's death or disability. If Mr. LaRocco retires during the performance periods, the performance-based deferred stock units will vest based upon our achievement of the performance goals during the performance periods. Mr. LaRocco is entitled to ~~Columbus, Ohio.~~

receive dividend equivalents on the deferred stock units, provided that such dividend equivalents are subject to the same vesting requirements that apply to the deferred stock units.

~~Contractual Arrangements with Named Executive Officers~~



Contractual Arrangements with Named Executive Officers

Employment Agreements

The Company enters into employment agreements to provide appropriate protection to the ~~employee~~associate and the Company and clarity to the ~~employee~~associate and the Company about the ~~Company’s~~Company's expectations. The ~~Company’s~~Company's only current employment agreement is with Mr. LaRocco, its Chairman, President and Chief Executive Officer. The Company believes ~~that~~ having an employment agreement in place with Mr. LaRocco ensures leadership stability and focus and assists in long-term retention. The Company also believes ~~that~~ continuity has a cumulative effect on the achievement of our long-term strategic and operational objectives and, therefore, also furthers the objectives of our executive compensation program.

The terms of Mr. ~~LaRocco’s~~LaRocco's employment agreement were the result of ~~arm’s~~arm's length negotiations between the Compensation Committee and Mr. LaRocco. As is the case with most executive employment agreements, our employment agreement with Mr. LaRocco addresses separation and severance benefits in connection with the termination of his ~~respective~~ employment with us, either prior to or at the end of the employment term. These provisions benefit both usthe Company and the executive in ~~that~~ they provide a clear understanding of the rights and obligations of the parties upon events resulting in the termination of the employment relationship. The terms of the employment agreement with Mr. LaRocco, including the severance and separation benefits provided to Mr. LaRocco upon the occurrence of certain termination events, are described in detail below under ~~“Agreements~~"Agreements with Named Executive Officers—LaRocco Employment Agreement.”

Change of Control Agreements

Change of control agreements are part of our corporate strategy to retain our well-qualified senior executive officers, notwithstanding a potential or actual change of control of our Company. Change of control agreements also serve our ~~shareholders’~~shareholders' interests by ensuring ~~that~~ senior executives will view any potential transaction objectively since an adverse change in their employment situation will not have adverse personal financial consequences. The terms of the change of control agreements with our NEOs are described in detail below under ~~“Agreements~~"Agreements with Named Executive Officers.”" The severance and separation benefits provided to the NEOs under their respective executive agreements are described below under ~~“Potential~~"Potential Payments Upon Termination or Change of Control.”

~~Tax Deductibility of Executive Compensation~~



Tax Deductibility of Executive Compensation

Section 162(m) of the Code imposes a limit on the amount of compensation ~~that~~ we may deduct in any one year for our NEOs unless certain specific criteria are satisfied. ~~“Qualified~~"Qualified performance-based compensation,”" as defined in Section 162(m) of the Code, is fully deductible if the programs are approved by shareholders and meet other requirements. Our shareholders have approved the material terms of the ~~LBP, the 2009 Equity Plan~~OTIP and the ~~LTIP~~2017 Long-Term Incentive Plan as required by Section 162(m) of the Code. Accordingly, compensation paid for the attainment of ~~Company performance-based~~the performance bonus awards under the ~~LBP, stock options awarded~~OTIP and the performance unit awards and PAU awards under the ~~2009 Equity~~2017 Long-Term Incentive Plan ~~and compensation paid for the attainment of the PAUs under the LTIP~~ are intended to be deductible for federal income tax purposes under Section 162(m) of the ~~Code; provided, however, that~~Code for the portion of the Company performance bonus earned by the NEOs for 2015 that was attributable to the Adjusted LBP Combined Ratio and Adjusted Return on Equity performance measures do not constitute “qualified performance-based compensation” for purposes of Section 162(m) due to the adjustments made by the Committee to the performance measures in February 2016. These adjustments are described in detail above in “Short-Term Incentive Compensation—Leadership Bonus Plan Bonuses—LBP Award Process.”2017 year. While we generally attempt to tax qualify our compensation programs, we also seek to maintain flexibility in compensating our executives. As a result, our Compensation Committee has not adopted a policy requiring all compensation to be deductible. For example, restricted common shares awarded under the 2009 Equity Plan and compensation paid for the attainment of individual performance-based awards under the LBP are not intended to constitute “qualified performance-based compensation” for purposes of Section 162(m) of the Code.

~~Stock Ownership Guidelines~~



Stock Ownership Guidelines

We have adopted stock ownership guidelines (“("Ownership ~~Guidelines”~~Guidelines") for our Section 16 officers, including our NEOs. These Ownership Guidelines reinforce one of the objectives of our executive compensation program and primary reasons for awarding equity compensation—to build appropriate levels of ~~Common Share~~common share ownership among our executive team. Each person subject to the Ownership Guidelines is advised to acquire and maintain ownership of a designated number of ~~Common Shares~~common shares based on the ~~person’s~~person's position with us (the ~~“Ownership~~"Ownership Target ~~Amounts”~~Amounts"). Our Stock Ownership Guidelines also encourage our Section 16 officers to hold the net amount of ~~Common Shares~~common shares they obtain through the exercise of stock options or the vesting of restricted common shares ~~until the later of (i) the first anniversary of the date the officer exercised the stock options~~ or ~~the restricted stock vested, as~~other applicable ~~or (ii)~~equity-based awards until the date on which the officer satisfies the Ownership Target Amounts.

Equity grants vary based on an ~~individual’s~~individual's level in the Company, our competitive market data, the scope of the ~~NEO’s~~NEO's responsibility and the number of ~~Common Shares~~common shares available for issuance under our equity compensation plans. As a result, it makes sense to also vary the level of ownership we require of these individuals based on their level in the Company and the number of option grants they receive. The following Ownership Target Amount categories will remain in place until changed by the Compensation Committee:

Executives are in compliance with the Ownership Guidelines if they meet the Ownership Target Amounts within five years of assuming the designated category of management or if they invest a minimum of 6% of their annual base salary, ~~in Company stock~~up to Employee Stock Purchase Plan limits, through a payroll deduction plan. All ~~Common Shares~~common shares directly owned by officers count toward meeting their respective Ownership Target Amounts, including unvested restricted common shares. In addition, for purposes of the Ownership Target Amounts we count as owned by officers one-third of their vested ~~“in-the-money”~~"in-the-money" stock options. The following table shows the Ownership Target Amounts for the NEOs and the number of ~~Common Shares~~common shares currently owned by the NEOs as of March ~~3, 2016.~~

Named Executive Officer
   Ownership Target
Amount for
Common Shares    Eligible Options
Owned by NEO(1)    Unvested
Restricted
Stock
Owned by
NEO    Common Shares
Owned Directly
by NEO    Total Common
Share Ownership
Toward Target
Michael E. LaRocco
   100,000       0       15,363       11,149       26,512
Steven E. English
   15,000       40,052       7,377       13,791       61,220
Jessica E. Clark
   15,000       14,124       6,128       4,771       25,023
Kim B. Garland
   15,000       0       6,485       15,217       21,702
Clyde H. Fitch
   15,000       34,918       3,380       18,413       56,711

16, 2018.



	Ownership Target Amount for Common Shares	Eligible Options Owned by NEO⁽¹⁾	Time-Based Unvested Restricted Stock Owned by NEO⁽²⁾⁽³⁾	Common Shares Owned Directly by NEO	Total Common Share Ownership Toward Target
Michael E. LaRocco	100,000	10,929	24,326	25,206	60,461
Steven E. English	15,000	44,542	16,005	19,104	79,651
Kim B. Garland	15,000	4,090	19,862	64,543	88,495
Paul M. Stachura	15,000	5,990	18,952	2,130	27,072
Gregory A. Tacchetti	15,000	1,861	16,651	—	18,512

⁽¹⁾ One-third of vested "in the money" stock options count toward the ownership level requirement. Vested options with an exercise price that is higher than the fair market value of the Company's common shares (i.e., underwater stock options) do not count towards the Ownership Guidelines. The stock options included in this table are one-third of those exercisable within 60 days of March 16, 2018, and "in the money" based on a price of $28.71, which represents the average closing price for the Company’s common shares during the 30-day period ending on March 16, 2018.
⁽²⁾ Includes dividend equivalents reinvested in our common shares of: Mr. LaRocco—600; Mr. English—334; Mr. Garland—206; Mr. Stachura—204; Mr. Tacchetti—131.
⁽³⁾ Excludes performance based unvested restricted stock of 10,000 shares for Mr. English, Mr. Garland, Mr. Stachura and Mr. Tacchetti.

~~(1)~~
	One-third of vested “in the money” stock options count toward the ownership level requirement. Vested options with an exercise price that is higher than the fair market value of the Company’s Common Shares (~~i.e.~~, underwater stock options) do not count towards the Ownership Guidelines. The stock options included in this table are one-third of those exercisable within 60 days of March 3, 2016 and “in the money” based on a price of $21.29, which represents the average closing price for the Company’s Common Shares during the 30-day period ending on March 3, 2016.
Clawback Policy

~~Clawback Policy~~

Our clawback policy provides that ~~the Company will seek to recover from any Section 16 officer of the Company all or a portion of pre-tax incentive compensation paid to the officer in excess of what should have been paid in the event~~if the Company is required to prepare an accounting restatement or amend a previously filed financial ~~statement due~~statements to ~~error.~~

correct errors to those financial statements, the Company will seek to recover from any current and future Section 16 officer of the Company the portion of pre-tax incentive compensation granted and paid to the officer on or after March 1, 2016, in excess of what should have been paid to the officer if the payment was determined based on the restated or amended financial statements.

~~Anti-Hedging Policy~~



Anti-Hedging and Anti-Pledging Policy

Our anti-hedging policy prohibits all Company ~~employees,~~associates, including our NEOs, and members of the Board from engaging in certain hedging transactions relating to Company securities held by them, including short sales and other transactions that shift the economic consequences of ownership of Company securities to a third party (e.g., the purchase or sale of puts, calls or listed options and hedging transactions such as prepaid variable forwards, equity swaps, caps, collars and exchange funds). Our executive officers and members of the Board are also subject to a policy that prohibits them from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.

~~Summary Compensation Table for 2015~~

Name and Principal
Position
Year Salary
($) Bonus
($)(6) Stock
Awards
($)(7) Option
Awards
($)(8) Non-Equity
Incentive Plan
Compensation
($)(9) Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(10) All Other
Compensation
($)(11) Total
($)
Michael E. LaRocco(1)
2015    572,115    0    178,506    283,062    319,576    0    109,992    1,463,251
President and Chief Executive Officer

Steven E. English
2015    461,539    0    55,820    87,967    201,682    76,537    20,791    904,336
Senior Vice President and Chief Financial Officer
2014    447,231    0    54,604    86,477    603,309    269,185    20,983    1,481,788
2013    435,500    0    0    199,738    346,845    61,525    15,073    1,058,681
Jessica E. Clark
2015    425,000    0    49,517    78,037    231,264    0    378,739    1,162,557
Senior Vice President, Specialty Lines
2014    372,692    0    39,424    62,457    601,643    0    159,007    1,235,223
2013    362,834    0    0    144,253    454,209    0    33,215    994,511
Kim B. Garland(2)
2015    152,308    50,000    99,532    75,445    330,000    0    38,457    745,742
Senior Vice President, Standard Lines

Clyde H. Fitch
2015    367,692    0    36,076    56,877    136,197    115,194    20,213    732,249
Senior Vice President and Chief Sales Officer
2014    357,692    0    37,853    59,959    473,942    216,490    20,746    1,166,682
2013    348,077    0    0    138,329    269,629    98,920    15,073    870,028
Robert P. Restrepo, Jr.(3)
2015    846,598    0    179,003    282,169    351,431    106,748    2,191,621    3,957,570
Former Chairman,
President and Chief Executive Officer

2014
2013

821,940
798,900


0
0



187,376
0

296,836
683,876

925,115
601,633

807,578
581,148

103,442
97,018

3,142,287
2,762,575

James A. Yano(4)
2015    268,577    0    36,189    57,029    368,130    0    22,658    752,583
Former Senior Vice President, Secretary and General Counsel

2014
2013

357,692
344,231


0
0



37,853
0

59,959
128,447

353,958
204,610

212,756
88,412

20,746
15,073

1,042,964
780,773

Steven J. Hunckler(5)
2015    227,788    0    31,694    49,956    178,750    0    1,304,789    1,792,977
Former Senior Vice President, Specialty Lines



Summary Compensation Table for 2017



Name and Principal Position	Year	Salary		Bonus (5)		Stock Awards (7)		Option Awards (8)		Non-Equity Incentive Plan Compensation (9)		Change in Pension Value and Nonqualified Deferred Compensation Earnings (10)		All Other (11)		Total
Michael E. LaRocco⁽¹⁾	2017	$	911,539	$	—	$	686,811	$	—	$	—	$	—	$	57,418	$	1,655,767
Chairman, President and Chief Executive Officer	2016	$	869,230	$	262,500	$	160,710	$	247,279	$	—	$	—	$	153,600	$	1,693,319
Chairman, President and Chief Executive Officer	2015	$	572,115	$	—	$	178,506	$	283,062	$	319,576	$	—	$	109,992	$	1,463,251
Steven E. English	2017	$	488,575	$	—	$	177,162	$	—	$	—	$	240,359	$	17,323	$	923,419
Senior Vice President and Chief Financial Officer	2016	$	475,731	$	107,764	$	50,274	$	77,348	$	78,975	$	154,595	$	23,099	$	967,786
Senior Vice President and Chief Financial Officer	2015	$	461,539	$	—	$	55,820	$	87,967	$	262,455	$	76,537	$	20,791	$	965,109
Kim B. Garland⁽²⁾	2017	$	464,219	$	—	$	157,798	$	—	$	—	$	—	$	77,247	$	699,264
Senior Vice President, Director of Commercial Lines and State Auto Labs	2016	$	451,595	$	102,392	$	44,782	$	68,901	$	—	$	—	$	97,486	$	765,156
	2015	$	152,308	$ 50,000(6)		$	99,532	$	75,445	$	330,000	$	—	$	38,457	$	745,742
Paul M. Stachura⁽³⁾	2017	$	393,245	$	—	$	116,207	$	—	$	—	$	—	$	28,490	$	537,942
Senior Vice President, Chief CARE Officer	2016	$	380,443	$	69,759	$	32,590	$	50,135	$	—	$	—	$	71,090	$	604,017
Gregory A. Tacchetti⁽⁴⁾	2017	$	399,067	$	—	$	118,238	$	—	$	—	$	—	$	20,963	$	538,269
Senior Vice President, Chief Information and Strategy Officer


(1)	Mr. LaRocco was hired by the Company and State Auto Mutual effective on April 27, 2015, and began serving as President and Chief Executive Officer of the Company and State Auto Mutual on May 8, ~~2015 and, therefore, was not an NEO in 2014 or 2013.~~ 2015.


(2)	Mr. Garland was hired by the Company effective on August 24, ~~2015 and, therefore, was not an NEO in 2014 or 2013.~~ 2015.


(3)	Mr. ~~Restrepo’s employment with~~Stachura was hired by the Company ~~terminated~~effective on ~~December 31,~~September 15, 2015.


(4)	Mr. ~~Yano’s employment with~~Tacchetti was hired by the Company ~~terminated upon his death~~effective on ~~September 14,~~August 25, 2015.

(5)

The dollar amounts shown in this column for 2016 represent the discretionary cash bonus awarded by the Compensation Committee to the NEOs as permitted under the OTIP in an amount equal to 30% of the target amount of the NEO's 2016 OTIP performance bonus award. For Mr. ~~Hunckler’s employment~~Stachura, this amount also includes a $6,716 signing bonus paid to Mr. Stachura in connection with ~~the Company terminated on September 11, 2015. Mr. Hunckler was not an NEO in 2014 or 2013.~~

his hiring.


(6)	This dollar amount represents a signing bonus paid to Mr. Garland in connection with his hiring.

(7)

~~This~~

For 2017, this dollar amount represents the grant date fair value of the ~~restricted common shares~~performance units awarded under our ~~2009 Equity~~2017 Long-Term Incentive Plan during 2017 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC Topic 718"). These amounts do not represent the ~~fiscal year indicated.~~actual amounts that will be realized by the NEOs with respect to such awards. The actual number of performance units that will vest and be earned (if any) by each NEO will be based on net written premium growth and combined ratio during the applicable performance period (which began on January 1, 2017, and ends on December 31, 2019, for the performance units awarded in 2017). The aggregate grant date fair value of the ~~restricted common shares was determined by multiplying~~performance units awarded in 2017 assuming we achieve the ~~closing price of our Common Shares on~~maximum performance level is as follows: Mr. LaRocco, $3,434,054; Mr. English, $885,809; Mr. Garland, $788,990; Mr. Stachura, $581,033; and Mr. Tacchetti, $591,192. See "Compensation Discussion and Analysis—2017 Executive Compensation Plan Elements—Long-Term Equity and Cash Incentive Compensation—2017 Performance Unit Awards" for more information concerning the ~~date of grant by the number of restricted common shares granted.~~

performance units awarded in 2017.

For 2016 and 2015, this dollar amount represents the grant date fair value of the restricted common shares awarded under our 2009 Equity Plan during 2016 and 2015. The grant date fair value of the restricted common shares was determined by multiplying the closing price of our common shares on the date of grant by the number of restricted common shares granted.

(8)

The dollar amounts shown in this column represent the aggregate grant date fair value of the stock options awarded in the fiscal year indicated. The grant date fair value of each stock option granted was calculated in accordance with ~~Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Options (“~~ASC Topic ~~718”).~~718. For a discussion of the assumptions used in the calculations, see Note 1314 to our Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2015.~~

2017.

(9)

The amounts earned in ~~2015~~2017 by the NEOs with respect to the PAUs awarded in ~~2013~~2015 under our Prior LTIP for the ~~2013-2015~~2015-2017 performance period are not included in this column as the results for the ~~2013-2015~~2015-2017 performance period applicable to such PAUs were not available as of the date of this Proxy Statement. We expect to determine the amounts payable to the NEOs with respect to such PAUs in May ~~2015.~~

2018.

For 2016 non-equity incentive plan compensation, the dollar amounts shown in this column reflect the aggregate total of the following awards earned in 2016 by each NEO under the OTIP performance bonus award for 2016 and the PAUs awarded under the Prior LTIP for the 2014-2016 performance period:



	OTIP Award ($)	PAU Award ($)	Total Non-Equity Incentive Plan Compensation Awards ($)
Michael E. LaRocco	—	—	—
Steven E. English	—	78,975	78,975
Kim B. Garland	—	—	—
Paul M. Stachura	—	—	—

For 2015 non-equity incentive plan compensation, the dollar amounts shown in this column reflect the aggregate total of the following awards earned in 2015 by each NEO under the Company performance component of the LBP, ~~and~~ the individual performance component of the ~~LBP:~~

   LBP
Company
Performance
Award ($)    LBP
Individual
Performance
Award ($)    Total
Non-Equity
Incentive Plan
Compensation
Awards ($)
Michael E. LaRocco.
   117,276       202,300       319,576 (a)
Steven E. English
   61,310       140,372       201,682
Jessica E. Clark
   58,014       173,250       231,264
Kim B. Garland
   247,500       82,500       330,000 (b)
Clyde H. Fitch
   48,784       87,413       136,197
Robert P. Restrepo, Jr.
   138,530       213,081       351,431
James A. Yano
   92,842       49,993       368,130 (c)
Steven J. Hunckler
   116,187       62,563       178,750

LBP and the PAUs awarded under the Prior LTIP for the 2013-2015 performance period:



	LBP Company Performance Award ($)	LBP Individual Performance Award ($)	PAU Award ($)	Total Non-Equity Incentive Plan Compensation Awards ($)
Michael E. LaRocco^(a)	117,276	202,300	—	319,576
Steven E. English	61,310	140,372	60,777	262,459
Kim B. Garland^(b)	247,500	82,500	—	330,000


(a)	Mr. ~~LaRocco’s~~LaRocco's LBP bonus was prorated to reflect the portion of the year during which he was employed by the Company.


(b)	Mr. ~~Garland’s~~Garland's LBP bonus was paid at target in accordance with the terms of his hiring arrangement.

~~(c)~~

Mr. Yano’s LBP bonus was prorated to reflect the portion of the year during which he was employed by the Company. Upon his death, Mr. Yano also received a payment of $225,295, which was equal to the target value of his outstanding PAU awards prorated to reflect the portion of the applicable performance periods during which he was employed by the Company.

For 2014 non-equity incentive plan compensation, the dollar amounts shown in this column reflect the aggregate total of the following awards earned in 2014 by each NEO under the Company performance component of the LBP, the individual performance component of the LBP and the PAUs relating to the 2012-2014 performance period:

   LBP
Company
Performance
Award ($)    LBP
Individual
Performance
Award ($)    PAU
Award
($)    Total
Non-Equity
Incentive Plan
Compensation
Awards ($)
Steven E. English
   320,896       200,813       81,600       603,309
Jessica E. Clark
   228,504       111,375       261,764       601,643
Clyde H. Fitch
   256,716       160,650       56,576       473,942
Robert P. Restrepo, Jr.
   725,885       82,750       116,480       925,115
James A. Yano
   188,258       124,740       40,960       353,958

For 2013 non-equity incentive plan compensation, the dollar amounts shown in this column reflect the aggregate total of the following awards earned in 2013 by each NEO under the Company performance component of the LBP, the individual performance component of the LBP and the PAUs relating to the 2011-2013 performance period:

   LBP
Company
Performance
Award ($)    LBP
Individual
Performance
Award ($)    PAU
Award
($)    Total
Non-Equity
Incentive Plan
Compensation
Awards ($)
Steven E. English
   141,682       139,613       65,550       346,845
Jessica E. Clark
   203,912       68,255       182,042       454,209
Clyde H. Fitch
   126,512       94,828       48,289       269,629
Robert P. Restrepo, Jr.
   277,205       144,612       179,816       601,633
James A. Yano
   83,025       86,625       34,960       204,610

(10)

The dollar amounts shown in this column reflect the change in the pension values for each of our NEOs, including amounts accruing under our Retirement Plan and SERPs in which certain of our NEOs participate. None of our NEOs who participate in our non-qualified deferred compensation plan receive preferential or above-market earnings.


(11)	The table below shows the components of the ~~“All~~"All Other ~~Compensation”~~Compensation" column for ~~2013~~2015 through ~~2015.~~ 2017.

   Year    Company
Matches
($)(a)    Spousal
Travel
Expenses
($)(b)    Restricted
Stock
Dividends
($)    Club
Membership
Dues
($)(c)    Insurance
Premiums
($) Other
($)(e)
Total
($)
Michael E. LaRocco.
   2015       27,433       9,746       1,580       0       0    71,233       109,992
Steven E. English
   2015       9,275       9,746       1,770       0       0    0       20,791
   2014       9,100       11,111       772       0       0    0       20,983
   2013       8,925       6,148       0       0       0    0       15,073
Jessica E. Clark
   2015       22,525       9,746       1,400       0       0    345,068       378,739
   2014       22,100       6,876       557       0       0    129,474       159,007
   2013       27,067       6,148       0       0       0    0       33,215
Kim B. Garland
   2015       4,062       0       441       0       0    33,954       38,457
Clyde H. Fitch
   2015       9,275       9,746       1,192       0       0    0       20,213
   2014       9,100       11,111       535       0       0    0       20,746
   2013       8,925       6,148       0       0       0    0       15,073
Robert P. Restrepo, Jr.
   2015       29,631       9,746       8,060       3,840       49,319 (d) 2,091,025       2,191,621
   2014       28,768       11,111       15,964       2,790       44,809 (d) 0       103,442
   2013       27,962       6,148       17,011       2,790       43,107 (d) 0       97,018
James A. Yano
   2015       9,275       0       855       0       0    12,528       22,658
   2014       9,100       11,111       535       0       0    0       20,746
   2013       8,925       6,148       0       0       0    0       15,073
Steven J. Hunckler
   2015       16,962       0       741       0       0    1,287,086       1,304,789



	Year	Company Matches ($)^(a)	Spousal Travel Expenses ($)^(b)	Restricted Stock Dividends ($)	Relocation Payments ($)^(c)	Other ($)^(d)	Total ($)
Michael E. LaRocco	2017	45,404	5,869	6,145	—	—	57,418
	2016	97,596	11,107	3,864	41,033	—	153,600
	2015	27,433	9,746	1,580	71,233	—	109,992
Steven E. English	2017	9,275	5,869	2,179	—	—	17,323
	2016	9,275	11,107	2,717	—	—	23,099
	2015	9,275	9,746	1,770	—	—	20,791
Kim B. Garland	2017	29,748	5,869	832	—	40,799	77,248
	2016	51,802	11,107	624	2,088	31,865	97,486
	2015	4,062	—	441	21,215	12,739	38,457
Paul M. Stachura	2017	22,016	5,869	605	—	—	28,490
	2016	35,864	11,107	454	23,665	—	71,090
Gregory A. Tacchetti	2017	20,393	—	570	—	—	20,963


(a)	The dollar amounts in this column reflect Company-paid matches and contributions under our 401(k) and/or non-qualified deferred compensation plans. None of the amounts paid as matches or contributions received preferential earnings or interest.


(b)	The dollar amounts in this column reflect spousal/guest travel hosting on agent incentive trips and gross-up payments for the taxes incurred by the NEOs in connection with their receipt of such ~~payments in 2015 and 2014.~~ payments.


(c)	~~All of the~~The dollar amounts in this column ~~reflect non-golf club membership dues.~~

~~(d)~~

~~These dollar amounts reflect the income attributed~~for 2016 reflects: (i) $41,033 in payments made to Mr. ~~Restrepo as a result of the long-term disability policy obtained by the Company to address its disability obligation under his Employment~~

~~Agreement ($28,992 in 2015, 2014 and 2013), and an amount~~LaRocco to reimburse ~~Mr. Restrepo~~him for expenses he incurred in connection with relocation to Columbus, Ohio (including $14,318 in gross-up payments for the ~~income tax liability that~~taxes incurred by Mr. LaRocco in connection with his receipt of such payments); (ii) $2,088 in payments made to Mr. Garland to reimburse him for expenses he incurred ~~as a result~~in connection with relocation to Columbus, Ohio (including $696 in gross-up payments for the taxes incurred by Mr. Garland in connection with his receipt of such ~~policy ($20,327, 15,818~~payments); and ~~$14,115~~(iii) $23,665 in ~~2015, 2014 and 2013, respectively)~~payments made to Mr. Stachura to reimburse him for expenses he incurred in connection with relocation to Columbus, Ohio (including $8,779 in gross-up payments for the taxes incurred by Mr. Stachura in connection with his receipt of such payments).

~~(e)~~

The dollar amounts in this column for 2015 reflects: (i) ~~71,233~~$71,233 in payments made to Mr. LaRocco to reimburse him for expenses he incurred in connection with relocation to Columbus, Ohio (including $23,816 in gross-up payments for the taxes incurred by Mr. LaRocco in connection with his receipt of such payments); and (ii) 345,068 in payments made to Ms. Clark to reimburse her for expenses she incurred in connection with relocation to Columbus, Ohio (including $115,477 in gross-up payments for the taxes incurred by Ms. Clark in connection with her receipt of such payments); (iii) $21,215 in payments made to Mr. Garland to reimburse him for expenses he incurred in connection with relocation to Columbus, ~~Ohio; (iv)~~Ohio (including $3,055 in gross-up payments for the taxes incurred by Mr. Garland in connection with his receipt of such payments).

(d)

The dollar amount in this column for 2017 reflects $40,799 in payments made to Mr. Garland to reimburse him for travel expenses (including $13,607 in gross-up payments for the taxes incurred by Mr. Garland in connection with his receipt of such payments). The dollar amount in this column for 2016 reflects $31,865 in payments made to Mr. Garland to reimburse him for travel expenses (including $10,627 in gross-up payments for the taxes incurred by Mr. Garland in connection with his receipt of such payments). The dollar amount in this column for 2015 reflects $12,739 in payments made to Mr. Garland to reimburse him for travel expenses (including $4,248 in gross-up payments for the taxes incurred by Mr. Garland in connection with his receipt of such payments)~~; (v) $2,091,025~~.



Grants of Plan-Based Awards in estimated severance payments made to or accrued with respect to Mr. Restrepo; (vi) $4,653 in payments made to Mr. Yano for spousal travel expenses; (vii) $7,875 in severance payments made to or accrued with respect to Mr. Yano; (viii) $4,653 in payments made to Mr. Hunckler for spousal travel expenses; (ix) $1,262,433 in estimated severance payments made to or accrued with respect to Mr. Hunckler; and (x) $20,000 in payments made to Mr. Hunckler to reimburse him for unused vacation. See “Potential Payments Upon Termination or Change of Control” for more information regarding the severance payments made to or accrued with respect to Messrs. Restrepo, Yano and Hunckler. 2017



Name	Grant Date	Non-Equity Incentive Plan Number of Units (#)	Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)			All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)
Name	Grant Date	Non-Equity Incentive Plan Number of Units (#)		Target ($)	Maximum ($)			Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)
Michael E. LaRocco
Performance Unit award⁽¹⁾	3/3/2017					28,056		—	686,811
OTIP award⁽²⁾	3/3/2017			925,000	2,775,000
PAU award⁽³⁾	3/3/2017	763,125		763,125	3,815,625
Steven E. English
Performance Unit award⁽¹⁾	3/3/2017					7,237		—	177,162
OTIP award⁽²⁾	3/3/2017			369,091	1,107,273
PAU award⁽³⁾	3/3/2017	196,849		196,849	984,245
Kim B. Garland
Performance Unit award⁽¹⁾	3/3/2017					6,446		—	157,798
OTIP award⁽²⁾	3/3/2017			350,691	1,052,073
PAU award⁽³⁾	3/3/2017	175,346		175,346	876,730
Paul M. Stachura
Performance Unit award⁽¹⁾	3/3/2017					4,747		—	116,207
OTIP award⁽²⁾	3/3/2017			258,283	774,849
PAU award⁽³⁾	3/3/2017	129,142		129,142	645,710
Gregory A. Tacchetti
Performance Unit award⁽¹⁾	3/3/2017					4,830		—	118,238
OTIP award⁽²⁾	3/3/2017			262,763	788,289
PAU award⁽³⁾	3/3/2017	131,382		131,382	656,910

The dollar amount in this column for 2014 reflects (i) $66,942 in payments made to Ms. Clark to reimburse her for expenses she incurred in connection with relocation to Columbus, Ohio (including $16,796 in gross-up payments for the taxes incurred by Ms. Clark in connection with her receipt of such relocation payments) and (ii) $62,532 paid to Ms. Clark as a result of a third party service provider failing to withhold taxes on a payment it issued to Ms. Clark on behalf of the Company.

~~Grants of Plan-Based Awards in 2015~~

Name
Grant
Date Non-Equity
Incentive
Plan
Number of
Units
(#)

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
($)
All Other
Stock Awards:
Number of
Shares of
Stock
or Units
(#) All Other
Option Awards:
Number of
Securities
Underlying
Options
(#) Exercise or
Base Price
of Option
Awards
($/Sh) Grant Date
Fair Value
of Stock
and
Option
Awards
($)
Threshold
($) Target
($) Maximum
($)
Michael E. LaRocco:

Restricted stock award(1)
5-7-15    7,902    181,825
Stock option award(2)
5-7-15    33,380    23.01    283,062
LBP Company performance award(3)
5-7-15    63,750    637,500    1,275,000
LBP individual performance award(4)
5-7-15    21,250    212,500    425,000
PAU award(5)
5-7-15    773,500    309,400    773,500    1,547,000
Steven E. English:

Restricted stock award(1)
3-5-15    2,471    56,141
Stock option award(2)
3-5-15    10,435    22.72    74,400
LBP Company performance award(3)
3-5-15    22,669    226,688    453,375
LBP individual performance award(4)
3-5-15    12,206    122,206    244,125
PAU award(5)
3-5-15    241,800    24,180    241,800    483,600
Jessica E. Clark:

Restricted stock award(1)
3-5-15    2,192    49,802
Stock option award(2)
3-5-15    9,257    22.72    66,000
LBP Company performance award(3)
3-5-15    21,450    214,500    429,000
LBP individual performance award(4)
3-5-15    11,550    115,500    231,000
PAU award(5)
3-5-15    214,500    21,450    214,500    429,000
Kim B. Garland:

Restricted stock award(1)
8-24-15    4,406    99,532
Stock option award(2)
8-24-15    9,257    22.60    75,445
LBP Company performance award(3)
8-24-15    24,750    247,500    495,000
LBP individual performance award(4)
8-24-15    8,250    82,500    165,000
PAU award(5)
8-24-15    214,500    21,450    214,500    429,000
Clyde H. Fitch:

Restricted stock award(1)
3-5-15    1,597    36,284
Stock option award(2)
3-5-15    6,747    22.72    48,100
LBP Company performance award(3)
3-5-15    18,038    180,375    360,750
LBP individual performance award(4)
3-5-15    9,713    97,125    194,250
PAU award(5)
3-5-15    156,325    62,494    156,325    312,650
Robert P. Restrepo, Jr.:

Restricted stock award(1)
3-5-15    7,924    180,033
Stock option award(2)
3-5-15    33,472    22.72    238,652
LBP Company performance award(3)
3-5-15    51,141    511,414    1,022,828
LBP individual performance award(4)
3-5-15    17,047    170,465    340,931
PAU award(5)
3-5-15    775,618    77,562    775,618    1,551,236
James A. Yano:

Restricted stock award(1)
3-5-15    1,602    36,397
Stock option award(2)
3-5-15    6,765    22.72    48,230
LBP Company performance award(3)
3-5-15    13,263    132,633    265,265
LBP individual performance award(4)
3-5-15    7,142    71,418    142,835
PAU award(5)
3-5-15    156,748    15,675    156,748    313,496
Stephen J. Hunckler:

Restricted stock award(1)
3-5-15    1,403    31,876
Stock option award(2)
3-5-15    5,926    22.72    42,250
LBP Company performance award(3)
3-5-15    11,619    116,188    232,375
LBP individual performance award(4)
3-5-15    6,256    71,418    142,835
PAU award(5)
3-5-15    137,313    13,731    137,313    274,626

(1)

In ~~2015,~~2017, all of our NEOs received ~~restricted common shares~~performance unit awards under our ~~2009 Equity~~2017 Long-Term Incentive Plan. The ~~restricted common shares~~amounts shown ~~in this column were granted on~~reflect the ~~date indicated pursuant to action~~target number of the ~~Compensation Committee~~performance units each NEO is eligible to earn based on ~~that day. These restricted common shares vest~~net written premium growth and combined ratio during the performance period which began on ~~the third anniversary of the grant date.~~January 1, 2017, and ends on December 31, 2019. The grant date fair value of these restricted common shares was determined by multiplying the closing price of Common Shares on the date of grant by the number of restricted common shares granted. For a further discussion of the 2009 Equity Plan, see “—Executive Compensation Program Elements—Long-Term Equity and Cash Incentive Compensation.”

~~(2)~~
In 2015, all of our NEOs received options under our 2009 Equity Plan. The options shown in this column were granted on the date indicated, at the closing price on that date, pursuant to action of the Compensation Committee on that day. These options vest in equal annual installments over a three-year period and are exercisable for a ten-year term. All of these options are non-qualified stock options. The grant date fair value of these optionsperformance units was determined in accordance with ASC Topic 718. ~~These options have not been re-priced or otherwise materially amended.~~ For a further discussion of the ~~2009 Equity Plan,~~performance units awarded to the NEOs in 2017, see “—"Compensation Discussion and Analysis—2017 Executive Compensation ~~Program~~Plan Elements—Long-Term Equity and Cash Incentive ~~Compensation.”~~
Compensation—2017 Performance Unit Awards."

