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FAIRFIELD — Cincinnati Financial Corp. officials have announced they expect the company's investment income to continue to decline in 2008, taking a double hit from high catastrophe losses and a steep dividend cut from one of its major investments.

"Through 2007, our company had seen investment income rise every year in our company's history," said Kenneth Stecher, current chief financial officer. "While we're disappointed that we will not be able to sustain that record in the current year, we have begun to focus on actions to return to a growth track."

Nine storms have rocked the Midwest in the Fairfield-based insurer's territory in the second quarter. The losses already amount to $115 million, 10 times higher than the $11 million reported at the same point last year, said company Vice Chairman James E. Benoski.

The storms have generating about 2,500 claims from policyholders in 15 states, and the company expects a continued increase in the second half of the year. The increase in claims could amount to a 28-cents-a-share loss in total for 2008 earnings, he added.

In addition, Cincinnati Financial will take a $19.5 million hit per quarter from Fifth Third Bancorp's announcement that it will cut its quarterly dividend by 66 percent.

Fifth Third said it would reduce its second-quarter dividend to 15 cents per share as opposed to the 44 cents per share paid in the first quarter of 2008. The Cincinnati Financial holds a 12 percent stake in the bank as the largest single shareholder.

Despite the loss, the company plans to take no immediate action on the stock.

"While ultimately it may be in our best interest to sell more of our Fifth Third holdings, our current assessment suggests that it may not be in our best interest to sell immediately,'' officials said in a statement.

More about Cincinnati Financial's plans for the second half of the year are expected at its second-quarter earnings report scheduled for Aug. 6.

Contact this reporter at (513) 705-2843

or jlander@coxohio.com.