EX-10.55



 






Exhibit 10.55




Reinsurance Pooling Agreement Amended

and Restated As of January 1, 2005





 









 








Page 1




REINSURANCE POOLING AGREEMENT

AMENDED AND RESTATED

AS OF JANUARY 1, 2005



This Reinsurance Pooling Agreement Amended and Restated effective as of 12:01
a.m., Eastern Standard Time, January 1, 2005 (the “2005 Pooling Agreement”) is
by and among State Automobile Mutual Insurance Company, 518 East Broad Street,
Columbus, Ohio (hereinafter referred to as “State Auto Mutual”), State Auto
Property and Casualty Insurance Company, 112 South Main Street, Greer, South
Carolina (hereinafter referred to as “State Auto P&C”), Milbank Insurance
Company, East Highway 12, Milbank, South Dakota (hereinafter referred to as
“Milbank”), State Auto Insurance Company of Wisconsin (formerly known as Midwest
Security Insurance Company), 1062 Oak Forest Drive, Onalaska, Wisconsin
(hereinafter referred to as “SA WI”), Farmers Casualty Insurance Company, 1300
Woodland Drive, West Des Moines, Iowa (hereinafter referred to as “Farmers
Casualty”) and State Auto Insurance Company of Ohio, 518 East Broad Street,
Columbus, Ohio (hereinafter referred to as “SA OH”), State Auto Florida
Insurance Company, 237 South Westmonte Drive, Suite 140 Altamonte Springs, FL
(hereinafter referred to as “SA FL”), Meridian Security Insurance Company, 2955
North Meridian Street, Indianapolis, Indiana (hereinafter referred to as
“Meridian Security”), and Meridian Citizens Mutual Insurance Company, 2955 North
Meridian Street, Indianapolis, Indiana (hereinafter referred to as “Meridian
Citizens Mutual”). (State Auto Mutual, State Auto P&C, Milbank, SA WI, Farmers
Casualty, SA OH, SA FL, Meridian Security, and Meridian Citizens Mutual are
herein collectively referred to as the “Pooled Companies” or “State Auto” and
individually as a “Pooled Company”).




BACKGROUND INFORMATION




     The Pooled Companies have determined that their business operations should
be conducted by employees of State Auto P&C on behalf of each of the Pooled
Companies and that State Auto Mutual should remain as the agent for each of the
Pooled Companies with respect to collecting and disbursing funds as required by
the Pooled Companies’ business operations. These arrangements have been effected
through the Management Agreement dated January 1, 2000 (the “2000 Management
Agreement”), as amended from time to time, as to SA WI through the Amended and
Restated Management Agreement dated effective January 1, 2000 (the “2000 Midwest
Management Agreement”), as to Farmers Casualty through the Amended and Restated
Management Agreement dated effective January 1, 2000 (the “2000 Farmers Casualty
Management Agreement”), as to SA FL by the Cost Sharing Agreement dated
effective January 1, 2003, and as to Meridian Security and Meridian Citizens
Mutual by the Management Services Agreement and Cost Sharing Agreement, each
dated effective as of July 1, 2002 and by means of mutual reinsurance on a
percentage basis as herein provided.



     State Auto Mutual and State Auto P&C originally entered into an
intercompany Reinsurance Agreement effective as of 12:01 a.m.,
January 1, 1987 (the “Reinsurance Agreement”).



     The Reinsurance Agreement has since been amended by an Addendum effective
January 1, 1987, adding insolvency and arbitration provisions; by Amendment
Number 1 effective as of January 1, 1992 amending the pooling percentages from
20% State Auto P&C — 80% State Auto Mutual to 30% and 70% respectively; by
Amendment Number 2 effective as of January 1, 1991 excluding post retirement
health care benefits liability as a pooled expense and as of January 1, 1994
excluding post employment benefits liability as a pooled expense; and by
Amendment Number 3 effective as of January 1, 1995 adding Milbank as a party and
adjusting




 









 








Page 2



the pooling percentages as follows: State Auto P&C 35%, State Auto Mutual 55%
and Milbank 10% and by an Amended and Restated Reinsurance Pooling Agreement
dated July 1, 1996 (the “7/1/96 Reinsurance Agreement”), which excluded from the
Reinsurance Agreement catastrophic loss claims and loss adjustment expenses
incurred by State Auto Mutual, State Auto P&C and Milbank in the amount of
$100,000,000 in excess of $120,000,000 of such losses and loss adjustment
expense and the premiums for such exposure; and by an Amended and Restated
Reinsurance Pooling Agreement effective January 1, 1998 (the “‘98 Pooling
Agreement”) which added SA WI as a party and adjusted the Respective Percentages
(as defined below) to State Auto P&C 37%, State Auto Mutual 52%, Milbank 10%,
and SA WI 1%; and by a Reinsurance Pooling Agreement Amended and Restated as of
January 1, 1999 (hereafter referred to as the “‘99 Pooling Agreement”) which
added Farmers Casualty as a party and adjusted the Respective Percentages to
State Auto P&C-37%, State Auto Mutual-49%, Milbank-10%, Farmers Casualty-3%, and
SA WI-1%. In adopting the Reinsurance Pooling Agreement, amended and restated as
of January 1, 2000, (the “2000 SA Pooling Agreement”)the parties amended and
restated the `99 Pooling Agreement as the 2000 Pooling Agreement, to provide for
the continuation of the pooling arrangement it effects, including the
above-described previous amendments and additional amendments including the
following: removing from the scope of the 2000 Pooling Agreement the premiums,
losses, underwriting and administrative expenses attributable to State Auto
Mutual’s voluntary assumption of reinsurance from third parties which are
unaffiliated with State Auto Mutual, which voluntary assumed reinsurance
contracts/treaties initially commenced on or after January 1, 1999 (this January
1, 1999 and after voluntary third party assumption reinsurance is hereafter
referred to as the “State Auto Mutual Reinsurance Book”); adding SA OH as a new
party; removing an exclusion for post retirement health care benefits
liabilities; and post employment benefits liabilities and adjusting the
Respective Percentages to SA OH 1%, Farmers Casualty 3%, SA WI 1%, Milbank 10%,
State Auto P&C 39% and State Auto Mutual 46%. The 2000 Pooling Agreement was
itself subject to five different amendments: the First Amendment effective
November 17, 2000, clarified that the State Auto P&C Catastrophe Assumption
Agreement, as defined in the 2000 SA Pooling Agreement provided such amount of
catastrophe reinsurance as was available in the then current Property
Catastrophe Overlying Excess of Loss Reinsurance Contract originally effective
July 1, 1999 and annually renewed thereafter; the Second Amendment to the 2000
SA Pooling Agreement clarified that the business that became the legal
obligation of State Auto Mutual as a result of its merger with Meridian Mutual
Insurance Company effective June 1, 2001, was excluded from the 2000 SA Pooling
Agreement until July 1, 2001; the Third Amendment to the 2000 SA Pooling
Agreement amended the Respective Percentages of the parties to result in the
following: SA OH 1%, Farmers Casualty 3%, SA WI 1%, Milbank 17%, State Auto P&C
59% and State Auto Mutual 19% and it also excluded the premiums or losses
attributable to the Stop Loss Agreement as defined in the Third Amendment, each
effective as of October 1, 2004; The Fourth Amendment, effective January 1, 2003
added SA FL to the 2000 SA Pooling Agreement with 0.7% as a Respective
Percentage, while lowering State Auto Mutual’s Respective Percentage to 18.3%;
The Fifth Amendment, effective July 1, 2004, excluded State Auto Middle Market
Insurance, (as defined below) from the 2000 SA Pooling Agreement. In addition to
the foregoing amendments to the pooling arrangement as set forth in the
various
agreements, each of these agreements and this 2000 Pooling Agreement is subject
to the Guaranty Agreement dated as of May 16, 1991 between State Auto Mutual and
State Auto P&C (the “Reserve Guaranty Agreement”).



