• Comments on A.M. Best rating and CinFin Capital status

Cincinnati, December 22, 2008 — Cincinnati Financial Corporation (Nasdaq: CINF) announced that on December 19, 2008, its lead property casualty insurance subsidiary, The Cincinnati Insurance Company, appointed Watkins Insurance Group, with locations in Austin and Marble Falls, Texas, as the first independent agency in that state to market its policies. Cincinnati Insurance executives initiated the relationship at the company's headquarters, welcoming agency representatives Patrick Watkins, CIC, CRM, president, and Mike Mosley, CIC, vice president.

Kenneth W. Stecher, president and chief executive officer, said, "With a healthy premium-to-surplus ratio that is less than 0.9-to-1, our capacity and desire to grow remain very strong. Agents in our current and future states tell us they are eager to bring their commercial clients Cincinnati's industry-leading claims service, broad coverages, highly competitive multi-year policies and solid financial strength. With our entry into Texas, Cincinnati Insurance will be actively marketing its policies in 35 states, expanding our opportunities and geographical footprint in the west where we opened New Mexico and Washington in 2007, Utah in 2000, Idaho in 1999 and Montana in 1998. After our Texas operation is underway, we will look next at appointing agencies in Colorado and Wyoming."

Local Staff to Provide Service and Marketplace Advantages
J. F. Scherer, executive vice president, commented, "The company expects to appoint five more agencies in Austin, Dallas and Waco over the coming weeks and add at least 10 more in 2009, with our first Texas policies effective January 1, 2009. The interior areas of the state selected for activation have a population of approximately 7.7 million.

"As we build our relationships and grow with Texas agents over the coming years, we will increase our premium revenues while also further spreading our risk beyond the Midwest and Southeast states that have traditionally accounted for the bulk of our business. To provide Texas agents with local support, our experienced marketing representatives Sean Givler, CIC, and Shawn Murphy, CPCU, already have relocated to Austin and Dallas. As our business builds, we will supplement this local presence, adding another marketing representative to serve the Dallas/Fort Worth market and field associates to provide claims, loss control, premium audit and other services in the region.

"Over the next two years, we would expect to appoint a total of 30 agencies in Texas. In recent years, agencies newly appointed by Cincinnati have averaged total property casualty premium volume in the $25 million to $30 million range. Cincinnati typically works to earn a share of that business of approximately 5 percent within the first five years and 10 percent in the first 10 years of a new relationship," Scherer stated.

A.M. Best's A+ (Superior) Rating with Stable Outlook to Differentiate Cincinnati
Stecher added, "Today, A.M. Best Co. acknowledged the effect of economic and market disruptions on the value of investments in our portfolio and the associated reduction in future dividend income. They have lowered our property casualty group's insurer financial strength rating to A+ (Superior) from A++ (Superior). Our life insurance rating now is A (Excellent) and our excess and surplus lines rating is affirmed at A (Excellent).

"In conjunction with the rating changes, A.M. Best improved its outlook on all of the ratings to Stable. Best noted our continued exposure to the vagaries of the capital markets but observed that the stable outlook on all ratings for Cincinnati reflected our enhanced risk management processes, sound liquidity, superior risk-adjusted capitalization for our operating entities and successful business profile within our targeted regional markets."

Stecher added, "Our property casualty group's rating compares favorably with those of many of our peers — only approximately 11 percent of U.S. property casualty insurer groups qualify for Superior ratings (A++ or A+). In fact, we're honored to be among the fewer than 35 insurer groups that have held ratings in the Superior category for 50 or more consecutive years.

"Agents understand the importance, especially in times like these, of choosing an insurer that backs its policies with healthy financial resources. Our property casualty operations are capitalized at levels higher than those historically associated with a company rated A++ by A.M. Best. We continue to emphasize capital preservation and liquidity, and we have developed new investment guidelines that focus on diversification and reduce concentrations.

"Since mid-summer, we have been rebalancing our investment portfolio to reflect newly adopted investment parameters in an effort to reduce volatility going forward. Through mid-December, we've reduced our financial sector holdings to less than 19 percent of our equity portfolio, near the Standard & Poor's 500 weighting and down from 56.2 percent at year-end 2007. Among other changes, we have reduced our Fifth Third Bancorp holding to approximately 14.5 million shares from 72.8 million a little over a year ago. The ratio of our property casualty subsidiaries' common stock holdings to statutory surplus now is near 50 percent.

Stecher noted, "As a result, despite economic and market disruptions that have led to unprecedented declines in market values, our equity portfolio has outperformed broader indices since September 30, 2008. As of November 30, we estimate our statutory risk-based capital ratio was in the range of 775 percent to 800 percent, comparing favorably with 810 percent at year-end 2007. As of December 15, we had approximately $9.5 billion in cash and invested assets, including $2.8 billion of common stock holdings, compared with $10.5 billion, including $3.9 billion of common stock holdings, at September 30, 2008."

Stecher added, "Additionally, our parent company, Cincinnati Financial, has a low level of debt compared with our total capital and more than $1 billion of assets that add flexibility to the insurance subsidiaries. Our $795 million of long-term debt isn't due until 2028 and 2032 and we have only $49 million in short-term borrowings on a $75 million line of credit. In addition, we currently have approximately $700 million in cash and a second, untapped line of credit with availability of $150 million."

CinFin Capital Management Company to Cease Operations as Focus Sharpens on Insurance
Stecher continued, "Our asset management services subsidiary, CinFin Capital Management Company, advised clients early this month that it would close on February 28, 2009. During the recent downturn, this business performed satisfactorily relative to the appropriate benchmarks, and it was profitable over its 10 years in operation. We determined that sufficient future growth through agency referrals or other routes would have required a substantial increase in resources even as we are ramping up insurance initiatives. Many of our agencies did not see referrals for its services within the scope of their offerings to their clients."

Consistency Drives Marketplace and Dividend Performance
Stecher concluded, "We remain comfortable with the expectations for 2008 financial performance we discussed in our third-quarter earnings release on October 29. We expect that economic conditions and insurance price competition will continue to pressure industry results, and our results, in 2009. As we have always done, we will manage with an eye toward long-term growth, building relationships with agents and policyholders who look to us for quality, service and stability. We have the capital strength and confidence to invest in increasing our advantages in the insurance marketplace. Our reserving practices have historically produced redundancies, with claims liabilities covered by a highly-rated, diversified bond portfolio.

"Our organization operates strategically — creating value for our agents, policyholders and shareholders — by focusing most directly on our insurance operations. Our insurance initiatives include heightened activity in new states, our selective appointment of new agency representation, our new excess and surplus lines company and our technology initiatives that increase efficiency. We succeed by helping independent insurance agencies do an exceptional job of serving the people and businesses in their local communities.

"That's the bright line test for all of our business decisions, and it's a test that keeps us focused and moving in the right direction to create value over time. Going forward, we'll continue that steady approach, reaffirming that we have the resources and commitment to consistently differentiate ourselves to agents and policyholders, consistently achieve growth and consistently pay shareholder dividends."