What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-04-28 compared with 2021-10-27 · 307 added, 438 removed, 576 unchanged (56% of the section changed)

19 unchanged sentences

• Effects of the COVID-19 pandemic that could affect results for reasons such as:

◦ Securities market disruption or volatility and related effects such as decreased economic activity that affect the company’s investment portfolio and book value

◦ Securities market disruption or volatility and related effects such as decreased economic activity and continued supply chain disruptions that affect our investment portfolio and book value

◦ An unusually high level of claims in our insurance or reinsurance operations that increase litigation-related expenses

11 unchanged sentences

◦ The inherent unpredictability of litigation

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

• Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns (whether as a result of global climate change or otherwise), environmental events, terrorism incidents, cyberattacks, civil unrest or other causes

• 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 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

• Domestic and global events resulting in capital market or credit market uncertainty, followed by prolonged periods of economic instability or recession, that lead to:

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

• Declines in overall stock market values negatively affecting our equity portfolio and book value

Cincinnati Financial Corporation First-Quarter 2022 10-Q

• Prolonged low interest rate environment or other factors that limit our 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

• Domestic and global events, such as Russia's invasion of Ukraine, resulting in capital market or credit market uncertainty, followed by prolonged periods of economic instability or recession, that lead to:

◦ Significant or prolonged decline in the fair value of a particular security or group of securities and impairment of the asset(s)

◦ Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities

◦ Significant rise in losses from surety and director and officer policies written for financial institutions or other insured entities

• Our inability to integrate Cincinnati Global and its subsidiaries into our ongoing operations, or disruptions to our ongoing operations due to such integration

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

◦ Significant rise in losses from surety or director and officer policies written for financial institutions or other insured entities

• Our inability to manage Cincinnati Global or other subsidiaries to produce related business opportunities and growth prospects for our ongoing operations

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

• Ineffective information technology systems or discontinuing to develop and implement improvements in technology may impact our success and profitability

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

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cause reputational damage, mitigation expenses and data loss and expose us to liability under federal and state laws

• Difficulties with our operations and technology that may negatively impact our ability to conduct business, including cloud-based data information storage, data security, cyberattacks, remote working capabilities, and/or outsourcing relationships and third-party operations and data security

• Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products

• Delays, inadequate data developed internally or from third parties, or performance inadequacies from ongoing development and implementation of underwriting and pricing methods, including telematics and other usage-based insurance methods, or technology projects and enhancements expected to increase our pricing accuracy, underwriting profit and competitiveness

• Increased competition that could result in a significant reduction in the company’s premium volume

• Changing consumer insurance-buying habits and consolidation of independent insurance agencies that could alter our competitive advantages

• Intense competition, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which we operate, could harm our ability to maintain or increase our ability to maintain or increase our business volumes and profitability

• Changing consumer insurance-buying habits and consolidation of independent insurance agencies could alter our competitive advantages

• Inability to obtain adequate ceded reinsurance on acceptable terms, amount of reinsurance coverage purchased, financial strength of reinsurers and the potential for nonpayment or delay in payment by reinsurers

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• Inability of our subsidiaries to pay dividends consistent with current or past levels

• Events or conditions that could weaken or harm the company’s relationships with its independent agencies and hamper opportunities to add new agencies, resulting in limitations on the company’s opportunities for growth, such as:

◦ Downgrades of the company’s financial strength ratings

◦ Concerns that doing business with the company is too difficult

◦ Perceptions that the company’s level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace

• Events or conditions that could weaken or harm our relationships with our independent agencies and hamper opportunities to add new agencies, resulting in limitations on our opportunities for growth, such as:

◦ Downgrades of our financial strength ratings

◦ Concerns that doing business with us is too difficult

◦ Perceptions that our level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace

◦ Inability or unwillingness to nimbly develop and introduce coverage product updates and innovations that our competitors offer and consumers expect to find in the marketplace

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◦ Impose new obligations on us that increase our expenses or change the assumptions underlying our critical accounting estimates

Cincinnati Financial Corporation First-Quarter 2022 10-Q

◦ Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

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

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◦ Restrict our ability to execute our business model, including the way we compensate agents

• Adverse outcomes from litigation or administrative proceedings

• Events or actions, including unauthorized intentional circumvention of controls, that reduce the company’s future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002

• Adverse outcomes from litigation or administrative proceedings, including effects of social inflation on the size of litigation awards

• Events or actions, including unauthorized intentional circumvention of controls, that reduce our future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002

• 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

• Our inability, or the inability of our independent agents, to attract and retain personnel in a competitve labor market, impacting the customer experience and altering our competitive advantages

• 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.

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

Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation.

The company also is subject to public and regulatory initiatives that can affect the market value for its common stock, such as measures affecting corporate financial reporting and governance.

We also are subject to public and regulatory initiatives that can affect the market value for our common stock, such as measures affecting corporate financial reporting and governance.

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

CORPORATE FINANCIAL HIGHLIGHTS

Net Income and Comprehensive Income Data

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

2021 2020 % Change 2021 2020 % Change

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

2022 2021 % Change

Earned premiums $ 1,690 $ 1,544 9

Investment income, net of expenses (pretax) 185 174 6

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

Investment gains and losses, net (pretax) (666) 504 nm

Total revenues 1,215 2,227 (45)

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

Net income (loss) (273) 620 nm

Comprehensive income (loss) (862) 476 nm

Net income (loss) per share—diluted (1.70) 3.82 nm

Cash dividends declared per share 0.69 0.63 10

Diluted weighted average shares outstanding 160.4 162.5 (1)

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.

