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Item 1. Financial Statements

2022-07-27 compared with 2022-04-28 · 161 added, 99 removed, 594 unchanged (30% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

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

Fixed maturities, at fair value (amortized cost:

5 unchanged sentences

2021—$ 4,121 )

10,675 11,315

Other invested assets 391 329

34 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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

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

2022 2021 2022 2021

Earned premiums $ 1,773 $ 1,593 $ 3,463 $ 3,137

20 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Net Income (Loss) $ ( 808 ) $ 703 $ ( 1,081 ) $ 1,323

7 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Beginning of period $ 397 $ 397 $ 397 $ 397

5 unchanged sentences

Share-based compensation 9 8 20 17

Other 2 2 3 3

End of period 1,367 1,334 1,367 1,334

6 unchanged sentences

Beginning of period 59 625 648 769

Other comprehensive loss ( 589 ) ( 144 )

Other comprehensive income (loss) ( 482 ) 106 ( 1,071 ) ( 38 )

End of period ( 423 ) 731 ( 423 ) 731

4 unchanged sentences

Shares acquired - share-based compensation plans ( 6 ) ( 4 ) ( 8 ) ( 7 )

Other 1 1 1 1

End of period ( 2,112 ) ( 1,809 ) ( 2,112 ) ( 1,809 )

8 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) Three months ended March 31,

(Dollars in millions) Six months ended June 30,

Cash Flows From Operating Activities

40 unchanged sentences

Supplemental Disclosures of Cash Flow Information:

Interest paid $ 26 $ 26

Income taxes paid 142 113

4 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6 unchanged sentences

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

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

Our June 30, 2022, condensed consolidated financial statements are unaudited.

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

10 unchanged sentences

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

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

We plan to adopt these ASUs on a modified retrospective basis on January 1, 2023.

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

3 unchanged sentences

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

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

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

Based on market value discount rates and other assumptions that existed at March 31, 2022, management estimated that adoption would have a material impact.

However, based on current conditions, primarily an increase in market value discount rates, management estimates at June 30, 2022, that adoption would not have a material impact and would have resulted in an after-tax reduction to shareholders' equity of approximately $ 50 million .

The ultimate impact of adoption of these ASUs will be affected by the market value discount rates and other assumptions determined at the January 1, 2023, adoption date.

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

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 2 – Investments

2 unchanged sentences

cost Gross unrealized Fair value

At March 31, 2022 gains losses

At June 30, 2022 gains losses

Fixed maturity securities:

3 unchanged sentences

United States government 146 — 2 144

Foreign government 25 — — 25

Government-sponsored enterprises 60 — — 60

Foreign government 23 — — 23

Total $ 12,497 $ 98 $ 662 $ 11,933

5 unchanged sentences

United States government 121 2 — 123

Foreign government 26 — — 26

Government-sponsored enterprises 8 — — 8

Foreign government 26 — — 26

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

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

Th e net unrealized investment losses in our fixed-maturity portfolio at June 30, 2022, are primarily due to an increase in U.S.

Treasury yields and a widening of corporate credit spreads.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Our commercial mortgage-backed securities had an average rating of Aa2/AA- and Aa2/AA at June 30, 2022, and December 31, 2021, respectively.

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

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

At March 31, 2022 Fair

At June 30, 2022 Fair

value Unrealized

6 unchanged sentences

United States government 85 2 11 — 96 2

Foreign government 7 — — — 7 —

Government-sponsored enterprises 36 — 3 — 39 —

Foreign government 16 — — — 16 —

Total $ 7,483 $ 630 $ 151 $ 32 $ 7,634 $ 662

5 unchanged sentences

United States government 48 — — — 48 —

Foreign government 16 — — — 16 —

Government-sponsored enterprises 7 — — — 7 —

Foreign government 16 — — — 16 —

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

2 unchanged sentences

value % of fair

At March 31, 2022

At June 30, 2022

Maturity dates:

5 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Investment income:

1 unchanged sentence

Dividends 72 60 137 118

Other 2 1 3 3

Total 198 178 387 356

9 unchanged sentences

Gross realized losses ( 2 ) ( 2 ) ( 3 ) ( 2 )

Subtotal — 9 3 12

Other 16 22 22 32

Total $ ( 1,154 ) $ 520 $ ( 1,820 ) $ 1,024

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

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

The fair value of our equity portfolio was $ 9.510 billion and $ 11.315 billion at June 30, 2022, and December 31, 2021, respectively.

