What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-10-27 compared with 2021-07-28 · 284 added, 280 removed, 730 unchanged (44% of the section changed)

29 unchanged sentences

◦ Judicial rulings in similar litigation involving other companies in the insurance industry

◦ Differences in state laws and developing case law in the relatively few decisions rendered to date

◦ Differences in state laws and developing case law

◦ Litigation trends, including varying legal theories advanced by policyholders

2 unchanged sentences

• Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns, environmental events, terrorism incidents or other causes

• Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance

• Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance, due to inflationary trends or other causes

• Inadequate estimates, assumptions or reliance on third-party data used for critical accounting estimates

• Declines in overall stock market values negatively affecting the company’s equity portfolio and book value

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

• Prolonged low interest rate environment or other factors that limit the company’s ability to generate growth in investment income or interest rate fluctuations that result in declining values of fixed-maturity investments, including declines in accounts in which we hold bank-owned life insurance contract assets

5 unchanged sentences

• Recession or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies

• Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our ability to conduct business;

• Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our or our agents' ability to conduct business;

disrupt our relationships with agents, policyholders and others;

16 unchanged sentences

◦ Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

◦ Add assessments for guaranty funds, other insurance‑related assessments or mandatory reinsurance arrangements;

8 unchanged sentences

• Unforeseen departure of certain executive officers or other key employees due to retirement, health or other causes that could interrupt progress toward important strategic goals or diminish the effectiveness of certain longstanding relationships with insurance agents and others

• Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location

• Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location or work effectively in a remote environment

Further, the company’s insurance businesses are subject to the effects of changing social, global, economic and regulatory environments.

2 unchanged sentences

The ultimate changes and eventual effects, if any, of these initiatives are uncertain.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

CORPORATE FINANCIAL HIGHLIGHTS

Net Income and Comprehensive Income Data

(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 % Change 2021 2020 % Change

1 unchanged sentence

Investment income, net of expenses (pretax) 179 167 7 528 498 6

Investment gains and losses, net (pretax) 520 1,060 (51) 1,024 (665) nm

Investment gains and losses, net (pretax) (70) 533 nm 954 (132) nm

Total revenues 1,785 2,227 (20) 6,307 4,842 30

Net income (loss) 703 909 (23) 1,323 (317) nm

Comprehensive income (loss) 809 1,302 (38) 1,285 (168) nm

Net income (loss) per share—diluted 4.31 5.63 (23) 8.13 (1.96) nm

Net income 153 484 (68) 1,476 167 nm

Comprehensive income 85 573 (85) 1,370 405 238

Net income per share—diluted 0.94 2.99 (69) 9.07 1.03 nm

Cash dividends declared per share 0.63 0.60 5 1.89 1.80 5

Diluted weighted average shares outstanding 162.9 162.0 1 162.8 162.5 0

Total revenues decreased 15% for the second quarter of 2021, compared with the second quarter of 2020, as a decrease in net investment gains offset increases in earned premiums and investment income.

For the first six months of 2021, compared with the same period of 2020, total revenues increased $1.907 billion, primarily due to higher earned premiums and net investment gains in 2021 instead of net investment losses in 2020.

Total revenues decreased 20% for the third quarter of 2021, compared with the third quarter of 2020, as a decrease in net investment gains offset increases in earned premiums and investment income.

For the first nine months of 2021, compared with the first nine months of 2020, total revenues increased 30%, primarily due to higher earned premiums and net investment gains in 2021 instead of net investment losses in 2020.

Premium and investment revenue trends are discussed further in the respective sections of Financial Results.

2 unchanged sentences

The change in fair value of securities is also generally independent of the insurance underwriting process.

Net income for the second quarter of 2021, compared with the same quarter in 2020, decreased $206 million, including a decrease of $427 million in after-tax net investment gains that offset increases of $207 million in after-tax property casualty underwriting income and $7 million in after-tax investment income.

Catastrophe losses for the second quarter of 2021, mostly weather related, were $136 million lower after taxes and favorably affected both net income and property casualty underwriting income.

Life insurance segment results on a pretax basis decreased by $3 million compared with the second quarter of 2020.

For the first six months of 2021, net income increased $1.640 billion, compared with the same period of 2020,

including increases of $1.334 billion in after-tax investment gains and losses, $293 million in after-tax property casualty underwriting income and $15 million improvement in after-tax investment income.

Net income for the third quarter of 2021, compared with the same period in 2020, decreased $331 million, including a decrease of $477 million in after-tax net investment gains that offset increases of $136 million in after-tax property casualty underwriting income and $10 million in after-tax investment income.

Catastrophe losses for the third quarter of 2021, mostly weather related, were $31 million lower after taxes and favorably affected both net income and property casualty underwriting income.

Life insurance segment results on a pretax basis decreased by $11 million compared with third-quarter 2020.

For the first nine months of 2021, net income increased $1.309 billion, compared with the same period of 2020,

including increases of $857 million in after-tax investment gains and losses, $429 million in after-tax property casualty underwriting income and $25 million in after-tax investment income.

The property casualty underwriting income increase included a favorable $145 million after-tax effect from lower catastrophe losses.

Life insurance segment results decreased by $18 million on a pretax basis.

During the first six months of 2021, SARS-CoV-2, also known as COVID-19 and recognized as a pandemic by the World Health Organization, continued to cause dampening economic effects in some areas where we operate, while many areas experienced strengthening economic effects due to increased business activity and consumer spending.

We believe the COVID-19 pandemic did not have a significant effect on our premium revenues for the second quarter of 2021, while it had a modestly slowing effect on premium growth for the first quarter of the year.

During the first nine months of 2021, SARS-CoV-2, also known as COVID-19 and recognized as a pandemic by the World Health Organization, continued to cause dampening economic effects in some areas where we operate, while many areas experienced strengthening economic effects due to increased business activity and consumer spending.

We believe the COVID-19 pandemic did not have a significant effect on our premium revenues for the second or third quarters of 2021, while it had a modestly slowing effect on premium growth for the first quarter of the year.

Premium growth by segment is discussed below in Financial Results.

1 unchanged sentence

We are not able to determine premium effects for future periods.

During the first six months of 2021, there were no material changes to our estimates for incurred losses and expenses related to the pandemic.

An updated estimate in the first quarter of 2021 of ultimate credit losses related to uncollectible premiums reduced underwriting expenses by approximately $2 million.

During the first nine months of 2021, changes to our estimates for incurred losses and expenses related to the pandemic included a $2 million increase in Cincinnati Re ® losses and a $5 million decrease in ultimate credit losses related to uncollectible premiums.

For full-year 2020, pandemic-related incurred losses and expenses totaled $85 million.

The total included $30 million for legal

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

expenses in defense of business interruption claims, $19 million for Cincinnati Re ® losses, $12 million for Cincinnati Global Underwriting Ltd.

The total included $30 million for legal expenses in defense of business interruption claims, $19 million for

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Re losses, $12 million for Cincinnati Global Underwriting Ltd.

SM (Cincinnati Global) losses, $8 million for credit losses related to uncollectible premiums and $16 million for the Stay-at-Home policyholder credit for personal auto policies.

9 unchanged sentences

In January 2021, the board of directors increased the regular quarterly dividend to 63 cents per share, setting the stage for our 61 st consecutive year of increasing cash dividends.

During the first six months of 2021, cash dividends declared by the company increased 5% compared with the same period of 2020.

During the first nine months of 2021, cash dividends declared by the company increased 5% compared with the same period of 2020.

Our board regularly evaluates relevant factors in decisions related to dividends and share repurchases.

The 2021 dividend increase reflected our strong earnings performance and signaled management's and the board's positive outlook and confidence in our outstanding capital, liquidity and financial flexibility.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Balance Sheet Data and Performance Measures

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

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

Total investments $ 23,213 $ 21,542

5 unchanged sentences

Debt-to-total-capital ratio 6.7 % 7.2 %

Total assets at June 30, 2021, increased 8% compared with year-end 2020, and included a 7% increase in total investments that reflected a combination of net purchases and higher fair values for many securities in our portfolio.

Shareholders' equity increased 10% and book value per share also increased 10% during the first six months of 2021.

Total assets at September 30, 2021, increased 9% compared with year-end 2020, and included an 8% increase in total investments that reflected a combination of net purchases and higher fair values for many securities in our portfolio.

Shareholders' equity increased 10% and book value per share also increased 10% during the first nine months of 2021.

Our debt-to-total-capital ratio (capital is the sum of debt plus shareholders' equity) decreased compared with year-end 2020.

Our value creation ratio is our primary performance metric.

That ratio was 11.6% for the first six months of 2021, and was significantly higher than the same period in 2020, primarily due to a higher amount of overall net gains from our investment portfolio.

The $6.53 increase in book value per share during the first six months of 2021 contributed 9.7 percentage points to the value creation ratio, while dividends declared at $1.26 per share contributed 1.9 points.

That ratio was 12.4% for the first nine months of 2021, and was significantly higher than the same period in 2020, reflecting both higher net income before investment gains and a higher amount of overall net gains from our investment portfolio.

The $6.45 increase in book value per share during the first nine months of 2021 contributed 9.6 percentage points to the value creation ratio, while dividends declared at $1.89 per share contributed 2.8 points.

Value creation ratios by major components and in total, along with calculations from per-share amounts, are shown in the tables below.

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

6 unchanged sentences

Value creation ratio 0.7 % 6.3 % 12.4 % 3.0 %

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

(Dollars are per share) Three months ended June 30, Six months ended June 30,

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

(Dollars are per share) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

5 unchanged sentences

Total value creation $ 0.55 $ 3.61 $ 8.34 $ 1.82

Value creation ratio from change in book value** 6.4 % 15.1 % 9.7 % (5.0) %

Value creation ratio from change in book

value** (0.1) % 5.2 % 9.6 % 0.0 %

Value creation ratio from dividends declared to

8 unchanged sentences

We market our insurance products through a select group of independent insurance agencies as discussed in our 2020 Annual Report on Form 10-K, Item 1, Our Business and Our Strategy, Page 5.

