Cincinnati Financial Reports First-Quarter 2011 Results

CINCINNATI, April 27, 2011 /PRNewswire/ — Cincinnati Financial Corporation today reported:

— First-quarter 2011 net income of $62 million, or 38 cents per share,

compared with $68 million, or 42 cents per share, in 2010.

— Operating income* of $55 million, or 33 cents per share, compared with

$63 million, or 39 cents per share.

— $6 million decrease in first-quarter 2011 net income was driven by a $7

million after-tax decrease in the contribution from property casualty

underwriting operations. The after-tax effect of property casualty

catastrophe losses, mostly weather-related, was $17 million higher in

the first quarter of 2011 compared with the same period of 2010.

— $31.40 book value per share at March 31, 2011, up 2 percent from

December 31, 2010.

— 2.9 percent value creation ratio for the first quarter of 2011, compared

with 3.4 percent for the 2010 first quarter.

Financial Highlights

(Dollars in millions except share data) Three months ended March 31, 2011 2010 Change % —- —- ——– Revenue Highlights Earned premiums $782 $746 5 Investment income, pre-tax 131 130 1 Total revenues 929 887 5 Income Statement Data Net income $62 $68 (9) Net realized investment gains and losses 7 5 40 Operating income* $55 $63 (13) === === Per Share Data (diluted) Net income $0.38 $0.42 (10) Net realized investment gains and losses 0.05 0.03 67 Operating income* $0.33 $0.39 (15) ===== ===== Book value $31.40 $29.86 5 Cash dividend declared $0.40 $0.395 1 Diluted weighted average shares outstanding 163,669,998 163,310,451 0 ———————— ———– ———– —

Insurance Operations First-Quarter Highlights

— 103.9 percent first-quarter 2011 property casualty combined ratio, up

from 102.6 percent for the first quarter of 2010.

— 3 percent growth in property casualty net written premiums, which

included personal lines segment growth of 12 percent.

— $102 million first-quarter 2011 property casualty new business written

by agencies, up $10 million from first-quarter 2010. $8 million of the

increase was standard market business contributed by agencies appointed

since the beginning of 2010.

— 4 cents per share contribution from life insurance to first-quarter

operating income, down 1 cent from first-quarter 2010.

Investment and Balance Sheet Highlights

— 1 percent first-quarter 2011 growth in pre-tax investment income as

higher dividends offset lower interest income that reflected continued

depressed yields in the bond market.

— 2 percent sequential-quarter increase in fair value of invested assets

plus cash at March 31, 2011, including equity portfolio growth of 2

percent and bond portfolio growth of 2 percent.

— $1.126 billion parent company cash and marketable securities at March

31, 2011, up 8 percent from year-end.

The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures on Page 11 defines and reconciles measures presented in this release that are not based on Generally Accepted * Accounting Principles. Forward-looking statements and related assumptions are subject to the ** risks outlined in the company’s safe harbor statement (see Page 8).

Strong Investment Performance

Kenneth W. Stecher, president and chief executive officer, commented, “Cincinnati Financial increased our book value, invested assets, unrealized gains, and the surplus of our insurance companies during the first quarter of 2011. A higher mix of equities compared with most of our peers in the insurance industry gives our portfolio more opportunity to hold its market value when interest rates rise and reduce bond values. Unrealized gains for our investment portfolio increased over 10 percent with the equity security portion increasing over 15 percent.

“Another advantage of our equity portfolio is the dividend income it generates. Our pre-tax dividend income rose 8 percent for the first quarter, offsetting lower interest income from bonds and allowing us to increase total investment income by 1 percent.”

Mixed Property Casualty Underwriting Performance

Stecher noted, “Growth of our property casualty insurance business was satisfactory in the first quarter, with a 3 percent increase in net written premiums. Underwriting was unprofitable, leading to lower earnings. Losses from natural catastrophes were at the second highest level for a first quarter in at least a dozen years. These claims are opportunities to prove the value of our policies and claims service – and to grow our business over time. While catastrophes cause volatility of earnings in the property casualty insurance industry, investors, agents and policyholders can rely on Cincinnati Financial to maintain consistency in estimating loss reserves. During the first quarter, we increased property casualty net loss and loss expense reserves over 1 percent, nearly $50 million, from year-end 2010.

“Of the seven first-quarter 2011 storms across our operating territory, the largest was a $13 million event in late February that affected our policyholders in several Midwest states. In total, catastrophes accounted for 5.5 percentage points of our 103.9 percent first-quarter combined ratio, including approximately 1 percentage point for catastrophe losses we assumed under a reinsurance agreement for the earthquake in Japan.

