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Cincinnati Financial Reports Fourth-Quarter and Full-Year 2012 Results

    Cincinnati Financial Reports Fourth-Quarter and Full-Year 2012 Results

PR Newswire

CINCINNATI, Feb. 6, 2013

CINCINNATI, Feb. 6, 2013 /PRNewswire/ -- Cincinnati Financial Corporation
(Nasdaq: CINF) today reported:

(Logo: http://photos.prnewswire.com/prnh/20110824/CL57087LOGO )

  oFourth-quarter 2012 net income of $192 million, or $1.17 per share,
    compared with $134 million, or 83 cents per share, in the fourth quarter
    of 2011; operating income* of $183 million, or $1.11 per share, up 32
    percent compared with $139 million, or 86 cents per share. Net income and
    operating income for the fourth quarter of 2012 benefited from property
    casualty underwriting profits that increased by $40 million after taxes.
  oFull-year 2012 net income of $421 million, or $2.57 per share, compared
    with $164 million, or $1.01, in 2011. Operating income of $393 million, or
    $2.40 per share, up 230 percent from $119 million, or 73 cents per share.
  o$257 million increase in full-year 2012 net income reflected the after-tax
    net effect of two primary items: $270 million improvement in the
    contribution from property casualty underwriting – including a favorable
    effect of $44 million from lower natural catastrophe losses, partially
    offset by a $17 million decrease from net realized investment gains.
  o$33.48 book value per share at December 31, 2012, up 8 percent for the
    year and 2 percent for the quarter.
  o12.6 percent value creation ratio for full-year 2012, compared with 6.0
    percent for 2011.



Financial Highlights
(Dollars in
millions      Three months ended December 31, Twelve months ended December 31,
except share
data in       2012        2011       Change% 2012        2011        Change%
thousands)
Revenue
Highlights
 Earned     $  917      $  827     11       $  3,522    $  3,194    10
premiums
 Investment
income,          136         132     3           531         525      1
pretax
 Total         1,070       955     12          4,111       3,803    8
revenues
Income
Statement
Data
 Net        $  192      $  134     43       $  421      $  164      157
income
 Net
realized
investment       9           (5)     nm          28          45       (38)
gains and
losses
 Operating  $  183      $  139     32       $  393      $  119      230
income*
Per Share
Data
(diluted)
 Net        $  1.17     $  0.83    41       $  2.57     $  1.01     154
income
 Net
realized
investment       0.06        (0.03)  nm          0.17        0.28     (39)
gains and
losses
 Operating  $  1.11     $  0.86    29       $  2.40     $  0.73     229
income*
 Book value                                 $  33.48    $  31.03    8
 Cash
dividend      $  0.4075   $  0.4025  1        $  1.62     $  1.605    1
declared
 Weighted
average          164,160     162,679 0           163,661     163,259  0
shares
outstanding



Insurance Operations Fourth-Quarter Highlights

  o81.9 percent fourth-quarter 2012 property casualty combined ratio,
    improved from 87.5 percent fourth-quarter 2011. Full-year 2012 property
    casualty combined ratio at 96.1 percent, with a 12 percent increase in net
    written premiums.
  o10 percent increase in fourth-quarter net written premiums, reflecting
    higher pricing and planned growth from strategic initiatives.
  o$132 million fourth-quarter 2012 property casualty new business written
    premiums, up $29 million to a record high for any quarter. Full-year 2012
    property casualty new business written premiums of $501 million, another
    record high.
  o5 cents per share contribution from life insurance operating income to
    fourth-quarter results, up 1 cent from 2011.

Investment and Balance Sheet Highlights

  o1 percent full-year 2012 growth in before-tax investment income, driven by
    an $11 million or 11 percent increase in common stock portfolio dividends
    – including $5 million not typically paid in the fourth quarter – that
    offset a 1 percent decline in interest income.
  o6 percent full-year rise in fair value of invested assets plus cash at
    December 31, 2012, including 14 percent for the equity portfolio and a 4
    percent increase for the bond portfolio.
  o$1.151 billion parent company cash and marketable securities at December
    31, 2012, up 10 percent from a year ago.

* The Definitions of Non-GAAP Information and Reconciliation to Comparable
GAAP Measures on Page 13 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 10).

Strong Fourth-Quarter and Full-Year 2012 Operating Earnings

Steven J. Johnston, president and chief executive officer, commented:
"Consolidated operating income for the fourth quarter and full-year 2012 was
higher than for any quarter since at least 2002 and any year since 2007.

"Our investment income rose 3 percent in the fourth quarter, thanks to
increased dividend income from stocks in the portfolio, which helped offset
the impact of low interest rates on bonds. Our dividend income for the fourth
quarter spiked from special payments and dividends that were accelerated from
future quarters into 2012. These payments are unlikely to be repeated in
2013."

Core Underwriting Progress

"Property casualty insurance underwriting results were outstanding, as
positive trends seen in the third quarter continued to gain momentum.
Underwriting profits before taxes rose to $160 million in the fourth quarter
and $137 million for the full year. The combined ratio of 81.9 percent was our
best quarterly result in 10 years, and the full-year ratio of 96.1 percent was
our best in five years.

"The $30 million impact of catastrophes was lower in the fourth quarter than
in any other 2012 quarter, even though it included our relatively modest
Superstorm Sandy losses announced in November. Still, that impact was more
than average for a fourth quarter, when we typically report low catastrophe
losses. For the full year, catastrophes contributed 10.0 percentage points to
the combined ratio, well above the 10-year average of 6.1 percent.

"Factors other than catastrophes drove our improved property casualty
underwriting results. We achieved better core underwriting, as indicated by
8.4 percentage points of improvement in our loss and loss expense ratio for
the current accident year before catastrophe losses. This progress is arising
incrementally from sustained efforts of our associates and agents to increase
our premium revenues, improve price adequacy, control losses and increase
efficiencies."

Ongoing, Cumulative Benefits

"The growth and profitability initiatives that produced the current results
were designed to improve our competitive position and opportunities over the
long term. We still have more work to do to build on our progress – and more
upside to realize from the cumulative effects of our efforts.