The parties desire to amend and restate the 2000 Pooling Agreement, as amended
as described, to add two new parties, Meridian Security and Meridian Citizens
Mutual and to adjust the Respective Percentages of State Auto Mutual and its
wholly-owned insurer affiliates.





 









 








Page 3




STATEMENT OF AGREEMENT




     In consideration of the mutual covenants set forth herein and INTENDING TO
BE LEGALLY BOUND HEREBY, the parties hereto hereby agree as follows:




	1.  	DEFINITIONS: As used in this Agreement:






a. “Net Liabilities” shall mean all direct liabilities plus
reinsurance assumed minus reinsurance ceded, except as otherwise
expressly excluded below, provided that the parties hereto expressly
understand and agree that Net Liabilities excludes any and all
liabilities arising out of the State Auto Mutual Reinsurance Book
for such reinsurance assumed on and after January 1, 2005. It is
understood and agreed that Net Liabilities excludes any and all
liabilities arising out of State Auto Middle Market Insurance for
such insurance written on and after 12:01 a.m., January 1, 2005.




b. “Net Premiums” shall mean all direct premiums plus reinsurance
assumed minus reinsurance ceded, except as otherwise expressly
excluded below, provided that the parties hereto expressly
understand and agree that Net Premiums excludes any and all premiums
arising out of the State Auto Mutual Reinsurance Book for such
reinsurance assumed on and after January 1, 2005. It is understood
and agreed that Net Premiums excludes any and all premiums arising
out of State Auto Middle Market Insurance for such insurance written
on and after 12:01 a.m., January 1, 2005.




c. “Respective Percentage” shall be:



	 	 	 	 	 
	As to SA OH
	 	 	1	%
	As to Farmers Casualty
	 	 	3	%
	As to SA WI
	 	 	0.0	%
	As to Milbank
	 	 	17	%
	As to State Auto P&C
	 	 	59	%
	As to State Auto Mutual
	 	 	19.5	%
	As to SA FL
	 	 	0.0	%
	As to Meridian Security
	 	 	0.0	%
	As to Meridian Citizens Mutual
	 	 	0.5	%







(d) “State Auto Mutual Reinsurance Book” means premiums,
losses, underwriting and administrative expenses attributable
to State Auto Mutual’s voluntary assumption of reinsurance
from third parties which are unaffiliated with State Auto
Mutual, which voluntary assumed reinsurance contracts/treaties
initially commenced on or after January 1, 2005.




(e) “State Auto Middle Market Insurance” means (i) property casualty
insurance for commercial risks that are larger than those included
in the standard segment of the Pooled Companies’ business; (ii)
underwritten by the State Auto Middle Market Insurance underwriting
unit; and (iii) coded by State Auto as State Auto Middle Market
Insurance.




 









 








Page 4





	2.  	CESSION:






(a) State Auto P&C Cession: State Auto Mutual hereby reinsures and
assumes and State Auto P&C hereby cedes and transfers to State Auto
Mutual all Net Liabilities incurred under or in connection with all
contracts and policies of insurance issued by State Auto P&C
outstanding and in force as of and subsequent to 12:01 a.m. Eastern
Standard Time, January 1, 2005. Such liabilities shall include State
Auto P&C’s reserves for unearned premiums, outstanding losses and
loss expenses (including unreported losses) and all other
outstanding underwriting and administrative expenses as evidenced by
State Auto P&C’s books and records at the close of business on
December 31, 2004, but shall not include intercompany balances,
liabilities incurred in connection with the investment transactions
of State Auto P&C, liabilities for dividends to stockholders
declared and unpaid, and other liabilities not incurred in
connection with underwriting operations. It is further agreed State
Auto Mutual shall receive the Net Premiums for said contracts and
policies.




(b) Milbank Cession: State Auto Mutual hereby reinsures and assumes
and Milbank hereby cedes and transfers to State Auto Mutual all Net
Liabilities incurred under or in connection with all contracts and
policies of insurance issued by Milbank outstanding and in force as
of and subsequent to 12:01 a.m. EST, January 1, 2005. Such
liabilities shall include Milbank’s reserves for unearned premiums,
outstanding losses and loss expenses (including unreported losses)
and all other outstanding underwriting and administrative expenses
as evidenced by Milbank’s books and records at the close of business
on December 31, 2004, but shall not include intercompany balances,
liabilities incurred in connection with the investment transactions
of Milbank, liabilities for dividends to stockholders declared and
unpaid, and other liabilities not incurred in connection with
underwriting operations. It is further agreed that State Auto Mutual
shall receive the Net Premiums for said contracts and policies.




(c) SA WI Cession: State Auto Mutual hereby reinsures and assumes
and SA WI hereby cedes and transfers to State Auto Mutual all Net
Liabilities incurred under or in connection with all contracts and
policies of insurance issued by SA WI outstanding and in force as of
and subsequent to 12:01 a.m. EST, January 1, 2005. Such liabilities
shall include SA WI’s reserves for unearned premiums, outstanding
losses and loss expenses (including unreported losses) and all other
outstanding underwriting and administrative expenses as evidenced by
SA WI’s books and records at the close of business on December 31,
2004, but shall not include intercompany balances, liabilities
incurred in connection with the investment transactions of SA WI,
liabilities for dividends to stockholders declared and unpaid, and
other liabilities not incurred in connection with underwriting
operations.




 









 








Page 5





It is further agreed that State Auto Mutual shall receive the Net Premiums for said contracts and policies.




(d) Farmers Casualty Cession: State Auto Mutual hereby reinsures and
assumes and Farmers Casualty hereby cedes and transfers to State
Auto Mutual all Net Liabilities incurred under or in connection with
all contracts and policies of insurance issued by Farmers Casualty
outstanding and in force as of and subsequent to 12:01 a.m. EST,
January 1, 2005. Such liabilities shall include Farmers Casualty’s
reserves for unearned premiums, outstanding losses and loss expenses
(including unreported losses) and all other outstanding underwriting
and administrative expenses as evidenced by Farmers Casualty’s books
and records at the close of business on December 31, 2004, but shall
not include intercompany balances, liabilities incurred in
connection with the investment transactions of Farmers Casualty,
liabilities for dividends to stockholders declared and unpaid, and
other liabilities not incurred in connection with underwriting
operations. It is further agreed that State Auto Mutual shall
receive the Net Premiums for said contracts and policies.




(e) SA OH Cession: State Auto Mutual hereby reinsures and assumes
and SA OH hereby cedes and transfers to State Auto Mutual all Net
Liabilities incurred under or in connection with all contracts and
policies of insurance issued by SA OH outstanding and in force as of
and subsequent to 12:01 a.m. EST, January 1, 2005. Such liabilities
shall include SA OH’s reserves for unearned premiums, outstanding
losses and loss expenses (including unreported losses) and all other
outstanding underwriting and administrative expenses as evidenced by
SA OH’s books and records at the close of business on December 31,
2004, but shall not include intercompany balances, liabilities
incurred in connection with the investment transactions of SA OH,
liabilities for dividends to stockholders declared and unpaid, and
other liabilities not incurred in connection with underwriting
operations. It is further agreed that State Auto Mutual shall
receive the Net Premiums for said contracts and policies.