Total revenues decreased 45% for the first quarter of 2022, compared with the first quarter of 2021, as a reduction in net investment gains offset increases in earned premiums and investment income.

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

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

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 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.

For future periods, renewal premium or new business premium amounts could decline if the basis for policy premiums, such as sales and payrolls of businesses we insure, decrease as a result of the pandemic and a weakening economy.

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

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 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.

Loss experience for our insurance operations is influenced by many factors, as discussed in our 2020 Annual Report on Form 10-K, Item 7, Property Casualty Insurance Loss and Loss Expense Reserves, Page 56.

Because of various factors that affect exposure to certain insurance losses, such as less miles driven for vehicles or reduced sales and payrolls for businesses, there could be a reduction in future losses, and in some cases a generally corresponding reduction in premiums.

Also, there could be losses or legal expenses that increase or otherwise occur independently of changes in sales or payrolls of businesses we insure, due to pandemic effects or other factors.

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

The net loss for the first quarter of 2022, compared with first-quarter 2021 net income, was a change of $893 million, including a decrease of $924 million in after-tax net investment gains that offset increases of $25 million in after-tax property casualty underwriting income and $9 million in after-tax investment income.

Catastrophe losses for the first quarter of 2022, mostly weather related, were $98 million lower after taxes and favorably affected both net income and property casualty underwriting income.

Life insurance segment results on a pretax basis matched first-quarter 2021.

During the first three months of 2022, SARS-CoV-2, also known as COVID-19 and recognized as a pandemic by the World Health Organization, continued to cause various effects in parts of the world.

We believe it did not have a significant effect on our premium revenues during the first three months of 2022 and there were no material changes to our estimates for incurred losses and expenses related to the pandemic.

Performance by segment is discussed below in Financial Results.

As discussed in our 2020 Annual Report on Form 10-K, Item 7, Factors Influencing Our Future Performance, Page 55, there are several reasons why our performance during 2021 may be below our long-term targets.

As discussed in our 2021 Annual Report on Form 10-K, Item 7, Executive Summary, Page 47, there are several reasons why our performance during 2022 may be below our long-term targets.

The board of directors is committed to rewarding shareholders directly through cash dividends and through share repurchase authorizations.

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publicly traded companies.

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

In January 2022, the board of directors increased the regular quarterly dividend to 69 cents per share, setting the stage for our 62 nd consecutive year of increasing cash dividends.

During the first three months of 2022, cash dividends declared by the company increased 10% compared with the same period of 2021.

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 Third-Quarter 2021 10-Q

The 2022 dividend increase reflected our strong operating performance and signaled management's and the board's positive outlook and confidence in our outstanding capital, liquidity and financial flexibility.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Balance Sheet Data and Performance Measures

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

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

Total investments $ 23,399 $ 24,666

5 unchanged sentences

Debt-to-total-capital ratio 6.5 % 6.0 %

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.

Total assets at March 31, 2022, decreased 4% compared with year-end 2021, and included a 5% decrease in total investments that reflected net purchases that were offset by lower fair values for many securities in our portfolio.

Shareholders' equity decreased 8% and book value per share also decreased 8% during the first three months of 2022.

Our debt-to-total-capital ratio (capital is the sum of debt plus shareholders' equity) increased compared with year-end 2021.

Our value creation ratio is our primary performance metric.

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.

That ratio was negative 6.9% for the first three months of 2022, and was less than the same period in 2021 due to a reduction in overall net gains from our investment portfolio.

The $6.29 decrease in book value per share during the first three months of 2022 contributed negative 7.7 percentage points to the value creation ratio, while dividends declared at $0.69 per share contributed positive 0.8 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 September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

Value creation ratio major components:

Net income before investment gains 1.9 % 2.1 %

Change in fixed-maturity securities, realized

and unrealized gains (0.5) 1.0 (1.0) 1.8

Change in fixed-maturity securities, realized and unrealized gains (4.5) (1.4)

Change in equity securities, investment gains (4.1) 3.6

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Value creation ratio (6.9) % 4.1 %

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

(Dollars are per share) Three months ended March 31,

Value creation ratio:

4 unchanged sentences

Total value creation $ (5.60) $ 2.75

Value creation ratio from change in book

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

Value creation ratio from dividends declared to

shareholders*** 0.8 1.1 2.8 3.0

Value creation ratio from change in book value** (7.7) % 3.2 %

Value creation ratio from dividends declared to shareholders*** 0.8 0.9

Value creation ratio (6.9) % 4.1 %

6 unchanged sentences

We market our insurance products through a select group of independent insurance agencies as discussed in our 2021 Annual Report on Form 10-K, Item 1, Our Business and Our Strategy, Page 6.

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

At March 31, 2022, we actively marketed through 1,946 agencies located in 46 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 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 first three months of 2022, our consolidated property casualty net written premium year-over-year growth was 12%.

As of February 2022, A.M.

Best projected the industry's full-year 2022 written premium growth at approximately 6%.

For the five-year period 2017 through 2021, 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 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.

For the first three months of 2022, our GAAP combined ratio was 89.9%, including 3.1 percentage points of current accident year catastrophe losses partially offset by 2.5 percentage points of favorable loss reserve development on prior accident years.

Our statutory combined ratio was 88.0% for the first three months of 2022.

As of February 2022, A.M.

Best projected the industry's full-year 2022 statutory combined ratio at approximately 101%, including approximately 7 percentage points of catastrophe losses and less than 1 percentage point of loss reserve development on prior accident years.

