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is better than industry averages and is among the best in the business. 

We’ve completed the transformation of our claim operations by redesigning business processes, restructuring the organiza- tion, reducing reliance on third-party vendors, and implementing a new technology platform. We’re now positioned to capitalize on these investments by using analytics to improve our fraud detection, enhance fi rst notice of loss handling, and identify op- portunities to improve customer service and speed. 

I’m very proud of what we’ve been able to accomplish in claim and how we continue to innovate. One example is a new early intervention narcotics management program. This new program closely monitors the use of narcotic pain medicine. Our nurse case managers begin working immediately on any claims where narcotics are prescribed and consult with the treating physician and/or our internal medical directors with the goal of weaning the claimant from the highly addictive narcotics and assisting them in their recovery, return to work and resumption of a normal life. 

“Last year, we made solid progress and, on average, improved our customer service perfor- mance by almost 10%. We’ll continue to look for ways to further improve our top quartile service capability for all of our customers.” 

## Operations 

We maintain detailed metrics on customer service and ex- perience across the enterprise. We survey agents, policyholders and claimants on a regular basis to assess our responsiveness and reliability in meeting their expectations. Last year, we made solid progress and, on average, improved our agent satisfaction results by almost 10%. We’ll continue to look for ways to further improve our top quartile service capability for all our customers. 

At the end of 2014, we successfully completed a new sourc- ing arrangement with a third party that assumed responsibility for maintaining all legacy system applications. This sourc- ing arrangement has already increased our speed to market, enhanced resource capacity and fl exibility, and broadened and deepened our skill set. Most importantly, our IT associates are now focused on the high priority and strategic initiatives under- way to replace all of our legacy policy administration and billing systems. The initiative will take several years to complete, but will begin this year with developing and deploying new agent portals to further improve customer service, enhance productiv- ity and, over time, reduce our expense ratio. 

## 1 Reconciliation of HO Quota Share Arrangement Cession and RED Underwriting Results to  As Reported Results Pro Forma 

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## State Auto Financial Corporation 

## People 

With all the change and transformation State Auto has expe- rienced over the past several years, what has not changed is our culture and the quality of our people. 

We are not a low cost provider, a product innovator or world class in operational excellence. We expect to be competitive in each of these three areas and we’re making the investments in people, technology and risk management capability to succeed. 

What has always distinguished State Auto is customer inti- macy. We have a genuine understanding of the people and com- munities we serve and provide relevant information and expert guidance that leads to better decisions. 

We know that agents, brokers and policyholders want to be treated as individuals and respected for who they are. We know them, we know what they expect, and we deliver. All of this comes from a culture built around a consistent set of values that has been ingrained for many years. We recruit, develop and retain smart, sincere and supportive associates who: 

z Do what’s necessary to grow surplus and preserve our fi nancial strength, which is critical to preserving agency and broker partnerships and policyholder trust; 

z Uphold and strengthen the company’s platinum plus reputation in the market place; 

z Build and sustain strong relationships with agents and brokers, policyholders and all of our constituencies; 

z Allow our company to provide reliable, stable and predictable markets; and 

z Respond to needs and requests that are often characterized by behaviors as simple as answering the telephone, which is increasingly rare in our industry. 

As a result, our agents, brokers and policyholders get the service and support they need to be secure today and prepared for tomorrow. 

The quality of our people has sustained us through a diffi cult period and now positions us for profi table growth and improved shareholder returns. 

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Robert P. Restrepo Jr. President, Chairman of the Board and Chief Executive O ffi cer 

