Cincinnati Financial Puts Katrina Losses at $34 Million

Cincinnati Financial Corporation today announced a preliminary estimate of approximately $34 million, net of reinsurance, for pretax catastrophe losses resulting from Hurricane Katrina. The August hurricane affected policyholders in several southern states with most of The Cincinnati Insurance Companies’ claims occurring in Alabama.

By the middle of last week, Cincinnati teams were on the ground in Mobile and Birmingham, Alabama, to assist local independent agencies and our local field claims staff in identifying losses and paying claims. Since that time, claims associates have made initial contact with more than 1,100 policyholders and closed approximately 20 percent of reported claims.

Earlier in the third quarter, the company incurred approximately $11 million in pretax catastrophe losses resulting from Hurricane Dennis, which affected policyholders in Alabama, Florida, Georgia and Mississippi. In the quarter, the company also will record an estimated $8 million reinsurance reinstatement premium to restore layers of its property catastrophe reinsurance treaty expected to be used for Katrina losses. Based on the estimate for Hurricane Dennis and the preliminary estimates for Hurricane Katrina, third-quarter catastrophe losses are expected to contribute approximately 6 percentage points to the company’s third-quarter property casualty GAAP combined ratio, net of reinsurance. The impact on after-tax earnings per share for the third quarter is expected to be approximately 20 cents.

For the third-quarter 2004 period, catastrophe losses were $86 million, net of reinsurance, which contributed 11.8 percentage points to the combined ratio, with a 31 cent impact on earnings per share. In last year’s third quarter, the company recorded an $11 million reinsurance reinstatement premium. (Per share amounts have been adjusted for the 5 percent stock dividend paid April 2005.)

The company’s loss estimate includes losses from claims already received as well as estimates of claims that have not yet been reported. Total losses before reinsurance from Hurricane Katrina are expected to be approximately $70 million. Approximately $28 million of the estimate is related to claims in Alabama, where the company actively markets property casualty insurance. Another approximately $37 million is related to claims in Louisiana and Mississippi, primarily associated with several large national accounts with locations and vehicles in those states. The Cincinnati Insurance Companies do not actively market property casualty insurance in Louisiana and Mississippi.

The company believes its full-year 2005 GAAP combined ratio will be at or below 93 percent. Through the first half of 2005, that ratio was 88.2 percent, including 1.1 percentage points from $17 million in catastrophe losses, an unusually low level. However, the company typically experiences heavy property losses due to weather-related events in the second and third quarters. The 2005 outlook is based on full-year storm losses of approximately $105 million that would contribute approximately 3.5 percentage points to the full-year combined ratio.

Cincinnati’s reinsurance program protects against catastrophic events such as wind and hail, hurricanes or earthquakes. Under the 2005 property catastrophe reinsurance treaty, the company retains the first $25 million in losses arising from a single event and 40 percent of losses from $25 million to $45 million. The company retains only 5 percent of losses between $45 million and $500 million. The company has received no information on which to develop estimates of any potential windpool assessments.

Cincinnati Financial Corporation offers property and casualty insurance through The Cincinnati Insurance Company, The Cincinnati Indemnity Company and The Cincinnati Casualty Company. The Cincinnati Life Insurance Company markets life and disability income insurance and annuities. CFC Investment Company offers commercial leasing and financing services. CinFin Capital Management Company provides asset management services to institutions, corporations and individuals.