At June 30, 2021, we actively marketed through agencies located in 45 states.

At September 30, 2021, we actively marketed through agencies located in 45 states.

We maintain a long-term perspective that guides us in addressing immediate challenges or opportunities while focusing on the major decisions that best position our company for success through all market cycles.

2 unchanged sentences

• Premium growth – We believe our agency relationships and initiatives can lead to a property casualty written premium growth rate over any five-year period that exceeds the industry average.

For the first six months of 2021, our consolidated property casualty net written premium year-over-year growth was 11%.

As of February 2021, A.M.

Best projected the industry's full-year 2021 written premium growth at approximately 5%.

For the first nine months of 2021, our consolidated property casualty net written premium year-over-year growth was 11%, comparing favorably with the industry's 7% growth rate reported by A.M.

Best for the first six months of 2021.

For the five-year period 2016 through 2020, our growth rate exceeded that of the industry.

1 unchanged sentence

• Combined ratio – We believe our underwriting philosophy and initiatives can generate a GAAP combined ratio over any five-year period that is consistently within the range of 95% to 100%.

For the first six months of 2021, our GAAP combined ratio was 88.3%, including 9.1 percentage points of current accident year catastrophe losses partially offset by 7.7 percentage points of favorable loss reserve development on prior accident years.

Our statutory combined ratio was 87.4% for the first six months of 2021.

As of February 2021, A.M.

Best projected the industry's full-year 2021 statutory combined ratio at approximately 100%, including approximately 6 percentage points of catastrophe losses and a favorable effect of approximately 1 percentage point of loss reserve development on prior accident years.

For the first nine months of 2021, our GAAP combined ratio was 89.8%, including 10.7 percentage points of current accident year catastrophe losses partially offset by 7.2 percentage points of favorable loss reserve development on prior accident years.

Our statutory combined ratio was 89.0% for the first nine months of 2021, comparing favorably with the industry's 96.9% reported by A.M.

Best for the first six months of 2021.

The industry's ratio again excludes its mortgage and financial guaranty lines of business.

• Investment contribution – We believe our investment philosophy and initiatives can drive investment income growth and lead to a total return on our equity investment portfolio over a five-year period that exceeds the five-year return of the Standard & Poor's 500 Index.

For the first six months of 2021, pretax investment income was $349 million, up 5% compared with the same period in 2020.

For the first nine months of 2021, pretax investment income was $528 million, up 6% compared with the same period in 2020.

We believe our investment portfolio mix provides an appropriate balance of income stability and growth with capital appreciation potential.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Highlights of Our Strategy and Supporting Initiatives

14 unchanged sentences

We continue to appoint new agencies to develop additional points of distribution.

During the first six months of 2021, we appointed 121 new agencies that offer most or all of our property casualty insurance products.

As of June 30, 2021, a total of 1,886 agency relationships market our property casualty insurance products from 2,663 reporting locations.

During the first nine months of 2021, we appointed 122 new agencies that offer most or all of our property casualty insurance products.

As of September 30, 2021, a total of 1,904 agency relationships market our property casualty insurance products from 2,687 reporting locations.

The totals do not include Lloyd's brokers or coverholders that source business for Cincinnati Global.

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Our strong parent-company liquidity and financial strength increase our flexibility to maintain a cash dividend through all periods and to continue to invest in and expand our insurance operations.

At June 30, 2021, we held $4.413 billion of our cash and invested assets at the parent-company level, of which $4.095 billion, or 92.8%, was invested in common stocks, and $90 million, or 2.0%, was cash or cash equivalents.

Our debt-to-total-capital ratio was 6.7% at June 30, 2021.

Another important indicator of financial strength is our ratio of property casualty net written premiums to statutory surplus, which was 0.9-to-1 for the 12 months ended June 30, 2021, compared with 1.0-to-1 at year-end 2020.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

At September 30, 2021, we held $4.461 billion of our cash and cash equivalents and invested assets at the parent-company level, of which $4.072 billion, or 91.3%, was invested in common stocks, and $156 million, or 3.5%, was cash or cash equivalents.

Our debt-to-total-capital ratio was 6.7% at September 30, 2021.

Another important indicator of financial strength is our ratio of property casualty net written premiums to statutory surplus, which was 0.9-to-1 for the 12 months ended September 30, 2021, compared with 1.0-to-1 at year-end 2020.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Financial strength ratings assigned to us by independent rating firms also are important.

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please see each rating agency's website for its most recent report on our ratings.

At July 27, 2021, our insurance subsidiaries continued to be highly rated.

At October 26, 2021, our insurance subsidiaries continued to be highly rated.

Insurer Financial Strength Ratings

10 unchanged sentences

A+ Strong 5 of 21 A+ Strong 5 of 21 - - - Stable

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

CONSOLIDATED PROPERTY CASUALTY INSURANCE HIGHLIGHTS

Consolidated property casualty insurance results include premiums and expenses for our standard market insurance segments (commercial lines and personal lines), our excess and surplus lines segment, Cincinnati Re and our London-based global specialty underwriter Cincinnati Global.

(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 % Change 2021 2020 % Change

5 unchanged sentences

Current accident year catastrophe losses 218 275 (21) 489 643 (24)

Prior accident years before catastrophe losses (90) (41) (120) (170) (69) (146)

Prior accident years catastrophe losses (29) (6) (383) (59) (11) (436)

Prior accident years before catastrophe losses (112) (3) nm (282) (72) (292)

Prior accident years catastrophe losses 10 (8) nm (49) (19) (158)

Loss and loss expenses 988 1,071 (8) 2,741 3,008 (9)

14 unchanged sentences

prior years reserve development 85.4 % 85.5 % (0.1) 86.3 % 88.8 % (2.5)

We believe the COVID-19 pandemic did not have a significant effect on our consolidated property casualty premium revenues for the second quarter of 2021, while it had a modestly slowing effect on premium growth for the first quarter of 2021.

The pandemic and a weakened economy reduced premium volume during the first quarter of 2021 and the second quarter of last year.

A strengthening economy in 2021 contributed to premium growth for the second quarter and first six months of 2021, compared with the same periods a year ago.

Consolidated property casualty net written premiums grew 10% for the second quarter of 2021, including a contribution of 3% from Cincinnati Re.

For the first six months of 2021, compared with the first six months of 2020, consolidated property casualty net written premiums grew 11%, including a contribution of 5% from Cincinnati Re.

Consolidated property casualty new business written premiums increased 12% for the second quarter of 2021 and 7% for the first six months, compared with the same periods of 2020.

For policies that renewed during the first six months of 2021, higher average pricing also contributed to premium growth.

We believe the COVID-19 pandemic did not have a significant effect on our consolidated property casualty premium revenues for the third or second quarters of 2021, while it had a modestly slowing effect on premium growth for the first quarter of 2021.

The pandemic and a weakened economy reduced premium volume during the first quarter of 2021 and the second and third quarters of last year.

A strengthening economy in 2021 contributed to premium growth for the third quarter and first nine months of 2021, compared with the same periods a year ago.

Consolidated property casualty net written premiums grew 10% for the third quarter of 2021.

For the first nine months of 2021, compared with the same period of 2020, consolidated property casualty net written premiums grew 11%, including a contribution of 3% from Cincinnati Re.

Consolidated property casualty new business written premiums increased 22% and 12% for the third quarter and first nine months of 2021, compared with the same periods of 2020.

For policies that renewed during the first nine months of 2021, higher average pricing also contributed to premium growth.

Regardless of pricing changes, new business and renewal premium amounts could decline if the exposure basis for policy premiums, such as sales and payrolls of businesses we insure, decrease as a result of a weakened economy.

2 unchanged sentences

However, there could be losses

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

or legal expenses that occur independent of changes in mileage, sales or payrolls of businesses we insure, due to pandemic effects or other factors.

Our consolidated property casualty insurance operations generated an underwriting profit of $221 million for the second quarter of 2021 and $354 million for the first six months of 2021.

Our consolidated property casualty insurance operations generated an underwriting profit of $121 million for the third quarter of 2021 and $475 million for the first nine months of 2021.

The increases of $172 million and $543 million, respectively, compared with the same periods of 2020, included favorable decreases of $39 million and $184 million in losses from catastrophes, mostly caused by severe weather.

We believe future property casualty underwriting results will continue to benefit from price increases and our ongoing initiatives to improve pricing precision and loss experience related to claims and loss control practices.

For all property casualty lines of business in aggregate, net loss and loss expense reserves at June 30, 2021, were $281 million, or 4%, higher than at year-end 2020, including an increase of $173 million for the IBNR portion.

For all property casualty lines of business in aggregate, net loss and loss expense reserves at September 30, 2021, were $504 million, or 8%, higher than at year-end 2020, including an increase of $299 million for the IBNR portion.

We measure and analyze property casualty underwriting results primarily by the combined ratio and its component ratios.

2 unchanged sentences

A combined ratio above 100% indicates that an insurance company's losses and expenses exceeded premiums.

Our consolidated property casualty combined ratio for the second quarter of 2021 improved by 17.6 percentage points, compared with the same period of 2020, including a decrease of 12.6 points from lower catastrophe losses and loss expenses.

For the first six months of 2021, compared with the 2020 six-month period, our combined ratio improved by 12.5 percentage points, including a decrease of 5.7 points from lower catastrophe losses and loss expenses.

Our consolidated property casualty combined ratio for the third quarter of 2021 improved by 11.0 percentage points, compared with the same period of 2020, including a decrease of 4.1 points from lower catastrophe losses and loss expenses.

For the first nine months of 2021, compared with the 2020 nine-month period, our combined ratio improved by 12.0 percentage points, including a decrease of 5.1 points from lower catastrophe losses and loss expenses.

The combined ratio can be affected significantly by natural catastrophe losses and other large losses as discussed in detail below.

