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Cincinnati Financial Reports Fourth-quarter and Full-year 2007 Results

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CINCINNATI, Feb. 6 /PRNewswire-FirstCall/ -- Cincinnati Financial Corporation (Nasdaq: CINF) today reported:

  • Fourth-quarter net income of $187 million, or $1.11 per share, compared with $130 million, or 75 cents, in the 2006 fourth quarter. Operating income* of $179 million, or $1.07 per share, compared with $122 million, or 70 cents.
  • Full-year 2007 net income of $855 million, or $4.97 per share, compared with $930 million, or $5.30, in 2006. Operating income a record $610 million, or $3.54 per share, compared with $496 million, or $2.82.
  • Full-year 2007 property casualty underwriting profits of $304 million
  • compared with $181 million in 2006.



    Financial Highlights


    (Dollars in millions           Three months ended
     except share data)                December 31,
                                    2007         2006    Change %

    Revenue Highlights
       Earned premiums            $   809       $   830    (2.5)
       Investment income              157           145     8.5
       Total revenues                 983           992    (0.9)
    Income Statement Data
       Net income                 $   187       $   130    43.2
       Net realized investment
        gains and losses                8             8    (4.7)
       Operating income*          $   179       $   122    46.4
    Per Share Data (diluted)
       Net income                 $  1.11       $  0.75    48.0
       Net realized investment
        gains and losses             0.04          0.05   (20.0)
       Operating income*          $  1.07       $  0.70    52.9

       Book value
       Cash dividend declared     $ 0.355       $ 0.335     6.0
       Weighted average
        shares outstanding    168,163,752   174,988,162    (3.9)


                                   Twelve months ended
                                       December 31,
                                   2007          2006   Change %

    Revenue Highlights
       Earned premiums            $ 3,250       $ 3,270    (0.6)
       Investment income              608           570     6.6
       Total revenues               4,259         4,542    (6.2)
    Income Statement Data
       Net income                 $   855       $   930    (8.0)
       Net realized investment
        gains and losses              245           434   (43.5)
       Operating income*          $   610       $   496    23.1
    Per Share Data (diluted)
       Net income                 $  4.97       $  5.30    (6.2)
       Net realized investment
        gains and losses             1.43          2.48   (42.3)
       Operating income*          $  3.54       $  2.82    25.5

       Book value                 $ 35.70       $ 39.38    (9.3)
       Cash dividend declared     $  1.42       $  1.34     6.0
       Weighted average
        shares outstanding    172,167,452   175,451,341    (1.9)

Insurance Operations Highlights

  • 85.6 percent fourth-quarter 2007 property casualty combined ratio with 4.1 percent decrease in net written premiums; 90.3 percent full-year 2007 property casualty combined ratio with 1.9 percent decrease in net written premiums.
  • Profitability improved from prior year periods because of lowest catastrophe loss ratio in over 15 years and $244 million in full-year savings from favorable development on prior period reserves compared with $116 million in 2006.
  • Continuing new business activity and policyholder retention levels illustrate value of the company's relationships with independent insurance agents in a competitive market.
  • 23 cent per share contribution from life insurance operating income to full-year results, up from 19 cents in 2006.

Investment and Balance Sheet Highlights
  • 8.5 percent growth in fourth-quarter 2007 pretax investment income with 6.6 percent full-year increase. Investment income benefited from strong dividend increases in the equity portfolio.
  • Book value of $35.70 per share compared with $39.38 at year-end 2006. Invested assets and book value declined primarily on lower market values of financial sector equity holdings.
  • $245 million in full-year 2007 net realized investment gains and losses compared with $434 million in full-year 2006. 2006 gains included the sale of the company's second largest common stock holding.
  • 3.3 million reduction in weighted-average shares outstanding in 2007. Repurchases of the company's common stock totaled 7.5 million shares at a cost of $306 million, including fourth-quarter accelerated share repurchase.

Full-year 2008 Outlook**
  • Property casualty insurance operations - Management anticipates lower net written premiums due to competitive pricing, with upward pressure on the combined ratio for 2008.
  • Investment operations - Management anticipates slower growth in investment income as financial sector holdings evaluate dividend levels. Portfolio strategies to balance near-term income generation and long-term book value growth continue to be our focus.

* The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures on Page 11 defines and reconciles measures presented in this release that are not based on Generally Accepted Accounting Principles or Statutory Accounting Principles.

** Forward-looking statements and related assumptions are subject to the risks outlined in the company's safe-harbor statement (see Page 8).

Challenging Property Casualty Insurance Environment

Chairman and Chief Executive Officer John J. Schiff, Jr., CPCU, commented, "We continue to see the benefits of our agency-centered approach, with local market decision making that creates agent and policyholder loyalty through all stages of the insurance pricing cycle. We credit those relationships with contributing to 2007's strong results. Further, our policyholders' catastrophe losses were at the lowest level since 1997 and our savings from favorable development on prior period reserves was above our guidance. We expect these measures to return to more normal levels in the future."

Schiff added, "Our commercial lines premiums continue to reflect reduced pricing due to increased competition. As well, we are seeing economic pressure in some regions and on some types of business, which affects our policyholders' revenues or payrolls and is a factor in the premiums calculated for certain business policies. We have performed well under these types of tough commercial lines market conditions in the past. Our approach - supporting our agents' strong local advantages through our team of field representatives and headquarters associates - gives us unique strengths to succeed. The local knowledge of our agents and field associates helps us carefully underwrite accounts, selecting only the commercial business that appears to be appropriately priced relative to the risk we would assume."

Schiff noted, "Likewise, the marketplace is competitive for personal lines in many regions. Lower new and renewal premiums per policy have reduced our personal lines net written premiums. We are addressing our competitive position so we can resume growing in personal lines. We continue to refine our rates, building on the changes we made in mid-2006 to the structure of our premium credits. Those changes better positioned our agencies to sell the value of our homeowner and personal auto policies. As a result, policy retention rates remain above 90 percent and new personal lines business continues to grow. Another way in which we hope to grow is by making our personal lines products available over the next two years in states where agents currently market only our commercial lines products."

Long-term Investment in Property Casualty Business

James E. Benoski, vice chairman, chief insurance officer and president, said, "2007 marked our first agency appointments and first commercial lines policies in Washington and New Mexico, the 33rd and 34th states where we actively market property casualty insurance."

Benoski added, "Across our established states, Cincinnati has earned a generous share of each agency's business over the years by offering the products and services agents need to protect their local businesses and families. Our agents have indicated their desire to have Cincinnati available as a market for commercial accounts that require the flexibility of excess and surplus lines coverage. Preparations that began in early 2007 for our excess and surplus lines operations concluded on schedule in December. Our new subsidiary, The Cincinnati Specialty Underwriters Insurance Company, received an A (Excellent) rating from A.M. Best Co., an independent provider of insurer ratings. They began 2008 by successfully issuing the first surplus lines policies from the new policy administration system.

