1
EXHIBIT 13

Material incorporated by reference from the annual report of the registrant to
the shareholders for the year ended December 31, 2000.

16. SEGMENT INFORMATION

The Company is organized and operates principally in two industries and has
four reportable segments - commercial lines property casualty insurance,
personal lines property casualty insurance, life insurance and investment
operations. The accounting policies of the segments are the same as those
described in the basis of presentation. Revenue is primarily from unaffiliated
customers. Identifiable assets by segment are those assets, including investment
securities, used in the Company's operations in each industry. Corporate and
other identifiable assets are principally cash and marketable securities.
Segment information, for which results are regularly reviewed by Company
management in making decisions about resources to be allocated to the segments
and assess their performance, is summarized in the following table. Information
regarding income before income taxes and identifiable assets is not available
for two reportable segments - commercial lines and personal lines - property
casualty insurance.
(000s omitted):

Years Ended December 31,

REVENUES 2000 1999 1998
-------------------------------------------------

INCOME BEFORE INCOME TAXES
Property casualty insurance ....... $ (225,342)* $ 3,241 $ (59,438)
Life insurance .................... 1,362 (903) (1,776)
Investment operations ............. 379,088 355,643 403,925
Corporate and other ............... (46,444) (36,408) (35,604)
------------ ------------ ------------
Total income before income taxes $ 108,664* $ 321,573 $ 307,107
============ ============ ============

IDENTIFIABLE ASSETS
Property casualty insurance ....... $ 6,487,819 $ 5,800,182 $ 5,879,064
Life insurance .................... 1,619,169 1,441,657 1,203,908
Corporate and other ............... 5,180,103 4,565,840 4,399,458
------------ ------------ ------------
Total identifiable assets ...... $ 13,287,091 $ 11,807,679 $ 11,482,430
============ ============ ============

* 2000 results include a one-time net charge for asset impairment of $39.1
million, before tax.

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A TRADITION OF VALUE

Cincinnati Financial Corporation stands among the nation's strongest and most
financially stable insurer groups. This is reflected in our dividends, our
ratings and the way we manage operations.

DIVIDENDS

In 2000, we returned more than $186 million to shareholders, including cash
dividends and repurchases of 2.1 million shares at an average price of $30.90
per share. In November, the Board extended indefinitely the repurchase period
for the 9.1 million remaining shares left on the authorization.

Dividends paid per share rose to 74 cents in 2000 from 23 2/3 cents in 1990,
adjusted for stock dividends and splits. That's a 12% compound growth rate for
the past 10 years. Further, the Board declared a 10.5% increase in the dividend
during the first quarter of 2001, raising the indicated annual dividend to 84
cents per share. The vote to continue the trend of increasing dividends reflects
the Board's confidence in our financial strength, business strategy, our
associates and agents.

INDEPENDENT RATINGS AGENCIES

Following our announcement of the $110 million reserve addition for uninsured
motorist losses, Standard & Poor's lowered its rating of our corporate senior
debentures to A+ (Strong) and its ratings of our insurance companies to AA-
(Very Strong). These are Security Circle ratings reserved for the top tier of
companies. S&P's decision reflects its negative outlook for the overall
insurance industry, and within that context, your Company's relative operational
and investment risk.

Other leading rating firms maintained their high ratings. A. M. Best, the
oldest and most authoritative insurance rating firm, awards our property
casualty companies its A++ (Superior) rating, for which fewer than 3% of insurer
groups qualify. Best awards Cincinnati Life the A+ (Superior) rating. Moody's
Investors Service has maintained the A2 rating on our corporate debentures and
the Aa3 rating of the property casualty companies.

The Cincinnati Insurance Companies remain strong, with year-end statutory
surplus of the property casualty companies at $2.761 billion, up 10.5% from
$2.499 billion at the end of 1999. Cincinnati Life's statutory surplus is $411.1
million, up 16.4% from $353.2 million. These increases were achieved during a
year when property casualty industry surplus declined 4.3%, as estimated by A.
M. Best.

Cash flow always has been more than adequate to pay claims, and we have never
sold off investments for that purpose. We buy and hold equities,

confident in the long-term appreciation potential of the well-managed companies
we select and monitor. Accumulated unrealized gains in our $11.247 billion
consolidated investment portfolio reached $4.156 billion, after tax, at year-end
2000, boosted by our financial equity holdings, which tend to outperform the
market in a declining interest rate environment.

RANKINGS (published in 2000 and generally based on 1999 performance)

The success of the Cincinnati formula for building
value is reflected in high national rankings:

- - FORBES (APRIL 17, 2000): Cincinnati Financial ranked 349(th) among the top 500
for profits and 250(th) for assets, with a Super Rank of 397. The Super Rank
compares all 895 companies appearing on any of the top 500 lists for market
value, sales, profits or assets.

- - FORTUNE (APRIL 17, 2000): Cincinnati Financial was the 17(th) largest U.S.
stock property casualty insurer, ranking seventh within that group for total
return to investors and fifth for two-year return. We ranked 653(rd) among the
Fortune 1000 U.S. industrial and service corporations, based on revenues.

- - BEST'S REVIEW (JULY 2000): The Cincinnati Insurance Companies ranked 34(th)
among property casualty insurers based on net written premiums. In the
commercial multi-peril line, our rank was 15(th) with a 2% market share. On
the life side, Cincinnati Life was the top net premium gainer in the country
by percent change, due to the sale of a large bank-owned life insurance
policy.

- - BEST'S VIEWPOINT (AUGUST 7, 2000): Cincinnati ranked 22(nd) among leading
property casualty insurers based on surplus and 29(th) based on net income.

- - BUSINESS INSURANCE (AUGUST 21, 2000): We were one of only 10 companies named
to both the property casualty and life/health Ward's 50 Benchmark Groups of
insurers with outstanding financial safety, consistency and performance over
five years. Cincinnati Insurance was one of only 13 companies named to Ward's
50 for 10 consecutive years.

- - 2000 MERGENT'S (FORMERLY MOODY'S) HANDBOOK OF DIVIDEND ACHIEVERS: Cincinnati
Financial ranked 20(th) for the longest record of dividend achievement, with
39 consecutive years (now 40) of annual dividend increases.

- - BUSINESS WEEK (DECEMBER 25, 2000): Cincinnati Financial scored high as an
investment opportunity, due to its S&P Equity Ranking of A and its relatively
low price-to-book ratio.

PROPERTY CASUALTY
INSURANCE OPERATIONS

GROWTH

At 11.9% for the year, overall growth of net written premiums continued at
more than double the 5% industry growth estimated by A. M. Best. Commercial
premiums rose 16.0% to $1.275 billion, while premiums for personal lines of
insurance rose 4.3% to $605.7 million.

While we benefited substantially from price increases averaging 10-15% for
commercial accounts, the primary driver of growth was the new business our
agents put on the books. Annualized new business written by agents rose 31% to
$275.4 million, for our best new business year ever. Commercial new business
rose 42.0% to $229.6 million, with increased production across a broad range of
territories and lines. Personal lines new business was $45.8 million in 2000
compared with $48.6 million in 1999. Growth in personal lines will remain at or
below industry levels pending rate increases in the homeowner and auto insurance
marketplace and progress on Company automation initiatives.

During 2000, we opened a territory in Utah, our 31(st) state of operations,
appointing three large agencies and writing more than $1 million of net premium.
States launched over the past four years - Utah, Idaho, upstate New York,
Montana and North Dakota--accounted for $16.8 million of premium; states
launched over the past nine years reached $89.4 million, or approximately 5% of
total volume.

Over the same nine years, we also increased service to our agents and premium
per agency by staffing 20 new marketing territories in established states,
including Eastern Pennsylvania, Southeastern Michigan and Minneapolis in 2000. A
new Chicago territory was staffed in January 2001, and planning has begun to
open additional Maryland, Kentucky and Charlotte, North Carolina territories
this year.

When entering new states and appointing new agencies, we generally target
cautious growth, concentrating on forming relationships, developing an
underwriting partnership and communicating our appetite for specific types of
business. By expanding at a steady, deliberate pace, we are gradually becoming
less geographically concentrated. Ohio accounted for 31.7% of

premium in 1992, declining to 25.6% in 2000. Our top four states accounted for
less than half of total premium volume in 2000, down from 61.0% in 1992.

Like the elite corps of Cincinnati agencies they join, the 23 new agencies
appointed during 2000 are the premier agencies in their communities.
Significantly, we also appointed 24 branches of established agencies, bringing
total agency relationships after closings to 969 and total agency locations to
1,233. Many of today's Cincinnati agencies are larger, stronger survivors of
agency consolidation and acquirers of other agencies. Thirty-three percent of
Cincinnati's independent agencies have total annual premium volume in excess of
$10 million. According to the recent Future One Agency Universe Study, only 13%
of agencies nationwide produce at this level.

In 2000, our agents gave Cincinnati almost 20% of their total premium, writing
nearly $2 million per agency relationship. While this penetration is
outstanding, we are taking steps to grow with each agency.

- - Our Cross-Serving initiative provides educational and technical assistance for
agencies to prospect additional sales to their current clients, increasing
customer loyalty and decreasing agency expenses. A customer relationship
management approach encourages integrated, customized insurance programs and
personal service.

- - As agencies streamline their operations by consolidating carriers, we expect
continued success attracting rollover books formerly placed with other
personal lines carriers. During 2000, agents gave us 38 rollovers with annual
premiums of $11.2 million. Because our agents controlled these accounts and
knew their loss history, we had assurance that these rollovers were quality
business.

- - On the commercial side, agents moved more than 700 new dentist accounts to
Cincinnati during 2000.

Already the officially endorsed carrier of the prestigious Chicago Dental
Society, we secured a new endorsement from the Vermont State Dental Society.
The dentist's program broke the $20 million mark in 2000, and coverage
enhancements slated for 2001 will make the product even more saleable.

- - We continuously improve products to incorporate differentiating features that
let agents compete on value and service instead of price. During 2000, we
updated products for cosmetologists and barbers, introduced superior business
income coverage for large manufacturing clients and made new and improved
products available for contractors whose policies often must provide coverage
for other project partners.

PROFITABILITY

As reported in the Letter to Shareholders on Pages 2-5, profitability of our
property casualty insurance companies was reduced by court decisions affecting
all insurers that write Ohio auto policies, by rapidly changing technology and
by rising cost inflation in the general economy. Our combined loss and expense
ratio was 110.7%, including 6.0 points for the uninsured motorist reserve
addition and excluding 1.8 points for the one-time technology charge. This
result compares with 100.4% in 1999 and A.M. Best's industry estimate of 110.3%
for 2000.

The pure loss ratio for commercial lines was 71.2% in 2000 versus 61.4% in
1999. For personal lines, it was 71.1% in 2000 and 62.0% last year. While we
continue to underwrite flexibly based first on agency relationships and overall
account quality, we are addressing loss severity in commercial auto, with a
108.0% pure loss ratio and in the homeowner line, with an 83.9% loss ratio.
Targeting a return to the historic profitability indicated by our 101.3% average
combined ratio over the previous over years, we are working from our historic
strengths to manage factors within our control.
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First, from the underwriting standpoint, we have instituted more conservative
standards by class of risk, particularly for commercial auto and workers'
compensation. In addition to loss history, underwriters are giving more weight
at renewal to loss-predictive information such as updated motor vehicle reports
and driver experience records on commercial auto risks.

Second, we are leveraging our large, empowered field staff and their extensive
local knowledge. Marketing representatives are reaffirming agreements on the
extent of frontline underwriting to be performed by agents. They are engaging
the entire team of local claims, engineering and loss control representatives
who get a bird's-eye view of the risk in the course of providing services to the
policyholder. At renewal discussions with the agent, this team confirms that
risks measure up to the same high quality as when the policies were first
written.

Marketing representatives have stepped up risk inspections on new and renewal
business, and claims representatives are conducting on-site inspections and
preparing full risk reports for every account reporting a loss above $100,000.
Field claims representatives now have access to specialists in estimating
property construction claims.

Third, we are following through on our commitment to stay customer-centered
and agent-focused:

- - During 2000 we provided tools to help agents verify that their homeowner
clients are fully protected by selling insurance to value, the level of
coverage that will allow them to repair or replace their home.

- - We are preparing to test an innovative use of credit scores as a criteria for
participation in payment plans, rather than as underwriting criteria to
restrict availability of coverage.

- - And during 2000, our Best Practices program helped agencies work toward their
full potential as frontline underwriters and producers of personal lines. This
program supports agents with field seminars and one-on-one consultation for
workflow and marketing plan review, as well as producer recruitment and
training.
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LIFE INSURANCE OPERATIONS

Cincinnati Life is a valued strategic member of the Cincinnati family of
insurance companies. During 2000, Cincinnati Life contributed $32.3 million of
net operating income, up from $28.1 million in 1999. Gross written premiums were
$157.3 million.

This growth was achieved profitably, with expenses offset by rising investment
income and rising premiums (excluding large, single-premium, bank-owned life
insurance "BOLI" policies) and good mortality experience. Strong new product
offerings -- including enhanced term, universal life and annuity portfolios -
contributed to 11.7% growth in net written premiums, excluding BOLI. New term
insurance regulations, which went into effect January 1, 2000, pushed first-year
term premiums up 41%. Ordinary life applications rose 9% and structured
settlement premiums reached a record $23 million - up 90% from 1999.

BOLI, which played so large a role in top-line growth during 1999 highlighted
by the sale of a $302.9 million single-premium policy, continues to be a source
of opportunity. Cincinnati Life is aggressively marketing this product, which
generally involves a six- to twelve-month sales process. During 2000, Cincinnati
Life reported $20.0 million in premium from BOLI. The Company now protects more
than 1,000 lives through BOLI and has more than $1 billion in force.

With an already strong product portfolio, and with individual disability
products and a series of next-generation whole life, term and universal products
on the horizon, Cincinnati Life delivers outstanding value to our dedicated
agency force. In addition to providing independent life agencies with the
strength and reliability of the Cincinnati name, the Company provides property
casualty agents with a competitive edge. A complete portfolio designed to meet
the life and property casualty insurance needs of customers simplifies
transactions both for agents and policyholders. And the fact that all of these
needs can be met by an agent and a company the consumer knows and trusts makes
doing business with Cincinnati easy.