(f) SA FL Cession: State Auto Mutual hereby reinsures and assumes
and SA FL hereby cedes and transfers to State Auto Mutual all Net
Liabilities incurred under or in connection with all contracts and
policies of insurance issued by SA FL outstanding and in force as of
and subsequent to 12:01 a.m. EST, January 1, 2005. Such liabilities
shall include SA FL’s reserves for unearned premiums, outstanding
losses and loss expenses (including unreported losses) and all other
outstanding underwriting and administrative expenses as evidenced by
SA FL’s books and records at the close of business on December 31,
2004, but shall not include intercompany balances, liabilities
incurred in connection with the investment transactions of SA FL,
liabilities for dividends to stockholders declared and unpaid, and
other liabilities not incurred in connection with underwriting
operations.




 









 








Page 6





It is further agreed that State Auto Mutual shall receive the Net
Premiums for said contracts and policies.




(g) Meridian Security Cession: State Auto Mutual hereby reinsures
and assumes and Meridian Security hereby cedes and transfers to
State Auto Mutual all Net Liabilities incurred under or in
connection with all contracts and policies of insurance issued by
Meridian Security outstanding and in force as of and subsequent to
12:01 a.m. EST, January 1, 2005. Such liabilities shall include
Meridian Security’s reserves for unearned premiums, outstanding
losses and loss expenses (including unreported losses) and all other
outstanding underwriting and administrative expenses as evidenced by
Meridian Security’s books and records at the close of business on
December 31, 2004, but shall not include intercompany balances,
liabilities incurred in connection with the investment transactions
of Meridian Security, liabilities for dividends to stockholders
declared and unpaid, and other liabilities not incurred in
connection with underwriting operations. It is further agreed that
State Auto Mutual shall receive the Net Premiums for said contracts
and policies.




(h) Meridian Citizens Mutual Cession: State Auto Mutual hereby
reinsures and assumes and Meridian Citizens Mutual hereby cedes and
transfers to State Auto Mutual all Net Liabilities incurred under or
in connection with all contracts and policies of insurance issued by
Meridian Citizens Mutual outstanding and in force as of and
subsequent to 12:01 a.m. EST, January 1, 2005. Such liabilities
shall include Meridian Citizens Mutual’s reserves for unearned
premiums, outstanding losses and loss expenses (including unreported
losses) and all other outstanding underwriting and administrative
expenses as evidenced by Meridian Citizen Mutual’s books and records
at the close of business on December 31, 2004, but shall not include
intercompany balances, liabilities incurred in connection with the
investment transactions of Meridian Citizens Mutual, liabilities for
dividends to stockholders declared and unpaid, and other liabilities
not incurred in connection with underwriting operations. It is
further agreed that State Auto Mutual shall receive the Net Premiums
for said contracts and policies.




	3.  	ASSETS TRANSFER TO STATE AUTO MUTUAL:






(a) State Auto P&C: In consideration of the agreements herein
contained, State Auto P&C hereby agrees that there has been or will
be assigned and transferred to State Auto Mutual an amount, in cash
or other assets, equal to the aggregate of all liabilities of State
Auto P&C assumed by State Auto Mutual under paragraph 2(a) hereof,
less a ceding commission equal to the sum of the acquisition
expenses associated with the unearned premium reserves which are
transferred as provided herein. There have been included among the
assets assigned and




 









 








Page 7





transferred to State Auto Mutual by State Auto P&C all of the right,
title and interest of State Auto P&C in and to all assets relative
to the underwriting operations of State Auto P&C, due or that became
due, as evidenced by its books and records at the close of business
on December 31, 2004, not including investments, accrued investment
income, intercompany balances and bank deposits.




(b) Milbank: In consideration of the agreements herein contained,
Milbank hereby agrees that there has been or will be assigned and
transferred to State Auto Mutual an amount, in cash or other assets,
equal to the aggregate of all liabilities of Milbank assumed by
State Auto Mutual under paragraph 2(b) hereof, less a ceding
commission equal to the sum of the acquisition expenses associated
with the unearned premium reserves which are transferred as provided
herein. There shall be included among the assets assigned and
transferred to State Auto Mutual by Milbank all of the right, title
and interest of Milbank in and to all assets relative to the
underwriting operations of Milbank due or that may become due as
evidenced by its books and records at the close of business on
December 31, 2004 not including investments, accrued investment
income, intercompany balances and bank deposits.




(c) SA WI: In consideration of the agreements herein contained, SA
WI hereby agrees that there has been or will be assigned and
transferred to State Auto Mutual an amount, in cash or other assets,
equal to the aggregate of all liabilities of SA WI assumed by State
Auto Mutual under paragraph 2(c) hereof, less a ceding commission
equal to the sum of the acquisition expenses associated with the
unearned premium reserves which are transferred as provided herein.
There shall be included among the assets assigned and transferred to
State Auto Mutual by SA WI all of the right, title and interest of
SA WI in and to all assets relative to the underwriting operations
of SA WI due or that may become due as evidenced by its books and
records at the close of business on December 31, 2004, not including
investments, accrued investment income, intercompany balances and
bank deposits.




(d) Farmers Casualty: In consideration of the agreements herein
contained, Farmers Casualty hereby agrees that there has been or
will be assigned and transferred to State Auto Mutual an amount, in
cash or other assets, equal to the aggregate of all liabilities of
Farmers Casualty assumed by State Auto Mutual under paragraph 2(d)
hereof, less a ceding commission equal to the sum of the acquisition
expenses associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among the
assets assigned and transferred to State Auto Mutual by Farmers
Casualty all of the right, title and interest of Farmers Casualty in
and to all assets relative to the underwriting operations of Farmers
Casualty due or




 









 








Page 8





that may become due as evidenced by its books and records at the
close of business on December 31, 2004, not including investments,
accrued investment income, intercompany balances and bank deposits.




(e) SA OH: In consideration of the agreements herein contained, SA
OH hereby agrees that there has been or will be assigned and
transferred to State Auto Mutual an amount, in cash or other assets,
equal to the aggregate of all liabilities of SA OH assumed by State
Auto Mutual under paragraph 2(e) hereof, less a ceding commission
equal to the sum of the acquisition expenses associated with the
unearned premium reserves which are transferred as provided herein. There shall be included among the assets assigned and transferred to
State Auto Mutual by SA OH all of the right, title and interest of
SA OH in and to all assets relative to the underwriting operations
of SA OH due or that may become due as evidenced by its books and
records at the close of business on December 31, 2004, not including
investments, accrued investment income, intercompany balances and
bank deposits.




(f) SA FL: In consideration of the agreements herein contained, SA
FL hereby agrees that there has been or will be assigned and
transferred to State Auto Mutual an amount, in cash or other assets,
equal to the aggregate of all liabilities of SA FL assumed by State
Auto Mutual under paragraph 2(f) hereof, less a ceding commission
equal to the sum of the acquisition expenses associated with the
unearned premium reserves which are transferred as provided herein.
There shall be included among the assets assigned and transferred to
State Auto Mutual by SA FL: all of the right, title and interest of
SA FL in and to all assets relative to the underwriting operations
of SA FL due or that may become due as evidenced by its books and
records at the close of business on December 31, 2004, not including
investments, accrued investment income, intercompany balances and
bank deposits.




(g) Meridian Security: In consideration of the agreements herein
contained, Meridian Security hereby agrees that there has been or
will be assigned and transferred to State Auto Mutual an amount, in
cash or other assets, equal to the aggregate of all liabilities of
Meridian Security assumed by State Auto Mutual under paragraph 2(g)
hereof, less a ceding commission equal to the sum of the acquisition
expenses associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among the
assets assigned and transferred to State Auto Mutual by Meridian
Security all of the right, title and interest of Meridian Security
in and to all assets relative to the underwriting operations of
Meridian Security due or that may become due as evidenced by its
books and records at the close of business on December 31, 2004, not
including




 









 








Page 9





investments, accrued investment income, intercompany balances and
bank deposits.