"In addition to growing with our current agencies, we also continue to build new relationships, making agency appointments within our current marketing territories and recently opened states. In total, we completed 66 agency appointments in 2007, including 50 that were new relationships. With many more in the pipeline, we are targeting another 65 appointments in 2008. New appointments, net of other changes in our agency relationships, brought total reporting agency locations to 1,327 at year-end 2007, compared with 1,289 at year-end 2006."

2007 Property Casualty Combined Ratio

Kenneth W. Stecher, chief financial officer and executive vice president, said, "Cincinnati's overall profitability for the fourth quarter and full year was excellent and improved from last year's levels. Results for both the quarter and year benefited from very low catastrophe losses and savings from favorable development on prior period reserves above our guidance. In contrast, the industry's full-year 2007 combined ratio is expected to rise to approximately 95.6 percent, including 1.7 percentage points from catastrophe losses, from 92.4 percent, including 2.1 percentage points from catastrophe losses, in 2006.

Stecher noted, "We did experience a rise in the current accident year loss ratio excluding catastrophe losses. We believe two factors were largely responsible. First, current market conditions and softer pricing are hampering profitability. Second, there are instances when losses from weather events can be significant for some carriers, but not rise to the level where Property Claims Services tracks industrywide losses and designates the events as insurance catastrophes. We believe that was the case for us in 2007, with non-catastrophe weather-related losses adding about 1 percentage point more to our loss ratio than in 2006."

2008 Property Casualty Outlook Update

Stecher commented, "If current commercial lines pricing trends continue into 2008, our net written premiums could decline as much as 5 percent. We believe our GAAP combined ratio could be between 96 percent and 98 percent, as we meet the needs of our agencies while managing for long-term profitability. Industry full-year 2008 net written premiums are expected to decline 0.6 percent with the combined ratio rising to 98.6 percent."

Stecher observed that the combined ratio target relies on three assumptions:

  • Current accident year loss ratio excluding catastrophe losses - The company believes the market trends that contributed to an increase in this ratio in 2007 are continuing and may put the ratio under further pressure in 2008.
  • Catastrophe loss ratio - The company assumes catastrophe losses would contribute approximately 4.5 percentage points to the full-year 2008 combined ratio. Stecher noted the unpredictability of catastrophic events in any given year. Catastrophe losses have made an average contribution of 3.7 percentage points to the company's combined ratio in the past 10 years, ranging from 2007's low of 0.8 points to 1998's high of 6.1 points.
  • Savings from favorable development on prior period reserves - The company assumes savings from favorable development would reduce the full-year 2008 combined ratio by approximately 4 percentage points. Stecher indicated that management will continue to rely on sound actuarial analysis in the determination of loss and loss expense reserves, even as market conditions soften.

Stecher added, "We believe the level of performance we have targeted will allow us to sustain our industry leading position in the commercial lines insurance marketplace. We plan to take steps in our personal lines insurance operations to enhance our response to the changing marketplace. And finally, we look for our life insurance business to continue to make a solid and growing contribution to our earnings.

"Our strong position gives us opportunities to be a market for our agents' best business, giving them market stability and contributing to their success. Further, we believe we can expect a positive contribution from our new excess and surplus lines operations, although our 2008 targets do not take into account any contribution from excess and surplus lines. We are mindful that it will take some time before our excess and surplus lines operation is of sufficient size to materially influence our overall corporate results," Stecher said.

Investment Performance Affected by Recent Market Activity

Schiff commented, "Our buy-and-hold equity investing strategy has been key to the long-term growth of our assets and shareholders' equity. We identify companies with the potential for sales, earnings and dividend growth, a strong management team and favorable outlook. Over the years, these equities have generally offered a steadily increasing flow of dividend income along with the potential for capital appreciation.

"Since mid-2007, the success of this strategy has been interrupted as the financial markets have reflected broad concerns about credit quality, liquidity and the general health of the economy. As we noted in September 2007, uncertainty about the duration and the impact of these issues could significantly influence valuations and the volatility of the markets," Schiff continued.

"Five months later, our book value has declined due to the significant drop in market value of our financial sector common stocks, which represent approximately 35 percent of our investment portfolio. To varying degrees, these companies are addressing a challenging credit quality environment and related issues. As a result, they may evaluate their dividend levels in light of their own capital requirements and earnings outlook, potentially slowing our investment income growth.

"Providing balance to the challenges of our equity portfolio, our bond portfolio continued to hold steady in the fourth quarter as widening credit spreads were offset by the strong demand in the market for low-risk securities. We believe our investment strategy will continue to allow us to maximize both income and capital appreciation over the long term. We are committed to sustaining the strong capitalization that supports our high insurer financial strength ratings, giving our agents a distinct marketing advantage for their value-oriented clients."

Schiff added, "Your company returned $546 million to shareholders in 2007 through cash dividends and a record level of repurchase activity, including the accelerated share repurchase agreement announced in October. At that time, the board of directors expanded its repurchase authorization to communicate to shareholders its confidence in our business and our long-term outlook. The board acted last week to raise the indicated annual dividend rate by 9.9 percent, to $1.56 per share. We expect the board to continue to take actions supporting increased shareholder value over the long term."




                Property Casualty Insurance Operations

    (Dollars in millions)       Three months ended      Twelve months ended
                                   December 31,             December 31,
                              2007    2006  Change %   2007    2006  Change %

    Written premiums           $724    $755     (4.1)  $3,117  $3,178    (1.9)

    Earned premiums            $777    $802     (3.1)  $3,125  $3,164    (1.2)

    Loss and loss expenses
     excluding catastrophes     397     458    (13.3)   1,806   1,833    (1.5)
    Catastrophe loss and
     loss expenses               (2)     44   (104.0)      26     175   (85.1)
    Commission expenses         159     144     10.3      599     596     0.4
    Underwriting expenses       105     108     (2.3)     375     363     3.2
    Policyholder dividends        6       4     41.6       15      16    (5.4)
      Underwriting profit      $112     $44    153.4     $304    $181    68.3

    Ratios as a percent of
     earned premiums:
      Loss and loss expenses
       excluding catastrophes  51.1%    57.1%            57.8%   58.0%
      Catastrophe loss and
       loss expenses           (0.2)     5.5              0.8     5.5
      Loss and loss expenses   50.9%    62.6%            58.6%   63.5%
      Commission expenses      20.5     18.0             19.2    18.8
      Underwriting expenses    13.4     13.3             12.0    11.5
      Policyholder dividends    0.8      0.6              0.5     0.5
        Combined ratio         85.6%    94.5%            90.3%   94.3%

  • $81 million in fourth-quarter 2007 new business written directly by agencies compared with $88 million in last year's fourth quarter. Full-year new business was $325 million in 2007 compared with $357 million in 2006.
  • 1,092 agency relationships with 1,327 reporting locations marketed our insurance products at year-end 2007, up from 1,066 agency relationships with 1,289 reporting locations at year-end 2006.
  • Contributions to premiums and underwriting income from excess and surplus lines will begin in 2008.
  • 2008 property casualty reinsurance program finalized. Program updated to maintain balance between the cost of the program and the level of risk retained. Reinsurance costs expected to decline slightly due to slightly higher retention levels and moderating rates for certain lines of business.




