What changed in this filing

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Item 1. Financial Statements

2021-10-27 compared with 2021-07-28 · 123 added, 120 removed, 629 unchanged (28% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(Dollars in millions, except per share data) June 30, December 31,

(Dollars in millions, except per share data) September 30, December 31,

Fixed maturities, at fair value (amortized cost:

41 unchanged sentences

Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(Dollars in millions, except per share data) Three months ended June 30, Six months ended June 30,

(Dollars in millions, except per share data) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

11 unchanged sentences

Total benefits and expenses 1,601 1,613 4,483 4,659

Income (Loss) Before Income Taxes 872 1,145 1,640 ( 431 )

Income Before Income Taxes 184 614 1,824 183

Provision (Benefit) for Income Taxes

1 unchanged sentence

Deferred ( 24 ) 75 182 ( 65 )

Total provision (benefit) for income taxes 169 236 317 ( 114 )

Net Income (Loss) $ 703 $ 909 $ 1,323 $ ( 317 )

Total provision for income taxes 31 130 348 16

Net Income $ 153 $ 484 $ 1,476 $ 167

Per Common Share

Net income (loss)—basic $ 4.36 $ 5.65 $ 8.21 $ ( 1.96 )

Net income (loss)—diluted 4.31 5.63 8.13 ( 1.96 )

Net income—basic $ 0.95 $ 3.01 $ 9.16 $ 1.03

Net income—diluted 0.94 2.99 9.07 1.03

Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Net Income (Loss) $ 703 $ 909 $ 1,323 $ ( 317 )

Net Income $ 153 $ 484 $ 1,476 $ 167

Other Comprehensive Income (Loss)

Change in unrealized gains on investments, net of tax (benefit) of $ 27 , $ 107 , $( 14 ) and $ 39 , respectively

Change in unrealized gains and losses on investments, net of tax of $( 19 ), $ 23 , $( 33 ) and $ 62 , respectively

( 69 ) 89 ( 119 ) 232

Amortization of pension actuarial loss and prior service cost, net of tax of $ 1 , $ 0 , $ 2 and $ 0 , respectively

Change in life deferred acquisition costs, life policy reserves and other, net of tax (benefit) of $ 0 , $( 2 ), $ 2 and $ 1 , respectively

Change in life deferred acquisition costs, life policy reserves and other, net of tax of $ 0 , $ 0 , $ 2 and $ 1 , respectively

Other comprehensive income (loss) ( 68 ) 89 ( 106 ) 238

Comprehensive Income (Loss) $ 809 $ 1,302 $ 1,285 $ ( 168 )

Comprehensive Income $ 85 $ 573 $ 1,370 $ 405

Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

12 unchanged sentences

Adjusted beginning of year 11,205 8,745 10,085 9,255

Net income (loss) 703 909 1,323 ( 317 )

Net income 153 484 1,476 167

Dividends declared ( 101 ) ( 97 ) ( 304 ) ( 290 )

20 unchanged sentences

Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) Six months ended June 30,

(Dollars in millions) Nine months ended September 30,

Cash Flows From Operating Activities

Net income (loss) $ 1,323 $ ( 317 )

Net income $ 1,476 $ 167

Adjustments to reconcile net income to net cash provided by operating activities:

45 unchanged sentences

Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6 unchanged sentences

Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been condensed or omitted.

Our June 30, 2021, condensed consolidated financial statements are unaudited.

Our September 30, 2021, condensed consolidated financial statements are unaudited.

We believe that we have made all adjustments, consisting only of normal recurring accruals, that are necessary for fair presentation.

12 unchanged sentences

In November 2020, the FASB issued an ASU that delayed the effective date of ASU 2018-12 to interim and annual reporting periods beginning after December 15, 2022.

These ASU's have not yet been adopted.

These ASUs have not yet been adopted.

