2011 Second-Quarter Letter to Shareholders
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Cincinnati Financial Corporation Announces Preliminary Loss Estimate for May Storms

Cincinnati, June 13, 2011 - Cincinnati Financial Corporation (Nasdaq: CINF) today announced that The Cincinnati Insurance Companies’ property casualty group expects its second-quarter results to include pre-tax catastrophe losses, net of reinsurance, of approximately $240 million to $290 million incurred due to severe weather during the entire months of April and May. This total includes the company’s previously announced catastrophe loss estimate for April storms, which has now been updated to approximately $155 million to $190 million, net of reinsurance. Catastrophe losses affect property casualty insurance underwriting income, one of the sources of consolidated net income along with profits from investment operations and life insurance operations.

Steven J. Johnston, president and chief executive officer, commented, “Much of the United States continued to see a higher than usual level of spring storm activity, raising our catastrophe losses well above our historical second-quarter average. The same storm system that caused the tragic tornado in Joplin, Missouri extended to Dayton, Ohio where hail damaged property of more than 5,000 policyholders. Our representatives working with affected families and businesses are promptly providing professional assistance. We are confident that their dedication will create long-term customer loyalty and appreciation for our agencies and our company.

“Over the past 10 years, the impact of catastrophes on our second-quarter loss ratio has averaged 8.5 percentage points compared with a full-year average of 4.4 points. The estimated impact of April plus May 2011 catastrophe losses on our second-quarter loss ratio would be approximately 33 to 40 percentage points, net of reinsurance and based on estimated earned premiums for the full second quarter. The mix of total April and May net catastrophe losses was split between commercial lines and personal lines, at approximately 50 percent each, roughly in line with our 10-year annual average.

“Our reinsurance program provided coverage for our losses above $45 million from a single catastrophe event. Policyholder losses exceeded that level for both the May tornado and hail event and the late April tornado event. Accordingly, we expect to recover significant amounts from our reinsurers. Reinsurance premiums we will pay to reinstate applicable coverage for the April and May events are expected to reduce our second-quarter 2011 earned premiums by approximately $33 million to $40 million, including the previously reported $26 million estimated after the April tornado event.

“For the remainder of 2011, we continue to have reinsurance coverage for any single catastrophe event that causes losses above $200 million up to $500 million, with one automatic reinstatement provision. While we may not again buy coverage for 2011 single-event catastrophe losses between $45 million and $105 million, we are studying options and we expect to replenish coverage we partially tapped for single-event losses above $105 million and up to $200 million. Our reinsurance relationships have served us well in 2011, and we are pleased to continue our coverage with highly rated reinsurers.

“With our solid reinsurance program and strong capital complementing ample recent-period net cash flow from operations, we have financial flexibility to pay catastrophe claims without liquidating any investments. We continue to earn a larger share of business from agents appointed in recent years in several states less prone to catastrophe losses. Over the long term, a result of that gradual geographic diversification should be reduced variability in our future catastrophe loss ratio.”

This report contains forward-looking statements that involve potential risks and uncertainties. For factors that could cause results to differ materially from those discussed, please see the most recent edition of our safe harbor statement under the Private Securities Litigation Reform Act of 1995. To view or print the edition in effect as of this report's initial publication date, please view this document as a printable PDF.