(h) Meridian Citizens Mutual: In consideration of the agreements
herein contained, Meridian Citizens Mutual hereby agrees that there
has been or will be assigned and transferred to State Auto Mutual an
amount, in cash or other assets, equal to the aggregate of all
liabilities of Meridian Citizens Mutual assumed by State Auto Mutual
under paragraph 2(h) hereof, less a ceding commission equal to the
sum of the acquisition expenses associated with the unearned premium
reserves which are transferred as provided herein. There shall be
included among the assets assigned and transferred to State Auto
Mutual by Meridian Citizens Mutual all of the right, title and
interest of Meridian Citizens Mutual in and to all assets relative
to the underwriting operations of Meridian Citizens Mutual due or
that may become due as evidenced by its books and records at the
close of business on December 31, 2004, not including investments,
accrued investment income, intercompany balances and bank deposits.




	4.  	ASSUMPTION OF REINSURANCE:






     (a) State Auto P&C: State Auto P&C hereby reinsures and
assumes and State Auto Mutual hereby cedes and transfers to State
Auto P&C its Respective Percentage of all Net Liabilities under all
contracts and policies of insurance, (including those ceded by State
Auto P&C and reinsured by State Auto Mutual as provided in paragraph
2(a)), on which State Auto Mutual is subject to liability and which
are outstanding and in force on or after the effective date hereof.



     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, and other liabilities not
incurred in connection with underwriting operations.




     (b) Milbank: Milbank hereby reinsures and assumes and
State Auto Mutual hereby cedes and transfers to Milbank its
Respective Percentage of all Net Liabilities under all
contracts and policies of insurance, (including those ceded by
Milbank and reinsured by State Auto Mutual as provided in
paragraph 2(b)), on which State Auto Mutual is subject to
liability and which are outstanding and in force on or after
the effective date hereof.



     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany




 









 








Page 10



balances, liabilities for federal income taxes, liabilities incurred in
connection with investment transactions, liabilities for dividends to
stockholders declared and unpaid, and other liabilities not incurred in
connection with underwriting operations.





     (c) SA WI: SA WI hereby reinsures and assumes and State Auto
Mutual hereby cedes and transfers to SA WI its Respective Percentage
of all Net Liabilities under all contracts and policies of
insurance, (including those ceded by SA WI and reinsured by State
Auto Mutual as provided in paragraph 2(c)), on which State Auto
Mutual is subject to liability and which are outstanding and in
force on or after the effective date hereof.



     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, and other liabilities not
incurred in connection with underwriting operations.




     (d) Farmers Casualty: Farmers Casualty hereby reinsures and
assumes and State Auto Mutual hereby cedes and transfers to Farmers
Casualty its Respective Percentage of all Net Liabilities under all
contracts and policies of insurance, (including those ceded by
Farmers Casualty and reinsured by State Auto Mutual as provided in
paragraph 2(d)), on which State Auto Mutual is subject to liability
and which are outstanding and in force on or after the effective
date hereof.



     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, and other liabilities not
incurred in connection with underwriting operations.




     (e) SA OH: SA OH hereby reinsures and assumes and State Auto
Mutual hereby cedes and transfers to SA OH its Respective Percentage
of all Net Liabilities under all contracts and policies of
insurance, (including those ceded by SA OH and reinsured by State
Auto Mutual as provided in paragraph 2(e)), on which State Auto
Mutual is subject to liability and which are outstanding and in
force on or after the effective date hereof.



     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and




 









 








Page 11



unpaid, and other liabilities not incurred in connection with underwriting
operations.





     (f) SA FL: SA FL hereby reinsures and assumes and State Auto
Mutual hereby cedes and transfers to SA FL its Respective Percentage
of all Net Liabilities under all contracts and policies of
insurance, (including those ceded by SA FL and reinsured by State
Auto Mutual as provided in paragraph 2(f)), on which State Auto
Mutual is subject to liability and which are outstanding and in
force on or after the effective date hereof.




     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, and other liabilities not
incurred in connection with underwriting operations.




     (g) Meridian Security: Meridian Security hereby reinsures and
assumes and State Auto Mutual hereby cedes and transfers to Meridian
Security its Respective Percentage of all Net Liabilities under all
contracts and policies of insurance, (including those ceded by
Meridian Security and reinsured by State Auto Mutual as provided in
paragraph 2(g)), on which State Auto Mutual is subject to liability
and which are outstanding and in force on or after the effective
date hereof.



     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, and other liabilities not
incurred in connection with underwriting operations.




     (h) Meridian Citizens Mutual: Meridian Citizens Mutual hereby
reinsures and assumes and State Auto Mutual hereby cedes and
transfers to Meridian Citizens Mutual its Respective Percentage of
all Net Liabilities under all contracts and policies of insurance,
(including those ceded by Meridian Citizens Mutual and reinsured by
State Auto Mutual as provided in paragraph 2(h)), on which State
Auto Mutual is subject to liability and which are outstanding and in
force on or after the effective date hereof.



     Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and all
other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and




 









 








Page 12



unpaid, and other liabilities not incurred in connection with underwriting
operations.





	5.  	ASSET TRANSFER BY STATE AUTO MUTUAL:






(a) State Auto P&C: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been or
will be assigned and transferred to State Auto P&C an amount, in
cash or other assets, equal to the aggregate of all liabilities of
State Auto Mutual assumed by State Auto P&C under paragraph 4(a)
hereof, less a ceding commission equal to the sum of the acquisition
expenses associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among the
assets assigned and transferred to State Auto P&C by State Auto
Mutual all of the right, title and interest of State Auto Mutual in
and to all assets relative to the underwriting operations of State
Auto Mutual, due or that may become due, as evidenced by its books
and records at the close of business on December 31, 2004, not
including investments, accrued investment income, intercompany
balances and bank deposits.




(b) Milbank: In consideration of the agreements herein contained,
State Auto Mutual hereby agrees that there has been or will be
assigned and transferred to Milbank an amount, in cash or other
assets, equal to the aggregate of all liabilities of State Auto
Mutual assumed by Milbank under paragraph 4(b) hereof, less a ceding
commission equal to the sum of the acquisition expenses associated
with the unearned premium reserves which are transferred as provided
herein. There shall be included among the assets assigned and
transferred to Milbank by State Auto Mutual all of the right, title
and interest of State Auto Mutual in and to all assets relative to
the underwriting operations of State Auto Mutual, due or that may
become due, as evidenced by its books and records at the close of
business on December 31, 2004, not including investments, accrued
investment income, intercompany balances and bank deposits.




(c) SA WI: In consideration of the agreements herein contained,
State Auto Mutual hereby agrees that there has been or will be
assigned and transferred to SA WI an amount, in cash or other
assets, equal to the aggregate of all liabilities of State Auto
Mutual assumed by SA WI under paragraph 4(c) hereof, less a ceding
commission equal to the sum of the acquisition expenses associated
with the unearned premium reserves which are transferred as provided
herein. There shall be included among the assets assigned and
transferred to SA WI by State Auto Mutual all of the right, title
and interest of State Auto Mutual in and to all assets relative to
the underwriting operations of State Auto Mutual, due or that may
become due, as evidenced by its books and records at the close of
business on December 31, 2004, not




 









 








Page 13





including investments, accrued investment income, intercompany
balances and bank deposits.