At the same time, we are expanding our network of independent life agencies.
We appointed 56 new agencies last year: 50 independent life agencies where the
Company already had property casualty representation and six agencies in areas
outside of property casualty states. Cincinnati Life also entered Maine during
2000. During the coming year, we expect to further develop markets in the West
and the Northeast.

All of these appointments, all of these expansions, occur with the careful
selection and agency nurturing that has become a hallmark of The Cincinnati
Insurance Companies. A genuine commitment to servicing our customers -
independent insurance agents - demonstrates that Cincinnati supports our agents.
Dozens of seminars held around the country

during 2000 introduced independent agents to Cincinnati Life products and
services, to advanced marketing strategies, to worksite marketing, to long-term
care products and to Cincinnati's Cross-Serving initiative - the Company's own
brand of customer relationship management. Nearly 3,000 agents benefited from
these workshops, and Cincinnati Life will remain committed to this type of
service and training in the years ahead.

Cincinnati service also was evident in technological initiatives launched in
2000. The life operations piloted imaging technology for the Corporation and
introduced an enhanced application tracking system. Another new development,
tele-underwriting, enables agents to phone in basic information and let
Cincinnati complete the application process. These technologies speed service to
agents and allow for a concentration on client relationships rather than on
paperwork. Similar initiatives and movements toward automated workflow and
information management are planned for the year ahead.

As Cincinnati Life looks toward our future, we remain committed to the values
that shaped our past: an absolute commitment to service, strength and profitable
growth over the long term.

FINANCIAL SERVICES

Service is a key differentiating factor for The Cincinnati Insurance
Companies, and CFC Investment Company is a tangible example of Cincinnati's
commitment to service.

CFC Investment Company writes equipment and vehicle leases and loans for
independent insurance agents, their commercial customers and other businesses.
We also provide commercial real estate loans to agents. These are services that
help agencies operate and expand their businesses - both physically and as a
means of becoming more comprehensive financial service providers themselves.
Agents referring clients to CFC Investment Company receive finders' fees, making
the relationship with CFC Investment Company rewarding for them as well as their
clients.

During 2000, net after-tax earnings for CFC Investment Company were $2.2
million.

Gross receivables reached $93.4 million. During 2001, CFC Investment Company
plans to subdivide territories in Ohio, committing more resources to our home
state agency base.

CinFin Capital Management, Cincinnati Financial Corporation's asset management
services subsidiary, grew during 2000, finishing the year with $536.3 million
under management and nearly doubling the client base it had during 1999, our
first full year of operation. Twenty-seven clients - up from 14 in 1999 - trust
Cincinnati to protect their financial futures.

CinFin's investment strategy mirrors the strategy of our parent company -
equity-based portfolios that center on best-in-class companies. Each client's
portfolio is custom-made according to the unique needs and risk appetite of the
individual or institution. Regular contact, both formal and informal, ensures
that clients know and understand their investments, and that they are
comfortable with the results.

Current and prospective clients include corporations, insurance agencies,
pension plans, endowment funds and high net-worth individuals. In 2001, CinFin
is evaluating plans for a new, separate account with a lower minimum than the
$500,000 required for individually managed accounts. Such a product would
broaden the appeal of the financial services company and help leverage the
Cincinnati name.

INVESTMENTS

Cincinnati Financial Corporation's investment strategy - heavily weighted
toward a small group of high-quality equity investments - is atypical for the
insurance industry. At its core are the same philosophies that guide insurance
operations at the Company - deep relationships, deep understanding and deep
commitment for the long term.

Cincinnati carefully selects a small group of equities, gains an understanding
of their industry, develops relationships with the management of each firm, and
holds them for the long-term. Overall, the Company's equity portfolio produced a
compounded annual return of 25.5% over the past five years, compared with 18.3%
for the Standard & Poor's 500 Index. Notably, in 2000, the Company's equity
portfolio returned 16.7% compared with the 9.1% decline of the same index.
Thirty of the 45 common stocks in our portfolio raised their dividends, adding
$12.8 million to gross investment earnings on an annualized basis. This type of
performance year after year affirms the value of Cincinnati's investment
strategy - a source of the Company's financial strength.

Bonds, too, are an important component of our portfolio.

Fixed-income investments in corporate, municipal, public utility and other bonds
help the Company meet insurance obligations and provide a steady stream of cash
flow. Cincinnati continues to focus on medium-risk bonds, reducing its appetite
for high-yield, non-investment grade bonds. Non-investment grade bonds comprised
just 5.3% of the Company's portfolio at year-end 2000, compared with 7.5% in
1999. While the Company experienced some realized losses in the bond portfolio,
partly due to higher interest rates and deteriorating economic conditions, most
were offset by gains in the stock portfolio.

Overall, higher interest rates in 2000 improved the growth rate for investment
income, with pre-tax revenue climbing 6.0% to a record $410.0 million, excluding
income recorded in the first quarter from a single-premium, bank-owned life
insurance policy sold in the fourth quarter of 1999. The total value of the
portfolio - $11.247 billion at year-end - rose 11.0% over 1999.

While higher interest rates allow us to grow investment income at an increased
rate, declining interest rates also benefit the Company, both in the bond and
equity portfolios. An inverse relationship between interest rates and bond value
will benefit the fixed-income portfolio. Financial securities - the core of
Cincinnati's portfolio - also tend to react favorably to lower interest rates.

With continued confidence in the Company and its value, Cincinnati Financial
Corporation repurchased 2.1 million shares of CFC common stock during 2000 at an
average purchase price of $30.90. The Company has 9.1 million shares remaining
on the repurchase authorization and will continue to buy back shares when such
action benefits earnings per share and book value. During 2000, book value for
Cincinnati Financial Corporation rose 11.4% to $37.26, with shareholders' equity
at $5.995 billion.

This financial strength demonstrates the Company's commitment to value and our
focus on the long term. These core competencies have benefited shareholders for
50 years and will continue to reward you in the future.

PROFESSIONAL DEVELOPMENT

In March, we completed the expansion of our Headquarters. The new building
measures more than 800,000 square feet and features a state-of-the-art education
facility. This new facility expanded from five rooms to 17, making it feasible
to offer a full menu of classes and training for associates and agents. New
agent programs included an Executive Liability Roundtable focusing on this
growing line of business and introducing our new Blue Chip Policy, as well as a
Cross-Serving Seminar demonstrating techniques to bring customers the benefits
of comprehensive, integrated insurance programs. The Cincinnati Life Insurance
Company took our training on the road and visited agents in 23 cities to present
Update 2000 field seminars. Agents learned about recent developments in
underwriting and new and improved Cincinnati Life products.

Our tradition of investing in our associates starts with providing extensive
training programs, especially for entry-level underwriters, claims
representatives and programmers. A commitment to help each associate pursue
continuous learning, insurance knowledge and skill development is just one of
the reasons Cincinnati Financial is a great place to work. ComputerWorld (June
5, 2000) recognized your Company's practices and ranked us among the "100 Best
Places to Work in IT." Selection was based on benefits, training and
development, salary and promotions, turnover rates and women/minority management
opportunities, as well as hot projects and mentoring programs.

PUBLIC RESPONSIBILITY

Your Company's tradition of support for the arts, education and other
community-related activities continued in 2000. Cincinnati Financial sponsored a
pig for the Big Pig Gig--Cincinnati's 2000 Artworks celebration. After the
event, the pig was auctioned, with proceeds donated to Artworks and to Insuring
the Children of Southern Ohio and Northern Kentucky, a nonprofit group organized
by insurance professionals to fund child abuse prevention and treatment. Other
corporate community investments included our traditional bi-annual blood drives,
Partnership in Education activities and participation in campaigns for the
Salvation Army, Fine Arts Fund and United Way.

Your Company works to educate, inform and develop consensus on legislative and
regulatory issues affecting our agents, policyholders and the insurance
industry. The future of the state insurance regulatory system will be a dominant
issue in 2001. We will continue to work with the National Association of
Insurance Commissioners as they refine their initiatives to modernize and
improve the efficiency of state insurance regulation. We also will urge Congress
to proceed with caution as it considers proposals to create a federal regulatory
system for the insurance industry. We oppose any modifications to the current
system of state regulation that are not in the best interests of policyholders,
agents and the industry.

A number of public policy issues equally important to your Company also will
dominate the year, including our continuing effort to advance the Policyholder
Disaster Protection Act, a proposal that would permit insurers to accumulate
tax-deferred reserves to meet policyholder needs after a mega-catastrophe and to
protect insurer solvency.

We will continue to act on behalf of shareholders and policyholders as
advocates of judicial restraint and a level playing field for all litigants in
our state supreme courts. In Ohio, we will be hard at work building
relationships with the large class of new legislators serving in the general
assembly with the onset of term limits.

Implementation of the landmark financial services modernization law, the
Gramm-Leach-Bliley Act, will continue. To comply with the Act's privacy
provisions, we have conducted a full audit to determine what information is
collected, how it is stored, who has access and when it is disclosed. In
addition, we are working with trade organizations to support our agents as they
also implement the privacy regulations. Information may be disclosed in order to
service policyholders or account holders, to comply with governmental
regulations or demands or to prevent fraud. We do not share personal information
with any unaffiliated party for marketing purposes.
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4. LOSSES AND LOSS EXPENSES

Activity in the reserve for losses and loss expenses is summarized as follows
(000s omitted):

Years Ended December 31,
-----------------------------------------
2000 1999 1998
---------- ---------- ----------
Balance at January 1 ........... $ 2,092,576 $ 1,978,461 $ 1,888,883
Less reinsurance receivable .. 160,809 138,138 112,235
---------- ---------- ----------
Net balance at January 1 ....... 1,931,767 1,840,323 1,776,648
---------- ---------- ----------
Incurred related to:
Current year ................. 1,527,669 1,303,651 1,306,194
Prior years .................. (19,726) (116,061) (153,311)
---------- ---------- ----------
Total incurred ................. 1,507,943 1,187,590 1,152,883
---------- ---------- ----------
Paid related to:
Current year ................. 666,796 574,038 590,366
Prior years .................. 590,909 522,108 498,842
---------- ---------- ----------
Total paid ..................... 1,257,705 1,096,146 1,089,208
---------- ---------- ----------
Net balance at December 31 ..... 2,182,005 1,931,767 1,840,323
Plus reinsurance receivable .. 219,477 160,809 138,138
---------- ---------- ----------
Balance at December 31 ....... $2,401,482 $2,092,576 $1,978,461
========== ========== ==========

As a result of changes in estimates of insured events in prior years, the
provision for losses and loss expenses decreased by $19,726,000, $116,061,000
and $153,311,000 in 2000, 1999 and 1998. These decreases are due in part to the
effects of settling reported (case) and unreported (IBNR) reserves established
in prior years for less than expected.

The reserve for losses and loss expenses in the accompanying balance sheets
also includes $71,577,000 and $61,573,000 at December 31, 2000 and 1999,
respectively, for certain life/health losses and loss checks payable.

PRICE RANGE OF COMMON STOCK

Shares are traded on the Nasdaq National Market. The closing sale price is
quoted under the symbol CINF on the National Market List of Nasdaq (National
Association of Securities Dealers Automated Quotation System). Tables below show
the price range reported for each quarter based on daily last sale prices.

2000 1999
---------------------------------------------- ------------------------------------------------
Quarter 1st 2nd 3rd 4th 1st 2nd 3rd 4th
--------- -------- -------- -------- ------- --------- ------- ----------

High ........... $37 5/8 $42 7/8 $40 3/16 $40 1/16 $39 1/4 $41 15/32 $42 1/4 $37 1/16
Low ............ 26 11/16 31 7/16 32 1/16 33 1/4 30 7/8 36 5/16 36 3/4 30 1/8
Dividend paid... .17 .19 .19 .19 .15 1/3 .17 .17 .17

15
SELECTED FINANCIAL INFORMATION
(000s omitted except per share data and ratios)

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

Years Ended December 31,
2000 1999 1998 1997
------------ ------------ ------------ ------------

TOTAL ASSETS ................................. $ 13,287,091 $ 11,807,679 $ 11,482,430 $ 9,867,404
LONG-TERM OBLIGATIONS ........................ $ 449,234 $ 456,373 $ 471,520 $ 58,430
SHAREHOLDERS' EQUITY ......................... $ 5,994,995 $ 5,421,284 $ 5,620,936 $ 4,716,965
BOOK VALUE PER SHARE ......................... $ 37.26 $ 33.46 $ 33.72 $ 28.35
- ------------------------------------------------------------------------------------------------------------------
REVENUES

Premium income ............................... $ 1,906,922 $ 1,731,950 $ 1,612,735 $ 1,516,378
Investment income (less expense) ............. 415,310 386,773 367,993 348,597
Realized (losses) gains on investments ....... (2,595) (564) 65,309 69,230
Other income ................................. 11,357 10,064 8,252 8,179
NET INCOME BEFORE REALIZED
GAINS ON INVESTMENTS
In Total ..................................... $ 120,052* $ 255,089 $ 199,116 $ 254,375
Per common share (basic) ..................... .75* 1.55 1.19 1.54
Per common share (diluted) ................... .74* 1.52 1.16 1.49
NET INCOME
In Total ..................................... $ 118,365* $ 254,722 $ 241,567 $ 299,375
Per common share (basic) ..................... .74* 1.55 1.45 1.81
Per common share (diluted) ................... .73* 1.52 1.41 1.77
- ------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER COMMON SHARE
Declared ..................................... $ .76 $ .68 $ .61 1/3 $ .54 2/3
Paid ......................................... .74 .66 1/3 .59 2/3 .53 1/3

PROPERTY CASUALTY OPERATIONS (STATUTORY BASIS)
Gross premiums written ....................... $ 1,979,741 $ 1,774,633 $ 1,656,476 $ 1,566,688
Net premiums written ......................... 1,881,112 1,680,812 1,557,581 1,471,603
Net premiums earned .......................... 1,827,576 1,657,277 1,542,639 1,453,526

Loss and expense ratio:
Loss ratio ................................... 71.1% 61.6% 65.4% 58.3%
Loss expense ratio ........................... 11.3 10.0 9.3 10.1
Underwriting expense ratio ................... 30.1* 28.8 29.5 29.6
Combined ratio ............................... 112.5%* 100.4% 104.2% 98.0%

Investment Income Before Taxes ............... $ 223,001 $ 207,640 $ 203,919 $ 199,427

Property and Casualty Reserves:
Unearned premiums ............................ $ 506,966 $ 454,844 $ 432,436 $ 418,465
Losses ....................................... 1,729,918 1,513,134 1,432,212 1,373,950
Loss adjustment expense ...................... 452,088 418,634 408,113 402,698

Policyholders' surplus ....................... $ 3,171,730 $ 2,851,774 $ 3,019,828 $ 2,472,532
- ------------------------------------------------------------------------------------------------------------------

* 2000 results include a one-time net charge for asset impairment of $39.1
million, before tax; $25.4 million, net of tax; or 16 cents per share. The
charge impacted the underwriting expense ratio and statutory combined ratio
by 1.8 percentage points.