"For the first time, full-year new business premiums written with our
independent agencies exceeded $500 million. Property casualty total written
premiums grew at a double-digit pace, rising for each of our property casualty
insurance segments for both the fourth quarter and the full year. We continue
our careful, measured expansion of our product lines, marketing territory and
independent agency force, with an eye toward gradual geographical
diversification of our premium sources. During the fourth quarter, written
premiums from our excess and surplus lines operation, launched in 2008, passed
the $100 million mark. We introduced two additional target market programs of
commercial insurance and appointed additional agencies, bringing total new
agency appointments for the year to 140, with more than half located outside
of our 10 highest volume states.

"We made great strides in 2012 toward pricing precision, using models and
agent-provided information to identify the right price for new business and to
take action on selected renewal accounts to improve price adequacy. During the
fourth quarter, commercial lines policies that renewed had price increases
that averaged in the mid-single digits; price increases averaged in the
low-single digits for personal auto renewals and in the high-single digits for
homeowner policies and excess and surplus lines business.

"During 2012, we ramped up loss control services for commercial policyholders
and field inspections of commercial and personal property. These services help
policyholders avoid loss by correcting unsafe conditions, while also allowing
us to note characteristics that require underwriting attention, such as roof
age or type. We also continued building out our commercial lines policy
administration system. Approximately 75 percent of our commercial lines
policies, excluding workers' compensation, now can be processed through this
efficient system. We will add workers' compensation capabilities to the system
in two states in 2013, following up with a staged rollout to all other states
where we offer workers' compensation policies."

Clarity and Confidence

"Our solid performance in 2012 was supported by communication of clear goals
for every associate of our company and every agency that represents us. Those
goals feed up to our primary performance target, a value creation ratio that
measures our ability to pay cash dividends to shareholders and to increase the
book value of the company over time. With a fourth-quarter ratio of 2.8
percent and a full-year ratio of 12.6 percent, this year's performance is
consistent with our long-term target of a 12 percent to 15 percent annual
average for the period of 2010-2014. While the current investment environment
and its near-term prospects are challenging, we are confident that our ongoing
improvements position our insurance operations to perform through all economic
and market cycles."



Consolidated Property Casualty Insurance Operations
(Dollars in        Three months ended December   Twelve months ended December
millions)          31,                           31,
                   2012       2011      Change% 2012       2011      Change%
Earned premiums    $ 869      $ 785     11       $ 3,344    $ 3,029   10
Fee revenues         2          1       100        6          4       50
 Total revenues    871        786     11         3,350      3,033   10
Loss and loss        433        437     (1)        2,137      2,335   (8)
expenses
Underwriting         278        250     11         1,076      976     10
expenses
 Underwriting    $ 160      $ 99      62       $ 137      $ (278)   nm
profit (loss)
Ratios as a                             Pt.                           Pt.
percent of earned                       Change                       Change
premiums:
 Loss and loss   49.9   %   55.6  % (5.7)      63.9   %   77.0  % (13.1)
expenses
 Underwriting    32.0       31.9    0.1        32.2       32.3    (0.1)
expenses
Combined ratio       81.9   %   87.5  % (5.6)      96.1   %   109.3 % (13.2)
                                        Change %                      Change %
Agency renewal     $ 771      $ 712     8        $ 3,138    $ 2,867   9
written premiums
Agency new
business written     132        103     28         501        437     15
premiums
Other written        (66)       (55)    (20)       (157)      (206)   24
premiums
 Net written     $ 837      $ 760     10       $ 3,482    $ 3,098   12
premiums
Ratios as a                             Pt.                           Pt.
percent of earned                       Change                       Change
premiums:
 Current
accident year        59.0   %   65.7  % (6.7)      64.6   %   73.0  % (8.4)
before catastrophe
losses
 Current
accident year        3.4        (1.9)   5.3        11.1       13.4    (2.3)
catastrophe losses
 Prior
accident years       (12.5)     (7.3)   (5.2)      (10.7)     (9.3)   (1.4)
before catastrophe
losses
 Prior
accident years       0.0        (0.9)   0.9        (1.1)      (0.1)   (1.0)
catastrophe losses
Total loss and       49.9   %   55.6  % (5.7)      63.9   %   77.0  % (13.1)
loss expenses
Current accident
year combined
ratio before
 catastrophe    91.0   %   97.6  % (6.6)      96.8   %   105.3 % (8.5)
losses

  o10 percent and 12 percent growth in fourth-quarter and full-year 2012
    property casualty net written premiums. Full-year renewal written premiums
    increase of 9 percent reflects higher pricing and rising insured exposures
    from the gradually improving economy. Ceded premiums of $42 million in
    2011 to reinstate property catastrophe reinsurance coverage were largely
    responsible for the $49 million change in full-year other written
    premiums.
  o$64 million increase to $501 million in 2012 new business written by
    agencies, reflecting contributions from new agency appointments and other
    growth initiatives in recent years. $35 million of the increase was from
    standard market property casualty new business produced by agencies
    appointed since the beginning of 2011.
  o1,408 agency relationships in 1,758 reporting locations marketing standard
    market property casualty insurance products at December 31, 2012, compared
    with 1,312 agency relationships in 1,648 reporting locations at year-end
    2011. One hundred forty new agency appointments were made during 2012,
    exceeding the initial full-year target of approximately 130.
  o5.6 percentage-point fourth-quarter 2012 combined ratio improvement,
    largely reflecting better pricing and other efforts that are improving
    loss ratios before catastrophe losses.
  o13.2 percentage-point full-year combined ratio improvement, including 3.3
    points from lower natural catastrophe losses in addition to lower weather
    losses not part of an industry-designated catastrophe event, plus benefits
    from better pricing.
  o8.4 percentage-point improvement, to 64.6 percent, for full-year ratio of
    2012 accident year losses and loss expenses before catastrophes, including
    1.9 points of improvement in the 2012 ratio for new losses of $250,000 or
    more per claim and 1.0 point of improvement due to the effect of the 2011
    reinsurance reinstatement premium.
  o12.5 and 11.8 percentage point fourth-quarter and full-year 2012 benefit
    from favorable prior accident year reserve development of $109 million and
    $396 million, compared with 8.2 percent and 9.4 percent from $64 million
    and $285 million of development for the same periods of 2011. Development
    from catastrophe losses accounted for 1.0 percentage point of the 2.4
    point full-year improvement.
  oRelatively flat fourth-quarter and full-year underwriting expense ratios,
    reflecting expense management efforts and higher earned premiums that
    essentially offset a 0.8 percentage point full-year increase in
    profit-sharing commissions.