The combined ratio can also be affected by updated estimates of loss and loss expense reserves established for claims that occurred in prior periods, referred to as prior accident years.

Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 7.7 percentage points in the first six months of 2021, compared with 2.8 percentage points in the same period of 2020.

Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 7.2 percentage points in the first nine months of 2021, compared with 2.1 percentage points in the same period of 2020.

Net favorable development is discussed in further detail in Financial Results by property casualty insurance segment.

The ratio for current accident year loss and loss expenses before catastrophe losses improved in the first six months of 2021.

That 57.2% ratio was 1.8 percentage points lower, compared with the 59.0% accident year 2020 ratio measured as of June 30, 2020, including a decrease of 0.2 points in the ratio for large losses of $1 million or more per claim, discussed below.

The underwriting expense ratio decreased for the second quarter and first six months of 2021, compared with the same periods a year ago.

The second-quarter decrease was primarily due to the second-quarter 2020 $16 million Stay-at-Home policyholder credit for personal auto policies.

The six-month decrease was primarily due to lower levels of business travel spending and uncollectible premiums, in addition to ongoing expense management efforts and higher earned premiums.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

The ratio for current accident year loss and loss expenses before catastrophe losses improved in the first nine months of 2021.

That 56.3% ratio was 1.6 percentage points lower, compared with the 57.9% accident year 2020 ratio measured as of September 30, 2020, including an increase of 0.2 points in the ratio for large losses of $1 million or more per claim, discussed below.

The underwriting expense ratio increased for the third quarter of 2021, compared with the same period a year ago, primarily due to an increase in profit-sharing commissions for agencies.

The underwriting expense ratio decreased for the first nine months of 2021, compared with the same period a year ago.

The nine-month decrease reflected the second-quarter 2020 $16 million Stay-at-Home policyholder credit for personal auto policies, in addition to ongoing expense management efforts and higher earned premiums.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Consolidated Property Casualty Insurance Premiums

(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 % Change 2021 2020 % Change

7 unchanged sentences

Price change trends that heavily influence renewal written premium increases or decreases, along with other premium growth drivers for 2021, are discussed in more detail by segment below in Financial Results.

Consolidated property casualty net written premiums for the three and six months ended June 30, 2021, grew $155 million and $330 million compared with the same periods of 2020.

Consolidated property casualty net written premiums for the three and nine months ended September 30, 2021, grew $145 million and $475 million compared with the same periods of 2020.

Our premium growth initiatives from prior years have provided an ongoing favorable effect on growth during the current year, particularly as newer agency relationships mature over time.

Consolidated property casualty agency new business written premiums increased by $25 million and $30 million for the second quarter and first six months of 2021, compared with the same periods of 2020.

New agency appointments during 2020 and 2021 produced a $23 million increase in standard lines new business for the first six months of 2021 compared with the same period of 2020.

Consolidated property casualty agency new business written premiums increased by $41 million and $71 million for the third quarter and first nine months of 2021, compared with the same periods of 2020.

New agency appointments during 2020 and 2021 produced a $38 million increase in standard lines new business for the first nine months of 2021 compared with the same period of 2020.

As we appoint new agencies that choose to move accounts to us, we report these accounts as new business.

1 unchanged sentence

We believe these seasoned accounts tend to be priced more accurately than business that may be less familiar to our agent upon obtaining it from a competing agent.

Net written premiums for Cincinnati Re, included in other written premiums, increased by $52 million and $143 million for the three and six months ended June 30, 2021, compared with the same periods of 2020, to $136 million and $332 million, respectively.

Net written premiums for Cincinnati Re, included in other written premiums, increased by $3 million and $147 million for the three and nine months ended September 30, 2021, compared with the same periods of 2020, to $57 million and $389 million, respectively.

Cincinnati Re assumes risks through reinsurance treaties and in some cases cedes part of the risk and related premiums to one or more unaffiliated reinsurance companies through transactions known as retrocessions.

Cincinnati Global is also included in other written premiums.

Net written premiums decreased, by $6 million and $2 million, for the three and six months ended June 30, 2021, compared with the same periods of 2020, to $47 million and $88 million, respectively.

Net written premiums increased, by $9 million and $6 million, for the three and nine months ended September 30, 2021, compared with the same periods of 2020, to $47 million and $135 million, respectively.

Other written premiums also include premiums ceded to reinsurers as part of our reinsurance ceded program.

An increase in ceded premiums decreased net written premiums by $6 million and $8 million for the second quarter and first six months of 2021, compared with the same periods of 2020.

Ceded premiums for the first six months of 2021 included $18 million for cyber insurance, and contributed $4 million of the increase in ceded premiums.

We offer cyber insurance as an affirmative coverage option on various insurance policies and subsequently cede all of the related premiums to a reinsurer, therefore transferring substantially all of that risk.

An increase in ceded premiums decreased net written premiums by $1 million and $9 million for the third quarter and first nine months of 2021, compared with the same periods of 2020.

Catastrophe losses and loss expenses typically have a material effect on property casualty results and can vary significantly from period to period.

Losses from catastrophes contributed 3.9 and 7.1 percentage points to the combined ratio in the second quarter and first six months of 2021, compared with 16.5 and 12.8 percentage points in the same periods of 2020.

Effective June 1, 2021, we nonrenewed our combined property catastrophe occurrence excess of loss treaty that provided coverage for business written on a direct basis and by Cincinnati Re.

We determined that the coverage was no longer cost effective.

A restructured reinsurance program became effective for Cincinnati Re only, providing retrocession coverages with various triggers and unique features.

That program included property catastrophe excess of loss coverage with a total available aggregate limit of $48 million in excess of $80 million per loss.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Coverage for Cincinnati Re only with a total available aggregate limit of $30 million expired during the second quarter of 2021.

Losses from catastrophes contributed 14.2 and 9.6 percentage points to the combined ratio in the third quarter and first nine months of 2021, compared with 18.3 and 14.7 percentage points in the same periods of 2020.

The reinsurance program for Cincinnati Re that was effective June 1, 2021, provided a recovery based on Hurricane Ida losses estimated as of September 30, 2021.

The estimated recovery from the program was $18 million, with a net incurred loss of $80 million for Cincinnati Re in the third quarter of 2021, excluding the benefit of reinstatement premiums estimated at approximately $11 million.

Before any recoveries, the program included property catastrophe excess of loss coverage with an annual total available aggregate limit of $48 million in excess of $80 million per loss.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The following table shows consolidated property casualty insurance catastrophe losses and loss expenses incurred, net of reinsurance, as well as the effect of loss development on prior period catastrophe events.

1 unchanged sentence

Consolidated Property Casualty Insurance Catastrophe Losses and Loss Expenses Incurred

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

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

Dates Region lines lines lines Other Total lines lines lines Other Total

5 unchanged sentences

17-20 Midwest 6 2 — — 8 12 16 — — 28

1 Midwest, Northeast, South, West 3 6 — — 9 5 12 — — 17

10 - 13 Midwest, Northeast, South 6 9 — — 15 6 9 — — 15

2 Northeast, South (Ida) 18 42 — 109 169 18 42 — 109 169

All other 2021 catastrophes 10 24 1 5 40 34 53 1 5 93

4 unchanged sentences

2-4 Midwest, South (3) — — — (3) 61 8 — 5 74

17-20 Midwest, South 1 5 — — 6 2 10 — — 12

27-30 Midwest, Northeast, South — 1 — — 1 23 14 — — 37

4 unchanged sentences

8 Midwest, Northeast, South, West (1) — — — (1) 18 — 1 8 27

10-12 Midwest, South 14 14 — — 28 14 14 — — 28

5 International, South, Northeast 6 21 — — 27 6 21 — — 27

8-11 Midwest 84 19 — — 103 84 19 — — 103

26-28 South (Laura) 2 2 — 42 46 2 2 — 42 46

7-16 West 12 3 — — 15 12 3 — — 15

14-18 South (Sally) 6 8 — 14 28 6 8 — 14 28

All other 2020 catastrophes 5 14 1 4 24 26 61 3 6 96

1 unchanged sentence

Calendar year incurred total $ 129 $ 83 $ 1 $ 54 $ 267 $ 335 $ 213 $ 4 $ 72 $ 624

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The following table includes data for losses incurred of $1 million or more per claim, net of reinsurance.

Consolidated Property Casualty Insurance Losses Incurred by Size

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

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

2021 2020 % Change 2021 2020 % Change

1 unchanged sentence

Current accident year losses $1 million - $5 million 72 46 57 154 149 3

Large loss prior accident year reserve development 13 7 86 37 33 12

Large loss prior accident year reserve development 30 (3) nm 67 30 123

Total large losses incurred 116 64 81 278 219 27

14 unchanged sentences

Our analysis continues to indicate no unexpected concentration of large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory.

The second-quarter 2021 property casualty total large losses incurred of $102 million, net of reinsurance, were higher than the $74 million quarterly average during full-year 2020 and the $79 million experienced for the second quarter of 2020.

The ratio for these large losses was 1.2 percentage points higher compared with last year's second quarter.

The second-quarter 2021 amount of total large losses incurred unfavorably contributed to the decrease in the six-month 2021 total large loss ratio, compared with 2020, as it partially offset a first-quarter 2021 ratio that was 1.4 points lower than the first quarter of 2020.

We believe results for the three- and six-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

The third-quarter 2021 property casualty total large losses incurred of $116 million, net of reinsurance, were higher than the $74 million quarterly average during full-year 2020 and the $64 million experienced for the third quarter of 2020.

The ratio for these large losses was 2.9 percentage points higher compared with last year's third quarter.

The third-quarter 2021 amount of total large losses incurred unfavorably contributed to the increase in the nine-month 2021 total large loss ratio, compared with 2020, as it offset a first-half 2021 ratio that was 0.2 points lower than the first half of 2020.

We believe results for the three- and nine-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

Losses by size are discussed in further detail in results of operations by property casualty insurance segment.