“Earned premiums and new business written premiums rose in each of our property casualty segments as growth initiatives continued. While we are seeing signs of marketplace improvement, our commercial lines pricing continues to decline in the low single digits, and we continue to walk away from underpriced business. A modest increase in commercial lines renewal written premiums reflected improving exposure levels as many businesses we insure continued to recover. Rates continued to firm for personal lines, where our net written premiums and new business written premiums rose at double-digit rates; and pricing is starting to firm for excess and surplus lines, where net written premiums rose over 30 percent and new business rose more than 10 percent. Earned premiums for our largest life insurance product, term life insurance, also grew almost 10 percent.

“Along with better market conditions, we believe improved pricing precision is our most effective strategy to improve profitability. We are using predictive data to develop and refine pricing and underwriting tools that seek to determine an appropriate price for each risk, higher or lower depending on measurable risk characteristics. These tools have been implemented for our major personal lines and workers’ compensation policies, and we now are piloting modeled pricing for the coverages in our commercial insurance packages including property, general liability and business auto.”

Responsiveness to Our Independent Agency Customers

“Our agents continue to give us opportunities to quote and write their best accounts, selling the value of a Cincinnati policy even when other quotes may be less. In turn, we are responding to their needs. They need efficiency and speed to serve their clients, so we continue to improve our processing systems and streamline our workflows. They need a strong Cincinnati field staff, so we continue to add loss control associates and to split marketing territories, increasing service for policyholders and support for agents in areas with high growth potential. They need outstanding claims service, so we continue to add staff expertise through field specialists and headquarters services. They need training resources to get new producers started and to assure the continuity and succession of their business and ours, so we continue to expand our agent curriculums.

Stecher concluded, “This past Monday, our board announced several leadership changes that provide for succession and assure continuity for our organization. As chairman, I’ll miss the daily experiences driving our key initiatives and working directly with the people whose contributions are making us a stronger competitor. Over the past three years, we have put in place a strong foundation and a vision of our future. Our next president and CEO, Steve Johnston, is uniquely qualified to take the lead in the next phase, where we will increase growth and profitability by further advancing our new technology and analytics capabilities. At the same time, Steve and his team will rededicate themselves to enhancing our proven advantages of solid agency relationships, superior claims service and exceptional financial strength.”

Consolidated Property Casualty Insurance Operations

(Dollars in millions) Three months ended March 31, 2011 2010 Change % —- —- ——– Earned premiums $745 $708 5 Fee revenues 1 1 0 — — Total revenues 746 709 5 Loss and loss expenses 530 475 12 Underwriting expenses 245 252 (3) — Underwriting loss $(29) $(18) (61) ==== ==== Ratios as a percent of earned Pt. premiums: Change ——- Loss and loss expenses 71.1% 67.0% 4.1 Underwriting expenses 32.8 35.6 (2.8) Combined ratio 103.9% 102.6% 1.3 ===== ===== === Change % ——– Agency renewal written premiums $708 $682 4 Agency new business written premiums 102 92 11 Other written premiums (31) (18) (72) Net written premiums $779 $756 3 ==== ==== Loss and loss expense ratios as a percent of earned Pt. premiums: Change ——- Current accident year before catastrophe losses 73.3% 69.5% 3.8 Current accident year catastrophe losses 5.7 3.1 2.6 Prior accident years before catastrophe losses (7.7) (4.6) (3.1) Prior accident years catastrophe losses (0.2) (1.0) 0.8 Total loss and loss expenses 71.1% 67.0% 4.1 ==== ==== === Current accident year combined ratio before catastrophe losses 106.1% 105.1% 1.0 ===== ===== ===

— $23 million or 3 percent increase in first-quarter 2011 property

casualty net written premiums. Growth largely reflected targeted growth

initiatives including $18 million from personal lines and $5 million

from excess and surplus lines.

— $10 million increase to $102 million new business written by agencies in

the first quarter of 2011 reflected the contribution from growth

initiatives in recent years. $8 million of the increase was from

standard market property casualty new business produced by agencies

appointed since the beginning of 2010.

— 1,263 agency relationships in 1,569 reporting locations marketing our

standard market property casualty insurance products at March 31, 2011,

compared with 1,245 agency relationships in 1,544 reporting locations at

year-end 2010. Forty new agencies were appointed during the first three

months of 2011.

