What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-04-28 compared with 2021-10-27 · 139 added, 198 removed, 554 unchanged (38% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

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

Fixed maturities, at fair value (amortized cost:

5 unchanged sentences

2021—$ 4,121 )

10,675 11,315

Other invested assets 348 329

34 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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

2021 2020 2021 2020

(Dollars in millions, except per share data) Three months ended March 31,

Earned premiums $ 1,690 $ 1,544

10 unchanged sentences

Total benefits and expenses 1,575 1,459

Income Before Income Taxes 184 614 1,824 183

Income (Loss) Before Income Taxes ( 360 ) 768

Provision (Benefit) for Income Taxes

1 unchanged sentence

Deferred ( 128 ) 112

Total provision for income taxes 31 130 348 16

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

Total provision (benefit) for income taxes ( 87 ) 148

Net Income (Loss) $ ( 273 ) $ 620

Per Common Share

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

Net income—diluted 0.94 2.99 9.07 1.03

Net income (loss)—basic $ ( 1.70 ) $ 3.85

Net income (loss)—diluted ( 1.70 ) 3.82

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

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

2021 2020 2021 2020

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

(Dollars in millions) Three months ended March 31,

Net Income (Loss) $ ( 273 ) $ 620

Other Comprehensive Income (Loss)

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

Change in unrealized gains and losses on investments, net of tax (benefit) of $( 157 ) and $( 41 ), respectively

( 589 ) ( 155 )

2 unchanged sentences

Other comprehensive income (loss) ( 589 ) ( 144 )

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

Comprehensive Income (Loss) $ ( 862 ) $ 476

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Beginning of period $ 397 $ 397

5 unchanged sentences

Share-based compensation 11 9

Other 1 1 4 4

End of period 1,354 1,322

1 unchanged sentence

Beginning of period 12,625 10,085

Cumulative effect of change in accounting for credit losses as of January 1, 2020 — — — ( 2 )

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

Net income 153 484 1,476 167

Net income (loss) ( 273 ) 620

Dividends declared ( 111 ) ( 102 )

2 unchanged sentences

Beginning of period 648 769

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

Other comprehensive loss ( 589 ) ( 144 )

End of period 59 625

4 unchanged sentences

Shares acquired - share-based compensation plans ( 2 ) ( 3 )

Other — 2 1 3

End of period ( 1,959 ) ( 1,809 )

8 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) Nine months ended September 30,

(Dollars in millions) Three months ended March 31,

Cash Flows From Operating Activities

Net income $ 1,476 $ 167

Net income (loss) $ ( 273 ) $ 620

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

38 unchanged sentences

Supplemental Disclosures of Cash Flow Information:

Interest paid $ 26 $ 27

Income taxes paid 121 66

4 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6 unchanged sentences

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

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

Our March 31, 2022, condensed consolidated financial statements are unaudited.

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

1 unchanged sentence

The results of operations for interim periods do not necessarily indicate results to be expected for the full year.

Beginning in mid-March 2020, the coronavirus (SARS-CoV-2 or COVID-19) pandemic outbreak, and unprecedented actions taken to contain the virus, caused an economic downturn on a global scale as well as market disruption and volatility.

The company continues to monitor the impact of the pandemic as it unfolds.

The company continues to monitor the impact of the coronavirus (SARS-CoV-2 or COVID-19) pandemic outbreak.

The company cannot predict the impact the pandemic will have on its future consolidated financial position, results of operations and cash flows, however the impact could be material.

4 unchanged sentences

Targeted Improvements to the Accounting for Long-Duration Contracts .

ASU 2018-12 is intended to improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows.

The ASU will simplify and improve the accounting for certain market-based options or guarantees associated with deposit or account balance contracts and simplify amortization of deferred acquisition costs while improving and expanding required disclosures.

ASU 2018-12 requires changes to the measurement and disclosure of long-duration insurance contracts.

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

These ASUs have not yet been adopted.

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

We plan to adopt these ASUs on a modified retrospective basis on January 1, 2023, with a transition date of January 1, 2021.

Related to the company's term and whole life products included in life policy and investment contract reserves, the new guidance requires that cash flow assumptions be reviewed at least annually to determine any necessary updates.

Additionally, the discount rate assumption is required to be updated quarterly based on upper-medium grade fixed-income instrument yields (market value discount rates).

The life policy and investment contract reserves balance is adjusted through insurance losses and contract holders' benefits for cash flow assumption updates and through accumulated other comprehensive income (AOCI) for discount rate updates.