6 unchanged sentences

• Investments

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

COMMERCIAL LINES INSURANCE RESULTS

(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 % Change 2021 2020 % Change

5 unchanged sentences

Current accident year catastrophe losses 37 128 (71) 130 343 (62)

Prior accident years before catastrophe losses (76) (39) (95) (142) (42) (238)

Prior accident years catastrophe losses (10) (6) (67) (27) (9) (200)

Prior accident years before catastrophe losses (102) (9) nm (244) (51) (378)

Prior accident years catastrophe losses (5) 1 nm (32) (8) (300)

Loss and loss expenses 451 620 (27) 1,434 1,824 (21)

14 unchanged sentences

prior years reserve development 88.2 % 88.6 % (0.4) 88.7 % 90.3 % (1.6)

Commercial lines insurance segment earned premiums grew 5% for the second quarter and 4% for the first six months of 2021, exceeding the 3% full-year 2019 earned premiums growth rate recorded prior to the COVID-19 pandemic.

The pandemic and a weakened economy reduced premium volume during the first quarter of 2021 and the second quarter of last year.

A strengthening economy in 2021 contributed to net written premium growth for the second quarter and first six months of 2021, compared with the same periods a year ago.

Net written premiums grew 8% for the second quarter of 2021 and 6% for the first six months, compared with the same periods of 2020.

New business written premiums increased 9% for the second quarter of 2021 and 1% for the first six months.

Commercial lines insurance segment earned premiums grew 8% for the third quarter and 5% for the first nine months of 2021, exceeding the 3% full-year 2019 earned premiums growth rate recorded prior to the COVID-19 pandemic.

The pandemic and a weakened economy reduced premium volume during the first quarter of 2021 and the second and third quarters of last year.

A strengthening economy in 2021 contributed to net written premium growth for the third quarter and first nine months of 2021, compared with the same periods a year ago.

Net written premiums grew 10% for the third quarter of 2021 and 7% for the first nine months of 2021, compared with the same periods of 2020.

New business written premiums increased 27% for the third quarter of 2021 and 8% for the first nine months of 2021.

New business and renewal premium amounts could decline if the exposure basis for policy premiums, such as sales and payrolls of businesses we insure, decrease as a result of a weakened economy.

Loss experience for our insurance operations is influenced by many factors, including lower catastrophe losses that contributed to lower overall commercial lines losses for the first half of 2021.

During the first six months of 2021, loss experience before catastrophe effects for our commercial lines insurance segment continued to improve.

Loss experience for our insurance operations is influenced by many factors, including lower catastrophe losses that contributed to lower overall commercial lines losses for the first nine months of 2021.

Loss experience before catastrophe effects for our commercial lines insurance segment continued to improve during the first nine months of 2021.

The main driver of the improvement was the ratio for reserve development on prior accident years before catastrophe losses.

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However, there could be losses or legal expenses that occur independent of changes in mileage, sales or payrolls of businesses we insure, due to pandemic effects or other factors.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Performance highlights for the commercial lines segment include:

• Premiums – Earned premiums and net written premiums for the commercial lines segment rose during the second quarter and first six months of 2021, compared with the same periods a year ago, primarily due to renewal written premium growth that continued to include higher average pricing.

• Premiums – Earned premiums and net written premiums for the commercial lines segment rose during the third quarter and first nine months of 2021, compared with the same periods a year ago, primarily due to renewal written premium growth that continued to include higher average pricing.

The table below analyzes the primary components of premiums.

We continue to use predictive analytics tools to improve pricing precision and segmentation while leveraging our local relationships with agents through the efforts of our teams that work closely with them.

We seek to maintain appropriate pricing discipline for both new and renewal business as our agents and underwriters assess account quality to make careful decisions on a case-by-case basis whether to write or renew a policy.

Agency renewal written premiums increased by 7% for both the second quarter and first six months of 2021, compared with the same periods of 2020.

During the second quarter of 2021, our overall standard commercial lines policies averaged estimated renewal price increases at percentages in the mid-single-digit range.

We seek to maintain appropriate pricing discipline for both new and renewal business as our agents and underwriters assess account quality to make careful decisions on a policy-by-policy basis whether to write or renew a policy.

Agency renewal written premiums increased by 7% for both the third quarter and the first nine months of 2021, compared with the same periods of 2020.

During the third quarter of 2021, our overall standard commercial lines policies averaged estimated renewal price increases at percentages near the low end of the mid-single-digit range.

We continue to segment commercial lines policies, emphasizing identification and retention of those we believe have relatively stronger pricing.

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Therefore, our reported change in average commercial lines renewal pricing reflects a blend of three-year policies that did not expire and other policies that did expire during the measurement period.

For commercial lines policies that did expire and were then renewed during the second quarter of 2021, we estimate that our average percentage price increases were as follows:

For commercial lines policies that did expire and were then renewed during the third quarter of 2021, we estimate that our average percentage price increases were as follows:

commercial property near the high end of the mid-single-digit range, commercial auto in the mid-single-digit range and commercial casualty in the mid-single-digit range.

1 unchanged sentence

Renewal premiums for certain policies, primarily our commercial casualty and workers' compensation lines of business, include the results of policy audits that adjust initial premium amounts based on differences between estimated and actual sales or payroll related to a specific policy.

Audits completed during the first six months of 2021 contributed $18 million to net written premiums, compared with $32 million for the same period of 2020.

New business written premiums for commercial lines increased by $12 million for the second quarter and $3 million for the first six months of 2021, compared with the same periods of 2020.

Audits completed during the first nine months of 2021 contributed $31 million to net written premiums, compared with $43 million for the same period of 2020.

New business written premiums for commercial lines increased by $31 million for the third quarter and $34 million for the first nine months of 2021, compared with the same periods of 2020.

Trend analysis for year-over-year comparisons of individual quarters is more difficult to assess for commercial lines new business written premiums, due to inherent variability.

1 unchanged sentence

Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program.

For our commercial lines insurance segment, an increase in ceded premiums decreased net written premiums by $4 million and $5 million for the second quarter and first six months of 2021, compared with the same periods of 2020.

For our commercial lines insurance segment, an increase in ceded premiums decreased net written premiums by $1 million and $6 million for the third quarter and first nine months of 2021, compared with the same periods of 2020.

Commercial Lines Insurance Premiums

(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 % Change 2021 2020 % Change

5 unchanged sentences

Earned premiums $ 930 $ 865 8 $ 2,727 $ 2,598 5

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

• Combined ratio – The commercial lines combined ratio for the second quarter of 2021 improved by 14.9 percentage points, compared with second-quarter 2020, including a decrease of 10.8 points in losses from catastrophes.

For the first six months of 2021, the combined ratio improved by 16.0 percentage points, compared with the same period a year ago, including a decrease of 8.2 points in losses from catastrophes.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

• Combined ratio – The commercial lines combined ratio for the third quarter of 2021 improved by 21.8 percentage points, compared with third-quarter 2020, including a decrease of 11.5 points in losses from catastrophes.

For the first nine months of 2021, the combined ratio improved by 17.9 percentage points, compared with the same period a year ago, including a decrease of 9.3 points in losses from catastrophes.

Underwriting results continued to reflect better loss experience for the current accident year and a higher level of favorable reserve development on prior accident years.

The ratio for current accident year loss and loss expenses before catastrophe losses for commercial lines improved in the first six months of 2021.

That 58.9% ratio was 1.1 percentage points lower, compared with the 60.0% accident year 2020 ratio measured as of June 30, 2020, including a decrease of 0.2 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Catastrophe losses and loss expenses accounted for 3.2 and 3.7 percentage points of the combined ratio for the second quarter and first six months of 2021, compared with 14.0 and 11.9 percentage points for the same periods a year ago.

The ratio for current accident year loss and loss expenses before catastrophe losses for commercial lines improved in the first nine months of 2021.

That 57.9% ratio was 1.3 percentage points lower, compared with the 59.2% accident year 2020 ratio measured as of September 30, 2020, including an increase of 0.5 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Catastrophe losses and loss expenses accounted for 3.3 and 3.6 percentage points of the combined ratio for the third quarter and first nine months of 2021, compared with 14.8 and 12.9 percentage points for the same periods a year ago.

Through 2020, the 10-year annual average for that catastrophe measure for the commercial lines segment was 6.2 percentage points, and the five-year annual average was 6.6 percentage points.

The net effect of reserve development on prior accident years during the second quarter and first six months of 2021 was favorable for commercial lines overall by $86 million and $169 million, compared with $45 million and $51 million for the same periods in 2020.

For the first six months of 2021, our commercial casualty, commercial property, commercial auto and workers' compensation lines of business were the main contributors to the commercial lines net favorable reserve development on prior accident years.

The net favorable reserve development recognized during the first six months of 2021 for our commercial lines insurance segment was primarily for accident years 2020 and 2019 and was primarily due to lower-than-anticipated loss emergence on known claims.

The net effect of reserve development on prior accident years during the third quarter and first nine months of 2021 was favorable for commercial lines overall by $107 million and $276 million, compared with $8 million and $59 million for the same periods in 2020.

For the first nine months of 2021, our commercial casualty, commercial property and workers' compensation lines of business were the main contributors to the commercial lines net favorable reserve development on prior accident years.

The net favorable reserve development recognized during the first nine months of 2021 for our commercial lines insurance segment was primarily for accident years 2018 through 2020 and was primarily due to lower-than-anticipated loss emergence on known claims.

Reserve estimates are inherently uncertain as described in our 2020 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 56.

The commercial lines underwriting expense ratio increased for the second quarter and decreased for the first six months of 2021, compared with the same periods a year ago.

The second-quarter increase was primarily due to an increase in profit-sharing commissions for agencies.

The six-month decrease was primarily due to lower levels of business travel spending and uncollectible premiums, in addition to ongoing expense management efforts and higher earned premiums.

The commercial lines underwriting expense ratio increased for the third quarter of 2021, compared with the same period a year ago, primarily due to an increase in profit-sharing commissions for agencies.

