1
                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                       ----------------------------------


                                    FORM 10-Q



         X        Quarterly Report Under Section 13 or 15 (d) of the Securities
       -----      Exchange Act of 1934

                  For the Quarterly Period Ended March 31, 1998

                  Transition Report Pursuant to Section 13 or 15 (d) of the
       -----      Securities Exchange Act of 1934


                       ----------------------------------

                          Commission File Number 0-4604


                        CINCINNATI FINANCIAL CORPORATION
                        --------------------------------

             (Exact name of registrant as specified in its charter)

       An Ohio Corporation                                     31-0746871
       (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                 Identification No.)


                             6200 South Gilmore Road
                           Fairfield, Ohio 45014-5141

                    (Address of principal executive offices)

       Registrant's telephone number, including area code: 513/870-2000

       *Indicate by check mark whether the registrant (1) has filed all reports
       required to be filed by Section 13 or 15 (d) of the Securities Exchange
       Act of 1934 during the preceding 12 months (or for such shorter period
       that the registrant was required to file such reports) and (2) has been
       subject to such filing requirements for the past 90 days.


                            YES   X .          NO    .
                                 ---              ---

       Securities registered pursuant to Section 12(g) of the Act:

              $2.00 Par Common--166,753,020 shares outstanding at March 31, 1998

                  (Shares outstanding reflect the effects of a 3-for-1 stock
                  split effective to shareholders of record on April 24, 1998.)

              $56,723,000 of 5.5% Convertible Senior Debentures Due 2002

   2


                                     PART I
                                     ------

ITEM 1.  FINANCIAL STATEMENTS

                CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                                                                 (000's omitted)



                                                                    (Unaudited)
                                                                      March 31,           December 31,
                                                                        1998                  1997
                                                                   --------------        --------------
                                                                                              
ASSETS
- ------
Investments
   Fixed Maturities (Cost: 1998--$2,614,127;
     1997--$2,571,549) .....................................       $    2,792,065        $    2,751,219
   Equity Securities (Cost: 1998--$1,812,209;
     1997--$1,725,855) .....................................            6,523,354             5,999,271
   Other Invested Assets ...................................               47,852                46,560
Cash .......................................................               75,895                80,168
Investment Income Receivable ...............................               74,872                74,520
Finance Receivables ........................................               32,217                31,715
Premiums Receivable ........................................              160,526               158,539
Reinsurance Receivable .....................................              110,008               109,110
Prepaid Reinsurance Premiums ...............................               23,980                23,612
Deferred Acquisition Costs Pertaining to Unearned
   Premiums and to Life Policies in Force ..................              135,304               135,313
Land, Buildings and Equipment for Company Use (at Cost
   Less Accumulated Depreciation) ..........................               55,074                52,559
Other Assets ...............................................               29,576                30,839
                                                                   --------------        --------------

      Total Assets .........................................       $   10,060,723        $    9,493,425
                                                                   ==============        ==============



LIABILITIES
- -----------
Insurance Reserves:
   Losses and Loss Expenses ................................       $    1,968,091        $    1,936,534
   Life Policy Reserves ....................................              494,261               482,447
Unearned Premiums ..........................................              440,697               443,054
Notes Payable ..............................................              281,100               280,558
5.5% Convertible Senior Debentures Due 2002 ................               56,723                58,430
Federal Income Taxes
   Current .................................................               51,970                24,335
   Deferred ................................................            1,559,304             1,406,478
Other Liabilities ..........................................              143,162               144,624
                                                                   --------------        --------------

      Total Liabilities ....................................            4,995,308             4,776,460
                                                                   --------------        --------------

SHAREHOLDERS' EQUITY
- --------------------
Common Stock, $2 per Share; Authorized 200,000    
   Shares; Issued 1998--169,787; 1997--169,391
   Shares; Outstanding 1998--166,753; 1997--166,356
   Shares ..................................................              339,574               338,782
Paid-In Capital ............................................              208,916               203,282
Retained Earnings ..........................................            1,400,341             1,341,730
Accumulated Other Comprehensive Income .....................            3,189,153             2,905,756
                                                                   --------------        --------------
                                                                        5,137,984             4,789,550
Less Treasury Shares at Cost (1998--3,034 Shares;
   1997--3,035 Shares) .....................................              (72,569)              (72,585)
                                                                   --------------        --------------
      Total Shareholders' Equity ...........................            5,065,415             4,716,965
                                                                   --------------        --------------

         Total Liabilities and Shareholders' Equity ........       $   10,060,723        $    9,493,425
                                                                   ==============        ==============



Common Stock, Paid-In-Capital and Share figures reflect the effects of a 3-for-1
stock split effective to shareholders of record on April 24, 1998.

Accompanying notes are an integral part of these financial statements.

  

   3


                CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                           (000's omitted except per share data)



                                                        Three Months Ended March 31,
Revenues:                                                   1998            1997
                                                         ---------       ---------
                                                                         
   Premiums Earned:
   Property and Casualty .........................       $ 378,400       $ 357,500
   Life ..........................................          14,128          13,533
   Accident and Health ...........................           2,064           1,950
                                                         ---------       ---------
      Net Premiums Earned ........................         394,592         372,983
 Investment Income, Less Expenses ................          90,300          84,231
 Realized Gain on Investments ....................          25,642          24,303
 Other Income ....................................           2,020           2,220
                                                         ---------       ---------
   Total Revenues ................................         512,554         483,737
                                                         ---------       ---------


Benefits & Expenses:
  Insurance Losses and Policyholder Benefits .....         270,131         266,498
  Commissions ....................................          70,211          67,443
  Other Operating Expenses .......................          36,121          33,135
  Taxes, Licenses & Fees .........................          12,821          11,982
  Increase in Deferred Acquisition Costs
      Pertaining to Unearned Premiums
      and to Life Policies in Force ..............               9            (174)
  Interest Expense ...............................           5,338           5,037
  Other Expenses .................................           1,590           1,538
                                                         ---------       ---------
   Total Benefits & Expenses .....................         396,221         385,459
                                                         ---------       ---------

Income Before Income Taxes .......................         116,333          98,278
                                                         ---------       ---------
Provision for Income Taxes:
 Current .........................................          31,927          20,236
 Deferred ........................................             228           3,995
                                                         ---------       ---------
   Total Provision for Income Taxes ..............          32,155          24,231
                                                         ---------       ---------


Net Income .......................................       $  84,178       $  74,047
                                                         =========       =========

Average Shares Outstanding .......................         166,601         166,437
                                                         =========       =========

Average Shares Outstanding (diluted) .............         172,538         172,817
                                                         =========       =========


Per Common Share:


     Net Income ..................................       $     .51       $     .44
                                                         =========       =========

     Net Income (diluted) ........................       $     .49       $     .43
                                                         =========       =========

     Cash Dividends Declared .....................       $   .1533       $   .1367
                                                         =========       =========



Per share amounts reflect the effects of a 3-for-1 stock split effective to
shareholders of record on April 24, 1998.

Accompanying notes are an integral part of these financial statements.

  

   4


                CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE I - ACCOUNTING POLICIES

The consolidated financial statements include the accounts of the Company and
all of its subsidiaries, each of which is wholly owned, and are presented in
conformity with generally accepted accounting principles. All significant
inter-company investments and transactions have been eliminated in
consolidation. The December 31, 1997 consolidated balance sheet amounts are
derived from the audited financial statements but do not include all disclosures
required by generally accepted accounting principles.

INVESTMENTS--Fixed maturities and equity securities have been classified as
available for sale and are carried at fair values at March 31, 1998 and December
31, 1997.

UNREALIZED GAINS AND LOSSES (000's omitted)--The increases (decreases) in
unrealized gains for fixed maturities and equity securities (net of income tax
effect) for the three-month periods ended March 31 are as follows:



                                      Fixed                     Equity
                                   Maturities                 Securities                Total
                                   ----------                 ----------                -----

                                                                                
           1998                    $  (1,126)                 $ 284,523               $ 283,397
           ----

           1997                    $ (16,883)                 $ 258,254               $ 241,371
           ----


Such amounts are included as additions to and deductions from shareholders'
equity.

REINSURANCE (000's omitted)--Premiums earned are net of $24,054 and $24,205 of
premium on ceded business for March 31, 1998 and 1997, respectively. Insurance
losses and policyholder benefits in the accompanying consolidated statements of
income are net of $11,954 and $13,010 reinsurance recoveries for March 31, 1998
and 1997, respectively.

NOTE II - 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 ten-year periods. On
March 31, 1998, outstanding options for Stock Option Plan No. III totalled
49,614 shares with a purchase price of $7.34, outstanding options for Stock Plan
No. IV totalled 2,834,211 shares with purchase prices ranging from a low of
$7.46 to a high of $42.88 and outstanding options for Stock Plan V totalled
1,419,405 shares with purchase prices ranging from a low of $20.48 to a high of
$45.38. These amounts reflect the effects of a 3-for-1 stock split effective to
shareholders of record on April 24, 1998.

NOTE III - INTERIM ADJUSTMENTS

The preceding summary of financial information for Cincinnati Financial
Corporation and consolidated subsidiaries is unaudited, but the Company believes
that all adjustments (consisting only of normal recurring accruals) necessary
for fair presentation have been made. The results of operations for this interim
period is not necessarily an indication of results to be expected for the
remaining nine months of the year.

NOTE IV - SUBSEQUENT EVENTS

On April 4, 1998, the Company's authorized capital was increased to 200,000,000
shares of common stock and a 3-for-1 stock split, in the form of a 200% stock
dividend, was declared to shareholders of record April 24, 1998, to be
distributed May 15, 1998.

   5

Cincinnati Financial Corporation filed a Form S-3 Registration Statement with
the Securities and Exchange Commission on May 1, 1998, to issue $350,000,000 of
debentures due 2028. The offering will be completed in late May 1998.

NOTE V - FINANCIAL ACCOUNTING PRONOUNCEMENTS

COMPREHENSIVE INCOME--SFAS No. 130 "Reporting Comprehensive Income" is effective
for the Company in 1998. This statement requires financial statement reporting
of comprehensive income, which includes net income and other items, such as the
change in unrealized gains on investments, net of income taxes. The accompanying
consolidated financial statements have reflected the effects of this
pronouncement.

SEGMENT INFORMATION--SFAS No. 131 "Disclosures About Segments of an Enterprise
and Related Information" is effective for the Company in 1998 and will require
additional disclosures for the Company's operating segments in the annual
consolidated financial statement. Beginning in 1999, certain segment information
is required to be reported quarterly.

   6



                                            CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES

                                              CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                                               (UNAUDITED)
                                                                                                       
                                                 THREE MONTHS ENDED MARCH 31, 1997 AND 1998
                                                 ------------------------------------------
                                                                                                       (000's omitted)
                                                                                             Accumulated
                                                                                                Other              Total
                        Common        Stock     Treasury      Paid-In        Retained        Comprehensive       Shareholders'
                        Shares       Amount       Stock       Capital        Earnings           Income             Equity
                       --------      ------       ------      -------        --------          --------           -------
                                                                                                     
Bal. Dec. 31,
  1996                  167,486     $334,972    $ (11,217)    $ 178,547      $1,132,880        $ 1,527,707         $3,162,889
                                                                                                                   ----------

Net Income                                                                       74,047                                74,047

Change in Unreal.
  Gains Net of
  Inc. Taxes of
  $129,969                                                                                         241,371            241,371
                                                                                                                     --------

Comprehensive
   Income                                                                                                             315,418

Div. Declared                                                                   (22,688)                              (22,688)

Purchase/Issuance of
  Treasury Shares                                 (23,070)           17                                               (23,053)

Stock Options
  Exercised                 101          202                      1,112                                                 1,314
Conversion of
   Debentures                 3            6                         37                                                    43
                        -------    ---------    ---------     ---------     -----------        -----------         ----------

Bal. March 31,
  1997                  167,590     $335,180    $ (34,287)    $ 179,713     $ 1,184,239        $ 1,769,078         $3,433,923
                        =======     ========    =========     =========     ===========        ===========         ==========
  

Bal. Dec. 31,
  1997                  169,391     $338,782    $ (72,585)    $ 203,282     $ 1,341,730        $ 2,905,756         $4,716,965
                                                                                                                   ----------

Net Income                                                                       84,178                                84,178

Change in Unreal.
  Gains Net of
  Inc. Taxes of
  $152,599                                                                                         283,397            283,397
                                                                                                                     --------

Comprehensive
   Income                                                                                                             367,575

Div. Declared                                                                   (25,567)                              (25,567)

Purchase/Issuance of
  Treasury Shares                                     16             14                                                    30

Stock Options
  Exercised                 281          562                      4,142                                                 4,704
Conversion of
  Debentures                115          230                      1,478                                                 1,708
                        -------    ---------    ---------     ---------     -----------        -----------         ----------

Bal. March 31,
  1998                  169,787    $ 339,574    $ (72,569)    $ 208,916     $ 1,400,341        $ 3,189,153         $5,065,415
                        =======    =========    =========     =========     ===========        ===========         ==========


Common Stock, Paid-In-Capital and Share figures reflect the effects of a 3-for-1
stock split effective to shareholders of record on April 24, 1998.

Accompanying notes are an integral part of these financial statements.

   7


                CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



                                                                            (000's omitted)


                                                                       Three Months Ended March 31,
                                                                       ----------------------------
                                                                        1998                 1997
                                                                        ----                 ----
                                                                                        
Cash flows from operating activities:
   Net income ..........................................       $      84,178        $      74,047
   Adjustments to reconcile operating income to net cash
      provided by operating activities:

      Depreciation and amortization ....................               2,626                2,503
      Increase in investment income receivable .........                (352)              (2,179)
      (Increase) decrease in premiums receivable .......              (1,987)               2,852
      (Increase) decrease in reinsurance receivable ....                (898)              14,481
      Increase in prepaid reinsurance premiums .........                (368)                (294)
      Increase in deferred acquisition costs ...........                   9                 (174)
      Decrease in accounts receivable ..................               3,811                  216
      Decrease in other assets .........................               3,663               44,215
      Increase in loss and loss expense reserves .......              31,557                2,866
      Increase in life policy reserves .................              11,814                9,906
      Decrease in unearned premiums ....................              (2,357)              (3,675)
      Decrease in other liabilities ....................              (4,327)              (3,274)
      Decrease in deferred income taxes ................                 228                4,102
      Realized gains on investments ....................             (25,642)             (24,303)
      Increase in current income taxes .................              27,394               20,129
      Other ............................................              (5,645)              (2,528)
                                                               -------------        -------------
         Net cash provided by operating activities .....             123,704              138,890
                                                               -------------        -------------

Cash flows from investing activities:

      Sale of fixed maturities .........................               3,034               78,236
      Call or maturity of fixed maturities investments .              79,408                9,264
      Sale of equity securities investments ............              80,437               61,472
      Collection of finance receivables ................               3,426                2,716
      Purchase of fixed maturities investments .........            (123,074)            (179,683)
      Purchase of equity securities investments ........            (142,547)             (93,175)
      Investment in land, buildings and equipment ......              (5,946)              (2,632)
      Investment in finance receivables ................              (3,928)              (4,177)
      Investment in other invested assets ..............              (1,359)                 (38)
                                                               -------------        -------------
         Net cash used in investing activities .........            (110,549)            (128,017)
                                                               -------------        -------------

Cash flows from financing activities:
      Proceeds from stock options exercised ............               4,704                1,314
      Purchase/Issuance of treasury shares .............                  30              (23,053)
      Increase in notes payable ........................                 542                1,853
      Payment of cash dividends to shareholders ........             (22,704)             (20,585)
                                                               -------------        -------------
         Net cash used in financial activities .........             (17,428)             (40,471)
                                                               -------------        -------------

Net decrease in cash ...................................              (4,273)             (29,598)
Cash at beginning of period ............................              80,168               59,934
                                                               -------------        -------------


Cash at end of period ..................................       $      75,895        $      30,336
                                                               =============        =============


Supplemental disclosures of cash flow information

   Interest paid .......................................       $       4,248        $       5,256
                                                               =============        =============

   Income taxes paid ...................................       $           0        $           0
                                                               =============        =============



Accompanying notes are an integral part of these financial statements.

   8

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations  (000's omitted)


Premiums earned for the three months ended March 31, 1998 have increased $21,609
(6%) over the three months ended March 31, 1997. For our property and casualty
insurance companies, gross written premiums increased $22,000 and gross earned
premiums increased by $20,759. The growth rate of our property and casualty
subsidiaries on a gross written and earned basis is less than last year. The
growth rate is less than last year because the increase in new business and some
rate increases on personal lines business were offset by lower premiums on
workers' compensation coverages. The premium volume of our life and health
company has increased approximately 5% as the Company had increases in both life
and health insurance production. The premium growth in our life subsidiary is
mainly attributable to increased sales of both traditional and work site
marketing products. For the three-month period ended March 31, 1998, investment
income, net of expenses, has increased $6,069 (7%) when compared with the first
three months of 1997. This increase is the result of the growth of the
investment portfolio because of investing cash flows from operations and
dividend increases from equity securities.

Realized gains on investments for the three months ended March 31, 1998 amounted
to $25,642 compared to $24,303 for the comparable three-month period ended March
31, 1997. The realized gains are predominantly the result of the sale of equity
securities and management's decision to realize the gains and reinvest the
proceeds at higher yields.

Insurance losses and policyholder benefits (net of reinsurance recoveries)
increased $3,633 (1%) for the first three months of 1998 over the same period in
1997. Property and casualty company losses increased $2,758 in the first quarter
of 1998, compared to the first quarter of 1997. Catastrophic claims were lower
by $2,699 in the same period. Policyholder benefits increased $875 over the
first quarter of 1997 in the life insurance subsidiary. The increase is the
result of a higher incidence of death claims, health claims, and related costs.

Other operating expenses increased $2,986 for the first quarter of 1998 compared
to the first quarter of 1997. The increase is attributable to increases in staff
and costs associated with the upgrading of our computer systems to handle
projected increases in premium and to make our systems year 2000 compliant.

Provision for income taxes, current and deferred, have increased by $7,923 for
the first three months of 1998 compared to the first three months of 1997. The
increase in federal taxes is primarily attributable to an increase in the
effective tax rate from 24.75% to 27.64% at March 31, 1997 and 1998.

In the first quarter of 1998, the Company experienced significantly more
unrealized gains in equity securities than in the first quarter of 1997,
resulting in comprehensive income of $367,575 in 1998, compared to $315,418 in
1997.

Market Risk--The Company could incur losses due to adverse changes in market
rates and prices. The Company's primary market risk exposures are to 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 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.

On November 22, 1996, the Board authorized repurchase of up to three million of
the Company's outstanding shares. As of March 31, 1998 the Company has
repurchased 934 shares, before the 1998 three-for-one split, and plans to
repurchase the remaining 2,066 shares as management deems appropriate, over an
unspecified period of time.

   9

                                     PART II
                                OTHER INFORMATION


ITEM 1.   Legal Proceedings
          -----------------

The Company is involved in no material litigation other than routine litigation
incident to the nature of the insurance industry.


ITEM 2.   Changes in Securities
          ---------------------

There have been no material changes in securities during the first quarter.

At the Annual Meeting of the Board of Directors, which occurred on April 4,
1998, the directors approved a 3-for-1 stock split in the form of a 200% stock
dividend to be distributed on May 15, 1998 to shareholders of record on April
24, 1998.


ITEM 3.   Defaults Upon Senior Securities
          -------------------------------

The Company has not defaulted on any interest or principal payment, and no
arrearage in the payment of dividends has occurred.


ITEM 4.   Submission of Matters to a Vote of Security Holders
          ---------------------------------------------------

No special matters were voted upon by security holders during the first quarter.

On April 4, 1998, the Company's authorized capital was increased to 200,000,000
shares of common stock.


ITEM 5.   Other Information
          -----------------

          No matters to report.


ITEM 6.   Exhibits and Reports on Form 8-K
          --------------------------------

          (a)  Exhibits included:

                     Exhibit 11--Statement re Computation of Per Share Earnings.
                     Exhibit 27--Financial Data Schedule

          (b)  The Company was not required to file any reports on Form 8-K
               during the quarter ended March 31, 1998.

                                    Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        CINCINNATI FINANCIAL CORPORATION
                                        --------------------------------
                                        (Registrant)

Date   May 11, 1998
     -----------------
                                              By/s/ T.F. Elchynski
                                              --------------------
                                              T.F. Elchynski
                                              Senior Vice President and Chief
                                                Financial Officer
                                              (Principal Financial Officer)