(d) Farmers Casualty: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been or
will be assigned and transferred to Farmers Casualty an amount, in
cash or other assets, equal to the aggregate of all liabilities of
State Auto Mutual assumed by Farmers Casualty under paragraph 4(d)
hereof, less a ceding commission equal to the sum of the acquisition
expenses associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among the
assets assigned and transferred to Farmers Casualty by State Auto
Mutual all of the right, title and interest of State Auto Mutual in
and to all assets relative to the underwriting operations of State
Auto Mutual, due or that may become due, as evidenced by its books
and records at the close of business on December 31, 2004, not
including investments, accrued investment income, intercompany
balances and bank deposits.




(e) SA OH: In consideration of the agreements herein contained,
State Auto Mutual hereby agrees that there has been or will be
assigned and transferred to SA OH an amount, in cash or other
assets, equal to the aggregate of all liabilities of State Auto
Mutual assumed by SA OH under paragraph 4(e) hereof, less a ceding
commission equal to the sum of the acquisition expenses associated
with the unearned premium reserves which are transferred as provided
herein. There shall be included among the assets assigned and
transferred to SA OH by State Auto Mutual all of the right, title
and interest of State Auto Mutual in and to all assets relative to
the underwriting operations of State Auto Mutual, due or that may
become due, as evidenced by its books and records at the close of
business on December 31, 2004, not including investments, accrued
investment income, intercompany balances and bank deposits.




(f) SA FL: In consideration of the agreements herein contained,
State Auto Mutual hereby agrees that there has been or will be
assigned and transferred to SA FL an amount, in cash or other
assets, equal to the aggregate of all liabilities of State Auto
Mutual assumed by SA FL under paragraph 4(f) hereof, less a ceding
commission equal to the sum of the acquisition expenses associated
with the unearned premium reserves which are transferred as provided
herein. There shall be included among the assets assigned and
transferred to SA FL by State Auto Mutual all of the right, title
and interest of State Auto Mutual in and to all assets relative to
the underwriting operations of State Auto Mutual, due or that may
become due, as evidenced by its books and records at the close of
business on December 31, 2004, not including investments, accrued
investment income, intercompany balances and bank deposits.




 









 








Page 14





(g) Meridian Security: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been or
will be assigned and transferred to Meridian Security an amount, in
cash or other assets, equal to the aggregate of all liabilities of
State Auto Mutual assumed by Meridian Security under paragraph 4(g)
hereof, less a ceding commission equal to the sum of the acquisition
expenses associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among the
assets assigned and transferred to Meridian Security by State Auto
Mutual all of the right, title and interest of State Auto Mutual in
and to all assets relative to the underwriting operations of State
Auto Mutual, due or that may become due, as evidenced by its books
and records at the close of business on December 31, 2004, not
including investments, accrued investment income, intercompany
balances and bank deposits.




(h) Meridian Citizens Mutual: In consideration of the agreements
herein contained, State Auto Mutual hereby agrees that there has
been or will be assigned and transferred to Meridian Citizens Mutual
an amount, in cash or other assets, equal to the aggregate of all
liabilities of State Auto Mutual assumed by Meridian Citizens Mutual
under paragraph 4(h) hereof, less a ceding commission equal to the
sum of the acquisition expenses associated with the unearned premium
reserves which are transferred as provided herein. There shall be
included among the assets assigned and transferred to Meridian
Citizens Mutual by State Auto Mutual all of the right, title and
interest of State Auto Mutual in and to all assets relative to the
underwriting operations of State Auto Mutual, due or that may become
due, as evidenced by its books and records at the close of business
on December 31, 2004, not including investments, accrued investment
income, intercompany balances and bank deposits.




	6.  	PREMIUM COLLECTION AND PAYMENT OF LOSSES:





          As of the effective date of this Agreement and pursuant to the terms
of the 2000 Management Agreement, as amended from time to time, the 2000
Midwest Management Agreement, as amended from time to time, the 2000
Farmers Casualty Management Agreement, as amended from time to time, the
2002 Management Services Agreement, the 2002 Cost Sharing Agreement, as
amended from time to time, and the 2003 Cost Allocation Agreement, as
amended from time to time, State Auto P&C, Milbank, SA WI, Farmers
Casualty, SA OH, SA FL, Meridian Security, and Meridian Citizens Mutual
hereby authorize and empower State Auto Mutual to collect and receive all
premiums and to take charge of, adjust and administer the payment of all
losses with respect to any and all contracts and policies of insurance
previously or thereafter issued by State Auto P&C, Milbank, SA WI, Farmers
Casualty, SA OH, SA FL, Meridian Security and Meridian Citizens Mutual,
and to reinsure or terminate all such contracts and policies, and in all
respects to act as though said contracts and policies were issued by State
Auto Mutual. State Auto Mutual agrees to





 









 








Page 15



administer the payment of all losses and loss adjustment expenses in
connection with such contracts and policies. None of the foregoing is
intended to affect or impair the direct obligation of State Auto P&C,
Milbank, SA WI, Farmers Casualty, SA OH, SA FL, Meridian Security and
Meridian Citizens Mutual to their insureds under policies issued by State
Auto P&C, Milbank, SA WI, Farmers Casualty, SA OH, SA FL, Meridian
Security and Meridian Citizens Mutual, respectively.





	7.  	PREMIUM PAYABLE BY STATE AUTO MUTUAL:






(a) State Auto P&C: Commencing with the effective date of this
Agreement, State Auto Mutual hereby agrees to pay to State Auto P&C
its Respective Percentage of the Net Premiums written by the parties
hereto. Similarly, commencing with the effective date of this
Agreement, all losses, loss expenses, underwriting expenses, and
administrative expenses chargeable to underwriting of the parties
hereto (except for losses, loss expenses, underwriting expenses and
administrative expenses chargeable to the State Auto Mutual
Reinsurance Book and State Auto Middle Market Insurance), including
the policyholder dividends, less all losses and expenses recovered
and recoverable under reinsurance ceded to reinsurers other than the
parties hereto, (except for catastrophe reinsurance ceded by State
Auto Mutual, Farmers Casualty, SA WI, Milbank, SA OH, SA FL,
Meridian Security, and Meridian Citizens Mutual to State Auto P&C
pursuant to a Property Catastrophe Overlying Excess of Loss
Reinsurance Contract dated as of July 1, 2004 as amended from time
to time, in which State Auto P&C provides catastrophe coverage for
the aforesaid companies for such amount of catastrophe loss and loss
expenses as equals the amount of the structured contingent financing
arrangement negotiated with a syndicate of lenders in excess of
$120,000,000 of such losses and loss expenses incurred by the Pooled
Companies) (the “State Auto P&C Catastrophe Assumption Agreement”)
shall be prorated among the parties on the basis of the Respective
Percentage of each. Accounts shall be rendered at quarterly
intervals and shall be settled within sixty (60) days thereafter.




(b) Milbank: Commencing with the effective date of this Agreement,
State Auto Mutual hereby agrees to pay Milbank its Respective
Percentage of the Net Premiums written by the parties hereto.
Similarly, commencing with the effective date of this Agreement, all
losses, loss expenses, underwriting expenses, and administrative
expenses chargeable to underwriting of the parties hereto (except
for losses, loss expenses, underwriting expenses and administrative
expenses chargeable to the State Auto Mutual Reinsurance Book and
State Auto Middle Market Insurance), including policyholder
dividends, less all losses and expenses recovered and recoverable
under reinsurance ceded to reinsurers other than the parties hereto,
(except for the State Auto P&C




 









 








Page 16





Catastrophe Assumption Agreement) shall be prorated among the
parties on the basis of the Respective Percentage of each. Accounts
shall be rendered at quarterly intervals and shall be settled within
sixty (60) days thereafter.




