CREDIT AGREEMENT

Exhibit 10.1

CREDIT AGREEMENT

Dated as of

May 8, 2009

between

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, as Borrower

and

STATE AUTO PROPERTY & CASUALTY INSURANCE COMPANY, as Lender

CREDIT AGREEMENT

This CREDIT AGREEMENT (“ this Agreement”) is made and entered into as of May 8, 2009 (the “ Effective Date ”), between STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, an Ohio mutual insurance company (the “ Borrower ”) and STATE AUTO PROPERTY & CASUALTY INSURANCE COMPANY, an Iowa corporation (the “ Lender ”).

Recitals

A. The Borrower desires to borrow funds under this Agreement for general corporate purposes, including liquidity and working capital.

B. The Lender is a wholly owned subsidiary of State Auto Financial Corporation, an Ohio corporation, which is a majority-owned subsidiary of the Borrower.

C. It is in the best interest of the Lender that the Borrower obtain a loan on the terms and conditions hereinafter set forth.

D. The Lender is willing to make loans under the terms and conditions set forth in this Agreement.

Agreement

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Defined Terms . As used in this Agreement, the following terms have the meanings specified below:

“ Applicable Insurance Regulatory Authority ” means, when used with respect to the Borrower or any SAM Insurance Subsidiary, the insurance department or similar administrative authority or agency located in the state in which the Borrower or such SAM Insurance Subsidiary is domiciled.

“ Available Debt Capacity ” means, for any year, the dollar amount equal to (a) the Statutory Surplus of the Borrower as set forth on the Borrower’s Statutory Statement as of the end of the immediately preceding calendar year (“ Annual Statutory Surplus ”) subtracted from (b) the quotient of (i) the Annual Statutory Surplus divided by (ii) 0.65. Available Debt Capacity may also be expressed by the following formula:

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“ Best ” means A.M. Best & Co. and its successors and assigns or, if it shall be dissolved or shall no longer assign ratings to insurance companies, then any other nationally recognized insurance statistical rating agency designated by the Lender.

“ Board of Directors ” means, the Board of Directors of the Borrower or any committee thereof duly authorized to act on behalf of such Board of Directors.

“ Borrower ” means State Automobile Mutual Insurance Company, an Ohio mutual insurance company, and its successors.

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in Columbus, Ohio are authorized or required by law to remain closed.

“ Change in Control ” means the occurrence of any of the following:

(a) the Borrower affiliates with or is merged with or into or consolidated with a third party and as a result, a majority of the Board of Directors of the Borrower or its successor is comprised of other than Continuing Directors; or

(b) the Borrower completes a conversion to a stock insurance company and as a result of which a majority of the Board of Directors of the Borrower or its successor is comprised of other than Continuing Directors.

“ Continuing Director ” means a director of the Borrower who was either:

(a) first elected or appointed as a director on or prior to the Effective Date; or

(b) subsequent to the Effective Date was elected or appointed as a director of the Borrower if such director was nominated by the Nominating and Governance Committee of the Borrower or appointed by at least two-thirds of the total number of the then Continuing Directors of the Borrower.

“ Debt ” of any Person means, without duplication:

(a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind (other than unspent cash deposits held in escrow by or in favor of such Person, or in a segregated deposit account controlled by such Person, in each case in the ordinary course of business to secure the performance obligations of, or damages owing from, one or more third parties),

(b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments,

(c) all obligations of such Person on which interest charges are customarily paid (other than obligations where interest is levied only on late or past due amounts),

(d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person,

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(e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business),

(f) all Debt of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Debt secured thereby has been assumed,

(g) all Guarantees by such Person of Debt of others,

(h) all Lease Obligations of such Person,

(i) all unpaid obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty (other than cash collateralized letters of credit to secure the performance of workers’ compensation, unemployment insurance, other social security laws or regulations, bids, trade contracts, leases, environmental and other statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case, obtained in the ordinary course of business),

(j) all capital stock of such Person which is required to be redeemed or is redeemable at the option of the holder if certain events or conditions occur or exist or otherwise, and

(k) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.

The Debt of any Person shall include the Debt of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor pursuant to law or judicial holding as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent that contractual provisions binding on the holder of such Debt provide that such Person is not liable therefor; provided that Debt of the Borrower shall not include (i) Lease Obligations which are subject to pooling under the Pooling Agreement or allocation under the Management Agreement, or (ii) obligations of the Borrower with respect to Surplus Notes having a maturity date later than the Maturity Date.

“ Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“ Dollars ” or “ $ ” refers to lawful money of the United States.

“ Environmental Laws ” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, the preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or the effects of the environment on health and safety.