At June 30, 2022, and December 31, 2021, Apple Inc.

(Nasdaq:AAPL) , an equity holding, was our largest single investment holding with a fair value of $ 664 million and $ 862 million, which was 7.3 % and 7.9 % of our publicly traded common equities portfolio and 3.1 % and 3.5 % of the total investment portfolio, respectively.

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

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

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

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

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

At June 30, 2022, and December 31, 2021, the allowance for credit losses, including changes in the amount during each period, was less than $ 1 million.

During the three and six months ended June 30, 2022, there were one and two fixed-maturity securities, respectively, that were written down to fair value due to an intention to be sold resulting in impairment charges of less than $ 1 million for each period.

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

At June 30, 2022, 2,735 fixed-maturity securities with a total unrealized loss of $ 662 million were in an unrealized loss position.

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

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 3 – Fair Value Measurements

5 unchanged sentences

Fair Value Disclosures for Assets

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

The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at June 30, 2022, and December 31, 2021.

We do not have any liabilities carried at fair value.

5 unchanged sentences

(Level 3) Total

At March 31, 2022

At June 30, 2022

Fixed maturities, available for sale:

3 unchanged sentences

United States government 144 — — 144

Foreign government — 25 — 25

Government-sponsored enterprises — 60 — 60

Foreign government — 23 — 23

Subtotal 144 11,789 — 11,933

11 unchanged sentences

United States government 123 — — 123

Foreign government — 26 — 26

Government-sponsored enterprises — 8 — 8

Foreign government — 26 — 26

Subtotal 123 12,899 — 13,022

5 unchanged sentences

Total $ 11,049 $ 14,300 $ — $ 25,349

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

We also held Level 1 cash and cash equivalents of $ 1.098 billion and $ 1.139 billion at June 30, 2022, and December 31, 2021, respectively.

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

2 unchanged sentences

(Dollars in millions) Book value Principal amount

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

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

2022 2021 2022 2021

9 unchanged sentences

(Level 3) Total

At March 31, 2022

At June 30, 2022

Note payable $ — $ 44 $ — $ 44

9 unchanged sentences

Total $ — $ 1,099 $ — $ 1,099

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

5 unchanged sentences

(Level 3) Total

At March 31, 2022

At June 30, 2022

Life policy loans $ — $ — $ 39 $ 39

7 unchanged sentences

Total $ — $ 201 $ 778 $ 979

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

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Outstanding principal and interest for these life policy loans totaled $ 31 million at June 30, 2022, and

December 31, 2021.

Recorded reserves for the deferred annuities were $ 755 million and $ 762 million at June 30, 2022, and December 31, 2021, respectively.

Recorded reserves for the structured settlements were $ 133 million and $ 136 million at June 30, 2022, and December 31, 2021, respectively.

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 4 – Property Casualty Loss and Loss Expenses

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

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Gross loss and loss expense reserves, beginning of period $ 7,287 $ 6,880 $ 7,229 $ 6,677

17 unchanged sentences

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

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

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

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

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

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

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

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 66 million at June 30, 2022, and $ 64 million at June 30, 2021, for certain life and health loss and loss expense reserves.

For the three months ended June 30, 2022, we experienced $ 59 million of favorable development on prior accident years, including $ 29 million of favorable development in commercial lines, $ 14 million of favorable development in personal lines and $ 1 million of favorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 18 million for the workers' compensation line and $ 7 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 16 million for the homeowner line.