** 1993 earnings include a net credit for $13.8 million, or 8 cents per share,
cumulative effect of a change in the method of accounting for income taxes
to conform with SFAS No. 109 and a net charge of $8.6 million, or 5 cents
per share, related to the effect of the 1993 increase in income tax rates
on deferred taxes recorded for various prior year items.

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

1996 1995 1994 1993 1992 1991 1990
- ---------- ---------- ---------- ---------- ---------- ---------- ----------

$7,397,109 $6,438,613 $5,036,903 $4,887,875 $4,356,648 $3,750,166 $2,839,258
$ 79,847 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 182 $ 202
$3,162,889 $2,657,971 $1,940,047 $1,947,338 $1,713,776 $1,441,401 $1,006,868
$ 18.95 $ 15.80 $ 11.63 $ 11.70 $ 10.37 $ 8.79 $ 6.18

$1,422,897 $1,314,126 $1,219,033 $1,140,791 $1,038,772 $ 947,576 $ 871,196
327,307 300,015 262,649 239,436 218,942 193,220 167,425
47,946 30,781 19,557 51,529 35,885 7,641 1,488
10,599 10,729 11,267 10,396 10,552 12,698 8,822

$ 192,595 $ 207,342 $ 188,538 $ 182,530** $ 147,669 $ 141,273 $ 128,052
1.15 1.24 1.13 1.10** .90 .86 .79
1.11 1.20 1.09 1.06** .87 .86 .78

$ 223,760 $ 227,350 $ 201,230 $ 216,024** $ 171,325 $ 146,280 $ 128,962
1.34 1.36 1.21 1.30** 1.04 .90 .79
1.31 1.33 1.18 1.27** 1.03 .89 .79

$ .48 2/3 $ .42 2/3 $ .38 2/3 $ .34 $ .31 $.27 2/3 $ .24 1/3
.47 2/3 .42 .37 1/3 .33 1/3 .30 .27 .23 2/3

$1,476,011 $1,377,426 $1,287,280 $1,216,766 $1,089,901 $ 996,807 $ 896,204
1,383,525 1,295,852 1,190,824 1,123,780 1,014,971 930,296 838,554
1,366,544 1,263,257 1,169,940 1,092,135 992,335 903,465 828,046

61.6% 57.6% 63.3% 63.5% 63.8% 61.6% 61.6%
13.8 14.7 9.8 8.7 9.0 9.2 9.0
27.6 26.9 26.9 27.4 29.0 28.9 29.0
103.0% 99.2% 100.0% 99.6% 101.8% 99.7% 99.6%

$ 190,318 $ 180,074 $ 162,260 $ 153,190 $ 141,958 $ 126,332 $ 110,827

$ 401,562 $ 385,418 $ 353,697 $ 333,550 $ 302,473 $ 280,404 $ 254,000
1,319,286 1,274,180 1,213,383 1,100,051 960,571 825,952 692,081
383,135 306,570 218,642 193,305 177,262 160,260 140,501

$1,608,084 $1,268,597 $ 998,595 $1,011,609 $ 933,529 $ 735,557 $ 477,355

The selected financial information presented above allows for a more complete
analysis of results of operations and should not be considered as a substitute
for any GAAP measures of performance.
Per share data adjusted for three-for-one stock splits in 1998 and 1992 and
stock dividends of 5% in 1996 and 1995.
17
MA N A G E M E N T DI S C U S S I O N
continued)

Cincinnati Financial Corporation and Subsidiaries
- -------------------------------------------------------------------------------

INTRODUCTION

This Management Discussion supplements the financial statements and related
notes of Cincinnati Financial Corporation and subsidiaries.

Cincinnati Financial Corporation (CFC) had six subsidiaries at year-end 2000.
The lead property and casualty insurance subsidiary, The Cincinnati Insurance
Company, markets a broad range of business and personal policies in 31 states
through an elite corps of 969 independent insurance agencies. Also engaged in
the property and casualty business are The Cincinnati Casualty Company, which
offers direct billing and agency-billed non-participatory workers' compensation
policies; and The Cincinnati Indemnity Company, which markets nonstandard
policies for preferred risk accounts. The Cincinnati Life Insurance Company
markets life, long term care, disability policies and annuities through property
casualty agencies and independent life agencies. CFC Investment Company
complements the insurance subsidiaries with commercial leasing, financing and
real estate services. The Company's sixth subsidiary, CinFin Capital Management
Company, was established in 1998 to provide asset management services to
institutions, corporations and individuals with $500,000 minimum accounts.
CinFin's assets under management rose to $541 million in 28 accounts by January
2001, from $150 million in two accounts in January 1999.

Investment operations are CFC's primary source of profits. A total-return
strategy emphasizes investment in fixed-maturity securities, as well as equity
securities that contribute to current earnings through dividend increases and
add to net worth through long-term price appreciation.

The following discussion, related consolidated financial statements and
accompanying notes contain certain forward- looking statements that involve
potential risks and uncertainties. The Company's future results could differ
materially from those discussed. Factors that could cause or contribute to such
differences include, but are not limited to: unusually high levels of
catastrophe losses due to changes in weather patterns or other natural causes;
changes in insurance regulations, legislation or court decisions that place the
Company at a disadvantage in the marketplace; recession or other economic
conditions resulting in lower demand for insurance products; sustained decline
in overall stock market values negatively affecting the Company's equity
portfolio; delays in the planned schedule of development and implementation of
technology enhancements; and decreased ability to generate growth in investment
income. Readers are cautioned that the Company undertakes no obligation to
review or update the forward-looking statements included in this material.

RESULTS OF OPERATIONS

THREE-YEAR HIGHLIGHTS

- -----------------------------------------------------------------------------------------------------------------------------------
(000,000s omitted except 2000 Change Change 1999 Change Change 1998 Change Change
per share data and ratios) $ % $ % $ %
- -----------------------------------------------------------------------------------------------------------------------------------

Revenue $2,331.0 $202.8 9.5 $2,128.2 $ 73.9 3.6 $2,054.3 $111.9 5.8
Net Operating Income
Excluding Charge 145.5 (109.6) (43.0) 255.1 56.0 28.1 199.1 (55.3) (21.7)
Net Capital (Losses) Gains
(after tax) (1.7) (1.3) (325.0) (.4) (42.9) (100.9) 42.5 (2.5) (5.6)
Net Income Excluding Charge 143.8 (110.9) (43.5) 254.7 13.1 5.4 241.6 (57.8) (19.3)
One-Time Charge for Asset
Impairment (25.4) (25.4) n/a 0.0 0.0 n/a 0.0 0.0 n/a
Net Income 118.4 (136.3) (53.5) 254.7 13.1 5.4 241.6 (57.8) (19.3)
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share Data (diluted)
Net Operating Income
Excluding Charge $ .90 $ (.62) (40.8) $ 1.52 $ .36 31.0 $ 1.16 $ (.33) (22.1)
Net Capital (Losses) Gains
(after tax) (.01) (.01) n/a 0.0 (.25) n/a .25 (.03) (10.7)
Net Income Excluding Charge $ .89 $ (.63) (41.4) $ 1.52 $ .11 7.8 $ 1.41 $ (.36) (20.3)
One-Time Charge for Asset
Impairment (.16) (.16) n/a 0.0 0.0 n/a 0.0 0.0 n/a
Net Income $ .73 $ (.79) (52.0) $ 1.52 $ .11 7.8 $ 1.41 $ (.36) (20.3)
- -----------------------------------------------------------------------------------------------------------------------------------

The selected financial information presented above allows for a more complete
analysis of results of operations and should not be considered as a substitute
for any GAAP measures of performance.
18

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

Revenue growth in each of the past three years primarily reflected higher
contributions from property casualty earned premiums and investment income. In
2000, the growth rate for property casualty earned premiums rose for the third
consecutive year because of strong growth in the Company's commercial insurance
lines.

Revenue from investment income rose 7.4% to $415.3 million in 2000,
including $5.3 million in interest earned in first quarter 2000 from a $302.9
million single-premium bank-owned life insurance (BOLI) policy booked at the end
of 1999. Excluding that interest income, investment income rose 6.0% in 2000, up
from the 5.1% increase in 1999 and the 5.6% increase in 1998.

In the third quarter of 2000, the Company recorded a one- time, pre-tax
charge of $39.1 million to expense assets related to development of
next-generation software to process property casualty policies based on
management's decision that the assets were impaired. The charge reduced net
income by $25.4 million or 16 cents per share, after tax.

Excluding the charge, net operating income in 2000 was 43.0% below the
prior year's record level, primarily because of the additional reserves related
to uninsured motorist coverage as well as the increased level of property
casualty claims in the second half of 2000. In 1999, net operating earnings were
28.1% ahead of the prior year's level, reflecting a lower level of catastrophe
losses and stronger overall profitability, while in 1998, net operating earnings
declined 21.7% due to the unusually high level of catastrophe losses.

The Company reported a net capital loss after tax of $1.7 million in 2000
versus a $0.4 million net capital loss in 1999 and a $42.5 million net capital
gain in 1998.

Book value grew to $37.26 at year-end 2000 from $33.46 at year-end 1999
and $33.72 at year-end 1998. The growth in 2000 was primarily due to unrealized
gains in the investment portfolio.

PROPERTY CASUALTY INSURANCE PREMIUMS
- -------------------------------------------------------------------------------------------------------------------------------
(000,000s omitted except ratios) 2000 Change Change 1999 Change Change 1998 Change Change
(*)Statutory basis $ % $ % $ %
- -------------------------------------------------------------------------------------------------------------------------------

Total Gross Written Premiums* $1,979.7 $205.1 11.6 $1,774.6 $118.1 7.1 $1,656.5 $ 89.8 5.7
Commercial Lines Net Written
Premiums* 1,275.4 175.6 16.0 1,099.8 80.0 7.8 1,019.8 32.4 3.3
Personal Lines Net Written
Premiums* 605.7 24.7 4.3 581.0 43.2 8.0 537.8 53.6 11.1
Total Net Written Premiums* 1,881.1 200.3 11.9 1,680.8 123.2 7.9 1,557.6 86.0 5.8
Total Net Earned Premiums 1,827.6 170.3 10.3 1,657.3 114.7 7.4 1,542.6 89.1 6.1
- -------------------------------------------------------------------------------------------------------------------------------

Cincinnati leverages its strong relationships with independent insurance
agents to market property casualty insurance in 31 states, up from 30 states in
1999 and 29 in 1998. In 2000, approximately 98% of the Company's premium volume
was in the 26 states in which the Company has had a presence for more than five
years. Further, Ohio contributed 26% and Georgia, Illinois, Indiana, Michigan
and Pennsylvania each contributed between 5% and 10% of premium volume in 2000.

Key factors that distinguish the Company in the insurance marketplace include:

- Single-channel distribution strategy that emphasizes the value of
independent agents and their knowledge of the local markets.

- Local field staff that enhances service and accountability by providing
24-hour-a-day, seven-day-a-week availability and local decision-making
authority. Local field staff is responsible for the selection of new
independent agents as well as underwriting and pricing of new business.

- Innovative products and services that meet the needs of the Company's
independent agents and their customers, including the availability of
three-year policy terms for many types of insurance coverage. In 2000, both
new and updated policies were introduced, including an endorsement that
allows living trusts to be named as insureds on homeowner policies, to
further meet the needs of agents and their customers. Looking ahead, plans
call for the introduction of an endorsement to cover identity theft under a
homeowner policy.

- Widely recognized quality claims service via locally based claims field
staff in conjunction with independent agents. To help ensure prompt claims
service, the Company provides most agents with authority to pay claims
immediately up to $2,500. In total, the Company pays in the range of $3-7
million per business day in claims.

- Emphasis on improving customer service through the creation of smaller
marketing territories, permitting local field marketing representatives to
devote more time to each independent agent. Since the beginning of 1997,
the Company has subdivided eight territories in established states,
increasing the field marketing staff by 23% to 75 over the four-year period.
Three new territories are expected to open in Kentucky, Maryland and North
Carolina in the coming months, in addition to one new territory that opened
in Illinois early in 2001.
19

MA N A G E M E N T DI S C U S S I O N
(continued)

Cincinnati Financial Corporation and Subsidiaries
- -------------------------------------------------------------------------------

- - Programs to support agency growth, including education programs for agents
and staff, and building and equipment financing. In 2000, the insurance
subsidiaries augmented ongoing training programs with a number of special
events, including seminars held around the country to encourage
cross-serving by expanding awareness of the Company's products among
producing agents. CFC Investment Company offers convenient, competitive
equipment and vehicle leases and loans for independent insurance agents,
their commercial customers and other businesses and also provides commercial
real estate loans to agents to help them operate and expand their
businesses.

By leveraging these characteristics and taking advantage of the improved
pricing environment in the commercial insurance market, the Company's property
casualty total net written premiums have expanded more than twice as rapidly as
the estimated industry growth rate in each of the past three years, rising 11.9%
in 2000 to $1.881 billion.

Premium growth in states in which the Company has had a presence for more
than five years was a healthy 11.4% in 2000, reflecting the continued
opportunities available to Cincinnati. Newer states also were a factor in
overall growth, with premiums of $17 million for the year; these states provide
an opportunity for expansion. Over the past five years, the Company began
marketing commercial lines insurance in North Dakota, Montana, upstate New York,
Idaho and Utah, and began writing or expanding personal lines in Maryland,
Michigan, Minnesota, Montana, North Dakota and Pennsylvania. The Company's
criteria for entry into new states include a favorable regulatory climate and a
limited residual market.

COMMERCIAL LINES

Commercial lines premiums rose to 67.8% of total statutory basis net
written premiums in 2000, reflecting the higher rate of growth in that segment
as the market continued the strengthening that began in the second half of 1999
after more than three years of intense price competition. Industry-wide growth
in the commercial insurance area was 3.6% in 2000, after declining 0.9% in 1999
and rising 0.1% in 1998. Cincinnati's commercial lines' premium growth rate
exceeded that of the industry in each of the past three years due to:

- - Strong competitive position and relationships with leading independent
insurance agents.