“ Events of Default ” has the meaning specified in Article 7.

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“ Federal Reserve Board ” means the Board of Governors of the Federal Reserve System of the United States.

“ Financial Officer ” means the chief financial officer, treasurer, any assistant treasurer, the controller or any assistant controller of the Borrower.

“ Financing Transaction ” means the execution, delivery and performance by the Borrower of the Loan Documents to which it is to be a party, and the borrowing of the Term Loan.

“ Governmental Authority ” means the government of the United States or any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“ Guarantee ” by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt or other debt-like obligations of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Debt or other obligation; provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

“ Hedging Agreement ” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest rate, currency exchange rate or commodity price hedging arrangement.

“ Interest Payment Date ” means the first day of each May and November of each calendar year, beginning on November 1, 2009, and the Maturity Date.

“ Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Lease Obligations ” of any Person means obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof.

“ Lender ” means State Auto Property & Casualty Insurance Company, an Iowa corporation.

“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a

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vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“ Loan Documents ” means this Agreement, the Term Loan Note and any other documents hereinafter entered into with respect to the Term Loan.

“ Management Agreement ” means the Management and Operations Agreement, Amended and Restated as of January 1, 2005, as heretofore or hereafter amended, among the Borrower, STFC, Lender, and other subsidiaries and affiliates of the Borrower and STFC.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, operations, properties, assets, financial condition, prospects, contingent liabilities or material agreements of the Borrower and the SAM Subsidiaries taken, as a whole, (b) the ability of the Borrower to perform any of its obligations under any Loan Document or (c) the rights of or benefits available to the Lender under, or the validity or enforceability of, any Loan Document.

“ Material Debt ” means Debt (other than obligations in respect of the Term Loan evidenced by this Credit Agreement and the term loan evidenced by the Other Credit Agreement) or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the SAM Subsidiaries in an aggregate principal amount exceeding $25,000,000. For purposes of determining Material Debt, the “principal amount” of the obligations of the Borrower or any SAM Subsidiary in respect of any Hedging Agreement at any time will be the maximum aggregate amount (after giving effect to any netting agreements) that the Borrower or such SAM Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

“ Maturity Date ” means May 8, 2019 or such earlier date as a result of an acceleration of the maturity of the Term Loan Note as provided in this Agreement or such later date as the Lender may hereafter agree in its sole discretion.

“ NAIC ” means the National Association of Insurance Commissioners and any successor thereto.

“ Other Credit Agreement ” means the Credit Agreement, to be entered into after the Effective Date, between the Borrower and Milbank Insurance Company, a South Dakota corporation, in the principal amount of Twenty Million Dollars ($20,000,000).

“ Other Taxes ” means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

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“ Pooling Agreement ” means the Reinsurance Pooling Agreement, Amended and Restated as of January 1, 2008, as heretofore or hereafter amended, among the Borrower, Lender, and other subsidiaries and affiliates of the Borrower and STFC.

“ Regulation U ” means Federal Reserve Board Regulation U as in effect from time to time.

“ Regulation X ” means Federal Reserve Board Regulation X as in effect from time to time.

“ SAM Insurance Subsidiary ” means a Person listed on Exhibit B hereto.

“ SAM Subsidiary ” means each SAM Insurance Subsidiary and each other Person listed on Exhibit C hereto.

“ SAP ” means, with respect to the Borrower or any SAM Insurance Subsidiary, the accounting procedures and practices prescribed or permitted by the Applicable Insurance Regulatory Authority.

“ Senior Debt ” means Debt of the Borrower that is secured by a Lien and/or that is otherwise senior in priority of payment to the Term Loan.

“ Statutory Statement ” means, as to the Borrower or any SAM Insurance Subsidiary, a statement of the condition and affairs of the Borrower or such SAM Insurance Subsidiary, prepared in accordance with statutory accounting practices required or permitted by the Applicable Insurance Regulatory Authority, and filed with the Applicable Insurance Regulatory Authority.

“ Statutory Surplus ” means, as at any date for the Borrower or any SAM Insurance Subsidiary, the aggregate amount of surplus as regards policyholders (determined without duplication in accordance with SAP) of the Borrower or such SAM Insurance Subsidiary, as set forth on page 3, line 35, of the most recent Statutory Statement of the Borrower or such SAM Insurance Subsidiary (or equivalent page, line, or statement, to the extent that any thereof is modified or replaced).

“ STFC ” means State Auto Financial Corporation, an Ohio corporation, and a majority-owned subsidiary of the Borrower.