Management is currently evaluating the impact on our company's consolidated financial position, results of operations and cash flows.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 2 – Investments

2 unchanged sentences

cost Gross unrealized Fair value

At June 30, 2021 gains losses

At September 30, 2021 gains losses

Fixed maturity securities:

15 unchanged sentences

Total $ 11,312 $ 1,036 $ 10 $ 12,338

The net unrealized investment gains in our fixed-maturity portfolio at June 30, 2021, are primarily the result of the continued low interest rate environment that increased the fair value of our fixed-maturity portfolio .

Our commercial mortgage-backed securities had an average rating of Aa1/AA at June 30, 2021 and December 31, 2020.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

The net unrealized investment gains in our fixed-maturity portfolio at September 30, 2021, are primarily the result of the continued low interest rate environment that increased the fair value of our fixed-maturity portfolio.

Our commercial mortgage-backed securities had an average rating of Aa1/AA at September 30, 2021 and

December 31, 2020.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The table below provides fair values and gross unrealized losses by investment category and by the duration of the securities' continuous unrealized loss positions:

(Dollars in millions) Less than 12 months 12 months or more Total

At June 30, 2021 Fair

At September 30, 2021 Fair

value Unrealized

20 unchanged sentences

value % of fair

At June 30, 2021

At September 30, 2021

Maturity dates:

5 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The following table provides investment income and investment gains and losses, net:

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

18 unchanged sentences

Total $ ( 70 ) $ 533 $ 954 $ ( 132 )

The fair value of our equity portfolio was $ 9.897 billion and $ 8.856 billion at June 30, 2021 and December 31, 2020, respectively.

At June 30, 2021 and December 31, 2020, Apple Inc.

(Nasdaq:AAPL) , an equity holding, was our largest single investment holding with a fair value of $ 665 million and $ 644 million, which was 7.0 % and 7.5 % of our publicly traded common equities portfolio and 2.9 % and 3.0 % of the total investment portfolio, respectively.

At June 30, 2021 and December 31, 2020, there were no fixed-maturity securities with an allowance for credit losses.

During the three and six months ended June 30, 2021, there were no fixed-maturity securities that were written down to fair value due to an intention to be sold.

During the three months ended June 30, 2020, there were no fixed-maturity securities that were written down to fair value due to an intention to be sold and during the six months ended June 30, 2020, there were 12 fixed-maturity securities from the energy, real estate, consumer goods and technology & electronics sectors that were written down to fair value due to an intention to be sold.

At June 30, 2021, 108 fixed-maturity securities with a total unrealized loss of $ 4 million were in an unrealized loss position.

Of that total, two fixed-maturity securities had fair values below 70 % of amortized cost.

The fair value of our equity portfolio was $ 9.887 billion and $ 8.856 billion at September 30, 2021 and December 31, 2020, respectively.

At September 30, 2021 and December 31, 2020, Apple Inc.

(Nasdaq:AAPL) , an equity holding, was our largest single investment holding with a fair value of $ 687 million and $ 644 million, which was 7.3 % and 7.5 % of our publicly traded common equities portfolio, respectively, and 3.0 % of the total investment portfolio for both periods.

At September 30, 2021 and December 31, 2020, there were no fixed-maturity securities with an allowance for credit losses.

During the three and nine months ended September 30, 2021, there were five fixed-maturity securities from the municipal sector that were written down to fair value due to an intention to be sold.

During the three months ended September 30, 2020, there were two fixed-maturity securities from the municipal sector that were written down to fair value due to an intention to be sold and during the nine months ended September 30, 2020, there were 14 fixed-maturity securities from the energy, real estate, consumer goods, municipal and technology & electronics sectors that were written down to fair value due to an intention to be sold.

At September 30, 2021, 244 fixed-maturity securities with a total unrealized loss of $ 12 million were in an unrealized loss position.

Of that total, one fixed-maturity security had a fair value below 70 % of amortized cost.

At December 31, 2020, 128 fixed-maturity securities with a total unrealized loss of $ 10 million were in an unrealized loss position.

Of that total, no fixed-maturity securities had fair values below 70 % of amortized cost.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 3 – Fair Value Measurements

5 unchanged sentences

Fair Value Disclosures for Assets

The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020.

The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020.

We do not have any liabilities carried at fair value.