— 1.3 percentage-point higher first-quarter combined ratio, driven

primarily by a $26 million pretax increase in losses from natural

catastrophe events, mostly weather-related.

— Underwriting results benefited from favorable prior accident year

reserve development of $58 million for the first quarter, compared with

$39 million for the same period of 2010.

— The lower first-quarter 2011 underwriting expense ratio reflected

expense management efforts and higher earned premiums, compared with the

first-quarter 2010 ratio, which also included an increase to provisions

for commitments and contingent liabilities.

The following table shows incurred catastrophe losses for the first quarters of 2011 and 2010.

(In millions, net of reinsurance) Three months ended March 31, Excess Total Cause of Commercial Personal and Dates loss Region lines lines surplus —– lines —– 2011 Flood, freezing, Jan. 31 – ice, snow, South, Feb 3 wind Midwest $5 $5 $ – $10 Flood, hail, tornado, Feb. 27 -28 wind Midwest 5 8 – 13 Mar. 11 Earthquake Japan 8 – – 8 All other 2011 catastrophes 5 6 – 11 Development on 2010 and prior catastrophes 4 (5) – (1) — — — — Calendar year incurred total $27 $14 $ – $41 === === === === 2010 Freezing, South, Jan. 7 wind Midwest $4 $2 $ – $6 Ice, snow, East, Feb. 4 wind Midwest 4 1 – 5 Ice, snow, East, Feb. 9 wind Midwest 6 2 – 8 All other 2010 catastrophes 2 1 – 3 Development on 2009 and prior catastrophes (6) (1) – (7) — — — — Calendar year incurred total $10 $5 $ – $15 === === === ===

Insurance Operations Highlights Commercial Lines Insurance Operations

(Dollars in millions) Three months ended March 31, 2011 2010 Change % —- —- ——– Earned premiums $540 $523 3 Fee revenues 1 1 0 — — Total revenues 541 524 3 Loss and loss expenses 374 353 6 Underwriting expenses 188 181 4 — Underwriting loss $(21) $(10) (110) ==== ==== Ratios as a percent of earned Pt. premiums: Change ——- Loss and loss expenses 69.2% 67.4% 1.8 Underwriting expenses 34.8 34.7 0.1 Combined ratio 104.0% 102.1% 1.9 ===== ===== === Change % ——– Agency renewal written premiums $542 $533 2 Agency new business written premiums 71 66 8 Other written premiums (25) (11) (127) Net written premiums $588 $588 0 ==== ==== Loss and loss expense ratios as a percent of earned Pt. premiums: Change ——- Current accident year before catastrophe losses 74.5% 71.1% 3.4 Current accident year catastrophe losses 4.3 3.0 1.3 Prior accident years before catastrophe losses (10.2) (5.5) (4.7) Prior accident years catastrophe losses 0.6 (1.2) 1.8 Total loss and loss expenses 69.2% 67.4% 1.8 ==== ==== === Current accident year combined ratio before catastrophe losses 109.3% 105.8% 3.5 ===== ===== ===

— No change in first-quarter commercial lines net written premiums as

recorded increases in renewal and new business written premiums were

offset by an adjustment for estimated premiums of policies in effect but

not yet processed.

— $9 million or 2 percent increase in renewal written premiums largely

reflected the effects of improving economic conditions on insured

exposure levels, partially offset by a low-single-digit average pricing

decline for the first quarter of 2011 that was similar to the full-year

2010 average pricing decline.

— $5 million increase to $71 million in first-quarter 2011 new business

premiums, in line with the first-quarter average of $71 million for 2008

and 2009.

— 104.0 percent first-quarter 2011 combined ratio was 1.9 percentage

points higher, driven by a 3.1 point increase in catastrophe losses that

included 1.5 points from assumed reinsurance losses related to the Japan

earthquake event.

— 74.5 percent ratio for current accident year losses and loss expenses

before catastrophes matched 74.5 percent for full-year 2010.