The underwriting expense ratio decreased for the first nine months of 2021, compared with the same period a year ago.

The nine-month decrease was primarily due to lower levels of uncollectible premiums, in addition to ongoing expense management efforts and higher earned premiums.

Commercial Lines Insurance Losses Incurred by Size

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

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

2021 2020 % Change 2021 2020 % Change

1 unchanged sentence

Current accident year losses $1 million - $5 million 60 20 200 115 100 15

Large loss prior accident year reserve development 14 5 180 40 27 48

Large loss prior accident year reserve development 29 (1) nm 69 27 156

Total large losses incurred 93 40 133 231 167 38

Losses incurred but not reported (34) 72 nm 5 130 (96)

Losses incurred but not reported (35) 60 nm (30) 190 nm

Other losses excluding catastrophe losses 270 287 (6) 857 817 5

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Total loss ratio 38.5 % 59.1 % (20.6) 42.2 % 57.8 % (15.6)

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We continue to monitor new losses and case reserve increases greater than $1 million for trends in factors such as initial reserve levels, loss cost inflation and claim settlement expenses.

Our analysis continues to indicate no unexpected concentration of these large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory.

The second-quarter 2021 commercial lines total large losses incurred of $81 million, net of reinsurance, were higher than the quarterly average of $55 million during full-year 2020 and the $69 million of total large losses incurred for the second quarter of 2020.

The increase in commercial lines large losses for the first six months of 2021 was primarily due to our commercial casualty line of business.

The second-quarter 2021 ratio for commercial lines total large losses was 0.9 percentage points higher than last year's second-quarter ratio.

The second-quarter 2021 amount of total large losses incurred unfavorably contributed to the increase in the six-month 2021 total large loss ratio, compared with 2020, as it offset a first-quarter 2021 ratio that was 0.2 points lower than the first quarter of 2020.

We believe results for the three-and six- month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

The third-quarter 2021 commercial lines total large losses incurred of $93 million, net of reinsurance, were higher than the quarterly average of $55 million during full-year 2020 and the $40 million of total large losses incurred for the third quarter of 2020.

The increase in commercial lines large losses for the first nine months of 2021 was primarily due to our commercial casualty line of business.

The third-quarter 2021 ratio for commercial lines total large losses was 5.5 percentage points higher than last year's third-quarter ratio.

The third-quarter 2021 amount of total large losses incurred unfavorably contributed to the increase in the nine-month 2021 total large loss ratio, compared with 2020, in addition to a first-half 2021 ratio that was 0.4 points higher than the first half of 2020.

We believe results for the three-and nine- month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

PERSONAL LINES INSURANCE RESULTS

(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 % Change 2021 2020 % Change

6 unchanged sentences

Prior accident years before catastrophe losses (3) 3 nm (31) (20) (55)

Prior accident years catastrophe losses (1) — nm (4) (5) 20

Prior accident years catastrophe losses — (3) 100 (4) (8) 50

Loss and loss expenses 281 265 6 795 782 2

Underwriting expenses 118 105 12 338 335 1

Underwriting profit (loss) $ 29 $ (43) nm $ 26 $ (22) nm

Underwriting profit (loss) $ (10) $ (2) (400) $ 16 $ (24) nm

Ratios as a percent of earned premiums:

11 unchanged sentences

prior years reserve development 83.4 % 77.3 % 6.1 84.7 % 84.8 % (0.1)

The COVID-19 pandemic did not have a significant effect on our personal lines insurance segment premiums for the second quarter or first six months of 2021, as net written premiums grew 4% for the quarter and 5% for the six-month period, compared with the same periods of 2020.

The COVID-19 pandemic did not have a significant effect on our personal lines insurance segment premiums for the third quarter or first nine months of 2021, as net written premiums grew 7% for the quarter and 5% for the nine-month period, compared with the same periods of 2020.

Loss experience for our insurance operations is influenced by many factors.

During the first six months of 2021, loss experience for our personal auto line of business improved, as reduced driving related to the pandemic contributed to a reduction in reported claims.

For the third quarter and first nine months of 2021, loss experience for our personal auto line of business drove the increase in the personal lines insurance segment loss and loss expenses for the current accident year before catastrophe effects, compared with the 2020 periods.

Reduced driving in 2020 related to the pandemic contributed to a reduction in reported claims, while driving patterns in 2021 have been moving towards pre-pandemic levels.

Because of factors that reduce exposure to certain insurance losses, there could be a reduction in future losses that generally corresponds to reduced premiums.

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Performance highlights for the personal lines segment include:

• Premiums – Personal lines earned premiums and net written premiums continued to grow during the second quarter and first six months of 2021, reflecting increased new business and renewal written premiums that included higher average pricing.

Personal lines net written premiums from high net worth policies totaled approximately $177 million and $310 million for the second quarter and first six months of 2021, compared with $144 million and $246 million for the same periods of 2020.

• Premiums – Personal lines earned premiums and net written premiums continued to grow during the third quarter and first nine months of 2021, reflecting increased new business and renewal written premiums that included higher average pricing.

Personal lines net written premiums from high net worth policies totaled approximately $180 million and $490 million for the third quarter and first nine months of 2021, compared with $141 million and $387 million for the same periods of 2020.

The table below analyzes the primary components of premiums.

Agency renewal written premiums increased 3% for both the second quarter and first six months of 2021, reflecting rate increases in selected states and other factors such as changes in policy deductibles or mix of business.

We estimate that premium rates for our personal auto line of business increased at average percentages in the mid-single-digit range during the first six months of 2021.

For our homeowner line of business, we estimate that premium rates for the first six months of 2021 also increased at average

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

percentages in the mid-single-digit range.

Agency renewal written premiums increased 7% for the third quarter and 4% for the first nine months of 2021, reflecting rate increases in selected states and other factors such as changes in policy deductibles or mix of

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We estimate that premium rates for our personal auto line of business increased at average percentages near the high end of the low-single-digit range during the first nine months of 2021.

For our homeowner line of business, we estimate that premium rates for the first nine months of 2021 increased at average percentages in the mid-single-digit range.

For both our personal auto and homeowner lines of business, some individual policies experienced lower or higher rate changes based on each risk's specific characteristics and enhanced pricing precision enabled by predictive models.

Personal lines new business written premiums increased 20% for the second quarter and 27% for the first six months of 2021, compared with the same periods of 2020, following growth of 26% for the second half of 2020.

Personal lines new business written premiums increased 4% for the third quarter and 18% for the first nine months of 2021, compared with the same periods of 2020.

We believe underwriting and pricing discipline was maintained in recent quarters, and growth was enhanced by expanded use of enhanced pricing precision tools, including excess and surplus lines homeowner policies we began offering in early 2020.

Those homeowner policies contributed $5 million to personal lines new business written premiums for the second quarter and $10 million for the first six months of 2021.

Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program.

For our personal lines insurance segment, an increase in ceded premiums decreased net written premiums by $1 million and $2 million for the second quarter and first six months of 2021, compared with the same periods of 2020.

For our personal lines insurance segment, an increase in ceded premiums decreased net written premiums by $1 million and $3 million for the third quarter and first nine months of 2021, compared with the same periods of 2020.

We continue to implement strategies discussed in our 2020 Annual Report on Form 10-K, Item 1, Strategic Initiatives, Page 15, to enhance our responsiveness to marketplace changes and to help achieve our long-term objectives for personal lines growth and profitability.

Personal Lines Insurance Premiums

(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 % Change 2021 2020 % Change

5 unchanged sentences

Earned premiums $ 388 $ 367 6 $ 1,146 $ 1,090 5

• Combined ratio – Our personal lines combined ratio for the second quarter of 2021 improved by 19.6 percentage points, compared with second-quarter 2020, including a decrease of 14.5 points in losses from catastrophes.

For the first six months of 2021, the combined ratio improved by 6.6 percentage points, compared with the same period a year ago, including a decrease of 2.7 points in losses from catastrophes.

The ratio for current accident year loss and loss expenses before catastrophe losses for personal lines improved in the first six months of 2021.

That 56.3% ratio was 0.6 percentage points lower, compared with the 56.9% accident year 2020 ratio measured as of June 30, 2020, including a decrease of 0.4 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Catastrophe losses and loss expenses accounted for 10.6 and 15.2 percentage points of the combined ratio for the second quarter and first six months of 2021, compared with 25.1 and 17.9 percentage points for the same periods a year ago.

• Combined ratio – Our personal lines combined ratio for the third quarter of 2021 increased by 2.0 percentage points, compared with third-quarter 2020, as higher current accident year loss and loss expenses before catastrophe losses offset a decrease of 2.5 points in losses from catastrophes.

For the first nine months of 2021, the combined ratio improved by 3.7 percentage points, compared with the same period a year ago, including a decrease of 2.7 points in losses from catastrophes.

The ratio for current accident year loss and loss expenses before catastrophe losses for personal lines increased in the first nine months of 2021.

That 55.2% ratio was 1.2 percentage points higher, compared with the 54.0% accident year 2020 ratio measured as of September 30, 2020, including a decrease of 0.2 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Catastrophe losses and loss expenses accounted for 20.0 and 16.8 percentage points of the combined ratio for the third quarter and first nine months of 2021, compared with 22.5 and 19.5 percentage points for the same periods a year ago.

The 10-year annual average catastrophe loss ratio for the personal lines segment through 2020 was 11.2 percentage points, and the five-year annual average was 11.1 percentage points.

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In addition, greater geographic diversification is expected to reduce the volatility of homeowner loss ratios attributable to weather-related catastrophe losses over time.

The net effect of reserve development on prior accident years during the second quarter and first six months of 2021 was favorable for personal lines overall by $12 million and $32 million, compared with less than $1 million and $28 million for the same periods of 2020.

Our personal auto line of business was the primary contributor to the personal lines net favorable reserve development for the first six months of 2021.