    2008 Reinsurance Program

    Treaties         Retention Summary                   Comments

    Property        For any one event,              -- After reinsurance, our
     catastrophe    retain losses of:                  maximum exposure to a
                    -- 100% of first $45 million       catastrophic event that
                    -- 43% between $45 million         caused $500 million in
                       and $70 million                 covered losses would be
                    -- 5% between $70 million          $105 million compared
                       and $200 million                with $103 million in
                    -- 11% to 19% for layers           2007. The largest
                       between $200 million and        catastrophe loss in
                       $500 million                    our history was
                                                       $87 million before
                                                       reinsurance.

    Casualty           For a single loss, retain:   -- Increased casualty
     per risk       -- 100% of first $5 million        treaty retention to
                    -- 0% between $5 million and       $5 million from
                       $25 million                     $4 million
                    -- Obtain facultative
                       reinsurance above $25 million

    Property           For a single loss, retain:   -- No changes in 2008
     per risk       -- 100% of first $4 million
                    -- 0% between $4 million
                       and $25 million
                    -- Obtain facultative
                       reinsurance above $25 million

    Casualty third  -- $25 million excess           -- No changes in 2008
     excess            of $25 million

    Casualty fourth -- $20 million excess           -- No changes in 2008
     excess            of $50 million



                         Insurance Segment Highlights

    Commercial Lines Insurance Operations

    (Dollars in millions)       Three months ended      Twelve months ended
                                   December 31,             December 31,
                              2007    2006  Change %  2007    2006  Change %


    Written premiums           $562    $589     (4.6)  $2,413  $2,442    (1.2)

    Earned premiums            $601    $619     (3.0)  $2,411  $2,402     0.4

    Loss and loss expenses
     excluding catastrophes     310     357    (13.2) 1,378    1,377      0.1
    Catastrophe loss and loss
     expenses                     0      11       nm     16       89    (81.3)
    Commission expenses         123     113      9.2    454      444      2.0
    Underwriting expenses        86      79      8.7    287      268      7.0
    Policyholder dividends        6       4     41.6     15       16     (5.4)
      Underwriting profit       $76     $55     38.1   $261     $208     25.4

    Ratios as a percent of
     earned premiums:
      Loss and loss expenses
       excluding catastrophes  51.5%   57.6%           57.2%    57.3%
      Catastrophe loss and loss
       expenses                 0.0     1.9             0.7      3.7
      Loss and loss expenses   51.5%   59.5%           57.9%    61.0%
      Commission expenses      20.6    18.3            18.8     18.5
      Underwriting expenses    14.1    12.6            11.9     11.1
      Policyholder dividends    1.1     0.7             0.6      0.7
        Combined ratio         87.3%   91.1%           89.2%    91.3%

  • $562 million of commercial lines net written premiums for the three months ended December 31, 2007. $71 million of new fourth-quarter commercial lines business written directly by agencies, down 10.5 percent from $80 million in the comparable 2006 quarter.
  • $2.413 billion of commercial lines net written premiums for full-year 2007. $287 million of new 2007 commercial lines business written directly by agencies, down 11.5 percent from $324 million for full-year 2006.
  • Direct bill payment option now available for businessowners policies issued through e-CLAS policy processing system. Selected agencies received this capability in 2007, with first-quarter 2008 rollout planned for all agencies currently using e-CLAS. By the end of 2008, development of a direct bill payment option for commercial policies not issued through e-CLAS is anticipated.
  • 89.2 percent full-year 2007 commercial lines combined ratio, improved 2.1 percentage points over 91.3 percent in full-year 2006. This result included higher current accident year losses excluding catastrophe losses and higher expenses. These increases were more than offset by lower catastrophe losses and higher savings from favorable development on prior period reserves.
  • 3.8 percentage point increase in full-year 2007 current accident year loss ratio excluding catastrophe losses, due to non-catastrophe weather-related losses and softening market conditions.
  • Commercial lines insurance industry combined ratio for full-year 2007 estimated at 94.0 percent with decline in net written premiums estimated at 1.5 percent.



    Personal Lines Insurance Operations
    (Dollars in millions)       Three months ended      Twelve months ended
                                   December 31,             December 31,
                              2007    2006  Change %    2007    2006  Change %

    Written premiums           $162    $166     (2.3)    $704    $736    (4.4)


    Earned premiums            $176    $183     (3.7)    $714    $762    (6.3)

    Loss and loss expenses
     excluding catastrophes     87      101    (13.9)     428     456    (6.2)
    Catastrophe loss
     and loss expenses          (2)      33   (105.3)      10      86   (89.0)
    Commission expenses         36       31     14.1      145     152    (4.4)
    Underwriting expenses       19       29    (32.5)      88      95    (7.5)
      Underwriting profit      $36     $(11)   426.3      $43    $(27)  260.9
    (loss)

    Ratios as a percent of
     earned premiums:
      Loss and loss expenses
       excluding
       catastrophes           49.6%    55.5%             60.0%   59.9%
      Catastrophe loss
       and loss expenses      (1.0)    17.9               1.3    11.3
      Loss and loss
       expenses               48.6%    73.4%             61.3%   71.2%
       Commission expenses    20.1     16.9              20.3    19.9
      Underwriting
       expenses               11.0     15.7              12.3    12.5
        Combined ratio        79.7%   106.0%             93.9%  103.6%

  • $162 million of personal lines net written premiums for the three months ended December 31, 2007. $10 million of new fourth-quarter personal lines business written directly by agencies, up 12.1 percent from $9 million in the comparable 2006 quarter.
  • $704 million of personal lines net written premiums for full-year 2007. $38 million of new 2007 personal lines business written directly by agencies, up 16.9 percent from $33 million in full-year 2006.
  • This was the sixth consecutive quarter of new business growth following July 2006 introduction of a limited program of policy credits for homeowner and personal auto pricing in most states where the company's Diamond personal lines policy processing system is in use. Lower premiums per policy continue to constrain new and renewal premium growth.
  • 93.9 percent full-year 2007 personal lines combined ratio, an improvement of 9.7 percentage points over 103.6 percent in full-year 2006. This result included higher current accident year losses excluding catastrophe losses. That increase was more than offset by lower catastrophe losses and higher savings from favorable development on prior period reserves.
  • 2.3 percentage point increase in full-year 2007 current accident year loss ratio excluding catastrophe losses, due to non-catastrophe weather-related losses and lower personal auto pricing.
  • Personal lines insurance industry combined ratio for full-year 2007 estimated at 97.0 percent on flat net written premiums.