(c) SA WI: Commencing with the effective date of this Agreement,
State Auto Mutual hereby agrees to pay SA WI its Respective
Percentage of the Net Premiums written by the parties hereto.
Similarly, commencing with the effective date of this Agreement, all
losses, loss expenses, underwriting expenses, and administrative
expenses chargeable to underwriting of the parties hereto (except
for losses, loss expenses, underwriting expenses and administrative
expenses chargeable to the State Auto Mutual Reinsurance Book and
State Auto Middle Market Insurance), including policyholder
dividends, less all losses and expenses recovered and recoverable
under reinsurance ceded to reinsurers other than the parties hereto,
(except for the State Auto P&C Catastrophe Assumption Agreement)
shall be prorated among the parties on the basis of the Respective
Percentage of each. Accounts shall be rendered at quarterly
intervals and shall be settled within sixty (60) days thereafter.




(d) Farmers Casualty: Commencing with the effective date of this
Agreement, State Auto Mutual hereby agrees to pay Farmers Casualty
its Respective Percentage of the Net Premiums written by the parties
hereto. Similarly, commencing with the effective date of this
Agreement, all losses, loss expenses, underwriting expenses, and
administrative expenses chargeable to underwriting of the parties
hereto (except for losses, loss expenses, underwriting expenses and
administrative expenses chargeable to the State Auto Mutual
Reinsurance Book and State Auto Middle Market Insurance), including
policyholder dividends, less all losses and expenses recovered and
recoverable under reinsurance ceded to reinsurers other than the
parties hereto, (except for the State Auto P&C Catastrophe
Assumption Agreement) shall be prorated among the parties on the
basis of the Respective Percentage of each. Accounts shall be
rendered at quarterly intervals and shall be settled within sixty
(60) days thereafter.




(e) SA OH: Commencing with the effective date of this Agreement,
State Auto Mutual hereby agrees to pay SA OH its Respective
Percentage of the Net Premiums written by the parties hereto.
Similarly, commencing with the effective date of this Agreement, all
losses, loss expenses, underwriting expenses, and administrative
expenses chargeable to underwriting of the parties hereto (except
for losses, loss expenses, underwriting expenses and administrative
expenses chargeable to the State Auto Mutual Reinsurance Book and
State Auto Middle Market Insurance), including policyholder
dividends, less all losses and expenses recovered and recoverable
under reinsurance ceded to reinsurers other than the parties hereto,
(except for the State Auto P&C




 









 








Page 17





Catastrophe Assumption Agreement) shall be prorated among the
parties on the basis of the Respective Percentage of each. Accounts
shall be rendered at quarterly intervals and shall be settled within
sixty (60) days thereafter.




(f) SA FL: Commencing with the effective date of this Agreement,
State Auto Mutual hereby agrees to pay SA FL its Respective
Percentage of the Net Premiums written by the parties hereto.
Similarly, commencing with the effective date of this Agreement, all
losses, loss expenses, underwriting expenses, and administrative
expenses chargeable to underwriting of the parties hereto (except
for losses, loss expenses, underwriting expenses and administrative
expenses chargeable to the State Auto Mutual Reinsurance Book and
State Auto Middle Market Insurance), including policyholder
dividends, less all losses and expenses recovered and recoverable
under reinsurance ceded to reinsurers other than the parties hereto,
(except for the State Auto P&C Catastrophe Assumption Agreement)
shall be prorated among the parties on the basis of the Respective
Percentage of each. Accounts shall be rendered at quarterly
intervals and shall be settled within sixty (60) days thereafter.




(g) Meridian Security: Commencing with the effective date of this
Agreement, State Auto Mutual hereby agrees to pay Meridian Security
its Respective Percentage of the Net Premiums written by the parties
hereto. Similarly, commencing with the effective date of this
Agreement, all losses, loss expenses, underwriting expenses, and
administrative expenses chargeable to underwriting of the parties
hereto (except for losses, loss expenses, underwriting expenses and
administrative expenses chargeable to the State Auto Mutual
Reinsurance Book and State Auto Middle Market Insurance), including
policyholder dividends, less all losses and expenses recovered and
recoverable under reinsurance ceded to reinsurers other than the
parties hereto, (except for the State Auto P&C Catastrophe
Assumption Agreement) shall be prorated among the parties on the
basis of the Respective Percentage of each. Accounts shall be
rendered at quarterly intervals and shall be settled within sixty
(60) days thereafter.




(h) Meridian Citizens Mutual: Commencing with the effective date of
this Agreement, State Auto Mutual hereby agrees to pay Meridian
Citizens Mutual its Respective Percentage of the Net Premiums
written by the parties hereto. Similarly, commencing with the
effective date of this Agreement, all losses, loss expenses,
underwriting expenses, and administrative expenses chargeable to
underwriting of the parties hereto (except for losses, loss
expenses, underwriting expenses and administrative expenses
chargeable to the State Auto Mutual Reinsurance Book and State Auto
Middle Market Insurance), including policyholder dividends, less all
losses and expenses recovered and recoverable under reinsurance
ceded to reinsurers




 









 








Page 18





other than the parties hereto, (except for the State Auto P&C
Catastrophe Assumption Agreement) shall be prorated among the
parties on the basis of the Respective Percentage of each. Accounts
shall be rendered at quarterly intervals and shall be settled within
sixty (60) days thereafter.


8. OFFSET: It is understood and agreed that, insofar as is practicable and
consistent with the purposes and intentions of this Agreement, the
obligations of each company under this Agreement to transfer assets to the
other company may, in whole or in part, be offset against the reciprocal
reinsurance obligations of each company to the other company so that each
company shall deliver hereunder only a net amount of assets required under
such offset.



9. GENERAL STATEMENT OF INTENT: It is the purpose and intent of this
Agreement that:





(a) State Auto Mutual shall be liable as a reinsurer to State Auto
P&C, Milbank, SA WI, Farmers Casualty, SA OH, SA FL, Meridian
Security and Meridian Citizens Mutual, on the policies and contracts
of insurance of State Auto P&C, Milbank, SA WI, Farmers Casualty. SA
OH, SA FL, Meridian Security, and Meridian Citizens Security
respectively, issued and in force at 12:01 a.m., EST, January 1,
2005, or on which there were, at that time, unsettled claims or
losses, and on policies and contracts thereafter issued by State
Auto P&C, Milbank, SA WI, Farmers Casualty, SA OH, SA FL, Meridian
Security and Meridian Citizens Mutual to the extent of State Auto
Mutual’s Respective Percentage. Premiums, losses, loss expenses,
underwriting expenses and administrative expenses chargeable to the
State Auto Mutual Reinsurance Book and State Auto Middle Market
Insurance from and after 12:01 a.m. EST January 1, 2005 are excluded
from the scope of the 2005 Pooling Agreement.




(b) State Auto P&C shall be liable as a reinsurer to State Auto
Mutual, Milbank, SA WI, Farmers Casualty, SA OH, SA FL, Meridian
Security, and Meridian Citizens Mutual on the policies and contracts
of insurance of State Auto Mutual, Milbank, SA WI, Farmers Casualty,
SA OH, SA FL, Meridian Security, and Meridian Citizens Mutual
respectively, issued and in force at 12:01 a.m., EST, January 1,
2005, or on which there were, at that time, unsettled claims or
losses, and on policies and contracts thereafter issued by State
Auto Mutual, Milbank, SA WI, Farmers Casualty, SA OH, SA FL,
Meridian Security, and Meridian Citizens Mutual to the extent of
State Auto P&C’s Respective Percentage. Premiums, losses, loss
expenses, underwriting expenses and administrative expenses
chargeable to the State Auto Mutual Reinsurance Book and State Auto
Middle Market Insurance from and after 12:01 a.m. EST January 1,
2005 are excluded from the scope of the 2005 Pooling Agreement.