5 unchanged sentences

(Level 3) Total

At June 30, 2021

At September 30, 2021

Fixed maturities, available for sale:

27 unchanged sentences

Total $ 8,712 $ 13,436 $ — $ 22,148

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

We also held Level 1 cash and cash equivalents of $ 1.003 billion and $ 900 million at June 30, 2021 and December 31, 2020, respectively.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We also held Level 1 cash and cash equivalents of $ 1.085 billion and $ 900 million at September 30, 2021 and December 31, 2020, respectively.

Fair Value Disclosures for Assets and Liabilities Not Carried at Fair Value

2 unchanged sentences

(Dollars in millions) Book value Principal amount

issue June 30, December 31, June 30, December 31,

issue September 30, December 31, September 30, December 31,

2021 2020 2021 2020

9 unchanged sentences

(Level 3) Total

At June 30, 2021

At September 30, 2021

Note payable $ — $ 59 $ — $ 59

9 unchanged sentences

Total $ — $ 1,126 $ — $ 1,126

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The following table shows the fair value of our life policy loans included in other invested assets and the fair values of our deferred annuities and structured settlements included in life policy and investment contract reserves:

5 unchanged sentences

(Level 3) Total

At June 30, 2021

At September 30, 2021

Life policy loans $ — $ — $ 43 $ 43

7 unchanged sentences

Total $ — $ 227 $ 836 $ 1,063

Outstanding principal and interest for these life policy loans totaled $ 31 million and $ 33 million at June 30, 2021 and December 31, 2020, respectively.

Recorded reserves for the deferred annuities were $ 769 million and $ 761 million at June 30, 2021 and December 31, 2020, respectively.

Recorded reserves for the structured settlements were $ 141 million and $ 145 million at June 30, 2021 and December 31, 2020, respectively.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Outstanding principal and interest for these life policy loans totaled $ 30 million and $ 33 million at September 30, 2021 and December 31, 2020, respectively.

Recorded reserves for the deferred annuities were $ 767 million and $ 761 million at September 30, 2021 and December 31, 2020, respectively.

Recorded reserves for the structured settlements were $ 139 million and $ 145 million at September 30, 2021 and December 31, 2020, respectively.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 4 – Property Casualty Loss and Loss Expenses

This table summarizes activity for our consolidated property casualty loss and loss expense reserves:

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

18 unchanged sentences

This uncertainty, together with the size of our reserves, makes the loss and loss expense reserves our most significant estimate.

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 64 million at June 30, 2021 and

$ 54 million at June 30, 2020, for certain life and health loss and loss expense reserves.

For the three months ended June 30, 2021, we experienced $ 119 million of favorable development on prior accident years, including $ 86 million of favorable development in commercial lines, $ 12 million of favorable development in personal lines and $ 1 million of favorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 27 million for the workers' compensation line and $ 26 million for the commercial casualty line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 9 million in personal auto.

For the six months ended June 30, 2021, we experienced $ 229 million of favorable development on prior accident years, including $ 169 million of favorable development in commercial lines, $ 32 million of favorable development in personal lines and $ 3 million of unfavorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 52 million for the workers' compensation line, $ 37 million for the commercial auto line, $ 34 million for the commercial property line and $ 32 million for the commercial casualty line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 66 million at September 30, 2021 and

$ 55 million at September 30, 2020, for certain life and health loss and loss expense reserves.

For the three months ended September 30, 2021, we experienced $ 102 million of favorable development on prior accident years, including $ 107 million of favorable development in commercial lines, $ 3 million of favorable development in personal lines and $ 3 million of unfavorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 52 million for the commercial casualty line and $ 34 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

For the nine months ended September 30, 2021, we experienced $ 331 million of favorable development on prior accident years, including $ 276 million of favorable development in commercial lines, $ 35 million of favorable development in personal lines and $ 6 million of unfavorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 85 million for the commercial casualty line, $ 68 million for the commercial property line, $ 59 million for the workers' compensation line and $ 44 million for the commercial auto line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 24 million in personal auto.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

For the three months ended June 30, 2020, we experienced $ 47 million of favorable development on prior accident years, including $ 45 million of favorable development in commercial lines and $ 8 million of unfavorable development in excess and surplus lines.