These ASUs also amend the previous guidance related to life deferred policy acquisition costs by requiring amortization of those costs on a constant level basis for a group of contracts that approximates straight-line and the removal of shadow deferred policy acquisition costs for universal life and deferred annuity products.

These ASUs also require entities to provide additional disclosures including disaggregated rollforwards of the life policy and investment contract reserves, separate account liabilities and life deferred policy acquisition costs.

Management has identified that the requirement to measure term and whole life policy reserves using updated discount rates is expected to have a material impact on shareholders' equity, through an increase to life policy and investment contract reserves and a decrease to AOCI, at the transition date.

The company is in the process of addressing necessary implementation-related items, including modifications to reporting and analysis capabilities as well as actuarial systems and associated data processes.

Further, the company continues to refine its accounting policy decisions associated with the new guidance.

Additional impacts of these ASUs on our company's consolidated financial position, results of operations and cash flows are being further evaluated by management .

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 2 – Investments

2 unchanged sentences

cost Gross unrealized Fair value

At September 30, 2021 gains losses

At March 31, 2022 gains losses

Fixed maturity securities:

15 unchanged sentences

Total $ 12,230 $ 808 $ 16 $ 13,022

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

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

December 31, 2020.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

The decrease in net unrealized investment gains in our fixed-maturity portfolio at March 31, 2022, is primarily due to an increase in U.S.

Treasury yields and a widening of corporate credit spreads.

Our commercial mortgage-backed securities had an average rating of Aa2/AA at March 31, 2022, and December 31, 2021.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

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

At September 30, 2021 Fair

At March 31, 2022 Fair

value Unrealized

16 unchanged sentences

Foreign government 16 — — — 16 —

Government-sponsored enterprises 7 — — — 7 —

Total $ 1,047 $ 15 $ 28 $ 1 $ 1,075 $ 16

2 unchanged sentences

value % of fair

At September 30, 2021

At March 31, 2022

Maturity dates:

5 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Investment income:

1 unchanged sentence

Dividends 65 58

Other 1 2 4 7

Total 189 178

9 unchanged sentences

Gross realized losses ( 1 ) —

Write-down of impaired securities ( 1 ) ( 1 ) ( 1 ) ( 78 )

Subtotal 8 3 20 ( 72 )

Other 27 — 59 ( 5 )

Total $ ( 666 ) $ 504

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

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

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

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

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

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

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

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

The fair value of our equity portfolio was $ 10.675 billion and $ 11.315 billion at March 31, 2022, and December 31, 2021, respectively.

At March 31, 2022, and December 31, 2021, Apple Inc.

(Nasdaq:AAPL) , an equity holding, was our largest single investment holding with a fair value of $ 848 million and $ 862 million, which was 8.3 % and 7.9 % of our publicly traded common equities portfolio and 3.7 % and 3.5 % of the total investment portfolio, respectively.

At March 31, 2022, and December 31, 2021, the allowance for credit losses, including changes in the amount during each period, was less than $ 1 million.

During the three months ended March 31, 2022, there was one fixed-maturity security that was written down to fair value due to an intention to be sold resulting in an impairment charge of less than $ 1 million.

During the three months ended March 31, 2021, there were no fixed-maturity securities that were written down to fair value due to an intention to be sold.

At March 31, 2022, 1,377 fixed-maturity securities with a total unrealized loss of $ 245 million were in an unrealized loss position.

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

At December 31, 2021, 278 fixed-maturity securities with a total unrealized loss of $ 16 million were in an unrealized loss position.

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 3 – Fair Value Measurements

5 unchanged sentences

Fair Value Disclosures for Assets

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

The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at March 31, 2022, and December 31, 2021.

We do not have any liabilities carried at fair value.

5 unchanged sentences

(Level 3) Total

At September 30, 2021

At March 31, 2022

Fixed maturities, available for sale:

27 unchanged sentences

Total $ 11,049 $ 14,300 $ — $ 25,349

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

We also held Level 1 cash and cash equivalents of $ 987 million and $ 1.139 billion at March 31, 2022, and December 31, 2021, respectively.

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

2 unchanged sentences

(Dollars in millions) Book value Principal amount

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

issue March 31, December 31, March 31, December 31,

2022 2021 2022 2021

9 unchanged sentences

(Level 3) Total

At September 30, 2021

At March 31, 2022

Note payable $ — $ 49 $ — $ 49

9 unchanged sentences

Total $ — $ 1,099 $ — $ 1,099

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

5 unchanged sentences

(Level 3) Total

At September 30, 2021

At March 31, 2022

Life policy loans $ — $ — $ 40 $ 40

7 unchanged sentences

Total $ — $ 201 $ 778 $ 979

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

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

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Outstanding principal and interest for these life policy loans totaled $ 30 million and $ 31 million at March 31, 2022, and December 31, 2021, respectively.