~~(3)~~

(2)

In ~~2015,~~2017, all of our NEOs participated in the ~~LBP, an~~OTIP, our annual cash incentive bonus ~~plan that has a Company performance component and an individual performance component.~~plan. For our NEOs, performance bonus awards ~~for~~under the ~~Company performance component of the LBP~~OTIP awards are based ~~solely~~ upon the achievement of ~~certain Company~~one or more performance measures ~~established by~~of the ~~Compensation Committee at~~Company (or one or more business segments or subgroups of the ~~beginning of a~~Company) over the performance ~~year.~~period. The Compensation Committee selected ~~Adjusted LBP Combined Ratio~~combined ratio and net written premium growth as the performance measures for the ~~Company~~OTIP performance ~~component of the LBP~~bonus awards for each of the NEOs ~~participating~~ in 2017. The amounts shown reflect the ~~LBP in 2015. The actual payments made to~~target and maximum bonus each NEO may earn based on the achievement of the performance goals. None of the NEOs earned an OTIP performance bonus for 2017 because the Company did not achieve the minimum performance goals for the ~~Company~~ performance ~~component of the LBP for 2015 are reported in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column and the footnotes thereto.~~measures. For a further discussion of the ~~Company~~2017 OTIP performance ~~component of the LBP,~~bonus awards, see “—"Compensation Discussion and Analysis—2017 Executive Compensation ~~Program~~Plan Elements—Short-Term Incentive Compensation—~~Leadership~~OTIP Performance Bonus ~~Plan Bonuses.”~~

Awards."

~~(4)~~

~~For~~

(3)

In 2017, all of our NEOs received PAU awards ~~for~~under our 2017 Long-Term Incentive Plan. The amounts shown reflect the ~~individual performance component~~target and maximum number of the ~~LBP are~~PAUs each NEO is eligible to earn based on net written premium growth and combined ratio during the ~~attainment of individual~~ performance ~~goals for a performance year. Our Compensation Committee, with input from the Board of Directors~~period which began on January 1, 2017, and the State Auto Mutual Board, establishes the individual performance goals for the CEO. The CEO establishes the individual performance goals for the other NEOs. The actual payments made to each NEO for the individual performance component of the LBP for 2015 are reported in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column and the footnotes thereto.ends on December 31, 2019. For a further discussion of the ~~individual performance component of the LBP,~~2017 PAU awards, see “—"Compensation Discussion and Analysis—2017 Executive Compensation ~~Program Elements—Short-Term Incentive Compensation—Leadership Bonus~~ Plan ~~Bonuses.”~~

~~(5)~~

In 2015, all of our NEOs were selected to participate in the LTIP, a cash incentive bonus plan, for the performance period beginning January 1, 2015 and ending December 31, 2017. Under the LTIP, the NEOs receive performance award units, or “PAUs,” the value of which is determined by our Company’s performance in three equally weighted measures—(a) statutory combined ratio for the State Auto Group, (b) the State Auto Group’s net written premium growth (excluding the impact of the Quota Share Agreement) and (c) the State Auto Group’s surplus growth—in comparison to the LTIP Peer Group over the three-year performance period. PAUs awarded to Ms. Clark for the 2015-2017 performance period are valued based on the achievement of three equally-weighted performance measures: (i) statutory combined ratio for our Specialty Group; (ii) direct or gross premium growth for our Specialty Group; and (iii) surplus growth for the State Auto Group—in comparison to the LTIP Peer Group over the three-year performance period. PAUs are granted with a target value of $1.00, although the final value of each PAU can range from $0.00 to $2.00. For a further discussion of the LTIP, see “—Executive Compensation Program Elements—Long-Term Equity and Cash Incentive ~~Compensation.”~~

Compensation—2017 Performance Award Unit Awards."

~~Outstanding Equity Awards at Fiscal 2015 Year-End~~

Option Awards Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)(1)
Unexercisable Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) Option
Exercise
Price
($) Option
Expiration
Date Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)(2) Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)* Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
Michael E. LaRocco.
33,380    0    0    23.01    5/6/26    7,902    162,702
Steven E. English
6,300    0    0    33.50    5/16/16    5,043    103,835
5,910    0    0    29.53    5/2/17
10,834    0    0    25.81    3/5/18
12,025    0    0    14.49    3/4/19
18,601    0    0    18.78    3/3/20
21,796    0    0    17.03    3/2/21
16,473    0    0    13.53    2/28/22
24,510    12,072    0    16.80    2/27/23
3,635    7,270    0    21.23    3/5/24
0    10,435    0    22.72    3/4/25    ��
Jessica E. Clark
12,850    0    0    17.03    3/2/21    4,049    83,369
9,141    0    0    13.53    2/28/22
17,701    8,719    0    16.80    2/27/23
2,625    5,251    0    21.23    3/5/24
0    9,257    0    22.72    3/4/25
Kim B. Garland
0    9,257    0    22.60    8/24/25    4,406    90,720
Clyde H. Fitch
18,850    0    0    25.72    11/4/17    3,376    69,512
10,834    0    0    25.81    3/5/18
10,994    0    0    14.49    3/4/19
17,051    0    0    18.78    3/3/20
16,056    0    0    17.03    3/2/21
11,422    0    0    13.53    2/28/22
16,974    8,361    0    16.80    2/27/23
2,520    5,041    0    21.23    3/5/24
0    6,747    0    22.72    3/4/25
Robert P. Restrepo, Jr.
30,000    0    0    31.94    3/1/16
23,012    0    0    29.53    5/2/17
49,624    0    0    25.81    3/5/18
52,088    0    0    14.49    3/4/19
54,015    0    0    18.78    3/3/20
52,890    0    0    17.03    3/2/21
94,057    0    0    13.53    2/28/22
125,252    0    0    16.80    2/27/23
37,432    0    0    21.23    3/5/24
33,472    0    0    22.72    12/31/20
James A. Yano
5,682    0    0    29.53    5/2/17
7,527    0    0    25.81    3/5/18
7,929    0    0    14.49    3/4/19
12,322    0    0    18.78    3/3/20
11,625    0    0    17.03    3/2/21
8,269    0    0    13.53    2/28/22
25,335    0    0    16.80    2/27/23
7,561    0    0    21.23    3/5/24
6,765    0    0    22.72    3/4/25
Stephen J. Hunckler
5,926    0    0    22.72    9/11/20

*
	~~The closing price of our Common Shares on December 31, 2015 was $20.59.~~
Outstanding Equity Awards at Fiscal 2017 Year-End



	Option Awards					Stock Awards
	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#)(1) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)(2)	Market Value of Shares or Units of Stock That Have Not Vested ($)*	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4)
Michael E. LaRocco	11,015	11,015	—	23.01	5/6/2025	15,363	447,371	28,056	816,991
	11,048	21,446	—	21.54	3/3/2026
Steven E. English	10,834	—	—	25.81	3/5/2018	4,805	139,922	7,237	210,741
	12,025	—	—	14.49	3/4/2019
	18,601	—	—	18.78	3/3/2020
	21,796	—	—	17.03	3/2/2021
	16,473	—	—	13.53	2/28/2022
	36,582	—	—	16.80	2/27/2023
	10,905	—	—	21.23	3/5/2024
	6,992	3,443	—	22.72	3/4/2025
	3,456	6,708	—	21.54	3/3/2026
Kim B. Garland	6,203	3,054	—	22.60	8/24/2025	6,485	188,843	6,446	187,708
	3,079	5,975	—	21.54	3/3/2026
Paul M. Stachura	13,555	6,675	—	24.27	9/15/2025	6,413	186,747	4,747	138,233
	2,240	4,348	—	21.54	3/3/2026
Gregory A. Tacchetti	1,425	701	—	21.95	8/25/2025	4,144	120,673	4,830	140,650
	2,111	4,096	—	21.54	3/3/2026

* The closing price of our common shares on December 29, 2017, (the last trading day of 2017) was $29.12.


(1)	~~Except for the 33,472 and 5,926 options granted to Messrs. Restrepo and Hunckler, respectively, in 2015 (which are exercisable for a five-year period after their respective retirement dates), all~~All options listed in this

table are exercisable for a ten-year period from their respective date of grant. The following schedule describes the vesting dates for the options listed as unexercisable by date of grant:

Options expiring February 27, 2023, were granted on February 28, 2013. These options vest in equal annual installments over a three-year period. All of these options ~~will~~ fully ~~vest~~vested as of February 28, 2016.

Options expiring March 5, 2024, were granted on March 6, 2014. These options vest in equal annual installments over a three-year period. All of these options ~~will~~ fully ~~vest~~vested as of March 6, 2017.

Options expiring March 4, 2025, were granted on March 5, 2015. These options vest in equal annual installments over a three-year period. All of these options fully vested as of March 5, 2018.

Options expiring May 6, 2025, were granted on May 7, 2015. These options vest in equal annual installments over a three-year period. All of these options will fully vest as of ~~March 5,~~May 7, 2018.

Options expiring August 24, 2025, were granted on August 25, 2015. These options vest in equal annual installments over a three-year period. All of these options will fully vest as of August ~~24,~~25, 2018.

Options expiring ~~May 6, 2026~~September 15, 2025, were granted on ~~May 7,~~September 16, 2015. These options vest in equal annual installments over a three-year period. All of these options will fully vest as of ~~May 7,~~September 16, 2018.

Options expiring March 3, 2026, were granted on March 4, 2016. These options vest in equal annual installments over a three-year period. All of these options will fully vest as of March 4, 2019.


(2)	All restricted common shares listed in this table vest on the third anniversary of the date of grant.

(3) The amounts shown reflect the target number of performance units awarded to the NEOs in 2017 under the 2017 Long-Term Incentive Plan. Assuming we achieve the maximum performance goals applicable to such performance units, the amounts shown would increase to: Mr. LaRocco, 140,280; Mr. English, 36,185; Mr. Garland, 32,230; Mr. Stachura, 23,735; and Mr. Tacchetti, 24,150. The actual number of performance units that will vest and be earned (if any) by each NEO will be based on net written premium growth and combined ratio during the applicable performance period (which began on January 1, 2017, and ends on December 31, 2019, for the performance units awarded in 2017).
(4) The amounts shown reflect the aggregate market value as of December 31, 2017, of the target number of performance units awarded to the NEOs in 2017, calculated by multiplying the target number of such performance units by $29.12 (the closing market price of our common shares on December 29, 2017, the last trading day of 2017). Assuming we achieve the maximum performance goals applicable to such performance units, the amounts shown would increase to: Mr. LaRocco, $4,084,954; Mr. English, $1,053,707; Mr. Garland, $938,538; Mr. Stachura, $691,163; and Mr. Tacchetti, $703,248.

~~Option Exercises and Stock Vested in Fiscal 2015~~

Name
   Option Awards    Stock Awards
   Number of Shares
Acquired on Exercise
(#)    Value Realized
on Exercise
($)(1)    Number of Shares
Acquired on Vesting
(#)    Value Realized
on Exercise
($)(2)
Michael E. LaRocco
   0       —       0       —
Steven E. English
   0       —       0       —
Jessica E. Clark
   0       —       0       —
Kim B. Garland
   0       —       0       —
Clyde H. Fitch
   0       —       0       —
Robert P. Restrepo, Jr.
   0       —       38,276       854,834
James A. Yano
   0       —       3,385       81,917
Stephen J. Hunckler
   54,611       401,009       2,939       71,300



Option Exercises and Stock Vested in Fiscal 2017



	Option Awards		Stock Awards
	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)⁽¹⁾	Number of Shares Acquired on Vesting (#)	Value Realized on Exercise ($)⁽²⁾
Michael E. LaRocco	11,350	16,117	—	—
Steven E. English	—	—	1,658	45,064
Kim B. Garland	—	—	—	—
Paul M. Stachura	—	—	—	—
Gregory A. Tacchetti	—	—	—	—


(1)	This dollar amount represents the aggregate difference between the exercise price of the options and the closing market price of our ~~Common Shares~~common shares on the exercise date.


(2)	This dollar amount represents the number of ~~Common Shares~~common shares underlying the unvested restricted common shares on the vesting date multiplied by the closing market price of our ~~Common Shares~~common shares on the vesting date.

~~Retirement Plans~~



Retirement Plans

Retirement Plan

We maintain a defined benefit pension plan, referred to as our ~~“Retirement~~"Retirement Plan.”" The Retirement Plan is intended to be a qualified plan under Section 401(a) of the Code and is subject to the minimum funding standards of Section 412 of the Code. ~~Employees~~Associates hired before January 1, 2010, (which does not include any NEOs currently employed by the ~~Company)~~Company other than Mr. English) are eligible to participate in the Retirement Plan. Benefits payable under the Retirement Plan are funded entirely through Company contributions to a trust fund. Only base salary, not incentive compensation, is taken into consideration in the calculation of benefits under our Retirement Plan.

Supplemental Executive Retirement ~~Plans~~

Plan

Our ~~SERP,~~Supplemental Executive Retirement Plan ("SERP"), which mirrors the Retirement Plan, provides a lump sum or deferred cash payments in actuarially determined amounts upon retirement for certain officers. ~~None of~~Mr. English is the ~~NEOs~~only current NEO who ~~are currently employed by the Company are~~is eligible to participate in the SERP. Like the Retirement Plan, the SERP considers

only base salary, not incentive compensation, in calculating the benefit due each participant. The Compensation Committee previously approved participation in this SERP for all NEOs. ~~Executives~~Eligible executives are now automatically enrolled in the SERP when his or her annual base salary exceeds the limit that can be considered in calculating benefits under the Retirement Plan.

~~Pension Benefits in Fiscal 2015~~

Name
   Plan Name    Number of Years
Credited Service
(#) Present Value
of Accumulated
Benefit ($)(1)    Payments During Last
Fiscal Year
($)
Michael E. LaRocco(2)

Steven E. English

Retirement Plan
   15 (3) 523,406       0
   SERP    15 (3) 322,173       0
Jessica E. Clark(2)

Kim B. Garland(2)

Clyde H. Fitch.(2)

Retirement Plan
   8    599,533       0
   SERP    218,247       0
Robert P. Restrepo, Jr.

Retirement Plan
   10    702,735       0
   SERP    10    1,558,110       0
   Individual SERP    10    1,794,433       0
James A. Yano

Retirement Plan
   9    595,995       0
   SERP    9    0       152,930 (4)
Stephen J. Hunckler

Retirement Plan
   6    47,551       0
   SERP    6    6,505       0



Pension Benefits in Fiscal 2017



	Plan Name	Number of Years of Credited Service	Present Value of Accumulated Benefit(1)		Payments During Last Fiscal Year
Michael E. LaRocco⁽²⁾
Steven E. English	Retirement Plan	17(3)	$	730,821	—
	SERP	17(3)	$	509,712	—
Kim B, Garland⁽²⁾
Paul M. Stachura⁽²⁾
Gregory A. Tacchetti⁽²⁾

(1)

The amounts shown in this column represent the present value of the normal retirement benefit each NEO would receive under the Retirement Plan, SERP and individual supplemental executive retirement plans if the NEO were to retire at his normal retirement age. Normal retirement age under the plans is defined as attaining age 65. The normal retirement benefit is equal to the sum of ~~(i)~~ 1.75% of a ~~participant’s “covered compensation”~~participant's "covered compensation" multiplied by the ~~participant’s~~participant's years of service plus ~~(ii)~~ 0.65% of a participant’s covered compensation multiplied by the ~~participant’s~~participant's years of service. The normal form of benefit is a single life ~~annuity; however,~~annuity. However, participants may elect a joint and survivor annuity with a survivor benefit of up to 100% of the ~~participant’s~~participant's benefit. A participant who elects a joint and survivor annuity receives a reduced annual benefit, with a joint and 100% survivor annuity providing the smallest annual benefit. Participants who have attained age 55 with 15 years of service may receive an early retirement benefit under the plans. The early retirement benefit for a participant is reduced by 5% for each year prior to age 65 for a participant who terminates between ages 55 and 59 and by 4% for each year prior to age 65 for a participant who terminates between ages 60 and 65. If a participant were to retire at age 55, their normal retirement benefit would be reduced by 45%. As of December 31, ~~2015, no NEOs were~~2017, Mr. English is the only NEO eligible for early retirement benefits under the plans. Participants may elect to receive up to 50% of their benefits in a lump-sum upon their retirement.


(2)	~~Ms. Clark and~~ Messrs. LaRocco, Garland, Stachura and ~~Garland~~Tacchetti are not eligible to participate in the Retirement Plan or SERP and are not a party to an individual supplemental executive retirement plan.

(3)

Includes Mr. ~~English’s~~English's one year of service with Meridian Insurance Group, Inc. ~~(“MIGI”~~("MIGI"). Mr. English was previously an executive officer with MIGI, which was acquired by State Auto Mutual in 2001. Following this acquisition, Mr. English became our ~~employee,~~associate, and for purposes of the Retirement Plan, he was given credit for his one year of eligible service with MIGI (total actuarial value of ~~$37,386~~$32,713 within the Retirement Plan and ~~$23,012~~$20,136 within the SERP).

~~(4)~~
	~~The aggregate balance under Mr. Yano’s SERP was distributed following his death.~~
Deferred Compensation Plans

~~Deferred Compensation Plans~~

Defined Contribution Plan/401(k) Plan

Our defined contribution plan, which we refer to as the ~~“Retirement Savings Plan” or “RSP,”~~"RSP," is intended to be a qualified plan under Sections 401(a) and 401(k) of the Code. Participation in the RSP is available on the same terms to all of our ~~employees,~~associates, including our NEOs. Each participant may elect to contribute from 1% to 50% of his or her base salary to the ~~RSP.~~RSP, subject to any Internal Revenue Service limitations. The deferred amount is contributed to the RSP trust fund and invested in accordance with the election of the participant from among investment funds established under the trust agreement. Investment options include ~~Common Shares,~~common shares, but only up to 20% of new contributions and the total account balance may be invested in ~~Common Shares.~~common shares. Mr. Garland is our only NEO who made this election.

The Company may make a discretionary matching contribution of 100% of each ~~participant’s~~participant's RSP contributions for the first 1% of base salary, plus 50% of each ~~participant’s~~participant's RSP contribution between 2% and 6% of base salary, subject to an annual maximum of $18,000 for ~~2015.~~2017. This equates to a Company contribution in the RSP of $0.58 cents for each salary dollar contributed by an ~~employee~~associate who contributed a full 6% of salary to RSP. While a participant is always vested in his or her own salary reduction contributions, the right of a participant to amounts credited to his or her account as matching contributions is subject to vesting as provided by the 401(k) Plan.

In 2010, all of our ~~employees~~associates hired before January 1, 2010, including our NEOs, made an election to either (i) continue participating in the Retirement Plan and RSP on the terms discussed above or (ii) cease participating in the Retirement Plan as of June 30, 2010, in favor of participating in an expanded benefit under the RSP beginning on July 1, 2010, pursuant to which the Company would

annually contribute to the RSP an amount equal to 5% of their annual base salary until the termination of their employment with the Company. If an ~~employee~~associate elected to participate in the expanded RSP benefit, they would continue to be eligible to receive upon retirement their accrued benefit under the Retirement Plan as of June 30, 2010.

Non-Qualified Deferred Compensation Plan/Supplemental 401(k) Plan

Our Non-Qualified Deferred Compensation Plan, which we refer to as our ~~“Shadow~~"Shadow Plan,”" is a non-qualified, unfunded deferred compensation plan for eligible key ~~employees.~~associates. Eligible ~~employees~~associates include those who are precluded by regulatory limitations from contributing a full 6% of salary to the RSP or who choose to defer a portion of their salary beyond the amount matched by the RSP. Under the Shadow Plan, eligible ~~employees~~associates who wish to participate enter into a salary reduction agreement to defer payment of an additional portion of the ~~employee’s~~associate's salary. Each ~~employee~~associate who is eligible to participate in the Shadow Plan is credited annually with his or her allocable share of Company matching contributions on the same basis ~~that~~ contributions are matched under the RSP, provided ~~that~~ no more than 6% of any ~~employee’s~~associate's base salary is subject to being matched in the aggregate under the RSP and the Shadow Plan.

The total amount of salary deferred under the RSP and the Shadow Plan cannot exceed in the aggregate 50% of a ~~participant’s~~participant's base salary. The Shadow Plan also allows participants to defer up to 100% of short-term and long-term incentive compensation, although bonuses remain ineligible for a Company match. Amounts deferred under the Shadow Plan, along with the Company match on any portion of salary deferral eligible for the match, are invested by State Auto P&C in a variety of mutual fund-type investment options in accordance with the election of the participants, which the participants may modify on a daily basis. Participants may choose from a variety of mutual fund-type investment options, and elect a five or ten-year payout option or a ~~“date-certain”~~"date-certain" distribution option for withdrawal of funds from the Plan. Neither the Shadow Plan nor the RSP provides for above market or preferential earnings opportunities for any participant.

~~Nonqualified Deferred Compensation for Fiscal 2015~~

Name
   Executive
Contributions
in Last Fiscal
Year
($)(1)(2)    Registrant
Contributions in
Last
Fiscal Year
($)(1)(3)    Aggregate Earnings
in Last Fiscal Year
($)(4) Aggregate
Withdrawals/
Distributions
($)    Aggregate
Balance at
Last
Fiscal
Year-End
($)
Michael E. LaRocco
   11,962       4,909       (1,249 ) 0       15,622
Steven E. English
   0       0       (1,301 ) 0       596,102
Jessica E. Clark
   0       0       (260 ) 0       20,457
Kim B. Garland
   0       0       0    0       0
Clyde H. Fitch
   0       0       (124 ) 0       26,520
Robert P. Restrepo, Jr.
   75,314       20,356       (18,910 ) 0       687,974
James A. Yano
   0       0       (121 ) 1,033       26,243
Stephen J. Hunckler
   0       0       (61 ) 0       7,106



Nonqualified Deferred Compensation for Fiscal 2017



	Executive Contributions in Last Fiscal Year ($)⁽¹⁾⁽²⁾	Registrant Contributions in Last Fiscal Year ($)⁽¹⁾⁽³⁾	Aggregate Earnings in Last Fiscal Year ($)⁽⁴⁾	Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at Last Fiscal Year-End ($)
Michael E. LaRocco	63,596	24,014	44,220	—	290,535
Steven E. English	—	—	38,737	—	664,050
Kim B. Garland	135,706	942	34,073	—	329,460
Paul M. Stachura	—	—	2,763	—	22,322
Gregory A. Tacchetti	—	—	952	—	5,928


(1)	Contributions by the NEO or by us, as the case may be, were made pursuant to the Shadow Plan.


(2)	The dollar amounts shown in this column are included in the ~~“Salary”~~"Salary" column in the Summary Compensation ~~Table.~~ Table for 2017.


(3)	The dollar amounts shown in this column are included in the ~~“All~~"All Other ~~Compensation”~~Compensation" column in the Summary Compensation Table for 2017 and are discussed in the footnotes thereto.

(4)

The dollar amounts shown in this column reflect the total earnings on dollars deposited into the ~~NEO’s~~NEO's account in ~~2015~~2017 and all prior years for which the NEO deferred compensation on a non-qualified basis. Earnings are not preferential, in any sense. The dollars in these accounts are invested in investment funds that mirror the investment funds offered to participants in our RSP.

~~Agreements with Named Executive Officers~~



Agreements with Named Executive Officers

LaRocco Employment Agreement

The Company, State Auto Mutual and State Auto P&C entered into an employment agreement with Michael E. LaRocco, our President and Chief Executive Officer, on ~~March 27, 2015,~~November 28, 2017, effective as of ~~April 27, 2015.~~January 1, 2018. The employment agreement ends on December 31, ~~2018,~~2021, unless terminated earlier due to Mr. ~~LaRocco’s~~LaRocco's disability, death, voluntary termination of employment, or involuntary termination of employment by the Company for cause or without ~~cause.~~

cause or termination by Mr. LaRocco for good reason.

Under his employment agreement, Mr. LaRocco receives an annual base salary and is entitled to participate in the ~~LBP,~~OTIP, the ~~LTIP,~~2017 Long-Term Incentive Plan, any Company employee stock purchase plan and the Retirement ~~Plan, the RSP, the SERP and the 2009 Equity~~Savings Plan, and is eligible to participate in all other incentive compensation plans, stock purchase plans, retirement plans, equity-based compensation plans and fringe benefits generally made available to ~~employees~~associates of the Company. The employment agreement further provides, ~~that~~ unless Mr. LaRocco otherwise ~~agrees~~agrees: (i) his annual base salary shall not be less than ~~$850,000,~~$1,040,000; (ii) his target bonus under the ~~LBP~~OTIP shall not be less than ~~100%~~120% of his then current annual base ~~salary~~salary; and (iii) his target bonus under the ~~LTIP~~2017 Long-Term Incentive Plan shall not be less than ~~140%~~180% of his then current annual base salary. The compensation paid to Mr. LaRocco in ~~2015~~2017 is set forth above in the ~~“Summary~~"Summary Compensation ~~Table” on page 65~~Table for 2017."

In addition, Mr. LaRocco's employment agreement requires the Company to grant a special equity award to Mr. LaRocco in 2018 in the form of 40,000 deferred stock units. More information regarding this ~~Proxy Statement.~~

special equity award is set forth above in "Looking Forward-2018 Compensation."

Mr. ~~LaRocco’s~~LaRocco's employment agreement also imposes post-employment covenants that prohibit Mr. LaRocco from disclosing or using our confidential information, engaging in activities which compete with our businesses and soliciting our ~~employees~~associates to work for another company. The obligations imposed by the non-competition and non-solicitation covenants will continue for a period of two years following Mr. ~~LaRocco’s~~LaRocco's separation of service with the Company, provided, ~~that~~ the non-competition obligations will only continue for a period of one year if Mr. ~~LaRocco’s separation from service~~LaRocco terminates his employment with the Company ~~is voluntary.~~

The severance and separation benefits provided to Mr. LaRocco under his employment agreement upon the occurrence of certain termination events are described below under “Potential Payments Upon Termination or Change of Control—LaRocco Employment Agreement.” Mr. LaRocco may be required to repay all or any part of such severance and separation benefits if:

~~Mr. LaRocco violates any of the non-competition, non-solicitation or confidentiality covenants applicable to Mr. LaRocco;~~

(i) the amount of such benefits are calculated based upon the achievement of certain financial results that are subsequently the subject of a financial statement restatement by the Company; and (ii) the amount of his severance and separation benefits would have been lower than the amount actually awarded to him had the financial results been properly reported; or

~~Mr. LaRocco engages in (i) any conduct detrimental to the Company during the employment term which has a material adverse effect on the Company or (ii) any fraudulent conduct.~~

~~LaRocco Executive Agreement~~

We entered into an executive agreement with Mr. LaRocco on March 27, 2015 contemporaneously with our entry into his employment agreement. The term of Mr. LaRocco’s executive agreement coincides with the term of his employment agreement, subject to an extension for the lesser of 36 months after any month in which a Change of Control occurs, or until Mr. LaRocco attains age 65. Mr. LaRocco’s executive agreement will terminate if his employment terminates prior to a Change of Control.

We will provide certain severance benefits to Mr. LaRocco under his executive agreement if Mr. LaRocco incurs a separation of service (as defined by Section 409A of the Code) during the term of his executive agreement:

~~by us at any time within 24 months after a Change of Control;~~

~~by Mr. LaRocco~~ for good ~~reason (as defined in the executive agreement) at any time within 24 months after a Change of Control; or~~

reason.

by us at any time after an agreement has been reached with an unaffiliated third party, the performance of which would result in a Change of Control involving that party, if such Change of Control is consummated within 12 months after the date of Mr. ~~LaRocco’s termination.~~

The severance and separation benefits provided to Mr. LaRocco under his executive agreement are described below under “Potential Payments Upon Termination or Change of Control—LaRocco Executive Agreement.”

Mr. LaRocco’s executive agreement also provides that, for a period of five years after a Change of Control, we would provide Mr. LaRocco with coverage under a standard directors’ and officers’ liability insurance policy at our expense. Furthermore, we will indemnify and hold harmless Mr. LaRocco to the fullest extent permitted under Ohio law against all expenses and liabilities reasonably incurred by Mr. LaRocco in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of having served as our director or officer.

~~English, Clark, Garland and Fitch Executive Agreements~~

We entered into a change of control agreement, which we refer to as “executive agreements,” with Messrs. English and Fitch and Ms. Clark effective as of October 27, 2014. Mr. Garland entered into an executive agreement effective as of December 1, 2015.

The term of the executive agreements ends on the earlier to occur of the third anniversary of the agreement and the end of the month in which the Executive attains age 65 (but, in any event, no later than October 27, 2017); provided, that if a Change of Control occurs during the three-year period, the term of the executive agreement will automatically extend until the earlier to occur of the 36-month anniversary of the date of the Change of Control or the date on which the executive reaches age 65. The executive agreement will terminate if the executive’s employment terminates prior to a Change of Control.

~~Each of the executive agreements defines a “Change of Control” to include the following:~~

the acquisition by any person of beneficial ownership of 30% or more of the Company’s outstanding voting securities (which percentage will increase or decrease, as the case may be, such that the percentage of securities ownership is consistent with any future changes to the percentage of securities ownership represented in the Change of Control definition in the 2009 Equity Plan);

~~a majority of the Board is comprised of other than continuing directors;~~

~~a merger involving the Company where the Company’s shareholders immediately prior to the merger own 50% or less of the combined voting power of the surviving entity immediately after the merger;~~

a sale or other disposition of all or substantially all of the assets of the Company, including a sale of assets or earning power aggregating more than 50% of the assets or earning power of the Company on a consolidated basis;

~~a reorganization or other corporate event involving the Company which would have the same effect as any of the above-described events; and~~

State Auto Mutual affiliates with or is merged into or consolidated with a third party or completes a conversion to a stock insurance company and, as a result, a majority of the Board of Directors of State Auto Mutual or its successor is comprised of other than continuing directors.

~~We will provide certain severance benefits to the executive under the executive agreement if during the term of his or her executive agreement the executive’s employment is terminated:~~

~~by us at any time within 24 months after a Change of Control (for any reason other than for cause, the death or disability of the executive or mandatory retirement at age 65);~~

~~by the executive for good reason (as defined in the executive agreement) at any time within 24 months after a Change of Control; or~~

by us (for any reason other than for cause or the death or disability of the executive) at any time after an agreement has been reached with an unaffiliated third party, the performance of which would result in a Change of Control involving that party, if such Change of Control is actually consummated within 12 months after the date of the executive’s termination.

The severance and separation benefits provided to each of our other executives under his executive agreement are described below under “Potential Payments Upon Termination or Change of Control—English, Clark, Garland and Fitch Executive Agreements.”

~~These executive agreements prohibit the executive from disclosing or using our confidential information. The Board may require the executive to repay all or any portion of the severance benefits if:~~

~~the executive violates any of the non-competition, non-solicitation or confidentiality covenants applicable to the executive;~~

(i) the amount of such benefits are calculated based upon the achievement of certain financial results that are subsequently the subject of a financial statement restatement by the Company; (ii) the executive engages in conduct detrimental to the Company that causes or substantially contributes to the need for the financial statement restatement; and (iii) the amount of his or her severance and separation benefits would have been lower than the amount actually awarded to him had the financial results been properly reported; or

~~the executive engages in any conduct detrimental to the Company during the employment term which has a material adverse effect on the Company.~~

These executive agreements also provide that, for a period of five years after a Change of Control, we will provide the executive with coverage under a standard directors’ and officers’ liability insurance policy at our expense. Furthermore, we will indemnify and hold harmless the executive to the fullest extent permitted under Ohio law if he or she is made a party to any proceeding by reason of having served as our director, officer or employee.

~~Potential Payments Upon Termination or Change of Control~~

~~LaRocco Employment Agreement~~

~~Mr. LaRocco’s~~LaRocco's employment agreement provides him with the following severance and separation benefits under the following termination events:

Termination for Cause.

If Mr. LaRocco is involuntarily terminated for cause, he would be entitled to receive his base salary through the date of ~~termination.~~termination plus any compensation to which he would be entitled under the OTIP and 2017 Long-Term Incentive Plan. Mr. ~~LaRocco’s~~LaRocco's employment agreement defines cause as:

the willful and continued failure of the executive to perform the ~~executive’s~~executive's duties (other than any such failure resulting from incapacity due to a disability), after a written demand for performance is delivered to the executive which specifically identifies the manner in which the executive has not performed the ~~executive’s~~executive's duties;

the willful engaging by the executive in illegal conduct or gross misconduct which has a material adverse effect on the Company;

the breach of any of the confidentiality, non-competition or non-solicitation covenants imposed by the employment agreement; or

the willful failure by the executive to comply with any code of conduct or code of ethics applicable to the executive.

For purposes of the definition of cause, no act or failure to act, on the part of the executive, will be considered ~~“willful”~~"willful" unless it is done, or omitted to be done, by the executive in bad faith or without reasonable belief ~~that~~ the ~~executive’s~~executive's action or omission was in the best interests of the Company.

Termination Without Cause. or for Good Reason

If Mr. LaRocco is terminated without cause (other than in the event of his death, disability or retirement), or Mr. LaRocco terminates his employment for good reason, he would be entitled to receive:

the continuation of the payment of his then-current base salary for ~~the lesser of~~ 24 ~~months or until the end of the calendar year in which he attains age 65;~~

months;

a one-year bonus payment equal to the average of the aggregate bonuses Mr. LaRocco earned under the ~~LBP~~OTIP and 2017 Long-Term Incentive Plan or Prior LTIP for each of the two years immediately preceding the year in which the ~~employment agreement is terminated;~~termination occurred; and

an amount equal to the then current monthly per ~~employee~~associate cost of providing State ~~Auto’s~~Auto's health insurance benefit multiplied by ~~24.~~

24, payable as a single lump sum payment as soon as practicable after separation from service.

In addition, if Mr. LaRocco is terminated without cause or Mr. LaRocco terminates his employment for good reason, any stock options granted to Mr. LaRocco shall vest on the termination date.

Mr. LaRocco's employment agreement defines good reason as:

a material diminution in base salary for any reason, other than in connection with either exigent circumstances or the termination of his employment;

a material diminution in his authority, duties or responsibilities;

a material change in the geographic location in which he must perform services under the employment agreement; and

any other action or inaction that constitutes a material breach of the employment agreement.

Death.

In the event Mr. LaRocco dies while employed by State Auto, his beneficiaries will receive his then-current base salary through the date of his death plus a pro rata share of the compensation he earned under the ~~LBP~~OTIP, the 2017 Long-Term Incentive Plan and the Prior LTIP as of the date of death.

Disability.

If Mr. LaRocco becomes unable to substantially perform his duties hereunder because of illness or other incapacity constituting a disability as defined in Section 409A of the Code, the Company may terminate Mr. ~~LaRocco’s~~LaRocco's employment. In the event of such a termination, Mr. LaRocco would be entitled to receive his base salary and payments under our incentive compensation plans to the date of termination. In addition, Mr. LaRocco shall continue to receive such health insurance benefits as he and his spouse receive on the date of the disability and such group life insurance as Mr. LaRocco has in place on his life as of the date of the disability.

Voluntary Termination.

If Mr. LaRocco voluntarily terminates his employment, including retirement initiated solely by Mr. LaRocco, he shall cease to receive compensation as of the date of his separation from service, except for any compensation to which he is entitled under the ~~LBP~~OTIP, the 2017 Long-Term Incentive Plan or the Prior LTIP as then in effect, provided ~~that~~ he is employed by State Auto on the date such compensation is paid under the ~~LBP~~OTIP, the 2017 Long-Term Incentive Plan or the Prior LTIP.

Mr. LaRocco may be required to repay all or any part of such severance and separation benefits if:

Mr. LaRocco violates any of the non-competition, non-solicitation or confidentiality covenants applicable to Mr. LaRocco;

(i) the amount of such benefits are calculated based upon the achievement of certain financial results that are subsequently the subject of a financial statement restatement by the Company; (ii) Mr. LaRocco engaged in conduct detrimental to State Auto, which caused or substantially contributed to the need for the financial statement restatement by State Auto; and (iii) the amount of his severance and separation benefits would have been lower than the amount actually awarded to him had the financial results been properly reported; or

Mr. LaRocco engages in any conduct detrimental to the Company during the employment term which has a material adverse effect on the Company or any fraudulent conduct.