 









 








Page 19





(c) Milbank shall be liable as a reinsurer to State Auto Mutual,
State Auto P&C, SA WI, Farmers Casualty SA OH, SA FL, Meridian
Security, and Meridian Citizens Mutual on the policies and contracts
of State Auto Mutual, State Auto P&C, SA WI, Farmers Casualty, SA
OH, SA FL, Meridian Security, and Meridian Citizens Mutual
respectively, issued and in force at 12:01 a.m., EST, on January 1,
2005 or on which there were, at that time, unsettled claims or
losses and on policies thereafter issued by State Auto Mutual, State
Auto P&C, SA WI, Farmers Casualty, SA OH, SA FL, Meridian Security,
and Meridian Citizens Mutual to the extent of Milbank’s Respective
Percentage. Premiums, losses, loss expenses, underwriting expenses
and administrative expenses chargeable to the State Auto Mutual
Reinsurance Book and State Auto Middle Market Insurance from and
after 12:01 a.m. EST January 1, 2005 are excluded from the scope of
the 2005 Pooling Agreement.




(d) SA WI shall be liable as a reinsurer to State Auto Mutual, State
Auto P&C, Milbank, Farmers Casualty, SA OH, SA FL, Meridian Security
and Meridian Citizens Mutual, on the policies and contracts of State
Auto Mutual, State Auto P&C, Milbank, Farmers Casualty SA OH, SA FL,
Meridian Security, and Meridian Citizens Mutual, respectively,
issued and in force at 12:01 a.m., EST, on January 1, 2005 or on
which there were, at that time, unsettled claims or losses and on
policies thereafter issued by State Auto Mutual, State Auto P&C,
Milbank, Farmers Casualty, SA OH, SA FL, Meridian Security, and
Meridian Citizens Mutual to the extent of SA WI’s Respective
Percentage. Premiums, losses, loss expenses, underwriting expenses
and administrative expenses chargeable to the State Auto Mutual
Reinsurance Book and State Auto Middle Market Insurance from and
after 12:01 a.m. EST January 1, 2005 are excluded from the scope of
the 2005 Pooling Agreement.




(e) Farmers Casualty shall be liable as a reinsurer to State Auto
Mutual, State Auto P&C, Milbank, SA WI, SA OH, SA FL, Meridian
Security, and Meridian Citizens Mutual on the policies and contracts
of State Auto Mutual, State Auto P&C, Milbank, SA WI, SA OH, SA FL,
Meridian Security, and Meridian Citizens Mutual, respectively,
issued and in force at 12:01 a.m., EST, January 1, 2005 or on which
there were, at that time, unsettled claims or losses, and on
policies and contracts thereafter issued by State Auto Mutual, State
Auto P&C, Milbank, SA WI, SA OH, SA FL, Meridian Security, and
Meridian Citizens Mutual to the extent of Farmers Casualty’s
Respective Percentage. Premiums, losses, loss expenses, underwriting
expenses and administrative expenses chargeable to the State Auto
Mutual Reinsurance Book and State Auto Middle Market Insurance from
and after 12:01 a.m. EST January 1, 2005 are excluded from the scope
of the 2005 Pooling Agreement.




 









 








Page 20





(f) SA OH shall be liable as a reinsurer to State Auto Mutual, State
Auto P&C, Milbank, SA WI, Farmers Casualty, SA FL, Meridian Security
and Meridian Citizens Mutual, on the policies and contracts of State
Auto Mutual, State Auto P&C, Milbank, SA WI, Farmers Casualty, SA
FL, Meridian Security, and Meridian Citizens Mutual, respectively,
issued and in force at 12:01 a.m., EST, January 1, 2005 or on which
there were, at that time, unsettled claims or losses, and on
policies and contracts thereafter issued by State Auto Mutual, State
Auto P&C, Milbank, SA WI, Farmers Casualty, SA FL, Meridian
Security, and Meridian Citizens Mutual to the extent of SA OH’s
Respective Percentage. Premiums, losses, loss expenses, underwriting
expenses and administrative expenses chargeable to the State Auto
Mutual Reinsurance Book and State Auto Middle Market Insurance from
and after 12:01 a.m. EST January 1, 2005 are excluded from the scope
of the 2005 Pooling Agreement.




(g) SA FL shall be liable as a reinsurer to State Auto Mutual, State
Auto P&C, Milbank, SA WI, Farmers Casualty, SA OH, Meridian
Security, and Meridian Citizens Mutual on the policies and contracts
of State Auto Mutual, State Auto P&C, Milbank, SA WI, Farmers
Casualty, SA OH, Meridian Security, and Meridian Citizens Mutual,
respectively, issued and in force at 12:01 a.m., EST, January 1,
2005 or on which there were, at that time, unsettled claims or
losses, and on policies and contracts thereafter issued by State
Auto Mutual, State Auto P&C, Milbank, SA WI, Farmers Casualty, SA
OH, Meridian Security, and Meridian Citizens Mutual to the extent of
SA FL’s Respective Percentage. Premiums, losses, loss expenses,
underwriting expenses and administrative expenses chargeable to the
State Auto Mutual Reinsurance Book and State Auto Middle Market
Insurance from and after 12:01 a.m. EST January 1, 2005 are excluded
from the scope of the 2005 Pooling Agreement.




(h) Meridian Security shall be liable as a reinsurer to State Auto
Mutual, State Auto P&C, Milbank, SA WI, Farmers Casualty, SA OH, SA
FL and Meridian Citizens Mutual on the policies and contracts of
State Auto Mutual, State Auto P&C, Milbank, SA WI, Farmers Casualty,
SA OH, SA FL, and Meridian Citizens Mutual, respectively, issued and
in force at 12:01 a.m., EST, January 1, 2005 or on which there were,
at that time, unsettled claims or losses, and on policies and
contracts thereafter issued by State Auto Mutual, State Auto P&C,
Milbank, SA WI, Farmers Casualty, SA OH, SA FL, and Meridian
Citizens Mutual to the extent of Meridian Security’s Respective
Percentage. Premiums, losses, loss expenses, underwriting expenses
and administrative expenses chargeable to the State Auto Mutual
Reinsurance Book and State Auto Middle Market Insurance from and
after 12:01 a.m. EST January 1, 2005 are excluded from the scope of
the 2005 Pooling Agreement.



 









 








Page 21





(i) Meridian Citizens Mutual shall be liable as a reinsurer to State
Auto Mutual, State Auto P&C, Milbank, SA WI, Farmers Casualty, SA
OH, SA FL and Meridian Security on the policies and contracts of
State Auto Mutual, State Auto P&C, Milbank, SA WI, Farmers Casualty,
SA OH, SA FL, and Meridian Security respectively, issued and in
force at 12:01 a.m., EST, January 1, 2005 or on which there were, at
that time, unsettled claims or losses, and on policies and contracts
thereafter issued by State Auto Mutual, State Auto P&C, Milbank, SA
WI, Farmers Casualty, SA OH, SA FL, and Meridian Security to the
extent of Meridian Citizens Mutual’s Respective Percentage.
Premiums, losses, loss expenses, underwriting expenses and
administrative expenses chargeable to the State Auto Mutual
Reinsurance Book and State Auto Middle Market Insurance from and
after 12:01 a.m. EST January 1, 2005 are excluded from the scope of
the 2005 Pooling Agreement.