The net effect of reserve development on prior accident years during the third quarter and first nine months of 2021 was favorable for personal lines overall by $3 million and $35 million, compared with less than $1 million of unfavorable development for third-quarter 2020 and $28 million of favorable development for the first nine months of 2020.

Our personal auto line of business was the primary contributor to the personal lines net favorable reserve development for the first nine months of 2021.

The net favorable reserve development was primarily due to lower-than-anticipated loss emergence on known claims.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

The underwriting expense ratio decreased for the second quarter and first six months of 2021, compared with the same periods a year ago.

The decreases reflected lower levels of uncollectible premiums in 2021 while the 2020 periods included a $16 million Stay-at-Home policyholder credit for personal auto policies.

The ratios also reflect ongoing expense management efforts and premium growth outpacing growth in expenses.

Reserve estimates are inherently

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

uncertain as described in our 2020 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 56.

The personal lines underwriting expense ratio increased for the third quarter of 2021, compared with the same period a year ago, primarily due to an increase in profit-sharing commissions for agencies.

The underwriting expense ratio decreased for the first nine months of 2021, compared with the same period a year ago.

The nine-month decrease reflected the second-quarter 2020 $16 million Stay-at-Home policyholder credit for personal auto policies.

The ratios also included ongoing expense management efforts and premium growth outpacing growth in expenses.

Personal Lines Insurance Losses Incurred by Size

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

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

2021 2020 % Change 2021 2020 % Change

1 unchanged sentence

Current accident year losses $1 million - $5 million 12 21 (43) 31 42 (26)

Large loss prior accident year reserve development (2) 2 nm (3) 7 nm

Large loss prior accident year reserve development (1) (2) 50 (4) 4 nm

Total large losses incurred 21 19 11 37 46 (20)

Losses incurred but not reported (4) 41 nm 37 65 (43)

Losses incurred but not reported — (24) 100 37 41 (10)

Other losses excluding catastrophe losses 154 156 (1) 442 388 14

12 unchanged sentences

In the second quarter of 2021, the personal lines total large loss ratio, net of reinsurance, was 0.7 percentage points higher than last year's second quarter.

The decrease in personal lines large losses for the first six months of 2021 occurred primarily for umbrella coverage in our other personal line of business.

The second-quarter 2021 amount of total large losses incurred unfavorably contributed to the decrease in the six-month 2021 total large loss ratio, compared with 2020, in as it partially offset a first-quarter 2021 ratio that was 3.9 points lower than the first quarter of 2020.

We believe results for the three- and six-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

In the third quarter of 2021, the personal lines total large loss ratio, net of reinsurance, was 0.2 percentage points higher than last year's third quarter.

The decrease in personal lines large losses for the first nine months of 2021 occurred primarily for umbrella coverage in our homeowner line of business.

The third-quarter 2021 amount of total large losses incurred unfavorably contributed to the decrease in the nine-month 2021 total large loss ratio, compared with 2020, as it partially offset a first-half 2021 ratio that was 1.6 points lower than the first half of 2020.

We believe results for the three- and nine-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

EXCESS AND SURPLUS LINES INSURANCE RESULTS

(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 % Change 2021 2020 % Change

9 unchanged sentences

Underwriting expenses 29 23 26 79 70 13

Underwriting profit (loss) $ 10 $ (1) nm $ 18 $ 8 125

Underwriting profit $ 7 $ 11 (36) $ 25 $ 19 32

Ratios as a percent of earned premiums:

11 unchanged sentences

prior years reserve development 90.5 % 87.0 % 3.5 89.2 % 87.3 % 1.9

The COVID-19 pandemic did not have a significant effect on our excess and surplus lines insurance segment premiums during the second quarter or first six months of 2021, as net written premiums grew 26% for the quarter and 22% for the six-month period, compared with the same periods of 2020.

The COVID-19 pandemic did not have a significant effect on our excess and surplus lines insurance segment premiums during the third quarter or first nine months of 2021, as net written premiums grew 30% for the quarter and 24% for the nine-month period, compared with the same periods of 2020.

Premium growth could slow significantly if the basis for policy premiums, such as the sales results of businesses we insure, decrease as a result of a weakened economy.

Loss experience for our insurance operations is influenced by many factors.

We have not determined any material effect on our excess and surplus lines insurance loss experience for the first six months of 2021 as a result of the pandemic.

We have not determined any material effect on our excess and surplus lines insurance loss experience for the first nine months of 2021 as a result of the pandemic.

Because of factors that reduce exposure to certain insurance losses, such as reduced sales results for businesses, there could be a reduction in future losses that generally corresponds to reduced premiums.

1 unchanged sentence

Performance highlights for the excess and surplus lines segment include:

• Premiums – Excess and surplus lines net written premiums continued to grow during the second quarter and first six months of 2021, compared with the same periods a year ago, primarily due to an increase in agency renewal written premiums.

Renewal written premiums rose 28% for the six months ended June 30, 2021, compared with the same period of 2020, reflecting the opportunity to renew many accounts for the first time, as well as higher renewal pricing.

For the first six months of 2021, excess and surplus lines policy renewals experienced estimated average price increases at percentages in the high-single-digit range, up from a mid-single-digit range in 2020.

We measure average changes in excess and surplus lines renewal pricing as

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies.

New business written premiums produced by agencies increased by 13% for the second quarter and 10% for the first six months of 2021 compared with the same periods of 2020, as we continued to carefully underwrite each policy in a highly competitive market.

• Premiums – Excess and surplus lines net written premiums continued to grow during the third quarter and first nine months of 2021, compared with the same periods a year ago, primarily due to an increase in agency renewal written premiums.

Renewal written premiums rose 28% for the nine months ended September 30, 2021, compared with the same period of 2020, reflecting the opportunity to renew many accounts for the first time, as well as higher renewal pricing.

For the first nine months of 2021, excess and surplus lines policy renewals experienced estimated average price increases at percentages in the high-single-digit range, up from a mid-single-digit range in 2020.

We measure average changes in excess and

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

surplus lines renewal pricing as the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies.

New business written premiums produced by agencies increased by 33% for the third quarter and 17% for the first nine months of 2021 compared with the same periods of 2020, as we continued to carefully underwrite each policy in a highly competitive market.

Some of what we report as new business came from accounts that were not new to our agents.

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Excess and Surplus Lines Insurance Premiums

(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 % Change 2021 2020 % Change

5 unchanged sentences

Earned premiums $ 105 $ 82 28 $ 289 $ 238 21

• Combined ratio – The excess and surplus lines combined ratio improved by 12.5 and 4.8 percentage points for the second quarter and first six months of 2021, compared with the same periods of 2020.

The improvement for both periods was primarily due to more favorable reserve development on prior accident years.

The $3 million of unfavorable reserve development for the six-month 2021 period was due to an updated estimate during the first quarter for salaries and other costs for claims associates, reflecting our experience in recent quarters of claims on average remaining open longer than previously expected.

The IBNR portion of the total loss and loss expense ratio before catastrophe losses was 2.7 percentage points higher for the first six months of 2021, compared with the same period a year ago, while the paid portion was 2.6 points lower and the case incurred portion was 3.0 points lower.

The ratio for current accident year loss and loss expenses before catastrophe losses for excess and surplus lines increased in the first six months of 2021.

That 61.5% ratio was 4.1 percentage points higher, compared with the 57.4% accident year 2020 ratio measured as of June 30, 2020, including an increase of 3.2 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Excess and surplus lines net reserve development on prior accident years, as a ratio to earned premiums, was a favorable 1.4% for second-quarter 2021 and an unfavorable 1.4% for the first six months of 2021, compared with unfavorable net reserve development of 11.0% and 6.1% for the same periods of 2020.

The $3 million of net unfavorable reserve development recognized during the first six months of 2021 included approximately $3 million for accident years prior to 2019.

• Combined ratio – The excess and surplus lines combined ratio increased by 7.4 percentage points for the third quarter of 2021, compared with the same period of 2020, including an increase in the ratio for current accident year loss and loss expenses before catastrophe losses and unfavorable reserve development on prior accident years.

The combined ratio decreased by 0.6 percentage points for the first nine months of 2021, compared with the same period of 2020.

The nine-month 2021 decrease included a lower underwriting expense ratio and less unfavorable effects from catastrophe losses and reserve development on prior accident years that offset a higher ratio for current accident year loss and loss expenses before catastrophe losses.

The ratios for loss and loss expenses before catastrophe losses reflected more prudent reserving, as claims on average are remaining open longer than previously expected.

The IBNR portion of the total loss and loss expense ratio before catastrophe losses was 9.7 percentage points higher for the first nine months of 2021, compared with the same period a year ago, while the paid portion was 1.4 points lower and the case incurred portion was 6.8 points lower.

The ratio for current accident year loss and loss expenses before catastrophe losses for excess and surplus lines increased in the first nine months of 2021.

That 61.9% ratio was 4.1 percentage points higher, compared with the 57.8% accident year 2020 ratio measured as of September 30, 2020, including a decrease of 0.2 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Excess and surplus lines net reserve development on prior accident years, as a ratio to earned premiums, was an unfavorable 3.2% for third-quarter 2021 and 2.0% for the first nine months of 2021, compared with favorable net reserve development of 1.3% for third-quarter 2020 and unfavorable development of 3.5% for the first nine months of 2020.

The $6 million of net unfavorable reserve development recognized during the first nine months of 2021 included approximately $5 million for accident years prior to 2019.