Recorded reserves for the deferred annuities were $ 757 million and $ 762 million at March 31, 2022, and December 31, 2021, respectively.

Recorded reserves for the structured settlements were $ 135 million and $ 136 million at March 31, 2022, and December 31, 2021, respectively.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 4 – Property Casualty Loss and Loss Expenses

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

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Gross loss and loss expense reserves, beginning of period $ 7,229 $ 6,677

17 unchanged sentences

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

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

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

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

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

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

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

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 79 million at March 31, 2022, and $ 70 million at March 31, 2021, for certain life and health loss and loss expense reserves.

For the three months ended March 31, 2022, we experienced $ 41 million of favorable development on prior accident years, including $ 18 million of favorable development in commercial lines, $ 34 million of favorable development in personal lines and $ 5 million of favorable development in excess and surplus lines.

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

Within personal lines, we recognized favorable development of $ 31 million for the homeowner line.

For the three months ended March 31, 2021, we experienced $ 110 million of favorable development on prior accident years, including $ 83 million of favorable development in commercial lines, $ 20 million of favorable development in personal lines and $ 4 million of unfavorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 25 million for the workers' compensation line, $ 24 million for the commercial auto line and $ 21 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 15 million in personal auto.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

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

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

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

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

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

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

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 5 – Life Policy and Investment Contract Reserves

7 unchanged sentences

This table summarizes our life policy and investment contract reserves:

(Dollars in millions) September 30,

(Dollars in millions) March 31,

2022 December 31,

8 unchanged sentences

Total life policy and investment contract reserves $ 3,027 $ 3,014

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 6 – Deferred Policy Acquisition Costs

2 unchanged sentences

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

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Property casualty:

15 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 7 – Accumulated Other Comprehensive Income

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

(Dollars in millions) Three months ended September 30,

Before tax Income tax Net Before tax Income tax Net

AOCI, beginning of period $ 962 $ 201 $ 761 $ 772 $ 162 $ 610

OCI before investment gains and losses, net, recognized in net income ( 80 ) ( 18 ) ( 62 ) 115 23 92

Investment gains and losses, net, recognized in net income ( 8 ) ( 1 ) ( 7 ) ( 3 ) — ( 3 )

OCI ( 88 ) ( 19 ) ( 69 ) 112 23 89

AOCI, end of period $ 874 $ 182 $ 692 $ 884 $ 185 $ 699

Pension obligations:

AOCI, beginning of period $ ( 36 ) $ ( 6 ) $ ( 30 ) $ ( 7 ) $ — $ ( 7 )

OCI excluding amortization recognized in net income — — — — — —

Amortization recognized in net income 2 1 1 — — —

OCI 2 1 1 — — —

AOCI, end of period $ ( 34 ) $ ( 5 ) $ ( 29 ) $ ( 7 ) $ — $ ( 7 )

Life deferred acquisition costs, life policy reserves and other:

AOCI, beginning of period $ — $ — $ — $ ( 8 ) $ ( 2 ) $ ( 6 )

OCI before investment gains and losses, net, recognized in net income — — — — — —

Investment gains and losses, net, recognized in net income — — — — — —

OCI — — — — — —

AOCI, end of period $ — $ — $ — $ ( 8 ) $ ( 2 ) $ ( 6 )

Summary of AOCI:

AOCI, beginning of period $ 926 $ 195 $ 731 $ 757 $ 160 $ 597

Investments OCI ( 88 ) ( 19 ) ( 69 ) 112 23 89

Pension obligations OCI 2 1 1 — — —

Life deferred acquisition costs, life policy reserves and other OCI — — — — — —

Total OCI ( 86 ) ( 18 ) ( 68 ) 112 23 89

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

(Dollars in millions) Nine months ended September 30,

(Dollars in millions) Three months ended March 31,

Before tax Income tax Net Before tax Income tax Net

25 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 8 – Reinsurance

Primary components of our property casualty reinsurance assumed operations include involuntary and voluntary assumed risks as well as contracts from Cincinnati Re ® , our reinsurance assumed operations.

Primary components of our ceded reinsurance include a property per risk treaty, property excess treaty, casualty per occurrence treaty, casualty excess treaty, property catastrophe treaty and retrocessions on our reinsurance assumed operations.