We had no net development in personal lines for the three months ended June 30, 2020.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

For the three months ended September 30, 2020, we experienced $ 11 million of favorable development on prior accident years, including $ 8 million of favorable development in commercial lines, less than $ 1 million of unfavorable development in personal lines and $ 1 million of favorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 10 million for the commercial casualty line and $ 6 million for the workers' compensation line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 7 million in personal auto and unfavorable reserve development of $ 7 million for the homeowner line of business.

For the six months ended June 30, 2020, we experienced $ 80 million of favorable development on prior accident years, including $ 51 million of favorable development in commercial lines, $ 28 million of favorable development in personal lines and $ 9 million of unfavorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 26 million for both the workers' compensation line and the commercial casualty line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

This was partially offset by unfavorable reserve development of $ 10 million for the commercial auto line.

For the nine months ended September 30, 2020, we experienced $ 91 million of favorable development on prior accident years, including $ 59 million of favorable development in commercial lines, $ 28 million of favorable development in personal lines and $ 8 million of unfavorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 36 million for the commercial casualty line and $ 32 million for the workers' compensation line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

This was partially offset by unfavorable reserve development of $ 14 million for the commercial auto line.

Within personal lines, we recognized favorable reserve development of $ 19 million in personal auto and $ 10 million for the homeowner line of business.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 5 – Life Policy and Investment Contract Reserves

7 unchanged sentences

This table summarizes our life policy and investment contract reserves:

(Dollars in millions) June 30,

(Dollars in millions) September 30,

2021 December 31,

8 unchanged sentences

Total life policy and investment contract reserves $ 2,999 $ 2,915

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 6 – Deferred Policy Acquisition Costs

2 unchanged sentences

The table below shows the deferred policy acquisition costs and asset reconciliation.

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

16 unchanged sentences

No premium deficiencies were recorded in the condensed consolidated statements of income, as the sum of the anticipated loss and loss expenses, policyholder dividends and unamortized deferred acquisition expenses did not exceed the related unearned premiums and anticipated investment income.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 7 – Accumulated Other Comprehensive Income

Accumulated other comprehensive income (AOCI) includes changes in unrealized gains and losses on investments, changes in pension obligations and changes in life deferred acquisition costs, life policy reserves and other as follows:

(Dollars in millions) Three months ended June 30,

(Dollars in millions) Three months ended September 30,

Before tax Income tax Net Before tax Income tax Net

23 unchanged sentences

AOCI, end of period $ 840 $ 177 $ 663 $ 869 $ 183 $ 686

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

(Dollars in millions) Six months ended June 30,

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

(Dollars in millions) Nine months ended September 30,

Before tax Income tax Net Before tax Income tax Net

25 unchanged sentences

Amortization on pension obligations is recorded in the insurance losses and contract holders' benefits and underwriting, acquisition and insurance expenses line items in the condensed consolidated statements of income.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 8 – Reinsurance

3 unchanged sentences

The table below summarizes our consolidated property casualty insurance net written premiums, earned premiums and incurred loss and loss expenses:

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

14 unchanged sentences

The table below summarizes our consolidated life insurance earned premiums and contract holders' benefits incurred:

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

6 unchanged sentences

The ceded benefits incurred can vary depending on the type of life insurance policy held and the year the policy was issued.

At June 30, 2021 and December 31, 2020, the allowance for uncollectible property casualty premiums was

At September 30, 2021, and December 31, 2020, the allowance for uncollectible property casualty premiums was

$ 15 million and $ 19 million, respectively.