The following table shows incurred catastrophe losses for 2012 and 2011.
(In millions, net of reinsurance)                                      Three months ended         Twelve months ended
                                                                       December 31,               December 31,
                                                                       Comm.  Pers. E&S           Comm.  Pers.  E&S
Dates                         Event          Region                    lines  lines lines   Total lines  lines  lines   Total
2012
Firstquartercatastrophes                                           $ (1)  $ -   $  -  $ (1)   $ 52   $ 62   $  -  $ 114
Secondquartercatastrophes                                            (3)    (1)    -    (4)     117    62      1    180
 Third quartercatastrophes                                             2      1      1    4       23     25      1    49
 Oct. 28 - 31               Sandy          Midwest,Northeast,South   20     10     -    30      20     10      -    30
Development on 2011 and prior catastrophes                             1      -      -    1       (17)   (22)    -    (39)
  Calendar year incurred total                                      $ 19   $ 10  $  1  $ 30    $ 195  $ 137  $  2  $ 334
2011
First quartercatastrophes                                           $ (3)  $ (1) $  -  $ (4)   $ 22   $ 16   $  -  $ 38
Secondquartercatastrophes                                            (4)    -      -    (4)     148    139     1    288
Thirdquartercatastrophes                                             (6)    (7)    -    (13)    52     23      -    75
Oct. 28 - 31                Freezing,wind East                        1      1      -    2       1      1       -    2
Nov. 30 - Dec. 2            Wind           West                        2      2      -    4       2      2       -    4
Development on 2010 and prior catastrophes                             (7)    -      -    (7)     2      (7)     -    (5)
 Calendar year incurred total                                      $ (17) $ (5) $  -  $ (22)  $ 227  $ 174  $  1  $ 402





Insurance Operations Highlights
Commercial Lines Insurance Operations
(Dollars in       Three months ended December   Twelve months ended December
millions)         31,                           31,
                  2012       2011      Change% 2012       2011       Change%
Earned premiums   $ 618      $ 567     9        $ 2,383    $ 2,197    8
Fee revenues        2          1       100        4          3        33
 Total revenues   620        568     9          2,387      2,200    9
Loss and loss       307        284     8          1,420      1,570    (10)
expenses
Underwriting        206        191     8          786        732      7
expenses
 Underwriting   $ 107      $ 93      15       $ 181      $ (102)    nm
profit (loss)
Ratios as a                            Pt.                            Pt.
percent of earned                      Change                        Change
premiums:
 Loss and       49.7   %   50.1  % (0.4)      59.5   %   71.4   % (11.9)
loss expenses
 Underwriting   33.2       33.8    (0.6)      33.0       33.4     (0.4)
expenses
Combined ratio      82.9   %   83.9  % (1.0)      92.5   %   104.8  % (12.3)
                                       Change %                       Change %
Agency renewal    $ 549      $ 514     7        $ 2,229    $ 2,063    8
written premiums
Agency new
business written    96         74      30         352        307      15
premiums
Other written       (57)       (42)    (36)       (122)      (152)    20
premiums
 Net written    $ 588      $ 546     8        $ 2,459    $ 2,218    11
premiums
Ratios as a                            Pt.                            Pt.
percent of earned                      Change                        Change
premiums:
 Current
accident year
before              59.1   %   60.9  % (1.8)      62.9   %   71.8   % (8.9)
catastrophe
losses
 Current
accident year       3.0        (1.7)   4.7        8.9        10.3     (1.4)
catastrophe
losses
 Prior
accident years
before              (12.5)     (7.9)   (4.6)      (11.6)     (10.8)   (0.8)
catastrophe
losses
 Prior
accident years      0.1        (1.2)   1.3        (0.7)      0.1      (0.8)
catastrophe
losses
Total loss and      49.7   %   50.1  % (0.4)      59.5   %   71.4   % (11.9)
loss expenses
Current accident
year combined
ratio before
 catastrophe   92.3   %   94.7  % (2.4)      95.9   %   105.2  % (9.3)
losses

  o8 percent and 11 percent growth in fourth-quarter and full-year 2012
    commercial lines net written premiums, primarily due to higher renewal
    written premiums that continued to reflect improved pricing.
  o$35 million and $166 million increase in fourth-quarter and full-year
    renewal written premiums, reflecting full-year 2012 commercial lines
    pricing changes that increased on average in a mid-single-digit range.
  o$22 million and $45 million rise in fourth-quarter and full-year new
    business written by agencies, reflecting recent-year growth initiatives,
    rising for the year in 30 of the 39 states where we offer standard market
    commercial lines policies.
  o1.0 percentage-point fourth-quarter 2012 combined ratio improvement, as
    higher catastrophe losses were largely offset by more favorable prior
    accident year reserve development.
  o12.3 percentage-point full-year combined ratio improvement, including 2.2
    points from lower natural catastrophe losses in addition to lower
    noncatastrophe weather losses and improving loss ratios. The lower ratios
    reflected initiatives to improve pricing precision and loss experience
    related to claims and loss control practices.
  o8.9 percentage-point improvement, to 62.9 percent, for full-year ratio of
    2012 accident year losses and loss expenses before catastrophes, including
    2.6 points of improvement in the 2012 ratio for new losses of $250,000 or
    more per claim and 0.8 points of improvement due to the effect of 2011
    reinsurance reinstatement premiums.
  o12.4 and 12.3 percentage-point fourth-quarter and full-year 2012 benefit
    from favorable prior accident year reserve development of $76 million and
    $292 million, compared with 9.1 percent and 10.7 percent from $52 million
    and $235 million of development for the same periods of 2011.