Personal Lines Insurance Operations

(Dollars in millions) Three months ended March 31, 2011 2010 Change % —- —- ——– Earned premiums $190 $174 9 Fee revenues – – nm — — Total revenues 190 174 9 Loss and loss expenses 141 112 26 Underwriting expenses 52 67 (22) — Underwriting loss $(3) $(5) 40 === === Ratios as a percent of earned Pt. premiums: Change ——- Loss and loss expenses 74.1% 64.4% 9.7 Underwriting expenses 27.3 38.1 (10.8) Combined ratio 101.4% 102.5% (1.1) ===== ===== ==== Change % ——– Agency renewal written premiums $156 $143 9 Agency new business written premiums 22 18 22 Other written premiums (5) (6) 17 Net written premiums $173 $155 12 ==== ==== Loss and loss expense ratios as a percent of earned Pt. premiums: Change ——- Current accident year before catastrophe losses 67.9% 63.7% 4.2 Current accident year catastrophe losses 10.0 3.3 6.7 Prior accident years before catastrophe losses (1.2) (2.3) 1.1 Prior accident years catastrophe losses (2.6) (0.3) (2.3) —- —- —- Total loss and loss expenses 74.1% 64.4% 9.7 ==== ==== === Current accident year combined ratio before catastrophe losses 95.2% 101.8% (6.6) ==== ===== ====

— $18 million or 12 percent growth in first-quarter 2011 personal lines

net written premiums, largely driven by higher renewal and new business

written premiums that reflected improved pricing.

— 1.1 percentage-point improvement in first-quarter 2011 combined ratio

primarily due to a 10.8 point reduction in the underwriting expense

ratio that offset a 4.7 point increase in large losses and a 4.4 point

rise in weather-related catastrophe losses.

— 67.9 percent ratio for current accident year losses and loss expenses

before catastrophes was a 2.5 percentage-point improvement over

full-year 2010, largely reflecting improved pricing.

— 10.8 percentage-point improvement in the underwriting expense ratio was

primarily due to first-quarter 2010 provisions for commitments and

contingent liabilities in addition to lower agency profit-sharing

expenses.

Excess and Surplus Lines Insurance Operations

(Dollars in millions) Three months ended March 31, 2011 2010 Change % —- —- ——– Earned premiums $15 $11 36 Loss and loss expenses 15 10 50 Underwriting expenses 5 4 25 — Underwriting loss $(5) $(3) (67) === === Ratios as a percent of Pt. earned premiums: Change ——- Loss and loss expenses 102.7% 91.4% 11.3 Underwriting expenses 30.3 35.7 (5.4) Combined ratio 133.0% 127.1% 5.9 ===== ===== === Change % ——– Agency renewal written premiums $10 $6 67 Agency new business written premiums 9 8 13 Other written premiums (1) (1) 0 Net written premiums $18 $13 38 === === Loss and loss expense ratios as a percent of Pt. earned premiums: Change ——- Current accident year before catastrophe losses 98.8% 88.0% 10.8 Current accident year catastrophe losses 1.7 0.0 1.7 Prior accident years before catastrophe losses 1.1 3.6 (2.5) Prior accident years catastrophe losses 1.1 (0.2) 1.3 — —- — Total loss and loss expenses 102.7% 91.4% 11.3 ===== ==== ==== Current accident year combined ratio before catastrophe losses 129.1% 123.7% 5.4 ===== ===== ===

— $5 million or 38 percent growth in first-quarter 2011 excess and surplus

lines net written premiums, largely driven by the initial opportunity to

renew many accounts for the first time, in addition to $1 million growth

in new business written.

— 5.9 percentage-point rise in first-quarter combined ratio primarily due

to new large losses greater than $250,000 and reserves for estimated

losses incurred but not reported (IBNR).

Life Insurance Operations

Three months ended (In millions) March 31, 2011 2010 Change % —- —- ——– Term life insurance $25 $23 9 Universal life insurance 5 9 (44) Other life insurance, annuity, and disability income products 7 7 0 — — Earned premiums 37 39 (5) Investment income, net of expenses 33 32 3 Other income 1 – nm — Total revenues, excluding realized investment gains and losses 71 71 0 — — Contract holders benefits 45 42 7 Underwriting expenses 16 16 0 — Total benefits and expenses 61 58 5 — — Net income before income tax and realized investment gains and losses 10 13 (23) Income tax 3 5 (40) — — Net income before realized investment gains and losses $7 $8 (13) === ===

— $2 million or 5 percent decrease in first-quarter 2011 earned premiums,

as lower universal life premiums offset 9 percent growth for term life

insurance, our largest life insurance product line. Face amount of life

policies in force rose 1 percent to $75.026 billion at March 31, 2011,

from $74.124 billion at year-end 2010.

— $60 million in first-quarter 2011 fixed annuity deposits received

compared with $65 million in first quarter 2010 and $201 million in

full-year 2010. Cincinnati Life does not offer variable or indexed

products.

— $1 million decline in first-quarter 2011 profit was primarily due to

less favorable mortality experience.

