Cincinnati Financial Corp. Notes Status of Ohio UM/UIM Reserves

December 12, 2003

Cincinnati Financial Corporation announced that the Ohio Supreme Court’s recent reversal of its Scott-Pontzer decision could result in the release of approximately $75 million in uninsured motorist/underinsured motorist (UM/UIM) reserves.

This amount would include some Cincinnati Insurance Company reserves for losses incurred but not yet reported (IBNR) as well as case reserves for reported claims, including approximately $6 million in case reserves released in November 2003. Because the court still must rule on motions to reconsider the reversal, the company believes it is premature to release all Scott- Pontzer-related reserves or specify the timing of their potential release.

In the Nov. 5, 2003, decision, the court ruled that an employer’s commercial automobile insurance policy only covers injured employees and only when the accident happens in the course and scope of their employment. UM/UIM claims dating back as far as 15 years would be affected by the court’s recent decision.

In 1999, the Ohio Supreme Court’s decision in Scott-Pontzer v. Liberty Mutual greatly increased the exposure on commercial auto insurance policies. That ruling extended commercial UM/UIM coverage in force over the past 15 years to employees when they were not at work and to their resident family members. It contributed to changes in policy wording for UM/UIM coverage. Additionally, the same court’s 2000 decision in Linko v. Indemnity effectively caused insurers to extend UM/UIM coverage, at the newly increased level of exposure, to every auto insurance policy in Ohio at no additional premium. The court rulings affected all auto insurers in the state.

The company established case reserves of approximately $40 million in 1999 and 2000. In addition, the company established a $110 million IBNR reserve, net of reinsurance, for past UM/UIM losses incurred but not yet reported in 2000. Over the past three years, the company had reduced the IBNR reserve to $18 million as of Nov. 1, 2003, as it established case reserves and paid approximately $55 million to claimants.

Chairman and Chief Executive Officer John Schiff, Jr. noted, “Following the court’s 1999 and 2000 Scott-Pontzer and Linko decisions, we moved quickly to protect our policyholders from court-mandated responsibilities they never intended to fund. At the same time, we have been fulfilling our obligations, as the court deemed, under coverages that had been in place over the prior years.

“The court’s recent reversal is good for policyholders, good for our state and good for the insurance industry. Presuming the court sustains its opinion, our shareholders also will benefit from the contribution to earnings of the released reserves.”

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