Personal Lines Insurance Operations
(Dollars in         Three months ended December   Twelve months ended December
millions)           31,                           31,
                    2012       2011      Change% 2012      2011      Change%
Earned premiums     $ 226      $ 199     14       $ 868     $ 762     14
Fee revenues          -          -        nm     2         1       100
 Total revenues     226        199     14         870       763     14
Loss and loss         116        145     (20)       652       723     (10)
expenses
Underwriting          64         53      21         261       222     18
expenses
 Underwriting     $ 46       $ 1       nm       $ (43)    $ (182)   76
profit (loss)
Ratios as a percent                      Pt.                          Pt.
of earned premiums:                      Change                      Change
 Loss and loss    51.5   %   72.9  % (21.4)     75.2  %   94.9  % (19.7)
expenses
 Underwriting     28.5       26.5    2.0        30.1      29.1    1.0
expenses
Combined ratio        80.0   %   99.4  % (19.4)     105.3 %   124.0 % (18.7)
                                         Change %                     Change %
Agency renewal      $ 203      $ 185     10       $ 836     $ 755     11
written premiums
Agency new business   27         22      23         111       95      17
written premiums
Other written         (8)        (11)    27         (29)      (49)    41
premiums
 Net written      $ 222      $ 196     13       $ 918     $ 801     15
premiums
Ratios as a percent                      Pt.                          Pt.
of earned premiums:                      Change                      Change
 Current
accident year         59.4   %   81.0  % (21.6)     68.2  %   76.7  % (8.5)
before catastrophe
losses
 Current
accident year         4.6        (2.6)   7.2        18.4      23.6    (5.2)
catastrophe losses
 Prior accident
years before          (12.3)     (5.4)   (6.9)      (8.9)     (4.5)   (4.4)
catastrophe losses
 Prior accident
years catastrophe     (0.2)      (0.1)   (0.1)      (2.5)     (0.9)   (1.6)
losses
Total loss and loss   51.5   %   72.9  % (21.4)     75.2  %   94.9  % (19.7)
expenses
Current accident
year combined ratio
before
 catastrophe     87.9   %   107.5 % (19.6)     98.3  %   105.8 % (7.5)
losses

  o13 percent and 15 percent growth in fourth-quarter and full-year 2012
    personal lines net written premiums, primarily due to increases in renewal
    written premiums. Ceded premiums of $18 million in 2011 to reinstate
    property catastrophe reinsurance coverage drove the $20 million change in
    full-year other written premiums.
  o$16 million or 17 percent increase in full-year 2012 new business written
    premium. New business from our six highest volume states where we offer
    personal lines policies declined on average by 2 percent, while it rose 34
    percent in all other states as we progress toward geographic
    diversification.
  o19.4 percentage-point fourth-quarter 2012 combined ratio improvement, as
    higher catastrophe losses were largely offset by more favorable prior
    accident year reserve development. A refined allocation process for loss
    expenses related primarily to salaries of claims associates added
    approximately 12 points to the fourth-quarter 2011 ratio.
  o18.7 percentage-point full-year combined ratio improvement, including 6.8
    points from lower natural catastrophe losses in addition to lower
    noncatastrophe weather losses that decreased 2012 homeowner losses by
    approximately $10 million. Improved loss ratios before catastrophe losses
    also reflect pricing precision improvement initiatives and higher market
    pricing in general.
  o8.5 percentage-point improvement, to 68.2 percent, for full-year ratio of
    2012 accident year losses and loss expenses before catastrophes, including
    1.8 points of improvement due to the effect of 2011 reinsurance
    reinstatement premiums. Better pricing drove most of the remaining
    improvement as lower non-catastrophe weather losses were essentially
    offset by higher new losses of $250,000 or more per claim.
  o12.5 and 11.4 percentage-point fourth-quarter and full-year 2012 benefit
    from favorable prior accident year reserve development of $29 million and
    $99 million, compared with 5.5 percent and 5.4 percent from $11 million
    and $41 million of development for the same periods of 2011. The homeowner
    line of business represented more than half of the $57 million increase in
    full-year personal lines favorable prior accident year reserve
    development.



Excess and Surplus Lines Insurance Operations
(Dollars in        Three months ended December   Twelve months ended December
millions)          31,                           31,
                   2012       2011      Change% 2012      2011       Change%
Earned premiums    $ 25       $ 19      32       $ 93      $ 70       33
Loss and loss        10         8       25         65        42       55
expenses
Underwriting         8          6       33         29        22       32
expenses
 Underwriting    $ 7        $ 5       40       $ (1)     $ 6        nm
(loss) profit
Ratios as a                             Pt.                           Pt.
percent of earned                       Change                       Change
premiums:
 Loss and loss   38.2   %   42.4  % (4.2)      69.4  %   60.3   % 9.1
expenses
 Underwriting    33.3       31.3    2.0        31.6      31.9     (0.3)
expenses
Combined ratio       71.5   %   73.7  % (2.2)      101.0 %   92.2   % 8.8
                                        Change %                      Change %
Agency renewal     $ 19       $ 13      46       $ 73      $ 49       49
written premiums
Agency new
business written     9          7       29         38        35       9
premiums
Other written        (1)        (2)     50         (6)       (5)      (20)
premiums
 Net written     $ 27       $ 18      50       $ 105     $ 79       33
premiums
Ratios as a                             Pt.                           Pt.
percent of earned                       Change                       Change
premiums:
 Current
accident year        52.3   %   50.6  % 1.7        72.8  %   71.0   % 1.8
before catastrophe
losses
 Current
accident year        1.4        (0.3)   1.7        2.1       2.1      0.0
catastrophe losses
 Prior
accident years       (15.3)     (7.9)   (7.4)      (5.6)     (12.9)   7.3
before catastrophe
losses
 Prior
accident years       (0.2)      0.0     (0.2)      0.1       0.1      0.0
catastrophe losses
Total loss and       38.2   %   42.4  % (4.2)      69.4  %   60.3   % 9.1
loss expenses
Current accident
year combined
ratio before
 catastrophe    85.6   %   81.9  % 3.7        104.4 %   102.9  % 1.5
losses