LaRocco Executive Change in Control Agreement

The Company, State Auto Mutual and State Auto P&C entered into an executive change in control agreement, which we refer to as an "executive agreement," with Mr. LaRocco on November 28, 2017, contemporaneously with our entry into his employment agreement, effective as of January 1, 2018. The term of Mr. LaRocco's executive agreement expires in 2020, subject to an extension for 36 months after any month in which a Change of Control occurs. Mr. LaRocco's executive agreement will ~~provide~~terminate if his employment terminates prior to a Change of Control.

Mr. LaRocco is entitled to receive certain severance benefits under his executive agreement if Mr. LaRocco incurs a separation of service (as defined by Section 409A of the Code) during the term of his executive agreement:

by us at any time within 24 months after a Change of Control;

by Mr. LaRocco for good reason (as defined in the executive agreement) at any time within 24 months after a Change of Control; or

In the event of such a separation of service, Mr. LaRocco will receive the following severance benefits (in addition to accrued compensation, bonuses and vested benefits and stock options) ~~to Mr. LaRocco~~ under his executive agreement if his employment with State Auto is terminated during the term of his executive agreement under the circumstances set forth above under “Change of Control Agreements with Named Executive Officers—LaRocco Executive Agreement”:

agreement:

a lump sum cash payment equal to 2.99 times Mr. ~~LaRocco’s then-current~~LaRocco's then current annual base ~~salary (subject to reduction if Mr. LaRocco is within two years of age 65);~~

salary;

a lump sum cash payment equal to (i) 2.99 times the average of the annual aggregate bonuses Mr. LaRocco earned under the ~~LBP~~OTIP for the three years immediately preceding the year in which the Change of Control occurs ~~(subject to reduction if Mr. LaRocco is within two years of age 65)~~ plus (ii) a prorated annual incentive payment for the year in which the Change of Control occurs based on the target award level established for such year;

~~a lump-sum cash payment~~an amount equal to the then current monthly per ~~employee~~associate cost of providing the ~~Company’s~~Company's health insurance benefit multiplied by ~~the lesser of 36 or the number of months until Mr. LaRocco attains age 65;~~

36;

outplacement benefits up to ~~$35,000;~~$35,000 plus travel expense of up to $5,000; and

stock options or other equity-based awards held by Mr. LaRocco become exercisable in accordance with the applicable terms of the equity compensation plans and award agreements.

Mr. ~~LaRocco’s~~LaRocco may be required to repay all or any part of such severance benefits if:

Mr. LaRocco violates any of the non-competition, non-solicitation or confidentiality covenants applicable to Mr. LaRocco;

(i) the Company calculated the benefits paid to Mr. LaRocco based upon certain financial results that the Company subsequently restates; (ii) Mr. LaRocco engaged in conduct that caused or substantially contributed to the restatement; and (iii) the benefits paid to him would have been reduced if they had been calculated based on the restated financial results; or

Mr. LaRocco engages in any conduct detrimental to the Company during the employment term which has a material adverse effect on the Company or any fraudulent conduct.

In the event Mr. LaRocco's severance payments and benefits are subject to any excise tax but otherwise would not be subject to such tax if the total of such payments and benefits were reduced by 10% or less, then such payments and benefits will be reduced by the minimum amount necessary (not to exceed 10% of such payments and benefits) ensuring the Company will not have to pay an excess severance payment and Mr. LaRocco will not be subject to an excise tax.

Mr. LaRocco's executive agreement also provides ~~that~~for a period of five years after a Change of Control, he would receive at no charge coverage under a standard directors' and officers' liability insurance policy. Furthermore, the Company, State Auto Mutual and State Auto P&C will ~~pay~~indemnify and hold harmless Mr. LaRocco to the fullest extent permitted under Ohio law against all expenses and liabilities reasonably incurred by Mr. LaRocco in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of having served as our director or officer.

English, Garland, Stachura and Tacchetti Executive Change in Control Agreements

The Company, State Auto Mutual and State Auto P&C entered into a change of control agreement, which we refer to as "executive agreements," with Messrs. English, Garland, Stachura and Tacchetti effective as of October 26, 2017.

The terms of the executive agreements end on November 30, 2020; provided, if a Change of Control occurs during the three-year period, the term of the executive agreement will automatically extend until the 36-month anniversary of the date of the Change of Control. The executive agreement will terminate if the executive's employment terminates prior to a Change of Control.

Each of the executive agreements defines a "Change of Control" to include the following:

the acquisition by any person of beneficial ownership of 30% or more of the Company's outstanding voting securities (which percentage will increase or decrease, as the case may be, such ~~amounts as~~that the percentage of securities ownership is consistent with any future changes to the percentage of securities ownership represented in the Change in Control definition in the 2017 Long-Term Incentive Plan);

a majority of the Board is comprised of other than continuing directors;

any event or transaction that the Company would be ~~necessary~~required to ~~compensate him for any excise tax paid~~report under Item 6(e) of Schedule 14A;

a merger involving the Company where the Company's shareholders immediately prior to the merger own 50% or ~~incurred due to any severance payment~~less of the combined voting power of the surviving entity immediately after the merger;

a sale or other ~~benefit provided~~disposition of all or substantially all of the assets of the Company, including a sale of assets or earning power aggregating more than 50% of the assets or earning power of the Company on a consolidated basis;

a reorganization or other corporate event involving the Company which would have the same effect as any of the above-described events; and

The executive is entitled to receive certain severance benefits under the executive agreement if during the term of his executive ~~agreement. However,~~agreement the executive's employment is terminated:

by us at any time within 24 months after a Change of Control (for any reason other than for cause or the death or disability of the executive);

by the executive for good reason (as defined in the executive agreement) at any time within 24 months after a Change of Control; or

by us (for any reason other than for cause or the death or disability of the executive) at any time after an agreement has been reached with an unaffiliated third party, the performance of which would result in a Change of Control involving that party, if ~~Mr. LaRocco’s~~such Change of Control is actually consummated within 12 months after the date of the executive's termination.

In the event of such termination, the executive is entitled to receive the following severance benefits (in addition to accrued compensation and bonuses) under the executive agreement:

a lump sum cash payment equal to two times the executive's annual base salary;

a lump sum cash payment equal to (i) two times the average of the annual aggregate bonus earned by the executive under the LBP or OTIP during the three fiscal years immediately preceding the year in which the Change of Control occurs plus (ii) a prorated annual incentive payment for the year in which the Change of Control occurs based on the target award level established for such year;

outplacement benefits up to a maximum amount equal to 15% of the executive's annual base salary plus up to $5,000 to reimburse the executive for travel expenses incurred in connection with seeking new employment;

stock options and other equity awards held by the executive become exercisable in accordance with the terms of the applicable plan and award agreement; and

an amount equal to the then current monthly per associate cost of providing the Company's health insurance benefit multiplied by 24.

These executive agreements also provide that in the event the executive's severance payments and benefits would not be subject to excise tax if the total of such payments and benefits were reduced by 10% or less, then such payments and benefits would be reduced by the minimum amount necessary (not to exceed 10% of such payments and benefits) so ~~that we would not have to pay an excess severance payment and Mr. LaRocco would not be subject to an excise tax.~~

~~English, Clark, Garland and Fitch Executive Agreements~~

We will provide the following severance benefits (in addition to accrued compensation and bonuses) to the executive under the executive agreement if the executive’s employment with the Company is terminated during the term of his executive agreement under the circumstances set forth above under “Agreements with Named Executive Officers—English, Clark, Garland and Fitch Executive Agreements.”

~~a lump sum cash payment equal to two times the executive’s annual base salary (subject to reduction if the executive is within two years of age 65);~~

a lump sum cash payment equal to two times the average of the annual aggregate bonus earned by the executive under the LBP during the three fiscal years immediately preceding the year in which the Change of Control occurs (subject to reduction if the executive is within two years of age 65);

outplacement benefits up to a maximum amount equal to 15% of the executive’s annual base salary plus up to $5,000 to reimburse the executive for travel expenses incurred in connection with seeking new employment;

~~stock options and other equity awards held by the executive become exercisable in accordance with the terms of the applicable plan; and~~

an amount equal to the then current monthly per employee cost of providing the Company’s health insurance benefit multiplied by 24 (subject to reduction if the executive is within two years of age 65).

These executive agreements also provide that if the executive’s severance payments and benefits would not be subject to excise tax if the total of such payments and benefits were reduced by 10% or less, then such payments and benefits would be reduced by the minimum amount necessary (not to exceed 10% of such payments and benefits) so that the executive would not be subject to an excise tax.

These executive agreements also prohibit the executive from disclosing or using our confidential information. The Board may require the executive to repay all or any portion of the severance benefits if:

the executive violates any of the non-competition, non-solicitation or confidentiality covenants applicable to the executive;

(i) the Company calculated the benefits paid to the executive based upon certain financial results that the Company subsequently restates, (ii) the executive engaged in conduct that caused or substantially contributed to the restatement and (iii) the benefits paid to the executive would have been reduced if they had been calculated based on the restated financial results; or

the executive engages in any conduct detrimental to the Company during the employment term which has a material adverse effect on the Company.

These executive agreements also provide that for a period of five years after a Change of Control, the executive will receive at no charge coverage under a standard directors' and officers' liability insurance policy. Furthermore, the Company, State Auto Mutual and State Auto P&C will indemnify and hold harmless the executive to the fullest extent permitted under Ohio law if he or she is made a party to any proceeding by reason of having served as our director, officer or associate.



Potential Payments Upon Termination or Change of Control

The following table summarizes the potential payments to NEOs upon a termination of employment and/or a change of control of the Company (assuming ~~that~~ the triggering event occurred on December 31, ~~2015)~~2017):

Name

Benefit(1)
   Termination
Without
Cause(2) Termination
For Cause or
Voluntary
Termination Death Disability After
Change
of Control
Michael E. LaRocco

Salary
   $ 1,750,000 (3) $ -0-    $ -0-    $ -0- (4) $ 2,541,500 (5)

Cash Bonus(6)
   $ -0- (7) $ 1,107,833 (8) $ 1,107,833 (8) $ 1,107,833 (8) $ 850,000 (9)

Stock Options
   $ -0- (10) $ -0- (10) $ -0- (10) $ -0- (10) $ -0- (10)

Restricted Stock
   $ -0-    $ -0-    $ 162,702 (11) $ 162,702 (11) $ 162,702 (11)

Health Benefits
   $ 16,560 (12) $ -0-    $ -0-    $ 28,632 (13) $ 24,840 (14)

Outplacement Assistance
   $ -0-    $ -0-    $ -0-    $ -0-    $ 40,000 (15)
TOTAL:    $ 1,766,560    $ 1,107,833    $ 1,270,535    $ 1,299,167    $ 3,619,042
Steven E. English

Salary
   $ -0-    $ -0-    $ -0-    $ -0- (4) $ 1,250,180 (17)

Cash Bonus(18)
   $ 974,175 (8) $ 625,425 (8) $ 739,850 (8) $ 974,175 (8) $ 624,755 (19)

Stock Options
   $ -0-    $ 45,753 (10) $ 45,753 (10) $ 45,753 (10) $ 45,753 (10)

Restricted Stock
   $ -0-    $ 103,835 (11) $ 103,835 (11) $ 103,835 (11) $ 103,835 (11)

Health Benefits
   $ -0-    $ -0-    $ -0-    $ 18,713 (13) $ 16,560 (12)

Outplacement Assistance
   $ -0-    $ -0-    $ -0-    $ -0-    $ 74,750 (20)

Retirement Benefits
   $ 845,580 (16) $ 845,580 (16) $ 845,580 (16) $ 845,580 (16) $ 845,580 (16)
TOTAL:    $ 1,819,755    $ 1,620,593    $ 1,735,018    $ 1,988,056    $ 2,961,413
Jessica E. Clark

Salary
   $ -0-    $ -0-    $ -0-    $ -0- (4) $ 880,000 (17)

Cash Bonus(18)
   $ 625,750 (8) $ -0-    $ 625,750 (8) $ 625,750 (8) $ 578,508 (19)

Stock Options
   $ -0-    $ -0-    $ 33,045 (10) $ 33,045 (10) $ 33,045 (10)

Restricted Stock
   $ -0-    $ -0-    $ 83,369 (11) $ 83,369 (11) $ 83,369 (11)

Health Benefits
   $ -0-    $ -0-    $ -0-    $ 29,508 (13) $ 16,560 (12)

Outplacement Assistance
   $ -0-    $ -0-    $ -0-    $ -0-    $ 71,000 (20)
TOTAL:    $ 625,750    $ -0-    $ 742,164    $ 771,672    $ 1,662,482
Kim B. Garland

Salary
   $ -0-    $ -0-    $ -0-    $ -0- (4) $ 880,000 (17)

Cash Bonus(18)
   $ 401,500 (8) $ -0-    $ 401,500 (8) $ 401,500 (8) $ -0- (19)

Stock Options
   $ -0- (10) $ -0- (10) $ -0- (10) $ -0- (10) $ -0- (10)

Restricted Stock
   $ -0-    $ -0-    $ 90,720 (11) $ 90,720 (11) $ 90,720 (11)

Health Benefits
   $ -0-    $ -0-    $ -0-    $ 29,736 (13) $ 16,560 (12)

Outplacement Assistance
   $ -0-    $ -0-    $ -0-    $ -0-    $ 71,000 (20)
TOTAL:    $ 401,500    $ -0-    $ 492,220    $ 521,956    $ 1,058,280
Clyde H. Fitch

Salary
   $ -0-    $ -0-    $ -0-    $ -0- (4) $ 740,000 (17)

Cash Bonus(18)
   $ 699,675 (8) $ 422,175 (8) $ 544,758 (8) $ 699,675 (8) $ 964,106 (19)

Stock Options
   $ 31,688 (10) $ 31,688 (10) $ 31,688 (10) $ 31,688 (10) $ 31,688 (10)

Restricted Stock
   $ 69,512 (11) $ 69,512 (11) $ 69,512 (11) $ 69,512 (11) $ 69,512 (11)

Health Benefits
   $ -0-    $ -0-    $ -0-    $ 18,713 (13) $ 16,560 (12)

Outplacement Assistance
   $ -0-    $ -0-    $ -0-    $ -0-    $ 60,500 (20)

Retirement Benefits
   $ 817,780 (16) $ 817,780 (16) $ 817,780 (16) $ 817,780 (16) $ 817,780 (16)
TOTAL:    $ 1,618,655    $ 1,314,155    $ 1,463,738    $ 1,637,368    $ 2,700,146
Robert P. Restrepo, Jr(21)

Cash Bonus
   $ 2,091,025 (22)

Stock Options
   $ 156,239 (23)

Restricted Stock
   $ 344,883 (24)

Retirement Benefits
   $ 4,055,279 (25)
TOTAL:    $ 6,647,426
James A. Yano(26)

Cash Bonus
   $ 368,130 (27)

Stock Options
   $ 94,340 (23)

Restricted Stock
   $ 81,917 (24)

Retirement Benefits
   $ 748,925 (25)
TOTAL:    $ 1,293,312
Stephen P. Hunckler(28)

Salary
   $ 418,750 (29)

Cash Bonus
   $ 365,788 (22)

Health Benefits
   $ 5,586

Stock Options
   $ 401,009 (23)

Restricted Stock
   $ 71,300 (24)

Retirement Benefits
   $ 54,056 (25)
TOTAL:    $ 1,316,489



	Benefit(1)	Termination Without Cause(2)			Termination For Cause or Voluntary Termination			Death			Disability			After Change of Control
Michael E. LaRocco	Salary	$	1,850,000	(3)	$	—		$	—		$	—	(4)	$	2,765,750	(5)
	Cash Bonus(6)	$	1,718,496	(7)	$	—	(8)	$	2,483,708	(8)	$	2,483,708	(8)	$	1,241,518	(9)
	Stock Options	$	229,863	(10)	$	—	(10)	$	229,863	(10)	$	229,863	(10)	$	229,863	(10)
	Restricted Stock	$	—		$	—		$	447,371	(11)	$	447,371	(11)	$	447,371	(11)
	Performance Units(22)	$	272,330		$	—		$	816,991		$	816,991		$	272,330
	Health Benefits	$	27,741	(21)	$	—		$	—		$	24,713	(13)	$	41,612	(14)
	Outplacement Assistance	$	—		$	—		$	—		$	—		$	40,000	(15)
	TOTAL:	$	4,098,430		$	—		$	3,977,933		$	4,002,646		$	5,038,444
Steven E. English	Salary	$	—		$	—		$	—		$	—	(4)	$	984,242	(17)
	Cash Bonus(18)	$	473,452	(8)	$	473,452	(8)	$	842,543	(8)	$	842,543	(8)	$	851,351	(19)
	Stock Options	$	72,882		$	72,882	(10)	$	72,882	(10)	$	72,882	(10)	$	72,882	(10)
	Restricted Stock	$	139,922		$	139,922	(11)	$	139,922	(11)	$	139,922	(11)	$	139,922	(11)
	Performance Units(22)	$	210,741		$	210,741		$	210,741		$	210,741		$	210,741
	Health Benefits	$	—		$	—		$	—		$	24,713	(13)	$	27,741	(21)
	Outplacement Assistance	$	—		$	—		$	—		$	—		$	78,818	(20)
	Retirement Benefits	$	1,240,533	(16)	$	1,240,533	(16)	$	1,240,533	(16)	$	1,240,533	(16)	$	1,240,533	(16)
	TOTAL:	$	2,137,530		$	2,137,530		$	2,506,621		$	2,531,334		$	3,606,230
Kim B. Garland	Salary	$	—		$	—		$	—		$	—	(4)	$	935,176	(17)
	Cash Bonus(18)	$	346,898	(8)	$	—		$	770,872	(8)	$	770,872	(8)	$	570,691	(19)
	Stock Options	$	—		$	—		$	65,203	(10)	$	65,203	(10)	$	65,203	(10)
	Restricted Stock	$	—		$	—		$	188,843	(11)	$	188,843	(11)	$	188,843	(11)
	Performance Units(22)	$	62,570		$	—		$	187,708		$	187,708		$	62,570
	Health Benefits	$	—		$	—		$	—		$	35,205	(13)	$	38,970	(12)
	Outplacement Assistance	$	—		$	—		$	—		$	—		$	75,138	(20)
	TOTAL:	$	409,468		$	—		$	1,212,626		$	1,247,831		$	1,936,591
Paul M. Stachura	Salary	$	—		$	—		$	—		$	—	(4)	$	794,718	(17)
	Cash Bonus(18)	$	416,930	(8)	$	—		$	675,213	(8)	$	675,213	(8)	$	277,997	(19)
	Stock Options	$	—		$	—		$	65,332	(10)	$	65,332	(10)	$	65,332	(10)
	Restricted Stock	$	—		$	—		$	186,747	(11)	$	186,747	(11)	$	186,747	(11)
	Performance Units(22)	$	46,078		$	—		$	138,233		$	138,233		$	46,078
	Health Benefits	$	—		$	—		$	—		$	35,205	(13)	$	38,970	(12)
	Outplacement Assistance	$	—		$	—		$	—		$	—		$	64,604	(20)
	TOTAL:	$	463,008		$	—		$	1,065,525		$	1,100,730		$	1,474,446
Gregory A. Tacchetti	Salary	$	—		$	—		$	—		$	—	(4)	$	808,500	(17)
	Cash Bonus(18)	$	194,430	(8)	$	—		$	457,193	(8)	$	457,193	(8)	$	284,229	(19)
	Stock Options	$	—		$	—		$	36,074	(10)	$	36,074	(10)	$	36,074	(10)
	Restricted Stock	$	—		$	—		$	120,673	(11)	$	120,673	(11)	$	120,673	(11)
	Performance Units(22)	$	46,883		$	—		$	140,650		$	140,650		$	46,883
	Health Benefits	$	—		$	—		$	—		$	35,205	(13)	$	38,970	(12)
	Outplacement Assistance	$	—		$	—		$	—		$	—		$	65,638	(20)
	TOTAL:	$	241,313		$	—		$	754,590		$	789,795		$	1,400,967

(1)

The potential post-employment payments and benefits shown in this table are payable to Messrs. LaRocco, English, Garland, Stachura and ~~Fitch and Ms. Clark~~Tacchetti pursuant to their respective employment and/or executive agreements with us and the applicable terms of the ~~LBP,~~OTIP, Prior LTIP, 2017 Long-Term Incentive Plan, 2009 Equity Plan and associated award agreements. The NEOs have no other agreement or plan which provides them with potential post-employment payments or benefits, except in the case of disability, where we provide long-term disability benefits to all of our ~~employees~~associates subject to certain terms and conditions. Unless otherwise indicated, all payments would be made in one lump sum amount. For narrative disclosure of the material terms of our agreements with Messrs. LaRocco, English, Garland, Stachura and ~~Fitch and Ms. Clark~~Tacchetti see “—above "Agreements with Named Executive ~~Officers” on page 75 of this Proxy Statement~~Officers" and the narrative disclosure ~~that~~ immediately ~~precedes~~preceding this table.

(2)

~~Under~~Mr. LaRocco's employment agreement entitles him to terminate his employment for good reason (as defined in his employment agreement) independent of a change in control, in which case he would be entitled to the same payments and benefits shown in the termination without cause column. There are no provisions under the applicable agreements ~~there are no provisions~~ permitting the other NEOs to terminate their employment for good reason prior to a change of control of our Company or State Auto Mutual.


(3)	This dollar amount represents the continuation of the payment of Mr. ~~LaRocco’s~~LaRocco's base salary for 24 months.


(4)	If terminated for disability, the NEO would be entitled to receive 60% of his or her base salary as of December 31, ~~2014~~2017, until retirement at age 65 or the disability terminates, payable in accordance with the Company’s standard payroll practices. The Company cannot develop a reasonable estimate of the aggregate amount that would be payable to the NEO for this benefit.


(5)	This dollar amount represents 2.99 times Mr. ~~LaRocco’s~~LaRocco's annual base salary on December 31, ~~2015.~~ 2017.

(6)

Mr. LaRocco would not be entitled to any cash award under the OTIP, Prior LTIP or 2017 Long-Term Incentive Plan in the event his employment is terminated for cause or in the event he voluntarily terminates his employment without good reason. In the event Mr. LaRocco is terminated by reason of his ~~voluntary termination~~death or disability, he would be entitled to a ~~prorated~~cash award under the OTIP, Prior LTIP and 2017 Long-Term Incentive Plan for each performance period in effect as of the date of termination equal to his target award for each such performance period multiplied by a fraction, the numerator would be the number of days of employment in the performance period through the date of termination, and the denominator would be the number of days in the performance period.

(7)

Mr. LaRocco's employment agreement provides, if he is terminated without cause (other than in the event of his death, disability or retirement) or if he terminates his employment for good reason, he would be entitled to receive a payment equal to the average of the aggregate bonuses he earned under the OTIP and the 2017 Long-Term Incentive Plan or Prior LTIP, as applicable, for each of the two years immediately preceding the year in which the termination occurred. Mr. LaRocco would also be entitled a prorated cash award under the 2017 Long-Term Incentive Plan and Prior LTIP for each performance period in effect as of the date of termination based upon the length of time ~~that the NEO~~he was employed by the Company during the performance period. The Company cannot develop a reasonable estimate of any future cash payments under the Prior LTIP or the 2017 Long-Term Incentive Plan because it does not have final performance data for any performance period under the Prior LTIP or the 2017 Long-Term Incentive Plan and cannot predict the performance of the members of the LTIP Peer Group. Accordingly, the Company has assumed, solely for the purpose of providing a quantification of the cash amounts that would be payable to ~~Mr. LaRocco~~the NEO upon a hypothetical termination of his employment without cause, ~~or by reason of his voluntary termination, that~~ each of the performance measures applicable to each performance period in effect under the Prior LTIP or the 2017 Long-Term Incentive Plan as of the date of termination would be satisfied at the target level. In addition, Mr. LaRocco would be entitled to the actual amount he earned under the OTIP for 2017.


(8)	This dollar amount represents the amount of cash compensation to which the NEO is entitled pursuant to the OTIP, 2017 Long-Term Incentive Plan and Prior LTIP as of December 31, 2017.


(9)	This dollar amount represents 2.99 times the sum of the average of the annual aggregate bonuses Mr. LaRocco earned for the three years immediately preceding the year in which the Change of Control occurs ($316,518) plus the target OTIP award established for Mr. LaRocco for 2017 ($925,000).

(10)

This dollar amount represents the aggregate difference between the closing market price for our common shares on December 31, 2017, ($29.12) and the exercise price of the unvested stock options held by the NEO on December 31, 2017, the vesting of which will accelerate upon the termination event. However, if the NEO's employment is terminated due to illegal conduct engaged in by the NEO, all options held by the NEO will be forfeited.


(11)	This dollar amount represents the number of common shares underlying the unvested restricted common shares held by the NEO on December 31, 2017, the vesting of which will accelerate upon the termination event, multiplied by the closing market price of our common shares on December 31, 2017, ($29.12).


(12)	This dollar amount represents the monthly per associate cost of providing State Auto's health insurance benefit as of December 31, 2017, ($1,624) multiplied by 24.


(13)	This dollar amount represents our estimate of the present value of the health benefits the NEO would be entitled to if the NEO was terminated on December 31, 2017, by reason of his or her disability.


(14)	This dollar amount represents the monthly per associate cost of providing State Auto's health insurance benefit as of December 31, 2017, ($1,156) multiplied by 36.


(15)	This dollar amount represents the maximum amount for which the Company will reimburse the NEO for expenses he incurs in connection with seeking new employment (up to $35,000 for outplacement services and up to $5,000 for travel expenses incurred in connection with seeking new employment).


(16)	This dollar amount represents the value of the retirement benefits payable to the NEO or his beneficiaries under the retirement plans of the Company in which the NEO participates assuming the termination event was effective on December 31, 2017.


(17)	This dollar amount represents two times the NEO's annual base salary as of December 31, 2017.

(18)

In the event a non-chief executive officer NEO is terminated without cause, the NEO would be entitled to a prorated cash award under the OTIP, Prior LTIP and 2017 Long-Term Incentive Plan for each performance period in effect as of the date of termination based upon the length of time the NEO was employed by the Company during the performance period. The Company cannot develop a reasonable estimate of any future cash payments under the Prior LTIP or the 2017 Long-Term Incentive Plan because it does not have final performance data for any performance period under the Prior LTIP or the 2017 Long-Term Incentive Plan and cannot predict the performance of the members of the LTIP Peer Group. Accordingly, the Company has assumed, solely for the purpose of providing a quantification of the cash amounts that would be payable to the NEO upon a hypothetical termination of his employment without cause, each of the performance measures applicable to each performance period in effect under the Prior LTIP or the 2017 Long-Term Incentive Plan as of the date of termination would be satisfied at the target level. The NEO would not be entitled to any cash award under the Prior LTIP or the 2017 Long-Term Incentive Plan in the event his employment is terminated for ~~cause.~~cause or the NEO voluntarily terminates his employment (unless the NEO is retirement eligible). In the event ~~Mr. LaRocco is terminated~~of termination of the NEO's employment by reason of his death heor disability, the NEO would be entitled to ana cash award under the OTIP, Prior LTIP and 2017 Long-Term Incentive Plan for each performance period in effect as of the date of termination equal to his target award for each such performance period multiplied by a fraction, the numerator of which would be the number of days of employment in the performance period through the date of termination, and the denominator of which would be the number of days in the performance period.

~~(7)~~

~~This dollar amount represents the sum of the average of the aggregate bonuses Mr. LaRocco earned under the LBP and LTIP for 2013 and 2014.~~

~~(8)~~

This dollar amount represents the amount of compensation to which the NEO is entitled pursuant to the LBP and LTIP as of December 31, 2015; provided that Mr. LaRocco would not be entitled to any payment pursuant to the LBP or LTIP if he is terminated for cause.

~~(9)~~

This dollar amount represents (i) 2.99 times the sum of the average of the annual aggregate bonuses Mr. LaRocco earned under the LBP for the two years immediately preceding the year in which the Change of Control occurs ($0) plus (ii) the target LBP award established for Mr. LaRocco for 2015 ($850,000).

~~(10)~~

This dollar amount represents the aggregate difference between the closing market price of our Common Shares on December 31, 2015 ($20.59) and the exercise price of the unvested stock options held by the NEO on December 31, 2015, the vesting of which will accelerate upon the termination event; provided, however, that if the NEO’s employment is terminated due to illegal conduct engaged in by the NEO, all options held by the NEO will be forfeited.

~~(11)~~
This dollar amount represents the number of Common Shares underlying the unvested restricted common shares held by the NEO on December 31, 2015, the vesting of which will accelerate upon the termination event, multiplied by the closing market price of our Common Shares on December 31, 2015 ($20.59).

~~(12)~~

~~This dollar amount represents the monthly per employee cost of providing State Auto’s health insurance benefit as of December 31, 2015 ($690) multiplied by 24.~~

~~(13)~~

~~This dollar amount represents our estimate of the present value of the health benefits the NEO would be entitled to if the NEO was terminated on December 31, 2015 by reason of his or her disability.~~

~~(14)~~

~~This dollar amount represents the monthly per employee cost of providing State Auto’s health insurance benefit as of December 31, 2015 ($690) multiplied by 36.~~

~~(15)~~

This dollar amount represents the maximum amount for which the Company will reimburse the NEO for expenses he incurs in connection with seeking new employment (up to $35,000 for outplacement services and up to $5,000 for travel expenses incurred in connection with seeking new employment).

~~(16)~~

This dollar amount represents the value of the retirement benefits payable to the NEO or his beneficiaries under the retirement plans of the Company in which the NEO participates assuming the termination event was effective on December 31, 2015.

~~(17)~~

~~This dollar amount represents two times the NEO’s annual base salary as of December 31, 2015, (subject to reduction if the executive is within two years of age 65).~~

~~(18)~~

In the event a non-CEO NEO who is not eligible for retirement under the LTIP (Ms. Clark and Mr. Garland) is terminated without cause or by reason of his or her voluntary termination or disability, the NEO would be entitled to a prorated award under the LTIP for each performance period in effect as of the date of termination based upon the length of time that the NEO was employed by the Company during the performance period. In the event a non-CEO NEO who is eligible for retirement under the LTIP (Messrs. English and Fitch) is terminated without cause or by reason of his voluntary termination or disability, the NEO would be entitled to the payment he would have received under the LTIP for each performance period in effect as of the date of termination had the NEO remained employed through the end of such performance periods. The Company cannot develop a reasonable estimate of any future payments under the LTIP because it does not have final performance data for any performance period under the LTIP and cannot predict the performance of the members of the LTIP Peer Group. Accordingly, the Company has assumed, solely for the purpose of providing a quantification of the amounts that would be payable to the NEO upon a hypothetical termination of his employment without cause or by reason of his voluntary termination, that each of the performance measures applicable to each performance period in effect under the LTIP as of the date of termination would be satisfied at the target level. The NEO would not be entitled to any award under the LTIP in the event his employment is terminated for cause. In the event of termination of the NEO’s employment by reason of his or her death, the NEO would be entitled to an award under the LTIP for each performance period in effect as of the date of termination equal to his target award for each such performance period multiplied by a fraction, the numerator of which would be the number of days of employment in the performance period through the date of termination, and the denominator of which would be the number of days in the performance period.

(19)

~~For non-CEO NEOs who are not eligible for retirement under the LTIP (Ms. Clark and Mr. Garland), this~~This dollar amount represents two times the average of the annual aggregate bonus earned by the executive under the LBP and OTIP for ~~2012, 2013~~2014, 2015 and ~~2014. Non-CEO NEOs who are eligible~~2016 plus the target OTIP award established for ~~retirement under the LTIP (Messrs. English and Fitch), would be entitled to a dollar amount equal to the sum of (i) two times the average of the annual aggregate bonus earned by~~ the executive ~~under the LBP~~ for 2012, 2013 and 2014 and (ii) the payment the NEO would have received under the LTIP for each performance period in effect as of the date of termination had the NEO remained employed through the end of such performance periods. The Company cannot develop a reasonable estimate of any future payments under the LTIP because it does not have final performance data for any performance period under the LTIP and cannot predict the performance of the members of the LTIP Peer Group. Accordingly, the Company has assumed, solely for the purpose of

2017.

providing a quantification of the amounts that would be payable in connection with this event to a non-CEO NEO, that each of the performance measures applicable to each performance period in effect under the LTIP as of the date of termination would be satisfied at the target level.

(20)	This dollar amount represents 15% of the value of the NEO’s annual base salary as of December 31, ~~2015,~~2017, plus a travel expense account of up to $5,000 to reimburse the NEO for travel expenses he incurs in connection with seeking new employment.

(21)

~~Mr. Restrepo’s employment with~~This dollar amount represents the ~~Company and~~monthly per associate cost of providing State ~~Auto Group terminated upon his retirement from his remaining positions with the Company and the State Auto Group effective on~~Auto's health insurance benefit as of December 31, 2015. Under the terms of his employment agreement, the termination of Mr. Restrepo’s employment constituted a retirement. Accordingly, with respect to Mr. Restrepo, this table only discloses those amounts payable to Mr. Restrepo in connection with that triggering event.

2017, ($1,156) multiplied by 24.

(22)

~~The~~In the event of a change in control (as defined in the 2017 Long-Term Incentive Plan) or if an NEO is ~~entitled to~~terminated without cause, a prorated portion of the ~~payment he~~performance units held by the NEO would ~~have received under the LTIP for each~~vest and be earned based on our actual performance ~~period in effect~~ as of the ~~date~~end of ~~termination had~~the performance period applicable to the performance units. The prorated amount will be based on the number of days the NEO remained employed ~~through~~during the ~~end of such~~ performance ~~periods.~~period. The Company cannot develop a reasonable estimate of ~~any future payments under~~ the ~~LTIP~~number of performance units that would vest and be earned in the event of a change in control or if the NEO is terminated without cause because it does not have final performance data for any performance period under the ~~LTIP and cannot predict the performance of the members of the LTIP Peer Group.~~2017 Long-Term Incentive Plan. Accordingly, the Company has assumed, solely for the purpose of providing a quantification of the ~~amounts~~value of the performance units that would ~~be payable to the NEO that~~vest upon a hypothetical termination, each of the performance measures applicable to each performance period in effect under the ~~LTIP~~2017 Long-Term Incentive Plan as of the date of termination would be satisfied at the target level.

~~(23)~~

~~This dollar amount represents the aggregate difference between the closing market price of our Common Shares on the termination date and the exercise price of the unvested stock options~~ The NEO would forfeit all performance units held by the NEO on the termination date, the vesting of which accelerated upon the termination event. The Summary Compensation Table does not include these amounts for Messrs. Restrepo and Yano as the grant date fair value reported in the ~~Summary Compensation Table~~event his employment is terminated for ~~these stock options exceeds such difference.~~

~~(24)~~

~~This~~cause or the NEO voluntarily terminates his employment (unless the NEO is retirement eligible). In the event of termination of the NEO's employment by reason of his death or disability, the target number of performance units held by the NEO would vest and be earned. The dollar amount represents the number of ~~Common Shares~~common shares underlying the unvested ~~restricted common shares~~performance units held by the NEO on ~~the termination date, the vesting of which accelerated~~December 31, 2017, that would vest and be earned upon the termination event, multiplied by the closing market price of our ~~Common Shares~~common shares on ~~the termination date. The Summary Compensation Table only includes the difference between such dollar amounts~~December 31, 2017, ($29.12).

OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY



Beneficial Ownership Information for Directors and ~~the grant date fair value reported in the Summary Compensation Table for these stock awards.~~ Named Executive Officers

~~(25)~~

This dollar amount represents the value as of the termination date of the retirement benefits payable to the NEO or his beneficiaries under the retirement plans of the Company in which the NEO participates.

