A.M. Best Removes from Under Review and Downgrades the Ratings of The Cincinnati Financial Corporation and Its Subsidiaries

A.M. Best Co. has removed from under review with negative implications and downgraded the financial strength ratings (FSR) to A+ (Superior) from A++ (Superior) and issuer credit ratings (ICR) to "aa” from "aa+” of The Cincinnati Insurance Companies (CIC) and its standard market property/casualty members. Concurrently, A.M. Best has removed from under review and downgraded the FSR to A (Excellent) from A+ (Superior) and ICR to "a+” from "aa-” of The Cincinnati Life Insurance Company (Cincinnati Life). Additionally, A.M. Best has removed from under review and downgraded the ICR and senior debt ratings to "a” from "aa-”of CIC and Cincinnati Life’s publicly traded parent, Cincinnati Financial Corporation (CINF) [NASDAQ: CINF]. The outlook assigned to these ratings is stable.

A.M. Best also has affirmed the FSR of A (Excellent) and ICR of "a” of The Cincinnati Specialty Underwriters Insurance Company (CSU) (Delaware), a wholly owned separately rated subsidiary of The Cincinnati Insurance Company, the lead property/casualty company. The outlook for CSU remains stable. All companies are domiciled in Fairfield, OH except where specified.

These rating actions reflect the rapid decline in the value of CINF's equity portfolio, along with an associated decline in future dividend income from that portfolio, resulting in a significant decline in GAAP equity and investment income. The rapid decline in equity was accentuated by CINF’s historical investment concentration in the financial services/bank sector, namely its holding of Fifth Third Bancorp. The company has sold approximately 80% of its Fifth Third shares since the end of the third quarter of 2007 and reduced other financial holdings. Earnings were further impacted by significant catastrophic losses from Hurricane Ike and a variety of Midwestern and southern storms through third quarter 2008 and remain susceptible to competitive pricing pressures.

Despite CINF’s continued exposure to the vagaries of the capital markets, the stable outlook on all ratings reflects CINF’s enhanced risk management processes, sound liquidity, superior risk-adjusted capitalization of its operating entities and successful business profile within its targeted regional markets, which centers on a distribution system developed through strong relationships with local independent insurance agencies.

Management has implemented a more robust and enhanced risk management process, which includes the identification, qualification, correlation and quantification of risk, resulting in the rebalancing of its investment portfolio since mid year. However, the potential equity market volatility remains a concern as common stocks make up approximately 30% of CINF’s cash and invested assets and nearly 50% of estimated statutory surplus of CIC as of mid-December 2008. The group maintains a large, highly rated and diversified fixed income portfolio that covers its insurance liabilities.

Despite the decline in GAAP equity and earnings through third quarter 2008, CINF’s financial leverage increased only modestly at over 15%, and coverage ratios, albeit negatively impacted, remain sound. In addition, CINF maintains sound liquidity as evidenced by cash and marketable securities, which should enable it to navigate the uncertainties associated with the current capital market environment over the near term.

As measured by Best’s Capital Adequacy Ratio (BCAR), CIC’s capitalization continues to support its ratings. Nevertheless, the magnitude and confluence of recent events have resulted in a reduction in the group’s flexibility to address further deterioration.

The ratings for CIC reflect its superior risk-adjusted capitalization, very strong five-year average operating performance, historically redundant reserves and highly successful business profile within its targeted regional markets, which centers on a distribution system developed through strong relationships with local independent insurance agencies. These strengths have enabled CIC to generate solid operating results through underwriting cycles. Offsetting these strengths are CIC's geographic concentration in the Midwest and Southeast, which exposes it to economic, legislative and judicial changes and weather and catastrophe related losses as well as continued high common stock investment leverage.

The ratings of Cincinnati Life reflect its strategic value within CINF, which allows for cross selling of its core life products with property and casualty agents. The ratings also reflect its lower but more than adequate risk-adjusted capital position and diverse portfolio of life insurance product offerings. Offsetting these factors are the company’s large level of realized investment losses recorded in 2008, lower unrealized gains in its investment portfolio, the resulting reduction in capital, the reduced level of reported earnings and relatively high exposure to equities on the balance sheet.

The rating of CSU reflects its excellent level of risk-adjusted capital and the explicit and implicit support garnered from being part of CINF. Somewhat offsetting these positive rating factors are the execution risks associated with this new excess and surplus (E&S) initiative, as management has not offered E&S coverages in the past.

The FSR has been downgraded to A+ (Superior) from A++ (Superior) and the ICRs to "aa” from "aa+” for The Cincinnati Insurance Companies and its following property/casualty members:

• The Cincinnati Insurance Company
• The Cincinnati Indemnity Company
• The Cincinnati Casualty Company

The FSR has been downgraded to A (Excellent) from A+ (Superior) and ICR to "a+” from "aa-” for The Cincinnati Life Insurance Company.

The FSR of A (Excellent) and ICR of "a” of The Cincinnati Specialty Underwriters Insurance Company have been affirmed.

The ICR has been downgraded to "a” from "aa-” for Cincinnati Financial Corporation and its following debt issues:

Cincinnati Financial Corporation—

-- $28 million 6.90% senior unsecured debentures, due 2028

-- $375 million 6.125% senior unsecured notes, due 2034

-- $392 million 6.92% senior unsecured debentures, due 2028

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.