  o$9 million and $26 million growth in fourth-quarter and full-year 2012
    excess and surplus lines net written premiums, largely due to the
    opportunity to renew many accounts for the first time. Growth was also
    from average full-year renewal price increases in a high-single-digit
    range. Full-year net written premiums exceeded $100 million level.
  o9 percent increase in full-year 2012 new business written premiums,
    reflecting higher pricing in a market that remains competitive and more
    larger-premium accounts, particularly in the fourth quarter.
  o8.8 percentage-point combined ratio increase for full-year 2012,
    reflecting lower net favorable reserve development on prior accident years
    as 2011 included an unusually large reduction in IBNR loss and loss
    expense estimates.
  o2.5 percentage-point loss ratio increase for full-year 2012, including a
    1.3 point increase in the 2012 ratio for total large losses of $250,000 or
    more per claim, while the ratio for loss expenses rose 6.6 points.
  o1.8 percentage-point rise, to 72.8 percent, for full-year ratio of 2012
    accident year losses and loss expenses before catastrophes, driven by a
    1.2 point increase in the 2012 ratio for new losses of $250,000 or more
    per claim.



Life Insurance Operations
                  Three months ended December 31, Twelve months ended December
(In millions)                                     31,
                      2012       2011   Change%      2012     2011  Change%
Term life         $   29     $   26     12        $   115   $  105   10
insurance
Universal life        12         8      50            34       32    6
insurance
Other life
insurance,
annuity, and          7          8      (13)          29       28    4
disability income
products
 Earned            48         42     14            178      165   8
premiums
Investment
income, net of        35         33     6             138      134   3
expenses
Other income          -          -       nm        1        2     (50)
 Total revenues,
excluding
realized              83         75     11            317      301   5
investment gains
and losses
Contract holders      49         51     (4)           185      189   (2)
benefits
Underwriting          20         13     54            79       62    27
expenses
 Total
benefits and          69         64     8             264      251   5
expenses
Net income before
income tax and
realized              14         11     27            53       50    6
investment gains
and losses
Income tax            5          4      25            19       18    6
Net income before
realized          $   9      $   7      29        $   34    $  32    6
investment gains
and losses

  o$13 million or 8 percent growth in full-year 2012 earned premiums,
    including 10 percent for term life insurance, our largest life insurance
    product line.
  o5 percent rise in face amount of life policies in force to $81.467 billion
    at December 31, 2012, from $77.691 billion at year-end 2011.
  o$73 million decline to $49 million in full-year 2012 fixed annuity
    deposits received, slowing as planned. Cincinnati Life does not offer
    variable or indexed products.
  o$2 million higher full-year profit as increased earned premiums, increased
    investment income revenues and decreased contract holders benefits
    slightly offset increased underwriting expenses. Increased levels of net
    death claims, still within our pricing expectations, were offset by less
    growth in policy reserves.
  o$87 million or 11 percent full-year 2012 growth to $857 million in GAAP
    shareholders' equity for The Cincinnati Life Insurance Company.



Investment and Balance Sheet Highlights
Investment Operations
                       Three months ended December    Twelve months ended December
(In millions)          31,                            31,
                       2012       2011     Change%   2012       2011     Change%
Total investment
income, net of       $ 136      $ 132      3        $ 531      $ 525      1
expenses, pretax
Investment interest
credited to contract   (20)       (20)     0          (82)       (81)     (1)
holders
Realized investment
gains and losses
summary:
 Realized
investment gains and   14         18       (22)       74         128      (42)
losses
 Change in fair
value of securities    -          (1)      100        1          (1)      200
with embedded
derivatives

Other-than-temporary   (1)        (24)     96         (33)       (57)     42
impairment charges
 Total realized
investment gains and   13         (7)      nm         42         70       (40)
losses
Investment           $ 129      $ 105      23       $ 491      $ 514      (4)
operations profit
                       Three months ended December    Twelve months ended December
(In millions)          31,                            31,
                       2012       2011     Change %   2012       2011     Change %
Interest            $ 103      $ 105      (2)      $ 420      $ 424      (1)
 Dividends           34         27       26         115        104      11
Other                  -          1        (100)      3          4        (25)
Investment expenses    (1)        (1)      0          (7)        (7)      0
 Total investment
income, net of         136        132      3          531        525      1
expenses, pretax
 Income taxes       (33)       (32)     (3)        (129)      (129)    0
 Total investment
income, net of       $ 103      $ 100      3        $ 402      $ 396      2
expenses, after tax
Effective tax rate     23.7   %   24.4   %            24.2   %   24.6   %
Average invested
assets plus cash and $ 12,108   $ 11,353            $ 11,847   $ 11,471
cash equivalents
Average yield pretax   4.49   %   4.65   %            4.48   %   4.58   %
Average yield after    3.40   %   3.52   %            3.39   %   3.45   %
tax

  o3 percent and 1 percent growth in fourth-quarter and full-year 2012 pretax
    investment income, as higher dividends offset a 1 percent decline in
    full-year interest income.
  o$386 million or 26 percent full-year 2012 net increase in pretax
    unrealized investment portfolio gains, including $210 million in the
    equity portfolio. $74 million of pretax netrealized gains were harvested
    from the investment portfolio during 2012, including $37 million from the
    equity portfolio.