- - Careful underwriting and pricing of both new and renewal accounts.

- - Healthy gains in new business, reflecting the Company's approach of
evaluating each new risk individually. In 2000, the Company's new business
from commercial lines reached $230 million, up 42% from the prior year. New
commercial business was $162 million in 1999 and $164 million in 1998.

One of the Company's advantages in the commercial lines market is the
availability of multi-year policy terms. Except for new business to an agent or
when a policy is aggressively priced, the Company's standard approach is to
write three-year policies. Within those multi-year packages, automobile
coverages, workers' compensation, professional liability and most umbrella
policies remain subject to annual adjustment. At year-end 2000, management
estimated that approximately 70% of the $1.275 billion in net commercial
premiums is subject to annual adjustment or re-pricing. The remainder have rates
that may be slightly higher than single-year policy rates, in some cases, and
that are guaranteed not to increase over a multi-year term.

PERSONAL LINES

During 2000, the personal insurance market grew less rapidly than the
commercial insurance market due to increased competition and lower rate
increases. Industry-wide growth in personal lines was estimated at 5.0% in 2000,
up from 3.6% in 1999 and 1998. Cincinnati's personal lines premium growth rate
declined in 2000 and 1999 because of:

- - An agency re-underwriting program designed to help improve profitability. In
2000, the program reviewed and strengthened underwriting standards for more
than 100 of the Company's independent agents, obtaining motor vehicle
reports for insured drivers and commitments that some agencies will provide
the Company with a specific volume of personal lines business.

- - Delayed introduction of automation initiatives that will increase
convenience and decrease agency work necessary to write the Company's
personal lines policies.

PROPERTY CASUALTY PROFITABILITY (STATUTORY BASIS)
- --------------------------------------------------------------------
(000,000s omitted except ratios
and per share data) 2000 1999 1998
- --------------------------------------------------------------------

Commercial Lines Pure Loss Ratio 71.2% 61.4% 61.1%
Personal Lines Pure Loss Ratio 71.1 62.0 73.8
Loss and LAE Ratio Excluding
Catastrophes 79.7 69.4 68.6
Catastrophes Loss Ratio 2.7 2.2 6.1
Loss and LAE Ratio 82.4 71.6 74.7
Expense Ratio Excluding Charge 27.3 28.4 28.9
Policyholder Dividend Ratio 1.0 .4 .6
Statutory Combined Ratio
Excluding Charge 110.7 100.4 104.2
One-Time Charge for Asset
Impairment 1.8 0.0 0.0
Combined Ratio 112.5 100.4 104.2
Catastrophe Loss Data
Catastrophe Losses (before tax) $50.1 $36.8 $93.5
Catastrophe Losses Per Share
(after tax)(diluted) $.20 $.14 $ .35
- --------------------------------------------------------------------

Cincinnati Financial Corporation and Subsidiaries
- -------------------------------------------------------------------------------

The Company recorded a statutory underwriting loss of $210.3 million in
2000, excluding the one-time charge to expense assets, compared with
underwriting losses of $12.5 million in 1999 and $68.5 million in 1998.

The Company's combined ratio (statutory basis), excluding the one-time
charge to expense assets, continued to compare favorably with industry results
of 110.3%, 107.8% and 105.6% in 2000, 1999 and 1998, respectively. Management,
however, expects to return profitability to the Company's five-year (1995-99)
average statutory combined ratio of 101.3%, including policyholder dividends, by
the end of 2001.

The following contributed to the Company's underwriting results.

LOSS AND LAE RATIO

Excluding catastrophe losses, the total loss and LAE ratio in 2000 was 10.3
percentage points higher than the level recorded in 1999 and 11.1 percentage
points higher than 1998 due to additional reserves related to uninsured motorist
losses and the unusually high level of claims in the second half of the year.

RESERVES -- As discussed in the Notes to the Consolidated Financial Statements,
management establishes the Company's liabilities for insurance reserves,
including adjustments of estimates, based upon Company experience and
information from internal analysis. Though uncertainty always exists as to the
adequacy of established reserves, management believes this uncertainty is
mitigated by the historic stability of the Company's book of business. Such
reserves are related to various lines of business and will be paid out over
future periods. Reserves for environmental claims have been reviewed and the
Company believes these reserves are adequate at this time. Environmental
exposures are minimal as a result of the types of risks the Company has insured
in the past. Historically, most of the Company's commercial accounts were
written with post-date coverages that afford clean-up costs and Superfund
responses.

In the fourth-quarter of 2000, the Company added $110 million (44 cents per
diluted share) to reserves for losses incurred but not yet reported (IBNR), net
of reinsurance, for uninsured motorist claims. The additional IBNR reserves
represented management's best estimate of past losses to be reported or paid in
2001 and beyond as a result of two Ohio Supreme Court decisions.

In the first of the two decisions, first addressed by the Company in
October 1999, the court ruled that Ohio business automobile policies covered
employees and their family members for injuries caused by uninsured or
underinsured motorists, even when the injured persons were not in company
vehicles or on company business. Since that decision and through year-end 2000,
Cincinnati Financial's property casualty insurance subsidiaries had incurred $40
million in related claims.

On December 27, 2000, the court further ruled that the forms used by
insurance companies to allow Ohio personal and commercial policyholders to
decline uninsured motorist coverage or to purchase reduced limits were not
sufficient. Based on this decision, uninsured or underinsured motorist coverage
must be provided at a limit equal to the bodily injury liability limit, even if
the policyholder had declined or reduced the coverage by signing one of these
forms. At year-end 2000, the Company was aware of approximately $32 million in
claims related to this decision that were reported but had not previously been
reserved due to the documented decision by the insurance customer to decline or
reduce such coverage.

The Company's loss and LAE ratio in 2000 and 1999 included 7.5 percentage
points and 0.8 percentage points, respectively, related to these uninsured
motorist claims and reserves. Excluding those amounts, the loss and LAE ratio
would have been 74.9% in 2000 and 70.8% in 1999 compared with 74.7% in 1998.

CLAIMS IN 2000 -- During July and August of 2000, losses moved above or to the
high end of the Company's normal monthly ranges. This reflected a combination of
higher than usual losses above $1 million and higher than usual adverse
developments above $250,000 on reserved claims, along with an upswing in the
frequency and severity of smaller losses. During the fourth quarter, losses
above $1 million and the frequency of smaller losses decreased. Also improved
from the third quarter level were adverse developments greater than $250,000 and
the severity of smaller losses, although these claims categories did not return
to historic levels. During the fourth quarter, however, the frequency and
severity of losses between $250,000 and $1 million moved higher than historic
levels. Further, the accelerating rate of commercial insurance premium growth
experienced by the Company led to higher IBNR reserves (in addition to the IBNR
reserves related to uninsured motorist coverage noted above). The total loss and
LAE ratio for the fourth quarter of 2000, however, improved 6.7 percentage
points from the third quarter level, although it remained 4.5 percentage points
above the five-year average.

To address the higher losses, beginning in the fourth quarter of 2000,
management put together teams of claims representatives and other Company
specialists, under the direction of the field marketing representatives. These
locally based Company representatives will intensify efforts on many fronts:

- - Reaffirm agreements on the extent of frontline renewal underwriting to be
performed by local agents.

- - Improve pricing and institute more conservative underwriting by class of
risk.

- - Increase the frequency of property inspections for new and renewal
commercial business.

MA N A G E M E N T DI S C U S S I O N
(continued)

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

- - Evaluate commercial auto risks for new and renewal business, based on driver
motor vehicle reports and length of experience of individual drivers, in
addition to policyholder loss history.

- - Re-emphasize agency reviews and profitability analysis, and follow up
aggressively.

- - Obtain overall risk reviews from claims representatives at account renewal
or in conjunction with loss reviews as well as conduct on-site inspections
and prepare full risk reports for every account reporting a loss over
$100,000.

- - Include claims representatives, loss control staff and engineering
representatives in policy renewal discussions with field marketing
representatives and agents.

In addition, the Company established property construction claims
specialists to augment the locally based field claims force and instituted
additional steps for claims and adverse development reviews. These actions are
expected to contribute to further improvement in loss results and lead to a
return to the Company's five-year average statutory combined ratio of 101.3% by
the end of 2001, absent an unusual level of catastrophe losses.

LOSS RATIO BY BUSINESS LINE

The pure loss ratio for commercial lines was 71.2% in 2000, compared with
61.4% in 1999 and 61.1% in 1998. Catastrophe losses contributed 1.5%, 2.3% and
4.6% to the commercial lines' pure loss ratio in 2000, 1999 and 1998,
respectively. The increase in the pure loss ratio excluding catastrophes in 2000
was due primarily to factors affecting the loss ratio, described above. In 2000,
uninsured motorist claims and reserves added 10.6 percentage points to the
commercial lines' pure loss ratio -- 2.3 percentage points due to recorded
claims and 8.3 percentage points due to additional IBNR reserves related to
potential future claims. In 1999, recorded uninsured motorist claims added 1.2
percentage points to the commercial lines' pure loss ratio.

To reduce the future impact of the court's decisions regarding uninsured
motorist coverage, effective October 1, 1999, the Company began using new
language in Ohio business auto policies to relieve business policyholders of the
need to fund coverage for losses for which they did not intend to assume
responsibility. The Company was proactive about changing policy language and
amending language on policies outside of Ohio to protect business policyholders
from this type of risk. Early in 2001, the Company began working with
independent agents to verify Ohio policyholders' decisions regarding uninsured
motorist coverage and document those decisions on a form that meets the court's
criteria.

The pure loss ratio for personal lines was 71.1% in 2000, after having
improved to 62.0% for 1999 from 73.8% in 1998. Catastrophe losses contributed
5.3%, 2.1% and 8.9% to the personal lines' pure loss ratio in 2000, 1999 and
1998, respectively. The increase in the pure loss ratio in 2000 was due to the
factors affecting the loss ratio, described above, as well as weakening
profitability in the personal lines segment, an industry-wide trend. The
Company's agency re-underwriting program, designed to help restore personal
lines profitability, was a factor in the improvement in the ratio between 1998
and 1999 and helped mitigate the higher losses in 2000. In 2001, the Company
anticipates continuing the re-underwriting program with an additional 100
agencies. In addition, the Company is assessing profitability and seeking
appropriate rate increases for personal lines products.

CATASTROPHE LOSSES

The contribution to the loss ratio due to catastrophe losses of 2.7% in
2000 and 2.2% in 1999 was within the Company's historic range and significantly
below the 6.1% recorded in 1998, an unusually high level. Due to the nature of
catastrophic events, management is unable to predict accurately the frequency or
potential cost of such occurrences in the future. However, in an effort to
control such catastrophe losses, the Company does not market property casualty
insurance in California, does not write flood insurance, reviews exposure to
huge disasters and continues to reduce coverage in certain coastal regions. For
property catastrophes, the Company retains the first $25 million of losses and
is reinsured for 95% of losses from $25 million up to $200 million.

EXPENSE RATIO

The expense ratio (statutory basis), excluding the one-time charge to
expense software development assets, remained relatively stable over the
three-year period, as the Company maintained its level of investment in staff
and costs associated with upgrading technology and facilities.

POLICYHOLDER DIVIDEND RATIO

Policyholder dividends as a percent of net earned premiums increased nearly
three-fold in 2000 over 1999 due to growth in workers' compensation premiums,
particularly in Wisconsin, where these policies are structured to include
policyholder dividends. As a result of the expansion of this business area, in
2000 the Company began reporting its statutory combined ratio after policyholder
dividends, in line with industry practices.

ONE-TIME CHARGE

The one-time, pre-tax charge of $39.1 million recorded in the third quarter
of 2000 was to expense assets related to

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

development of next-generation software to process property casualty policies.
The development of next-generation software remains a strategic priority. The
charge reflected the determination that previous work to establish business
requirements retained asset value, and costs associated with that portion of the
project were excluded from the charge.

LIFE AND ACCIDENT AND HEALTH
- -----------------------------------------------------------------------------------------------------------------------------------
(000,000s omitted except ratios) 2000 Change Change 1999 Change Change 1998 Change Change
(*)Statutory basis $ % $ % $ %
- -----------------------------------------------------------------------------------------------------------------------------------

Gross Written Premiums* $ 157.3 $(263.4) (62.6) $ 420.7 $ 306.0 266.8 $ 114.7 $ 17.1 17.5
Net Written Premiums* 140.1 (270.3) (65.9) 410.4 301.2 275.8 109.2 16.8 18.2
Earned Premiums 79.3 4.6 6.2 74.7 4.6 6.6 70.1 7.2 11.4
Other Income 1.9 (0.9) (32.1) 2.8 2.8 n/a 0.0 0.0 n/a
Investment Income 79.1 8.8 12.5 70.3 5.0 7.7 65.3 4.4 7.2
Total Revenues 158.0 14.2 9.9 143.8 11.6 8.8 132.2 1.7 1.3
Total Expenses 112.1 5.6 5.3 106.5 4.9 4.8 101.6 14.2 16.2
Net Operating Income 32.3 4.2 14.9 28.1 4.5 19.1 23.6 (1.2) (4.8)
Net Realized Capital Losses (1.5) 1.0 40.0 (2.5) (0.4) (19.0) (2.1) (6.5) (147.7)
Net Income 30.8 5.2 20.3 25.6 4.1 19.1 21.5 (7.7) (26.4)
Total Assets 1,620.9 173.8 12.0 1,447.1 236.9 19.6 1,210.2 110.2 10.0
Equity 524.7 61.5 13.3 463.2 (61.8) (11.8) 525.0 48.4 10.2
- -----------------------------------------------------------------------------------------------------------------------------------

The Company's life insurance subsidiary had net written premiums of $140.1
million in 2000 including $20.0 million of BOLI premiums. In 1999, net written
premiums were $410.4 million, including a $302.9 million BOLI premium. Excluding
BOLI premiums, net written premiums grew 11.7% in 2000, compared with a decline
of 1.5% in 1999 and an increase of 18.2% in 1998. Total net earned premium
income for 2000 was up for the third consecutive year, with life insurance
premiums rising to $74.2 million in 2000 from $65.1 million in 1999 and $61.7
million in 1998. Growth in 2000 reflected continued penetration of the Company's
property casualty agencies, appointment of independent life agencies and
introduction of new products. In addition, through the first half of 2000, the
Company processed ordinary life applications for policyholders who purchased
term life insurance before the "Triple X" regulations took effect, contributing
to the year's increase.