At June 30, 2021 and December 31, 2020, the allowances for credit losses on other premiums receivable and recoverable assets were immaterial.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

At September 30, 2021, and December 31, 2020, the allowances for credit losses on other premiums receivable and recoverable assets were immaterial.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 9 – Income Taxes

The differences between the 21 % statutory federal income tax rate and our effective income tax rate were as follows:

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

5 unchanged sentences

Other 2 1.2 11 1.8 ( 6 ) ( 0.3 ) 6 3.0

Provision (benefit) for income taxes $ 169 19.4 % $ 236 20.6 % $ 317 19.3 % $ ( 114 ) 26.5 %

Provision for income taxes $ 31 16.8 % $ 130 21.2 % $ 348 19.1 % $ 16 8.7 %

The provision for federal income taxes is based upon filing a consolidated income tax return for the company and its domestic subsidiaries.

2 unchanged sentences

As a result, we have no valuation allowance for our U.S.

domestic operations at June 30, 2021 and December 31, 2020.

domestic operations at September 30, 2021, and December 31, 2020.

As more fully discussed below, we do carry a valuation allowance on the deferred tax assets related to Cincinnati Global.

Unrecognized Tax Benefits

At June 30, 2021 and December 31, 2020, we had a gross unrecognized tax benefit of $ 34 million.

There were no changes to this amount during the first half of 2021.

It is reasonably possible that within the next 12 months, our unrecognized tax benefit could change when the IRS completes its examination of the tax year ended

December 31, 2018.

At September 30, 2021, and December 31, 2020, we had a gross unrecognized tax benefit of $ 34 million.

There were no changes to this amount during the first nine months of 2021.

It is reasonably possible that within the next 12 months, our unrecognized tax benefit could change when the IRS completes its examination of the tax year ended December 31, 2018.

Cincinnati Global

As a result of operations for the three and six months ended June 30, 2021, Cincinnati Global decreased their net deferred assets $ 3 million and $ 4 million with an offsetting decrease of $ 3 million and $ 4 million to their valuation allowance.

At June 30, 2021, Cincinnati Global had a net deferred tax asset of $ 52 million and an offsetting valuation allowance of $ 52 million.

As a result of operations for the three months ended September 30, 2021, Cincinnati Global increased net deferred assets $ 4 million with an offsetting increase of $ 4 million to the valuation allowance.

There was no change in the net deferred assets or valuation allowance for the nine months ended September 30, 2021.

At September 30, 2021, Cincinnati Global had a net deferred tax asset of $ 56 million and an offsetting valuation allowance of $ 56 million.

Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized.

After considering all positive and negative evidence related to the Cincinnati Global operations, we continue to believe it is appropriate to carry a valuation allowance at June 30, 2021.

At June 30, 2021 and December 31, 2020, Cincinnati Global had operating loss carryforwards in the United States of $ 26 million for both periods and in the United Kingdom of $ 119 million and $ 108 million, respectively.

After considering all positive and negative evidence related to the Cincinnati Global operations, we continue to believe it is appropriate to carry a valuation allowance at September 30, 2021.

At September 30, 2021, and December 31, 2020, Cincinnati Global had operating loss carryforwards in the United States of $ 26 million for both periods and in the United Kingdom of $ 128 million and $ 108 million, respectively.

These Cincinnati Global losses can only be utilized within the Cincinnati Global group in both the United States and in the United Kingdom and cannot offset the income of our domestic operations in the United States.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

NOTE 10 – Net Income (Loss) Per Common Share

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 10 – Net Income Per Common Share

Basic earnings per share are computed based on the weighted average number of common shares outstanding.

1 unchanged sentence

The table shows calculations for basic and diluted earnings per share:

(In millions, except per share data) Three months ended June 30, Six months ended June 30,

(In millions, except per share data) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Net income (loss)—basic and diluted $ 703 $ 909 $ 1,323 $ ( 317 )

Net income—basic and diluted $ 153 $ 484 $ 1,476 $ 167

Basic weighted-average common shares outstanding 161.1 160.9 161.1 161.3

3 unchanged sentences

Diluted weighted-average shares 162.9 162.0 162.8 162.5

Earnings (loss) per share:

Earnings per share:

Basic $ 0.95 $ 3.01 $ 9.16 $ 1.03

3 unchanged sentences

See our 2020 Annual Report on Form 10-K, Item 8, Note 17, Share-Based Associate Compensation Plans, Page 176, for information about share-based awards.