(Dollars in millions except share data)    At December 31,   At December 31,
                                                 2012            2011
Balance sheet data
 Invested assets                         $     12,534      $   11,801
 Total assets                                  16,548          15,635
 Short-term debt                               104             104
 Long-term debt                                790             790
 Shareholders' equity                          5,453           5,033
 Book value per share                          33.48           31.03
 Debt-to-total-capital ratio                   14.1      %     15.1     %

  o$13.021 billion in consolidated cash and invested assets at December 31,
    2012, up 6 percent from $12.239 billion at year‑end 2011.
  o$9.093 billion bond portfolio at December 31, 2012, with an average rating
    of A2/A. Fair value rose $314 million or 4 percent during the year 2012.
  o$3.373 billion equity portfolio was 26.9 percent of invested assets,
    including $1.004 billion in pretax net unrealized gains at December 31,
    2012. $417 million or 14 percent full-year 2012 growth in fair value.
  o$3.914 billion of statutory surplus for the property casualty insurance
    group at December 31, 2012, up $167 million from $3.747 billion at
    year-end 2011, after declaring $300 million in dividends to the parent
    company. Ratio of net written premiums to property casualty statutory
    surplus for the 12 months ended December 31, 2012, of 0.9-to-1, up from
    0.8-to-1 at year-end 2011.
  oValue creation ratio of 12.6 percent for full-year 2012 is the total of
    5.2 percent from shareholder dividends and 7.4 percent from the change 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, fixed 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 2011 Annual Report on Form 10-K, Item 1A,
Risk Factors, Page 26.

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

  oUnusually high levels of catastrophe losses due to risk concentrations,
    changes in weather patterns, environmental events, terrorism incidents or
    other causes
  oIncreased frequency and/or severity of claims
  oInadequate estimates or assumptions used for critical accounting estimates
  oRecession or other economic conditions resulting in lower demand for
    insurance products or increased payment delinquencies
  oDeclines in overall stock market values negatively affecting the company's
    equity portfolio and book value
  oEvents resulting in capital market or credit market uncertainty, followed
    by prolonged periods of economic instability or recession, that lead to:

       oSignificant or prolonged decline in the value of a particular
         security or group of securities and impairment of the asset(s)
       oSignificant decline in investment income due to reduced or eliminated
         dividend payouts from a particular security or group of securities
       oSignificant rise in losses from surety and director and officer
         policies written for financial institutions or other insured entities

  oProlonged low interest rate environment or other factors that limit the
    company's ability to generate growth in investment income or interest rate
    fluctuations that result in declining values of fixed-maturity
    investments, including declines in accounts in which we hold bank-owned
    life insurance contract assets
  oIncreased competition that could result in a significant reduction in the
    company's premium volume
  oDelays or performance inadequacies from ongoing development and
    implementation of underwriting and pricing methods or technology projects
    and enhancements expected to increase our pricing accuracy, underwriting
    profit and competitiveness
  oChanging consumer insurance-buying habits and consolidation of independent
    insurance agencies that could alter our competitive advantages
  oInability to obtain adequate reinsurance on acceptable terms, amount of
    reinsurance purchased, financial strength of reinsurers and the potential
    for non-payment or delay in payment by reinsurers
  oInability 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
  oEvents or conditions that could weaken or harm the company's relationships
    with its independent agencies and hamper opportunities to add new
    agencies, resulting in limitations on the company's opportunities for
    growth, such as:

       oDowngrades of the company's financial strength ratings
       oConcerns that doing business with the company is too difficult
       oPerceptions that the company's level of service, particularly claims
         service, is no longer a distinguishing characteristic in the
         marketplace

  oActions of insurance departments, state attorneys general or other
    regulatory agencies, including a change to a federal system of regulation
    from a state-based system, that:

       oImpose new obligations on us that increase our expenses or change the
         assumptions underlying our critical accounting estimates
       oPlace the insurance industry under greater regulatory scrutiny or
         result in new statutes, rules and regulations
       oRestrict our ability to exit or reduce writings of unprofitable
         coverages or lines of business
       oAdd assessments for guaranty funds, other insurance related
         assessments or mandatory reinsurance arrangements; or that impair our
         ability to recover such assessments through future surcharges or
         other rate changes
       oIncrease our provision for federal income taxes due to changes in tax
         law
       oIncrease our other expenses
       oLimit our ability to set fair, adequate and reasonable rates
       oPlace us at a disadvantage in the marketplace
       oRestrict our ability to execute our business model, including the way
         we compensate agents

  oAdverse outcomes from litigation or administrative proceedings
  oEvents or actions, including unauthorized intentional circumvention of
    controls, that reduce the company's future ability to maintain effective
    internal control over financial reporting under the Sarbanes-Oxley Act of
    2002
  oUnforeseen departure of certain executive officers or other key employees
    due to retirement, health or other causes that could interrupt progress
    toward important strategic goals or diminish the effectiveness of certain
    longstanding relationships with insurance agents and others
  oEvents, such as an epidemic, natural catastrophe or terrorism, that could
    hamper our ability to assemble our workforce at our headquarters location
  oDifficulties with technology or data security breaches, including cyber
    attacks, that could negatively affect our ability to conduct business and
    our relationships with agents, policyholders and others

Further, the company's insurance businesses are subject to the effects of
changing social, economic and regulatory environments. Public and regulatory
initiatives have included efforts to adversely influence and restrict premium
rates, restrict the ability to cancel policies, impose underwriting standards
and expand overall regulation. The company also is subject to public and
regulatory initiatives that can affect the market value for its common stock,
such as measures affecting corporate financial reporting and governance. The
ultimate changes and eventual effects, if any, of these initiatives are
uncertain.