    Life Insurance Operations
    (in millions)              Three months ended       Twelve months ended
                                   December 31,             December 31,
                              2007    2006  Change %    2007    2006  Change %

    Written premiums            $41     $41     (0.1)    $167    $161     3.2

    Earned premiums             $32     $29     11.0     $125    $107    17.4
    Investment income, net of
     expenses                    30      27     10.2      115     108     6.3
    Other income                  1       1     (1.0)       4       3    25.1
      Total revenues, excluding
       realized investment gains
       and losses                63      57     10.4      244     218    12.0
    Policyholder benefits        35      30     15.0      133     122     9.2
    Expenses                     15      16     (6.8)      52      43    20.1
      Total benefits and
       expenses                  50      46      7.6      185     165    12.0
    Net income before income
     tax and realized investment
     gains and losses            13      11     22.8       59      53    12.1
    Income tax                    4       4     17.9       20      19     5.2
    Net income before realized
     investment gains and losses $9      $7     25.3      $39     $34    15.9

  • $167 million in total 2007 life insurance segment net written premiums. Written premiums include life insurance, annuity and accident and health premiums.
  • 10.5 percent increase to $141 million in 2007 in written premiums for life insurance products.
  • 21.6 percent rise in full-year term life insurance written premiums, reflecting marketing advantages of competitive, up-to-date products, providing close personal attention and exhibiting financial strength and stability. Statutory written annuity premiums decreased to $22 million in 2007 from $30 million in 2006. Since late 2005, the company has de-emphasized annuity sales due to unfavorable market conditions.
  • 8.6 percent rise in face amount of life policies in force to $61.875 billion at year-end 2007, from $56.971 billion at year-end 2006.
  • $5 million increase in 2007 operating profit due to favorable mortality experience and persistency as well as healthy earned premium and investment income growth.
  • 2008 plans include redesign of all life term insurance products. In addition to redesigning the worksite term product, we will update the full worksite life portfolio. These improvements support opportunities to cross-sell life insurance products to clients of the independent agencies that sell Cincinnati's property casualty insurance policies.





                   Investment and Balance Sheet Highlights

    Investment Operations
    (in millions)              Three months ended      Twelve months ended
                                   December 31,             December 31,
                              2007    2006  Change %    2007    2006  Change %

    Investment income:
       Interest                    $79    $75    4.4    $308    $300      2.5
       Dividends                    75     68   10.4     294     262     12.1
       Other                         4      4    0.8      15      15     (0.5)
       Investment expenses          (1)    (2)  96.9      (9)     (7)   (18.7)
         Total investment
           income, net
           of expenses             157    145    8.5     608     570      6.6
    Investment interest credited
     to contract holders           (14)   (14)  (5.6)    (57)    (54)    (5.1)
    Realized investment gains and
     losses summary:
      Realized investment gains
       and losses                   38     11  254.0     409     678    (39.6)
      Change in fair value of
       securities with embedded
       derivatives                 (12)     2 (933.2)    (11)      7   (263.6)
       Other-than-temporary
        impairment charges         (14)     0     nm     (16)     (1)(1,872.5)
         Total realized
          investment gains
          and losses                12     13   (2.0)    382     684    (44.1)
    Investment operations income  $155   $144    7.9    $933  $1,200    (22.2)



    (Dollars in millions except                         At           At
     share data)                                   December 31,  December 31,
                                                       2007          2006
    Balance sheet data
       Invested assets                               $ 12,261     $ 13,759
       Total assets                                    16,637       17,222
       Short-term debt                                     69           49
       Long-term debt                                     791          791
       Shareholders' equity                             5,929        6,808
       Book value per share                             35.70        39.38

       Debt-to-capital ratio                             12.7%        11.0%


                                    Three months ended   Twelve months ended
                                       December 31,         December 31,
                                      2007       2006      2007       2006
    Performance measures
       Comprehensive income          $(404)      $449     $(376)    $1,057
       Return on equity,
        annualized                    12.0%       7.9%     13.4%      14.4%
       Return on equity,
        annualized, based on
        comprehensive income         (25.9)      27.0      (5.9)      16.4

  • 8.5 percent growth in fourth-quarter net investment income to $157 million pretax. Full-year 2007 investment income up 6.6 percent to $608 million.
  • 12.1 percent growth in full-year 2007 dividend income, which contributed $294 million to investment income. Increase reflected higher dividend payout by 35 of the company's 41 common stock holdings. Dividend income growth rate expected to moderate in 2008 as financial sector holdings evaluate dividend levels.
  • Repurchases of the company's common stock totaled 4.0 million shares at a cost of $162 million in the fourth quarter and 7.5 million shares at a cost of $306 million for the year. 2007 repurchases represented 4.3 percent of shares outstanding. Approximately 13 million shares remain authorized for repurchase.
  • Fourth-quarter repurchases largely due to accelerated share repurchase agreement announced in October. Completed in January 2008, ASR totaled 4,071,000 shares at an average price of $39.18.
  • Sales of equity securities were the primary reason for $382 million in 2007 pre-tax realized investment gains. Equity sales in 2007 included the sale of approximately 3.8 million shares of Exxon Mobil Corporation common stock as well as the block sale of 5.5 million shares of Fifth Third Bancorp common stock. Sale of our large Alltel Corporation common stock holding was the primary reason for the $684 million in 2006 pre- tax realized investment gains.
  • Fifth Third remains the company's largest equity holding and Cincinnati Financial remains Fifth Third's largest shareholder.
  • $12.198 billion in investment portfolio assets market value at year-end 2007 compared with $13.699 billion at year-end 2006. Lower market valuations of equity holdings due to broad concerns about credit quality, liquidity and the general health of the economy accounted for the majority of the decline.
  • Shareholders' equity at $5.929 billion, or $35.70 per share, at year-end 2007, down from $6.808 billion, or $39.38, at year-end 2006. Decline caused by lower market values for equity holdings and record level of repurchase activity.
  • $4.306 billion in statutory surplus for the property casualty insurance group at year-end 2007, compared with $4.750 billion at year-end 2006. The ratio of common stock to statutory surplus for the property casualty insurance group portfolio was 84.5 percent at year-end 2007, compared with 96.7 percent at year-end 2006.
  • 28.4 percent ratio of investment securities held at the holding-company level to total holding-company-only assets at year-end 2007, comfortably within management's below-40 percent target.