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

For the first three months of 2022, pretax investment income was $185 million, up 6% compared with the same period in 2021.

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Highlights of Our Strategy and Supporting Initiatives

Management has worked to identify a strategy that can lead to long-term success, with concurrence by the board of directors.

Our strategy is intended to position us to compete successfully in the markets we have targeted while appropriately managing risk.

Further description of our long-term, proven strategy can be found in our 2020 Annual Report on Form 10-K, Item 1, Our Business and Our Strategy, Page 5.

We believe successful implementation of initiatives that support our strategy will help us better serve our agent customers and reduce volatility in our financial results while we also grow earnings and book value over the long term, successfully navigating challenging economic, market or industry pricing cycles.

• Manage insurance profitability – Implementation of these initiatives is intended to enhance underwriting expertise and knowledge, thereby increasing our ability to manage our business while also gaining efficiency.

Better profit margins can arise from additional information and more focused action on underperforming product lines, plus pricing capabilities we are expanding through the use of technology and analytics.

In addition to enhancing company efficiency, improving internal processes also supports the ability of the independent agencies that represent us to grow profitably by allowing them to serve clients faster and to more efficiently manage agency expenses.

We continue to enhance our property casualty underwriting expertise and to effectively and efficiently underwrite individual policies and process transactions.

Ongoing initiatives supporting this work include expanding our pricing and segmentation capabilities through experience and use of predictive analytics and additional data.

Our segmentation efforts emphasize identification and retention of insurance policies we believe have relatively stronger pricing, while seeking more aggressive renewal terms and conditions on policies we believe have relatively weaker pricing.

• Drive premium growth – Implementation of these initiatives is intended to further penetrate each market we serve through our independent agencies.

Strategies aimed at specific market opportunities, along with service enhancements, can help our agents grow and increase our share of their business.

Premium growth initiatives also include expansion of Cincinnati Re, our reinsurance assumed operation, and successful integration of Cincinnati Global, our London-based global specialty underwriter for Lloyd's Syndicate 318.

Diversified growth also may reduce variability of losses from weather-related catastrophes.

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

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.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Financial Strength

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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 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

At March 31, 2022, we held $4.777 billion of our cash and cash equivalents and invested assets at the parent-company level, of which $4.509 billion, or 94.4%, was invested in common stocks, and $137 million, or 2.9%, was cash or cash equivalents.

Our debt-to-total-capital ratio was 6.5% at March 31, 2022.

Another important indicator of financial strength is our ratio of property casualty net written premiums to statutory surplus, which was 1.0-to-1 for the 12 months ended March 31, 2022, compared with 0.9-to-1 at year-end 2021.

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

At April 27, 2022, our insurance subsidiaries continued to be highly rated.

Insurer Financial Strength Ratings

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 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 September 30, Nine months ended September 30,

2021 2020 % Change 2021 2020 % Change

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 Underwriting Ltd.

SM (Cincinnati Global).

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Earned premiums $ 1,618 $ 1,475 10

4 unchanged sentences

Current accident year catastrophe losses 50 183 (73)

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

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

Prior accident years before catastrophe losses (20) (80) 75

Prior accident years catastrophe losses (21) (30) 30

Loss and loss expenses 956 923 4

Underwriting expenses 500 421 19

Underwriting profit (loss) $ 121 $ (51) nm $ 475 $ (68) nm

Underwriting profit $ 165 $ 133 24

Ratios as a percent of earned premiums:

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Combined ratio 89.9 % 91.2 % (1.3)

Contribution from catastrophe losses and prior

years reserve development 7.2 18.1 (10.9) 3.5 13.0 (9.5)

Combined ratio before catastrophe losses and

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 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.

Loss experience for our insurance operations is influenced by many factors as discussed in further detail in Financial Results by property casualty insurance segment.

For future periods, factors that reduce exposure to certain insurance losses, such as fewer vehicular miles driven or reduced sales and payrolls for businesses, could cause a reduction in future losses that generally correspond to reduced premiums.

However, there could be losses

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 $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.

Contribution from catastrophe losses and prior years reserve development 0.6 5.0 (4.4)

Combined ratio before catastrophe losses and prior years reserve development 89.3 % 86.2 % 3.1

Our consolidated property casualty insurance operations generated an underwriting profit of $165 million for the first three months of 2022.

The improvement of $32 million, compared with the same period of 2021, included a favorable decrease of $124 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 September 30, 2021, were $504 million, or 8%, higher than at year-end 2020, including an increase of $299 million for the IBNR portion.

For all property casualty lines of business in aggregate, net loss and loss expense reserves at March 31, 2022, were $66 million, or 1%, higher than at year-end 2021, including an increase of $69 million for the incurred but not reported (IBNR) portion.

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

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

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.

Our consolidated property casualty combined ratio for the first quarter of 2022 improved by 1.3 percentage points, compared with the same period of 2021, including a decrease of 8.6 points from lower catastrophe losses and loss expenses.

Other combined ratio components that increased are discussed below and in further detail in Financial Results by property casualty insurance segment.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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 7.2 percentage points in the first nine months of 2021, compared with 2.1 percentage points in the same period of 2020.

Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 2.5 percentage points in the first three months of 2022, compared with 7.4 percentage points in the same period of 2021.

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 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

The ratio for current accident year loss and loss expenses before catastrophe losses increased in the first three months of 2022.

That 58.5% ratio was 0.9 percentage points higher, compared with the 57.6% accident year 2021 ratio measured as of March 31, 2021, including an increase of 4.0 points in the ratio for large losses of $1 million or more per claim, discussed below.