Cincinnati Financial Corporation
Condensed Consolidated Balance Sheets (unaudited)
(In millions except per share data)                 December31,  December31,
                                                    2012          2011
ASSETS
 Investments
 Fixed maturities, at fair value (amortized    $   9,093     $   8,779
cost: 2012—$8,222; 2011—$8,084)
 Equity securities, at fair value (cost:           3,373         2,956
2012—$2,369; 2011—$2,162)
 Other invested assets                             68            66
 Total investments                              12,534        11,801
 Cash and cash equivalents                            487           438
 Investment income receivable                         115           119
 Finance receivable                                   75            76
 Premiums receivable                                  1,214         1,087
 Reinsurance recoverable                              615           622
 Prepaid reinsurance premiums                         26            24
 Deferred policy acquisition costs                    470           477
 Land, building and equipment, net, for company
use (accumulated depreciation: 2012—$397;               217           227
2011—$376)
 Other assets                                         61            93
 Separate accounts                                    734           671
 Total assets                                  $   16,548    $   15,635
LIABILITIES
 Insurance reserves
 Loss and loss expense reserves                $   4,230     $   4,339
 Life policy and investment contract reserves      2,295         2,214
 Unearned premiums                                    1,792         1,633
 Other liabilities                                    644           517
 Deferred income tax                                  469           303
 Note payable                                         104           104
 Long-term debt and capital lease obligations         827           821
 Separate accounts                                    734           671
 Total liabilities                                 11,095        10,602
SHAREHOLDERS' EQUITY
 Common stock, par value—$2 per share;
(authorized: 2012 and 2011—500 million                  394           393
shares;issued and outstanding: 2012—197 million
shares, 2011—196 million shares)
 Paid-in capital                                      1,134         1,096
 Retained earnings                                    4,021         3,863
 Accumulated other comprehensive income               1,129         901
 Treasury stock at cost (2012 and 2011—34             (1,225)       (1,220)
million shares)
 Total shareholders' equity                        5,453         5,033
 Total liabilities and shareholders' equity    $   16,548    $   15,635





Cincinnati Financial Corporation
Condensed Consolidated Statements of Income (unaudited)
(Dollars in millions except per share   Three months ended Twelve months ended
data)
                                        December 31,       December 31,
                                             2012     2011      2012     2011
Revenues
 Earned premiums                        $  917    $ 827    $  3,522  $ 3,194
 Investment income, net of expenses        136      132       531      525
 Realized investment gains and             13       (7)       42       70
(losses), net
 Fee revenues                              2        1         6        4
 Other revenues                            2        2         10       10
 Total revenues                         1,070    955       4,111    3,803
Benefits and Expenses
 Insurance losses and policyholder         482      488       2,322    2,524
benefits
 Underwriting, acquisition and             298      264       1,155    1,039
insurance expenses
 Interest expense                          13       14        54       54
 Other operating expenses                  4        3         14       13
 Total benefits and expenses            797      769       3,545    3,630
Income Before Income Taxes                   273      186       566      173
Provision (Benefit) for Income Taxes
 Current                                   42       36        102      27
 Deferred                                  39       16        43       (18)
 Total provision for income taxes       81       52        145      9
Net Income                               $  192    $ 134    $  421    $ 164
Per Common Share:
 Net income—basic                       $  1.18   $ 0.83   $  2.59   $ 1.01
 Net income—diluted                     $  1.17   $ 0.83   $  2.57   $ 1.01



Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP
Measures

(See attached tables for 2012 reconciliations; prior-period reconciliations
available at www.cinfin.com/investors.)

Cincinnati Financial Corporation prepares its public financial statements in
conformity with accounting principles generally accepted in the United States
of America (GAAP). Statutory data is prepared in accordance with statutory
accounting rules as defined by the National Association of Insurance
Commissioners' (NAIC) Accounting Practices and Procedures Manual, and
therefore is not reconciled to GAAP data.

Management uses certain non-GAAP and non-statutory financial measures to
evaluate its primary business areas – property casualty insurance, life
insurance and investments. Management uses these measures when analyzing both
GAAP and non-GAAP measures to improve its understanding of trends in the
underlying business and to help avoid incorrect or misleading assumptions and
conclusions about the success or failure of company strategies. Management
adjustments to GAAP measures generally: apply to non-recurring events that are
unrelated to business performance and distort short-term results; involve
values that fluctuate based on events outside of management's control; or
relate to accounting refinements that affect comparability between periods,
creating a need to analyze data on the same basis.

  oOperating income: Operating income is calculated by excluding net realized
    investment gains and losses (defined as realized investment gains and
    losses after applicable federal and state income taxes) from net income.
    Management evaluates operating income to measure the success of pricing,
    rate and underwriting strategies. While realized investment gains (or
    losses) are integral to the company's insurance operations over the long
    term, the determination to realize investment gains or losses in any
    period may be subject to management's discretion and is independent of the
    insurance underwriting process. Also, under applicable GAAP accounting
    requirements, gains and losses can be recognized from certain changes in
    market values of securities without actual realization. Management
    believes that the level of realized investment gains or losses for any
    particular period, while it may be material, may not fully indicate the
    performance of ongoing underlying business operations in that period.

    For these reasons, many investors and shareholders consider operating
    income to be one of the more meaningful measures for evaluating insurance
    company performance. Equity analysts who report on the insurance industry
    and the company generally focus on this metric in their analyses. The
    company presents operating income so that all investors have what
    management believes to be a useful supplement to GAAP information.
  oValue creation ratio: This is a measure of shareholder value creation that
    management believes captures the contribution of the company's insurance
    operations, the success of its investment strategy and the importance
    placed on paying cash dividends to shareholders. The value creation ratio
    measure is made up of two primary components: (1) rate of growth in book
    value per share plus (2) the ratio of dividends declared per share to
    beginning book value per share. Management believes this non-GAAP measure
    is a useful supplement to GAAP information, providing a meaningful measure
    of long-term progress in creating shareholder value. It is intended to be
    all-inclusive regarding changes in book value per share, and uses
    originally reported book value per share in cases where book value per
    share has been adjusted, such as adoption of Accounting Standards Updates
    with a cumulative effect of a change in accounting.
  oStatutory accounting rules: For public reporting, insurance companies
    prepare financial statements in accordance with GAAP. However, insurers
    also must calculate certain data according to statutory accounting rules
    as defined in the NAIC's Accounting Practices and Procedures Manual, which
    may be, and has been, modified by various state insurance departments.
    Statutory data is publicly available, and various organizations use it to
    calculate aggregate industry data, study industry trends and compare
    insurance companies.
  oWritten premium: Under statutory accounting rules, property casualty
    written premium is the amount recorded for policies issued and recognized
    on an annualized basis at the effective date of the policy. Management
    analyzes trends in written premium to assess business efforts. Earned
    premium, used in both statutory and GAAP accounting, is calculated ratably
    over the policy term. The difference between written and earned premium is
    unearned premium.