(g) The parties hereto shall, on and after 12:01 a.m., EST, January
1, 2005, participate on the basis of 19.5% for State Auto Mutual,
59% for State Auto P&C, 17% for Milbank, 0.0% for SA WI, 3% for
Farmers Casualty, 1% for SA OH, 0.0% for SA FL, 0.0% for Meridian
Security and 0.5% for Meridian Citizens Mutual in all of the
underwriting operations of each of the nine parties hereto, except
as otherwise expressly excluded herein. Premiums, losses, loss
expenses, underwriting expenses and administrative expenses
chargeable to the State Auto Mutual Reinsurance Book and State Auto
Middle Market Insurance from and after 12:01 a.m. EST January 1,
2005 are excluded from the scope of the 2005 Pooling Agreement.


10. LOSSES EXCLUDED: Notwithstanding any of the foregoing, the parties
hereto understand and agree that this 2005 Pooling Agreement shall not
apply to catastrophe losses and loss expenses for residential and
commercial property to the extent such losses and loss expenses are
covered by the State Auto P&C Catastrophe Assumption Agreement. Once the
limit of coverage available under the State Auto P&C Catastrophe
Assumption Agreement is exhausted by loss expenses and loss payments on
behalf of any party hereto, under either the State Auto P&C Catastrophe
Assumption Agreement or directly, all parties understand and agree that
catastrophe losses and loss expenses in excess of $120,000,000 plus the
amount of coverage under the State Auto P&C Catastrophe Assumption
Agreement shall once again be ceded and assumed under the terms of the
2005 Pooling Agreement. All premiums attributable to the State Auto P&C
Catastrophe Assumption Agreement are to be paid to State Auto P&C outside
of the 2005 Pooling Agreement. All premiums, losses, loss expenses,
underwriting expenses and administrative expenses attributable to the
State Auto Mutual Reinsurance Book and State Auto Middle Market Insurance
from and after 12:01 a.m. EST January 1, 2005 are outside the 2005 Pooling
Agreement. In addition, this 2005 Pooling Agreement is subject to the
Reserve Guaranty Agreement.





 









 








Page 22



11. LIABILITIES EXCLUDED: In addition to the liabilities set forth in
paragraphs 2(a), 2(b), 2(c), 2(d), 2(e), 2(f), 2(g), 2(h) and 10 above,
this Agreement shall not apply to the investment operation or liabilities
for federal income tax or other liabilities excluded by this Agreement.



12. “FOLLOW THE FORTUNES”: The reinsurance provided by the terms of this
Agreement shall be subject to the same terms and conditions under which
the original insurance was concluded, or which may be or may have been
agreed to during the term of the original insurance contract.



13. METHODS AND PROCEDURES: The president of State Auto Mutual, State Auto
P&C, Milbank, SA WI, Farmers Casualty, SA OH, SA FL, Meridian Security,
and Meridian Citizens Mutual or any officer of any of these companies
designated by said president, shall determine the methods and procedures,
including accounting transactions, by which the terms of this Agreement
shall be performed by and on behalf of the parties hereto.



14. AMENDMENTS: This Agreement may be modified from time to time, so as to
adapt its provisions to the varying conditions of the business of the
Pooled Companies, by a mutual agreement in writing of the parties hereto,
subject to ratification by the Board of Directors of each party and with
the approval of the insurance regulatory officials from the State of Ohio,
the State of South Carolina, the State of South Dakota, the State of
Wisconsin, the State of Iowa, the State of Florida and the State of
Indiana as required by law.



15. TERM: This Agreement shall remain in full force and effect until
canceled by agreement of the parties or by the giving of twelve months
notice by one of the parties to the other parties and to the respective
domiciliary insurance department of each of the parties.



16. INTERPRETATION: Wherever required to give the correct meaning
throughout this Agreement, the singular shall be interpreted in the
plural. Clerical errors or errors of involuntary or inadvertent omission
or commission shall not be interpreted as a discharge of liability on
behalf of any of the parties to this contract. Such errors shall be
rectified at the time of discovery or as soon as practicable thereafter.
Caption headings are for convenience only and are not intended to affect
the construction of the terms hereof.



17. INSOLVENCY: The reinsurance made under this Agreement (which the
parties understand and agree excludes the State Auto Mutual Reinsurance
Book and State Auto Middle Market Insurance for such business assumed on
and after January 1, 2005) shall be payable by the assuming reinsurer on
the basis of the liability of the ceding insurer under the contract or
contracts reinsured without diminution because of the insolvency of the
ceding insurer. In the event of insolvency of the ceding insurer, the
liquidator or receiver or statutory successor of such insurer shall give
written notice to the assuming reinsurer of the pendency of a claim
against the insolvent ceding insurer on the policy or bond reinsured
within a reasonable time after such claim is filed in the insolvency
proceeding; that during the pendency of such claim the assuming reinsurer
may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the ceding insurer or its liquidator or
receiver or statutory




 









 








Page 23



successors; that the expense thus incurred by the assuming reinsurer shall
be chargeable, subject to court approval, against the insolvent ceding
insurer as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the ceding insurer
solely as a result of the defense undertaken by the assuming reinsurer.
The reinsurance made effective under this Agreement shall be payable by
the assuming reinsurer to the ceding insurer or to the liquidator,
receiver or statutory successor of the ceding insurer.



18. ARBITRATION: In the event of any dispute hereafter arising with
respect to this Agreement, State Auto Mutual, State Auto P&C, Milbank, SA
WI, Farmers Casualty, SA OH, SA FL, Meridian Security, and Meridian
Citizens Mutual hereby agree that such dispute shall, upon the request of
the one of the parties, be submitted to arbitration. One arbitrator shall
be chosen by each party and those arbitrators shall then select an umpire
who shall hear and decide the issues to be arbitrated. If one party fails
to name an arbitrator within thirty (30) days after receipt of a written
request to do so, the party initiating the arbitration may choose the
arbitrators. The decision of the umpire shall be final and binding on the
parties. Each party shall bear the expense of its arbitrator and the cost
of the umpire shall be shared equally. The arbitration shall take place at
Columbus, Ohio or such other location upon which the parties may mutually
agree.



19. ACCESS TO RECORDS: The parties hereto understand and agree that each
shall have such access to the records of the other as is necessary to
confirm that the 2005 Pooling Agreement is being properly administered and
applied, provided that such access is achieved in compliance with laws
protecting the privacy of insureds and claimants. It is further understood
and agreed that the parties will permit regulators with jurisdiction to
have such access to such records, as and to the extent required by law.



20. COUNTERPARTS: The 2005 Pooling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same instrument.






 











 








Page 24




     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date and the year first above written.



	 	 	 	 	 	 	 
	Attest

	 	 	 	 	 	State Automobile Mutual

Insurance Company
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	By
	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	State Auto Property and

Casualty Insurance Company
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	By
	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	Milbank Insurance Company
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	By
	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	State Auto Insurance

Company of Wisconsin
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	By
	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	Farmers Casualty

Insurance Company
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	By
	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	State Auto Insurance

Company of Ohio
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	By
	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 







 











 








Page 25






	 	 	 	 	 	 	 
	

	 	 	 	 	 	State Auto Florida

Insurance Company
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	 	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	Meridian Security

Insurance Company
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	 	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	Meridian Citizens Mutual

Insurance Company
	 
	 	 	 	 	 	 
	/s/ John R. Lowther

	 	 	 	 	 	/s/ Robert H. Moone
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	 	 	President