The underwriting expense ratio increased for the first quarter of 2022, compared with the same period a year ago, primarily due to an increase in profit-sharing commissions for agencies and related expenses.

The ratio also included ongoing expense management efforts and higher earned premiums.

Consolidated Property Casualty Insurance Premiums

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Agency renewal written premiums $ 1,397 $ 1,276 9

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Price change trends that heavily influence renewal written premium increases or decreases, along with other premium growth drivers for 2022, are discussed in more detail by segment below in Financial Results.

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.

Consolidated property casualty net written premiums for the three months ended March 31, 2022, grew $206 million compared with the same period of 2021.

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 $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.

Consolidated property casualty agency new business written premiums increased by $24 million for the first quarter of 2022, compared with the same period of 2021.

New agency appointments during 2022 and 2021 produced a $13 million increase in standard lines new business for the first three months of 2022 compared with the same period of 2021.

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

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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 $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.

Net written premiums for Cincinnati Re, included in other written premiums, increased by $58 million for the three months ended March 31, 2022, compared with the same period of 2021, to $254 million.

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 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.

Net written premiums increased, by $10 million for the three months ended March 31, 2022, compared with the same period of 2021, to $51 million.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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 $1 million and $9 million for the third quarter and first nine months of 2021, compared with the same periods of 2020.

An increase in ceded premiums decreased net written premiums by $7 million for the first three months of 2022, compared with the same period of 2021.

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 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.

Losses from catastrophes contributed 1.8 percentage points to the combined ratio in the first three months of 2022, compared with 10.4 percentage points in the same period of 2021.

The reinsurance program for Cincinnati Re which went into effect on June 1, 2021, provided no additional recoveries during the first three months of 2022.

As of March 31, 2022, it provided an estimated recovery of $14 million from Hurricane Ida, with a net incurred loss of $80 million for Cincinnati Re, 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.

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Consolidated Property Casualty Insurance Catastrophe Losses and Loss Expenses Incurred

(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

12-15 South, West $ (1) $ — $ — $ (10) $ (11) $ 9 $ 5 $ — $ 37 $ 51

16-20 Midwest, Northeast, South (3) (3) — (2) (8) 21 30 1 9 61

24-26 Midwest, Northeast, South (1) (1) — — (2) 12 18 — — 30

27-29 Midwest, Northeast, South 1 (1) — — — 4 8 — — 12

May 3-4 South (2) — — — (2) 9 4 — — 13

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

(Dollars in millions, net of reinsurance) Three months ended March 31,

Dates Region lines lines lines Other Total

15-17 Northeast, South $ 4 $ 6 $ 1 $ — $ 11

All other 2022 catastrophes 12 22 — 5 39

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Calendar year incurred total $ 13 $ 7 $ 1 $ 8 $ 29

10-12 Midwest, Northeast, South $ — $ — $ — $ — $ — $ 6 $ 5 $ — $ — $ 11

5-8 Northeast, South — — — — — 10 5 — — 15

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

12-15 South, West $ 10 $ 6 $ — $ 49 $ 65

16-20 Midwest, Northeast, South 22 37 1 1 61

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27-29 Midwest, Northeast, South 4 8 — — 12

May 4-5 Midwest, South 1 — — — 1 23 5 — — 28

May 26 - Jun.

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 2021 catastrophes 10 8 — — 18

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Calendar year incurred total $ 37 $ 75 $ 1 $ 40 $ 153

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 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 September 30, Nine months ended September 30,

2021 2020 % Change 2021 2020 % Change

(Dollars in millions, net of reinsurance) Three months ended March 31,

2022 2021 % Change

Current accident year losses greater than $5 million $ 23 $ 5 360

Current accident year losses $1 million - $5 million 82 31 165

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

Large loss prior accident year reserve development 25 24 4

Total large losses incurred 130 60 117

Losses incurred but not reported (13) 38 nm 52 251 (79)

Losses incurred but not reported 36 102 (65)

Other losses excluding catastrophe losses 592 451 31

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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 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.

The first-quarter 2022 property casualty total large losses incurred of $130 million, net of reinsurance, were higher than the $116 million quarterly average during full-year 2021 and the $60 million experienced for the first quarter of 2021.

The ratio for these large losses was 3.9 percentage points higher compared with last year's first quarter.

We believe results for the three-month period 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.

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• Investments

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

COMMERCIAL LINES INSURANCE RESULTS

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Earned premiums $ 962 $ 886 9

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Current accident year catastrophe losses 16 54 (70)

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

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

Prior accident years before catastrophe losses (15) (66) 77

Prior accident years catastrophe losses (3) (17) 82

Loss and loss expenses 586 503 17

Underwriting expenses 301 254 19

Underwriting profit (loss) $ 182 $ (20) nm $ 457 $ (32) nm

Underwriting profit $ 76 $ 130 (42)

Ratios as a percent of earned premiums:

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Combined ratio 92.3 % 85.4 % 6.9

Contribution from catastrophe losses and

prior years reserve development (7.6) 13.8 (21.4) (5.3) 11.0 (16.3)

Combined ratio before catastrophe losses and

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

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 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.

For future periods, factors that reduce exposure to certain insurance losses, such as fewer vehicular miles driven or reduced sales results and payrolls for businesses, could cause a reduction in future losses that generally correspond to reduced premiums.