The above table shows the number of anti-dilutive share-based awards for the three and six months ended June 30, 2021 and 2020.

The above table shows the number of anti-dilutive share-based awards for the three and nine months ended September 30, 2021 and 2020.

These share-based awards were not included in the computation of net income per common share (diluted) because their exercise would have anti-dilutive effects.

In accordance with Accounting Standards Codification 260, Earnings per Share , the assumed exercise of share-based awards for the six months ended June 30, 2020, were excluded from the computation of diluted loss per share.

NOTE 11 – Employee Retirement Benefits

The following summarizes the components of net periodic benefit cost for our qualified and supplemental pension plans:

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

9 unchanged sentences

Service costs and non-service costs (benefit) are allocated in the same proportion primarily to the underwriting, acquisition and insurance expenses line item with the remainder allocated to the insurance losses and contract holders' benefits line item on the condensed consolidated statements of income for both 2021 and 2020.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

We made matching contributions totaling $ 5 million and $ 4 million to our 401(k) and Top Hat savings plans during the second quarter of 2021 and 2020 and contributions of $ 11 million and $ 12 million for the first half of 2021 and 2020, respectively.

We m ade no con tributions to our qualified pension plan during the first six months of 2021.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We made matching contributions totaling $ 7 million and $ 6 million to our 401(k) and Top Hat savings plans during the third quarter of 2021 and 2020 and contributions of $ 18 million during both the first nine months of 2021 and 2020, respectively.

We m ade no con tributions to our qualified pension plan during the first nine months of 2021.

NOTE 12 – Commitments and Contingent Liabilities

7 unchanged sentences

The company denies the allegations in these lawsuits and intends to continue to vigorously defend them.

Although the policy terms vary in general, the claims at issue in these lawsuits were denied because the policyholder identified no direct physical loss or damage to property at the insured premises, and the governmental orders that led to the complete or partial shutdown of the business were not due to the existence of any direct physical loss or damage to property in the immediate vicinity of the insured premises and did not prohibit access to the insured premises, as required by the terms of the insurance policies.

Depending on the individual policy, additional policy terms and conditions may also prohibit coverage, such as exclusions for pollutants, ordinance or law, loss of use, and acts or decisions.

Although the policy terms vary, in general, the company denied the claims at issue in these lawsuits because the policyholder identified no direct physical loss or damage to property at the insured premises, and/or the governmental orders that led to the complete or partial shutdown of the business were not due to the existence of any direct physical loss or damage to property in the immediate vicinity of the insured premises and did not prohibit access to the insured premises, as required by the terms of the insurance policies.

Additional policy terms and conditions may also prohibit coverage, such as exclusions for pollutants, ordinance or law, loss of use, and acts or decisions.

The company’s standard commercial property insurance policies generally did not contain a specific virus exclusion.

In addition to the inherent difficulty in predicting litigation outcomes, the COVID-19 pandemic business income coverage lawsuits present a number of uncertainties and contingencies that are not yet known, including how many policyholders will ultimately file claims, the number of lawsuits that will be filed, the extent to which any class may be certified, and the size and scope of any such classes.

The legal theories advanced by plaintiffs vary by case as do the state laws that govern policy interpretation.

The legal theories advanced by plaintiffs vary by case, and the state laws that govern policy interpretation will guide judicial rulings on dispositive motions.

These lawsuits are at various stages of litigation;

1 unchanged sentence

several have been dismissed voluntarily and may be refiled;

and others have been dismissed in favor of the company by trial courts.

Some early decisions on motion filings have been appealed.

While these appeals are at various stages of the briefing and argument process, several of the cases are now fully briefed and scheduled for oral argument.

The first appellate case in the nation to consider these issues was recently decided by the Federal Court of Appeals for the Eighth Circuit in favor of the company.

The vast majority of cases in Ohio remain stayed pending a decision by the Ohio Supreme Court on a question certified to it by the federal district court in the Northern District of Ohio in the case of Neuro-Communication Services, Inc.

others have been dismissed in favor of the company by trial courts;

and a handful of cases are advancing toward trials.