— $8 million or 1 percent first-quarter 2011 growth to $756 million in

GAAP shareholders’ equity for The Cincinnati Life Insurance Company.

Investment and Balance Sheet Highlights Investment Operations

Three months ended March (In millions) 31, 2011 2010 Change % —- —- ——– Total investment income, net of expenses, pre-tax $131 $130 1 — — Investment interest credited to contract holders (20) (19) (5) — — Realized investment gains and losses summary: Realized investment gains and losses 38 3 nm Change in fair value of securities with embedded derivatives 4 6 (33) Other-than-temporary impairment charges (30) (1) nm Total realized investment gains and losses 12 8 50 — — Investment operations profit $123 $119 3 ==== ====

Three months ended March (In millions) 31, 2011 2010 Change % —- —- ——– Investment income: Interest $106 $107 (1) Dividends 26 24 8 Other 1 1 0 Investment expenses (2) (2) 0 Total investment income, net of expenses, pre-tax 131 130 1 Income taxes (32) (32) 0 Total investment income, net of expenses, after-tax $99 $98 1 === === Effective tax rate 24.5% 24.5% Average yield pre-tax 4.6% 4.8% Average yield after-tax 3.4% 3.6% ———————– — —

— 1 percent growth in first-quarter 2011 in both pretax and after-tax

investment income. 8 percent growth in pretax dividend income more than

offset a 1 percent decline in pretax interest income.

— $129 million or 10 percent first-quarter 2011 increase in pre-tax

unrealized investment portfolio gains, including $122 million for the

equity portfolio. $35 million of realized gains from sales were

harvested from the equity portfolio.

(Dollars in millions except share data) At March 31, At December 31, 2011 2010 —- —- Balance sheet data Invested assets $11,704 $11,508 Total assets 15,369 15,095 Short-term debt 49 49 Long-term debt 790 790 Shareholders’ equity 5,118 5,032 Book value per share 31.40 30.91 Debt-to-total-capital ratio 14.1% 14.3% Three months ended March 31, 2011 2010 —- —- Performance measure Value creation ratio 2.9% 3.4 % ——————– — —-

— $12.083 billion in consolidated cash and invested assets at March 31,

2011, up 2 percent from $11.893 billion at year-end.

— $8.536 billion bond portfolio at March 31, 2011, with an average rating

of A2/A and with a 2 percent rise in fair value during the first quarter

of 2011.

— $3.100 billion equity portfolio was 26.5 percent of invested assets,

including $877 million in pre-tax net unrealized gains at March 31,

2011. 2 percent first-quarter 2011 growth in fair value.

— $3.833 billion of statutory surplus for the property casualty insurance

group at March 31, 2011, up $56 million from $3.777 billion at year-end

2010, after declaring $60 million in dividends to the parent company.

Ratio of net written premiums to property casualty statutory surplus for

the 12 months ended March 31, 2011, of 0.8-to-1, unchanged from the 12

months ended December 31, 2010.

— Value creation ratio of 2.9 percent for the first quarter of 2011 is the

sum of 1.3 percent from shareholder dividends plus 1.6 percent from

growth in book value per share.

For additional information or to register for our conference call webcast, please visit www.cinfin.com/investors.

Cincinnati Financial Corporation offers business, home and auto insurance, our main business, through The Cincinnati Insurance Company and its two standard market property casualty companies. The same local independent insurance agencies that market those policies may offer products of our other subsidiaries, including life and disability income insurance, annuities and surplus lines property and casualty insurance. For additional information about the company, please visit www.cinfin.com. Mailing Address: Street Address: P.O. Box 145496 6200 South Gilmore Road Cincinnati, Ohio 45250-5496 Fairfield, Ohio 45014-5141

Safe Harbor Statement

This is our “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2010 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 24.

Factors that could cause or contribute to such differences include, but are not limited to:

— Unusually high levels of catastrophe losses due to risk concentrations,

changes in weather patterns, environmental events, terrorism incidents

or other causes

— Increased frequency and/or severity of claims

— Inadequate estimates or assumptions used for critical accounting

estimates

— Recession or other economic conditions resulting in lower demand for

insurance products or increased payment delinquencies

— Delays in adoption and implementation of underwriting and pricing

methods that could increase our pricing accuracy, underwriting profit

and competitiveness

— Inability to defer policy acquisition costs for any business segment if

pricing and loss trends would lead management to conclude that segment

could not achieve sustainable profitability

— Declines in overall stock market values negatively affecting the

company’s