Primary components of our property casualty reinsurance assumed operations include involuntary and voluntary assumed as well as contracts from our reinsurance assumed operations, known as Cincinnati Re.

Primary components of our ceded reinsurance include a property per risk treaty, property excess treaty, casualty per occurrence treaty, casualty excess treaty, property catastrophe treaty and catastrophe bonds and retrocessions on our reinsurance assumed operations.

Management’s decisions about the appropriate level of risk retention are affected by various factors, including changes in our underwriting practices, capacity to retain risks and reinsurance market conditions.

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

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Direct written premiums $ 1,703 $ 1,545

12 unchanged sentences

Primary components of our life reinsurance program include individual mortality coverage, aggregate catastrophe and accidental death coverage in excess of certain deductibles.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Direct earned premiums $ 90 $ 87

5 unchanged sentences

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

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

$ 15 million and $ 19 million, respectively.

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

At March 31, 2022, and December 31, 2021, the allowance for uncollectible property casualty premiums was $ 14 million.

At March 31, 2022, and December 31, 2021, the allowances for credit losses on other premiums receivable and recoverable assets were immaterial.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 9 – Income Taxes

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

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Tax at statutory rate:

4 unchanged sentences

Other ( 1 ) 0.4 ( 3 ) ( 0.3 )

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

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

Provision (benefit) for income taxes $ ( 87 ) 24.2 % $ 148 19.3 %

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

We continue to believe that after considering all positive and negative evidence of taxable income in the carryback and carryforward periods as permitted by law, it is more likely than not that all of the deferred tax assets on our U.S.

1 unchanged sentence

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

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

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

domestic operations at March 31, 2022, and December 31, 2021.

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

SM (Cincinnati Global).

Unrecognized Tax Benefits

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

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

At March 31, 2022, and December 31, 2021, we had a gross unrecognized tax benefit of $ 34 million.

There were no changes to this amount during the first quarter of 2022.

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

Cincinnati Global

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

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

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

As a result of operations for the three months ended March 31, 2022, Cincinnati Global decreased its net deferred tax assets by $ 3 million with an offsetting decrease of $ 3 million to the valuation allowance.

At March 31, 2022, Cincinnati Global had a net deferred tax asset of $ 50 million and an offsetting valuation allowance of $ 50 million.

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

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

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

After considering all positive and negative evidence, we continue to believe it is appropriate to carry a valuation allowance at March 31, 2022.

At March 31, 2022, and December 31, 2021, Cincinnati Global had operating loss carryforwards in the United States of $ 6 million and $ 8 million, respectively, and in the United Kingdom of $ 130 million for both periods.

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

NOTE 10 – Net Income Per Common Share

Cincinnati Financial Corporation First-Quarter 2022 10-Q

NOTE 10 – Net Income (Loss) Per Common Share

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

1 unchanged sentence

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

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

(In millions, except per share data) Three months ended March 31,

Net income (loss)—basic and diluted

$ ( 273 ) $ 620

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

Basic weighted-average common shares outstanding 160.4 161.0

3 unchanged sentences

Diluted weighted-average shares 160.4 162.5

Earnings per share:

Earnings (loss) per share:

Basic $ ( 1.70 ) $ 3.85

1 unchanged sentence

Number of anti-dilutive share-based awards 2.3 1.0

The sources of dilution of our common shares are certain equity-based awards.

In accordance with Accounting Standards Codification 260, Earnings per Share , the assumed exercise of share-based awards were excluded from the computation of diluted loss per share for the three months ended March 31, 2022.

See our 2021 Annual Report on Form 10-K, Item 8, Note 17, Share-Based Associate Compensation Plans, Page 169, for information about share-based awards.

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

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

The above table shows the number of anti-dilutive share-based awards for the three months ended March 31, 2022 and 2021.

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

NOTE 11 – Employee Retirement Benefits

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

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Service cost $ 2 $ 2

Non-service costs (benefit):

Non-service (benefit) costs:

Interest cost 3 2

1 unchanged sentence

Amortization of actuarial loss and prior service cost — 2

Other — — 2 —

Total non-service benefit ( 1 ) ( 2 ) ( 2 ) ( 5 )

Total non-service (benefit) cost ( 3 ) 1

Net periodic (benefit) cost $ ( 1 ) $ 3

1 unchanged sentence

Service costs and non-service costs (benefit) are allocated in the same proportion primarily to the underwriting, acquisition and insurance expenses line item with the remainder allocated to the insurance losses and contract holders' benefits line item on the condensed consolidated statements of income for both 2022 and 2021.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

We made matching contributions totaling $ 8 million and $ 6 million to our 401(k) and Top Hat savings plans during the first quarter of 2022 and 2021, respectively.