In 2000, favorable mortality experience, expense control and continued
growth from new products led to strong operating earnings, up 14.9% from the
prior year. In 1999, net operating income rose 19.1% due to favorable mortality
experience. The life insurance subsidiary contributed 27% of CFC's operating
income in 2000 compared with 11% in 1999 and 12% in 1998.

An important part of Cincinnati Life's strategic mission is to round out
accounts while improving persistency for the Company. Term and worksite
insurance products are well suited to cross-serving by the Company's property
casualty agency force, 90% of which now do business with Cincinnati Life. Agents
find that offering worksite marketing to employees of their small commercial
accounts provides a benefit to the employees at low cost to the employer.

With the success of the term and worksite efforts, the Company intends to
enhance and develop new life insurance products that will meet the needs of the
property casualty agents and their customers as well as attract independent life
agents to help support overall product volume. To provide increased support to
agents and accommodate growth, the Company subdivided existing life marketing
territories in Michigan and in Georgia/Alabama during 2000, adding two new life
field marketing representatives to bring the total to 25 across the country.

INVESTMENT INCOME AND INVESTMENTS

Reflecting the interest rate environment, the growth rate for investment
income improved in 2000 to 6.0%, excluding interest income recorded in the first
quarter from the BOLI, after having declined slightly in 1999 to 5.1% from 5.6%
in 1998. As a result, pre-tax investment income, excluding BOLI, reached a new
record of $410.0 million compared with the previous record of $386.8 million in
1999. The growth was primarily the result of investing the cash flows from
operating activities and dividend increases from equity securities in the
investment portfolio.

Investment income was affected over the past three years by decreased cash
available for the investment portfolio due to the repurchase of the Company's
common stocks. In addition, the higher paid losses in the second half of 2000
reduced the available funds.

MA N A G E M E N T DI S C U S S I O N
(continued)

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

The asset value of the Company's equity portfolio rose approximately $1.015
billion in 2000, while the bond portfolio value rose approximately $103.9
million. In 2000, 30 of the 45 common stocks in the Company's investment
portfolio increased dividends during the year, adding more than $12.8 million to
gross investment earnings on an annualized basis.

The Company's primary investment strategy is to maintain liquidity to meet
both immediate and long-range insurance obligations through the purchase and
maintenance of medium- risk fixed-maturity and equity securities, while earning
optimal returns on the equity portfolio through higher dividends and capital
appreciation. The Company's investment decisions on an individual insurance
company basis are influenced by insurance regulatory statutory requirements
designed to protect policyholders from investment risk. Cash generated from
insurance operations is invested almost entirely in corporate, municipal, public
utility and other fixed-maturity securities or equity securities. Such
securities are evaluated prior to purchase based on yield and risk.

The equity emphasis is on common stocks with an annual dividend yield of at
least 2% to 3% and with annual dividend increases. The Company's portfolio of
equity investments had an average dividend yield-to-cost of 9.0% at December 31,
2000. Management's strategy in equity investments includes identifying
approximately 10 to 12 companies, for the core of the investment portfolio, in
which the Company can accumulate 10% to 20% of their common stock.

INCOME TAXES

The Company's income tax expense was $(9.7) million, $66.9 million and
$65.5 million for 2000, 1999 and 1998, respectively, while the effective tax
rate was (8.9)%, 20.8% and 21.3% for the same periods. The negative effective
tax rate for 2000 was primarily attributable to lower income before income
taxes, combined with the Company's tax-exempt interest and dividend exclusions,
as compared with 1999 and 1998. The effective rate was constant from 1998 and
1999. The Company expects to pay $9.8 million in alternative minimum tax for
2000. The $9.8 million in alternative minimum tax can offset taxes owed in
future years, thus creating a deferred tax benefit. Recording this deferred tax
benefit in the current year serves to offset the current alternative minimum tax
such that total tax expense is unaffected.

OUTLOOK

Having achieved the goal to reach $2.0 billion in total direct written
premiums by the year 2000 in both 2000 and 1999, management is targeting
continued growth at two or more times the industry averages. In 2001, industry
analysts are projecting 5.8% growth for the property casualty insurance market.
The Company's further objectives are to return to historic profitability levels
and maximize annual growth in investment income. Management believes that its
statutory combined ratio, a key measure of profitability, should return to its
five-year (1995-99) average of 101.3%, including policyholder dividends.

The Company's $2.0 billion premium (statutory basis) target was met in
1999, when $2.158 billion in direct written premiums were written, including a
single BOLI premium of $302.9 million written by The Cincinnati Life Insurance
Company. In 2000, the target was reached with $1.944 billion in direct written
property casualty premiums and $157.3 million in direct written life insurance
premiums.

Factors that contribute to the positive outlook for total premium growth
include the growing strength of the commercial insurance marketplace, the
Company's strong competitive position and reputation among independent insurance
agencies and management's belief that the Company can achieve additional market
penetration in states in which it currently operates. However, management
believes that the growth rate of personal lines premiums will be relatively
unchanged from the 4.3% recorded in 2000 until the Company completes its rollout
of next-generation software that will include direct billing capabilities.

CASH FLOW AND LIQUIDITY

CASH FLOW
- ------------------------------------------------------------------------
(000,000s omitted) 2000 1999 1998
- ------------------------------------------------------------------------

Net Cash Provided by
Operating Activities $ 356.6 $ 687.8 $ 273.6
Net Cash Used in Investing
Activities (513.2) (205.3) (320.7)
Net Cash (Used in) Provided by
Financing Activities (122.7) (201.6) 25.5
Net (Decrease) Increase in Cash (279.3) 280.9 (21.6)
Cash at Beginning of Year 339.5 58.6 80.2
Cash at End of Year 60.2 339.5 58.6
Supplemental
Interest Paid 40.2 31.6 36.4
Income Taxes Paid 33.4 55.0 91.2
- ------------------------------------------------------------------------

Cash flow was sufficient to meet operating needs, with short-term
borrowings utilized for financing and investing activities for the years 2000
and 1999. Excluding the 1999 year-end sale of the BOLI policy, amounting to
approximately $302.9 million, cash flows from operations have been relatively

24
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

consistent from year to year. The Company had $55 million of unused letters of
credit at December 31, 2000. Management expects operating cash flow will
continue to be CFC's primary source of funds because no substantial changes are
anticipated in the Company's mix of business, nor are there plans to reduce
protection by entering or modifying ceded reinsurance agreements. Further, the
Company has no significant exposure to assumed reinsurance because this
comprised no more than 2.3% of gross premiums in each of the last three years.

The change in net cash used in investing activities for 2000 and 1999
reflected a continued decline in the amount of fixed maturity investments being
called by the issuers, compared with higher amounts called in 1998. For the
years 2000 and 1999, the primary reasons for increases in net cash used for
financing activities were for the payment of cash dividends and the purchase of
treasury shares. In 1998, net cash was provided in financing activities due to
the issuance of senior debentures, offset by treasury share purchases, cash
dividend payments and reduction of short-term debt.

NOTES PAYABLE

Notes payable, primarily short-term debt used to enhance liquidity, increased
to $170.0 million in 2000 and $118.0 million in 1999 from zero in 1998.
Management used short-term debt for purchase of treasury shares, the
construction of an additional Cincinnati Headquarters building and other
purposes.

DIVIDENDS

CFC has increased cash dividends to shareholders for 40 consecutive years
and, periodically, the Board of Directors authorizes stock dividends or splits.
In February 2001, the Board of Directors authorized a 10.5% increase in the
regular quarterly dividend to an indicated annual rate of 84 cents. In February
2000, the Board authorized an 11.8% increase; in February 1999, a 10.9%
increase; and, in February 1998, a 12.2% increase. In the past 10 years, the
Company has paid an average of 30-35% of net income as dividends, with the
remaining 65-70% reinvested for future growth. The ability of the Company to
continue paying cash dividends is subject to factors as the Board of Directors
may deem relevant.

Since 1992, the Company's Board also has authorized four stock splits or
stock dividends: a three-for-one stock split in 1998; a 5% stock dividend in
1996; a 5% stock dividend in 1995; and, a three-for-one stock split in 1992.
After the stock split in 1998, a shareholder who purchased one Cincinnati
Insurance share before 1957 would own 1,947 Cincinnati Financial shares, if all
shares from accrued stock dividends and splits were held and cash dividends not
reinvested.

FINANCIAL CONDITION

ASSETS

At year-end 2000, total assets were $13.287 billion compared with $11.808
billion at year-end 1999.

CASH AND INVESTMENTS

Cash and marketable securities of $11.376 billion make up 85.6% of the
Company's $13.287 billion assets; compared with 89.2% in 1999. The Company has
minor investments in real estate and mortgages, which are typically illiquid. At
December 31, 2000, the Company's portfolio of fixed-maturity securities had an
average yield-to-cost of 7.7% and an average maturity of 11.2 years. For the
insurance companies' purposes, strong emphasis has been placed on purchasing
current income-producing securities and maintaining such securities as long as
they continue to meet the Company's yield and risk criteria. Historically,
municipal bonds have been attractive due to their tax-exempt feature. Essential
service (e.g., schools, sewer, water, etc.) bonds issued by municipalities are
prevalent in this area. Many of these bonds are not rated due to the small size
of their offerings.

At year-end 2000 and 1999, investments totaling approximately $730 million
and $888 million ($806 million and $970 million at cost) of the Company's
$11.376 billion and $10.194 billion investment portfolio related to securities
rated as non-investment grade or not rated by Moody's Investors Service or
Standard & Poor's. Such investments, which tend to have higher yields,
historically have benefited the Company's results of operations and many have
been upgraded to investment grade while owned. However, in 2000, the Company
recorded losses in its non-investment grade bond portfolio due to the interest
rate environment and deteriorating economic conditions.The losses were offset by
gains in the equity portfolio. The Company continues to closely monitor these
investments.

Because of alternative minimum tax matters, the Company uses a blend of
tax-exempt and taxable fixed-maturity securities. Tax-exempt bonds comprised 9%
of invested assets as of December 31, 2000, unchanged from year-end 1999 and
1998. Additional information regarding the composition of investments, together
with maturity data regarding investments in fixed maturities, is included in the
Notes to Consolidated Financial Statements.

REMAINING ASSETS

Land, building and equipment for the Company at year-end 2000 included $61
million relating to the addition of a second

MA N A G E M E N T DI S C U S S I O N
(continued)

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

office tower completed in the first half of 2000, which approximately doubled
the Headquarters space.

In the second quarter of 2000, the Company began accounting for the assets
related to the $302.9 million single- premium BOLI policy written on December
30, 1999, as a separate item on the balance sheet, "Separate Accounts." At
year-end 1999, the premium amount was included in cash.

MARKET RISK

The Company could incur losses due to adverse changes in market rates and
prices. The Company's primary market risk exposures are changes in price for
equity securities and changes in interest rates and credit ratings for
fixed-maturity securities. The Company could alter the existing investment
portfolios or change the character of future investments to manage this exposure
to market risk. CFC, with the Board of Directors, administers and oversees
investment risk through the Investment Committee, which provides executive
oversight of investment activities. The Company has specific investment
guidelines and policies that define the overall framework used daily by
investment portfolio managers to limit the Company's exposure to market risk.

LIABILITIES AND SHAREHOLDERS' EQUITY

At December 31, 2000, total long- and short-term debt was 4.7%, insurance
reserves were 23.2% and total shareholders' equity was 45.1% of total assets,
with remaining liabilities consisting of unearned premiums, deferred income
taxes, declared but unpaid dividends and other liabilities. At December 31,
2000, and December 31, 1999, long-term debt consisted of $449.2 million and
$456.4 million, respectively, of convertible and senior debentures. Short-term
debt is used to provide working capital as discussed above.

EQUITY

Statutory risk-based capital requirements became effective for life
insurance companies in 1993 and for property casualty companies in 1994. The
Company's risk-based capital has been well above required amounts in each year
since those effective dates.

- ---------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------
(000,000s omitted) 2000 1999 1998
- ---------------------------------------------------------------------------

Common Stock, Paid in Capital
less Treasury Stock $ 219.1 $ 267.3 $ 462.0
Retained Earnings 1,620.0 1,623.9 1,480.9
Accumulated Other
Comprehensive Income 4,155.9 3,530.1 3,678.0
Total Shareholders' Equity $5,995.0 $5,421.3 $5,620.9
- ---------------------------------------------------------------------------

As a long-term investor, the Company has followed a buy-and-hold strategy
for more than 40 years. A significant amount of unrealized appreciation on
equity investments has been generatedas a result of this policy. Unrealized
appreciation on equity investments, before deferred income taxes, was $6.438
billion as of December 31, 2000, and constituted 57.2% of the total investment
portfolio; 75.5% of the equity investment portfolio; and, after deferred income
taxes, 69.8% of total shareholders' equity. Such unrealized appreciation, before
deferred income taxes, amounted to $5.488 billion and $5.512 billion, at
year-end 1999 and 1998, respectively.

COMMON STOCK REPURCHASE

The CFC Board of Directors believes that stock repurchases can help fulfill
the Company's commitment to enhancing shareholder value. Consequently, the
Company's Board of Directors has authorized the repurchase of outstanding
shares. At December 31, 2000, 9.1 million shares remained authorized for
repurchase at any time in the future. The Company has purchased 2.1 million
shares at a cost of $66.4 million and 6.1 million shares at a cost of $217.1
million during the years ended December 31, 2000 and 1999, respectively, with
11.8 million total shares repurchased at a total cost to the Company of $376.6
million since the inception of the share repurchase program in 1996.

