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Executive Perspective
May 27, 2008

To Our Shareholders, Friends and Associates:

The early months of 2008 brought rocky weather of all kinds to Cincinnati Financial and The Cincinnati Insurance Companies. Our policyholders were caught in severe storms, resulting in $43 million of catastrophe losses in the first quarter followed by additional events in April and May. This increased storm activity contrasted sharply with the atypically storm-free 2007.

It's no surprise that the timing and severity of storms is unpredictable. But we expect and plan for them. We make sure we have staff trained to respond to policyholders and financial resources to pay claims. Year after year, we maintain solid reinsurance agreements and policy reserves to add to our flexibility.

We're weathering other storms too.

The property casualty insurance underwriting cycle is at the stage called a soft market, with carriers aggressively competing by cutting prices. We expect and plan for soft markets by building up our underwriting strength, as well as agency and policyholder relationships. Our agents work with our underwriters to help us identify and retain the highest quality accounts with clear potential to be profitable over the long term. We continue to identify new ways to serve our agencies, appoint new agencies and take advantage of our automation to write business in new areas.

Nor can we claim to be totally surprised at the stormy financial markets, which currently are reducing our investment income growth rate and book value. The current storm is widespread and powerful, yet our premiums-to-surplus ratio remains a healthy 0.75 to 1, and we remain one of the few insurer groups with A.M. Best Co's highest rating, the A++ (Superior). We believe our total return investment philosophy, which encompasses selecting and holding securities that offer both current income and appreciation potential, will yet prove to be the most enduring shelter from this storm's worst damage.

You'll see the impact of all of these storms in our first-quarter results – and you'll also see that they did not cause us to change our outlook for full-year 2008. At our annual meeting of shareholders we discussed our belief that we can still achieve modest full-year property casualty profitability, total premiums as much as 5 percent lower than the 2007 level and growth in investment income.

Yes, it's been rocky weather to start 2008 with the confluence of higher storm claims, market competition and a difficult investment environment, and the rain continues to fall. We're going to focus on our proven strategies, deliberately conceived to produce a stronger company over the long term and to take us through all kinds of weather and economic cycles. Our goal remains to increase your return on your investment.

We believe better weather will return.

Sincerely,

/S/ John J. Schiff, Jr.

John J. Schiff, Jr., CPCU
Chairman and Chief Executive Officer
/S/ James E. Benoski

James E. Benoski
Vice Chairman, President, Chief Operating Officer, and Chief Insurance Officer


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.