For additional information or to register for this morning's conference call webcast, please visit www.cinfin.com/investors .

This is our "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2006 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 20. Although we often review or update our forward-looking statements when events warrant, we caution our readers that we undertake no obligation to do so. Factors that could cause or contribute to such differences include, but are not limited to:

  • Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns, environmental events, terrorism incidents or other causes
  • Increased frequency and/or severity of claims
  • Inaccurate estimates or assumptions used for critical accounting estimates
  • Events or actions, including unauthorized intentional circumvention of controls, that reduce the company's future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002
  • Changing consumer buying habits and consolidation of independent insurance agencies that could alter our competitive advantages
  • Events or conditions that could weaken or harm the company's relationships with its independent agencies and hamper opportunities to add new agencies, resulting in limitations on the company's opportunities for growth, such as:
  • Downgrade of the company's financial strength ratings
  • Concerns that doing business with the company is too difficult or
  • Perceptions that the company's level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace
  • Sustained decline in overall stock market values negatively affecting the company's equity portfolio and book value; in particular a sustained decline in the market value of Fifth Third shares, a significant equity holding
  • Securities laws that could limit the manner and timing of our investment transactions
  • Recession or other economic conditions or regulatory, accounting or tax changes resulting in lower demand for insurance products
  • Events, such as the sub-prime mortgage lending crisis, that lead to a significant decline in the value of a particular security or group of securities, such as our financial sector holdings, and impairment of the asset(s)
  • Prolonged low interest rate environment or other factors that limit the company's ability to generate growth in investment income or interest- rate fluctuations that result in declining values of fixed-maturity investments
  • Delays or inadequacies in the development, implementation, performance and benefits of technology projects and enhancements
  • Ability to obtain adequate reinsurance on acceptable terms, amount of reinsurance purchased, financial strength of reinsurers and the potential for non-payment or delay in payment by reinsurers
  • Increased competition that could result in a significant reduction in the company's premium growth rate
  • Underwriting and pricing methods adopted by competitors that could allow them to identify and flexibly price risks, which could decrease our competitive advantages
  • Personal lines pricing and loss trends that lead management to conclude that this segment could not attain sustainable profitability, which could prevent the capitalization of policy acquisition costs
  • Actions of insurance departments, state attorneys general or other regulatory agencies that:
  • Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business
  • Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations
  • Increase our expenses
  • Add assessments for guaranty funds, other insurance related assessments or mandatory reinsurance arrangements; or that impair our ability to recover such assessments through future surcharges or other rate changes
  • Limit our ability to set fair, adequate and reasonable rates
  • Place us at a disadvantage in the marketplace or
  • Restrict our ability to execute our business model, including the way we compensate agents
  • Adverse outcomes from litigation or administrative proceedings
  • Investment activities or market value fluctuations that trigger restrictions applicable to the parent company under the Investment Company Act of 1940
  • Events, such as an epidemic, natural catastrophe, terrorism or construction delays, that could hamper our ability to assemble our workforce at our headquarters location

Further, the company's insurance businesses are subject to the effects of changing social, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. The company also is subject to public and regulatory initiatives that can affect the market value for its common stock, such as recent measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.



                     Cincinnati Financial Corporation
                      Consolidated Balance Sheets

    (Dollars in millions except per share data)    December 31, December 31,
                                                          2007         2006
                                                      (unaudited)
    ASSETS
      Investments
        Fixed maturities, at fair value (amortized
         cost: 2007-$5,783; 2006-$5,739)                   $5,848     $5,805
        (includes securities pledged to creditors
        of $745 at December 31, 2007)
        Equity securities, at fair value (cost:
         2007-$2,975; 2006-$2,621)                          6,249      7,799
        Short-term investments, at fair value
         (amortized cost: 2007-$101; 2006-$95)                101         95
        Other invested assets                                  63         60
             Total investments                             12,261     13,759

      Cash and cash equivalents                               226        202
      Securities lending collateral invested                  760          0
      Investment income receivable                            124        121
      Finance receivable                                       92        108
      Premiums receivable                                   1,107      1,128
      Reinsurance receivable                                  754        683
      Prepaid reinsurance premiums                             13         13
      Deferred policy acquisition costs                       461        453
      Land, building and equipment, net, for company
       use (accumulated depreciation:
       2007-$276; 2006-$261)                                  239        193
      Other assets                                             72         58
      Separate accounts                                       528        504
         Total assets                                  $   16,637 $   17,222

    LIABILITIES
      Insurance reserves
        Loss and loss expense reserves                 $    3,967 $    3,896
        Life policy reserves                                1,478      1,409
      Unearned premiums                                     1,564      1,579
      Securities lending payable                              760          0
      Other liabilities                                       574        533
      Deferred income tax                                     977      1,653
      Note payable                                             69         49
      6.125% senior notes due 2034                            371        371
      6.9% senior debentures due 2028                          28         28
      6.92% senior debentures due 2028                        392        392
      Separate accounts                                       528        504
        Total liabilities                                  10,708     10,414

    SHAREHOLDERS' EQUITY
      Common stock, par value-$2 per share;
       (authorized: 2007-500 million shares,
       2006-500 million shares; issued:
       2007-196 million shares,
       2006-196 million shares)                               393        391
      Paid-in capital                                       1,049      1,015
      Retained earnings                                     3,404      2,786
      Accumulated other comprehensive income                2,151      3,379
      Treasury stock at cost (2007-30 million shares,
       2006-23 million shares)                             (1,068)      (763)
         Total shareholders' equity                         5,929      6,808
         Total liabilities and shareholders'
          equity                                       $   16,637 $   17,222



                     Cincinnati Financial Corporation
                     Consolidated Statements of Income

    (In millions except             Three months ended   Twelve months ended
     per share data)                   December 31,         December 31,
                                       2007      2006       2007      2006
                                   (unaudited)          (unaudited)
    REVENUES
      Earned premiums
        Property casualty        $      777  $    802 $    3,125  $  3,163
        Life                             32        29        125       107
      Investment income, net of
       expenses                         157       145        608       570
      Realized investment gains
       and losses                        12        12        382       684
      Other income                        5         4         19        18
        Total revenues                  983       992      4,259     4,542

    BENEFITS AND EXPENSES
      Insurance losses and
       policyholder benefits            430       532      1,963     2,128
      Commissions                       164       150        624       622
      Other operating expenses           96       100        362       354
      Taxes, licenses and fees           18        19         75        77
      Increase in deferred policy
       acquisition costs                  8         5         (9)      (21)
      Interest expense                   13        14         52        53
        Total benefits and
         expenses                       729       820      3,067     3,213

    INCOME BEFORE INCOME TAXES          254       172      1,192     1,329

    PROVISION (BENEFIT) FOR
     INCOME TAXES
      Current                            71        41        336       404
      Deferred                           (4)        1          1        (5)
        Total provision for
         income taxes                    67        42        337       399

    NET INCOME                   $      187  $    130 $      855  $    930

    PER COMMON SHARE
      Net income-basic           $     1.12  $   0.75 $     5.01  $   5.36
      Net income-diluted         $     1.11  $   0.75 $     4.97  $   5.30



Cincinnati Financial Corporation offers property and casualty insurance, our main business, through our three standard market companies, The Cincinnati Insurance Company, The Cincinnati Indemnity Company and The Cincinnati Casualty Company. The Cincinnati Specialty Underwriters Insurance Company provides excess and surplus lines property and casualty insurance. The Cincinnati Life Insurance Company markets life and disability income insurance and annuities. CSU Producer Resources Inc., is our excess and surplus lines brokerage, serving the same local independent agencies that offer our standard market policies. CFC Investment Company offers commercial leasing and financing services. CinFin Capital Management Company provides asset management services to institutions, corporations and individuals. For additional information about the company, please visit www.cinfin.com.