26
C O N S O L I D A T E D B A L A N C E S H E E T S
(000s omitted)
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

December 31,
-----------------------------------
2000 1999
------------ ------------

ASSETS
Investments
Fixed maturities, at fair value (amortized cost: 2000-$2,802,863;
1999-$2,692,154) $ 2,721,291 $ 2,617,412
Equity securities, at fair value (cost: 2000-$2,067,984;
1999-$2,022,555) 8,525,985 7,510,918
Other invested assets .............................................. 68,560 65,909
Cash .................................................................. 60,254 339,554
Investment income receivables ......................................... 86,234 80,128
Finance receivables ................................................... 30,718 32,931
Premiums receivable ................................................... 652,340 522,539
Reinsurance receivables ............................................... 214,576 159,229
Prepaid reinsurance premiums .......................................... 15,246 24,684
Deferred acquisition costs pertaining to unearned
premiums and to life policies in force ............................. 258,734 225,896
Land, buildings and equipment for Company use (at cost, less
accumulated depreciation: 2000-$123,840; 1999-$123,427) ............ 122,005 107,784
Other assets .......................................................... 173,533 120,695
Separate accounts ..................................................... 357,615 - 0 -
------------ ------------
Total assets .................................................... $ 13,287,091 $ 11,807,679
============ ============

LIABILITIES
Insurance reserves
Losses and loss expenses ........................................... $ 2,473,059 $ 2,154,149
Life policy reserves ............................................... 605,421 860,561
Unearned premiums ..................................................... 921,872 836,407
Other liabilities ..................................................... 257,254 241,232
Deferred income taxes ................................................. 2,057,641 1,719,673
Notes payable ......................................................... 170,000 118,000
6.9% senior debentures due 2028 ....................................... 419,631 419,614
5.5% convertible senior debentures due 2002 ........................... 29,603 36,759
Separate accounts ..................................................... 357,615 - 0 -
------------ ------------
Total liabilities ............................................... 7,292,096 6,386,395
------------ ------------

SHAREHOLDERS' EQUITY
Common stock, par value-$2 per share; authorized 200,000 shares;
issued: 2000-172,883; 1999-171,862 ................................. 345,766 343,725
Paid-in capital ....................................................... 254,156 237,859
Retained earnings ..................................................... 1,619,954 1,623,890
Accumulated other comprehensive income-unrealized
net capital gains .................................................. 4,155,929 3,530,104
------------ ------------
6,375,805 5,735,578
Less treasury stock at cost (2000-11,992 shares; 1999-9,841 shares) ... (380,810) (314,294)
------------ ------------
Total shareholders' equity ...................................... 5,994,995 5,421,284
------------ ------------
Total liabilities and shareholders' equity ...................... $ 13,287,091 $ 11,807,679
============ ============

Accompanying notes are an integral part of this statement.

27
CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except per share data)
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

Years Ended December 31,
-----------------------------------------
2000 1999 1998
----------- ----------- -----------

REVENUES
Premium income
Property and casualty ........................... $ 1,827,576 $ 1,657,277 $ 1,542,639
Life ............................................ 76,716 65,824 61,704
Accident and health ............................. 2,630 8,849 8,392
----------- ----------- -----------
Premiums earned ................................. 1,906,922 1,731,950 1,612,735
Net investment income .............................. 415,310 386,773 367,993
Realized (losses) gains on investments ............. (2,595) (564) 65,309
Other income ....................................... 11,357 10,064 8,252
----------- ----------- -----------
Total revenues .................................. 2,330,994 2,128,223 2,054,289
----------- ----------- -----------

BENEFITS AND EXPENSES
Insurance losses and policyholder benefits ......... 1,581,123 1,254,363 1,221,118
Commissions ........................................ 351,104 316,416 293,926
Other operating expenses ........................... 171,729 151,495 145,022
Taxes, licenses and fees ........................... 55,694 60,475 61,271
Increase in deferred acquisition costs pertaining to
unearned premiums and to life policies in force . (32,838) (16,930) (11,323)
Interest expense ................................... 36,788 33,043 28,012
Other expenses ..................................... 19,630 7,788 9,156
Asset impairment-software written off .............. 39,100 -0- -0-
----------- ----------- -----------
Total benefits and expenses ..................... 2,222,330 1,806,650 1,747,182
----------- ----------- -----------

INCOME BEFORE INCOME TAXES ............................ 108,664 321,573 307,107
----------- ----------- -----------

PROVISION FOR INCOME TAXES
Current ............................................ (11,223) 76,534 78,847
Deferred ........................................... 1,522 (9,683) (13,307)
----------- ----------- -----------
Total provision for income taxes ................ (9,701) 66,851 65,540
----------- ----------- -----------

NET INCOME ............................................ $ 118,365 $ 254,722 $ 241,567
=========== =========== ===========

PER COMMON SHARE
Net income (basic) ................................. $ .74 $ 1.55 $ 1.45
=========== =========== ===========
Net income (diluted) ............................... $ .73 $ 1.52 $ 1.41
=========== =========== ===========
Cash dividends (declared) .......................... $ .76 $ .68 $ .61 1/3
=========== =========== ===========

Accompanying notes are an integral part of this statement.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(000s omitted)
Cincinnati Financial Corporation and Subsidiaries
- -------------------------------------------------------------------------------

Accumulated
Other Total
Common Treasury Paid-In Retained Comprehensive Shareholders'
Stock Stock Capital Earnings Income Equity
----------- ----------- --------- ----------- ---------- -----------

Balance, December 31, 1997 ........ $ 338,782 $ (72,585) $ 203,282 $ 1,341,730 $2,905,756 $ 4,716,965

Net income ........................ 241,567 241,567
Change in unrealized gains on
investments .................... 1,188,097 1,188,097
Income taxes on unrealized gains .. (415,834) (415,834)
----------
Comprehensive income .............. 1,013,830
Dividends declared ................ (102,383) (102,383)
Purchase/issuance of
treasury shares ................ (24,611) 310 (24,301)
Stock options exercised ........... 1,214 9,100 10,314
Conversion of debentures .......... 875 5,636 6,511
----------- ----------- --------- ----------- ---------- -----------
Balance, December 31, 1998 ........ 340,871 (97,196) 218,328 1,480,914 3,678,019 5,620,936

Net income ........................ 254,722 254,722
Change in unrealized gains on
investments .................... (227,562) (227,562)
Income taxes on unrealized gains.. 79,647 79,647
----------
Comprehensive income .............. 106,807
Dividends declared ................ (111,746) (111,746)
Purchase/issuance of
treasury shares ................ (217,098) 14 (217,084)
Stock options exercised ........... 816 6,396 7,212
Conversion of debentures .......... 2,038 13,121 15,159
----------- ----------- --------- ----------- ---------- -----------
Balance, December 31, 1999 ........ 343,725 (314,294) 237,859 1,623,890 3,530,104 5,421,284

Net income ........................ 118,365 118,365
Change in unrealized gains on
investments .................... 962,808 962,808
Income taxes on unrealized gains.. (336,983) (336,983)
----------
Comprehensive income .............. 744,190
Dividends declared ................ (122,301) (122,301)
Purchase/issuance of
treasury shares ................ (66,516) 11 (66,505)
Stock options exercised ........... 1,080 10,091 11,171
Conversion of debentures .......... 961 6,195 7,156
----------- ----------- --------- ----------- ---------- -----------
Balance, December 31, 2000 ........ $ 345,766 $ (380,810) $ 254,156 $ 1,619,954 $4,155,929 $ 5,994,995
=========== =========== ========= =========== ========== ===========

Accompanying notes are an integral part of this statement.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted)
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

Years Ended December 31,
------------------------------------
2000 1999 1998
--------- --------- ---------

Cash flows from operating activities:
Net income ......................................................... $ 118,365 $ 254,722 $ 241,567
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................................... 18,269 16,016 11,793
Asset impairment-software written off ........................... 39,100 -0- -0-
Increase in investment income receivable ........................ (11,038) (3,355) (2,253)
Increase in premiums receivable ................................. (129,801) (28,270) (24,081)
Increase in reinsurance receivables ............................. (55,347) (23,238) (26,881)
Decrease (increase) in prepaid reinsurance premiums ............. 9,438 1,751 (2,823)
Increase in deferred acquisition costs .......................... (32,838) (16,930) (11,323)
Decrease (increase) in accounts receivable ...................... 22,502 (15,277) (7,369)
(Increase) decrease in other assets ............................. (72,306) 2,170 425
Increase in loss and loss expense reserves ...................... 318,910 99,424 118,191
Increase in life policy reserves ................................ 52,621 326,831 51,283
Increase in unearned premiums ................................... 85,465 46,855 34,849
Increase (decrease) in other liabilities ........................ 53,078 15,471 (16,590)
(Decrease) increase in current income taxes ..................... (63,400) 20,752 (14,595)
Increase (decrease) in deferred income taxes .................... 985 (9,683) (13,307)
Realized loss (gains) on investments ............................ 2,595 564 (65,309)
--------- --------- ---------
Net cash provided by operating activities ................... 356,598 687,803 273,577
--------- --------- ---------
Cash flows from investing activities:
Sale of fixed maturities investments ............................... 3,518 61,909 47,486
Call or maturity of fixed maturities investments ................... 302,145 316,495 320,510
Sale of equity securities investments .............................. 293,474 197,141 321,003
Collection of finance receivables .................................. 15,434 16,133 14,738
Purchase of fixed maturities investments ........................... (795,766) (423,505) (475,751)
Purchase of equity securities investments .......................... (272,172) (246,129) (474,176)
Investment in land, buildings and equipment ........................ (43,724) (102,141) (47,750)
Investment in finance receivables .................................. (13,220) (16,957) (15,131)
Increase in other invested assets .................................. (2,912) (8,232) (11,589)
--------- --------- ---------
Net cash used in investing activities ....................... (513,223) (205,286) (320,660)
--------- --------- ---------
Cash flows from financing activities:
Payment of cash dividends to shareholders .......................... (119,342) (109,702) (99,522)
Purchase/issuance of treasury shares ............................... (66,504) (217,084) (24,301)
Increase in (payoff of) notes payable .............................. 52,000 118,000 (280,558)
Proceeds from stock options exercised .............................. 11,171 7,212 10,314
Proceeds from issue of 6.9% senior debentures ...................... -0- -0- 419,593
--------- --------- ---------
Net cash (used in) provided by financing activities ......... (122,675) (201,574) 25,526
--------- --------- ---------
Net (decrease) increase in cash ....................................... (279,300) 280,943 (21,557)
Cash at beginning of year ............................................. 339,554 58,611 80,168
--------- --------- ---------
Cash at end of year ................................................... $ 60,254 $ 339,554 $ 58,611
========= ========= =========
Supplemental disclosures of cash flow information:
Interest paid ...................................................... $ 40,214 $ 31,612 $ 36,419
========= ========= =========
Income taxes paid .................................................. $ 33,396 $ 55,000 $ 91,241
========= ========= =========

Supplemental disclosure of noncash activity - During the current year, the
Company established a separate account. This resulted in a noncash transfer to
the separate account of the following: $300,818 from investments, $307,762 from
life policy reserves, $11,394 from cash, $8,984 from accounts payable
securities, $4,932 from investment income receivable, $540 from other
liabilities, and $142 from accounts receivable securities.

Accompanying notes are an integral part of this statement.
30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

NATURE OF OPERATIONS- Cincinnati Financial Corporation (Company), through
four insurance subsidiaries, sells insurance in 31 states, primarily in the
Midwest and Southeast regions of the United States of America through a network
of local independent agents.Insurance products sold include fire, automobile,
casualty, bonds and all related forms of property casualty insurance as well as
life insurance, long term care, disability policies and annuities.

BASIS OF PRESENTATION- The consolidated financial statements include the
accounts of the Company and subsidiaries, each of which is wholly owned, and are
presented in conformity with accounting principles generally accepted in the
United States of America. All significant inter-company balances and
transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

PROPERTY AND CASUALTY INSURANCE- Expenses incurred in the issuance of
policies are deferred and amortized over the terms of the policies. Anticipated
investment income is not considered in determining if a premium deficiency
related to insurance contracts exists. Policy premiums are deferred and earned
on a pro rata basis over the terms of the policies. Losses and loss expense
reserves are based on claims reported prior to the end of the year and estimates
of unreported claims, based upon facts in each claim and the Company's
experience with similar claims. The establishment of appropriate reserves,
including reserves for catastrophes, is an inherently uncertain process. Reserve
estimates are regularly reviewed and updated, using the most current information
available. Any resulting adjustments are reflected in current operations.

LIFE INSURANCE- Policy acquisition costs are deferred and amortized over
the premium-paying period of the policies. Life policy reserves are based on
anticipated rates of mortality derived primarily from industry experience data,
anticipated withdrawal rates based principally on Company experience and
estimated future interest earnings using initial interest rates ranging from 3%
to 7%. Interest rates on approximately $415,000,000 and $380,000,000 of such
reserves at December 31, 2000 and 1999, respectively, are periodically adjusted
based upon market conditions.

Payments received for investment, limited pay and universal life-type
contracts are recognized as income only to the extent of the current cost of
insurance and policy administration, with the remainder recognized as
liabilities and included in life policies reserves.

ACCIDENT AND HEALTH INSURANCE- Expenses incurred in the issuance of
policies are deferred and amortized over a five-year period. Policy premium
income, unearned premiums and reserves for unpaid losses are accounted for in
substantially the same manner as property casualty insurance discussed above.

REINSURANCE- In the normal course of business, the Company seeks to reduce
losses that may arise from catastrophes or other events that cause unfavorable
underwriting results by reinsuring certain levels of risk in various areas of
exposure with other insurance companies and reinsurers. Reinsurance contracts do
not relieve the Company from any obligation to policyholders. Although the
Company historically has not experienced uncollectible reinsurance, failure of
reinsurers to honor their obligations could result in losses to the Company.
Amounts recoverable from reinsurers are estimated in a manner consistent with
the claim liability associated with the reinsured policy.

The Company also assumes some reinsurance from other insurance companies,
reinsurers and involuntary state pools. Such assumed reinsurance activity is
recorded principally on the basis of reports received from the ceding companies.

INVESTMENTS- Fixed maturities (bonds and notes) and equity securities
(common and preferred stocks) are classified as available for sale and are
stated at fair values.

Unrealized gains and losses on investments, net of income taxes associated
therewith, are included in shareholders' equity in accumulated other
comprehensive income. Realized gains and losses on sales of investments are
recognized in net income on a specific identification basis.

Investment income consists primarily of interest and dividends. Interest is
recognized on an accrual basis and dividends are recorded at the ex-dividend
date.

LAND, BUILDING AND EQUIPMENT - Property and equipment are classified as
land, buildings and equipment for Company use or as other invested assets and
are carried at cost less accumulated depreciation. The Company provides
depreciation based on estimated useful lives using straight-line and accelerated
methods. The Company reviews property and equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable.

