Credit Agreement with State Automobile Mutual Insurance Company

State Automobile Mutual Insurance Company ("State Auto Mutual") owns approximately 64% of the outstanding common shares of State Auto Financial Corporation ("State Auto Financial"). Milbank Insurance Company ("Milbank") is a wholly owned subsidiary of State Auto Financial.

On May 19, 2009, State Auto Mutual, as borrower, and Milbank, as lender, entered into a credit agreement (the "Milbank Credit Agreement") providing for a $20.0 million loan from Milbank to State Auto Mutual (the "Milbank Loan"). The Milbank Loan was fully funded on that date. The Milbank Loan has a 10-year term, with principal due at maturity. The outstanding principal balance of the Milbank Loan accrues interest at the rate of 7% per annum, payable semi-annually on May 1 and November 1 of each year, and may be prepaid at any time prior to maturity without penalty. The Milbank Loan is an unsecured obligation of State Auto Mutual. The Milbank Credit Agreement contains covenants limiting (i) the amount of senior debt (i.e., debt secured by liens or otherwise senior in priority of payment to the Milbank Loan) that may be incurred by State Auto Mutual,
(ii) State Auto Mutual's debt to capitalization to a specified ratio, and
(iii) the amount of liens on State Auto Mutual's assets (other than liens securing senior debt). In addition, State Auto Mutual may not take any action that is materially detrimental to the repayment of the Milbank Loan.

The Milbank Loan was approved by the South Dakota Department of Insurance, Milbank's domiciliary state. The Milbank Loan was recommend for approval by the Independent Committee of the Board of Directors of State Auto Financial, a committee consisting of all independent directors, and was approved by the Milbank Board of Directors, whose members are identical to the Board of Directors of State Auto Financial.

A copy of the Milbank Credit Agreement is attached as an exhibit to this Current Report on Form 8-K.

Information concerning the Milbank Credit Agreement is set forth in Item 1.01, which information is incorporated herein by reference.

(c) Exhibits.

Exhibit No.   Description
10.1          Credit Agreement dated as of May 19, 2009, between State Automobile
              Mutual Insurance Company, as borrower, and Milbank Insurance Company, as
              lender.