    Mailing Address:                    Street Address:
    P.O. Box 145496                     6200 South Gilmore Road
    Cincinnati, Ohio 45250-5496         Fairfield, Ohio 45014-5141



                   Definitions of Non-GAAP Information and
                  Reconciliation to Comparable GAAP Measures

(See attached tables for 2007 and 2006 data; prior-period reconciliations available at www.cinfin.com/investors .)

Cincinnati Financial Corporation prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Statutory data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners' (NAIC) Accounting Practices and Procedures Manual and therefore is not reconciled to GAAP data.

Management uses certain non-GAAP and non-statutory financial measures to evaluate its primary business areas - property casualty insurance, life insurance and investments - when analyzing both GAAP and certain non-GAAP measures may improve understanding of trends in the underlying business, helping avoid incorrect or misleading assumptions and conclusions about the success or failure of company strategies. Management adjustments to GAAP measures generally: apply to non-recurring events that are unrelated to business performance and distort short-term results; involve values that fluctuate based on events outside of management's control; or relate to accounting refinements that affect comparability between periods, creating a need to analyze data on the same basis.

  • Operating income: Operating income is calculated by excluding net realized investment gains and losses (defined as realized investment gains and losses after applicable federal and state income taxes) from net income. Management evaluates operating income to measure the success of pricing, rate and underwriting strategies. While realized investment gains (or losses) are integral to the company's insurance operations over the long term, the determination to realize investment gains or losses in any period may be subject to management's discretion and is independent of the insurance underwriting process. Also, under applicable GAAP accounting requirements, gains and losses can be recognized from certain changes in market values of securities without actual realization. Management believes that the level of realized investment gains or losses for any particular period, while it may be material, may not fully indicate the performance of ongoing underlying business operations in that period. For these reasons, many investors and shareholders consider operating income to be one of the more meaningful measures for evaluating insurance company performance. Equity analysts who report on the insurance industry and the company generally focus on this metric in their analyses. The company presents operating income so that all investors have what management believes to be a useful supplement to GAAP information.
  • Statutory accounting rules: For public reporting, insurance companies prepare financial statements in accordance with GAAP. However, insurers also must calculate certain data according to statutory accounting rules as defined in the NAIC's Accounting Practices and Procedures Manual, which may be, and has been, modified by various state insurance departments. Statutory data is publicly available, and various organizations use it to calculate aggregate industry data, study industry trends and compare insurance companies.
  • Written premium: Under statutory accounting rules, property casualty written premium is the amount recorded for policies issued and recognized on an annualized basis at the effective date of the policy. Management analyzes trends in written premium to assess business efforts. Earned premium, used in both statutory and GAAP accounting, is calculated ratably over the policy term. The difference between written and earned premium is unearned premium.
  • Written premium adjustment - statutory basis only: In 2002, the company refined its estimation process for matching property casualty written premiums to policy effective dates, which added $117 million to 2002 written premiums. To better assess ongoing business trends, management may exclude this adjustment when analyzing trends in written premiums and statutory ratios that make use of written premiums.
  • 
    
    
                             Cincinnati Financial Corporation
                           Quarterly Net Income Reconciliation
    
        (In millions except per share data)             Three months ended
                                               12/31/07  9/30/07  6/30/07  3/31/07
    
           Net income                             $187     $124     $351     $194
           Net realized investment gains
            and losses                               8       10      187       41
           Operating income                        179      114      164      153
           Less catastrophe losses                   1       (9)      (7)      (2)
           Operating income before
            catastrophe losses                    $178     $123     $171     $155
    
        Diluted per share data
           Net income                            $1.11    $0.72    $2.02    $1.11
           Net realized investment gains
            and losses                            0.04     0.06     1.08     0.23
           Operating income                       1.07     0.66     0.94     0.88
           Less catastrophe losses                0.01    (0.05)   (0.04)   (0.01)
           Operating income before
            catastrophe losses                   $1.06    $0.71    $0.98    $0.89
    
    
                                                        Three months ended
                                               12/31/06  9/30/06  6/30/06  3/31/06
    
           Net income                             $130     $115     $132     $552
           Net realized investment gains
            and losses                               8        -        6      421
           Operating income                        122      115      126      131
           Less catastrophe losses                 (29)     (18)     (41)     (26)
           Operating income before
            catastrophe losses                    $151     $133     $167     $157
    
        Diluted per share data
           Net income                            $0.75    $0.66    $0.76    $3.13
           Net realized investment gains
            and losses                            0.05      -       0.04     2.39
           Operating income                       0.70     0.66     0.72     0.74
           Less catastrophe losses               (0.16)   (0.10)   (0.24)   (0.14)
           Operating income before
            catastrophe losses                   $0.86    $0.76    $0.96    $0.88
    
    
                                   Six                 Nine           Twelve
                               months ended        months ended    months ended
                             6/30/07  6/30/06  9/30/07  9/30/06 12/31/07 12/31/06
    
           Net income           $545     $684     $669     $800     $855     $930
           Net realized
            investment gains
            and losses           228      426      238      427      245      434
           Operating income      317      258      431      373      610      496
           Less catastrophe
            losses                (9)     (67)     (18)     (85)     (17)    (113)
           Operating income
            before catastrophe
            losses              $326     $325     $449     $458     $627     $609
    
        Diluted per
         share data
           Net income          $3.13    $3.90    $3.86    $4.56    $4.97    $5.30
           Net realized
            investment gains
            and losses          1.31     2.43     1.37     2.43     1.43     2.48
           Operating income     1.82     1.47     2.49     2.13     3.54     2.82
           Less catastrophe
            losses             (0.05)   (0.38)   (0.10)   (0.48)   (0.10)   (0.65)
           Operating income
            before catastrophe
            losses             $1.87    $1.85    $2.59    $2.61    $3.64    $3.47
    
        Dollar amounts shown are rounded to millions; certain amounts may not add
        due to rounding. Ratios are calculated based on whole dollar amounts. The
        sum of quarterly amounts may not equal the full year as each is computed
        independently.
    