“ Surplus Notes ” means notes, debentures, bonds or other evidence of Debt issued by the Borrower: (a) pursuant to Section 3901.72 of the Revised Code of Ohio in effect on the Effective Date and any regulations applicable thereto, the advancement and repayment of which are subject to the approval of the superintendent of insurance of the State of Ohio, and which (i) may be repaid only out of the surplus earnings of the Borrower and (ii) except as ordered by the superintendent of insurance of the State of Ohio, no part of the principal or interest thereof shall be repaid until the surplus of the Borrower remaining after such repayment is equal in amount to the principal of the money so advanced; or (b) pursuant to any amendments to Section 3901.72 of the Revised Code of Ohio from time to time after the Effective Date and any regulations applicable thereto, provided that the conditions for the advancement and repayment of such notes, debentures, bonds or other evidence of Debt under this clause (b) are substantially similar to those set forth in clause (a) of this definition.

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“ Taxes ” means any and all present or future taxes, levies, imposts, duties, deductions, charges for withholdings imposed by any Governmental Authority.

“ Term Loan ” shall have the meaning assigned to such term in Section 2.01 hereof.

“ Term Loan Note ” means the promissory note, dated as of the Effective Date, in the form attached hereto as Exhibit A, by the Borrower to the order of the Lender evidencing the Borrower’s obligations to repay the Term Loan on the terms and conditions stated herein.

“ Total Capitalization ” means, as of any date, the aggregate of, without duplication, (a) Debt of the Borrower, of the type described in any or all of clauses (a), (b), (c), (d), (e) and (h) of the definition of “Debt”, to the extent applicable to the Borrower, as reflected on its most recent Statutory Statement and (b) the Statutory Surplus of the Borrower, as reflected on its most recent Statutory Statement.

“ United States ” means the United States of America.

(b) Section 1.02. Accounting Terms. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial information and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with SAP.

ARTICLE 2

THE TERM LOAN

Section 2.01 Term Loan . Subject to the terms and conditions set forth herein, the Lender agrees to make a term loan to the Borrower in the aggregate principal amount of Fifty Million Dollars ($50,000,000) (the “ Term Loan ”).

Section 2.02. Payment at Maturity; Evidence of Debt. The Borrower unconditionally promises to pay to the Lender on the Maturity Date, the then unpaid principal amount of the Term Loan together with any accrued but unpaid interest.

Section 2.03. Optional Prepayments. The Borrower will have the right at any time to prepay the Term Loan in whole or in part without penalty or premium.

Section 2.04. Interest. (a) The Term Loan shall bear interest at the rate per annum of seven percent (7%).

(b) Notwithstanding the foregoing, if any principal of or interest on the Term Loan is not paid when due, whether on an Interest Payment Date (in the case of a payment of interest), at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to two percent (2%) plus the rate that otherwise would be applicable to the Term Loan.

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(c) Interest accrued on the Term Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon the Maturity Date; provided that interest accrued pursuant to Section 2.04(b) shall be payable on demand.

(d) All interest hereunder will be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case will be payable for the actual number of days elapsed (including the first day but excluding the last day).

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender that as of the Effective Date:

Section 3.01. Organization; Powers. The Borrower and each of the SAM Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where failures to do so, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

Section 3.02. Authorization; Enforceability. The Financing Transaction to be entered into by the Borrower is within its corporate powers and has been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document to which the Borrower is to be a party, when executed and delivered by the Borrower, will constitute, a legal, valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

Section 3.03. Governmental Approvals; No Conflicts. The Financing Transaction and the use of the proceeds thereof (a) do not require any consent or approval of, registration or filing with, or other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, articles of incorporation, code of regulations, by-laws, or other organizational documents of the Borrower or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its properties, or give rise to a right thereunder to require the Borrower to make any payment, where such default or payment reasonably can be expected to have a Material Adverse Effect and (d) will not result in the creation or imposition of any Lien on any property of the Borrower.

Section 3.04. Financial Statements; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lender a draft Statutory Statement of the Borrower as of March 31, 2009. Such Statutory Statement presents fairly, in all material respects, the financial position of the Borrower in accordance with SAP. None of the Borrower or any of the SAM Subsidiaries has on the date hereof any material contingent liabilities, material liabilities for taxes, material unusual forward or long-term commitments or material unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates.

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(b) Since March 31, 2009, there has been no material adverse change in the business, operations, properties, assets, financial condition, prospects, contingent liabilities or material agreements of the Borrower and the SAM Subsidiaries, taken as a whole.

(c) The Borrower has heretofore furnished to the Lender a draft Statutory Statement of each SAM Insurance Subsidiary for the period ended March 31, 2009. All such Statutory Statements present fairly in all mate