Cincinnati Financial Corporation
Balance Sheet Reconciliation
                        Three months ended        Twelve months ended December
(Dollars are per share) December 31,              31,
                           2012         2011          2012          2011
Book value change per
share
 Book value as
originally reported                   $ 31.16                    $  31.16
December 31, 2011
 Cumulative effect of
a change in accounting
for deferred policy
 acquisition costs,                 (0.13)                      (0.13)
net of tax
 Book value as
adjusted December 31,                 $ 31.03                    $  31.03
2011
 End of period book   $  33.48      $ 31.03     $   33.48      $  31.03
value - as adjusted
 Less beginning of
period book value - as     32.95        29.41         31.03         30.79
adjusted
 Change in book value $  0.53       $ 1.62      $   2.45       $  0.24
- as adjusted
Value creation ratio
 End of period book
value - as originally   $  33.48      $ 31.16     $   33.48      $  31.16
reported
 Less beginning of
period book value - as     32.95        29.54         31.16         30.91
originally reported
 Change in book value
- as originally            0.53         1.62          2.32          0.25
reported
 Dividend declared to    0.4075       0.4025        1.62          1.6050
shareholders
 Total contribution
to value creation       $  0.9375     $ 2.0225    $   3.94       $  1.8550
ratio
 Contribution to
value creation ratio       1.6     %    5.5    %      7.4     %     0.8     %
from change in book
value*
 Contribution to value
creation ratio from        1.2          1.3           5.2           5.2
dividends declared to
shareholders**
 Value creation ratio    2.8     %    6.8    %      12.6    %     6.0     %
* Change in book value divided by the beginning of period book value as
originally reported
** Dividend declared to shareholders divided by beginning of period book
value as originally reported



Net Income Reconciliation
                                       Three months ended  Twelve months ended
(In millions except per share data)
                                       December 31,       December 31,
                                       2012      2011      2012      2011
Net income                            $ 192     $ 134     $ 421     $ 164
Net realized investment gains and        9         (5)       28        45
losses
Operating income                        183       139       393       119
Less catastrophe losses                  (19)      14        (217)     (261)
Operating income before catastrophe    $ 202     $ 125     $ 610     $ 380
losses
Diluted per share data:
 Net income                         $ 1.17    $ 0.83    $ 2.57    $ 1.01
 Net realized investment gains and     0.06      (0.03)    0.17      0.28
losses
 Operating income                     1.11      0.86      2.40      0.73
 Less catastrophe losses               (0.12)    0.09      (1.33)    (1.60)
 Operating income before catastrophe $ 1.23    $ 0.77    $ 3.73    $ 2.33
losses

Cincinnati Financial Corporation
Property Casualty Reconciliation
                    Three months ended December 31, 2012
                    Consolidated     Commercial    Personal      E&S
Premiums:
 Written premiums $    837         $  588        $  222        $  27
 Unearned              32             30            4             (2)
premiums change
 Earned premiums  $    869         $  618        $  226        $  25
Statutory ratio:
 Statutory             82.9     %     84.1    %     80.7    %     70.5    %
combined ratio
 Contribution
from catastrophe         3.4            3.1           4.4           1.2
losses
 Statutory
combined ratio           79.5     %     81.0    %     76.3    %     69.3    %
excluding
catastrophe losses
 Commission            20.4     %     20.2    %     20.4    %     26.4    %
expense ratio
 Other expense         12.6           14.2          8.8           5.9
ratio
 Statutory             33.0     %     34.4    %     29.2    %     32.3    %
expense ratio
GAAP ratio:
 GAAP combined         81.9     %     82.9    %     80.0    %     71.5    %
ratio
 Contribution
from catastrophe         3.4            3.1           4.4           1.2
losses
 Prior accident
years before             (12.5)         (12.5)        (12.3)        (15.3)
catastrophe losses
 GAAP combined
ratio excluding
catastrophe losses
and prior
 years             91.0     %     92.3    %     87.9    %     85.6    %
reserve development
                    Twelve months ended December 31, 2012
                    Consolidated     Commercial    Personal      E&S
Premiums:
 Written premiums $    3,482       $  2,459      $  918        $  105
 Unearned              (138)          (76)          (50)          (12)
premiums change
 Earned premiums  $    3,344       $  2,383      $  868        $  93
Statutory ratio:
 Statutory             95.4     %     92.1    %     104.0   %     100.8   %
combined ratio
 Contribution
from catastrophe         10.0           8.2           15.9          2.2
losses
 Statutory
combined ratio           85.4     %     83.9    %     88.1    %     98.6    %
excluding
catastrophe losses
 Commission            18.9     %     18.5    %     19.3    %     25.9    %
expense ratio
 Other expense         12.6           14.1          9.5           5.5
ratio
 Statutory             31.5     %     32.6    %     28.8    %     31.4    %
expense ratio
GAAP ratio:
 GAAP combined         96.1     %     92.5    %     105.3   %     101.0   %
ratio
 Contribution
from catastrophe         10.0           8.2           15.9          2.2
losses
 Prior accident
years before             (10.7)         (11.6)        (8.9)         (5.6)
catastrophe losses
 GAAP combined
ratio excluding
catastrophe losses
and prior
 years             96.8     %     95.9    %     98.3    %     104.4   %
reserve development
Dollar amounts shown are rounded to millions; certain amounts may not add due
to rounding. Ratios are calculated based on whole dollar amounts.

SOURCE Cincinnati Financial Corporation

Website: http://www.cinfin.com
Contact: Investors, Dennis E. McDaniel, +1-513-870-2768, CINF-IR@cinfin.com or
Media, Joan O. Shevchik, +1-513-603-5323, Media_Inquiries@cinfin.com