For the six months ended June 30, 2022, we experienced $ 100 million of favorable development on prior accident years, including $ 47 million of favorable development in commercial lines, $ 48 million of favorable development in personal lines and $ 6 million of favorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 27 million for the workers' compensation line and $ 12 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 46 million for the homeowner line.

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

For the six months ended June 30, 2021, we experienced $ 229 million of favorable development on prior accident

years, including $ 169 million of favorable development in commercial lines, $ 32 million of favorable development in

personal lines and $ 3 million of unfavorable development in excess and surplus lines.

Within commercial lines, we

recognized favorable reserve development of $ 52 million for the workers' compensation line, $ 37 million for the

commercial auto line, $ 34 million for the commercial property line and $ 32 million for the commercial casualty line

due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 5 – Life Policy and Investment Contract Reserves

7 unchanged sentences

This table summarizes our life policy and investment contract reserves:

(Dollars in millions) March 31,

(Dollars in millions) June 30,

2022 December 31,

8 unchanged sentences

Total life policy and investment contract reserves $ 3,041 $ 3,014

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 6 – Deferred Policy Acquisition Costs

2 unchanged sentences

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

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Property casualty:

15 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 7 – Accumulated Other Comprehensive Income

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

(Dollars in millions) Three months ended March 31,

(Dollars in millions) Three months ended June 30,

Before tax Income tax Net Before tax Income tax Net

23 unchanged sentences

AOCI, end of period $ ( 535 ) $ ( 112 ) $ ( 423 ) $ 926 $ 195 $ 731

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

(Dollars in millions) Six months ended June 30,

Before tax Income tax Net Before tax Income tax Net

AOCI, beginning of period $ 792 $ 165 $ 627 $ 1,026 $ 215 $ 811

OCI before investment gains and losses, net, recognized in net income ( 1,353 ) ( 284 ) ( 1,069 ) ( 52 ) ( 11 ) ( 41 )

Investment gains and losses, net, recognized in net income ( 3 ) — ( 3 ) ( 12 ) ( 3 ) ( 9 )

OCI ( 1,356 ) ( 284 ) ( 1,072 ) ( 64 ) ( 14 ) ( 50 )

AOCI, end of period $ ( 564 ) $ ( 119 ) $ ( 445 ) $ 962 $ 201 $ 761

Pension obligations:

AOCI, beginning of period $ 27 $ 7 $ 20 $ ( 41 ) $ ( 7 ) $ ( 34 )

OCI excluding amortization recognized in net income — — — 2 — 2

Amortization recognized in net income — — — 3 1 2

OCI — — — 5 1 4

AOCI, end of period $ 27 $ 7 $ 20 $ ( 36 ) $ ( 6 ) $ ( 30 )

Life deferred acquisition costs, life policy reserves and other:

AOCI, beginning of period $ 1 $ — $ 1 $ ( 10 ) $ ( 2 ) $ ( 8 )

OCI before investment gains and losses, net, recognized in net income 1 — 1 10 2 8

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

OCI 1 — 1 10 2 8

AOCI, end of period $ 2 $ — $ 2 $ — $ — $ —

Summary of AOCI:

AOCI, beginning of period $ 820 $ 172 $ 648 $ 975 $ 206 $ 769

Investments OCI ( 1,356 ) ( 284 ) ( 1,072 ) ( 64 ) ( 14 ) ( 50 )

Pension obligations OCI — — — 5 1 4

Life deferred acquisition costs, life policy reserves and other OCI 1 — 1 10 2 8

Total OCI ( 1,355 ) ( 284 ) ( 1,071 ) ( 49 ) ( 11 ) ( 38 )

AOCI, end of period $ ( 535 ) $ ( 112 ) $ ( 423 ) $ 926 $ 195 $ 731

Investment gains and losses, net, and life deferred acquisition costs, life policy reserves and other investment gains and losses, net, are recorded in the investment gains and losses, net, line item in the condensed consolidated statements of income.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 8 – Reinsurance

3 unchanged sentences

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

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Direct written premiums $ 1,871 $ 1,649 $ 3,574 $ 3,194

12 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Direct earned premiums $ 96 $ 98 $ 186 $ 185

5 unchanged sentences

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

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

At June 30, 2022, and December 31, 2021, the allowance for uncollectible property casualty premiums was $ 14 million.