    
    
                               Cincinnati Insurance Group
                     Quarterly Property Casualty Data - Consolidated
    
    
        (Dollars in millions)                        Three months ended
                                             12/31/07  9/30/07  6/30/07  3/31/07
        Premiums
           Adjusted written premiums
            (statutory)                          $749     $779     $808     $811
           Written premium adjustment -
            statutory only                        (25)     (43)       2       35
           Reported written premiums
            (statutory)*                         $724     $736     $810     $846
           Unearned premiums change                53       41      (23)     (61)
           Earned premiums                       $777     $777     $787     $785
    
        Statutory combined ratio
           Statutory combined ratio              87.8%    98.7%    87.7%    87.7%
           Less catastrophe losses               (0.3)     1.7      1.4      0.4
           Statutory combined ratio
            excluding catastrophe losses         88.1%    97.0%    86.3%    87.3%
    
           Commission expense ratio              23.1%    18.1%    18.1%    18.0%
           Other expense ratio                   13.9     13.2     11.7     11.4
           Statutory expense ratio               37.0%    31.3%    29.8%    29.4%
    
        GAAP combined ratio
           GAAP combined ratio                   85.6%    97.3%    88.6%    89.6%
    
    
    
                               Cincinnati Insurance Group
                     Quarterly Property Casualty Data - Consolidated
    
    
        (Dollars in millions)                         Three months ended
                                             12/31/06  9/30/06  6/30/06  3/31/06
        Premiums
           Adjusted written premiums
            (statutory)                          $785     $787     $804     $796
           Written premium adjustment -
            statutory only                        (30)      (7)      10       33
           Reported written premiums
            (statutory)*                         $755     $780     $814     $829
           Unearned premiums change                47       11      (21)     (51)
           Earned premiums                       $802     $791     $793     $778
    
        Statutory combined ratio
           Statutory combined ratio              95.9%    96.4%    93.7%    89.6%
           Less catastrophe losses                5.5      3.5      8.0      5.0
           Statutory combined ratio
            excluding catastrophe losses         90.4%    92.9%    85.7%    84.6%
    
           Commission expense ratio              19.9%    19.3%    17.6%    18.2%
           Other expense ratio                   13.4     11.9     10.8     10.8
           Statutory expense ratio               33.3%    31.2%    28.4%    29.0%
    
        GAAP combined ratio
           GAAP combined ratio                   94.5%    96.1%    94.5%    92.0%
    
    
    
                               Cincinnati Insurance Group
                     Quarterly Property Casualty Data - Consolidated
    
    
        (Dollars in millions)                Six months ended   Nine months ended
                                            6/30/07   6/30/06   9/30/07   9/30/06
        Premiums
           Adjusted written premiums
            (statutory)                       $1,619   $1,600     $2,398   $2,387
           Written premium adjustment -
            statutory only                        37       43         (6)      36
           Reported written premiums
            (statutory)*                      $1,656   $1,643     $2,392   $2,423
           Unearned premiums change              (85)     (72)       (44)     (61)
           Earned premiums                    $1,571   $1,571     $2,348   $2,362
    
        Statutory combined ratio
           Statutory combined ratio             87.7%    91.7%      91.3%    93.2%
           Less catastrophe losses               0.9      6.5        1.2      5.5
           Statutory combined ratio
            excluding catastrophe losses        86.8%    85.2%      90.1%    87.7%
    
           Commission expense ratio             18.0%    17.9%      18.0%    18.3%
           Other expense ratio                  11.6     10.8       12.1     11.2
           Statutory expense ratio              29.6%    28.7%      30.1%    29.5%
    
        GAAP combined ratio
           GAAP combined ratio                  89.1%    93.3%      91.8%    94.2%
    
    
    
                               Cincinnati Insurance Group
                     Quarterly Property Casualty Data - Consolidated
    
    
        (Dollars in millions)                              Twelve months ended
                                                        12/31/07          12/31/06
        Premiums
           Adjusted written premiums
            (statutory)                                  $3,149           $3,172
           Written premium adjustment -
            statutory only                                  (32)               6
           Reported written premiums
            (statutory)*                                 $3,117           $3,178
           Unearned premiums change                           8              (14)
           Earned premiums                               $3,125           $3,164
    
        Statutory combined ratio
           Statutory combined ratio                        90.3%            93.9%
           Less catastrophe losses                          0.8              5.5
           Statutory combined ratio
            excluding catastrophe losses                   89.5%            88.4%
    
           Commission expense ratio                        19.2%            18.7%
           Other expense ratio                             12.5             11.7
           Statutory expense ratio                         31.7%            30.4%
    
        GAAP combined ratio
           GAAP combined ratio                             90.3%            94.3%
    
    
         * Dollar amounts shown are rounded to millions; certain amounts may not
           add due to rounding. Ratios are calculated based on whole dollar
           amounts. The sum of quarterly amounts may not equal the full year as
           each is computed independently.
    
         * nm - Not meaningful
    
         * Statutory data prepared in accordance with statutory accounting rules
           as defined by the National Association of Insurance Commissioners and
           filed with the appropriate regulatory bodies.
    
    
    
                                Cincinnati Insurance Group
                   Quarterly Property Casualty Data - Commercial Lines
    
        (Dollars in millions)                         Three months ended
                                             12/31/07  9/30/07  6/30/07  3/31/07
        Premiums
           Adjusted written premiums
            (statutory)                          $586     $587     $611     $658
           Written premium adjustment --
            statutory only                        (24)     (43)       2       35
           Reported written premiums
            (statutory)*                         $562     $544     $613     $693
           Unearned premiums change                39       56       (6)     (89)
           Earned premiums                       $601     $600     $607     $604
    
        Statutory combined ratio
           Statutory combined ratio              89.7%    97.3%    84.4%    86.5%
           Less catastrophe losses                 -       0.2      0.8      1.8
           Statutory combined ratio
            excluding catastrophe losses         89.7%    97.1%    83.6%    84.7%
    
        GAAP combined ratio
           GAAP combined ratio                   87.3%    95.4%    85.2%    88.9%
    
    
    
                                Cincinnati Insurance Group
                   Quarterly Property Casualty Data - Commercial Lines
    
    
        (Dollars in millions)                        Three months ended
                                             12/31/06  9/30/06  6/30/06  3/31/06
        Premiums
           Adjusted written premiums
            (statutory)                          $618     $589     $593     $635
           Written premium adjustment --
            statutory only                        (29)      (7)      10       33
           Reported written premiums
            (statutory)*                         $589     $582     $603     $668
           Unearned premiums change                30       20       (4)     (86)
           Earned premiums                       $619     $602     $599     $582
    