The excess and surplus lines underwriting expense ratio decreased for the first six months of of 2021, compared with the same period of 2020, including lower levels of business travel spending and uncollectible premiums, in addition to ongoing expense management efforts and premium growth outpacing growth in expenses.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

The excess and surplus lines underwriting expense ratio decreased for the third quarter and first nine months of 2021, compared with the same periods of 2020, largely due to ongoing expense management efforts and premium growth outpacing growth in expenses.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Excess and Surplus Lines Insurance Losses Incurred by Size

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

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

2021 2020 % Change 2021 2020 % Change

Current accident year losses greater than $5 million $ — $ — nm $ — $ — nm

Current accident year losses $1 million - $5 million 7 — nm 8 2 300

Large loss prior accident year reserve development 1 — nm — (1) 100

Total large losses incurred 8 — nm 8 1 nm

Losses incurred but not reported 1 21 (95) 23 18 28

Current accident year losses $1 million - $5 million — 5 (100) 8 7 14

Large loss prior accident year reserve development 2 — nm 2 (1) nm

Total large losses incurred 2 5 (60) 10 6 67

Losses incurred but not reported 22 2 nm 45 20 125

Other losses excluding catastrophe losses 23 24 (4) 72 74 (3)

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In the second quarter of 2021, the excess and surplus lines total ratio for large losses, net of reinsurance, was 8.7 percentage points higher than last year's second quarter.

We believe results for the three- and six-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

In the third quarter of 2021, the excess and surplus lines total ratio for large losses, net of reinsurance, was 4.7 percentage points lower than last year's third quarter.

The third-quarter 2021 amount of total large losses incurred partially offset a first-half 2021 ratio that was 3.7 points higher than the first half of 2020.

We believe results for the three- and nine-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

LIFE INSURANCE RESULTS

(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 % Change 2021 2020 % Change

Earned premiums $ 73 $ 72 1 $ 221 $ 218 1

Fee revenues 1 1 0 2 1 100

Fee revenues 1 — nm 3 1 200

Total revenues 74 72 3 224 219 2

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Life insurance segment profit (loss) $ (5) $ 6 nm $ (9) $ 9 nm

The COVID-19 pandemic did not have a significant effect on our life insurance segment earned premiums, benefits or expenses for the first six months of 2021.

However, the pandemic did contribute to a moderate increase in death claims in the first three months of 2021.

The COVID-19 pandemic did not have a significant effect on our life insurance segment earned premiums or expenses for the first nine months of 2021.

However, the pandemic did contribute to a moderate increase in death claims in the first nine months of 2021.

Further, growth in worksite premiums, which originate from enrollments at the workplace, have slowed to a small extent in recent quarters, and could continue to slow in the future, due to curtailed enrollment activity.

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Performance highlights for the life insurance segment include:

• Revenues – Revenues increased for the six months ended June 30, 2021, compared with the same period a year ago, driven by higher earned premiums from term life insurance, our largest life insurance product line.

Net in-force life insurance policy face amounts increased to $75.487 billion at June 30, 2021, from $73.475 billion at year-end 2020.

Fixed annuity deposits received for the three and six months ended June 30, 2021, were $10 million and $27 million, compared with $13 million and $24 million for the same periods of 2020.

• Revenues – Revenues increased for the nine months ended September 30, 2021, compared with the same period a year ago, driven by higher earned premiums from term life insurance, our largest life insurance product line.

Net in-force life insurance policy face amounts increased to $76.604 billion at September 30, 2021, from $73.475 billion at year-end 2020.

Fixed annuity deposits received for the three and nine months ended September 30, 2021, were $8 million and $35 million, compared with $9 million and $33 million for the same periods of 2020.

Fixed annuity deposits have a minimal impact to earned premiums because deposits received are initially recorded as liabilities.

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Life Insurance Premiums

(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 % Change 2021 2020 % Change

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We include only investment income credited to contract holders (including interest assumed in life insurance policy reserve calculations) in our life insurance segment results.

A $4 million loss for our life insurance segment in the first six months of 2021, compared with profit of $3 million for the same period of 2020, was primarily due to less favorable mortality results as a result of higher death claims and less favorable effects from the unlocking of interest rate and other actuarial assumptions.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

A $9 million loss for our life insurance segment in the first nine months of 2021, compared with profit of $9 million for the same period of 2020, was primarily due to less favorable mortality results as a result of higher death claims.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Life insurance segment benefits and expenses consist principally of contract holders' (policyholders') benefits incurred related to traditional life and interest-sensitive products and operating expenses incurred, net of deferred acquisition costs.

Total benefits increased in the first six months of 2021.

Total benefits increased in the first nine months of 2021.

Life policy and investment contract reserves increased with continued growth in net in-force life insurance policy face amounts and less favorable effects from the unlocking of interest rate and other actuarial assumptions.

Mortality results increased, compared with the same period of 2020, and were above our 2021 projections, due in part to pandemic-related death claims.

Underwriting expenses for the first six months of 2021 were slightly lower than the same period a year ago.

Underwriting expenses for the first nine months of 2021 matched the same period a year ago.

We recognize that assets under management, capital appreciation and investment income are integral to evaluating the success of the life insurance segment because of the long duration of life products.

On a basis that includes investment income and investment gains or losses from life-insurance-related invested assets, the life insurance company reported net income of $14 million and $24 million for the three and six months ended June 30, 2021, compared with net income of $12 million for the second quarter of 2020 and a net loss of $1 million for the first six months of 2020.

The life insurance company portfolio had net after-tax investment gains of $3 million for the three and six months ended June 30, 2021, compared with a net after-tax investment gain of $1 million for the second quarter of 2020 and a net after-tax investment loss of $24 million for the six months ended June 30, 2020.

The after-tax investment losses for the six months ended June 30, 2020, were due to impairments of fixed-maturity securities.

On a basis that includes investment income and investment gains or losses from life-insurance-related invested assets, the life insurance company reported net income of $11 million and $35 million for the three and nine months ended September 30, 2021, compared with net income of $18 million and $17 million for the third quarter and first nine months of 2020.

The life insurance company portfolio had net after-tax investment gains of $3 million and $6 million for the three and nine months ended September 30, 2021, compared with a net after-tax investment gain of $1 million for the third quarter of 2020 and a net after-tax investment loss of $23 million for the nine months ended September 30, 2020.

The after-tax investment losses for the nine months ended September 30, 2020, were due to impairments of fixed-maturity securities.

INVESTMENTS RESULTS

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Investment Income

Pretax investment income grew 5% for both the second quarter and first six months of 2021, compared with the same periods of 2020.

Interest income increased by $3 million and $9 million for the three and six months ended June 30, 2021, as net purchases of fixed-maturity securities in recent quarters generally offset the continuing effects of the low interest rate environment.

Higher dividend income reflected rising dividend rates and net purchases of equity securities in recent quarters, helping dividend income to grow by $7 million and $12 million for the three and six months ended June 30, 2021.

Pretax investment income grew 7% and 6% for the third quarter and first nine months of 2021, compared with the same periods of 2020.

Interest income increased by $8 million and $17 million for the three and nine months ended September 30, 2021, as net purchases of fixed-maturity securities in recent quarters generally offset the continuing effects of the low interest rate environment.

Higher dividend income reflected rising dividend rates and net purchases of equity securities in recent quarters, helping dividend income to grow by $6 million and $18 million for the three and nine months ended September 30, 2021.

Investments Results

(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 % Change 2021 2020 % Change

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Investment interest credited to contract holders (26) (26) — (79) (77) (3)

Investment gains and losses, net 520 1,060 (51) 1,024 (665) nm

Investments profit (loss), pretax $ 668 $ 1,201 (44) $ 1,320 $ (385) nm

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Investment gains and losses, net (70) 533 nm 954 (132) nm

Investments profit (loss), pretax $ 83 $ 674 (88) $ 1,403 $ 289 385

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We continue to position our portfolio considering both the challenges presented by the current low interest rate environment and the risks presented by potential future inflation.

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(Dollars in millions) % Yield Principal redemptions

At June 30, 2021

At September 30, 2021

Fixed-maturity pretax yield profile:

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The table below shows the average pretax yield-to-amortized cost for fixed-maturity securities acquired during the periods indicated.

The average yield for total fixed-maturity securities acquired during the first six months of 2021 was lower than the 4.12% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2020.

Our fixed-maturity portfolio's average yield of 4.06% for the first six months of 2021, from the investment income table below, was also lower than the 4.12% yield for the year-end 2020 fixed-maturities portfolio.

Three months ended June 30, Six months ended June 30,

The average yield for total fixed-maturity securities acquired during the first nine months of 2021 was lower than the 4.12% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2020.

Our fixed-maturity portfolio's average yield of 4.07% for the first nine months of 2021, from the investment income table below, was also lower than the 4.12% yield for the year-end 2020 fixed-maturities portfolio.

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

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We discuss risks related to our investment income and our fixed-maturity and equity investment portfolios in this quarterly report Item 3, Quantitative and Qualitative Disclosures About Market Risk.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The table below provides details about investment income.

Average yields in this table are based on the average invested asset and cash amounts indicated in the table, using fixed-maturity securities valued at amortized cost and all other securities at fair value.

(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 % Change 2021 2020 % Change

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Accounting requirements for the allowance for credit losses for the fixed-maturity portfolio are disclosed in our 2020 Annual Report on Form 10-K, Item 8, Note 1, Summary of Significant Accounting Policies, Page 133.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The table below summarizes total investment gains and losses, before taxes.

(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

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Total $ (158) $ 645 $ 802 $ 162

Of the 4,251 fixed-maturity securities in the portfolio, two securities were trading below 70% of amortized cost at June 30, 2021.

Of the 4,285 fixed-maturity securities in the portfolio, one security was trading below 70% of amortized cost at September 30, 2021.

Our asset impairment committee regularly monitors the portfolio, including a quarterly review of the entire portfolio for potential credit losses, resulting in charges disclosed in the table below.

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The table below provides additional details for write-downs of impaired securities.

We had no allowance for credit losses for the first six months of 2021 or 2020 .

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

We had no allowance for credit losses for the first nine months of 2021 or 2020.

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

2021 2020 2021 2020

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Consumer goods — — — 1

Municipal 1 1 1 1

Technology & Electronics — — — 1

Total fixed maturities $ 1 $ 1 $ 1 $ 78

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We report as Other the noninvestment operations of the parent company and a noninsurance subsidiary, CFC Investment Company.