~~(26)~~

Mr. Yano’s employment with the Company and State Auto Group terminated upon his death on September 14, 2015. Accordingly, with respect to Mr. Yano, this table only discloses those amounts payable to Mr. Yano in connection with that triggering event.

~~(27)~~

~~This dollar amount represents the amount of compensation to which the NEO is entitled pursuant to the LBP and LTIP as of his termination date.~~

~~(28)~~

Mr. Hunckler’s employment with the Company and State Auto Group terminated effective on September 11, 2015. Accordingly, with respect to Mr. Hunckler, this table only discloses those amounts payable to Mr. Hunckler in connection with that triggering event.

~~(29)~~

~~This dollar amount represents the aggregate salary Mr. Hunckler is entitled to continue to receive under his severance arrangement after his termination date.~~

~~COMPENSATION COMMITTEE~~

~~INTERLOCKS AND INSIDER PARTICIPATION~~

The following table sets forth information with respect to common shares beneficially owned by directors, director nominees and our NEOs (those persons listed in the Summary Compensation Committee currently consists of the following five members of our Board of Directors: Chairperson Robert E. Baker; David J. D’Antoni; Eileen A. Mallesch; Thomas E. Markert; and S. Elaine Roberts. None of the members of the Compensation Committee is, or was, an officer or employee of our Company or any of our subsidiaries or of State Auto Mutual. Also, none of our executive officers served during 2015 as a member of a compensation committee or as a director of any entity for which any of our directors served as an executive officer.

~~COMPENSATION COMMITTEE REPORT~~

The Compensation Committee of our Board of Directors oversees our compensation programs on behalf of our Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with managementTable within the Compensation Discussion and Analysis ~~set forth~~section of this Proxy Statement) as of March 16, 2018:



	Common Shares Beneficially Owned (1)	Stock Options (2)	Restricted Share Units (3)	Total Beneficial Ownership of Common Shares and RSUs	Percent of Class
Robert E. Baker	2,800	—	34,449	37,249	*
Michael J. Fiorile	—	—	9,875	9,875	*
Kym M. Hubbard	—	—	5,331	5,331	*
Michael E. LaRocco	69,532 (4)(5)(6)(7)	32,786	—	102,318	*
Eileen A. Mallesch	3,800	—	27,549	31,349	*
Thomas E. Markert	506	—	34,449	34,955	*
David R. Meuse	65,000	—	36,306	101,306	*
Setareh Pouraghabagher	—	—	2,943	2,943	*
S. Elaine Roberts	1,000	—	38,181	39,181	*
Steven E. English	35,109 (6)(7)(8)	133,627	—	168,736	*
Kim B. Garland	84,405 (6)(7)(8)(9)	12,270	—	96,675	*
Paul M. Stachura	21,082 (6)(7)(8)(10)	17,969	—	39,051	*
Gregory A. Tacchetti	16,651 (6)(7)(8)(11)	5,584	—	22,235	*

Directors and Officers as a Group (20 people)	360,002 (4)(5)(6)(7)(8)(9)(10)(11)	293,248	189,083	842,233	1.97%

* Less than one (1%) percent.

(1)

Except as indicated in the notes to this table, the persons named in the table and/or their spouses have sole voting and investment power with respect to all common shares shown as beneficially owned by them. Includes restricted stock that vests on a time (and not performance) basis, and associated restricted stock dividend reinvestment, as appropriate, for Named Executive Officers, as further described below.


(2)	With respect to stock options, this table includes only stock options for common shares which are currently exercisable or exercisable within 60 days of March 16, 2018, and "in the money" based on a price of $28.71, which represents the average closing price for the Company’s common shares during the 30-day period ending on March 16, 2018.


(3)	Represents RSUs granted under the Directors' RSU Plan. Includes dividend equivalents reinvested in our common shares of: Mr. Baker—3,654; Mr. Fiorile—270; Mrs. Hubbard—72; Mrs. Mallesch—2,165; Mr. Markert—3,654; Mr. Meuse—4,111; Mrs. Pouraghabagher—21; Ms. Roberts—4,586.

(4)

Includes a restricted stock award of 7,902 common shares which are subject to a risk of forfeiture if, prior to May 7, 2018, Mr. LaRocco's employment is terminated or he violates any provision of the restricted stock agreement applicable to these common shares. However, these common shares will not be forfeited, and will automatically vest, if, prior to May 7, 2018, Mr. LaRocco's employment is terminated in connection with a change of control of the Company. These common shares are also subject to restrictions on transfer until May 7, 2018.

(5)

Includes a time-based deferred stock unit award of 20,000 units which vest over a three year period, with 1/3 vesting each year on the last day of February, beginning in 2019 and ending in 2021, unless Mr. LaRocco's employment is terminated or he violates any provision of the deferred stock unit agreement applicable to these units. However, if Mr. LaRocco's employment is terminated in connection with a change of control of the Company, these units will not be forfeited, and will automatically vest on the date of Mr. LaRocco's termination of employment. These units are also

subject to restrictions on transfer until they vest according to the three year vesting schedule. The Compensation Committee also made a deferred stock unit award of 20,000 units to Mr. LaRocco, which vest based on performance criteria over a three year period. These units are not included in this Proxy Statement. Based upon the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our Company’s Annual Report on Form 10-K for the 2015 fiscal year and in this Proxy Statement.

~~Compensation Committee~~

~~Robert E. Baker, Chairperson~~

~~David J. D’Antoni~~

~~Eileen A. Mallesch~~

~~Thomas E. Markert~~

~~S. Elaine Roberts~~

~~REPORT OF THE AUDIT COMMITTEE~~

The Audit Committee provides assistance to our directors in fulfilling their responsibility to our shareholders relating to corporate accounting, reporting practices, internal controls relating to financial reporting, and the quality and integrity of our financial reports. In so doing, the Audit Committee maintains free and open communication between our directors, independent registered public accounting firm, internal auditors, and senior management. Notwithstanding the foregoing, it is not the dutytotal because of the Audit Committee to plan or conduct audits or to determine that our financial statements and disclosures are complete, accurate, and in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilitiesnature of ~~our independent registered public accounting firm and management, respectively.~~

In the course of fulfilling its responsibilities, the Audit Committee reviewed the audited financial statements in our Company’s Annual Report on Form 10-K for the 2015 fiscal year with our management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee also reviewed with our independent registered public accounting firm, who are responsible for expressing an opinion on the conformity of those audited financial statements with United States’ generally accepted accounting principles (“US GAAP”), their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee under auditing standards generally accepted in the United States, including those matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. In addition, the Audit Committee discussed with our independent registered public accounting firm its independence from our management and considered the compatibility of any permitted and pre-approved non-audit services with the independent registered public accounting firm’s independence. The Audit Committee also received written disclosures regarding the independent auditors’ independence from management and the Company, and received a letter confirming that fact from the independent auditors, which included applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence.

The Audit Committee discussed with our internal auditor and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee regularly monitors our compliance with Section 404 of the Sarbanes-Oxley Act. The Company uses the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework to evaluate the effectiveness of our internal control over financial reporting. The Audit Committee periodically reviews the suitability of this framework with management. The Audit Committee and management currently believe that the COSO 2013 framework is a suitable framework for its evaluation of our internal control over financial reporting because it is free from bias, permits reasonably qualitative and quantitative measurements of our internal controls, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of our internal controls are not omitted and is relevant to an evaluation of internal control over financial reporting. The Audit Committee meets with our internal auditor and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting. The Audit Committee also meets with our Chief Financial Officer and our General Counsel without the rest of management present to discuss any matters of interest to the Audit Committee. The Audit Committee receives a quarterly report from the CRO on selected risk areas. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to our Board of Directors (and our Board has approved) that the audited financial statements be included in our Annual Report on Form 10-K for the 2015 fiscal year for filing with the SEC.

The Audit Committee held a total of nine meetings in 2015, four in person and five by conference calls. All of the Audit Committee members participated in 100% of the 2015 meetings that took place while they were members of the Committee. All of the members of the Audit Committee are independent directors as defined by the Nasdaq listing rules and the applicable regulations of the SEC.

The full responsibilities of the Audit Committee are set forth in its charter. The charter is reviewed annually by the Audit Committee and our Board and, if deemed necessary following such review, amended. In addition to the foregoing, these responsibilities include sole authority for selecting our independent registered public accounting firm, reviewing with management the adequacy of loss reserves, pre-approving expenditures for services of our independent registered public accounting firm, sole authority to retain independent advisors, receipt and disposition of matters relating to allegations of accounting or other improprieties, reviewing matters relating to our Code of Business Conduct and participating in disclosure control procedures and functioning as our qualified legal compliance committee. The Audit Committee also consults with our General Counsel with respect to legal matters affecting the Company.

As discussed above, the Audit Committee is responsible to monitor and review our financial reporting process on behalf of our Board of Directors. However, it is not the duty or responsibility of the Audit Committee to conduct auditing or accounting reviews or procedures. Members of the Audit Committee are not our employees, and some members are not accountants or auditors by profession or experts in the fields of accounting or auditing. Therefore, the Audit Committee has relied, without independent verification, on management’s representation that the financial statements have been prepared with integrity and objectivity and in conformity with US GAAP and on the audit opinions of our independent registered public accounting firm included in its report on our financial statements. The Audit Committee’s review does not provide the Audit Committee with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions with management and our independent registered public accounting firm do not assure that our financial statements are presented in accordance with US GAAP, that the audit of our financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States), or that our independent auditors are in fact “independent.”

The Audit Committee receives regular reports from our Chief Compliance Officer with respect to matters coming within the scope of our Employee Code of Business Conduct. Our Chief Executive Officer and principal financial officers have each agreed to be bound by our Employee Code of Business Conduct and the Sarbanes-Oxley Act mandated Code of Ethics for Senior Financial Officers as a Special Supplement to our Employee Code of Business Conduct. We have also implemented and applied our Employee Code of Business Conduct throughout our Company. We have also implemented procedures for the receipt of complaints concerning our accounting, internal accounting controls, or auditing practices, including the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing practices.

~~Audit Committee~~

~~Eileen A. Mallesch, Chairperson~~

~~Robert E. Baker~~

~~David R. Meuse~~

~~Alexander B. Trevor~~

performance-based deferred stock units.

(6)

Includes restricted stock awards made to the Named Executive Officers and other officers on March 3, 2016. On that date, the Compensation Committee made the following restricted stock awards to the Named Executive Officers: Mr. LaRocco—7,461 common shares; Mr. English—2,334 common shares; Mr. Garland—2,079 common shares; Mr. Stachura—1,513 common shares; Mr. Tacchetti—1,426 common shares; and Section 16 Officers as a group—22,862 common shares. The common shares are subject to a risk of forfeiture if, prior to March 3, 2019, the award recipient's employment is terminated or he or she violates any provision of the restricted stock agreement applicable to these common shares. However, these common shares will not be forfeited, and will automatically vest, if, prior to March 3, 2019, the award recipient’s employment is terminated in connection with a change of control of the Company. These common shares are also subject to restrictions on transfer until March 3, 2019.

(7)

Includes a time-based restricted stock award made to the Named Executive Officers and other officers on March 1, 2018. On that date, the Compensation Committee made the following restricted stock awards to the Named Executive Officers: Mr. LaRocco—8,363 common shares; Mr. English—3,337 common shares; Mr. Garland—3,171 common shares; Mr. Stachura—2,335 common shares; Mr. Tacchetti—2,376 common shares; and Section 16 Officers as a group—27,049 common shares. These shares vest over a three period, with 1/3 vesting each year on December 31. The common shares, or some portion thereof, are subject to a risk of forfeiture if, prior to December 31, 2020, the award recipient's employment is terminated or he or she violates any provision of the restricted stock agreement applicable to these common shares. However, these common shares will not be forfeited, and will automatically vest, if, prior to December 31, 2020, the award recipient's employment is terminated in connection with a change of control of the Company. These common shares are also subject to restrictions on transfer until they vest according to the three year vesting schedule.

(8)

Includes a time-based restricted stock award made to the Named Executive Officers on March 1, 2018. On that date, the Compensation Committee made the following time-based restricted stock awards to the Named Executive Officers: Mr. English—10,000 common shares; Mr. Garland—10,000 common shares; Mr. Stachura—10,000 common shares; and Mr. Tacchetti—10,000 common shares. These shares vest over a four year period, with 1/4 vesting each year end beginning on December 31, 2018 and ending on December 31, 2021, unless individually, any of the above named executive officer's employment is terminated or they violate any provision of the restricted stock agreement applicable to these shares. However, if any of the above named executive officer's employment is terminated in connection with a change of control of the Company, the individual named executive officer’s shares will not be forfeited, and will automatically vest on the date of the award recipient's termination of employment. These shares are also subject to restrictions on transfer until they vest according to the four year vesting schedule. The Compensation Committee also made the following performance-based restricted stock awards, a portion of which vest based on annual performance criteria each year, to the Named Executive Officers: Mr. English—10,000 common shares; Mr. Garland—10,000 common shares; Mr. Stachura—10,000 common shares; and Mr. Tacchetti— 10,000 common shares, and are not included in this figure because of the nature of performance-based restricted stock.

(9)

Includes restricted stock awards of 2,214 and 2,192 common shares which are subject to a risk of forfeiture if, prior to August 24, 2018, Mr. Garland's employment is terminated or he violates any provision of the restricted stock agreement applicable to these common shares. However, these common shares will not be forfeited, and will automatically vest, if, prior to August 24, 2018, Mr. Garland's employment is terminated in connection with a change of control of the Company. These common shares are also subject to restrictions on transfer until August 24, 2018.

(10)

Includes restricted stock awards of 470 and 4,430 common shares which are subject to a risk of forfeiture if, prior to September 15, 2018, Mr. Stachura's employment is terminated or he violates any provision of the restricted stock agreement applicable to these common shares. However, these common shares will not be forfeited and will automatically vest, if, prior to September 15, 2018, Mr. Stachura's employment is terminated in connection with a change of control of the Company. These common shares are also subject to restrictions on transfer until September 15, 2018.

(11)

Includes a restricted stock award of 2,718 common shares which is subject to a risk of forfeiture if, prior to August 25, 2018, Mr. Tacchetti's employment is terminated or he violates any provision of the restricted stock agreement applicable to these common shares. However, these common shares will not be forfeited and will automatically vest, if, prior to August 25, 2018, Mr. Tacchetti's employment is terminated in connection with a change of control of the Company. These common shares are also subject to restrictions on transfer until August 25, 2018.

~~PRINCIPAL HOLDERS OF VOTING SECURITIES~~



Principal Holders of Voting Securities

The following table sets forth certain information, as of March ~~8, 2016,~~16, 2018, with respect to the only shareholders known to us to be the beneficial owners of more than 5% of our outstanding ~~Common Shares:~~

Name and Address of Beneficial Owner
   Amount and Nature
of Beneficial
Ownership Percent
of Class
State Automobile Mutual Insurance Company(1)
   25,960,859    62.6 %
518 East Broad Street

Columbus, OH 43215

Dimensional Fund Advisors LP
   2,388,855 (2) 5.78 %
Building One, 6300 Bee Cave Road

Austin, Texas, 78746

T. Rowe Price Associates, Inc.
   3,591,760 (3) 8.6 %
100 E. Pratt Street

Baltimore, Maryland 21202

common shares:



Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class
State Automobile Mutual Insurance Company⁽²⁾ 518 East Broad Street, Columbus, Ohio 43215	25,955,908	60.6%
T. Rowe Price Associates, Inc.⁽³⁾ 100 E. Pratt Street, Baltimore, Maryland 21202	3,696,510	8.7%
Dimensional Fund Advisors LP⁽⁴⁾ Building One, 6300 Bee Cave Road, Austin, Texas 78746	2,540,630	6.01%

⁽²⁾ State Auto Mutual exercises sole voting and investment power with respect to such common shares.
⁽³⁾ Based solely on a Schedule 13G filed with the SEC on February 14, 2018.
⁽⁴⁾ Based solely on a Schedule 13G filed with the SEC on February 9, 2018.

~~(1)~~
	~~State Auto Mutual exercises sole voting and investment power with respect to such Common Shares.~~
Section 16(a) Beneficial Ownership Reporting Compliance

~~(2)~~

~~Based solely on a Schedule 13G filed with the SEC on February 9, 2016.~~

~~(3)~~

~~Based solely on a Schedule 13G filed with the SEC on February 16, 2016.~~

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who own more than 10% of the common shares, referred to as our reporting persons, to file statements of beneficial ownership of our common shares. Based solely on a review of copies of the forms filed under Section 16(a) and furnished to us, we believe all applicable Section 16(a) filing requirements were complied with during 2017 by our reporting persons, with the following exceptions: The Company filed a Form 4 one day late on behalf of Eileen A. Mallesch, a director of the Company. The Form 4 related to the 3,343 shares granted to her on May 5, 2017. The Company filed a Form 4 on March 5, 2018, on behalf of Kim B. Garland. The Form 4 related to an exchange Mr. Garland made in the Company's non-qualified deferred compensation plan where acquired 1,804.080 shares on September 2, 2016.

EQUITY COMPENSATION PLAN INFORMATION

~~(At~~ AND BURN RATE



Outstanding Options and Available Shares

The following table provides information regarding the shares of our common shares that may be issued under the 2017 Long Term Incentive Compensation Plan and our Employee Stock Purchase Plan as of December 31, ~~2015)~~

Plan Category
   Number of
Securities
to be Issued
upon Exercise
of Outstanding
Options    Weighted-
Average
Exercise Price
of Outstanding
Options    Number of
Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
Equity Compensation Plans Approved by Security Holders(1)
   3,213,969       $ 24.25       833,971
Equity Compensation Plans not Approved by Security Holders(2)
   33,910       $ 32.44       0




Total
   3,247,879          833,971

2017:



Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options	Weighted- Average Exercise Price of Outstanding Options		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans
Equity Compensation Plans Approved by Security Holders(1)	1,831,771	$	19.38	2,418,587

(1)

Includes ~~513,535 Common Shares~~2,263,812 common shares available for issuance under our ~~2009 Equity~~2017 Long Term Incentive Compensation Plan and ~~320,436 Common Shares~~154,775 common shares available for issuance under our Employee Stock Purchase Plan. Does not include RSUs which have been awarded to our outside directors under the ~~Old~~Directors' RSU Plan. Because RSUs are settled only upon the conclusion of an outside ~~director’s~~director's board service, and then in cash or ~~Common Shares,~~common shares, as elected by the outside director, the number of ~~Common Shares~~common shares to be issued or remaining available for future issuance under the ~~Old~~Directors' RSU Plan ~~or the Proposed RSU Plan, if approved by shareholders at the Annual Meeting,~~ cannot be determined at this time.

~~(2)~~
	Our only equity compensation plan that has not been approved by our shareholders is the 1998 State Auto Agent’s Stock Option Plan, which plan terminated by its terms in May 2008 and was not renewed. A description of this plan follows these footnotes.
Burn Rate

~~1998 State Auto Agent’s Stock Option Plan~~

~~Our Board~~

As of ~~Directors adopted the 1998 State Auto Agent’s Stock Option Plan (the “Agent’s Option Plan”) to encourage selected independent insurance agencies that represent us and~~December 31, 2017, our ~~affiliates (the “State Auto Agents”) to acquire~~three-year average annual "burn rate" or ~~increase and retain a financial interest in our Company in order to strengthen the mutuality~~

percentage of interests between the State Auto Agents and our Company’s shareholders. The Agent’s Option Plan is administered by a plan administration committee consisting of at least three members appointed by our Board of Directors. The Agent’s Option Plan terminated by its terms in May 2008, and we did not renew it.

Under the Agent’s Option Plan, State Auto Agents who became participants were offered nonqualified stock options to purchase Common Shares. The number of options granted to a participant was based on the formula set forth in the Agent’s Option Plan and in each participant’s participation agreement. The exercise price of optionsweighted average shares outstanding granted under the ~~Agent’s Option~~2009 Equity Plan ~~was equal to~~and the last reported sale price of the Common Shares on the Nasdaq Stock Market on the day of the grant. The options granted became exercisable on the first day of the calendar year following the participant’s achievement of specific production and profitability requirements over a period not greater than two calendar years from date of grant or a portion thereof2017 Long Term Incentive Compensation Plan in the first calendar year in which a participant commenced participation in the Agent’s Option Plan. Subject to certain restrictions, participants may exercise options that become vested. Each option has a term of ten years. If an option is not fully exercised by its expiration date, it will terminate to the extent not previously exercised.

If a participant’s agency agreement terminates, or if the participant fails to meet its performance criteria as set forth in its participation agreement and in the Agent’s Option Plan, or the participant fails to pay on time any amounts due under its agency agreement, the option granted to such participant, to the extent not vested, will terminate.

The Common Shares subject to the Agent’s Option Plan have been registered under the Securities Act of 1933, as amended. Therefore, these Common Shares are freely tradeable once acquired upon the exercise of the options, unless such Common Shares are acquired by a participant who is considered an “affiliate” of the Company.

prior three years was 0.63%.

RELATED PERSON TRANSACTIONS

~~Policies and Procedures for Review and Approval of Related Person Transactions~~



Policies and Procedures for Review and Approval of Related Person Transactions

We review all relationships and transactions in which our Company and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our ~~Company’s~~Company's legal staff is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether we or a related person has a direct or indirect material interest in the transaction. As required under SEC rules, transactions that are determined to be directly or indirectly material to us or a related person are disclosed in our proxy statement.

We also have a standing Independent Committee ~~which~~that principally serves to review related person transactions between or among usthe Company and our subsidiaries ~~on the one hand,~~ and State Auto Mutual and its subsidiaries and ~~affiliates, on the other.~~affiliates. In the context of transactional opportunities, the Independent Committee helps determine which entity, our Company or State Auto Mutual, is best suited to take advantage of the transactional opportunity presented by a third party. As specified in its charter, the Independent Committee assists our Board in monitoring all related person transactions, not just those involving State Auto Mutual and its subsidiaries and affiliates.



Transactions Involving State Auto Mutual

⁽¹⁾⁽²⁾⁽³⁾

Management and Cost Sharing Agreements

^2,^3,⁴

Through various management and cost sharing agreements, State Auto P&C generally provides the ~~employees~~associates to perform most organizational, operational and management functions for insurers in the State Auto Group while State Auto Mutual generally provides certain operating facilities, including our corporate headquarters. These management and cost sharing agreements are described below.

We operate and manage our businesses in conjunction with State Auto Mutual and certain of its subsidiaries and affiliates under a Management and Operations Agreement that we call the ~~“2015~~"2015 Management Agreement.”" The 2015 Management Agreement is strictly a cost sharing agreement. Accordingly, no management fees are paid under the 2015 Management Agreement. Under the 2015 Management Agreement, most executive, managerial, technical, professional, supervisory and clerical functions for the companies named below were performed by an ~~employee~~associate of State Auto P&C.

We have a Management and Operations Agreement that we call the ~~“2000~~"2000 Midwest Management ~~Agreement”~~Agreement" among State Auto P&C, State Auto Mutual and SAWI. During ~~2015,~~2017, SAWI paid management fees in the amount of ~~$0.17~~$0.14 million to State Auto P&C under the 2000 Midwest Management Agreement.

⁽¹⁾	~~During 2015, our subsidiaries were State Auto P&C, Milbank, SAOH, Stateco Financial Services, Inc. (“Stateco”) and 518 Property Management and Leasing LLC (“518 PML”).~~

⁽²⁾

State Auto Mutual’s subsidiaries and affiliates that during 2015 were parties to the 2015 Management Agreement were Meridian, Patrons, State Auto Holdings, Inc., Facilitators, Inc., CDC Holding, Inc., Partners General Insurance Agency, LLC and Network E&S Insurance Brokers, LLC. During 2015, additional subsidiaries of State Auto Mutual included SAWI and the “Rockhill Companies” which consist of Rockhill Holding Company, RIC, Plaza, ACIC, BCIC (RIC, Plaza, ACIC and BCIC are collectively referred to as the “Rockhill Insurers”), National Environmental Coverage Corporation (“NECC”), RTW, Inc. (“RTW”), Rockhill Insurance Services, LLC, Rockhill Underwriting Management, LLC and Risk Evaluation and Design, LLC (“RED”).

⁽³⁾	~~The State Auto Group refers to State Auto P&C, Milbank, SAOH, State Auto Mutual, SAWI, Meridian, Patrons, RIC, Plaza, ACIC and BCIC.~~

We have a Management and Operations Agreement that we call the ~~“Rockhill~~"Rockhill Management ~~Agreement”~~Agreement" among State Auto P&C, State Auto Mutual and the Rockhill Companies (except RED). The Rockhill Management Agreement is strictly a cost sharing agreement. Accordingly, no management fees are paid under the Rockhill Management Agreement.

^2, The State Auto Group refers to State Auto Property Casualty Insurance Company ("State Auto P&C"), Milbank Insurance Company ("Milbank"), State Auto Insurance Company of Ohio ("SAOH"), State Auto Mutual, State Auto Insurance Company of Wisconsin ("SAWI"), Meridian Security Insurance Company ("Meridian"), Patrons Mutual Insurance Company of Connecticut ("Patrons"), Rockhill Insurance Company ("RIC"), Plaza Insurance Company ("Plaza"), American Compensation Insurance Company ("ACIC") and Bloomington Compensation Insurance Company ("BCIC").

^3, During 2017, our subsidiaries were State Auto P&C, Milbank, SAOH, Stateco Financial Services, Inc. (“Stateco”) and 518 Property Management and Leasing LLC ("518 PML").

⁴ During 2017, the following State Auto Mutual subsidiaries and affiliates were parties to the 2015 Management Agreement: Meridian, Patrons, State Auto Holdings, Inc., Facilitators, Inc., Partners General Insurance Agency, LLC, State Auto Labs Corp. and Network E&S Insurance Brokers, LLC. During 2017, additional subsidiaries of State Auto Mutual included SAWI and the "Rockhill Companies" which consist of Rockhill Holding Company, RIC, Plaza, ACIC, BCIC (RIC, Plaza, ACIC and BCIC are collectively referred to as the "Rockhill Insurers"), RTW, Inc. ("RTW"), Rockhill Insurance Services, LLC, Rockhill Underwriting Management, LLC and Risk Evaluation and Design, LLC ("RED").

The 2015 Management Agreement addresses procedures for potential conflicts of interest. Generally, business opportunities presented to the common officers of the companies, other than business opportunities that meet certain criteria, must be presented to Independent Committees of State Auto ~~Mutual’s~~Mutual's and our boards of directors. These committees review and evaluate the business opportunity using such factors as each considers relevant. Based upon such review and evaluation, these committees then make recommendations to each respective board of directors as to whether or not such business opportunities should be pursued and, if so, by which company. The boards of directors of State Auto Mutual or its insurance subsidiaries and our Company or any of our subsidiaries must then act on the recommendation of their committees after considering all other factors deemed relevant to them.

The 2015 Management Agreement has a ten-year term and automatically renews for an additional ten-year term, provided ~~that~~ any party to the agreement can terminate its own participation at the end of the term then in effect by giving at least one-year advance written notice of non-renewal to the other parties, with the exception that Patrons may terminate its participation on 90 ~~days’~~days' notice. The 2000 Midwest Management Agreement has a ten-year term and automatically renews for an additional ten-year term, provided ~~that~~ any party to the agreement can terminate its own participation at the end of the term then in effect by giving at least two ~~years’~~years' advance written notice of non-renewal. Any party to either of these agreements could also terminate its participation upon events constituting a change of control or potential change of control (as defined in the 2015 Management Agreement and the 2000 Midwest Management Agreement) of the Company, or upon agreement of the parties. The applicable management agreement automatically terminates with respect to a party (and only that party) if such party is subject to insolvency proceedings. The Rockhill Management Agreement has a ten-year term and automatically renews for successive ten-year periods, provided ~~that~~ any party may terminate its own participation at the end of the term then in effect by giving the other parties at least 60 ~~days’~~days' advance written notice.

Other Agreements

State Auto P&C, Milbank, State Auto Mutual and various insurance subsidiaries and affiliates of State Auto Mutual have entered into a Consulting Services Agreement with RTW whereby RTW provides claims and case management services for these insurers’ workers’ compensation programs. RTW investigates potential “high risk” workers’ compensation claims and assigns RTW nurses for ongoing case management for those claims that meet certain criteria. During 2015, RTW was compensated on a cost basis for some of its services and on an hourly basis for other services rendered. The Consulting Services Agreement has a one-year term and automatically renews for additional one-year terms unless 60 days’ advance written notice of non-renewal is given. In addition, a party may terminate the agreement as to itself upon 30 days’ advance written notice. During 2015, RTW was paid $3.16 million under this agreement.

State Auto P&C, Milbank, State Auto Mutual and various insurance subsidiaries and affiliates of State Auto Mutual were parties to an Underwriting Management Agreement (“UMA”) with RED. Under this agreement, the State Auto insurers delegated to RED the authority to act as their underwriting manager in the performance of certain underwriting and marketing functions associated with insurance coverages for certain program business. As of the end of 2013, all RED programs subject to the UMA had been terminated due to unprofitability, and the business was in runoff. During 2015, RED was paid nothing under the UMA, which was terminated effective December 31, 2015.

Since January 1987, State Auto P&C and State Auto Mutual have participated in an intercompany pooling arrangement (the ~~“State Auto Pool” or the “Pooling Arrangement”~~"Pooling Arrangement") which has been amended from time to time, including amendments adding participants to the Pooling Arrangement and adjusting pooling percentages. The

Pooling Arrangement generally covers all of the property and casualty insurance written by the pooled companies. Under the terms of the Pooling Arrangement, State Auto P&C and the other pooling participants cede all of their direct insurance business to State Auto Mutual, and State Auto Mutual then cedes a percentage of the pooled business to State Auto P&C and the other pooling participants and retains the balance. During ~~2015,~~2017, parties to the Pooling Arrangement and their allocated pooling percentages were as follows: State Auto Mutual—34.5%; State Auto P&C—51.0%; Milbank—14.0%; SAWI—0.0%; SAOH—0.0%; Meridian—0.0%; Patrons—0.5%; RIC—0.0%; Plaza—0.0%; ACIC—0.0%; and BCIC—0.0%.

Stateco undertook on behalf of State Auto Mutual, State Auto P&C, Milbank, SAWI, SAOH, Meridian, Patrons, RIC, Plaza, ACIC and BCIC the responsibility of managing those ~~companies’~~companies' investable assets. In consideration of this service, Stateco charged such companies an annual fee, paid quarterly, based on a percentage of the average investable assets of each company. For ~~2015,~~2017, the percentage was 0.2% for bonds and 0.5% for equities, with a 0.1% bonus available, other than under the State Auto Mutual and SAOH agreements, if the stock portfolio return exceeds ~~that of~~ the S&P 500 Index for the same period. During ~~2015,~~2017, the following companies incurred the following fees to Stateco: State Auto Mutual— ~~$1.48~~$1.6 million; State Auto P&C—$~~4.1~~4.4 million; Milbank—$~~1.04~~1.1 million; SAWI—$~~25,779;~~24,457; SAOH—$~~36,055;~~34,707; Meridian—$~~0.17~~0.14 million; Patrons—$~~77,394;~~70,897; RIC—$~~0.14~~0.15 million; Plaza—$~~49,495;~~51,820; ACIC—$~~40,625;~~73,706; and BCIC—$~~23,509.~~28,818. We believe the fees charged by Stateco are comparable to those charged by independent investment managers under similar circumstances.

In May 2009, State Auto P&C and Milbank entered into separate Credit Agreements with State Auto Mutual. Under these Credit Agreements, State Auto Mutual borrowed $50.0 million from State Auto P&C and $20.0 from Milbank, or a total of $70.0 million, on an unsecured basis. Interest is payable semi-annually at a fixed annual interest rate of 7.00%. Principal is payable in May 2019. During ~~2015,~~2017, State Auto Mutual made interest payments to State Auto P&C and Milbank in the amount of $3.5 million and $1.4 million, respectively.

State Auto Mutual has guaranteed the adequacy of State Auto P&C’s loss and loss expense reserves as of December 31, 1990. Pursuant to the guarantee, State Auto Mutual has agreed to reimburse State Auto P&C for any losses and loss expenses in excess of State Auto P&C’s December 31, 1990 reserves ($65.5 million) that may develop from claims that have occurred on or prior to that date. This guarantee ensures that any deficiency in the reserves of State Auto P&C as of December 31, 1990, under the pooling arrangement percentages effective on December 31, 1990, will be reimbursed by State Auto Mutual. As of December 31, 2015, there had been no adverse development of this liability. As of December 31, 2015, the potential liability remaining under this guaranty was estimated to be $0.21 million.

518 PML leases office buildings it owns in West Des Moines, Iowa, and near Nashville, Tennessee, to State Auto Mutual for its Des Moines Center Office and Nashville Center, respectively. State Auto Mutual paid 518 PML $0.22 million in rent for the Iowa location and $0.41 million in rent for the Nashville office in ~~2015.~~2017. We believe these rents reflect market rates.

~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

OTHER MATTERS

~~General~~

~~Ernst & Young LLP served as our independent registered public accounting firm for 2015. It is anticipated that representatives~~



Other Proposals at the Annual Meeting of Shareholders

Management does not know of ~~Ernst & Young LLP will be present at~~any other matters which may come before the Annual Meeting. However, if any other matters properly come before the Annual Meeting, and will have an opportunity to make a statement if they desire to do so. Such representatives will be available to respond to appropriate questions. The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firm for 2016. See “Proposal Six: Ratification of Selection of Independent Registered Public Accounting Firm.”

~~Audit and Other Services Fees~~

~~All services to be provided by Ernst & Young LLP are pre-approved by~~it is the Audit Committee, including audit services, audit-related services, tax services and certain other services. See “—Audit Committee’s Pre-Approval Policies and Procedures.” Aggregate fees billed to or incurred by the Company for services performed for the years ending December 31, 2015 and 2014, respectively, by Ernst & Young LLP were as follows:

   2015    2014
Audit fees(1)
   $ 1,722,767       $ 1,860,191
Audit related fees(2)
   —       —
Tax fees(2)(3)
   67,100       44,115
All other fees(2)
   —       —




Total(4)
   $ 1,789,867       $ 1,904,306

~~(1)~~

Includes services rendered for the audit of our annual financial statements, review of financial statements included in our quarterly reports on Form 10-Q and other audit services normally provided by Ernst & Young LLP in connection with statutory and regulatory filings or engagements.

~~(2)~~

The Audit Committee has considered whether the provision of these services is compatible with maintaining the independence of our registered public accounting firm. The Audit Committee must pre-approve any non-audit services performed by our independent registered public accounting firm to the extent such services are not prohibited by law from being performed by such independent registered public accounting firm. See “—Audit Committee’s Pre-Approval Policies and Procedures.”

~~(3)~~

~~Includes services for tax research and compliance.~~

~~(4)~~

~~All Ernst & Young LLP fees are on a State Auto Group basis.~~

~~Audit Committee’s Pre-Approval Policies and Procedures~~

The Audit Committee has adopted a policy under which audit and non-audit services to be rendered by our independent registered public accounting firm are pre-approved. The Audit Committee’s policy is to pre-approve all auditing services and our useintention of the ~~independent public accountants~~persons named in the accompanying form of proxy to ~~perform any non-audit or tax services which are not prohibited by Section 10A(g) of~~vote the ~~Securities Exchange Act of 1934, subject to the de minimus exception for non-audit services described~~proxy in ~~Section 10A(i)(1)(B) of~~accordance with their judgment on such Act. No services were provided by Ernst & Young LLP in 2015 or 2014 that were approved by the Audit Committee under SEC Regulation S-X Section 2-01(c)(7)(i)(C) (which addresses certain services considered de minimus approved by the Audit Committee after such services have been performed).

matters.

~~FUTURE SHAREHOLDER PROPOSALS~~



Future Shareholder Proposals

In order to bring business, including a proposal, before the ~~2017~~2019 annual meeting of shareholders, expected to be held in May ~~2017,~~2019, a shareholder must comply with the notice procedures set forth in Section 1.15 of the Company’s Code of Regulations. To be considered timely, a ~~shareholder’s~~shareholder's notice must be given to the ~~Company’s~~Company's Corporate Secretary and delivered either in person or by United States certified mail, postage prepaid, and received at the principal executive offices of the Company, 518 East Broad Street, Columbus, Ohio 43215, not less than 60 days nor more than 90 days prior to the meeting. However, in the event ~~that~~ notice or public disclosure of the date of the meeting is given or made by the Company at least 75 days prior to the meeting, to be timely a ~~shareholder’s~~shareholder's notice must be received by the Company no later than the close of business on the 10th day following the day on which such notice or public disclosure of the date of the meeting was given or made by the Company.

A ~~shareholder’s~~shareholder's notice to the ~~Company’s secretary~~Company's Corporate Secretary must set forth (i) a description in reasonable detail of the business desired to be brought before the meeting and reasons for conducting such business at the meeting, including the complete text of any resolutions to be presented at the ~~meeting,~~meeting; (ii) the name and address, as they appear on the ~~Company’s~~Company's books, of the shareholder proposing such ~~business,~~business; (iii) the class and number of shares

of the Company beneficially owned and of record by such ~~shareholder,~~shareholder; (iv) the name in which such shares are registered on the books of the ~~Company,~~Company; (v) a representation that the shareholder intends to appear at the meeting in person or by proxy to submit the business specified in such ~~notice,~~notice; and (vi) any material interest of the shareholder in the business to be submitted. In addition, the shareholder making such proposal must promptly provide any other information reasonably requested by the Company.

In addition to the information required above to be given by a shareholder who intends to submit business at a meeting of shareholders, if the business to be submitted is the nomination of a person or persons for election to the board of directors, then such ~~shareholder’s~~shareholder's notice to the ~~Company’s secretary~~Company's Corporate Secretary must also set forth, as to each person whom the shareholder proposes to nominate for election as a director, ~~(A)~~(i) the name, age, business address and, if known, residence address of such ~~person, (B)~~person; (ii) the principal occupation or employment of such ~~person, (C)~~person; (iii) the class and number of shares of the Company which are beneficially owned by such ~~person, (D)~~person; (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required by the rules and regulations of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as ~~amended, (E)~~amended; (v) the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if ~~elected~~elected; and ~~(F)~~(vii) a description of all arrangements or understandings between such shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such shareholder.

Notwithstanding the foregoing notice requirements, a shareholder who seeks to have any proposal included in the ~~Company’s~~Company's proxy statement must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended. One of these requirements is the proposal must be received by us at our principal executive offices on or prior to 120 days in advance of the first anniversary date of this Proxy Statement.

~~SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE~~

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who own more than 10% of the Common Shares, referred to as our reporting persons, to file statements of beneficial ownership of our Common Shares. Based solely on a review of copies of the forms filed under Section 16(a) and furnished to us, we believe that all applicable Section 16(a) filing requirements were complied with during 2015 by our reporting persons.

~~OTHER MATTERS~~

Management does not know of any other matters which may come before the Annual Meeting. However, if any other matters properly come before the Annual Meeting, it is the intention of the persons named in the accompanying form of proxy to vote the proxy in accordance with their judgment on such matters.

We will bear the cost of solicitation of proxies. In addition to the use of the mails, proxies may be solicited personally or by telephone or electronic mail. Proxies may be solicited by our directors, officers, and regular employees, who will not receive any additional compensation for their solicitation services. We will reimburse banks, brokers, and nominees for their out-of-pocket expenses incurred in sending proxy material to the beneficial owners of shares held by them. If there are follow-up requests for proxies, we may employ other persons for such purpose.

~~Melissa A. Centers~~

~~Secretary~~

~~Exhibit A~~

~~SECOND AMENDMENT~~

~~AMENDED AND RESTATED~~

~~CODE OF REGULATIONS~~

~~STATE AUTO FINANCIAL CORPORATION~~

~~ARTICLE 10~~

~~Forum for Adjudication of Disputes~~

Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Corporation to the Corporation or the Corporation’s shareholders, (c) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of Chapter 1701 of the Ohio Revised Code or the articles or these regulations, or (d) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine shall be (i) the Court of Common Pleas of Franklin County, Ohio, or (ii) if that court does not have jurisdiction, then the United States District Court for the Southern District of Ohio, Eastern Division sitting in Columbus, Ohio, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.

~~Exhibit B~~

~~[Proposed changes are underlined for reference purposes]~~

~~STATE AUTO FINANCIAL CORPORATION~~

~~2009 EQUITY INCENTIVE COMPENSATION PLAN~~

~~Background Information~~

~~The following is the 2009 Equity Incentive Compensation Plan of State Auto Financial Corporation, an Ohio Corporation, (the “~~~~Company~~”), including the proposed amendment being presented to shareholders for approval at the Annual Meeting of Shareholders being held on May 6, 2016. The 2009 Equity Incentive Compensation Plan and the proposed amendment thereto are hereinafter collectively referred to as the “~~Plan~~.”

~~Section 1.~~

~~Purposes of Plan~~

The Plan is intended to advance the interests of the Company and its shareholders by enhancing the ability of the Company and its affiliates to attract and retain highly-qualified key employees and by providing additional incentives and compensation to such employees to achieve the Company’s long-term business plans and objectives. The Plan is also intended to encourage and enable key employees to participate in the Company’s future prosperity and growth by providing the participants with incentives and compensation based on the Company’s performance, development and financial success. The Plan is not intended to be, and shall not be construed as, a deferred compensation plan.

~~These purposes will be achieved by granting to key employees equity-based awards (the “~~~~Awards~~~~”) under the Plan in the form of: (A) Incentive Stock Options (“~~~~ISOs~~~~”), which are intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “~~~~Code~~~~”); (B) stock options which are not intended to qualify as ISOs (“~~~~NQSOs~~~~”) (ISOs and NQSOs are referred to together hereinafter as “~~~~Stock Options~~~~”); (C) common shares of the Company (the “~~~~Shares~~~~”), which will be subject to a vesting schedule based on the recipient’s continued employment (“~~~~Restricted Shares~~~~”); (D) Shares which will be subject to a vesting schedule based on certain performance objectives (“~~~~Performance Shares~~”), (E) Performance Units as described in Section 9, and (F) Other Stock-Based Awards as described in Section 10. For purposes of this Plan, the terms “parent” and “subsidiary” mean “parent corporation” and “subsidiary corporation” respectively, as those terms are defined in Code Section 424.

~~Section 2.~~

~~Administration~~

~~The Plan shall be administered by a committee (the “~~~~Committee~~~~”) which shall be the Compensation Committee of the Company’s Board of Directors (the “~~~~Board~~”). The members of the Committee shall serve at the pleasure of the Board, which may remove members from the Committee or appoint new members to the Committee from time to time and members of the Committee may resign by written notice to the Chairman of the Board or the Secretary of the Company. The members of the Committee shall not be eligible to participate in the Plan while serving on the Committee, and each member shall be a “non-employee director” within the meaning of Rule 16b-3, as amended, under the Securities Exchange Act of 1934 (the “Exchange Act”). Additionally, each member of the Committee shall be an “outside director” within the meaning of Code Section 162(m).

Unless otherwise determined by the Board, the Committee shall have full and final authority to administer the Plan in accordance with its terms, including, without limitation, authority, to the extent not inconsistent with the specific provisions of the Plan, to: (A) interpret all provisions of the Plan consistent with law; (B) designate the key employees to receive Awards under the Plan (such recipients, “~~Participants~~~~”); (C) determine the frequency of Awards; (D) determine the number and type of Awards to be granted to each Participant;~~

(E) determine the terms and conditions, not inconsistent with the terms hereof, of any Award, including without limitation, time and performance restrictions; (F) prescribe the form and terms of instruments evidencing any Awards granted under this Plan; (G) determine the vesting requirement, if any, for Awards; (H) make special Award grants when appropriate; (I) adopt, amend and rescind general and special rules and regulations for the Plan’s administration including administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; (J) direct employees of the Company, its parent and the Company’s and its parent’s subsidiary corporations and affiliates, and advisors to prepare such materials or perform such analyses as the Committee deems necessary and appropriate; (K) interpret the terms and provisions of the Plan and any Award granted and any agreements relating thereto; (L) make all other determinations necessary or advisable for the administration of this Plan; and (M) take any other actions the Committee considers appropriate in connection with, and otherwise supervise the administration of, the Plan.

The Committee may designate selected Committee members or certain employees of the Company to assist the Committee in the administration of the Plan and may grant authority to such persons to execute documents on behalf of the Committee.

Any interpretation or administration of the Plan by the Committee, and all actions of the Committee, shall be made in the Committee’s sole discretion and shall be final, binding and conclusive on the Company, its shareholders, its parent and subsidiary corporations, and all Participants in the Plan, their respective legal representatives, successors and assigns, and upon all persons claiming under it through any of them.

Service on the Committee shall constitute service as a member of the Board of Directors of the Company, so that members of the Committee shall be entitled to indemnification, reimbursement and other protections as directors of the Company as set forth in the Company’s Amended and Restated Articles of Incorporation and Amended and Restated Code of Regulations, as each may be further amended from time to time, as set forth in the Indemnity Agreements between the Company and each of its directors, and additionally as provided, and to the full extent not prohibited, by law.

~~Section 3.~~

~~Eligibility and Factors to be Considered in Granting Awards~~

~~The employees eligible to receive Awards under the Plan (“~~~~Eligible Employees~~”) shall include only employees of the Company or its parent or the Company’s or its parent’s subsidiary corporations or affiliates who: (A) are executive, administrative, professional or technical personnel who, in the opinion of the Committee, have responsibilities affecting the management, development or financial success of the Company or one or more of its subsidiaries or other affiliated entities; (B) perform services for the benefit of the Company, its parent or subsidiary corporations; and (C) are otherwise eligible employees as defined by applicable law. No director of the Company who is not also an employee of the Company, its parent or the Company’s or its parent’s subsidiary corporations or affiliates shall be eligible to participate in the Plan.

In making any determination as to the employees to whom Awards shall be granted, the Committee shall take into account, in each case, the level and responsibility of the employee’s position, the level of the employee’s performance, the employee’s level of compensation, the assessed potential of the employee and such other factors as the Committee in its sole discretion shall deem relevant to the accomplishment of the purposes of the Plan.

~~Section 4.~~

~~Shares Subject to Plan~~

~~The maximum aggregate number of common shares, without par value, of the Company (“~~~~Shares~~”) which may be issued under the Plan shall be 2,000,000 shares; provided that in no event shall more than 33% of the Shares authorized for issuance under the Plan be granted in the form of Awards other than Stock Options. Subject to shareholder approval and effective upon such approval, an additional 1,000,000 Shares shall be authorized for Awards granted under the Plan. Each Share issued or transferred pursuant to an Award of Stock Options will

reduce the aggregate Plan limit described in this Section by one (1) Share. Each Share issued or transferred (and in the case of Restricted Shares, released from all substantial risk of forfeiture) pursuant to an Award other than Stock Options shall reduce the aggregate Plan limit described in this Section by: (A) one (1) Share if issued or transferred pursuant to an Award granted prior to the effective date of this Amendment; and (B) three (3) Shares if issued or transferred pursuant to an Award granted on or after the effective date of this Amendment.In addition to the 1,000,000 Shares added to the Plan by Amendment No. 2, and subject to shareholder approval and effective upon such approval, an additional 2,000,000 Shares shall be authorized for Awards granted under the Plan.

For each calendar year, the maximum number of Shares which may be granted to any individual during that year in the form of Awards of Stock Options, Restricted Shares and Performance Shares shall not exceed 250,000 Shares.

The Shares which may be issued under the Plan may be authorized but unissued Shares or issued Shares reacquired by the Company and held as treasury Shares. If any Shares subject to a Stock Option granted under the Plan are forfeited by the holder thereof, or if any Restricted Shares or Performance Shares granted under the Plan are forfeited by the holder thereof, or if any Stock Option or other Award granted under the Plan terminates without a payment or transfer being made to the Award recipient in the form of Shares, then such Shares shall again be available for distribution in connection with future Awards under the Plan. If any Award granted under the Plan expires or terminates for any reason without having been fully exercised, the unpurchased Shares which had been subject to that Award shall again be available for other Awards to be granted under the Plan. The aggregate number of Shares shall be subject to adjustment under Section 11.(A) of the Plan.

~~Section 5.~~

~~Grant of Awards~~

Any Awards may be granted alone or in addition to other Awards granted under the Plan. Any Awards granted under the Plan shall be in such form as the Committee may from time to time approve, consistent with the Plan, and the provisions of Awards need not be the same with respect to each Participant.

~~Each Award granted under the Plan shall be authorized by the Committee and shall be evidenced by a written award agreement (the “~~~~Award Agreement~~”), in the form approved by the Committee from time to time, which shall be dated as of the date approved by the Committee in connection with the grant, signed by an officer of the Company authorized by the Committee, and signed by the Participant, and which shall describe the Award and state that the Award is subject to all the terms and provisions of the Plan and such other terms and provisions, not inconsistent with the Plan, as the Committee may approve. The date on which the Committee approves the granting of an Award shall be deemed to be the date on which the Award is granted for all purposes, unless the Committee otherwise specifies. The granting of an Award under the Plan, however, shall be effective only if and when a written Award Agreement is duly executed and delivered by or on behalf of the Company and the Participant. Any Award Agreement which is not duly executed and returned by the Participant within 60 days of the granting of the Award shall be null and void.

Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, compensation or exchange of Shares), the terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Stock Options or cancel outstanding Stock Options in exchange for cash, other Awards or Stock Options with an exercise price that is less than the exercise price of the original Stock Options without shareholder approval.

~~Section 6.~~

~~Stock Options~~

The Committee may, in its sole discretion and subject to the provisions of the Plan, grant to Eligible Employees and Participants at such times as it deems appropriate, Stock Options to purchase Shares. Stock Options granted under this Plan may be: (i) Options which are intended to qualify as ISOs under Code

Section 422; and/or (ii) Stock Options which are not intended to qualify under Code Section 422. Stock Options may be allotted to Eligible Employees or Participants in such amounts, subject to the limitations specified in this Section and Sections 3 and 4 of the Plan, as the Committee, in its sole discretion, may from time to time determine.

Stock Options granted hereunder shall be evidenced by a Stock Option Award Agreement executed as set forth in Section 5 above, containing such terms and provisions not inconsistent with the terms of the Plan as are recommended and approved from time to time by the Committee. Each Stock Option Award Agreement shall be consistent with the Plan, including, without limitation, the following provisions:

~~(A)~~

~~Exercise Price~~. The exercise price per Share at which each Stock Option granted under the Plan may be exercised shall not be less than the Fair Market Value per Share at the time such Stock Option is granted. In the case of an Eligible Employee or Participant who owns Shares representing more than 10% of the total combined voting power of all classes of the Company’s stock, or the stock of any subsidiary, at the time an ISO is granted, the exercise price of the ISO shall not be less than 110% of the Fair Market Value of the Shares at the time the ISO is granted.

~~For the purposes of the Plan “~~~~Fair Market Value~~” means, as of any given transaction date, the following: (1) if the Company’s Shares are listed on a national securities exchange at the time of the transaction, then the Fair Market Value of each Share shall be no less than the average of the highest and lowest selling price on such exchange on the transaction date, or if there were no sales on said date, then on the next prior business day on which there were sales; (2) if the Company’s Shares are traded other than on a national securities exchange on the transaction date, then the Fair Market Value of each Share shall be not less than the last sale price as reported on the Nasdaq Stock Market as of the close of the regular trading day or the mean between the bid and asked price as reported on the National Association of Securities Dealers as the case may be, on the transaction date, or if there is no sale price or bid and asked price on said date, then on the next prior business date on which there was a sale price or bid or asked price. Notwithstanding the foregoing, Fair Market Value may be determined at the time of such transaction and according to the standard market processes or the procedures of the Plan’s third party administrator, as applicable.

If the Company’s Shares are not traded on any security exchange or reported on the Nasdaq Stock Market or by the National Association of Securities Dealers, then the Committee shall exercise its best judgment to make a good faith determination of the fair market value per Share. Such determination shall include a valuation of the Company’s present and future earnings capacity for the purpose of determining the fair market value of a Share of the Company’s Shares as of a specified date. The value determined shall be defined as the fair market value of a Share of stock for a specified period of time as defined by the Committee.

~~The Committee retains the right to determine the price per Share at which each NQSO granted under the Plan may be exercised, provided that no NQSO shall be granted at less than Fair Market Value.~~

~~(B)~~

~~Option Period and Vesting. Stock Options granted under the Plan are exercisable at such time or times as may be determined by the Committee (the “~~~~Vesting Date~~”). A Stock Option shall be exercisable only with respect to the Shares which have become vested pursuant to the terms of that Stock Option. Each Stock Option shall become vested with respect to Shares subject to that Stock Option on such date or dates and on the basis of such other criteria, including, without limitation, the performance of the Company, as the Committee may determine, in its discretion, and as shall be specified in the applicable Stock Option Award Agreement; provided, however, that each Stock Option shall be subject to a minimum three-year vesting period. The Committee shall have the authority, in its discretion, to accelerate the time at which a Stock Option shall be exercisable whenever it may determine that such action is appropriate by reason of changes in applicable tax or other law or other changes in circumstances occurring after the grant of such Stock Option.

A Stock Option granted under the Plan shall terminate, and the right of the Participant (or the Participant’s estate, personal representative, or beneficiary) to purchase Shares upon exercise of the Stock Option shall expire, after the date determined by the Committee at the time the Stock Option is granted (the “~~Expiration Date~~”). No Stock Option, however, may have a life of more than 10 years after the date the Stock Option is granted. In the case of a Participant who owns stock representing more than 10% of the total combined voting power of all classes of the Company’s stock, or the stock of any subsidiary at the time an ISO is granted, the ISO may not have a life of more than five years after the date on which it is granted. The date on which the Committee approves the granting of a Stock Option shall be deemed the date on which the Stock Option is granted, unless the Committee specifically designates a different date on which the Stock Option shall be deemed to have been granted, subject to Section 6.(A) of the Plan.

~~(C)~~

~~Exercise of Stock Options~~.

~~(1)~~

~~By an Eligible Employee or Participant During Continuous Employment~~. Subject to Section 6.(E) below, during the lifetime of an Eligible Employee or Participant to whom a Stock Option is granted, the Stock Option may be exercised only by the Eligible Employee or Participant.

An Eligible Employee or Participant who has been continuously employed by the Company, its parent or the Company’s or its parent’s subsidiaries and affiliates since the date of the Stock Option grant is eligible to exercise all Stock Options granted beginning on the Vesting Date, or on the date on which the Stock Option is granted, whichever is later, and continuing up to and including the Expiration Date. The Committee will decide in each case to what extent leaves of absence for government or military service, illness, temporary disability or other reasons shall not for this purpose be deemed interruptions of continuous employment.

~~(2)~~

~~By a Former Employee~~. If a Participant’s employment by the Company and its subsidiaries terminates for any reason other than death, disability or retirement (as each is defined below) then: (a) to the extent any Stock Option held by such Participant is not vested as of the date of such termination, such Stock Option shall automatically terminate on such date; and (b) to the extent any Stock Option held by such Participant is vested as of the date of such termination, such Stock Option may thereafter be exercised for a period of 90 days (or, with respect to NQSOs, such longer period as the Committee may specify at or after grant) from the date of such termination or until the expiration of the stated term of such Stock Option, whichever period is shorter; provided that, upon the termination of the Participant’s employment by the Company or its subsidiaries for illegal conduct, any and all unexercised Stock Options granted to such Participant shall immediately lapse and be of no further force or effect.

~~(3)~~

~~In Case of Retirement~~. If a Participant who was granted a Stock Option terminates employment due to retirement, as such term is defined in the State Auto Insurance Companies Employee Retirement Plan (the “Retirement Plan”), the Stock Options shall immediately vest and must be exercised as follows: (a) ISOs must be exercised within 90 days of such termination (but no later than the Expiration Date, if earlier) and (b) NQSOs must be exercised on or before the Expiration Date; provided, however, that NQSOs granted on or after January 1, 2015 must be exercised within five years of such termination (but no later than the Expiration Date, if earlier). If the Participant should become permanently and totally disabled, as defined in Code Section 22(e)(3) or die within the aforementioned 90-day period following termination due to retirement, the provisions contained in Section 6.(C), paragraphs 4 and 5 hereof respectively, shall apply. Notwithstanding Section 6.(B), all Stock Options previously granted to the Participant may be immediately exercised by a Participant whose employment terminates due to retirement prior to the Vesting Date.

Notwithstanding the foregoing, effective for terminations due to retirement on or after August 8, 2014, “retirement” shall mean the attainment of age 55 plus the completion of five years of service with State Auto; provided, however, that if a Participant’s employment is terminated for

cause after such Participant has satisfied the requirements for “retirement”, such termination of employment shall not be an eligible “retirement” under the Plan. For this purpose, a “year of service” and “for cause” shall be determined in the absolute discretion of the Committee, whose decision shall be final and binding on all parties. Such revised definition of “retirement” shall apply to all grants issued under the Plan on or after August 8, 2014.

~~(4)~~

~~In Case of Permanent and Total Disability~~. If a Participant who was granted a Stock Option terminates employment with the Company and its subsidiaries because of permanent and total disability, as defined in Code Section 22(e)(3), such Stock Option must be exercised as follows: (a) ISOs must be exercised within one year of such termination (but no later than the Expiration Date), and (b) NQSOs must be exercised on or before the Expiration Date. If the Participant should die within the aforementioned one-year period following termination due to such permanent and total disability, the provisions contained in Section 6.(C), paragraph 5 hereof, shall apply. Notwithstanding Section 6.(B), all Stock Options previously granted to the Participant may be immediately exercised by the Participant who becomes permanently and totally disabled, as defined in Code Section 22(e)(3), prior to the Vesting Date.

~~(5)~~

~~In Case of Death~~. If a Participant who was granted a Stock Option dies, such Stock Options must be exercised as follows: (a) ISOs must be exercised within one year of such death (but no later than the Expiration Date), and (b) NQSOs must be exercised on or before the Expiration Date, provided that if such Participant dies with less than 90 days remaining prior to the Expiration Date, the estate or successor(s) in interest of such Participant shall have a period of 180 days from the date of death of such Participant to exercise such Stock Option, regardless of the Expiration Date.

~~(6)~~

~~Sequential Exercise Requirement. ISOs and NQSOs may be exercised in any order the Participant may deem appropriate.~~

~~(7)~~

~~Termination of Stock Options~~. A Stock Option granted under this Plan shall be considered terminated in whole or in part, to the extent that, in accordance with the provisions of this Plan, it can no longer be exercised for Shares originally subject to the Stock Option. Except as otherwise permitted by the Committee in its sole discretion, no Stock Option held by a transferee of a Participant pursuant to Section 6.(E)(3), below, shall remain exercisable for any period of time longer than would otherwise be permitted under Sections 6.(C)(2),(3),(4) and (5) without specification of other periods by the Committee as provided therein.

~~(D)~~

~~Method of Exercise~~. Any Stock Option granted hereunder shall be exercisable at such times and under such conditions as shall be permissible under terms of the Plan and of the Stock Option Award Agreement between the Company and the Participant.

Each Stock Option granted under this Plan shall be deemed exercised, in whole or in part, when the Participant shall indicate the decision to do so by written notice delivered in person or by facsimile or electronic transmission or by certified mail to the Secretary of the Company. The notice shall state the election to exercise the Stock Option, the number of Shares with respect to which it is being exercised, the person in whose name the stock certificate or certificates is to be registered and the address and Social Security Number of such recipient. The notice shall be signed by the person or persons entitled to exercise the Stock Option and, if the Stock Option is being exercised by any person or persons other than the Participant, be accompanied by proof, satisfactory to legal counsel of the Company, of the right of such person to exercise the Stock Option. The Participant shall at the same time tender to the Company payment in full, in cash or by certified bank cashier’s or teller’s check, for the Shares for which the Stock Option is exercised and shall comply with such other reasonable requirements as the Committee may establish, pursuant to Section 11.(D) of the Plan. These provisions shall not preclude exercise of, or payment for a Stock Option by any other proper legal method specifically approved by the Committee, including, but not limited to, the constructive delivery or actual delivery of eligible, unrestricted Shares with a Fair Market Value equal to the total option price

~~at the time of exercise in accordance with rules and procedures prescribed or approved by the Committee.~~

Except as otherwise set forth in any agreement between the Participant and the Company with respect to the Stock Option, as approved by the Committee, no person, estate or other entity shall have any of the rights of the shareholder with reference to Shares subject to a Stock Option until a certificate for the Shares has been issued by the Company.

A Stock Option granted under this Plan may be exercised for any lesser number of Shares than the full amount for which it could be exercised. Such a partial exercise of a Stock Option shall not affect the right to exercise the Stock Option from time to time in accordance with this Plan for the remaining Shares subject to the Stock Option. The Stock Option may be exercised only with respect to full Shares and no fractional Shares of common stock shall be issued upon exercise of the Option.

~~(E)~~

~~Non-Transferability~~. Except as provided in this paragraph, no Stock Option granted to an Eligible Employee or Participant under the Plan shall be transferable other than by will or the laws of descent and distribution and shall be exercisable during the Participant’s lifetime only by such Participant, or the Participant’s legal representative. Any attempted transfer (other than as provided in this paragraph) shall be null and void. Without limiting the generality of the foregoing, (1) ISOs may be transferred only upon the Participant’s death and only by will or the laws of descent and distribution and, in the case of such a transfer, shall be exercisable only by the transferee or such transferee’s legal representative, (2) NQSOs may be transferred by will or the laws of descent and distribution and, in the case of such a transfer, shall be exercisable only by the transferee or such transferee’s legal representative, and (3) the Committee may, in its sole discretion and in the manner established by the Committee, provide for the irrevocable transfer, without payment of consideration, of any NQSO by a Participant to such Participant’s parent(s), spouse, children, grandchildren, nieces, or nephews or to the trustee of a trust for the principal benefit of one or more such persons or to a partnership whose only partners are one or more such persons, and, in the case of such transfer, such NQSO shall be exercisable only by the transferee or such transferee’s legal representative. In addition, NQSOs and, if permitted by applicable law, ISOs may be transferred pursuant to a Qualified Domestic Relations Order, as defined in Code Section 414(p), to a Participant’s former spouse. Any such Stock Option which is transferred shall continue to be subject to all provisions and conditions of the Plan and the Stock Option Award Agreement applicable to the Stock Option prior to its transfer, including without limitation, vesting requirements, restrictions on transferability and limitations on exercise following termination of employment or death or disability, provided that the person receiving the transfer shall have the same right to exercise as the Participant who transferred the Option, notwithstanding Section 11.(D) to the contrary. Notwithstanding the foregoing, the Committee shall only have authority to grant Stock Options which may be transferred pursuant to this Section if it is reasonably satisfied that such grant will not cause other Stock Options under the Plan to lose the exemption provided by Rule 16b-3 promulgated under the Exchange Act as amended from time to time.

~~(F)~~

~~No Stock Option Repricing Without Shareholder Approval~~. The exercise price per Share of any Stock Option granted under the Plan shall not be changed or modified after the time such Stock Option is granted unless such change or modification is made with the prior approval of the Company’s shareholders.

~~Section 7.~~

~~Restricted Shares~~

Restricted Shares awarded under the Plan shall be subject to the following terms and conditions and such additional terms and conditions not inconsistent with the terms of the Plan as the Committee deems appropriate. Each Restricted Share grant shall be evidenced by a Restricted Share Award Agreement, executed as set forth in Section 5, above, which shall be consistent with the Plan, including without limitation, the following provisions:

~~(A)~~

~~Price. The purchase price for Restricted Shares shall be any price set by the Committee and may be zero. Payment in full of the purchase price shall be made by certified or bank cashier’s check or other~~

form of payment acceptable to the Company, or, if approved by the Committee, by (1) actual or constructive delivery of unrestricted Shares having a Fair Market Value on the date of such delivery equal to the total purchase price, or (2) a combination of the preceding methods.

~~(B)~~

~~Acceptance of Restricted Shares~~. At the time of the Restricted Share Award, the Committee may determine that such Shares shall, after vesting, be further restricted as to transferability or be subject to repurchase by the Company or forfeiture upon the occurrence of certain events determined by the Committee, in its sole discretion, and specified in the Restricted Share Award Agreement. Notwithstanding the foregoing, each Restricted Share shall have a minimum three (3)-year vesting period; provided, however, that with regard to Restricted Shares issued on or after January 1, 2014, such Restricted Shares shall immediately vest upon the Participant’s death or termination of employment due to retirement (as defined in Section 6.(C)(3)). Awards of Restricted Shares must be accepted by the Participant within 30 days (or such other period as the Committee may specify at grant) after the grant date by executing the Restricted Share Award Agreement. The Participant shall not have any rights with respect to the grant of Restricted Shares unless and until the Participant has executed the Restricted Share Award Agreement, delivered a fully executed copy thereof to the Company, and otherwise complied with the applicable terms and conditions of the Award.

~~(C)~~

~~Share Restrictions~~. Subject to the provisions of the Plan and the applicable Restricted Share Award Agreement, during such period as may be set by the Committee, in its discretion, and as shall be set forth in the applicable Restricted Share Award Agreement (the “~~Restriction Period~~”), the Participant shall not be permitted to sell, transfer, pledge, assign or otherwise encumber the Restricted Shares. Furthermore, the Committee shall have the authority, in its sole discretion, to determine the voting rights (which may be full or limited), dividend rights (which may be full or limited), or other shareholder rights associated with the Restricted Shares during the Restriction Period, which rights shall be set forth in the applicable Restricted Share Award Agreement.

The Committee shall have the authority, in its sole discretion, to accelerate the time at which any or all of the restrictions shall lapse with respect to any Restricted Shares or to remove any or all restrictions after the grant of such Restricted Shares. Unless otherwise determined by the Committee at or after grant or termination of the Participant’s employment, if the Participant’s employment by the Company and its parent or subsidiaries terminates during the Restriction Period, all Restricted Shares held by such Participant and still subject to restriction, shall be forfeited by the Participant.

~~(D)~~

~~Stock Issuances and Restrictive Legends~~. Upon execution and delivery of the Restricted Share Award Agreement as described above and receipt of payment of the full purchase price for the Restricted Shares subject to such Restricted Share Award Agreement, the Company shall, no later than 30 days thereafter, issue the Restricted Shares. Restricted Shares may be issued in the form of a certificate, by book entry, or otherwise, in the Company’s sole discretion, and shall bear an appropriate restrictive legend. Notwithstanding the foregoing to the contrary, the Company may, in the Committee’s sole discretion, issue Restricted Shares (whether or not such Restricted Shares are, at the time of such issuance, the subject of an Award) to the trustee of a trust set up by the Committee, consistent with the terms and conditions of the Plan, to hold such Restricted Shares until the restrictions thereon have lapsed (in full or in part, in the Committee’s sole discretion), and the Committee may require that, as a condition of any Restricted Share Award, the Participant shall have delivered to the Company or such trustee, as appropriate, a stock power, endorsed in blank, relating to the Restricted Shares covered by the Award.

~~(E)~~

~~Stockholder Rights~~. Unless otherwise provided in the applicable Restricted Share Award Agreement, no Participant (or his executor or administrator or other transferee) shall have any rights of a stockholder in the Company with respect to the Restricted Shares covered by an Award unless and until the Restricted Shares have been duly issued and delivered to him under the Plan.

~~(F)~~

~~Expiration of Restriction Period~~. Upon the expiration of the Restriction Period without prior forfeiture of the Restricted Shares (or rights thereto) subject to such Restriction Period, unrestricted Shares shall be issued and delivered to the Participant.

~~Section 8.~~ ~~Performance Shares~~

Performance Shares awarded under the Plan shall be subject to the following terms and conditions and such additional terms and conditions not inconsistent with the terms of the Plan as the Committee deems appropriate. Each Performance Share grant shall be evidenced by a Performance Share Award Agreement, executed as set forth in Section 5, above, which shall be consistent with the Plan, including without limitation the following provisions:

~~(A)~~

~~Performance Periods and Goals~~.

~~(1)~~

~~The performance period for each Award of Performance Shares shall be of such duration as the Committee shall establish at the time of the Award (the “~~~~Performance Period~~~~”), but in no event less than one calendar year. There may be more than one Award in existence at any one time, and Performance Periods may differ.~~

~~(2)~~

~~The Committee shall establish in writing a range of performance goals (the “~~~~Performance Goals~~”) to be achieved during the Performance Period at the time of each Award of Performance Shares (but in no event later than 90 days after the commencement of the Performance Period). The Performance Goals shall be determined by the Committee using such measures of the performance of the Company over the Performance Period as the Committee shall select, including, without limitation, earnings, return on capital, revenue, premiums, net income, earnings per share, combined ratio, loss ratio, expense ratio, assets, equity, cash flows, stock price, total shareholders’ return,~~policies in force~~, or any other performance goal approved by the stockholders of the Company in accordance with Code Section 162(m). Performance Shares awarded to Participants will be earned as determined by the Committee with respect to the attainment of the Performance Goals set for the Performance Period. At the end of each Performance Period, the Committee shall certify the extent to which the Performance Goals were met during the Performance Period. Attainment of the highest Performance Goal for the Performance Period will earn 100% of the Performance Shares awarded for the Performance Period; failure to attain the lowest Performance Goal for the Performance Period will earn none of the Performance Shares awarded for the Performance Period.For purposes of the Plan, “policies in force” means, as of the applicable measurement date, the active policies underwritten by the Company’s Personal and Business (including workers’ compensation) Insurance Segments.

~~(3)~~

Attainment of the Performance Goals will be calculated from the consolidated financial statements of the Company but shall exclude (a) the effects of changes in federal income tax rates, (b) the effects of unusual, non-recurring and extraordinary items as defined by United States generally accepted accounting principles (“~~GAAP~~”), and (c) the cumulative effect of changes in accounting principles in accordance with GAAP. The Performance Goals may vary for different Performance Periods and need not be the same for each Participant receiving an Award for a Performance Period. The Committee may, in its sole discretion, subject to the limitations of Section 11.(J), vary the terms and conditions of any Performance Share Award, including, without limitation, the Performance Period and Performance Goals, without stockholder approval, as applied to any recipient who is not a “covered employee” with respect to the Company as defined in Code Section 162(m). In the event applicable tax or securities laws change to permit the Committee discretion to alter the governing performance measures as they pertain to covered employees without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval.

~~(B)~~

~~Price~~. The purchase price for Performance Shares shall be any price set by the Committee and may be zero. Payment in full of the purchase price shall be made by certified or bank cashier’s check or other form of payment acceptable to the Company, or, if approved by the Committee, by (1) delivery of unrestricted Shares having a Fair Market Value on the date of such delivery equal to the total purchase price, or (2) a combination of the preceding methods.

~~(C)~~
~~Acceptance of Performance Shares~~. At the time of the Performance Share Award, the Committee may determine that such Shares shall, after vesting pursuant to the Performance Period and Performance Goal provisions described above, be further restricted as to transferability or be subject to repurchase by the Company or forfeiture upon the occurrence of certain events determined by the Committee, in its sole discretion, and specified in the Performance Share Award Agreement. Awards of Performance Shares must be accepted by the Participant within 30 days (or such other period as the Committee may specify at grant) after the grant date by executing the Performance Share Award Agreement. The Participant shall not have any rights with respect to the grant of Performance Shares unless and until the Participant has executed the Performance Share Award Agreement, delivered a fully executed copy thereof to the Company and otherwise complied with the applicable terms and conditions of the Award.

~~(D)~~

~~Share Restrictions~~. Subject to the provisions of the Plan and the applicable Performance Share Award Agreement, during the Performance Period and any additional Restriction Period (as defined in Section 7.(C), above), the Participant shall not be permitted to sell, transfer, pledge, assign or otherwise encumber the Performance Shares. Furthermore, the Committee shall have the authority, in its sole discretion, to determine the voting rights (which may be full or limited), dividend rights (which may be full or limited), or other shareholder rights associated with the Performance Shares during the Restriction Period, which rights shall be set forth in the applicable Performance Share Award Agreement; provided, however, that dividends and/or dividend rights shall not be granted in connection with unearned Performance Shares.

The Committee shall have the authority, in its sole discretion, to accelerate the time at which any or all of the restrictions shall lapse with respect to any Performance Shares. Unless otherwise determined by the Committee at or after grant or termination of the Participant’s employment, if the Participant’s employment by the Company and its subsidiaries terminates during the Performance Period or the Restriction Period, all Performance Shares held by such Participant and still subject to restriction shall be forfeited by the Participant.

~~(E)~~

~~Stock Issuances and Restrictive Legends~~. Despite the execution and delivery of the Performance Share Award Agreement as described above, the Company shall have no obligation to issue the Performance Shares prior to the vesting of the Performance Shares, provided that the Company shall issue the Performance Shares no later than 30 days after such vesting and after payment in full of the purchase price for such Performance Shares. Performance Shares may be issued, whenever issued, in the form of a certificate, by book entry, or otherwise, in the Company’s sole discretion, and shall bear such restrictive legend as is consistent with applicable restrictions, if any, including without limitation those represented by the Performance Period and Performance Goals and those described in Section 8.(D), above. The Committee may require that, whenever issued, the Performance Shares be issued to and held by the Company or a trustee until the restrictions on such Performance Shares have lapsed (in full or in part), and that, as a condition of any Performance Share Award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Performance Shares covered by the Award.

~~(F)~~

~~Stockholder Rights~~. Unless otherwise provided in the applicable Performance Share Award Agreement, no Participant (or his executor or administrator or other transferee) shall have any rights of a stockholder in the Company with respect to the Performance Shares covered by an Award unless and until the Performance Shares have been duly issued and delivered to him under the Plan.

~~(G)~~

~~Expiration of Restriction Period~~. Subject to fulfillment of the terms and conditions of the applicable Performance Share Award Agreement and any other vesting requirements related to the applicable Performance Period or Performance Goals, upon the expiration of the Restriction Period without prior forfeiture of the Performance Shares (or rights thereto) subject to such Restriction Period, unrestricted Shares shall be issued and delivered to the Participant.

~~(H)~~

Award Agreement), or Change in Control, the Committee, taking into consideration the performance of such Participant, the level of attainment of the Participant’s Performance Goals and the performance of the Company over the Performance Period, may authorize the issuance to such Participant (or his legal representative or designated beneficiary) of all or a portion of the Performance Shares which would have been issued to him had his employment continued to the end of the Performance Period. If the Participant’s employment by the Company and its subsidiaries terminates before the end of any Performance Period for any other reason, all Performance Shares shall be forfeited.

~~Section 9.~~

~~Performance Units~~

~~The Committee may award performance units under the Plan (“~~~~Performance Units~~”), which shall represent the right of the Participant to receive an amount equal to the value related to the Performance Units awarded, such value to be determined in the manner established by the Committee at the time of the Award, but may not be less than a value per Performance Unit equal to the Fair Market Value of a Share. For each calendar year, the maximum number of Performance Units which may be granted to any individual during that year shall not exceed 100,000 Performance Units. Each Performance Unit grant shall be evidenced by a Performance Unit Award Agreement as provided in Section 5, above, which shall be consistent with the Plan, including without limitation the following provisions:

~~(A)~~

~~Establishment of Performance Accounts. At the time of an Award consisting in whole or in part of Performance Units, the Company shall establish an account (the “~~~~Performance Account~~~~”) in the name of the Participant to whom such Performance Units are awarded. Performance Units awarded to a Participant shall be credited to such Participant’s Performance Account.~~

~~(B)~~

~~Performance Periods and Goals~~.

~~(1)~~

~~The Performance Period for each Award of Performance Units shall be of such duration as the Committee shall establish at the time of the Award, but in no event less than one calendar year.~~

~~There may be more than one Award outstanding at any one time, and Performance Periods may differ for different Awards.~~

~~(2)~~

The Committee shall establish in writing a range of Performance Goals to be achieved during the Performance Period at the time of each Award of Performance Units (but in no event later than 90 days after the commencement of the Performance Period). The Performance Goals shall be determined by the Committee using such measures of the performance of the Company over the Performance Period as the Committee shall select, including without limitation, earnings, return on capital, revenue, premiums, net income, earnings per share, combined ratio, loss ratio, expense ratio, assets, equity, cash flows, stock price, total shareholder return, or any other performance goal approved by the stockholders of the Company in accordance with Code Section 162(m). Performance Units awarded to Participants will be earned as determined by the Committee with respect to the attainment of the Performance Goals set for the Performance Period. At the end of each Performance Period, the Committee shall certify the extent to which the Performance Goals were met during the Performance Period. Attainment of the highest Performance Goal for the Performance Period will earn 100% of the Performance Units awarded for the Performance Period; failure to attain the lowest Performance Goal for the Performance Period will earn none of the Performance Units awarded for the Performance Period.

~~(3)~~

Performance Unit Award, including without limitation the Performance Period and Performance Goals, without stockholder approval, as applied to any recipient who is not a “covered employee” with respect to the Company as defined in Code Section 162(m). In the event applicable tax or securities laws change to permit the Committee discretion to alter the governing performance measures as they pertain to covered employees without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval.

~~(C)~~

~~Rights and Benefits During Performance Period~~. The Committee may provide that amounts equivalent to interest at such rates as the Committee may determine shall be payable with respect to Performance Units. All amounts payable pursuant to this Section 9.(C) shall be credited for valuation purposes to the Participant’s Performance Account.

~~(D)~~

~~Payment Respecting Performance Units~~.

~~(1)~~

Performance Units shall be earned to the extent that the terms and conditions of the Plan and the applicable Performance Unit Award Agreement are met. Notwithstanding the foregoing, Performance Units and any other amounts credited to the Participant’s Performance Account shall be payable to the Participant only when, if, and to the extent that the Committee determines to make such payment.

~~(2)~~

Any payment determination with respect to each Award of Performance Units and the corresponding Performance Period shall be made by the Committee during the first two months following the end of the Performance Period.

~~(3)~~

Payment for Performance Units and any related amounts equivalent to interest may be made in a lump sum or in installments, in cash, Shares, other Awards, other property or a combination thereof, and may have such other terms as the Committee may determine.

~~(E)~~

~~Termination of Employment~~. If a Participant’s employment by the Company and its subsidiaries terminates before the end of any Performance Period due to the Participant’s death, disability (as defined by the Committee in its discretion at the time of Grant and set forth in the Performance Unit Award Agreement), or Change in Control, the Committee, taking into consideration the performance of such Participant, the level of attainment of the Participant’s Performance Goals and the performance of the Company over the Performance Period, may authorize the payment to such Participant (or his legal representative or designated beneficiary) of all or a portion of the amount which would have been paid to him had his employment continued to the end of the Performance Period. If the Participant’s employment by the Company and its subsidiaries terminates for any other reason, all Performance Units and amounts credited to the Participant’s Performance Account shall be forfeited.

~~Section 10.~~

~~Other Stock-Based Awards~~

The Committee is authorized, subject to limitations under applicable law, to grant such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, the Stock and factors that may influence the value of the Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified Subsidiaries (“~~Other Stock-Based Awards~~”). The Committee shall determine the terms and conditions of such Awards. Stock issued pursuant to an Award in the nature of a purchase right granted under this Section 10 shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may be granted pursuant to this Section 10.

~~Section 11.~~ ~~Other Provisions~~

~~(A)~~

~~Adjustments upon Changes in Capitalization~~. In the event the Company changes its outstanding Shares by reason of stock splits, stock dividends or any other increase or reduction of the number of outstanding Shares without receiving consideration in the form of money, services or property deemed appropriate by the Board, the aggregate number of Shares subject to the Plan shall be proportionately adjusted, and the number of Shares and the option price for each Share subject to the unexercised portion of any then outstanding Award shall be proportionately adjusted with the objective that the Participant’s proportionate interest in the Company shall remain the same as before the change without any change in the total option price applicable to the unexercised portion of the then outstanding Awards, all as determined by the Committee in its sole discretion.

In the event of any other recapitalization or any merger, consolidation or other reorganization of the Company, the Committee shall make such adjustment, if any, as it may deem appropriate to accurately reflect the number and kind of Shares deliverable, and the option prices payable, upon subsequent exercise of any then outstanding Awards, as determined by the Committee in its sole discretion.

The Committee’s determination of the adjustments appropriate to be made under this Section 11.(A) shall be conclusive upon all Participants and other Eligible Employees under the Plan. Notwithstanding anything in this Section 11.(A) to the contrary, any adjustment made under this Section 11.(A) shall be made in a manner that will not constitute a “modification” within the meaning defined in Code Section 424(h).

~~(B)~~

~~Change in Control~~.

~~(1)~~

~~Impact of Event~~. Notwithstanding any provision of this Plan or any Award Agreement to the contrary (unless such Award Agreement contains a provision referring specifically to this Section 11.(B) and stating that this Section 11.(B) shall not be applicable to the Award evidenced by such Award Agreement), if a Change in Control or a Potential Change in Control (each as defined below) occurs, then:

~~(a)~~

Any and all Stock Options theretofore granted and not fully vested shall thereupon become vested and exercisable in full and shall remain so exercisable in accordance with their terms, and the restrictions applicable to any or all Restricted Shares, Performance Shares and Performance Units shall lapse and such Shares and Awards shall be fully vested; provided that no Stock Option or other Award right which has previously been exercised or otherwise terminated shall become exercisable; and

~~(b)~~

The Company may, at its option, terminate any or all outstanding, unexercised Stock Options and portions thereof not more than 30 days after such Change in Control or Potential Change in Control; provided that the Company shall, upon such termination and with respect to each Stock Option so terminated, pay to the Participant of each terminated Stock Option (or such Participant’s transferee, if applicable) cash, less applicable withholding taxes, in an amount equal to the difference between the option price, as described in Section 6.(C), and the “~~Change in Control Price~~” (as defined in Section 11.(B)(4)) as of the date such Change in Control or such Potential Change in Control is determined to have occurred or such other date as the Company may determine prior to the Change in Control; and provided further that if such Change in Control Price is less than such option price, then the Board may, in its sole discretion, terminate such Stock Option without any payment.

~~(c)~~

In the event of a Change in Control or a Potential Change in Control, as defined herein, the accelerated vesting provided above shall occur only if the Participant incurs a termination of employment with the Company and any related entity within one (1) year of the Change in Control or Potential Change in Control; provided, however, that if the Change in Control or Potential Change in Control involves a change in the ownership of the Company and the

successor entity does not provide benefits of equal or greater value at the time of the transaction, the Participant’s Award(s) shall automatically vest upon the close of the Change in Control or Potential Change in Control transaction. For purposes of the Plan, “termination of employment” means a separation from service as defined in Code Section 409A, as amended.

~~(2)~~

~~Definition of Change in Control. For purposes of Section 11.(B)(1), a Change in Control means the happening of any of the following:~~

~~(a)~~

When any “person” as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act, but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee) and excluding State Automobile Mutual Insurance Company, directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; or

~~(b)~~

~~When, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the “~~~~Incumbent~~~~Directors~~~~”) cease for any reason other than death to constitute at least a majority of the Board; provided, however, that a director who was not a director at the beginning of such24-month~~ period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of, or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this Section 11.(B)(2)(b); or

~~(c)~~

The occurrence of a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or subsidiary through purchase of assets, by merger or otherwise; or

~~(d)~~

~~The occurrence of a “Rule 13e-3 transaction” (as defined in Rule 13e-3 under the Exchange Act) requiring approval by the shareholders of the Company.~~

~~(3)~~

~~Definition of Potential Change in Control. For purposes of Section 11.(B)(1), a Potential Change in Control means the happening of any one of the following:~~

~~(a)~~

~~The approval by shareholders of an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 11.(B)(2) above; or~~

~~(b)~~

The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company, a subsidiary or any Company employee benefit plan (including any trustee of such plan acting as such trustee) and other than State Automobile Mutual Insurance Company) of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this Plan.

~~(4)~~

~~Definition of Change in Control Price. For purposes of this Section 11, “~~~~Change in Control Price~~” means the highest price per share bid or paid, as applicable, in any transaction reported by the National Association of Securities Dealers on the Nasdaq Stock Market or otherwise or on any stock exchange on which the Shares are listed or paid or offered in any bona fide transaction related to a potential or actual Change in Control of the Company at any time during the 60-day period immediately preceding the occurrence of the Change in Control (or, where applicable, the occurrence of the Potential Change in Control event).

~~(C)~~
~~Compliance with Law and Approval of Regulatory Bodies~~. No right under the Plan shall be exercisable and no Shares will be delivered under this Plan except in compliance with all applicable Federal and State laws and regulations including, without limitation, compliance with withholding tax requirements, compliance with Federal and State securities laws and regulations and with the rules of all domestic stock exchanges on which the Company’s Shares may be listed. Any Share certificate issued to evidence shares for which a Stock Option is exercised may bear legends and statements the Committee shall deem advisable to assure compliance with Federal and State laws and regulations, to implement buy-sell restrictions or for other purposes deemed appropriate by the Committee. No Stock Option shall be exercisable and no Shares will be delivered under this Plan, until the Company has obtained consent or approval from regulatory bodies, Federal or State, having jurisdiction over such matters as the Committee may deem advisable. The Company shall not be required to deliver any Shares or other securities under the Plan prior to such registration or other qualification of such Shares or other securities under any State or Federal law, rule or regulation as the Committee shall determine to be necessary or advisable.

In the case of the exercise of any Stock Option by a person or estate acquiring the right to exercise the Stock Option by bequest or inheritance, the Committee may require reasonable evidence as to the ownership of the Stock Option and may require consents and releases of taxing authorities that it may deem advisable.

The Committee may require each person acquiring Shares under the Plan (1) to represent and warrant to and agree with the Company in writing that such person is acquiring the Shares without a view to the distribution thereof, and (2) to make such additional representations, warranties and agreements with respect to the investment intent of such person or persons as the Committee may reasonably request. Any certificates for such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.

All Shares or other securities delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed and any applicable Federal or State securities law, and the Committee may cause a legend or legends to be put on any certificates evidencing such Shares to make appropriate reference to such restrictions.

~~(D)~~

~~Forfeiture Events~~. The Board may, in its discretion, require that all or any portion of the value of the Awards made under the Plan, as well as any gain on the exercise of such Awards, is subject to an obligation of repayment to the Company upon: (i) the violation of any non-competition and confidentiality covenant applicable to the Participant; (ii) a financial restatement where (1) the amount of the Participant’s Award(s) was calculated based upon the achievement of certain financial results that were subsequently the subject of a financial statement restatement; (2) the Participant engaged in fraudulent misconduct that caused or substantially contributed to the need for the financial statement restatement; and (3) the amount of the Participant’s Award(s) would have been lower than the amount actually awarded or received by such Participant had the financial results been properly reported; or (iii) the Participant has engaged in any wrongful conduct during the Participant’s employment with the Company which has a material adverse effect on the Company as determined by the Board, in good faith.

~~(E)~~

~~No Right to Employment~~. The adoption of the Plan, its operation, any document describing or referring to the Plan, or any part thereof, or the grant of one or more Awards to an Eligible Employee shall not confer upon any Participant under this Plan any right to continue in the employ of the Company or its subsidiaries or any other affiliated entity, or shall not in any way affect the right and power of the Company to terminate the employment of any Participant under this Plan at any time with or without assigning a reason therefore, to the same extent as the Company might have done if this Plan had not been adopted.

~~(F)~~
~~Restriction on Exercise After Termination. Notwithstanding any provision of this Plan to the contrary, no unexercised right created under this Plan (an “~~~~Unexercised Right~~”) and held by a Participant on the date of termination of such Participant’s employment by the Company and its subsidiaries for any reason shall be exercisable after such termination if, prior to such exercise, the Participant violates any non-competition or confidentiality agreement or similar provision set forth in the Award Agreement pursuant to which such Unexercised Right was awarded.

~~(G)~~

~~Successors in Interest~~. This Plan shall be binding upon, inure to the benefit of, and be enforceable by and against successors, assignees and transferees of the Company and, if appropriate, the personal representatives and heirs of the Eligible Employee or Participant.

~~(H)~~

~~Rights as a Stockholder~~. No Participant or his executor or administrator or other transferee shall have any rights of a stockholder in the Company with respect to the Shares covered by an Award unless and until such Shares have been duly issued and delivered to him under the Plan.

~~(I)~~

~~Acceleration of Rights~~. The Committee shall have the authority, in its discretion, to accelerate the time at which a Stock Option or other Award right shall be exercisable whenever it may determine that such action is appropriate by reason of changes in applicable tax or other laws or other changes in circumstances occurring after the grant of the Award.

~~(J)~~

~~Interpretation, Amendment or Termination of the Plan~~. The interpretation by the Committee of any provision of the Plan or of any Award Agreement executed pursuant to the grant of an Award under the Plan shall be final and conclusive upon all Eligible Employees, Participants or transferees under the Plan. The Board, without further action on the part of the stockholders of the Company, may from time to time alter, amend or suspend the Plan or may at any time terminate the Plan, provided that: (1) no such action shall materially and adversely affect any outstanding Stock Option or other right under the Plan without the consent of the holder of such Stock Option or other right; and (2) except for the adjustments provided for in Section 11.(A), above, no amendment may be made by Board action without stockholder approval if the amendment would (a) materially increase the benefits accruing to Participants under the Plan, (b) materially increase the number of Shares which may be issued under the Plan, (c) materially modify the requirements as to eligibility for participation in the Plan, (d) extend the maximum option period of Stock Options or (e) effect any other change which requires stockholder approval under applicable law or regulation. Subject to the above provisions, the Board shall have authority to amend the Plan to take into account changes in applicable tax and securities laws and accounting rules, as well as other developments.

~~(K)~~

~~Unfunded Status of the Plan~~. The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments or deliveries of Shares not yet made by the Company to a Participant or transferee nothing contained herein shall give any such Participant or transferee any rights that are greater than those of a general creditor of the Company. The Committee may authorize the creation of trusts or other arrangements to meet obligations created under the Plan to deliver Shares or payments hereunder consistent with the foregoing.

~~(L)~~

~~Protection of Board and Committee. No member of the Board or the Committee shall have any liability for any determination or other action made or taken in good faith with respect to the Plan or any Award granted under the Plan.~~

~~(M)~~

~~Government Regulations~~. Notwithstanding any provision of the Plan or any Award Agreement executed pursuant to the Plan, the Company’s obligations under the Plan and such Award Agreement shall be subject to all applicable laws, rules and regulations and to such approvals as may be required by any governmental or regulatory agencies, including without limitation any stock exchange on which the Company’s Shares may then be listed.

~~(N)~~

~~Genders and Numbers. When permitted by the context, each pronoun used in the Plan shall include the same pronoun in other genders and numbers.~~

~~(O)~~
~~Captions. The captions of the various sections of the Plan are not part of the context of the Plan, but are only labels to assist in locating those sections, and shall be ignored in construing the Plan.~~

~~(P)~~

~~Effective Date of the Plan. This Plan shall be effective immediately upon approval by the shareholders of the Company (the “~~~~Effective Date~~~~”). This Plan shall be submitted to the shareholders of the Company for approval at the Company’s 2009 annual meeting of shareholders, anticipated to be held on May 8, 2009.~~

~~(Q)~~

~~Duration of the Plan~~. Unless previously terminated by the Board, this Plan shall terminate 10 years from the Effective Date and no Award shall be granted under it thereafter, but such termination shall not affect any Award theretofore granted.

~~(R)~~

~~Governing Law. The Plan shall be construed and governed by the laws of the State of Ohio.~~

~~(S)~~

~~Withholding Tax~~. The Company, at its option, shall have the right to require the Participant or any other person receiving Shares, Restricted Shares, Performance Shares or Performance Units (including cash payments) to pay the Company the amount of any taxes which the Company is required to withhold with respect to such Shares, Restricted Shares, Performance Shares or Performance Units or, in lieu of such payment, to retain or sell without notice a number of such Shares subject to the applicable Award sufficient to cover the amount required to be so withheld. The Company, at its option, shall have the right to deduct from all dividends paid with respect to Shares, Restricted Shares, Performance Shares and Performance Units the amount of any taxes which the Company is required to withhold with respect to such dividend payments. The Company, at its option, shall also have the right to require a Participant to pay to the Company the amount of any taxes which the Company is required to withhold with respect to the receipt by the Participant of Shares pursuant to the exercise of a Stock Option, or, in lieu thereof, to retain, or sell without notice, a number of Shares sufficient to cover the amount required to be withheld. The obligations of the Company under the Plan shall be conditional on such payment or other arrangements acceptable to the Company.

~~(T)~~

~~Savings Clause~~. In case any one or more of the provisions of this Plan or any Award shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and the invalid, illegal or unenforceable provision shall be deemed null and void; however, to the extent permissible by law, any provision which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Plan or such Award, as applicable, to be construed so as to foster the intent of this Plan. This Plan and all Awards are intended to comply in all respects with applicable laws and regulations, including Code Section 422, Rule 16b-3 under the 1934 Act (with respect to persons subject to Section 16 of the 1934 Act (“~~Reporting Persons~~~~”)) and Code Section 162(m) (with respect to covered employees as defined under Code Section 162(m) (“~~~~Covered Employees~~”)). In case any one or more of the provisions of this Plan or any Award shall be held to violate or be unenforceable in any respect under Code Section 422, Rule 16b-3 or Code Section 162(m), then, to the extent permissible by law, any provision which could be deemed to violate or be unenforceable under Code Section 422, Rule 16b-3 or Code Section 162(m) shall first be construed, interpreted or revised retroactively to permit the Plan or such Award, as applicable, to be in compliance with Code Section 422, Rule 16b-3 and Code Section 162(m). Notwithstanding anything in this Plan to the contrary, the Committee, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of this Plan to Participants who are Reporting Persons or Covered Employees without so restricting, limiting or conditioning this Plan with respect to other Participants.

~~Exhibit C~~

~~STATE AUTO FINANCIAL CORPORATION~~

~~OUTSIDE DIRECTORS RESTRICTED SHARE UNIT PLAN~~

~~Background Information~~

~~The directors and shareholders of State Auto Financial Corporation, an Ohio corporation (the “~~~~Company~~~~”), desire to adopt a renewed version of the Company’s Outside Directors Restricted Share Unit Plan (the “~~~~Plan~~”) in order to continue to align and strengthen the interests of Outside Directors with the interests of the Company’s shareholders. The Company originally adopted an Outside Directors Restricted Share Unit Plan, subject to shareholder approval, on May 11, 2005, which such plan expired on May 31, 2015.

~~The Plan is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “~~~~Code~~”) and the regulations applicable to the same. To the extent inconsistent with Code Section 409A or regulations issued thereunder, this Plan shall be amended to conform to such requirements within applicable time limitations established by the IRS.

~~ARTICLE I~~

~~DEFINITIONS AND GENERAL PROVISIONS~~

~~1.1~~ ~~Definitions. For purposes of the Plan, the following terms shall be defined as set forth below. Other capitalized terms used in the Plan shall be defined as set forth in the Plan.~~

~~(a)Account. The bookkeeping account described in Section 3.2 under which benefits and earnings are credited on behalf of a Participant.~~

~~(b)Administrative Committee~~. The Compensation Committee of the Board or such other individuals designated by the Compensation Committee, in its discretion, to oversee the administration of the Plan. Such designees, if any, may include employees of the Company and shall be the Plan’s “~~Administrator~~”.

~~(c)Award. An award of Restricted Share Units under the Plan.~~

~~(d)Beneficiary~~. The person(s) (including a trust) entitled to receive any distribution hereunder upon the death of a Participant. The Beneficiary for benefits payable under this Plan shall be the beneficiary designated by the Participant in accordance with procedures established by the Administrator as of the Participant’s date of death, or, in the absence of any such designation, the Participant’s estate.

~~(e)Board. The Board of Directors of the Company.~~

~~(f)Common Shares. The common shares, without par value, of the Company.~~

~~(g)Disability. Permanent and total disability as defined in Code Section 22(e)(3).~~

~~(h)Distribution Options~~. An immediate, single lump sum payment, or annual installment payments over a period of five (5) or ten (10) years. In the absence of an election by the Participant, the default shall be an immediate single lump sum.

~~(i)Form of Payment Options. The form of payment of distributions of Restricted Share Units, which shall be either in cash or Common Shares.~~

~~(j)Outside Director. Any non-employee member of the Board of Directors of the Company.~~

~~(k)Participant. Any Outside Director who meets the eligibility requirements for participation in the Plan as set forth in Article II and who receives an Award under the Plan.~~

~~(l)Plan Year~~. The fiscal year of the Plan, which is the twelve (12) consecutive month period beginning January 1 and ending December 31; provided, however, the first Plan Year shall begin on the Effective Date (as defined in Section 8.9) and end on December 31, 2016.

~~(m)Payment Processing Date. The dates of March 31, June 30, September 30, or December 31 of each Plan Year.~~

~~1.2~~ ~~General Provisions~~. The masculine wherever used herein shall include the feminine; singular and plural forms are interchangeable. Certain terms of more limited application have been defined in the provisions to which they are principally applicable. The division of the Plan into Articles and Sections with captions is for convenience only and is not to be taken as limiting or extending the meaning of any of its provisions.

~~ARTICLE II~~

~~ELIGIBILITY AND PARTICIPATION~~

~~2.1~~ ~~General Eligibility Conditions. All Outside Directors are eligible to receive Awards under the Plan. However, in order to receive a benefit under the Plan, a Participant must meet the requirements of Sections 2.2 and 2.3.~~

~~2.2~~ ~~Specific Conditions for Active Participation. To participate actively in the Plan, a Participant must execute or acknowledge a Restricted Share Unit Agreement (“~~~~Agreement~~”) as described in Section 3.3 and comply with such other procedures as may be established by the Administrator from time to time. A Participant’s Agreement shall be maintained by the Administrator, on behalf of the Administrative Committee, and must be executed, acknowledged, and filed as of the date of grant or at such other time as may be required by regulations issued under Code Section 409A.

~~2.3~~ ~~Termination of Participation~~. Once an Outside Director becomes a Participant, such individual shall continue to be a Participant until such individual (a) ceases to qualify as an Outside Director, and (b) ceases to have any vested interest in the Plan (as a result of distributions made to such Participant or his Beneficiary, if applicable, or otherwise).

~~ARTICLE III~~

~~RESTRICTED SHARE UNITS~~

~~3.1~~ ~~Awards of Restricted Share Units~~. Promptly following each annual meeting of the shareholders of the Company on and after the Effective Date, each Outside Director shall be automatically granted an Award of restricted share units (“~~Restricted Share Units~~”), in such number as determined by the Administrative Committee in accordance with Section 6.2, for prospective service to be rendered. Except for the elections which may be made by each Participant as provided in the Plan, the terms of each annual Award of Restricted Share Units shall be the same with respect to each Participant. In addition, an Outside Director elected or appointed to the Board other than in connection with an annual meeting of shareholders shall be granted, at the time of such election or appointment, an Award of Restricted Share Units equal to the number of Restricted Share Units that was granted to each Outside Director following the preceding annual meeting of shareholders, prorated based upon the number of anticipated days to the next annual meeting of shareholders. The Company will credit the number of Restricted Share Units awarded for each Plan Year to the Participant’s Account. If an Organic Change occurs, then the number of Restricted Share Units to be awarded to Participants as an annual Award shall be adjusted consistent with such Organic Change.

~~3.2~~ ~~Record of Account~~. Solely for the purpose of measuring the amount of the Company’s obligations to each Participant or his beneficiary(ies) under the Plan, the Administrator will maintain a separate bookkeeping record, an Account, for each Participant in the Plan that shall reflect the fair market value of the Account.

Subject to the provisions of this Article III, on the date when the Restricted Share Units to be credited to the Participant are allocated to his Account, the Administrator will credit to a separate sub-account a number of hypothetical Common Shares (and fractions thereof) having a Value equal to the Restricted Share Units. For

~~purposes of this Plan, the “~~~~Value~~” of a Common Share on a particular day shall mean: (a) the last reported sale price of a Common Share on the Nasdaq National Market System on the most recent previous trading day (or if there was no trading in the Common Shares on that day, then on the next preceding trading day in which there was trading in the Common Shares), or (b) the mean between the high and low bid and ask price of a Common Share as reported by the National Association of Securities Dealers on the most recent previous trading day, or (c) the last reported sale price of a Common Share on any stock exchange on which the Common Shares are listed on the most recent previous trading day (or if there was no trading in the Common Shares on that day, then on the next preceding trading day on which there was trading in the Common Shares). By way of example and for illustration purposes only, if the Payment Processing Date is December 31, the Value of a Common Share under option (a) above is determined on December 30.

If any Organic Change shall occur, then the Participant’s Account shall be adjusted so as to contain a Value equivalent to such shares of stock, securities or assets (including cash) as would have been issued or payable with respect to or in exchange for the number of Common Shares credited thereto immediately before such Organic Change, if such Common Shares had been outstanding. An “~~Organic Change~~” means the following: (a) a recapitalization, reorganization, reclassification, consolidation, or merger of the Company, or any sale of all or substantially all of the Company’s assets to another person or entity, or any other transaction which is effected in such a way that holders of Common Shares are entitled to receive (either directly or upon subsequent liquidation) other stock, securities, or assets with respect to or in exchange for Common Shares; or (b) a change in the Company’s outstanding Common Shares by reason of stock splits, stock dividends, or any other increase or reduction of the number of outstanding Common Shares without receiving consideration in the form of money, services, or property deemed appropriate by the Board.

The Account of a Participant (as of the Dividend Payment Date), shall be credited with such earnings (or losses) consisting solely of dividend equivalent credits pursuant to this paragraph. Whenever a dividend or other distribution is made with respect to the Common Shares, then the Account of a Participant (as of the Dividend Payment Date) shall be credited, on the payment date for such dividend or other distribution (the “~~Dividend Payment Date~~”), with a number of additional Common Shares having a Value, as of the Dividend Payment Date, based upon the number of Common Shares deemed to be held in the Participant’s Account as of the record date for such dividend or other distribution (the “~~Dividend Record Date~~”), if such Common Shares were outstanding. If such dividend or other distribution is in the form of cash, the number of Common Shares so credited shall be a number of Common Shares (and fractions thereof) having a Value, as of the Dividend Payment Date, equal to the amount of cash that would have been distributed with respect to the Common Shares deemed to be held in the Participant’s Account as of the Dividend Record Date, if such Common Shares were outstanding. If such dividend or other distribution is in the form of Common Shares, the number of Common Shares so credited shall equal the number of such Common Shares (and fractions thereof) that would have been distributed with respect to the Common Shares deemed to be held in the Participant’s Account as of the Dividend Record Date, if such Common Shares were outstanding. If such dividend or other distribution is in the form of property other than cash or Common Shares, the number of Common Shares so credited shall be a number of Common Shares (and fractions thereof) having a Value, as of the Dividend Payment Date, equal to the value of the property that would have been distributed with respect to the Common Shares deemed to be held in the Participant’s Account as of the Dividend Record Date, if such Common Shares were outstanding. The value of such property shall be its fair market value as of the Dividend Payment Date, determined by the Board based upon market trading if available and otherwise based upon such factors as the Board deems appropriate.

~~3.3~~ ~~Restricted Share Unit Agreement~~. Each Restricted Share Unit Award granted under the Plan shall be evidenced by a Restricted Share Unit Agreement. The Agreement shall be dated as of the date of the Award, shall be signed by an officer of the Company authorized by the Board, and shall be signed by the Participant. The Agreement shall describe the Restricted Share Unit Award and state that such Restricted Share Units are subject to all the terms and provisions of the Plan. At the time the Restricted Share Units are awarded, the Board may determine that such Restricted Share Units shall be restricted as to transferability as specified in the Agreement. The prospective Participant of an Award shall not have any rights with respect to such Award, unless and until

such Participant has executed an agreement evidencing the Award and has delivered a fully executed copy thereof to the Administrator, and has otherwise complied with the applicable terms and conditions of such Award.

~~ARTICLE IV~~

~~VESTING~~

~~4.1~~ ~~Vesting~~. A Participant will be one hundred percent (100%) vested in amounts credited to such Participant’s Account attributable to an Award upon the completion of six (6) months of service as an Outside Director from the date of the Award. Notwithstanding the foregoing, a Participant will be one hundred percent (100%) vested in the total amount credited to such Participant’s Account upon the Participant’s death or Disability.

~~ARTICLE V~~

~~DISTRIBUTION OF BENEFITS~~

~~5.1~~ ~~Elections of Distribution and Form of Payment Options~~. For each Award, each Participant shall elect a Distribution Option and a Form of Payment Option applicable to that Award. The Distribution Option and the Form of Payment Option elected by the Participant shall be set forth in the Agreement.

~~5.2~~ ~~Changes to Distribution or Form of Payment Options~~. After initial election, each Participant may thereafter change his Distribution Option or Form of Payment Option election with respect to a particular Award. However, a participant my not change a Distribution Option to one that would complete the distribution of the Participant’s Account more quickly than the election in effect at the date of the new election. Furthermore, any change with respect to a Distribution Option or Form of Payment Option cannot be effective until at least twelve (12) months after such election and a change in Distribution Option must delay such distribution for at least five (5) years beyond the initial distribution date. If a Distribution Option or Form of Payment Option election is changed, and distribution is triggered before twelve (12) months have elapsed from the change of such election, the distribution will be made in accordance with the Distribution Option or Form of Payment Option election, as the case may be, in effect prior to the change.

~~5.3~~ ~~Payment of Benefits~~. A Participant shall receive payment of vested amounts credited to his Account upon his termination from membership on the Board. In addition, a Participant may receive payment of amounts credited to his Account upon the occurrence of an “unforeseeable emergency,” as further described in Section 5.4.

~~(a)Payment Upon Termination other than Death or Disability~~. Except in the case of termination from membership on the Board due to death or Disability, a Participant will receive payment of the amounts credited to his Account in the Form of Payment Option elected by the Participant as follows:

(i) If the immediate single lump sum Distribution Option is elected by the Participant, then payment shall be made on the first Payment Processing Date to occur at least six (6) months after the date of such Participant’s termination from membership on the Board.

(ii) If the annual installment Distribution Option is elected by the Participant, then payments shall commence on the first Payment Processing Date to occur after the date of such Participant’s termination from membership on the Board, with subsequent annual installment payments to occur on the same Payment Processing Date each year thereafter until the Participant’s Account has been distributed in full. The amount of the annual installment payments shall be equal to the amount necessary to fully distribute the Participant’s Account as an annual benefit over the Distribution Option period elected, consistent with the following methodology: the amount payable on the applicable close of the Payment Processing Date shall equal the value of the Participant’s Account as of the Payment

Processing Date, multiplied by a fraction, the numerator of which is one (1) and the denominator of which is the number of annual installments remaining in the Distribution Option period elected by the Participant. For example, assuming a ten (10) year Distribution Option period applies, the amount paid on each of the applicable Payment Processing Dates would represent the value of the Participant’s Account of the close of the Payment Processing Date times the following factors: Year 1 = 10% (1/10); Year 2 = 11.11% (1/9); Year 3 = 12.5% 1/8); Year 4 = 14.29% (1/7); Year 5 = 16.66% (1/6); Year 6 = 20% (1/5); Year 7 = 25% (1/4); Year 8 = 33.33% (1/3); Year 9 = 50% (1/2); Year 10 = 100% (1/1).

