Cincinnati Financial Sells Half Its Fifth Third Bancorp Shares

Cincinnati Financial Corp. announced today it was selling off more than half of its shares of Fifth Third Bancorp because the bank cut its dividend, and it expects sale proceeds of approximately $480 million.

The transaction will result in capital gains taxes of approximately $120 million, the insurance holding company said, and net proceeds of about $1.35 a share.

Kenneth W. Stecher, CFC president and chief executive officer, said in a statement, "In recent years, at times we have taken action to reduce our exposure to companies that have reduced or eliminated their dividend, helping protect our capital and future investment income.

"Since June, we carefully have studied our options for our Fifth Third holding and feel we are exercising appropriate sell discipline in light of the dividend reduction."

He called the move a diversifying action "consistent with our view of prudent enterprise risk management for our policyholders and shareholders."

Mr. Stecher said that going forward, the company will evaluate its remaining holdings in Fifth Third with all of its common stocks, "using our company's investment parameters and risk tolerances."

The $360 million net proceeds from selling the bank stock, he said, will be systematically reinvested over coming months in fixed maturity and equity investments.

Mr. Stecher said the company believes it can reinvest "to achieve our long-standing portfolio objectives of balancing near-term income generation and the potential for long-term book value growth. In the short term, we do not expect to be able to replace the investment income lost due to Fifth Third's dividend reduction."

The shares sold were owned by The Cincinnati Insurance Company, a subsidiary company. After the transaction, Cincinnati Financial and its subsidiaries hold approximately 5.5 percent of the bank's total common shares outstanding as of June 30, 2008. Based on June 30 market values, Fifth Third would be one of Cincinnati's three largest equity holdings.

At the current dividend payout, the remaining Fifth Third shares should contribute approximately $5 million to Cincinnati's quarterly dividend income.

CEO Stecher said management believes it is "taking the appropriate actions to position us for a return to our record of annual investment income growth, while protecting our capital position."

Fifth Third is based in Cincinnati.