Many decisions on motion filings have been appealed.

While these appeals are at various stages of the briefing and argument process, several of the cases are now fully briefed and are ripe for decision.

The first two appellate cases in the nation to consider these issues were recently decided by the Federal Courts of Appeals for the Eighth and Eleventh Circuits in favor of the company, applying Iowa law and Georgia law, respectively.

The Federal Courts of Appeals for the Sixth and Ninth Circuits also recently decided cases on these issues in favor of other insurers, applying Ohio law and California law, respectively.

The company’s cases pending in trial courts in Ohio are stayed pending a decision by the Ohio Supreme Court on a question certified to it by the federal district court in the Northern District of Ohio in the case of Neuro-Communication Services, Inc.

The Cincinnati Insurance Company, et al., Case No.

3 unchanged sentences

“Does the general presence in the community, or on surfaces at a premises, of the novel coronavirus known as SARS-CoV-2, constitute direct physical loss or damage to property;

or does the presence of a person infected with COVID-19 constitute direct physical loss or damage to property at that premises?" Accordingly, little discovery has occurred on pending cases and most cases have not yet produced any substantive legal rulings.

In addition, business income calculations depend upon a wide range of factors that are particular to the circumstances of each individual policyholder and, here, virtually none of the plaintiffs have submitted proofs of loss or otherwise quantified or factually supported any allegedly covered loss.

or does the presence of a person infected with COVID-19 constitute direct physical loss or damage to property at that premises?"

Because most of our pending cases remain in the early stages of motion practice or appeals from trial court rulings on dispositive motions, little discovery has occurred.

In addition, business income calculations depend upon a wide range of factors that are particular to the circumstances of each individual policyholder and, here, the vast majority of plaintiffs have not submitted proofs of loss or otherwise quantified or factually supported any allegedly covered loss.

Moreover, the company’s experience shows that demands stated in lawsuits often bear little relation to a reasonable estimate of potential loss.

Accordingly, management cannot now reasonably estimate the possible loss or range of loss, if any.

Accordingly, management cannot now reasonably estimate the possible loss

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

or range of loss, if any.

Nonetheless, given the number of claims and potential claims, the indeterminate amounts sought, and the inherent unpredictability of litigation, it is possible that adverse outcomes, if any, in the aggregate could have a material adverse effect on the company’s consolidated financial position, results of operations and cash flows.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

The company and its subsidiaries also are occasionally involved in other legal and regulatory proceedings, some of which assert claims for substantial amounts.

5 unchanged sentences

Based on our quarterly review, we believe that our accruals for probable and estimable losses are reasonable and that the amounts accrued do not have a material effect on our consolidated financial position, results of operations and cash flows.

However, if any one or more of these matters results in a judgment against us or settlement for an amount that is significantly greater than the amount accrued, the resulting liability could have a material effect on the company’s consolidated financial position, results of operations and cash flows.

However, if any one or more of these matters results in a judgment against us or settlement for an amount that is significantly greater than the amount accrued, if any, the resulting liability could have a material effect on the company’s consolidated financial position, results of operations and cash flows.

Based on our most recent review, our estimate for any other matters for which the risk of loss is not probable, but more than remote, is immaterial.

11 unchanged sentences

See our 2020 Annual Report on Form 10-K, Item 8, Note 18, Segment Information, Page 179, for a description of revenue, income or loss before income taxes and identifiable assets for each of the five segments.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Segment information is summarized in the following table:

(Dollars in millions) Three months ended June 30, Six months ended June 30,

(Dollars in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

36 unchanged sentences

Other ( 73 ) ( 55 ) ( 68 ) ( 78 )

Total income (loss) before income taxes $ 872 $ 1,145 $ 1,640 $ ( 431 )

Total income before income taxes $ 184 $ 614 $ 1,824 $ 183

Identifiable assets:

September 30,

2021 December 31,

4 unchanged sentences

Total $ 29,907 $ 27,542

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements