Shepard Comments on Suit Dismissal, Extends Offer

Gregory M. Shepard announced that State Auto Financial Corp. (STFC) and State Automobile Mutual Insurance Co. (SAM) voluntarily dismissed without prejudice the lawsuit that they had filed against Shepard June 30, 2003, in the U.S. District Court for the Southern District of Ohio.

Shepard is the owner of 2 million shares of STFC stock and is STFC’s largest individual, unaffiliated stockholder. Shepard, through a company that is wholly owned by him, is making a tender offer for 8 million shares at $32 per share, conditioned upon (among other things) financing through issuance of surplus notes by SAM (which SAM has thus far refused to issue). SAM is the owner of approximately 67 percent of STFC’s issued and outstanding shares.

Commenting on this development, Shepard stated, “Despite the scurrilous allegations that they have made against me, and their prior self-aggrandizing statements in which they portrayed themselves as the guardians of the public, the reality is that State Auto Mutual and State Auto Financial have accomplished nothing by their lawsuit other than irresponsibly costing their policyholders and stockholders significant legal fees. It is my view that the lawsuit never should have been brought in the first place, and I consider its filing to be indicative of the lengths to which Mr. Moone, Mr. Lowther, SAM, STFC and their entrenched management and directors will go to deprive STFC’s minority stockholders of the benefits of the tender offer.”

Shepard also announced an extension of the expiration date of the tender offer from Oct. 17, 2003, to Dec. 12, 2003.