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 Third-Quarter 2021 10-Q

Contribution from catastrophe losses and prior years reserve development (0.2) (3.3) 3.1

Combined ratio before catastrophe losses and prior years reserve development 92.5 % 88.7 % 3.8

Performance highlights for the commercial lines segment include:

• 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.

• Premiums – Earned premiums and net written premiums for the commercial lines segment grew during the first three months of 2022, compared with the same period 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.

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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.

Agency renewal written premiums increased by 8% for the first quarter of 2022, compared with the same period of 2021.

During the first quarter of 2022, our overall standard commercial lines policies averaged estimated renewal price increases at percentages in 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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We measure average changes in commercial 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 the respective policies.

Our average overall commercial lines renewal pricing change includes the impact of flat pricing for certain coverages within package policies written for a three-year term that were in force but did not expire during the period being measured.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

the period being measured.

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 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.

For commercial lines policies that did expire and were then renewed during the first quarter of 2022, we estimate that our average percentage price increases were as follows:

commercial property in the mid-single-digit range, commercial auto in the mid-single-digit range and commercial casualty in the mid-single-digit range.

The estimated average percentage price change for workers' compensation was a decrease near the high end of the low-single-digit range.

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 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.

Audits completed during the first three months of 2022 contributed $21 million to net written premiums, compared with $11 million for the same period of 2021.

New business written premiums for commercial lines increased $11 million during the first three months of 2022, compared with the same period of 2021.

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.

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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 $1 million and $6 million for the third quarter and first nine 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 $7 million for the first three months of 2022, compared with the same period of 2021.

Commercial Lines Insurance Premiums

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Agency renewal written premiums $ 970 $ 898 8

4 unchanged sentences

Earned premiums $ 962 $ 886 9

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 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.

• Combined ratio – The commercial lines combined ratio for the first quarter of 2022 increased by 6.9 percentage points, compared with first-quarter 2021, including a decrease of 2.8 points in losses from catastrophes.

Underwriting results also included a higher ratio for loss experience for the current accident year and a lower 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 increased in the first three months of 2022.

That 61.2% ratio was 1.2 percentage points higher, compared with the 60.0% accident year 2021 ratio measured as of March 31, 2021, including an increase of 5.1 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Catastrophe losses and loss expenses accounted for 1.4 percentage points of the combined ratio for the first three months of 2022, compared with 4.2 percentage points for the same period a year ago.

Through 2021, the 10-year annual average for that catastrophe measure for the commercial lines segment was 5.5 percentage points, and the five-year annual average was 5.8 percentage points.

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.

The net effect of reserve development on prior accident years during the first three months of 2022 was favorable for commercial lines overall by $18 million, compared with $83 million for the same period in 2021.

For the first three months of 2022, our workers' compensation and commercial auto 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 three months of 2022 for our commercial lines insurance segment was primarily for accident years 2020 and 2021 and was primarily due to lower-than-anticipated loss emergence on known claims.

Reserve estimates are inherently uncertain as described in our 2021 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 52.

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.

The commercial lines underwriting expense ratio increased for the first quarter of 2022, compared with the same period a year ago, primarily due to an increase in profit-sharing commissions for agencies and related expenses.

The ratio also included ongoing expense management efforts and higher earned premiums.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Commercial Lines Insurance Losses Incurred by Size

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions, net of reinsurance) Three months ended March 31,

2022 2021 % Change

Current accident year losses greater than $5 million $ 16 $ 5 220

Current accident year losses $1 million - $5 million 67 26 158

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

Large loss prior accident year reserve development 21 26 (19)

Total large losses incurred 104 57 82

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

Losses incurred but not reported 38 39 (3)

Other losses excluding catastrophe losses 318 261 22

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Total loss ratio 48.9 % 44.2 % 4.7

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 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

The first-quarter 2022 commercial lines total large losses incurred of $104 million, net of reinsurance, were higher than the quarterly average of $95 million during full-year 2021 and the $57 million of total large losses incurred for the first quarter of 2021.

The increase in commercial lines large losses for the first three months of 2022 was primarily due to our commercial property line of business.

The first-quarter 2022 ratio for commercial lines total large losses was 4.2 percentage points higher than last year's first-quarter ratio.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

PERSONAL LINES INSURANCE RESULTS

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Earned premiums $ 402 $ 376 7

4 unchanged sentences

Current accident year catastrophe losses 28 78 (64)

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

Prior accident years before catastrophe losses (13) (17) 24

Prior accident years catastrophe losses (21) (3) (600)

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Combined ratio 83.9 % 101.1 % (17.2)

Contribution from catastrophe losses and

prior years reserve development 19.3 23.4 (4.1) 14.1 17.7 (3.6)

Combined ratio before catastrophe losses and

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 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.

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.

However, there could be losses or legal expenses that occur independent of changes in miles driven for autos we insure, due to pandemic effects or other factors.

Contribution from catastrophe losses and prior years reserve development (1.5) 15.3 (16.8)

Combined ratio before catastrophe losses and prior years reserve development 85.4 % 85.8 % (0.4)

Performance highlights for the personal lines segment include:

• 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.

• Premiums – Personal lines earned premiums and net written premiums continued to grow during the first three months of 2022, including increased new business and renewal written premiums that included higher average pricing.

Personal lines net written premiums from high net worth policies totaled approximately $176 million for the first three months of 2022, compared with $133 million for the same period of 2021.

The table below analyzes the primary components of premiums.

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.

Agency renewal written premiums increased 10% for the first three months of 2022, 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 low-single-digit range during the first three months of 2022.

For our homeowner line of business, we estimate that premium rates for the first three months of 2022 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 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.