        Statutory combined ratio
           Statutory combined ratio              92.4%    94.1%    89.6%    87.5%
           Less catastrophe losses                1.9      2.3      5.6      5.1
           Statutory combined ratio
            excluding catastrophe losses         90.5%    91.8%    84.0%    82.4%
    
        GAAP combined ratio
           GAAP combined ratio                   91.1%    93.4%    90.3%    90.5%
    
    
    
                                Cincinnati Insurance Group
                   Quarterly Property Casualty Data - Commercial Lines
    
    
        (Dollars in millions)               Six months ended   Nine months ended
                                            6/30/07   6/30/06   9/30/07   9/30/06
        Premiums
           Adjusted written premiums
            (statutory)                       $1,269   $1,228     $1,857   $1,817
           Written premium adjustment --
            statutory only                        37       43         (6)      36
           Reported written premiums
            (statutory)*                      $1,306   $1,271     $1,851   $1,853
           Unearned premiums change              (96)     (90)       (41)     (70)
           Earned premiums                    $1,210   $1,181     $1,810   $1,783
    
        Statutory combined ratio
           Statutory combined ratio             85.4%    88.6%      89.2%    90.3%
           Less catastrophe losses               1.3      5.3        0.9      4.3
           Statutory combined ratio
            excluding catastrophe losses        84.1%    83.3%      88.3%    86.0%
    
        GAAP combined ratio
           GAAP combined ratio                  87.0%    90.4%      89.8%    91.4%
    
    
    
                                Cincinnati Insurance Group
                   Quarterly Property Casualty Data - Commercial Lines
    
        (Dollars in millions)                            Twelve months ended
                                                      12/31/07           12/31/06
        Premiums
           Adjusted written premiums
            (statutory)                                  $2,444            $2,435
           Written premium adjustment --
            statutory only                                  (31)                7
           Reported written premiums
            (statutory)*                                 $2,413            $2,442
           Unearned premiums change                          (2)              (40)
           Earned premiums                               $2,411            $2,402
    
        Statutory combined ratio
           Statutory combined ratio                        89.2%             90.8%
           Less catastrophe losses                          0.6               3.7
           Statutory combined ratio
            excluding catastrophe losses                   88.6%             87.1%
    
        GAAP combined ratio
           GAAP combined ratio                             89.2%             91.3%
    
    
         * Dollar amounts shown are rounded to millions; certain amounts may not
           add due to rounding. Ratios are calculated based on whole dollar
           amounts. The sum of quarterly amounts may not equal the full year as
           each is computed independently.
    
         * nm - Not meaningful
    
         * Statutory data prepared in accordance with statutory accounting rules
           as defined by the National Association of Insurance Commissioners and
           filed with the appropriate regulatory bodies.
    
    
    
    
                               Cincinnati Insurance Group
                   Quarterly Property Casualty Data - Personal Lines
    
        (Dollars in millions)                         Three months ended
                                             12/31/07  9/30/07   6/30/07  3/31/07
        Premiums
           Adjusted written premiums
            (statutory)                          $163      $192     $197     $153
           Written premium adjustment --
            statutory only                         (1)        -        -        -
           Reported written premiums
            (statutory)*                         $162      $192     $197     $153
           Unearned premiums change                14       (15)     (17)      28
           Earned premiums                       $176      $177     $180     $181
    
        Statutory combined ratio
           Statutory combined ratio              81.4%    103.6%    98.6%    93.5%
           Less catastrophe losses               (1.0)      7.0      3.5     (4.1)
           Statutory combined ratio
            excluding catastrophe losses         82.4%     96.6%    95.1%    97.6%
    
        GAAP combined ratio
           GAAP combined ratio                   79.7%    103.8%    99.9%    92.0%
    
    
    
                               Cincinnati Insurance Group
                   Quarterly Property Casualty Data - Personal Lines
    
    
        (Dollars in millions)                         Three months ended
                                              12/31/06  9/30/06  6/30/06 3/31/06
        Premiums
           Adjusted written premiums
            (statutory)                          $167     $198     $211    $161
           Written premium adjustment --
            statutory only                         (1)       -        -       -
           Reported written premiums
            (statutory)*                         $166     $198     $211    $161
           Unearned premiums change                17       (9)     (17)     35
           Earned premiums                       $183     $189     $194    $196
    
        Statutory combined ratio
           Statutory combined ratio             107.7%   104.0%   106.4%   98.1%
           Less catastrophe losses               17.9      7.1     15.6     5.0
           Statutory combined ratio
            excluding catastrophe losses         89.8%    96.9%    90.8%   93.1%
    
        GAAP combined ratio
           GAAP combined ratio                  106.0%   104.4%   107.6%   96.4%
    
    
    
                               Cincinnati Insurance Group
                   Quarterly Property Casualty Data - Personal Lines
    
    
        (Dollars in millions)          Six            Nine           Twelve
                                   months ended   months ended     months ended
                                 6/30/07 6/30/06 9/30/07 9/30/06 12/31/07 12/31/06
        Premiums
           Adjusted written
            premiums (statutory)     $350    $372    $541    $570    $705    $737
           Written premium
            adjustment --
            statutory only              -       -       -       -      (1)     (1)
           Reported written
            premiums (statutory)*    $350    $372    $541    $570    $704    $736
           Unearned premiums
            change                     11      18      (3)      9      10      26
           Earned premiums           $361    $390    $538    $579    $714    $762
    
        Statutory combined ratio
           Statutory combined
            ratio                    95.8%  101.6%   98.3%  102.3%   94.1%  103.6%
           Less catastrophe losses   (0.3)   10.3     2.1     9.2     1.3    11.3
           Statutory combined
            ratio excluding
            catastrophe losses       96.1%   91.3%   96.2%   93.1%   92.8%   92.3%
    
        GAAP combined ratio
           GAAP combined ratio       96.0%  102.0%   98.6%  102.8%   93.9%  103.6%
    
    
         * Dollar amounts shown are rounded to millions; certain amounts may not
           add due to rounding. Ratios are calculated based on whole dollar
           amounts. The sum of quarterly amounts may not equal the full year as
           each is computed independently.
    
         * nm - Not meaningful
    
         * Statutory data prepared in accordance with statutory accounting rules
           as defined by the National Association of Insurance Commissioners and
           filed with the appropriate regulatory bodies.
    
    

    SOURCE Cincinnati Financial Corporation
    CONTACT:
    Investors, Heather J. Wietzel
    +1-513-870-2768
    CINF-IR@cinfin.com
    or Media, Joan O. Shevchik
    +1-513-603-5323
    Media_Inquiries@cinfin.com
    Web site: http://www.cinfin.com

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