We m ade no con tributions to our qualified pension plan during the first three months of 2022.

NOTE 12 – Commitments and Contingent Liabilities

In the ordinary course of conducting business, the company and its subsidiaries are named as defendants in various legal proceedings.

Most of these proceedings are claims litigation involving the company’s insurance subsidiaries in which the company is either defending or providing indemnity for third-party claims brought against insureds or litigating first-party coverage claims.

The company, through its insurance subsidiaries, is involved in claims litigation arising in the ordinary course of conducting its business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it.

The company accounts for such activity through the establishment of unpaid loss and loss expense reserves.

We believe that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, is immaterial to our consolidated financial position, results of operations and cash flows.

Beginning in April 2020, like many companies in the property casualty insurance industry, the company’s property casualty subsidiaries, were named as defendants in lawsuits seeking insurance coverage under commercial property insurance policies issued by the company for alleged economic losses resulting from the shutdown or suspension of their businesses due to the COVID-19 pandemic.

Subject to the uncertainties discussed in Note 4, Property Casualty Loss and Loss Expenses, and in the discussion in the balance of this Note, we believe that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses, costs of defense, and reinsurance recoveries, is immaterial to our consolidated financial position, results of operations and cash flows.

Beginning in April 2020, like many companies in the property casualty insurance industry, the company’s property casualty subsidiaries, were named as defendants in lawsuits seeking insurance coverage under commercial property insurance policies issued by the company for alleged losses resulting from the shutdown or suspension of their businesses due to the COVID-19 pandemic.

Although the allegations vary, the plaintiffs generally seek a declaration of insurance coverage, damages for breach of contract in unspecified amounts for claim denials, interest and attorney fees.

Some of the lawsuits also allege that the insurance claims were denied in bad faith or otherwise in violation of state laws and seek extra-contractual or punitive damages.

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

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

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

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

The company maintains that it has no coverage obligations with respect to these lawsuits for business income allegedly lost by the plaintiffs due to the COVID-19 pandemic based on the terms of the applicable insurance policies.

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

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

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

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

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

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

These lawsuits are at various stages of litigation;

1 unchanged sentence

several have been dismissed voluntarily and may be refiled;

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

and a handful of cases are advancing toward trials.

Many decisions on motion filings have been appealed.

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

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

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

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

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

4:20-cv-1275 (N.D.

Ohio filed June 10, 2020).

The Ohio Supreme Court has agreed to answer the following question:

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

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

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

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

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

Accordingly, management cannot now reasonably estimate the possible loss

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

or range of loss, if any.

and others have been dismissed by trial courts and appealed.

While early appellate decisions have been favorable, many remain to be decided.

In some jurisdictions, many cases have been stayed pending appellate decisions in their state or federal circuit.

Accordingly, little discovery has occurred on pending cases.

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

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

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

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

1 unchanged sentence

These actions include, among others, putative class actions seeking certification of a national class.

The company’s insurance subsidiaries also are occasionally parties to individual actions in which extra-contractual damages, punitive damages or penalties are sought, such as claims alleging bad faith handling of insurance claims or writing unauthorized coverage or claims alleging discrimination by former or current associates.

Such proceedings have alleged, for example, breach of an alleged duty to search national databases to ascertain unreported deaths of insureds under life insurance policies.

The company’s insurance subsidiaries also are occasionally parties to individual actions in which extra-contractual damages,

Cincinnati Financial Corporation First-Quarter 2022 10-Q

punitive damages or penalties are sought, such as claims alleging bad faith handling of insurance claims or writing unauthorized coverage or claims alleging discrimination by former or current associates.

On a quarterly basis, we review these outstanding matters.

2 unchanged sentences

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

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

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

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

11 unchanged sentences

See our 2021 Annual Report on Form 10-K, Item 8, Note 18, Segment Information, Page 172, for a description of revenue, income or loss before income taxes and identifiable assets for each of the five segments.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Segment information is summarized in the following table:

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

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Commercial lines insurance

24 unchanged sentences

Premiums 142 124

Other 3 3 8 8

Total other revenues 144 126

8 unchanged sentences

Other ( 7 ) ( 17 )

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

Total income (loss) before income taxes $ ( 360 ) $ 768

Identifiable assets:

September 30,

2022 December 31,

4 unchanged sentences

Total $ 30,250 $ 31,387

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

What changed 10-Q

Item 1. Financial Statements