Personal lines new business written premiums increased 13% for the first three months of 2022, compared with the same period of 2021.

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

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 $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.

For our personal lines insurance segment, an increase in ceded premiums decreased net written premiums by less than $1 million for the first three months of 2022, compared with the same period of 2021.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

We continue working 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 September 30, Nine months ended September 30,

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Agency renewal written premiums $ 333 $ 302 10

4 unchanged sentences

Earned premiums $ 402 $ 376 7

• 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.

• Combined ratio – Our personal lines combined ratio for the first quarter of 2022 improved by 17.2 percentage points, compared with first-quarter 2021, including a lower ratio for current accident year loss and loss expenses before catastrophe losses and a decrease of 18.1 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 three months of 2022.

That 55.0% ratio was 2.3 percentage points lower, compared with the 57.3% accident year 2021 ratio measured as of March 31, 2021, including an increase of 3.2 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.

Catastrophe losses and loss expenses accounted for 1.7 percentage points of the combined ratio for the first three months of 2022, compared with 19.8 percentage points for the same period a year ago.

The 10-year annual average catastrophe loss ratio for the personal lines segment through 2021 was 10.8 percentage points, and the five-year annual average was 12.0 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 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 effect of reserve development on prior accident years during the first quarter of 2022 was favorable for personal lines overall by $34 million, compared with $20 million of favorable development for the first three months of 2021.

Our homeowner line of business was the primary contributor to the personal lines net favorable reserve development for the first three months of 2022.

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

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.

The personal lines underwriting expense ratio increased for the first quarter of 2022, compared with the same period a year ago, primarily due to an increase in profit-sharing commissions for agencies and related expenses.

The ratio also included ongoing expense management efforts and higher earned premiums.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Personal Lines Insurance Losses Incurred by Size

(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 $ 10 $ — nm $ 10 $ — nm

(Dollars in millions, net of reinsurance) Three months ended March 31,

2022 2021 % Change

Current accident year losses greater than $5 million $ 7 $ — nm

Current accident year losses $1 million - $5 million 11 4 175

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

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

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

Total large losses incurred 22 3 nm

Losses incurred but not reported (14) 41 nm

Other losses excluding catastrophe losses 165 130 27

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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

In the first quarter of 2022, the personal lines total large loss ratio, net of reinsurance, was 4.6 percentage points higher than last year's first quarter.

The increase in personal lines large losses for the first three months of 2022 occurred primarily for our homeowner line of business.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

EXCESS AND SURPLUS LINES INSURANCE RESULTS

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Earned premiums $ 112 $ 89 26

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Combined ratio 85.9 % 92.0 % (6.1)

Contribution from catastrophe losses and

prior years reserve development 3.6 (0.3) 3.9 2.7 5.2 (2.5)

Combined ratio before catastrophe losses and

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 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 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.

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

Contribution from catastrophe losses and prior years reserve development (3.5) 5.7 (9.2)

Combined ratio before catastrophe losses and prior years reserve development 89.4 % 86.3 % 3.1

Performance highlights for the excess and surplus lines segment include:

• 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.

• Premiums – Excess and surplus lines net written premiums continued to grow during the first three months of 2022, compared with the same period a year ago, primarily due to an increase in agency renewal written premiums.

Renewal written premiums rose 24% for the three months ended March 31, 2022, compared with the same period of 2021, reflecting the opportunity to renew many accounts for the first time, as well as higher renewal pricing.

For the first three months of 2022, excess and surplus lines policy renewals experienced estimated average price increases at percentages in the high-single-digit range.

We measure average changes in excess and 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 24% for the first quarter of 2022 compared with the same period of 2021, 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.

We believe our agents' seasoned accounts tend to be priced more accurately than business that may be less familiar to them.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Excess and Surplus Lines Insurance Premiums

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Agency renewal written premiums $ 94 $ 76 24

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Earned premiums $ 112 $ 89 26

• 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.

• Combined ratio – The excess and surplus lines combined ratio improved by 6.1 percentage points for the first quarter of 2022, compared with the same period of 2021, primarily due to favorable reserve development on prior accident years.

The IBNR portion of the total loss and loss expense ratio before catastrophe losses was 20.8 percentage points lower for the first three months of 2022, compared with the same period a year ago, while the paid portion was 10.0 points lower and the case incurred portion was 12.3 points higher.

The ratio for current accident year loss and loss expenses before catastrophe losses for excess and surplus lines increased in the first three months of 2022.

That 61.8% ratio was 0.8 percentage points higher, compared with the 61.0% accident year 2021 ratio measured as of March 31, 2021, including an increase of 2.4 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 5.0% for the first three months of 2022, compared with unfavorable net reserve development of 4.4% for the first three months of 2021.

The $5 million of net favorable reserve development recognized during the first three months of 2022 was primarily for accident years prior to 2021.

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

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

The excess and surplus lines underwriting expense ratio increased for the first three months of 2022, compared with the same period of 2021, primarily due to an increase in commissions for agencies and related expenses.

The ratio also included ongoing expense management efforts and higher earned premiums.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Excess and Surplus Lines Insurance Losses Incurred by Size

(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

(Dollars in millions, net of reinsurance) Three months ended March 31,

2022 2021 % Change

Current accident year losses greater than $5 million $ — $ — 0

Current accident year losses $1 million - $5 million 4 1 300

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

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

Total large losses incurred 4 — nm

Losses incurred but not reported 12 22 (45)

Other losses excluding catastrophe losses 32 15 113

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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

In the first quarter of 2022, the excess and surplus lines total ratio for large losses, net of reinsurance, was 4.4 percentage points higher than last year's first quarter.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

LIFE INSURANCE RESULTS

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Earned premiums $ 72 $ 69 4

Fee revenues 1 — nm 3 1 200

Fee revenues 1 1 0

Total revenues 73 70 4

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Total benefits and expenses 75 72 4

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 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.