~~(b)Payment upon Death~~. In the event of the death of a Participant prior to the commencement of the distribution of payments under the Plan, such benefits shall be paid to the Beneficiary or Beneficiaries designated by the Participant in accordance with the Distribution Option in effect for such Participant as of such Participant’s date of death, payable on, or beginning with, the first Payment Processing Date to occur after the date of the Participant’s death. In the event of the death of the Participant while receiving payments of benefits under the Plan, the Beneficiary or Beneficiaries designated by the Participant shall be paid the remaining payments due under the Plan in accordance with the Distribution Option in effect for such Participant as of such Participant’s date of death, payable on, or beginning with, the first Payment Processing Date to occur after the date of the Participant’s death.

~~(c)Payment upon Disability~~. If the Administrative Committee makes a determination that a Participant has suffered a Disability, either before or after such Participant has terminated his membership on the Board, then such Participant shall receive payment of the full amount in his Account in an immediate single lump sum, regardless of the Distribution Option elected by such Participant, payable on the first Payment Processing Date to occur after the date the Administrative Committee makes its determination that such Participant has suffered a Disability.

~~5.4~~ ~~Withdrawals for Unforeseeable Emergency~~. Upon the occurrence of an unforeseeable emergency, a Participant shall be eligible to receive payment of the amount necessary to satisfy such emergency plus any amount necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent such liquidation would not itself cause severe financial hardship). The amount determined to be properly distributable under this section and applicable regulations under Code Section 409A shall be payable in a single lump sum only. For the purposes of this section, the term “~~unforeseeable emergency~~” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant (as defined in Code Section 152(a)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. It shall be the responsibility of the Participant seeking to make a withdrawal under this section to demonstrate to the Administrator that an unforeseeable emergency has occurred and to document the amount properly distributable hereunder.

~~5.5~~ ~~Value of Payments. The amount of the payment to be made to a Participant on any Payment Processing Date shall be equal to the following:~~

~~(a)Restricted Share Units Payable in Cash~~. If a Participant has elected the cash Form of Payment Option, the amount of cash payable to the Participant shall be equal to the Value of a Common Share as of the close of the Payment Processing Date multiplied by the number of Restricted Share Units to which payment is due on that Payment Processing Date.

~~(b)Restricted Share Units Payable in Common Shares~~. If a Participant has elected the Common Share Form of Payment Option, the number of Common Shares to be issued to the Participant shall be equal to the number of Restricted Share Units to which payment is due on that Payment Processing Date.

~~5.6~~ ~~Notice of Intention to Retire or Terminate Board Membership~~. To the extent practicable, a Participant shall provide the Company with advance notice of his intention to retire or terminate his Board membership and receive benefits hereunder in accordance with uniform procedures established by the Administrator.

~~5.7~~ ~~Annual Installment Payments Treated Separately. For purposes of benefit payment elections, each annual installment payment shall be treated as a separate payment.~~

~~ARTICLE VI~~

~~PLAN ADMINISTRATION~~

~~6.1~~ ~~Administration~~. The Plan shall be administered by the Administrative Committee, or its designee, as an unfunded, deferred compensation plan that is not intended to meet the qualification requirements of Code Section 401.

~~6.2~~ ~~Administrative Committee~~. The Administrative Committee, or its designee, will operate and administer the Plan and shall have all powers necessary to accomplish that purpose, including, but not limited to, the discretionary authority to interpret the Plan, the discretionary authority to determine all questions relating to the rights and status of Participants, and the discretionary authority to make such rules and regulations for the administration of the Plan as are not inconsistent with the terms and provisions hereof or applicable law, as well as such other authority and powers relating to the administration of the Plan, except such as are reserved by the Plan to the Board. All decisions made by the Administrative Committee shall be final.

Without limiting the powers set forth herein, the Administrative Committee shall have the power: (a) to change or waive any requirements of the Plan to conform with the law or to meet special circumstances not anticipated or covered in the Plan; (b) to determine the times and places for holding meetings of the Administrative Committee and the notice to be given of such meetings; (c) to employ such agents and assistants, such counsel (who may be counsel to the Company), and such clerical and other services as the Administrative Committee may require in carrying out the provisions of the Plan; and (d) to authorize one or more of their number or any agent to execute or deliver any instrument on behalf of the Administrative Committee. The Administrative Committee shall also have the power to decrease or increase the number of Restricted Share Units to be awarded to Plan Participants as annual Awards described in Section 3.1 without further shareholder approval if, within the Administrative Committee’s discretion, such a decrease or increase is warranted to maintain director compensation at an appropriate level; provided that no annual Award described in Section 3.1 shall be greater than 10,000 Restricted Share Units. If an Organic Change occurs, then the minimum and maximum number of Restricted Share Units to be awarded to Participants as annual Awards shall be adjusted consistent with such Organize Change.

The members of the Administrative Committee and the Company and its officers and directors, shall be entitled to rely upon all valuations, certificates and reports furnished by any funding agent or service provider, upon all certificates and reports made by an accountant, and upon all opinions given by any legal counsel selected or approved by the Administrative Committee, and the members of the Administrative Committee and the Company and its officers and directors shall, except as otherwise provided by law, be fully protected in respect of any action taken or suffered by them in good faith in reliance upon any such valuations, certificates, reports, opinions or other advice of a funding agent, service provider, accountant or counsel.

~~6.3~~ ~~Statement of Participant’s Account~~. The Administrator shall, as soon as practicable after the end of each Plan Year, provide to each Participant a statement setting forth the Account of such Participant under Section 3.2 as of the end of such Plan Year. Such statement shall be deemed to have been accepted as correct unless written notice to the contrary is received by the Administrator within thirty (30) days after providing such statement to the Participant. Account statements may be provided more often than annually in the discretion of the Administrator.

~~6.4~~ ~~Filing Claims. Any Participant, Beneficiary or other individual (hereinafter a “~~~~Claimant~~”) entitled to benefits under the Plan, or otherwise eligible to participate herein, shall be required to make a claim with the Administrative Committee (or its designee) requesting payment or distribution of such Plan benefits (or written

confirmation of Plan eligibility, as the case may be), on such form or in such manner as the Administrator shall prescribe. Unless and until a Claimant makes proper application for benefits in accordance with the rules and procedures established by the Administrator, such Claimant shall have no right to receive any distribution from or under the Plan.

~~ARTICLE VII~~

~~AMENDMENT AND TERMINATION~~

~~7.1~~ ~~Amendment~~. The Board reserves the right, in its sole discretion, to amend, modify or alter any or all of the provisions of the Plan at any time and from time to time without the consent of any Participant; provided, however, that no amendment shall operate retroactively so as to affect adversely any rights to which a Participant may be entitled under the provisions of the Plan as in effect prior to such action. Furthermore, no such amendments, modifications or alterations shall be made without the approval of the Company’s shareholders to the extent such approval is required by applicable law, regulation or Nasdaq or stock exchange rule.

~~7.2~~ ~~Termination~~. The Company reserves, in its sole discretion, the right to suspend, discontinue or terminate the Plan at any time in whole or in part; provided, however, that a suspension, discontinuance or termination of the Plan shall not: (a) accelerate the obligation to make payments to any person not otherwise currently entitled to payments under the Plan, unless otherwise specifically so determined by the Company and permitted by applicable law, (b) relieve the Company of its obligations to make payments to any person then entitled to payments under the Plan, or (c) reduce any existing Account balance. Unless previously terminated by the Board, the Plan shall terminate on May 31, 2026.

~~ARTICLE VIII~~

~~MISCELLANEOUS PROVISIONS~~

~~8.1~~ ~~Facility of Payments~~. Whenever, in the opinion of the Administrative Committee, a person entitled to receive any payment, or installment thereof, is under a legal disability or is unable to manage his financial affairs, the Administrative Committee shall have the discretionary authority to direct payments to such person’s legal representative or to a relative or friend of such person for his benefit; alternatively, the Administrative Committee may in its discretion apply the payment for the benefit of such person in such manner as the Administrative Committee deems advisable. Any such payment or application of benefits made in good faith in accordance with the provisions of this Section shall be a complete discharge of any liability of the Administrative Committee (including the Administrator), the Company and the Board with respect to such payment or application of benefits.

~~8.2~~ ~~Funding~~. All benefits under the Plan are unfunded and the Company shall not be required to establish any special or separate fund or to make any other segregation of assets in order to assure the payment of any amounts under the Plan; provided, however, that in order to provide a source of payment for its obligations under the Plan, the Company may establish a trust fund. The right of a Participant or his Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his Beneficiary shall have any rights in or against any amounts credited under the Plan or any other specific assets of the Company. All amounts credited under the Plan to the benefit of a Participant shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate.

~~8.3~~ ~~Anti-Assignment~~. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge; and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit shall be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefits. If a Participant, a Participant’s spouse, or any Beneficiary should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge

any right to benefits under the Plan, then those rights, in the discretion of the Administrative Committee, shall cease. In this case, the Administrative Committee may hold or apply the benefits at issue or any part thereof for the benefit of the Participant, the Participant’s spouse, or Beneficiary in such manner as the Administrative Committee may deem proper.

~~8.4~~ ~~Unclaimed Interests~~. If the Administrator shall at any time be unable to make distribution or payment of benefits hereunder to a Participant or any Beneficiary of a Participant by reason of the fact that his whereabouts are unknown, the Administrative Committee shall so certify, and thereafter the Administrator shall make a reasonable attempt to locate such missing person. If such person continues missing for a period of three (3) years following such certification, the interest of such Participant in the Plan shall, in the discretion of the Administrative Committee, be distributed to the Beneficiary of such missing person.

~~8.5~~ ~~References to Code, Statutes and Regulations~~. Any and all references in the Plan to any provision of the Code, or any other statute, law, regulation, ruling or order shall be deemed to refer also to any successor statute, law, regulation, ruling or order.

~~8.6~~ ~~Liability~~. The Company, and its directors, officers and employees, shall be free from liability, joint or several, for personal acts, omissions, and conduct, and for the acts, omissions and conduct of duly constituted agents, in the administration of the Plan.

~~8.7~~ ~~Governing Law; Severability~~. The Plan shall be construed according to the laws of the State of Ohio, including choice of law provisions, and all provisions hereof shall be administered according to the laws of that State, except to the extent preempted by federal law. A final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. In the event that any one or more of the provisions of the Plan shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of the Plan, but the Plan shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein, and there shall be deemed substituted such other provision as will most nearly accomplish the intent of the parties to the extent permitted by applicable law.

~~8.8~~ ~~Taxes. The Company shall be entitled to withhold any taxes from any distribution hereunder or from other compensation then payable, as it believes necessary, appropriate, or required under relevant law.~~

~~8.9~~ ~~Effective Date. This Plan shall be effective upon approval by the shareholders of the Company (the “~~~~Effective Date~~~~”). This Plan shall be submitted to the shareholders of the Company for approval at the Company’s 2016 annual meeting of shareholders, anticipated to be held May 6, 2016.~~

~~Exhibit D~~

~~STATE AUTO FINANCIAL CORPORATION~~

~~ONE TEAM INCENTIVE PLAN~~

~~Effective January 1, 2016~~

~~SECTION 1. INTRODUCTION~~

~~1.01 Purposes of the Plan.~~

The purposes of the State Auto Financial Corporation One Team Incentive Plan are to: (a) further the long-term profitable growth and earnings of the Company by providing incentives and rewards to all employees who achieve the stated performance goals and strategic objectives which contribute significantly to the achievement of that profitable growth; (b) focus employees on the key measures that align and drive superior performance and value over the long term; and (c) assist the Company in recruiting and maintaining highly talented associates by providing competitive total rewards. To accomplish these objectives, the Plan authorizes the grant of Awards, as further described herein. The Plan is intended, in part, to provide for performance-based compensation which is not subject to the deduction limitation rules under Code Section 162(m) as in effect from time to time.

~~1.02 Term of the Plan.~~

Subject to shareholder approval, the Plan shall be effective as of January 1, 2016, and shall remain in effect until terminated by the Board or the Committee in accordance with 0. Any Award granted before the termination of the Plan shall continue to be governed thereafter by the terms of the Plan, including the terms in effect on the termination date.

~~SECTION 2. DEFINITIONS~~

~~2.01 Definitions.~~

~~Except where otherwise indicated, the following terms shall have the definitions set forth below for purposes of the Plan:~~

~~(a)~~~~“Applicable Law”~~ ~~means the requirements of Code Section 162(m) applicable to performance-based compensation.~~

~~(b)~~~~“Award”~~ ~~means a Performance Bonus Award granted under 0 or a Cash Bonus Award granted under Section 6 as established by the Committee for a Performance Period.~~

~~(c)~~~~“Beneficiary”~~ ~~means the Participant’s surviving spouse, or if the Participant has no surviving spouse, the Participant’s estate.~~

~~(d)~~~~“Board”~~ or ~~“Board of Directors”~~ ~~means the Board of Directors of State Auto Financial Corporation.~~

~~(e)~~~~“Cash Bonus Award”~~ ~~means the dollar amount granted by members of Senior Leadership, or their designees, and payable to a Participant in accordance with Section 6.~~

~~(f)~~~~“Change in Control”~~ ~~means one of the following events shall have taken place after January 1, 2016:~~

(1) when any “person” as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act, but excluding the Company and any employee benefit plan sponsored or maintained by the Company (including any trustee of such plan acting as trustee) and excluding State Automobile Mutual Insurance

Company, directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; or

~~(2) when, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the~~~~“Incumbent Directors”~~) cease for any reason other than death to constitute at least a majority of the Board; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of, or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this Section 2.01(f); or

~~(3) the occurrence of a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company through purchase of assets, by merger or otherwise; or~~

~~(4) the occurrence of a “Rule 13e-3 transaction” (as defined in Rule 13e-3 under the Exchange Act) requiring approval by the shareholders of the Company.~~

A~~“Potential Change in Control”~~ ~~means the happening of any one of the following:~~

~~(5) the approval by shareholders of an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 2.01(f) above; or~~

(6) the acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or any Company employee benefit plan (including any trustee of such plan acting as such trustee) and other than State Automobile Mutual Insurance Company) of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this Plan.

~~(g)~~~~“Code”~~ ~~means the United States Internal Revenue Code of 1986, as amended, and the regulations and rulings of general applicability issued thereunder, as in effect from time to time.~~

~~(h)~~~~“Committee”~~ generally means the Compensation Committee of the Board or such other individuals designated by the Compensation Committee, in its discretion, to oversee the administration of the Plan, including members of the Company’s senior leadership; provided, however, with regard to the provisions of this Plan applicable to a Covered Employee, “Committee” means a committee of three or more persons appointed by the Board to administer the Plan, each member of whom shall be (1) an “independent director” as defined by the rules of the New York Stock Exchange, (2) a “non-employee director” within the meaning of Rule 16b-3 and (3) an “outside director” within the meaning of Section 162(m) of the Code.

~~(i)~~~~“Company”~~ means State Auto Financial Corporation and its related entities, subsidiaries and affiliates, including State Auto Mutual Insurance Company, or any successors thereto. Notwithstanding the foregoing, whenever the terms of this Plan authorize the Company to take action, such action shall be considered properly authorized if taken by the Board or the Committee as defined herein.

~~(j)~~~~“Covered Employee”~~ ~~means an Employee who is, or who is determined by the Committee to be likely to become, a “covered employee” within the meaning of Code Section 162(m).~~

~~(k)~~~~“Disability”~~ shall have the meaning ascribed to such term in the long term disability plan maintained by the Participant’s employer at the time that the determination regarding Disability is made hereunder. Notwithstanding the foregoing, if a payment under this Plan is subject to Code Section 409A, “Disability” has the meaning ascribed to such term under that Code Section.

~~(l)~~~~“Employee”~~ means a regular, active employee of the Company. Directors who are not employed by the Company shall not be considered Employees under the Plan, nor shall independent contractors, leased employees, consultants or anyone else designated as not eligible to participate in the Plan by the Committee.

~~(m)~~~~“Final Bonus”~~ ~~means the actual Performance Bonus Award earned during a Performance Period by a Participant, as determined by the Committee.~~

~~(n)~~~~“Participant”~~ ~~means an Employee who meets the eligibility requirements of Section 4 with respect to one or more Performance Periods.~~

~~(o)~~~~“Performance Bonus Award”~~ ~~means an Award granted by the Committee and payable to a Participant in accordance with Section 5.~~

~~(p)~~~~“Performance Criteria”~~ ~~shall have the meaning set forth in Section 5.~~

~~(q)~~~~“Performance Period”~~ ~~means the twelve month period beginning on each January 1~~^st ~~and ending on the next succeeding December 31~~^st ~~during the term of the Plan, or such other time period established by the Committee from time to time with respect to which the attainment of Performance Criteria will be determined.~~

~~(r)~~~~“Plan”~~ ~~means the State Auto Financial Corporation One Team Incentive Plan, as set forth herein and as amended from time to time.~~

~~(s)~~~~“Retirement”~~ means the attainment of age 55 and the completion of five years of service with the Company; provided, however, that if a Participant’s employment is terminated for cause after such Participant has satisfied the requirements for “retirement” as stated herein, such termination of employment shall not be an eligible “retirement” under the Plan. For this purpose, a “year of service” and “for cause” shall be determined in the absolute discretion of the Committee, whose decision shall be final and binding on all parties.

~~(t)~~~~“Rule 16b-3”~~ ~~means Rule 16b-3 under the Securities Exchange Act of 1934, as amended from time to time, or any successor thereto.~~

~~(u)~~~~“Target Bonus Award”~~ means the potential Award designated for a Participant in accordance with Section 5 that would be payable to the Participant for a Performance Period if the Performance Criteria for the Performance Period were fully (100%) achieved and no negative discretion was exercised by the Committee in regard to that Award.

~~(v)~~~~“Termination of Employment”~~ means, for purposes of this Plan, unless otherwise determined by the Committee, ceasing to be an Employee (as determined in accordance with Code Section 3401(c) and the regulations promulgated thereunder) of the Company. Unless otherwise determined by the Committee, if a Participant’s employment with the Company terminates but such Participant continues to provide services to the Company in a non-employee director capacity, such change in status shall not be deemed a Termination of Employment within the Performance Period during which it occurs. A Participant employed by, or performing services for, a related company or a division of the Company shall be deemed to incur a Termination of Employment if, as a result of a disaffiliation, such related company or division ceases to be a related company or division, as the case may be, and the Participant does not immediately thereafter become an Employee of the Company or another related company. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its related companies shall not be considered a Termination of Employment. In addition, Termination of Employment shall mean a “separation from service” as defined in regulations issued under Code Section 409A whenever necessary to ensure compliance therewith for any payment of an Award conferred under this Plan that is subject to such Code Section, and, for such purposes, shall be determined based upon a reduction in the bona fide level of services performed to a level equal to twenty percent (20%) or less of the average level of services performed by the Employee during the immediately preceding 36-month period.

~~SECTION 3. ADMINISTRATION~~

~~3.01 The Committee.~~

The Plan shall be administered by the Committee, or its designee, as defined in Section 2.01(h) and collectively referred to herein as the “Committee”. The Committee shall periodically determine, in its sole

discretion, the amounts and other terms and conditions of Awards to be granted to Participants under the Plan. The Committee shall administer the Plan in accordance with applicable legal requirements. All questions of interpretation and administration with respect to the Plan and Awards made hereunder shall be determined by the Committee in its sole and absolute discretion. All determinations by the Committee shall be final and conclusive upon all persons. The Committee shall act by vote or written consent of a majority of its members and its actions shall be recorded in the minutes of the Committee. Notwithstanding any other provision of the Plan, the Committee shall not have any discretion or authority to make changes to any Award for a Covered Employee that is intended to qualify as “performance-based compensation” under Code Section 162(m) to the extent that the existence of such discretion or authority would cause such Award not to so qualify.

~~3.02 Additional Powers of the Committee.~~

~~In addition to any implied powers and duties that are needed to carry out the provisions of the Plan, the Committee shall have the following specific powers and duties:~~

~~(a) to make, amend, rescind and enforce any rules and regulations it shall deem necessary or proper for the efficient administration of the Plan;~~

~~(b) to correct administrative errors;~~

~~(c) to determine the terms and provisions for making or modifying Awards;~~

~~(d) to make all other determinations necessary or advisable for the administration of the Plan;~~

~~(e) to designate one or more officers of the Company to execute on behalf of the Company all agreements and other documents approved by the Committee under the Plan;~~

(f) except to the extent prohibited by Applicable Law, to delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan, including the power to approve Awards to Employees who are not Covered Employees; provided, however, that such delegation may be revoked at any time and all determinations and decisions of any delegate as to any disputed question arising under the Plan, including questions of construction and interpretation, shall be final, binding and conclusive upon all persons; and

~~(g) to employ one or more persons to render advice with respect to any of its responsibilities under the Plan.~~

~~SECTION 4. PARTICIPATION~~

~~4.01 Participation.~~

The Committee shall designate, or determine the methodology and criteria, if any, for the designation of the Employees who are eligible to receive an Award under the Plan. In general, all Employees shall be eligible to participate in the Plan. An individual who is not an Employee shall not be eligible to participate in the Plan. Only the Committee may determine the eligibility of Employees who are Covered Employees.

~~4.02 Partial Performance Period Participation.~~

An Employee who becomes eligible after the beginning of a Performance Period and prior to the beginning of the fourth calendar quarter, may participate in the Plan for that Performance Period on a ratable basis. Such situations may include, but are not limited to new hires. The Committee, in its sole discretion, retains the right to prohibit or allow participation in the initial Performance Period of eligibility for any such Employee. If an Employee participates for only a portion of a Performance Period for any reason, the Performance Criteria previously established under the Plan for that Performance Period shall apply to any Employee who becomes eligible after the beginning of the Performance Period, but his Award may be prorated. Such proration may be based on the number of days the Employee performed services during the Performance Period while a Participant

in the Plan over the total days in the Performance Period, or some similar method adopted by the Committee that results in a ratable reduction of the Award based on the partial Performance Period applicable to the Employee. In addition, in the event a Participant changes job levels, sub-groups or business segments during a Performance Period, the Participant’s Award may be adjusted to reflect the amount of time at each job level, sub-group or business segment during the Performance Period, in the Committee’s discretion. Notwithstanding anything in this Section 4.02 or in the Plan to the contrary, the participation in the Plan for a Covered Employee who becomes eligible after the beginning of the Performance Period shall comply with the provisions of Code Section 162(m), as set forth in Section 5.

~~SECTION 5. PERFORMANCE BONUS AWARDS~~

~~5.01 Establishment of Performance Criteria.~~

For each Performance Period, the Committee will establish in writing Performance Criteria based on one or more of the following performance measures of the Company (and/or one or more business segments or sub-groups of the Company, as applicable), applied to the Company as a whole or to a business segment or sub-group, either individually, alternatively or in any combination, and measured over the Performance Period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the award criteria or by duly adopted resolution: (i) combined ratio; (ii) premium growth; and (iii) policies in force. Except as otherwise provided herein, the extent to which the Performance Criteria are satisfied will determine the amount, if any, of the Final Bonus that will be earned by each Participant (subject to Section 5.04). The Performance Criteria may vary for different Performance Periods and need not be the same for each Participant eligible for a Performance Bonus Award for a Performance Period. If the identified Performance Criteria are not met at the minimum level established by the Committee, no Performance Bonus Awards will be paid for the applicable Performance Period. For purposes of this Plan, “policies in force” means, as of the applicable measurement date, the active policies underwritten by the Company’s Personal and Business (including workers’ compensation) Insurance Segments.

~~5.02 Adjustment of Performance Criteria.~~

Once established, the Performance Criteria shall not be changed during the Performance Period. Subject to the requirements of Code Section 162(m) with respect to Covered Employees, at the time a Performance Bonus Award is made and Performance Criteria are established, the Committee is authorized to determine the manner in which the Performance Criteria will be calculated or measured to take into account certain factors over which Participants have no or limited control, including, but not limited to, cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles or extraordinary charges to income.

~~5.03 Issuance of Awards.~~

For each Performance Period, the Committee may issue to Participants in the Plan, as the Committee shall determine in its sole discretion, a Target Bonus Award which is contingent on the achievement of established Performance Criteria during the Performance Period or, with respect to Employees who are not Covered Employees, the occurrence of another specified event as determined by the Committee in accordance with the terms of the Plan. In determining the nature and amount of the Target Bonus Award, the Committee shall consider, among other factors, responsibility level, and performance. Awards will be earned based upon the performance of the Company or one or more of its business segments and/or sub-groups and the attainment of the established Performance Criteria during the Performance Period. In no event shall the maximum Award that may be paid to any single Participant for any single Performance Period exceed $3,000,000.00, such maximum Award amount to be pro-rated if the Performance Period is less than a full fiscal year of the Company. The total amount of Performance Bonus Awards for the Performance Period will be calculated and allocated from a pool of incentive dollars established by the Company on an annual basis under an objective formula. For each Performance Period, a specified share of the pool shall be determined as the Performance Bonus Award for each Participant, provided that the total shares shall not exceed 100% of the available pool. In addition, should the

Committee exercise its discretion to reduce a Covered Employee’s Performance Bonus Award, no reduction in a Covered Employee’s Performance Bonus Award shall result in an increase in the share of another Covered Employee’s Performance Bonus Award.

Performance Criteria and Target Bonus Awards shall be established prior to the beginning of each Performance Period or as soon as practicable thereafter. If a Participant commences participation after the beginning of a Performance Period, Performance Criteria in effect for the Participant’s position shall apply for the remaining balance of the Performance Period, unless otherwise determined by the Committee within 90 days of the date the Employee becomes a Participant. In all cases where the Participant is a Covered Employee, the Performance Criteria and Target Bonus Award shall be established in no event later than 90 days following the first day of the Performance Period or after twenty-five percent (25%) of the Performance Period has elapsed, if earlier, and the outcome relative to the attainment of the Performance Criteria shall not be substantially certain at the time the Performance Criteria and Target Bonus Award are established. This Section 5.03 is intended to ensure compliance with the exception from Code Section 162(m) for qualified “performance-based compensation,” and shall be construed, applied and administered accordingly with respect to any Participant who is a Covered Employee.

~~5.04 Final Bonus Determinations.~~

At the end of each Performance Period, the Committee shall certify in writing the extent to which the Performance Criteria were met during the Performance Period for any Performance Bonus Awards for Covered Employees. If the Performance Criteria for the Performance Period are met, Covered Employees shall be entitled to the payment of the Performance Bonus Awards, subject to the Committee’s exercise of negative discretion to reduce any Final Bonus payable to a Covered Employee based on business objectives established for that Covered Employee or other factors as determined by the Committee in its sole discretion. With respect to Participants who are not Covered Employees, the Committee will determine the Final Bonus for a Performance Period based on the Performance Criteria and other business and/or individual objectives. The Committee may adjust (up or down) any Final Bonus for Participants who are not Covered Employees on the basis of such further considerations as the Committee shall determine in its sole discretion. Subject to the maximum dollar amount for an Award provided in Section 5.03, no Final Bonus shall be greater than 200% of a Participant’s Target Bonus Award. Further, should the Committee desire to provide any additional bonus amount or payment to a Covered Employee above the Performance Bonus Award issued to the Covered Employee for the Performance Period, such payment shall be a separate bonus payment and shall not be a Performance Bonus Award, meaning it shall not be subject to or covered by Section 162(m) of the Code as performance-based compensation.

~~5.05 Change of Control or Potential Change of Control.~~

If a Change of Control or Potential Change of Control, as defined in Section 2.01(f), occurs prior to the end of a specified Performance Period, the Committee shall determine the Final Bonus in accordance with Section 5.04; provided, however, that such Final Bonus shall be determined based on the achievement of the Performance Criteria up to the date of the Change of Control or Potential Change of Control and then prorated based upon the length of time that the Participant was employed by the Company during the applicable Performance Period. The Final Bonus, thus determined, shall be paid per the terms of the Plan.

~~5.06 Termination of Employment.~~

~~(a)Termination of Employment Due to Retirement, Death or Disability~~. In the event of a Participant’s Termination of Employment by reason of Retirement, death or Disability during the applicable Performance Period, the Final Bonus determined in accordance with Section 5.04 herein shall be reduced to reflect participation prior to termination only and as further described below.

~~(1)Death or Disability. If the Participant’s employment is terminated due to death or Disability, the Final Bonus, if any, shall be equal to 100% of the Participant’s Target Bonus Award, prorated by~~

multiplying the Final Bonus by a fraction, the numerator of which is the number of days of employment in the Performance Period through the date of employment termination, and the denominator of which is the number of days in the Performance Period. In the case of a Participant’s Disability, the employment termination shall be deemed to have occurred as of the date that the Committee determines was the date on which the definition of Disability was satisfied. Notwithstanding the foregoing, if the Participant is a Covered Employee, the Final Bonus, if any, shall be based upon the achievement of the Performance Criteria during the applicable portion of the Performance Period and then prorated as described above.

~~(2)Retirement~~. If the Participant’s employment is terminated due to Retirement, the Final Bonus, if any, shall be based upon the achievement of the Performance Criteria during the applicable Performance Period and then prorated based upon the length of time that the Participant was employed by the Company during the Performance Period.

The Final Bonus, thus determined, shall be paid as soon as possible and reasonable following the Participant’s death, and if paid due to Disability or Retirement, the Final Bonus shall be paid as soon as practicable and reasonable following the end of the Performance Period in which the Disability or Retirement occurs, and shall be made at the same time payments are made to Participants who did not incur a Disability or retire during the applicable Performance Period, unless otherwise elected by the Participant as provided in any deferred compensation plan sponsored by the Company and applicable to the Participant.

~~(b)Termination of Employment for Other Reasons~~. In the event of a Participant’s Termination of Employment before the fourth quarter of the Performance Period for a reason other than due to Retirement, death, Disability or involuntary termination by the Company other than for “Cause”, all of the Participant’s rights to any Final Bonus for that Performance Period shall be forfeited unless otherwise determined by the Committee in its sole discretion. Except as provided in Section 5.06(a), only Participants who are, as of the date the Final Bonus, if any, is paid, either current, active Employees or current Employees who are on a leave of absence authorized by the Company shall be entitled to any Final Bonus earned for the Performance Period, unless otherwise determined by the Committee in its sole discretion. Payment of the Final Bonus shall be made at the same time payments are made to Participants who did not have a Termination of Employment during the applicable Performance Period, unless otherwise elected by the Participant as provided in any deferred compensation plan sponsored by the Company and applicable to the Participant. For purposes of this Section whether an involuntary termination is for “Cause” shall be determined in the absolute discretion of the Committee, whose decision shall be final and binding on all parties.

~~(c)Other Forfeiture Events~~. The Committee may, in its discretion, require that all or any portion of a Final Bonus be subject to an obligation of repayment to the Company upon the violation of a non-competition and confidentiality covenant applicable to the Participant. The Committee may, in its discretion, also require repayment to the Company of all or any portion of a Final Bonus if the amount of the Final Bonus was calculated based upon the achievement of certain financial results that were subsequently the subject of a financial statement restatement or amendment to a previously filed financial statement and the amount of the Final Bonus would have been lower than the amount actually paid to the Participant had the financial results been properly reported, and the Committee shall require repayment to the Company of any Final Bonus to the extent such repayment is required by law. Further, the Committee may, in its discretion, require that all or any portion of a Final Bonus paid to a Participant for the current or immediately preceding Performance Period be forfeited and returned to the Company if the Participant directly or indirectly solicits or causes to be solicited, or in any other way is responsible for, an offer of employment to be made to any Employee of the Company for twelve months after such Participant’s Termination of Employment from the Company, without the prior written consent of the Company. This Section 5.06(c) shall not be the Company’s exclusive remedy with respect to such matters. This Section 5.06(c) shall not apply after a Change in Control or Potential Change in Control except if required by law. Notwithstanding the foregoing, if the Company adopts any policy requiring the repayment of bonus amounts due to financial restatements

~~or other identified conduct (collectively, a~~~~“Clawback Policy”~~), the provisions of such Clawback Policy shall also apply to the Plan and in the event of any inconsistency between the Plan and the Clawback Policy, the terms of the Clawback Policy, as applicable, shall govern.

~~5.07 Payment of Performance Bonus Awards.~~

Each Participant’s Final Bonus, as determined by the Committee, shall be paid in cash, in one lump sum, subject to applicable tax and other authorized withholdings, on the last business day occurring on or before the 15^th day of the third month after the end of each Performance Period. If payment is delayed due to an unforeseeable event or other administrative delay, payment shall in no event be made later than the December 31^st of the taxable year following the year in which the Final Bonus was earned. Other withholdings may include, but not be limited to, amounts previously elected to be deferred to a tax-qualified or non-qualified retirement or deferred compensation plan. In addition, the Committee may provide for deferred payment of any Final Bonus to a specified date or to a date not less than six months after Termination of Employment, in compliance with the requirements of Code Section 409A, as applicable.

~~SECTION 6. CASH BONUS AWARDS~~

~~6.01 Additional Cash Bonus Awards.~~

~~Senior Leadership (i.e., business segment leaders or their designees, a “~~~~Leader~~”) may also issue and pay “spot” Cash Bonus Awards at any other time as such Leader, in his discretion, determines to be appropriate in order to reward an Employee (who is not a Covered Employee) for exemplary performance results, as determined by the Leader in his sole discretion. Any such Cash Bonus Awards are not intended to qualify as performance-based compensation within the meaning of Code Section 162(m).

~~6.02 Payment of Cash Bonus Awards.~~

The Leader may, but shall not be required to, issue Cash Bonus Awards to one or more Participants, including, but not limited to, a Participant to whom a Performance Bonus Award has been designated pursuant to Section 5 above (other than a Covered Employee). A Cash Bonus Award as determined by the Leader shall be paid in cash, in one lump sum, subject to applicable tax and other authorized withholdings, no later than the last business day occurring on or before the 15^th ~~day of the third month after the end of the Performance Period for which the Cash Bonus Award was made.~~

~~SECTION 7. PAYMENT OF AWARDS~~

~~7.01 Awards Solely from General Assets.~~

The Awards under the Plan shall be paid solely from the general assets of the Company. Nothing herein shall be construed to require the Company or the Board to maintain any fund or to segregate any amount for the benefit of any Participant, and no Participant or other party claiming an interest in amounts earned under the Plan shall have any right against, right to, or security or other interest in, any fund, account, or asset of the Company from which the payment pursuant to the Plan may be made. The Plan is intended to constitute an unfunded plan for incentive compensation. To the extent that any party acquires a right to receive a payment under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company.

~~7.02 Plan Expenses.~~

~~All reasonable expenses of administering the Plan shall be paid by the Company.~~

~~SECTION 8. AMENDMENT AND TERMINATION~~

~~8.01 Amendment of Plan.~~

Except as otherwise provided in Section 8.02, the Committee, without notice, at any time and from time to time, may modify or amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely; provided, however, that no such modification, amendment, suspension, or termination may, without the consent of a Participant, materially reduce the right of a Participant to a payment or distribution hereunder to which he has already become entitled, as determined under Sections 5 and 6 hereof. Shareholder approval of any amendment will be required only as required by Applicable Law. No new Award may be granted during any period of suspension of the Plan or after termination of the Plan.

~~8.02 Change in Control.~~

Notwithstanding Section 8.01, above, on or after the occurrence of a Change in Control, no direct or indirect alteration, amendment, suspension, termination or discontinuance of the Plan, no establishment or modification of rules, regulations or procedures under the Plan, no interpretation of the Plan or determination under the Plan, and no exercise of authority or discretion vested in the Committee under any provision of the Plan (collectively or individually, a~~“Change”~~) shall be made if the Change: (a) is not required by Applicable Law or necessary to meet the requirements of Rule 16b-3, Code Section 162(m) or Code Section 409A;, and (b) would have the effect of:

~~(a) eliminating, reducing or otherwise adversely affecting a Participant’s, former Participant’s or beneficiary’s rights with respect to any Award granted prior to the Change in Control;~~

(b) altering the meaning or operation of the definition of Change in Control in Section 2.01(f) (and of the definition of all the defined terms that appear in the definition of Change in Control), the provisions of this 0, or any rule, regulation, procedure, provision or determination made or adopted prior to the Change in Control pursuant to this 0 or any provision in any rule, regulation, procedure, provision or determination made or adopted pursuant to the Plan that becomes effective upon the occurrence of a Change in Control (collectively, the~~“Change in Control Provisions”); or~~

(c) undermining or frustrating the intent of the Change in Control Provisions to secure for Participants, former Participants and beneficiaries the maximum rights and benefits that can be provided under the Plan.

