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August 19, 2010

To Our Shareholders, Friends and Associates:

Two years have gone by since we assumed our new roles on Cincinnati Financial's executive team. Those two years turned out to be unlike any other period in the company's history, or for that matter, unlike anything experienced by the broader economy in a long time. We continue to feel some effects.

Over these two years, we have pushed diligently to make necessary changes and to pursue new opportunities, and we are grateful for the loyalty of our shareholders and the investment community, our agents, policyholders and associates. With your support, we have successfully managed our capital, in large part by diversifying our investment portfolio and stabilizing our investment income. New technology and other initiatives are helping to restore profitability of our homeowners and workers' compensation business, reducing future earnings volatility from catastrophe risk and improving pricing capabilities and tools. Excluding those two challenging lines of business, we have maintained overall underwriting profitability. And we have acted to drive premium growth by expanding our product offerings and operating territories, achieving strong new business and resuming premium growth in personal lines.

Our insurance operations already are seeing some benefits from these efforts, and we are confident that most of the benefits are yet to come. By changing incrementally, we seek to continue as a source of stability now and in the future for our appointed agencies and their clients. Our planning horizon is longer than the next earnings period or even the next two to three years that is often the focus of investment analysts.

Our strategy has been to maintain exceptional capital strength through all market cycles. Our level of capital is very strong. With this capital cushion, we can afford to focus on building for the long term, absorbing setbacks while continuing to be the predictable, reliable company you count on.

Solid reserves contribute to our financial strength. In 2009, we gave up some of our current earnings in order to strengthen our workers' compensation reserves - a decision that supported our record of consistent, sound reserving practices. While this decision added to our combined ratio, we believe it was the right choice. At this point in the insurance cycle, observers believe some insurers are not making such decisions and may incur charges later to restore reserve adequacy. To us, this is a matter of integrity; we do not knowingly borrow from future earnings.

We made many other capital management choices that increase balance sheet strength and financial flexibility. Among the most important, Cincinnati Financial maintains more than $1 billion of assets at the parent company level, more than enough to retire all of our corporate debt while preserving our insurance subsidiaries' very strong surplus and capacity for growth.

August 2, the anniversary of The Cincinnati Insurance Company's charter, marked the beginning of your company's 60th year. Perhaps more noteworthy, our first policy was written on January 25, 1951, and our anniversary recognitions will focus on that date.

With the issue of that first policy, the careful and diligent planning of our company's founders became reality. We are, in 2010, once again carefully and diligently planning for the future, moving into position by accomplishing initiatives related to agency and geographic expansion, technology, products, expense management and investments. We are looking forward to the real results and growth that we believe will flow from these efforts, creating value for shareholders, agents, policyholders and associates.

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

/S/ Steven J. Johnston Steven J. Johnston, FCAS, MAAA, CFA Senior Vice President and Chief Financial 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.

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