It is also possible we may continue to experience higher than projected future death claims due to the pandemic.

Life insurance segment loss $ (2) $ (2) 0

The COVID-19 pandemic did not have a significant effect on our life insurance segment earned premiums or expenses for the first three months of 2022.

However, the pandemic did contribute to a moderate increase in death claims in that time period.

It is possible we may continue to experience higher than projected future death claims due to the pandemic.

Performance highlights for the life insurance segment include:

• 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.

• Revenues – Revenues increased for the three months ended March 31, 2022, 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 1% to $78.372 billion at March 31, 2022, from $77.493 billion at year-end 2021.

Fixed annuity deposits received for the three months ended March 31, 2022, were $8 million, compared with $17 million for the same period of 2021.

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 September 30, Nine months ended September 30,

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Term life insurance $ 54 $ 51 6

Universal life insurance 7 10 (30) 28 34 (18)

Other life insurance and annuity products 13 13 0 37 37 0

Whole life insurance 11 11 0

Universal life and other 7 7 0

Net earned premiums $ 72 $ 69 4

1 unchanged sentence

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 $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

A $2 million loss for our life insurance segment was reported in the first three months of 2022 and 2021.

Favorable impacts from unlocking of interest rate actuarial assumptions in the first three months of 2022 were mostly offset by less favorable mortality experience compared to the same period of 2021, due in part to pandemic-related death claims.

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 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 nine months of 2021 matched the same period a year ago.

Total benefits increased in the first three months of 2022.

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

Mortality results increased,

Cincinnati Financial Corporation First-Quarter 2022 10-Q

compared with the same period of 2021, and were above our 2022 projections, due in part to pandemic-related death claims.

Underwriting expenses for the first three months of 2022 increased compared to the same period a year ago, largely due to higher commission and general expense levels compared to the same period of 2021.

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 $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.

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 $10 million for the three months ended March 31, 2022, and March 31, 2021.

INVESTMENTS RESULTS

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Investment Income

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.

Pretax investment income grew 6% for the first quarter of 2022, compared with the same period of 2021.

Interest income increased by $5 million for the first quarter, 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 for the three months ended March 31, 2022.

Investments Results

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

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Total investment income, net of expenses $ 185 $ 174 6

Investment interest credited to contract holders (27) (26) (4)

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.

As bonds in our generally laddered portfolio mature or are called over the near term, we will be challenged to replace their current yield.

Investment gains and losses, net (666) 504 nm

Investments profit (loss), pretax $ (508) $ 652 nm

We continue to consider the low interest rate environment that has prevailed in recent years as well as the potential for a continuation of the recent spike in both inflation and yields as we position our portfolio.

As bonds in our generally laddered portfolio mature or are called over the near term, we will reinvest with a balanced approach, keeping in mind our long term strategy and pursuing attractive risk-adjusted after-tax yields.

The table below shows the average pretax yield-to-amortized cost associated with expected principal redemptions for our fixed-maturity portfolio.

1 unchanged sentence

(Dollars in millions) % Yield Principal redemptions

At September 30, 2021

At March 31, 2022

Fixed-maturity pretax yield profile:

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Average yield and total expected maturities from the remainder of 2022 through 2024 4.00 $ 2,343

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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 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

Average pretax yield-to-amortized cost on new

fixed-maturities:

The average yield for total fixed-maturity securities acquired during the first three months of 2022 was lower than the 4.02% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2021.

Our fixed-maturity portfolio's average yield of 4.01% for the first three months of 2022, from the investment income table below, was also lower than the 4.02% yield for the year-end 2021 fixed-maturities portfolio.

Three months ended March 31,

Average pretax yield-to-amortized cost on new fixed-maturities:

Acquired taxable fixed-maturities 3.79 % 3.74 %

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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 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 September 30, Nine months ended September 30,

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Investment income:

5 unchanged sentences

Less income taxes

28 26 8 82 77 6

Total investment income, after-tax $ 156 $ 147 6

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Effective tax rate 17.0 16.7

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Total Investment Gains and Losses

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Accounting requirements for the allowance for credit losses for the fixed-maturity portfolio are disclosed in our 2021 Annual Report on Form 10-K, Item 8, Note 1, Summary of Significant Accounting Policies, Page 127.

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 September 30, Nine months ended September 30,

2021 2020 2021 2020

(Dollars in millions) Three months ended March 31,

Investment gains and losses:

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Gross realized losses (1) —

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

Subtotal 8 3 20 (72)

Other 27 — 59 (5)

Total investment gains and losses reported in net income (666) 504

2 unchanged sentences

Total $ (1,412) $ 308

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

Of the 4,362 fixed-maturity securities in the portfolio, none were trading below 70% of amortized cost at March 31, 2022.

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.

We believe that if liquidity in the markets were to significantly deteriorate or economic conditions were to significantly weaken, we could experience declines in portfolio values and possibly increases in the allowance for credit losses or write-downs to fair value.