Upon and after the occurrence of a Change in Control: (1) all rights of all Participants, former Participants and beneficiaries under the Plan (including without limitation any rules, regulations or procedures promulgated under the Plan) shall be contractual rights enforceable against the Company and any successor to all or substantially all of the Company’s business or assets; and (2) any Award (i) shall be deemed to have been earned at the annual target amount, regardless of whether the specified Performance Criteria have been satisfied and (ii) shall be payable immediately following the Change in Control. These Change in Control Provisions may be altered, amended or suspended at any time before the date on which a Change in Control occurs; provided, however, that any alteration, amendment or suspension of the Change in Control Provisions that is made before the date on which a Change in Control occurs, and at the request of a person who effectuates the Change in Control, shall be treated as though it occurred after the Change in Control and shall be subject to the restrictions and limitations imposed by the preceding provisions of the immediately preceding paragraph.

~~8.03 Other Plans.~~

Nothing herein shall preclude the Committee from authorizing or approving other plans or forms of incentive or bonus compensation. The Committee shall have the right to determine the extent to which any Participant shall participate in this Plan in addition to any other plan or plans of the Company in which he shall participate.

~~SECTION 9. MISCELLANEOUS~~

~~9.01 No Right to Employment.~~

The receipt of an Award under the Plan shall not give any Employee any right to continued employment by the Company, nor shall it limit or interfere in any way with the right of the Company to terminate the employment of any Participant at any time or to increase or decrease the compensation of any Participant. There is no obligation for uniformity of treatment of Participants under this Plan or otherwise. No person shall have any claim or right to be granted an Award under this Plan and the receipt of an Award shall not give an Employee the right to receive any subsequent Award.

~~9.02 Nontransferability.~~

No right or interest of any Participant in the Plan shall be assignable or transferable, other than by will or pursuant to the laws of descent and distribution, or subject to any lien, directly, by operation of law or otherwise, including, but not limited to, by execution, levy, garnishment, attachment, pledge, or bankruptcy, and any attempt to take any such action shall be null and void.

~~9.03 Recipient of Payment.~~

~~(a) Except as otherwise provided in paragraph (b), below, any Award under the Plan shall be paid to the Participant, or to the Beneficiary of a deceased Participant.~~

(b) If the Committee deems any person entitled to receive any amount under the provisions of the Plan to be incapable of receiving or disbursing the same by reason of minority, illness or infirmity, mental incompetence, or incapacity of any kind, the Committee may, in its sole discretion: (1) apply such amount directly for the comfort, support and maintenance of such person; (2) reimburse any person for any such support theretofore supplied to the person entitled to receive any such payment; (3) pay such amount to any person selected by the Committee to disburse it for such comfort, support and maintenance, including without limitation, any relative who has undertaken, wholly or partially, the expense of such person’s comfort, care and maintenance, or any institution in whose care or custody the person entitled to the amount may be; or (4) with respect to any amount due to a minor, deposit such amount to his credit in any savings or commercial bank of the Committee’s choice, direct that such distribution be paid to the legal guardian, or if none, to a parent of such person or a responsible adult with whom the minor maintains his residence, or to the custodian for such person under the Uniform Gift to Minors Act or Gift to Minors Act, if such payment is permitted by the laws of the state in which the minor resides.

(c) If a payment is made under the Plan to a third party pursuant to Section 9.04(b), above, the Plan, the Board, the Committee and the Company shall be relieved, to the fullest extent permitted by law, of any obligation to make a duplicate payment to or on behalf of the Participant or Beneficiary.

~~9.04 Taxes.~~

The Committee may make any appropriate arrangements to deduct from amounts otherwise payable to a Participant any taxes that the Committee believes to be required to be withheld by any government or governmental agency in respect of an Award. The Participant and/or his Beneficiary shall bear all taxes on amounts paid under the Plan to the extent that no taxes are withheld, irrespective of whether withholding is required.

~~9.05 Headings.~~

~~Any headings used in this document are for convenience of reference only and may not be given any weight in interpreting any provision of the Plan.~~

~~9.06 Severability.~~

If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted herein. In addition, if any provision of the Plan inadvertently causes an Award granted under the Plan to be “nonqualified deferred compensation” within the meaning of Code Section 409A, then such Award shall be construed and enforced as if the provision had never been inserted therein.

~~9.07 Governing Law.~~

The Plan and all agreements hereunder shall be construed, administered, and regulated in accordance with the laws of the State of Ohio (excluding the choice of law provisions thereof), except as to matters pre-empted or governed by federal law.

~~9.08 Gender and Number.~~

~~Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular, and the singular shall include the plural.~~

~~9.09 Successors.~~

All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.


~~TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:~~Future Electronic Access to Proxy Materials and the Annual Report

Registered shareholders can further reduce the costs incurred by the Company by consenting to receive all future proxy statements, proxy cards, annual reports to shareholders and Notices of Internet Availability of Proxy Materials, as appropriate, electronically via e-mail or the Internet. To sign up for electronic delivery of future proxy materials, you must vote your common shares electronically via the Internet by logging on to www.proxyvote.com and, when prompted, indicate you agree to receive or access shareholder communications electronically in future years. You will be responsible for any fees or charges you would typically pay for access to the Internet.


		~~E02280-TBD~~		~~KEEP THIS PORTION FOR YOUR RECORDS~~

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						~~DETACH AND RETURN THIS PORTION ONLY~~
~~THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.~~

STATE AUTO FINANCIAL CORPORATION

    For
All

Withhold
All

For All
Except

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

The Board of Directors recommends you vote FOR the following:

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¨

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1.

Election of Directors

Nominees:

01)  Robert E. Baker
02)  Thomas E. Markert

The Board of Directors recommends you vote FOR Proposals 2, 3, 4, 5, 6 and 7:
For Against Abstain For Against Abstain

2.

Proposal to amend the Company’s Code of Regulations to provide an exclusive forum for the adjudication of certain legal actions.

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7.

Advisory Vote - Approval of the compensation of the Company’s named executive officers as disclosed in the Proxy Statement for the 2016 Annual Meeting of Shareholders.

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3.

Proposal to amend the Company’s 2009 Equity Incentive Compensation Plan.

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¨

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NOTE:In addition, the named proxies are authorized to vote, in their discretion, upon such other matters as may properly come before the Annual Meeting or any adjournment thereof.

4.

Proposal to adopt the Company’s Outside Directors Restricted Share Unit Plan.

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5.

Proposal to adopt the Company’s One Team Incentive Plan.

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6.

Ratification of selection of Ernst & Young LLP as the Company’s registered public accounting firm for 2016.

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Yes

No

Please indicate if you plan to attend this meeting.

¨

¨

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date


		~~Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:~~~~The~~ Annual Report ~~Notice~~on Form 10-K and ~~Proxy Statement are available atwww.proxyvote.com~~.						Additional Information About State Auto Financial Corporation

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~~E02281-TBD~~

~~STATE AUTO FINANCIAL CORPORATION~~

~~ANNUAL MEETING OF SHAREHOLDERS~~

~~This~~A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, including the financial statements, but not including exhibits, will be provided at no charge to each person to whom this Proxy Statement is ~~Solicited on Behalf~~delivered upon the written request of ~~the Board of Directors of~~

~~State Auto Financial Corporation~~

~~The undersigned hereby appoints Michael E. LaRocco, and in the event he is unable~~such person addressed to ~~so act, any one or both of Steven E. English and Melissa A. Centers, proxies, with full power of substitution, to represent and vote all common shares, without par value (the “Shares”), of~~ State Auto Financial Corporation, ~~(the “Company”) which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders to be held at the Company’s principal executive offices located at~~Attn: Investor Relations, 518 East Broad Street, Columbus, Ohio 43215, or by contacting Investor Relations at (800) 622-6757 (U.S., Canada, Puerto Rico) or (781) 575-4735 (outside the U.S.) or via our website at www.stateauto.com.

You may read without charge and copy at prescribed rates all or any portion of the Proxy Statement or any reports, statements or other information in the files at the public reference facilities of the SEC’s principal office at Room 1580, 100 F Street, N.E., Washington, D.C., 20549. You can request copies of these documents upon payment of a duplicating fee by writing to the SEC. You may call the SEC at 1-800-SEC-0330 for further information on ~~May 6, 2016,~~the operation of its public reference rooms. Our filings are also available on the Internet website maintained by the SEC at ~~11:00 a.m., local time,~~www.sec.gov.

If you would like to receive further information about State Auto Financial Corporation, please visit our website at www.stateauto.com. The "Investors" section of our website contains management presentations, financial information, stock quotes and ~~at any and all adjournments thereof, as specified in this Proxy.~~

~~The Shares represented by~~links to our filings with the SEC.

In this Proxy ~~will~~Statement, we state that information and documents are available on our website. These references are merely intended to suggest where our shareholders may obtain additional information. The materials and other information presented on our website are not incorporated in and should not otherwise be ~~voted upon the proposals listed on the reverse side in accordance with the instructions given by the undersigned, but if~~considered part of this Proxy is signed and returned and no instructions are given, this Proxy will be voted FOR the election of all nominees set forth in Proposal 1, FOR Proposals 2, 3, 4, 5, 6 and 7 and, in the discretion of the proxies, on any other matter which properly comes before the Annual Meeting or any adjournment thereof.

~~(Continued and to be signed on the reverse side)~~

Statement.

*** Exercise Your~~Right~~ to Vote ***

~~Important Notice Regarding the Availability of Proxy Materials for the~~

~~Shareholder Meeting to Be Held on May 6, 2016.~~


		~~STATE AUTO FINANCIAL CORPORATION~~


		~~STATE AUTO FINANCIAL CORPORATION~~ ~~518 E. BROAD ST.~~ ~~COLUMBUS, OH 43215~~


~~Meeting Information~~
~~Meeting Information~~
~~Meeting Type:~~ ~~Annual Meeting~~
~~For holders as of:~~ ~~March 8, 2016~~
~~Date:~~ ~~May 6, 2016~~ ~~Time:~~ ~~11:00 a.m. local time~~
~~Location:~~ ~~Principal Executive Offices~~
~~518 East Broad Street~~ ~~Columbus, Ohio~~

~~You are receiving this communication because you hold shares in the company named above~~

This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at~~www.proxyvote.comor easily request a paper copy (see reverse side).~~

~~We encourage you to access and review all of the important information contained in the proxy materials before voting.~~

~~See the reverse side of this notice to obtain proxy materials and voting instructions.~~


				~~— Before You Vote —~~

~~How to Access the Proxy Materials~~


						~~Proxy Materials Available to VIEW or RECEIVE:~~
						~~NOTICE AND PROXY STATEMENT ANNUAL REPORT~~ ~~How to View Online:~~ ~~Have the information that is printed in the box marked by the arrow(located on the following page) and visit:~~~~www.proxyvote.com.~~ ~~How to Request and Receive a PAPER or E-MAIL Copy:~~ ~~If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request:~~ 1)~~BY INTERNET~~~~: www.proxyvote.com~~ 2)~~BY TELEPHONE~~~~: 1-800-579-1639~~ 3)BY E-MAIL~~: sendmaterial@proxyvote.com~~ If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow ~~(located on the following page) in the subject line.~~ Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April 29, 2016 to facilitate timely delivery.


				~~— How To Vote —~~

~~Please Choose One of the Following Voting Methods~~

~~Vote In Person:~~Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares.

~~Vote By Internet:~~~~To vote now by Internet, go to~~~~www.proxyvote.com.~~~~Have the information that is printed in the box marked by the arrow(located on the following page) available and follow the instructions.~~

~~Vote By Mail:~~~~You can vote by mail by requesting a paper copy of the materials, which will include a proxy card.~~


~~Voting Items~~


~~The Board of Directors recommends you vote~~ ~~FOR the following:~~

1.		~~Election~~By Order of ~~Directors~~

		~~Nominees:~~

		~~01)~~	~~Robert E. Baker~~
		~~02)~~	~~Thomas E. Markert~~

~~The~~the Board of Directors ~~recommends you vote FOR Proposals 2, 3, 4, 5, 6 and 7:~~

2.	MELISSA A. CENTERS
	~~Proposal to amend the Company’s Code of Regulations to provide an exclusive forum for the adjudication of certain legal actions.~~

3.		~~Proposal to amend the Company’s 2009 Equity Incentive Compensation Plan.~~

4.		~~Proposal to adopt the Company’s Outside Directors Restricted Share Unit Plan.~~

5.		~~Proposal to adopt the Company’s One Team Incentive Plan.~~

6.		~~Ratification of selection of Ernst & Young LLP as the Company’s registered public accounting firm for 2016.~~

7.		~~Advisory Vote - Approval of the compensation of the Company’s named executive officers as disclosed in the Proxy Statement for the 2016 Annual Meeting of Shareholders.~~

~~NOTE:~~~~In addition, the named proxies are authorized to vote, in their discretion, upon such other matters as may properly come before the Annual Meeting or any adjournment thereof.~~ Secretary

x

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Check the appropriate box:
¨	Preliminary Proxy Statement

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¨	Definitive ~~Proxy Statement~~ Additional Materials



2018 ANNUAL MEETING OF SHAREHOLDERS
Date and Time May 11, 2018, 11:00 a.m. local time	Place 518 East Broad Street Columbus, Ohio 43215	Record Date You may vote if you were a shareholder of record at the close of business on March 16, 2018

			8	*
~~Number of Independent Directors~~		7
~~Audit Committee Comprised Entirely of Independent Directors~~				~~YES~~	How to Vote
~~Compensation Committee Comprised Entirely of Independent Directors~~ :Internet			~~YES~~	Visit the applicable voting website (www.proxyvote.com) until 11:59 p.m. Eastern Standard Time on May 10, 2018.
~~Nominating~~ ( Telephone	Within the United States, United States Territories and ~~Governance Committee Comprised Entirely of Independent Directors~~			~~YES~~	Canada, call 1-800-690-6903 until 11:59 p.m. Eastern Standard Time on May 10, 2018.
~~Risk Committee Comprised Entirely of Independent Directors~~ , Mail			~~YES~~	Complete, sign, date and return your proxy card or voting instruction form in the self-addressed envelope provided. Documents returned by mail must be received by May 10, 2018.
~~Independent Lead Director~~ ? In Person			~~YES~~
~~Majority Voting for Election~~Attend the 2018 Annual Meeting of ~~Directors~~		NO
~~Annual Advisory Vote on Executive Compensation~~		~~YES~~
~~Annual Board and Committee Self-Evaluations~~		~~YES~~
~~Stock Ownership Guidelines for Directors and Executive Officers~~		~~YES~~
~~All Current Directors Own Company Stock~~		~~YES~~
~~Restrictions on Pledging of Company Shares by Directors and Executive Officers~~		~~YES~~
~~“Clawback” Obligations Imposed on Named Executive Officers~~		~~YES~~
~~Directors and Executive Officers Permitted to Hedge Company Shares~~		NO
~~Directors Involved in Related Party Transactions~~		NO
~~Super Majority Vote to Approve Amendments to Charter or Bylaws~~		NO
~~Shareholder Rights Plan (Poison Pill)~~		NO
			Shareholders.


~~Component~~			~~Form~~	~~Key Features~~
~~Base Salary~~	~~Cash~~	~~• Intended to attract and retain top-caliber executives.~~ ~~• Generally based on the median level of base salary for the executive in our competitive market, but may vary based on the executive’s scope of responsibility or unique skills or expertise.~~
~~Short-Term Incentive~~	~~Cash~~	~~• Intended to focus our executives on achieving the objectives of our annual operating plan and balance the focus of our long-term incentive plans.~~ ~~• Consists of a Company performance component (65%-75% weighting in 2015) and an individual performance component (25%-35% weighting in 2015).~~ ~~• Payouts range from 10% of target payout to 200% of target payout depending on performance.~~
~~Performance Award Units~~	~~Cash~~	• Intended to encourage business behaviors that drive appreciation in the price of our Common Shares over the long term, align the interests of our executives with the interests of our shareholders and balance the focus of our annual operating plan. ~~• Payouts determined based on the performance of the State Auto Group compared to a peer group over a three-year performance period.~~ ~~• Payouts range from 40% of target payout to 200% of target payout depending on performance.~~ • Represented 65% of the total long-term incentive opportunity awarded to each NEO in 2015, except for Mr. Garland whose long-term incentive opportunity was independently negotiated and determined in connection with his hiring. DIRECTOR NOMINEES

x

STATE AUTO FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)



Payment of Filing Fee (Check the appropriate box):
ý	No fee required.


1.	~~To elect two~~Election of three Class IIII directors, each to hold office for a three-year term and one Class II director to hold office for a two-year term (the remaining term for that class of directors) and in each case until a successor is elected and qualified;


2.	~~To consider and vote upon a proposal to amend the Company’s Code~~Ratification of ~~Regulations to provide an exclusive forum for the adjudication of certain legal actions;~~

	7.
3.	~~To consider and vote upon, on a non-binding~~Non-binding and advisory ~~basis,~~vote on the compensation of ~~the Company’s~~State Auto Financial Corporation's Named Executive Officers as disclosed in the Proxy Statement for the ~~2016~~2018 Annual Meeting of Shareholders; and

	8.
4.	To transact such other business as may properly come before the meeting or any adjournment thereof.



	By Order of the Board of Directors

	MELISSA A. CENTERS
	Secretary

Dated: March 26, 2018



	Page
PROXY STATEMENT SUMMARY	1
QUESTIONS AND ANSWERS ABOUT THE 2018 ANNUAL MEETING AND VOTING	6
PROPOSAL ONE: ELECTION OF DIRECTORS	10
Nominees for Class III and Class II Directors	10
Board Recommendation	10
Backgrounds of Class III Director Nominees (Terms Expiring in 2021)	10
Background of Class II Director Nominee (Term Expiring in 2020)	12
Backgrounds of Continuing Class I Directors (Terms expiring in 2019)	12
Backgrounds of Continuing Class II Directors (Terms expiring in 2020)	13
Majority Voting Policy for Incumbent Directors	14
PROPOSAL TWO: RATIFICATION OF SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	15
Reasons for Shareholder Approval; Board Recommendation	15
PROPOSAL THREE: ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT	16
Reasons for Shareholder Approval; Board Recommendation	16
CORPORATE GOVERNANCE AND BOARD OF DIRECTORS	17
Relationship with State Auto Mutual	17
Board Responsibility	17
Board Leadership	17
Board Composition	18
Board Meetings and Attendance	19
Committees of the Board of Directors	19
The Board's Role in Enterprise Risk Management	21
Risk Assessment in Compensation Programs	22
Directors	22
Nomination of Directors	22
Director Independence	23
Compensation of Outside Directors and Outside Director Compensation Table	24
2017 Outside Director Compensation	25
Outside Directors' Ownership of Restricted Share Units	26
Communications with the Board	26
Other Governance Issues of Interest	26
Availability of Corporate Governance Documents	27
AUDIT COMMITTEE MATTERS	28
Audit Committee Report for the Fiscal Year Ending December 31, 2017	28
Independent Registered Public Accounting Firm's Audit and Other Service Fees	30
Audit Committee's Pre-Approval Policies and Procedures	30
COMPENSATION COMMITTEE MATTERS	31
Compensation Committee Interlocks and Insider Participation	31
Compensation Committee Report	31
CEO PAY RATIO DISCLOSURE	32
COMPENSATION DISCUSSION AND ANALYSIS	33
Executive Summary	33
Executive Compensation Philosophy	37
How the Amount of Executive Compensation is Determined	38
2017 Executive Compensation Program Elements	40



Looking Forward-2018 Compensation	46
Contractual Arrangements with Named Executive Officers	49
Tax Deductibility of Executive Compensation	49
Stock Ownership Guidelines	49
Clawback Policy	50
Anti-Hedging and Anti-Pledging Policy	50
Summary Compensation Table for 2017	51
Grants of Plan-Based Awards in 2017	54
Outstanding Equity Awards at Fiscal 2017 Year-End	55
Option Exercises and Stock Vested in Fiscal 2017	56
Retirement Plans	56
Pension Benefits in Fiscal 2017	57
Deferred Compensation Plans	57
Nonqualified Deferred Compensation for Fiscal 2017	58
Agreements with Named Executive Officers	59
Potential Payments Upon Termination or Change of Control	64
OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY	68
Beneficial Ownership Information for Directors and Named Executive Officers	68
Principal Holders of Voting Securities	70
Section 16(a) Beneficial Ownership Reporting Compliance	70
EQUITY COMPENSATION PLAN INFORMATION AND BURN RATE	71
Outstanding Options and Available Shares	71
Burn Rate	71
RELATED PERSON TRANSACTIONS	72
Policies and Procedures for Review and Approval of Related Person Transactions	72
Transactions Involving State Auto Mutual	72
OTHER MATTERS	74
Other Proposals at the Annual Meeting of Shareholders	74
Future Shareholder Proposals	74
Future Electronic Access to Proxy Materials and the Annual Report	74
Annual Report on Form 10-K and Additional Information About State Auto Financial Corporation	75



Proposal		Board Vote Recommendation		Page Reference (for more detail)
Proposal 1	Election of Directors		FOR each ~~Director~~ Nominee			4	10
~~Vote on Proposed Amendment to Company’s Code of Regulations to provide an exclusive forum for the adjudication of certain legal actions~~Proposal 2		~~FOR~~			10
~~Vote on Proposed Amendment to Company’s 2009 Equity Incentive Compensation Plan~~		~~FOR~~			12
~~Vote on Proposed Adoption of Company’s Outside Directors Restricted Share Unit Plan~~		~~FOR~~			19
~~Vote on Proposed Adoption of the Company’s One Team Incentive Plan~~		~~FOR~~			23
Ratification of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm		FOR			26	15
Proposal 3	Advisory Vote to Approve Compensation of ~~STFC’s~~Company's Named Executive Officers		FOR			27	16


	Number of Members	Percent Independent	Number of Meetings During Fiscal 2015
Full Board	8*	87%	5
Audit Committee	4	100%	9
Compensation Committee	5	100%	7
Independent Committee	6	100%	1
Investment and Finance Committee	4	75%	4
Nominating and Governance Committee	4	100%	6
Risk Committee	4	100%	4



§	8 of our ~~Common Shares over~~9 directors are independent	§	Independent Lead Director	§	Policy prohibiting hedging of Company shares
§	Audit Committee is comprised only of independent directors	§	All current directors own Company common shares or restricted share units	§	No shareholder rights plan or "poison pill"
§	Compensation Committee is comprised only of independent directors	§	Annual Board and Committee self-evaluations	§	Majority voting policy for incumbent directors
§	Nominating and Governance Committee is comprised only of independent directors	§	Stock ownership guidelines for directors and executive officers	§	Restrictions on pledging Company shares by directors and executive officers
§	Risk Committee is comprised only of independent directors	§	Annual advisory vote on executive compensation	§	Mandatory retirement age for directors
§	Compensation "clawback" obligations imposed on Named Executive Officers	§	Over 94% average Board and Committee meeting attendance in 2017	§	No super majority vote of shareholders to approve amendments to charters or bylaws (approved by two-thirds of the ~~long term, align the interests~~Board)
§	Board participation in executive succession planning	§	4 of our ~~executives with~~9 directors are women	§	Risk oversight by full Board and committees



§	Pre-tax income of $33.4 million, which represented an increase of $14.2 million compared to 2016	§	Net written premium of $1,269.3 million, which represented a 1.9% decrease compared to 2016	§	Stock price increased approximately 8.6% from December 31, 2016, to December 31, 2017
§	Net investment income of $78.8 million, which represented a 5.5% increase compared to 2016	§	Combined ratio of 107.7%, which represented a 1.5 point increase compared to 2016	§	Dividends paid per share of $0.40
§	Favorable development of prior accident year losses and loss expenses of $46.6 million compared to adverse development of $27.0 million in 2016.	§	Statutory personal insurance segment combined ratio of 102.4%, which represented a 0.6 point improvement compared to 2016	§	Book value per share of $20.76 at December 31, 2017, which represented a decrease of $0.55 per share from December 31, 2016
§	Net loss of $10.7 million, which represented a decrease of $31.7 million from 2016. 2017 results included a provisional net charge of $36.4 million due to the ~~interests~~revaluation of our ~~shareholders and build appropriate levels~~deferred tax assets	§	Statutory commercial insurance segment combined ratio of ~~Common Share ownership among our executive team.~~ ~~• One-third~~102.6%, which represented a 5.1 point improvement compared to 2016	§	Return on average equity of ~~the total options granted vests on each anniversary of the grant date.~~ ~~• Represented 20% of the total long-term incentive opportunity awarded~~(1.2)%, which represented a 3.6 point decrease compared to ~~each NEO in 2015, except for Mr. Garland whose long-term incentive opportunity was independently negotiated and determined in connection with his hiring.~~ 2016


	•	~~Base Salary~~~~. The base salaries of our NEOs increased by approximately 3% in 2015, except for Ms. Clark whose 17% increase was designed to move her compensation closer to the 75~~^th percentile of the competitive market for similar executives to reward her for the results of her business unit and her strategic value to the Company. The increases were based on: (i) each NEO’s performance; (ii) increases in the median base salaries for individuals in similar roles at peer companies and other insurers comparable in size to the State Auto Group; and (iii) the Company’s overall merit increase budget and policies.
2017 EXECUTIVE COMPENATION HIGHLIGHTS



			~~Page~~
~~General~~	1
~~Proxies and Voting~~	1
~~Proposal One: Election of Directors~~	4
~~Nominees for Class I Directors~~	4
~~Board Recommendation~~	4
~~Backgrounds of Class I Director Nominees (Terms expiring in 2019)~~	4
~~Backgrounds of Continuing Class II Directors (Terms expiring in 2017)~~	5
~~Backgrounds of Continuing Class III Directors (Terms expiring in 2018)~~	6
~~Majority Voting Policy for Incumbent Directors~~	7
~~Beneficial Ownership Information for Directors and Named Executive Officers~~	8
~~Proposal Two: Amendment to the Company’s Code of Regulations~~	10
~~Summary of Proposed Amendment~~	10
~~Reasons for Shareholder Approval; Board Recommendation~~	11
~~Proposal Three: Amendment to the 2009 Equity Incentive Compensation Plan~~	12
~~Proposal~~	12
~~Shares Available for Issuance under the Plan~~	12
~~Summary of the Plan~~	12
~~Stock Price~~	16
~~Number of Awards~~	16
~~Federal Income Tax Information~~	16
~~Reasons for Shareholder Approval; Board Recommendation~~	18
~~Proposal Four: Approval of Material Terms of the Outside Directors Restricted Share Unit Plan~~	19
~~Proposal~~	19
~~Restricted Share Units to be Granted under the Proposed RSU Plan~~	19
~~Summary of the Proposed RSU Plan~~	19
~~Federal Income Tax Information~~	22
~~Reasons for Shareholder Approval; Board Recommendation~~	22
~~Proposal Five: Approval of Material Terms of the One Team Incentive Plan~~	23
~~Proposal~~	23
~~Reason for One Team Incentive Plan~~	23
~~Description of One Team Incentive Plan~~	23
~~Reasons for Shareholder Approval; Board Recommendation~~	25
~~Proposal Six: Ratification of Selection of Independent Registered Public Accounting Firm~~	26
~~Reasons for Shareholder Approval; Board Recommendation~~	26
~~Proposal Seven: Advisory Vote on Compensation of Named Executive Officers as Disclosed in this Proxy Statement~~	27
~~Reasons for Shareholder Approval; Board Recommendation~~	27
~~Corporate Governance and Board of Directors~~	28
~~Relationship with State Auto Mutual and Changes in Board Structure~~	28
~~Director Independence~~	29
~~Board and Executive Leadership: CEO Succession~~	29
~~Board Meetings and Board Committee Meetings~~	31
~~Independent Committees of STFC and State Auto Mutual~~	32
~~Executive Sessions of Independent Directors~~	33
~~Compensation of Outside Directors and Outside Director Compensation Table~~	33
~~2015 Outside Director Compensation~~	34
~~Outside Directors’ Ownership of Restricted Share Units~~	35
~~Communications with the Board~~	35
~~Director Attendance at Annual Meeting of Shareholders~~	35	PRIMARY COMPONENTS OF OUR 2017 EXECUTIVE COMPENSATION PROGRAM



Component	~~Page~~
~~Nomination of Directors~~ Form		35	Key Features
~~Other Governance Issues of Interest~~ Base Salary		37
~~Availability of Corporate Governance Documents~~ Cash		37	Intended to attract and retain top-caliber executives. Generally based on the median level of base salary for the executive in our competitive market, but may vary based on the executive's scope of responsibility or unique skills or expertise.
~~Enterprise Risk Management~~ Short-Term Incentive		38
~~The Board’s Role in Enterprise Risk Management~~ Cash		38	Intended to: (i) provide incentives and rewards to executives who achieve performance goals and strategic objectives that significantly contribute to long-term profitable growth; (ii) focus executives on the key measures we believe will drive superior performance and increase shareholder value over the long term; and (iii) assist us in recruiting and retaining highly talented executives by providing competitive total rewards. Payouts determined based on net written premium growth and combined ratio over a one-year performance period. Payouts range from 0% of target payout, if we fail to meet the minimum performance goals for both of the performance measures, to 300% of target payout, if we achieve the maximum performance goals for both of the performance measures.
~~Risk Assessment in Compensation Programs~~ Performance Award Units		39
~~Compensation Discussion and Analysis~~ Cash		40	Intended to: (i) more effectively incentivize our executives by providing significant upside potential to our executives, if they deliver exceptional results; (ii) better focus our executives on achieving profitable growth, which the Compensation Committee believes to represent the most critical result for delivering long-term success and shareholder value; and (iii) be more consistent with structure of the OTIP performance bonus awards and the performance unit awards, which the Compensation Committee believes will solidify our One Team structure. Payouts determined based on net written premium growth and combined ratio over a three-year performance period. Payouts range from 0% of target payout, if we fail to meet the minimum performance goals for both of the performance measures, to 500% of target payout, if we achieve the maximum performance goals for both of the performance measures. Represented 50% of the total long-term incentive opportunity awarded to each executive in 2017.
~~Executive Summary~~ Performance Units		40
~~Executive Compensation Philosophy~~ Equity		46	Intended to: (i) more effectively incentivize our executives by providing significant upside potential to our executives, if they deliver exceptional results; (ii) better focus our executives on achieving profitable growth, which the Compensation Committee believes to represent the most critical result for delivering long-term success and shareholder value; (iii) be more consistent with structure of the OTIP performance bonus awards and the PAU awards, which the Compensation Committee believes will solidify our One Team structure; and (iv) further our focus on pay-for-performance. Payouts determined based on net written premium growth and combined ratio over a three-year performance period. Payouts range from zero performance units, if we fail to meet the minimum performance goals for both of the performance measures, to 500% of the target number of performance units, if we achieve the maximum performance goals for both of the performance measures. Represented 50% of the total long-term incentive opportunity awarded to each executive in 2017.
~~How the Amount of Executive Compensation is Determined~~ Perquisites		46
~~Executive Compensation Program Elements~~ Cash; Benefits	Intended to attract and retain top-caliber executives. Are limited in value and participation.

49
~~Contractual Arrangements with Named Executive Officers~~			62
~~Tax Deductibility~~Why Did I Receive a Notice of ~~Executive Compensation~~ Internet Availability of Proxy Materials in the Mail Instead of a Full Set of Printed Proxy Materials?

			63
~~Stock Ownership Guidelines~~	63
~~Clawback Policy~~				64
~~Anti-Hedging Policy~~	64
~~Summary Compensation Table for 2015~~	65
~~Grants of Plan-Based Awards in 2015~~	69
~~Outstanding Equity Awards at Fiscal 2015 Year-End~~	71
~~Option Exercises and Stock Vested in Fiscal 2015~~	72
~~Retirement Plans~~	72
~~Pension Benefits in Fiscal 2015~~	73
~~Deferred Compensation Plans~~	74
~~Nonqualified Deferred Compensation for Fiscal 2015~~	75
~~Agreements with Named Executive Officers~~	75
~~Potential Payments Upon Termination or Change of Control~~	78
~~Compensation Committee Interlocks and Insider Participation~~	85
~~Compensation Committee Report~~	85
~~Report of the Audit Committee~~	86
~~Principal Holders of Voting Securities~~	88
~~Equity Compensation Plan Information~~	88
~~1998 State Auto Agent’s Stock Option Plan~~	88
~~Related Person Transactions~~	90
~~Policies and Procedures for Review and Approval of Related Person Transactions~~	90
~~Transactions Involving State Auto Mutual~~	90
~~Independent Registered Public Accounting Firm~~	92
~~General~~	92
~~Audit and Other Services Fees~~	93
~~Audit Committee’s Pre-Approval Policies and Procedures~~	93
~~Future Shareholder Proposals~~	93
~~Section 16(a) Beneficial Ownership Reporting Compliance~~	94
~~Other Matters~~	94
~~Exhibit A—Second Amendment to Amended and Restated Code of Regulations of State Auto Financial Corporation~~	~~A-1~~
~~Exhibit B—2009 Equity Incentive Compensation Plan of State Auto Financial Corporation, as amended, including proposedamendment~~	~~B-1~~
~~Exhibit C—Proposed Outside Directors Restricted Share Unit Plan of State Auto Financial Corporation~~	~~C-1~~
~~Exhibit D—Proposed One Team Incentive Plan of State Auto Financial Corporation~~	~~D-1~~	Why Did I Receive These Proxy Materials?



What is the Difference Between a Shareholder of Record and a Shareholder Who Holds Common Shares in Street Name?



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Board Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE THREE NOMINEES NAMED BELOW AS CLASS III DIRECTORS AND "FOR" THE ELECTION OF THE PERSON NAMED BELOW AS A NOMINEE FOR CLASS II DIRECTOR.



Backgrounds of Class III Directors Nominees (Terms expiring in 2021)



Michael J. Fiorile
	Age: 63
	STFC Director Since: 2015
	Committees Served in 2017: Nominating and Governance (Chair) and Risk (Chair)



Michael E. LaRocco
	Age: 61
	STFC Director Since: 2015
	Committees Served in 2017: Investment and Finance

¹

Eileen A. Mallesch
	Age:~~The State Auto Group refers to (1) the insurance subsidiaries of State Auto Financial Corporation: State Auto Property & Casualty Insurance Company (“State Auto P&C”)~~ 62
	STFC Director Since: 2010
	Committees Served in 2017: Audit (Chair), ~~Milbank Insurance Company (“Milbank”)~~Compensation, and State Auto Insurance Company of Ohio (“SAOH”) and to (2) State Automobile Mutual Insurance Company (“State Auto Mutual”) and its insurance subsidiaries and affiliates: State Auto Insurance Company of Wisconsin (“SAWI”), Meridian Security Insurance Company (“Meridian”), Patrons Mutual Insurance Company of Connecticut (“Patrons”), Rockhill Insurance Company (“RIC”), Plaza Insurance Company (“Plaza”), American Compensation Insurance Company (“ACIC”) and Bloomington Compensation Insurance Company (“BCIC”).Independent



Setareh Pouraghabagher
	Age: 47
	STFC Director Since: 2017
	Committees Served in 2017: Audit, Independent, Nominating and Governance, and Risk



Robert E. Baker
	Age: 71
	STFC Director Since: 2007
	Committees Served in 2017: Audit and Compensation (Chair)



Kym M. Hubbard
	Age: 60
	STFC Director Since: 2016
	Committees Served in 2017: Audit, Independent, Compensation, and Investment and Finance

~~Chairman/CEO~~
Position

Ownership Target Amount

Chairman/Chief Executive Officer

100,000 ~~Common Shares~~

common shares

Senior Vice President

15,000 ~~Common Shares~~

common shares

Vice President

7,000 ~~Common Shares~~

common shares