Kenneth W. Stecher, president and chief executive officer, commented, “The 2009 second quarter brought an unwelcome repeat of recent trends for our property casualty insurance operations. Our underwriting loss primarily was driven by very high catastrophe losses, less favorable development on claims for prior accident years and a prolonged period of soft pricing and economic weakness that has reduced premium revenues for our company and our industry. Interest and dividend income from investments and steady profits from life insurance operations offset some of the property casualty underwriting loss.

“At June 30, 2009, unrealized gains in our stock and bond portfolio significantly exceeded the March 31 level. This increase offset the effects of the second-quarter underwriting loss on book value per share, which rose by $1.61 during the quarter. As a result, the value creation ratio we use to measure our success trended positively, reaching 8.4 percent for the second quarter and 2.0 percent for the six months. Looking past 2009 to the 2010-2014 period, we continue to target a five-year value creation ratio of 12 percent to 15 percent, comprised of the total of our rate of growth in book value per share plus the rate of dividend contribution per share.

“We continue to focus on actions to build our company’s long-term competitive advantages, financial strength and stability through all market cycles. Some of those actions, such as the diversification of our investment portfolio that has been achieved over the past year, set income back for the short term but improved our position going forward. We rebalanced our portfolio with a smaller equity component in order to preserve capital and increase stability. After adjusting prior periods to reflect current accounting standards for impaired securities, we expect to again see favorable trend comparisons for investment income by the end of this year’s second half. At that point, we anticipate interest from bonds will increase to a level that offsets lower dividends from our stock holdings.

“We believe that the quality of an insurer’s balance sheets hinges on its reserving practices,” Stecher noted. “Consistent reserving practices are essential during soft markets. As losses develop over the years after they occur, our reserves have proven more than adequate and allowed us to release favorable development from prior-year loss reserves into current earnings. In the current quarter and first half, the benefit from this savings was less than in the year-ago period because we slightly increased our inflation assumption for workers’ compensation reserves going back 20 or more years. Our reserves for open workers’ compensation claims total nearly $1 billion, so even small changes in inflation assumptions translate into significant quarterly income effects.

“The unique strength of our relationship with our agents remains a key competitive advantage, and we remain confident that it will lead to profitable growth as insurance markets improve. Our strong capital position provides plenty of capacity for that growth along with financial flexibility.”

Stecher said, “We expect to see improvement in our underperforming workers’ compensation and homeowner lines of business as we apply predictive modeling techniques to improve pricing accuracy. We are on target to begin using our workers’ compensation predictive modeling tool throughout our operating territory during the second half of 2009 to assist our underwriting staff with improved risk selection and pricing capabilities. We recently refined our homeowner predictive modeling and continue to improve pricing sophistication for individual risks. Rate increases are also being implemented for states representing approximately 80 percent of our personal lines business.

“Frequent catastrophe events continue to weigh on our results, particularly for the homeowner line. In addition to the three significant events during the second quarter for which we reported a preliminary catastrophe loss estimate on July 13, we identified smaller impacts from several events classified as catastrophes by Property Claims Services, an industry group that declares catastrophes when a single incident or a series of closely related incidents causes severe insured property losses totaling more than $25 million. Our second quarter 2009 total incurred losses from catastrophes were $118 million compared with $113 million for the same quarter in 2008.

“These amounts in both periods were well above our historical norm for catastrophe losses. We are addressing catastrophe risk through several initiatives, including ongoing efforts to control our hurricane exposure. Additionally, we have made progress with geographic diversification, expanding our personal lines operations over the past 18 months into seven states less prone to catastrophe events. Through the first six months of 2009, agencies in these states already have contributed more than $5 million of new business, approximately 15 percent of total new personal lines business. While it will take time to see meaningful earnings effects from geographic diversification, it is an important part of our enterprise risk management program.”

Stecher continued, “Although new property casualty business written for the second quarter of 2009 exceeded the 2008 level by 6.9 percent, due primarily to our surplus lines operation, total net written premiums declined 8.5 percent. These trends reflect pricing pressure as well as reduced premiums based on insured exposures that are highly sensitive to economic cycles, such as business sales or payrolls. Premiums on commercial accounts we choose to renew continue to reflect pricing declines at a low-single-digit rate, on average. We choose not to renew accounts that would require price decreases out of proportion to the quality of the individual risk.

“Rather than compete for business that appears to be underpriced, we are focusing on expanding our agency plant, geographical territory and lines of business. During the second quarter, we appointed our first Colorado agency, and we expect to announce our first agency relationship in Wyoming soon. We also recently added a third marketing territory in Texas, a state where we began actively marketing in 2008, and generated $3 million in direct written premiums for the first half of 2009. Typically, new agencies give us opportunities to underwrite accounts they formerly placed with another carrier, bringing us the advantage of risk characteristics and loss histories that are well-known to our agent.

“Agents also have responded enthusiastically to the surplus lines offerings of The Cincinnati Specialty Underwriters Insurance Company, now in its second year of operation. Of the $29 million increase in new, consolidated property casualty business written in the first six months, $12 million was surplus lines premium. Our ability to handle surplus lines risk through this company also increases our opportunities to write standard business for the same accounts through The Cincinnati Insurance Company.

“Our life insurance operation similarly provides opportunities to cross-sell life insurance products to clients of the independent agencies that sell Cincinnati’s property casualty insurance policies. We continue to enhance this portfolio of products and later this year plan to offer a new secondary guarantee universal life product, a new return of premium term life series and also a worksite return of premium 20-year term life product.

“We are on the verge of introducing our new commercial lines policy administration system, which we expect to drive future premium growth. A group of our associates are using it now to produce commercial package and commercial auto policies for Ohio and Indiana agencies they serve. In October, agents will receive the system and will gain direct bill capability. Further, our improved personal lines administration system is on track for early 2010 delivery to agents.

“In summary, our second quarter results were a disappointment but not a surprise, and we see few signs of a better environment for the remainder of 2009. Looking to the future, we strengthened our competitive and financial position during the second quarter by continuing to improve our portfolio and risk management, build our agency relationships, expand our independent agency force and advance our technology.”

Stecher concluded, “Our property casualty insurance group was named in July to the Ward’s 50 list of insurers that excel at balancing financial strength with superior performance over a five-year period. Our group is one of only five insurers named to the Ward’s 50 every year since inception of the list 19 years ago. With support from our loyal shareholders, agents, policyholders and associates, we will continue making progress and building value that endures over time.”

Additional information is available on our Web site, www.cinfin.com/investors, including an audio replay of the July 30^th conference call webcast.