During 2000, the Company wrote off $39.1 million of previously capitalized
costs related to the development of next-generation software to process property
casualty policies. Management conducted a review of the project, including an
assessment by an independent firm, and determined, after several deliverable
dates were missed, that the project design would not

perform as originally intended. The decision required the application software
under development be abandoned and a new application purchased.

INCOME TAXES- Deferred tax liabilities and assets are computed using the
tax rates in effect for the time when temporary differences in book and taxable
income are estimated to reverse. Deferred income taxes are recognized for
numerous temporary differences between the Company's taxable income and
book-basis income and other changes in shareholders' equity. Such temporary
differences relate primarily to unrealized gains on investments and differences
in the recognition of deferred acquisition costs and insurance reserves.
Deferred taxes associated with unrealized appreciation (except the amounts
related to the effect of income tax rate changes) are charged to shareholders'
equity, and deferred taxes associated with other differences are charged to
income.

SEPARATE ACCOUNTS - The Company issues variable life contracts with
guaranteed minimum returns, the assets and liabilities of which are legally
segregated and recorded as assets and liabilities of the separate accounts.
Minimum investment returns and account values are guaranteed by the Company and
also include death benefits to beneficiaries of the contract holders.

The assets of the separate accounts are carried at fair value. Separate
account liabilities primarily represent the contract holders' claim to the
related assets and are carried at the fair value of the assets. In the event
that the asset value of contract holders' accounts is projected below the value
guaranteed by the Company, a liability is established through a charge to
earnings. Investment income and realized capital gains and losses of the
separate accounts generally accrue directly to the contract holders and,
therefore, are not included in the Company's Consolidated Statements of Income.
Revenues and expenses for the Company related to the separate accounts consist
of contractual fees, percentages of net realized capital gains and losses, and
mortality, surrender and expense risk charges.

EARNINGS PER SHARE- Net income per common share is based on the weighted
average number of common shares outstanding during each of the respective years.
The calculation of net income per common share (diluted) assumes the conversion
of convertible senior debentures and the exercise of stock options.

FAIR VALUE DISCLOSURES- Fair values for investments in fixed-maturity
securities (including redeemable preferred stock and assets held in separate
accounts) are based on quoted market prices, where available. For such
securities not actively traded, fair values are estimated by discounting
expected future cash flows using a current market rate applicable to the yield,
credit quality and maturity of the investments. Fair values for equity
securities are based on quoted market prices.

The fair values for liabilities under investment-type insurance contracts
(annuities) are estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued. Fair values for
short-term notes payable are estimated using interest rates currently available
to the Company. Fair values for long-term debentures are based on the quoted
market prices for such debentures.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (amended by SFAS Nos. 137 and 138). The Company plans to adopt SFAS
No. 133, as amended, on January 1, 2001.

Management has determined that the adoption of SFAS No. 133 will not have a
significant impact on the consolidated results of operations, financial position
or cash flows of the Company because the Company does not have significant
derivative activity.

TRANSFERS OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES - In
September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
replaces SFAS No. 125 and addresses certain issues not previously addressed in
SFAS No. 125. SFAS No. 140 is effective for transfers and servicing occurring
after March 31, 2001. Additionally, SFAS No. 140 is effective for disclosures
about securitizations and collateral for fiscal years ending after December 15,
2000. The Company does not expect that SFAS No. 140 will have a material effect
on its financial statements.

RECLASSIFICATIONS- Certain prior year amounts have been reclassified to
conform with current year classifications, including certain premium receivables
and deferred acquisition costs, which prior to 2000 were netted against unearned
premiums and underwriting expense accruals in the balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

2. INVESTMENTS
(000s omitted)

Years Ended December 31,
------------------------------------------
2000 1999 1998
----------- ------------ -----------
Investment income summarized by investment category:

Interest on fixed maturities ............................................... $ 221,993 $ 218,688 $ 217,675
Dividends on equity securities ............................................. 186,181 165,137 145,885
Other investment income .................................................... 11,409 8,316 9,545
----------- ------------ -----------
Total ................................................................... 419,583 392,141 373,105
Less investment expenses ................................................... 4,273 5,368 5,112
----------- ------------ -----------
Net investment income ................................................... $ 415,310 $ 386,773 $ 367,993
=========== ============ ===========

Realized (losses) gains on investments summarized by investment category:
Fixed maturities:
Gross realized gains .................................................... $ 7,216 $ 10,842 $ 11,591
Gross realized losses ................................................... (76,540) (48,518) (10,354)
Equity securities:
Gross realized gains .................................................... 108,299 57,605 104,079
Gross realized losses ................................................... (41,570) (20,493) (40,007)
----------- ------------ -----------
Realized (losses) gains on investments .................................. $ (2,595) $ (564) $ 65,309
=========== ============ ===========
Change in unrealized gains on investments summarized by investment category:
Fixed maturities ........................................................... $ (6,830) $ (204,314) $ (50,098)
Equity securities .......................................................... 969,638 (23,248) 1,238,195
----------- ------------ -----------
Change in unrealized gains on investments ............................... $ 962,808 $ (227,562) $ 1,188,097
=========== ============ ===========

Analysis of cost or amortized cost, gross unrealized gains, gross unrealized
losses and fair value as of December 31, 2000 and 1999 (000s omitted):

Cost or Gross Gross
Amortized Unrealized Unrealized Fair
2000 Cost Gains Losses Value
----------- ----------- ----------- -----------

Fixed maturities:
States, municipalities and political subdivisions .......... $ 947,470 $ 37,822 $ 2,062 $ 983,230
Convertibles and bonds with warrants attached .............. 76,506 1,387 9,703 68,190
Public utilities ........................................... 80,929 2,522 918 82,533
United States government and government
agencies and authorities ................................ 7,030 186 -- 7,216
All other corporate bonds .................................. 1,690,928 40,605 151,411 1,580,122
----------- ----------- ----------- -----------
Total ................................................... $ 2,802,863 $ 82,522 $ 164,094 $ 2,721,291
=========== =========== =========== ===========
Equity securities .............................................. $ 2,067,984 $ 6,517,504 $ 59,503 $ 8,525,985
=========== =========== =========== ===========

1999
Fixed maturities:
States, municipalities and political subdivisions .......... $ 891,319 $ 16,971 $ 21,637 $ 886,653
Convertibles and bonds with warrants attached .............. 83,993 2,221 10,419 75,795
Public utilities ........................................... 60,978 1,120 690 61,408
United States government and government
agencies and authorities ................................ 7,038 34 173 6,899
All other corporate bonds .................................. 1,648,826 30,886 93,055 1,586,657
----------- ----------- ----------- -----------
Total ................................................... $ 2,692,154 $ 51,232 $ 125,974 $ 2,617,412
=========== =========== =========== ===========
Equity securities .............................................. $ 2,022,555 $ 5,580,114 $ 91,751 $ 7,510,918
=========== =========== =========== ===========

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

Contractual maturity dates for investments in fixed maturity securities as of
December 31, 2000 (000s omitted):

Amortized Fair % of
Cost Value Fair Value
---------- ---------- ----------

Maturity dates occurring:
One year or less...................... $ 113,765 $ 115,575 4.2
After one year through five years..... 763,746 734,204 27.0
After five years through ten years.... 806,477 740,758 27.2
After ten years....................... 1,118,875 1,130,754 41.6
---------- ---------- -----
Total.............................. $2,802,863 $2,721,291 100.0
========== ========== =====

Actual maturities may differ from contractual maturities when there exists
a right to call or prepay obligations with or without call or prepayment
penalties.

At December 31, 2000, investments with a cost of $64,020,000 and fair value
of $63,878,000 were on deposit with various states in compliance with certain
regulatory requirements.

Investments in companies that exceed 10% of the Company's shareholders'
equity include the following as of December 31 (000s omitted):

2000 1999
-------------------------- --------------------------
Cost Fair Value Cost Fair Value
-------- ---------- -------- ----------

Fifth Third Bancorp common stock...... $276,799 $4,329,797 $276,799 $3,544,757
Alltel Corporation common stock....... $118,931 $ 822,624 $100,467 $1,060,481

3. DEFERRED ACQUISITION COSTS

Acquisition costs incurred and capitalized during 2000, 1999 and 1998
amounted to $437,504,000, $381,635,000 and $347,704,000, respectively.
Amortization of deferred acquisition costs was $404,666,000, $364,705,000 and
$336,381,000 for 2000, 1999 and 1998, respectively.

4. LOSSES AND LOSS EXPENSES

Activity in the reserve for losses and loss expenses is summarized as
follows (000s omitted):

Years Ended December 31,
----------------------------------------------------
2000 1999 1998
----------- ----------- -----------

Balance at January 1................ $ 2,092,576 $ 1,978,461 $ 1,888,883
Less reinsurance receivable....... 160,809 138,138 112,235
----------- ----------- -----------
Net balance at January 1............ 1,931,767 1,840,323 1,776,648
----------- ----------- -----------
Incurred related to:
Current year...................... 1,527,669 1,303,651 1,306,194
Prior years....................... (19,726) (116,061) (153,311)
----------- ----------- -----------
Total incurred...................... 1,507,943 1,187,590 1,152,883
----------- ----------- -----------
Paid related to:
Current year...................... 666,796 574,038 590,366
Prior years....................... 590,909 522,108 498,842
----------- ----------- -----------
Total paid.......................... 1,257,705 1,096,146 1,089,208
----------- ----------- -----------
Net balance at December 31.......... 2,182,005 1,931,767 1,840,323
Plus reinsurance receivable....... 219,477 160,809 138,138
----------- ----------- -----------
Balance at December 31............ $ 2,401,482 $ 2,092,576 $ 1,978,461
=========== =========== ===========

5. LIFE POLICY RESERVES

Life policy reserves have been calculated using the account value basis for
universal life and annuity policies and primarily the Basic Table (select)
mortality basis for ordinary/traditional, industrial and other policies.
Following is a summary of such reserves (000s omitted):

2000 1999
-------- --------

Ordinary/traditional life..... $170,816 $155,931
Universal life................ 251,722 236,214
Annuities..................... 162,848 144,221
Group life.................... 106 302,990
Industrial.................... 15,120 15,555
Other......................... 4,809 5,650
-------- --------
Total....................... $605,421 $860,561
======== ========

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Cincinnati Financial Corporation and Subsidiaries
- -------------------------------------------------------------------------------

At December 31, 2000 and 1999, the fair value associated with the annuities
shown above approximated $179,000,000 and $158,000,000 respectively.

6. NOTES PAYABLE

The Company and subsidiaries had no compensating balance requirement on
debt for either 2000 or 1999. The Company had lines of credit with commercial
banks amounting to $225,000,000,of which $170,000,000 and $118,000,000 were in
use at December 31, 2000 and 1999. Interest rates charged on such borrowings
ranged from 6.38% to 7.40% during 2000, which resulted in an average interest
rate of 7.12%. At December 31, 2000, the fair value of the notes payable
approximated the carrying value and the weighted average interest rate
approximated 6.68%.

7. SENIOR DEBENTURES

The Company issued $420,000,000 of senior debentures due in 2028 in 1998.
The convertible senior debentures due in 2002 are convertible by the debenture
holders into shares of common stock at a conversion price of $14.88 (67.23
shares for each $1,000 principal). At December 31, 2000 and 1999, the fair value
of the debentures approximated $450,000,000 and $445,000,000, respectively.

8. SHAREHOLDERS' EQUITY AND RESTRICTION

The insurance subsidiaries paid cash dividends to the Company of
approximately $100,000,000, $195,000,000 and $105,000,000 in 2000, 1999 and
1998, respectively. Dividends paid to the Company by insurance subsidiaries are
restricted by regulatory requirements of the insurance subsidiaries' domiciliary
state. Generally, the maximum dividend that may be paid without prior regulatory
approval is limited to the greater of 10% of statutory surplus or 100% of
statutory net income for the prior calendar year, up to the amount of statutory
unassigned surplus as of the end of the prior calendar year. Dividends exceeding
these limitations may be paid only with approval of the insurance department of
the subsidiaries' domiciliary state. During 2001, the total dividends that may
be paid to the Company without regulatory approval are approximately
$317,173,000.

2,151,000 shares of common stock were available for future stock option
grants, as of December 31, 2000.

The Company's Board of Directors has authorized the repurchase of
outstanding shares. At December 31, 2000, 9.1 million shares remain authorized
for repurchase at any time in the future. The Company has purchased 11.8 million
shares at a cost of $376.6 million between the inception of the share repurchase
program in 1996 and December 31, 2000.

9. REINSURANCE

Property casualty premium income in the accompanying statements of income
includes approximately $33,773,000, $37,113,000 and $38,790,000 of earned
premiums on assumed business and is net of approximately $108,067,000,
$95,572,000 and $96,073,000 of earned premiums on ceded business for 2000, 1999
and 1998, respectively.

Written premiums for 2000, 1999 and 1998 consist of the following (000s
omitted):

2000 1999 1998
---------- ---------- ----------

Direct business ........... $1,987,019 $1,763,751 $1,636,859
Assumed business .......... 35,597 37,263 38,119
Ceded business ............ (99,085) (94,105) (99,189)
---------- ---------- ----------
Net ..................... $1,923,531 $1,706,909 $1,575,789
========== ========== ==========

Insurance losses and policyholder benefits in the accompanying statements
of income are net of approximately $109,478,000, $63,206,000 and $59,741,000 of
reinsurance recoveries for 2000, 1999 and 1998, respectively.

10. FEDERAL INCOME TAXES

Significant components of the Company's net deferred tax liability as of
December 31, 2000 and 1999 are as follows (000s omitted):

2000 1999
---------- ----------

Deferred tax liabilities:
Unrealized gains on investments ...................... $2,231,751 $1,894,768
Deferred acquisition costs ........................... 82,163 71,115
Other ................................................ 28,331 22,211
---------- ----------
Total ................................................ 2,342,245 1,988,094
---------- ----------
Deferred tax assets:
Losses and loss expense reserves ..................... 178,211 181,713
Unearned premiums .................................... 64,405 56,174
Life policy reserves ................................. 18,620 18,603
Tax credit carryforward .............................. 9,848 -0-
Other ................................................ 13,520 11,931
---------- ----------
Total ................................................ 284,604 268,421
---------- ----------
Net deferred tax liability ............................. $2,057,641 $1,719,673
========== ==========

The provision for federal income taxes is based upon a consolidated income
tax return for the Company and subsidiaries.