We also report as Other the underwriting results of Cincinnati Re and Cincinnati Global, including earned premiums, loss and loss expenses and underwriting expenses in the table below.

Total revenues for the first six months of 2021 for our Other operations increased, compared with the same period of 2020, primarily due to earned premiums from Cincinnati Re and Cincinnati Global, with increases of $67 million and $3 million, respectively.

Total expenses for Other increased for the first six months of 2021, primarily due to more losses and loss expenses from Cincinnati Re and Cincinnati Global.

Total revenues for the first nine months of 2021 for our Other operations increased, compared with the same period of 2020, primarily due to earned premiums from Cincinnati Re and Cincinnati Global, with increases of $100 million and $7 million, respectively.

Total expenses for Other increased for the first nine months of 2021, primarily due to the combination of more losses and loss expenses from Cincinnati Re and Cincinnati Global.

Other profit or loss in the table below represents profit or losses before income taxes.

For periods with a loss shown, other loss resulted largely from interest expense from debt of the parent company.

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

Other loss resulted primarily from underwriting losses from the combination of Cincinnati Re and Cincinnati Global, along with interest expense from debt of the parent company.

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

2021 2020 % Change 2021 2020 % Change

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Total expenses 249 194 28 499 402 24

Total other profit (loss) $ 22 $ (21) nm $ 5 $ (23) nm

We had $169 million and $317 million of income tax expense for the three and six months ended June 30, 2021, compared with $236 million of income tax expense and $114 million of income tax benefit for the same periods of 2020.

The effective tax rate for the three and six months ended June 30, 2021, was 19.4% and 19.3% compared with 20.6% and 26.5% for the same periods last year.

The change in our effective tax rate between periods was primarily due to net investment gains included in income for 2021 versus large net investment losses included in income for the prior-year six-month period as well as changes in underwriting income.

Total other loss $ (73) $ (55) (33) $ (68) $ (78) 13

We had $31 million and $348 million of income tax expense for the three and nine months ended September 30, 2021, compared with $130 million and $16 million for the same periods of 2020.

The effective tax rate for the three and nine months ended September 30, 2021, was 16.8% and 19.1% compared with 21.2% and 8.7% for the same periods last year.

The change in our effective tax rate between periods was primarily due to large changes in our net investment gains and losses included in income for the periods, as well as changes in underwriting income.

Historically, we have pursued a strategy of investing some portion of cash flow in tax-advantaged fixed-maturity and equity securities to minimize our overall tax liability and maximize after-tax earnings.

See Tax-Exempt Fixed Maturities in this quarterly report Item 3, Quantitative and Qualitative Disclosures About Market Risk for further discussion on municipal bond purchases in our fixed-maturity investment portfolio.

For our property casualty insurance subsidiaries, approximately 75% of interest from tax-advantaged fixed-maturity investments and approximately 40% of dividends from qualified equities are exempt from federal tax after applying proration from the 1986 Tax Reform Act.

Our noninsurance companies own an immaterial amount of tax-advantaged fixed-maturity investments.

For tax years after 2017, for our property casualty insurance subsidiaries, approximately 75% of interest from tax-advantaged, fixed-maturity investments and approximately 40% of dividends from qualified equities are exempt from federal tax after applying proration.

For our noninsurance companies, the dividend received deduction exempts 50% of dividends from qualified equities.

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Details about our effective tax rate are in this quarterly report Item 1, Note 9, Income Taxes.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2021, shareholders' equity was $11.858 billion, compared with $10.789 billion at December 31, 2020.

Total debt was $848 million at June 30, 2021, up $6 million from December 31, 2020.

At June 30, 2021, cash and cash equivalents totaled $ 1.003 billion, compared with $900 million at December 31, 2020.

The pandemic did not have a significant effect on our cash flows for the first half of 2021.

At September 30, 2021, shareholders' equity was $11.841 billion, compared with $10.789 billion at December 31, 2020.

Total debt was $848 million at September 30, 2021, up $6 million from December 31, 2020.

At September 30, 2021, cash and cash equivalents totaled $ 1.085 billion, compared with $900 million at December 31, 2020.

The pandemic did not have a significant effect on our cash flows for the first nine months of 2021.

In addition to our historically positive operating cash flow to meet the needs of operations, we have the ability to sell a portion of our high-quality, liquid investment portfolio or slow investing activities if such need arises.

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Subsidiary Dividends

Our lead insurance subsidiary declared dividends of $258 million to the parent company in the first six months of 2021, compared with $225 million for the same period of 2020.

Our lead insurance subsidiary declared dividends of $358 million to the parent company in the first nine months of 2021, compared with $325 million for the same period of 2020.

For full-year 2020, subsidiary dividends declared totaled $550 million.

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The table below shows a summary of the operating cash flow for property casualty insurance (direct method):

(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 % Change 2021 2020 % Change

5 unchanged sentences

Cash flow from operations $ 564 $ 398 42 $ 1,420 $ 1,056 34

Collected premiums for property casualty insurance rose $106 million during the first six months of 2021, compared with the same period in 2020.

Collected premiums for property casualty insurance rose $283 million during the first nine months of 2021, compared with the same period in 2020.

Loss and loss expenses paid for the 2021 perio d decreased $110 million.

Commissions and other underwriting expenses pai d increased $49 million.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We discuss our future obligations for claims payments and for underwriting expenses in our 2020 Annual Report on Form 10-K, Item 7, Contractual Obligations, Page 102, and Other Commitments also on Page 102.

Capital Resources

At June 30, 2021, our debt-to-total-capital ratio was 6.7%, considerably below our 35% covenant threshold, with $789 million in long-term debt and $59 million in borrowing on our revolving short-term line of credit.

At June 30, 2021, $241 million was available for future cash management needs as part of the general provisions of the line of credit agreement, with another $300 million available as part of an accordion feature.

Based on our capital requirements at June 30, 2021, we do not anticipate a material increase in debt levels exceeding the available line of credit amount during the remainder of the year.

At September 30, 2021, our debt-to-total-capital ratio was 6.7%, considerably below our 35% covenant threshold, with $789 million in long-term debt and $59 million in borrowing on our revolving short-term line of credit.

At September 30, 2021, $241 million was available for future cash management needs as part of the general provisions of the line of credit agreement, with another $300 million available as part of an accordion feature.

Based on our capital requirements at September 30, 2021, we do not anticipate a material increase in debt levels exceeding the available line of credit amount during the remainder of the year.

As a result, we expect changes in our debt-to-total-capital ratio to continue to be largely a function of the contribution of unrealized investment gains or losses to shareholders' equity.

We have an unsecured letter of credit agreement which provides a portion of the capital needed to support Cincinnati Global's obligations at Lloyd's.

The amount of this unsecured letter of credit agreement was $94 million at June 30, 2021, with no amounts drawn.

The amount of this unsecured letter of credit agreement w as $94 m illion at September 30, 2021, with no amounts drawn.

We provide details of our three long-term notes in this quarterly report Item 1, Note 3, Fair Value Measurements.

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Four independent ratings firms award insurer financial strength ratings to our property casualty insurance companies and three firms rate our life insurance company.

Those firms made no changes to our parent company debt ratings during the first six months of 2021.

Those firms made no changes to our parent company debt ratings during the first nine months of 2021.

Our debt ratings are discussed in our 2020 Annual Report on Form 10-K, Item 7, Liquidity and Capital Resources, Long-Term Debt, Page 101.

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In addition to our contractual obligations, we have other property casualty operational commitments.

• Commissions – Commissions paid were $679 million in the first six months of 2021.

• Commissions – Commissions paid were $934 million in the first nine months of 2021.

Commission payments generally track with written premiums, except for annual profit-sharing commissions typically paid during the first quarter of the year.

• Other underwriting expenses – Many of our underwriting expenses are not contractual obligations, but reflect the ongoing expenses of our business.

Noncommission underwriting expenses paid were $325 million in the first six months of 2021.

There were no contributions to our qualified pension plan during the first six months of 2021.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Noncommission underwriting expenses paid were $500 million in the first nine months of 2021.

There were no contributions to our qualified pension plan during the first nine months of 2021.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Investing Activities

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In January 2021, the board of directors declared regular quarterly cash dividends of 63 cents per share for an indicated annual rate of $2.52 per share.

During the first six months of 2021, we used $195 million to pay cash dividends to shareholders.

During the first nine months of 2021, we used $295 million to pay cash dividends to shareholders.

PROPERTY CASUALTY INSURANCE LOSS AND LOSS EXPENSE RESERVES

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Reserving practices are discussed in our 2020 Annual Report on Form 10-K, Item 7, Property Casualty Insurance Loss and Loss Expense Obligations and Reserves, Page 103.

Total gross reserves at June 30, 2021, increased $278 million compared with December 31, 2020.

Total gross reserves at September 30, 2021, increased $549 million compared with December 31, 2020.

Case loss reserves for losses increased by $204 million, IBNR loss reserves increased by $305 million and loss expense reserves increased by $40 million.

The total gross increase was primarily due to our commercial casualty and homeowner lines of business, and also Cincinnati Re.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Property Casualty Gross Reserves

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Case reserves IBNR reserves Percent of total

At June 30, 2021

At September 30, 2021

Commercial lines insurance:

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LIFE POLICY AND INVESTMENT CONTRACT RESERVES

Gross life policy and investment contract reserves were $2.980 billion at June 30, 2021, compared with $2.915 billion at year-end 2020, reflecting continued growth in life insurance policies in force.

Gross life policy and investment contract reserves were $2.999 billion at September 30, 2021, compared with $2.915 billion at year-end 2020, reflecting continued growth in life insurance policies in force.

We discuss our life insurance reserving practices in our 2020 Annual Report on Form 10-K, Item 7, Life Insurance Policyholder Obligations and Reserves, Page 109.

Cincinnati Financial Corporation Second-Quarter 2021 10-Q

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

OTHER MATTERS

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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 2. Management’s Discussion and Analysis