* Q1 oper profit tops estimates
* Sees business closings, shrinking payrolls in 2009
* Lower investment income hurts Q1 profit
* Says has enough liquidity to maintain dividend
* Stock down as much as 6 pct (Adds conference call details, background, share movement)
April 30 (Reuters) - Cincinnati Financial Corp (CINF.O) posted a 66 percent fall in first-quarter operating profit, and said there was potential for closing businesses and shrinking payrolls in 2009, sending its shares down as much as 6 percent.
"As predicted, 2009 is proving to be challenging... The economy may continue to create challenges for us as well as for others," Chief Executive Kenneth Stecher said in a conference call.
Stecher, however, said the company had enough liquidity and earnings potential to maintain current dividend levels.
Cincinnati Financial, a U.S. Midwestern property and casualty insurer, currently pays out a quarterly dividend of 39 cents a share.
For the latest quarter, the company, a component of the S&P 500 index .SPX, earned $35 million, or 22 cents a share, compared with a loss of $42 million, or 26 cents a share, a year earlier.
Operating earnings, a measure most commonly used by insurance analysts, was $37 million, or 23 cents a share, which beat analysts estimates by 3 cents.
The company said combined ratio rose to 107.5 percent from 98.6 percent.
Combined ratio is the percentage of premiums an insurer has to pay out in claims and expenses. A figure over 100 indicates that underwriting was unprofitable.
Total investment income fell 19 percent to $124 million.
In the recent past, several U.S. property and casualty insurers, including Cincinnati Financial, posted a decline in the value of their investments due to exposure to troubled financial firms like Lehman Brothers LEHMQ.PK.
However, Chief Financial Officer Steve Johnston said in the call that he expects investment income to resume an upward trend in the second half of the year.
The company said catastrophe losses and rise in workers' compensation reserve reduced first-quarter net income by 29 cents a share, compared with 15 cents a share in the year-ago quarter.
Shares of the Fairfield, Ohio-based company were down $1.54 at $24 Thursday on Nasdaq. They earlier touched a low of $23.98. (Reporting by Anurag Kotoky in Bangalore; Editing by Vinu Pilakkott, Anil D'Silva)