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

The differences between the statutory federal rates and the Company's
effective federal income tax rates are as follows:

2000 1999 1998
Percent Percent Percent
----- ----- -----

Tax at statutory rate ...................... 35.00 35.00 35.00
Increase (decrease) resulting from:
Tax-exempt municipal bonds ............... (15.11) (5.13) (5.39)
Dividend exclusion ....................... (30.39) (9.19) (9.29)
Other .................................... 1.57 .11 1.02
----- ----- -----
Effective rate ............................. (8.93) 20.79 21.34
===== ===== =====

No provision has been made (at December 31, 2000, 1999 and 1998) for
federal income taxes on approximately $14,000,000 of the life insurance
subsidiary's retained earnings, since such taxes will become payable only to the
extent that such retained earnings are distributed as dividends or exceed
limitations prescribed by tax laws. The Company does not contemplate any such
dividend.

11. NET INCOME PER COMMON SHARE

The computation of earnings per share for the years ended December 31,
2000, 1999 and 1998 is as follows (000s omitted except per share data):

Net Income Shares Per Share
2000 (Numerator) (Denominator) Amount
-------- ------- --------

Basic ................................ $118,365 160,611 $ .74
Effect of dilutive securities:
5.5% convertible senior
debentures ....................... 1,206 1,990
Stock options ...................... 1,320
-------- -------
Diluted .............................. $119,571 163,921 $ .73
======== ======= ========

1999
Basic ................................ $254,722 164,637 $ 1.55
========
Effect of dilutive securities:
5.5% convertible senior
debentures ....................... 1,539 2,471
Stock options ...................... 1,507
-------- -------
Diluted .............................. $256,261 168,615 $ 1.52
======== ======= ========

1998
Basic ................................ $241,567 166,821 $ 1.45
========
Effect of dilutive securities:
5.5% convertible senior
debentures ....................... 1,918 3,490
Stock options ...................... 1,767
-------- -------
Diluted .............................. $243,485 172,078 $ 1.41
======== ======= ========

Options to purchase 1,112,000, 918,000 and 667,000 shares of common stock
were outstanding during 2000, 1999 and 1998, respectively, but were not included
in the computation of net income per common share (diluted) because the options'
exercise prices were greater than the average market price of the common shares.

12. PENSION PLAN

The Company and subsidiaries have a defined benefit pension plan covering
substantially all employees. Benefits are based on years of credited service and
compensation level. Contributions to the plan are based on the frozen entry age
actuarial cost method. Pension expense is composed of several components that
are determined using the projected unit credit actuarial cost method and based
on certain actuarial assumptions. The following table sets forth summarized
information on the Company's defined benefit pension plan (000s omitted):

Years Ended December 31,
-----------------------
2000 1999
--------- ---------

Change in benefit obligation:
Benefit obligation at beginning of year .......... $ 75,921 $ 76,314
Service cost ..................................... 4,855 5,319
Interest cost .................................... 6,031 5,147
Plan amendments .................................. -0- 11,088
Actuarial loss (gain) ............................ 6,187 (18,795)
Benefits paid .................................... (4,811) (3,152)
--------- ---------
Benefit obligation at end of year ................ $ 88,183 $ 75,921
========= =========

Change in plan assets:
Fair value of plan assets at beginning
of year ......................................... $ 148,620 $ 151,879
Actual return on plan assets ..................... 16,632 (107)
Benefits paid .................................... (4,812) (3,152)
--------- ---------
Fair value of plan assets at end of year ......... $ 160,440 $ 148,620
========= =========

Funded status:
Funded status at end of year ..................... $ 72,257 $ 72,699
Unrecognized net actuarial gain .................. (76,164) (80,552)
Unrecognized net transitional asset .............. (2,591) (2,962)
Unrecognized prior service cost .................. 9,080 10,770
--------- ---------
Prepaid (accrued) pension cost .................... $ 2,582 $ (45)
========= =========

A 1999 plan amendment increased benefit obligations and unrecognized prior
service costs. This plan amendment primarily changed the retirement benefit
formula, resulting in increased benefit payments to plan participants.

The fair value of the Company's stock comprised $23,042,000 and $18,164,000
of the plan's assets at December 31, 2000 and 1999, respectively.

35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

The following summarizes the assumptions for the plan:

Years Ended December 31,
--------------------------
2000 1999
Percent Percent
-------- --------

Discount rate ........................................ 7.25 7.50
Expected return on plan assets ....................... 8.00 8.00
Rate of compensation increase ........................ 5 to 7 5 to 7

The components of the net periodic benefit cost for 2000, 1999 and 1998 include
the following (000s omitted):

Years Ended December 31,
------------------------------------
2000 1999 1998
-------- -------- --------

Service cost ......................... $ 4,855 $ 5,319 $ 4,150
Interest cost ........................ 6,031 5,147 4,474
Expected return on plan assets ....... (10,688) (9,100) (7,451)
Amortization of:
Transition obligation (asset) ...... (370) (370) (370)
Prior service cost ................. 543 (40) (40)
Actuarial (gain) loss .............. (2,998) (1,269) (1,049)
-------- -------- --------
Net pension expense .................. $ (2,627) $ (313) $ (286)
======== ======== ========

13. STATUTORY ACCOUNTING INFORMATION

Accounting principles generally accepted in the United States of America
differ in certain respects from statutory insurance accounting practices
prescribed or permitted for insurance companies by regulatory authorities. Net
income and shareholders' equity, as determined in accordance with statutory
accounting practices for the Company's insurance subsidiaries, are as follows
(000s omitted):

Years Ended December 31,
---------------------------------
2000 1999 1998
-------- ---------- ----------

Net income:
Property casualty insurance
subsidiaries ...................................... $ 35,035 $ 209,915 $ 148,235
Life health insurance
subsidiary ......................................... $ 30,071 $ 21,381 $ 7,248

December 31,
-----------------------
2000 1999
---------- ----------

Capital and surplus:
Property casualty insurance subsidiaries ............. $2,760,594 $2,498,609

Life health insurance subsidiary ..................... $ 411,136 $ 353,165

In March 1998, the National Association of Insurance Commissioners adopted
the Codification of Statutory Accounting Principles (the Codification). The
Codification, which is intended to standardize regulatory accounting and
reporting to state insurance departments, is effective January 1, 2001. However,
statutory accounting principles will continue to be established by individual
state laws and permitted practices. Ohio, the domiciliary state of the Company's
insurance subsidiaries, will require adoption of the Codification with certain
modifications for the preparation of statutory financial statements effective
January 1, 2001. The Company estimates that the adoption of the Codification as
modified by the Ohio Department of Insurance will reduce statutory capital and
surplus as of January 1, 2001 by approximately $465,000,000 for the property
casualty insurance subsidiaries and $62,000,000 for the life health insurance
subsidiary.

14. TRANSACTIONS WITH AFFILIATED PARTIES

The Company paid certain officers and directors, or insurance agencies of
which they are shareholders, commissions of approximately $13,934,000,
$12,989,000 and $11,654,000 on premium volume of approximately $87,465,000,
$82,707,000 and $82,839,000 for 2000, 1999 and 1998, respectively.

15. STOCK OPTIONS

The Company has primarily qualified stock option plans under which options
are granted to employees of the Company at prices which are not less than market
price at the date of grant and which are exercisable over 10-year periods. The
Company applies APB Opinion 25 and related Interpretations in accounting for
these plans. Accordingly, no compensation cost has been recognized for the stock
option plans. Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123,

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------

the Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below (000s omitted except per share data):

2000 1999 1998
----------- ----------- -----------

Net income ............................................ As reported $ 118,365 $ 254,722 $ 241,567
Pro forma 107,597 246,007 235,420
Net income per common share ........................... As reported $ .74 $ 1.55 $ 1.45
(basic) ........................................... Pro forma .67 1.49 1.41
Net income per common share ........................... As reported $ .73 $ 1.52 $ 1.41
(diluted) ......................................... Pro forma .66 1.47 1.38

In determining the pro forma amounts above, the fair value of each option
was estimated on the date of grant using the Binomial option-pricing model with
the following weighted-average assumptions used for grants in 2000, 1999 and
1998, respectively: dividend yield of 2.11%, 2.36% and 1.79%; expected
volatility of 24.92%, 22.89% and 21.79%; risk-free interest rates of 5.30%,
6.81% and 5.02%; and expected lives of 10 years for all years. Compensation
expense in the pro forma disclosures is not indicative of future amounts as
options vest over several years and additional grants are generally made each
year.

A summary of options information for the years ended December 31, 2000,
1999 and 1998 follows (000s omitted except per share data):

2000 1999 1998
----------------------------- --------------------------- ----------------------------
Shares Weighted-Average Shares Weighted-Average Shares Weighted-Average
Exercise Price Exercise Price Exercise Price
--------- --------------- --------- ---------------- --------- -----------------

Outstanding at beginning of year .. 5,460,140 $27.57 4,940,591 $25.11 3,932,271 $17.88
Granted ........................... 1,294,600 31.08 1,011,800 35.46 1,664,200 38.00
Exercised ......................... (520,679) 18.48 (414,703) 16.55 (615,884) 15.27
Forfeited/revoked ................. (80,843) 29.57 (77,548) 32.89 (39,996) 25.48
--------- --------- ---------
Outstanding at end of year ........ 6,153,218 29.05 5,460,140 27.57 4,940,591 25.11
========= ========= =========
Options exercisable at end of year 3,694,725 3,224,461 2,243,982
Weighted-average fair value of
options granted during the year $ 10.56 $14.40 $13.39

Options outstanding and exercisable at December 31, 2000 consisted of the
following:

Options Outstanding Options Exercisable
- --------------------------------------------------------------------------- -----------------------------------
Range of Weighted-Average
Exercise Remaining Weighted-Average Weighted-Average
Prices Number Contractual Life Exercise Price Number Exercise Price
- --------------- ----------- ---------------- ------------ ----------- ---------------

$ 9.07 to 15.79 525,613 1.86 yrs $13.08 525,613 $13.08
$15.95 to 20.47 575,878 4.30 yrs 18.60 575,878 18.60
$20.50 to 23.00 1,121,355 5.62 yrs 21.25 1,121,355 21.25
$26.41 to29.72 1,069,829 9.83 yrs 29.59 40,629 26.52
$32.06 to 33.75 755,980 8.04 yrs 33.62 285,494 33.59
$33.88 to 39.88 1,226,363 8.15 yrs 34.79 628,034 34.22
$40.16 to 45.37 878,200 7.48 yrs 42.80 517,722 43.17
--------- ---------
6,153,218 6.97 yrs 29.05 3,694,725 28.27
========= =========

37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
16. SEGMENT INFORMATION

Corporate and other identifiable assets are principally cash and marketable
securities. Segment information, for which results are regularly reviewed by
Company management in making decisions about resources to be allocated to the
segments and assess their performance, is summarized in the following table.
Information regarding income before income taxes and identifiable assets is not
available for two reportable segments - commercial lines and personal lines -
property casualty insurance.

(000s omitted):

Years Ended December 31,
-----------------------
REVENUES 2000 1999 1998
------------ ------------ ------------

Commercial lines insurance ........ $ 1,231,306 $ 1,088,039 $ 1,019,463
Personal lines insurance .......... 596,270 569,238 523,176
Life insurance .................... 79,346 74,673 70,096
Investment operations ............. 412,715 386,209 433,302
Corporate and other ............... 11,357 10,064 8,252
------------ ------------ ------------
Total revenues ................. $ 2,330,994 $ 2,128,223 $ 2,054,289
============ ============ ============
INCOME BEFORE INCOME TAXES
Property casualty insurance ....... $ (225,342)* $ 3,241 $ (59,438)
Life insurance .................... 1,362 (903) (1,776)
Investment operations ............. 379,088 355,643 403,925
Corporate and other ............... (46,444) (36,408) (35,604)
------------ ------------ ------------
Total income before income taxes $ 108,664* $ 321,573 $ 307,107
============ ============ ============
IDENTIFIABLE ASSETS
Property casualty insurance ....... $ 6,487,819 $ 5,800,182 $ 5,879,064
Life insurance .................... 1,619,169 1,441,657 1,203,908
Corporate and other ............... 5,180,103 4,565,840 4,399,458
------------ ------------ ------------
Total identifiable assets ...... $ 13,287,091 $ 11,807,679 $ 11,482,430
============ ============ ============

(*)2000 results include a one-time net charge for asset impairment of $39.1
million, before tax.

INDEPENDENT AUDITORS' REPORT

[DELOITTE & TOUCHE LLP LOGO]

To the Shareholders and Board of Directors of Cincinnati Financial
Corporation:

We have audited the consolidated balance sheets of Cincinnati Financial
Corporation and subsidiaries as of December 31, 2000 and 1999 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Cincinnati Financial
Corporation and subsidiaries at December 31, 2000 and 1999 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio
February 6, 2001
38

S E L E C T E D Q U A R T E R L Y F I N A N C I A L D A T A
(Unaudited)

Cincinnati Financial Corporation and Subsidiaries
- --------------------------------------------------------------------------------
(000s omitted except per share data)
Financial data for each quarter in the two years ended December 31,

2000
--------------------------------------------------------------------------------
Quarter 1st 2nd 3rd 4th Full Year
--------- --------- ---------- --------- ----------

Revenues $ 571,270 $ 578,806 $ 599,790 $ 581,127 $2,330,994
Income before income taxes 103,528 96,640 (8,731)* (82,773) 108,664*
Net income 79,363 74,694 5,577* (41,269) 118,365*
Net income per common share (basic) .49 .46 .03* (.26) .74*
Net income per common share (diluted) .48 .45 .03* (.26) .73*

1999
--------------------------------------------------------------------------------
Quarter 1st 2nd 3rd 4th Full Year
--------- --------- ---------- --------- ----------

Revenues $ 536,659 $ 541,321 $ 538,301 $ 511,942 $2,128,223
Income before income taxes 82,061 116,341 69,042 54,129 321,573
Net income 64,477 86,254 57,046 46,945 254,722
Net income per common share (basic) .39 .53 .35 .29 1.55
Net income per common share (diluted) .38 .52 .34 .28 1.52

* Fourth-quarter and full-year 2000 results include a one-time net charge for
asset impairment of $39.1 million, before tax; $25.4 million, net of tax;
or 16 cents per share.

Note: The sum of the quarterly reported amounts may not equal the full year as
each is computed independently.