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

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

Fixed maturities:

Energy $ — $ — $ — $ 62

Real estate — — — 13

Consumer goods — — — 1

Municipal 1 1 1 1

Technology & Electronics — — — 1

Total fixed maturities $ 1 $ 1 $ 1 $ 78

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Fixed-maturity securities written down to fair value due to an intention to be sold and changes in the allowance for credit losses were each less than $1 million for the first three months of 2022.

We had no fixed-maturity securities written down to fair value due to an intention to be sold and no allowance for credit losses for the first three months of 2021.

Cincinnati Financial Corporation First-Quarter 2022 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 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.

Total revenues for the first three months of 2022 for our Other operations increased, compared with the same period of 2021, primarily due to earned premiums from Cincinnati Re and Cincinnati Global, with increases of $18 million and less than $1 million, respectively.

Total expenses for Other increased for the first three months of 2022, primarily due to underwriting expenses from Cincinnati Re and Cincinnati Global.

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

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

Other loss resulted primarily from interest expense from debt of the parent company.

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Interest and fees on loans and leases $ 1 $ 1 0

8 unchanged sentences

Total other loss $ (7) $ (17) 59

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.

We had $87 million of income tax benefit for the three months ended March 31, 2022, compared with $148 million of income tax expense for the same period of 2021.

The effective tax rate for the three months ended March 31, 2022, was 24.2% compared with 19.3% for the same period 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.

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.

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

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 10-Q

LIQUIDITY AND CAPITAL RESOURCES

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.

At March 31, 2022, shareholders' equity was $12.092 billion, compared with $13.105 billion at December 31, 2021.

Total debt was $838 million at March 31, 2022, down $5 million from December 31, 2021.

At March 31, 2022, cash and cash equivalents totaled $987 million, compared with $1.139 billion at December 31, 2021.

The pandemic did not have a significant effect on our cash flows for the first three months of 2022.

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

We also have additional capacity to borrow on our revolving short-term line of credit, as described further below.

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Subsidiary Dividends

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.

Our lead insurance subsidiary declared dividends of $504 million to the parent company in the first three months of 2022, compared with $158 million for the same period of 2021.

For full-year 2021, our lead insurance subsidiary paid dividends totaling $583 million to the parent company.

State of Ohio regulatory requirements restrict the dividends our insurance subsidiary can pay.

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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 September 30, Nine months ended September 30,

2021 2020 % Change 2021 2020 % Change

(Dollars in millions) Three months ended March 31,

2022 2021 % Change

Premiums collected $ 1,714 $ 1,523 13

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Cash flow from operations $ 241 $ 368 (35)

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.

Collected premiums for property casualty insurance rose $191 million during the first three months of 2022, compared with the same period in 2021.

Loss and loss expenses paid for the 2022 perio d increased $ 185 million.

Commissions and other underwriting expenses pai d increased $140 million.

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.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

We discuss our future obligations for claims payments and for underwriting expenses in our 2021 Annual Report on Form 10-K, Item 7, Obligations, Page 96.

Capital Resources

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.

At March 31, 2022, our debt-to-total-capital ratio was 6.5%, considerably below our 35% covenant threshold, with $789 million in long-term debt and $49 million in borrowing on our revolving short-term line of credit.

At March 31, 2022, $251 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 March 31, 2022, we do not anticipate a material increase in debt levels exceeding the available line of credit amount during 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 w as $94 m illion at September 30, 2021, with no amounts drawn.

The amount of this unsecured letter of credit agreement w as $94 m illion at March 31, 2022, 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 nine months of 2021.

Those firms made no changes to our parent company debt ratings during the first three months of 2022.

Our debt ratings are discussed in our 2021 Annual Report on Form 10-K, Item 7, Liquidity and Capital Resources, Long-Term Debt, Page 95.

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

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

• Commissions – Commissions paid were $499 million in the first three months of 2022.

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 $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

Noncommission underwriting expenses paid were $212 million in the first three months of 2022.

There were no contributions to our qualified pension plan during the first three months of 2022.

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Investing Activities

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In January 2022, the board of directors declared regular quarterly cash dividends of 69 cents per share for an indicated annual rate of $2.76 per share.

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

During the first three months of 2022, we used $99 million to pay cash dividends to shareholders.

PROPERTY CASUALTY INSURANCE LOSS AND LOSS EXPENSE RESERVES

For the business lines in the commercial and personal lines insurance segments, and in total for the excess and surplus lines insurance segment and other property casualty insurance operations, the following table details gross reserves among case, IBNR (incurred but not reported) and loss expense reserves, net of salvage and subrogation reserves.

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 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 Third-Quarter 2021 10-Q

Reserving practices are discussed in our 2021 Annual Report on Form 10-K, Item 7, Property Casualty Loss and Loss Expense Obligations and Reserves, Page 97.

Total gross reserves at March 31, 2022, increased $58 million compared with December 31, 2021.

Case loss reserves decreased by $4 million, IBNR loss reserves increased by $45 million and loss expense reserves increased by $17 million.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Property Casualty Gross Reserves

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Case reserves IBNR reserves Percent of total

At September 30, 2021

At March 31, 2022

Commercial lines insurance:

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LIFE POLICY AND INVESTMENT CONTRACT RESERVES

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.

Gross life policy and investment contract reserves were $3.027 billion at March 31, 2022, compared with $3.014 billion at year-end 2021, reflecting continued growth in life insurance policies in force.

We discuss our life insurance reserving practices in our 2021 Annual Report on Form 10-K, Item 7, Life Insurance Policyholder Obligations and Reserves, Page 103.

Cincinnati Financial Corporation Third-Quarter 2021 10-Q

Cincinnati Financial Corporation First-Quarter 2022 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