At June 30, 2022, and December 31, 2021, the allowances for credit losses on other premiums receivable and recoverable assets were immaterial.

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 9 – Income Taxes

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

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Tax at statutory rate:

9 unchanged sentences

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

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

domestic operations at June 30, 2022, and December 31, 2021.

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

1 unchanged sentence

Unrecognized Tax Benefits

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

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

At June 30, 2022, and December 31, 2021, we had a gross unrecognized tax benefit of $ 34 million.

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

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

Cincinnati Global

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

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

As a result of operations for the three and six months ended June 30, 2022, Cincinnati Global decreased its net deferred tax assets by $ 8 million and $ 11 million with an offsetting decrease of $ 8 million and $ 11 million to the valuation allowance.

At June 30, 2022, Cincinnati Global had a net deferred tax asset of $ 42 million and an offsetting valuation allowance of $ 42 million.

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

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

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

After considering all positive and negative evidence, we continue to believe it is appropriate to carry a valuation allowance at June 30, 2022.

At June 30, 2022, and December 31, 2021, Cincinnati Global had operating loss carryforwards in the United States of $ 6 million and $ 8 million, respectively, and in the United Kingdom of $ 125 million and $ 130 million, respectively.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

NOTE 10 – Net Income (Loss) Per Common Share

2 unchanged sentences

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

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

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

2022 2021 2022 2021

Net income (loss)—basic and diluted

9 unchanged sentences

Number of anti-dilutive share-based awards 2.0 0.4 2.2 1.0

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

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

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

The above table shows the number of anti-dilutive share-based awards for the three and six months ended June 30, 2022 and 2021.

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

1 unchanged sentence

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

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Service cost $ 3 $ 3 $ 5 $ 5

3 unchanged sentences

Amortization of actuarial loss and prior service cost — 1 — 3

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

Other — — — 2

Total non-service benefit ( 3 ) ( 2 ) ( 6 ) ( 1 )

Net periodic (benefit) cost $ — $ 1 $ ( 1 ) $ 4

See our 2021 Annual Report on Form 10-K, Item 8, Note 13, Employee Retirement Benefits, Page 162, for information on our retirement benefits.

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

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

The net periodic (benefit) cost is allocated in the same proportion primarily to the underwriting, acquisition and insurance expenses line item with the remainder allocated to the insurance losses and contract holders' benefits line item on the condensed consolidated statements of income for both 2022 and 2021.

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

We made matching contributions totaling $ 6 million and $ 5 million to our 401(k) and Top Hat savings plans during the second quarter of 2022 and 2021 and contributions of $ 14 million and $ 11 million for the first half of 2022 and 2021.

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

NOTE 12 – Commitments and Contingent Liabilities

13 unchanged sentences

These lawsuits are at various stages of litigation:

many complaints continue to be amended;

several have been dismissed voluntarily and may be refiled;

and others have been dismissed by trial courts and appealed.

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

a few filed in 2022, including several that continue to be amended;

several that have been dismissed voluntarily and may be refiled;

and others that have been dismissed by trial courts and appealed.

While appellate decisions issued to date generally have been favorable for the insurance industry and the company, many remain to be decided.

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

7 unchanged sentences

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

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

The company’s

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

On a quarterly basis, we review these outstanding matters.

16 unchanged sentences

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Segment information is summarized in the following table:

(Dollars in millions) Three months ended March 31,

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

2022 2021 2022 2021

Commercial lines insurance

24 unchanged sentences

Premiums 166 126 308 250

Other 3 3 5 5

Total other revenues 169 129 313 255

16 unchanged sentences

Total $ 29,192 $ 31,387

Cincinnati Financial Corporation First-Quarter 2022 10-Q

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

What changed 10-Q

Item 1. Financial Statements