Please subscribe to CFC Reports on our e-Mail Alerts page to receive an e-mail notice that links you to our quarterly Letter to Shareholders. To speed delivery, reflect changing shareholder preferences and capture expense savings, we no longer print and mail this report to shareholders, except by request.

prev

 next
Executive Perspective
February 18, 2009

To Our Shareholders, Friends and Associates:

Challenges intensified in the fourth quarter of 2008 and early 2009. Every company – including Cincinnati Financial – is adapting accordingly. To arrive at sound business decisions that support long-term shareholder value, we diligently studied the numbers, modeled variables and measured potential impacts. In implementing those decisions, we also were guided by the conviction that, now and always, putting people first is good for business:

By offering multi-year terms on policies for businesses. We are willing to help qualified businesses stabilize their insurance budget at today’s low prices. We commit to keeping rates for selected coverages the same over a multi-year policy term. Agents use this distinct sales advantage to attract and retain accounts, finding that many businesses will pay slightly more for this stability.

By making decisions that are locally responsive. During the fourth quarter, we funded charitable grants made by each of our 1,100-plus agencies to their local organizations that help people in need. Replacing our planned 2009 President’s Club meeting for top-performing agencies, this funding recognized agencies for their good work under difficult market conditions. Our field associates who are present in agencies every day observed that many agents added their own funds to inspire an even stronger community response to neighbors in need.

By acting to preserve capital and policyholder surplus. To assure policyholder safety and our ability to be a stable market for our agents’ business, your company maintains low debt, excellent liquidity and now, a portfolio that is more diversified than ever before. In the fourth quarter and January, we further reduced financial sector exposure in our portfolio by completing the sale of our former largest common stock holding. Our diversifying actions improved the portfolio’s future ability to withstand unusual conditions like those of 2008, when stock market volatility took a significant toll and led A.M. Best to lower our ratings in December. At A+ (Superior), our property casualty group’s rating continues in the top category awarded to fewer than 11 percent of insurer groups, and Best has a Stable outlook on all of our ratings.

By sharply aligning resources to bring more efficiency and ease to our customers – the independent agents. We are cutting back on many expenses and channeling resources where we can achieve the best return. Without significant infrastructure expense, we are increasing our growth opportunities by expanding operations into new geographic areas. We have increased our technology investment and accelerated our deployment dates for systems that ultimately will improve cash flow and profitability for our agencies and company. Recognizing that future growth of our asset management business would require a substantial increase in resources, we announced in December that CinFin Capital Management Company will cease operations February 28. We are assisting clients for a smooth transition.

By maintaining your shareholder dividend. In January, the board declared a quarterly dividend of 39 cents per share, payable to you in April. Many other companies have stopped paying or reduced dividends as a capital management strategy. We know that many of you expect steadily increasing dividends, and for 48 consecutive years we have not disappointed. Our board takes a long-term view. After carefully reviewing our capital needs, resources and our initiatives to preserve capital and grow profitably, the board maintained the dividend and continued for discussion later in the year the potential for an increase in the 2009 dividend payout level.

We will continue to consider how our decisions and actions affect people, tackling problems by finding long-term, relationship-based solutions rather than short-term answers. Thank you for giving us that opportunity.

Respectfully,

/S/ John J. Schiff, Jr.

John J. Schiff, Jr., CPCU
Chairman of the Board
/S/ Kenneth W. Stecher

Kenneth W. Stecher
President and Chief Executive 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.