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A.M. Best Downgrades Issuer Credit Ratings Of Cincinnati Financial Corporation And Certain Property/Casualty Subsidiaries; Affirms Financial Strength Ratings

A.M. Best Co. has downgraded the issuer credit ratings (ICR) to “aa-” from “aa” and affirmed the financial strength rating (FSR) of A+ (Superior) of The Cincinnati Insurance Companies (CIC) and its standard market property/casualty members. Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a+” of The Cincinnati Life Insurance Company (Cincinnati Life). Additionally, A.M. Best has downgraded the ICR to “a-” from “a” and debt ratings of CIC and Cincinnati Life’s publicly traded parent, Cincinnati Financial Corporation (CINF) [NASDAQ: CINF]. All companies are domiciled in Fairfield, OH, except where specified. The outlook for 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) (Wilmington, DE), a wholly owned, separately rated subsidiary of The Cincinnati Insurance Company, the lead property/casualty company. The outlook for CSU remains stable.

The rating action to CIC’s ICR reflects the continued deterioration of its underwriting results in recent years. The primary source of this recent deterioration has been above-average catastrophe-related losses recorded due to CIC’s concentrated business profile. Lackluster results in the workers' compensation line of business also have contributed to the decline in underwriting performance, although to a lesser extent. As a result, the group’s underwriting and operating performance measures are no longer in line with similarly rated peers.

Furthermore, the group’s market profile is somewhat geographically concentrated relative to its rating level, as nearly 50% of its writings are derived from six states in the Midwest and Southeast. The group is therefore exposed to economic, legislative and judicial changes, as well as weather and catastrophe-related losses, as evidenced by significant losses in more recent accident years. In the first nine months of 2011, CIC reported in excess of $400.0 million in catastrophe-related losses, which is expected to add approximately 14.5 points on the year-end combined ratio.

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