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Item 1. Financial Statements

2022-10-31 compared with 2022-07-27 · 124 added, 108 removed, 647 unchanged (26% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

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

Fixed maturities, at fair value (amortized cost:

41 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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

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

2022 2021 2022 2021

21 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

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

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

2022 2021 2022 2021

5 unchanged sentences

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

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

Other comprehensive loss ( 405 ) ( 68 ) ( 1,476 ) ( 106 )

Comprehensive Income (Loss) $ ( 823 ) $ 85 $ ( 2,975 ) $ 1,370

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity

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

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

2022 2021 2022 2021

15 unchanged sentences

Beginning of period ( 423 ) 731 648 769

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

Other comprehensive loss ( 405 ) ( 68 ) ( 1,476 ) ( 106 )

End of period ( 828 ) 663 ( 828 ) 663

15 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) Six months ended June 30,

(Dollars in millions) Nine months ended September 30,

Cash Flows From Operating Activities

47 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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 June 30, 2022, condensed consolidated financial statements are unaudited.

Our September 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.

16 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.

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 Second-Quarter 2022 10-Q

Based on current conditions, management estimates at September 30, 2022, that adoption would not have a material impact and would have resulted in an after-tax increase 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 and could be material.

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 is substantially complete.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

NOTE 2 – Investments

2 unchanged sentences

cost Gross unrealized Fair value

At June 30, 2022 gains losses

At September 30, 2022 gains losses

Fixed maturity securities:

15 unchanged sentences

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

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

Th e net unrealized investment losses in our fixed-maturity portfolio at September 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- and Aa2/AA at June 30, 2022, and December 31, 2021, respectively.

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

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

Cincinnati Financial Corporation Third-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 June 30, 2022 Fair

At September 30, 2022 Fair

value Unrealized

21 unchanged sentences

value % of fair

At June 30, 2022

At September 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 Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

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

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

2022 2021 2022 2021

14 unchanged sentences

Gross realized losses — ( 1 ) ( 3 ) ( 3 )

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

Subtotal — 8 3 20

1 unchanged sentence

Total $ ( 674 ) $ ( 70 ) $ ( 2,494 ) $ 954

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.

The fair value of our equity portfolio was $ 8.840 billion and $ 11.315 billion at September 30, 2022, and December 31, 2021, respectively.

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

(Nasdaq:AAPL) , an equity holding, was our largest single investment holding with a fair value of $ 638 million and $ 862 million, which was 7.6 % and 7.9 % of our publicly traded common equities portfolio and 3.1 % and 3.5 % of the total investment portfolio, respectively.

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 September 30, 2022, and December 31, 2021, the allowance for credit losses was $ 1 million and less than

$ 1 million, respectively.

Changes in the amount during each period were less than $ 1 million.

During the three months ended September 30, 2022, there were no fixed-maturity securities that were written down to fair value due to an intention to be sold.

During the nine months ended September 30, 2022, there were two fixed-maturity securities that were written down to fair value due to an intention to be sold resulting in impairment charges of less than $ 1 million.

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

At September 30, 2022, 4,049 fixed-maturity securities with a total unrealized loss of $ 1.115 billion were in an unrealized loss position.

Of that total, 118 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 Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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 June 30, 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 September 30, 2022, and December 31, 2021.

We do not have any liabilities carried at fair value.

5 unchanged sentences

(Level 3) Total

At June 30, 2022

At September 30, 2022

Fixed maturities, available for sale:

27 unchanged sentences

Total $ 11,049 $ 14,300 $ — $ 25,349

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

We also held Level 1 cash and cash equivalents of $ 1.083 billion and $ 1.139 billion at September 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 June 30, December 31, June 30, December 31,

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

2022 2021 2022 2021

9 unchanged sentences

(Level 3) Total

At June 30, 2022

At September 30, 2022

Note payable $ — $ 44 $ — $ 44

9 unchanged sentences

Total $ — $ 1,099 $ — $ 1,099

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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 June 30, 2022

At September 30, 2022

Life policy loans $ — $ — $ 37 $ 37

7 unchanged sentences

Total $ — $ 201 $ 778 $ 979

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

Outstanding principal and interest for these life policy loans totaled $ 31 million at September 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

Recorded reserves for the deferred annuities were $ 753 million and $ 762 million at September 30, 2022, and December 31, 2021, respectively.

Recorded reserves for the structured settlements were $ 131 million and $ 136 million at September 30, 2022, and December 31, 2021, respectively.

Cincinnati Financial Corporation Third-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 June 30, Six months ended June 30,

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

2022 2021 2022 2021

18 unchanged sentences

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

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 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.

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 68 million at September 30, 2022, and $ 66 million at September 30, 2021, for certain life and health loss and loss expense reserves.

For the three months ended September 30, 2022, we experienced $ 43 million of favorable development on prior accident years, including $ 4 million of favorable development in commercial lines, $ 8 million of favorable development in personal lines and $ 7 million of favorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 24 million for the commercial property line and $ 16 million for the workers' compensation line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

This was partially offset by unfavorable reserve development of $ 23 million for the commercial casualty line and $ 16 million for the commercial auto line.

For the nine months ended September 30, 2022, we experienced $ 143 million of favorable development on prior accident years, including $ 51 million of favorable development in commercial lines, $ 56 million of favorable development in personal lines and $ 13 million of favorable development in excess and surplus lines.

Within commercial lines, we recognized favorable reserve development of $ 43 million for the workers' compensation line and $ 36 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

This was partially offset by unfavorable reserve development of $ 25 million for the commercial casualty line and $ 15 million for the commercial auto line.

Within personal lines, we recognized favorable reserve development of $ 51 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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

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

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

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

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

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

Cincinnati Financial Corporation Third-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) June 30,

(Dollars in millions) September 30,

2022 December 31,

8 unchanged sentences

Total life policy and investment contract reserves $ 3,053 $ 3,014

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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 June 30, Six months ended June 30,

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

2022 2021 2022 2021

16 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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 June 30,

(Dollars in millions) Three months ended September 30,

Before tax Income tax Net Before tax Income tax Net

23 unchanged sentences

AOCI, end of period $ ( 1,049 ) $ ( 221 ) $ ( 828 ) $ 840 $ 177 $ 663

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

(Dollars in millions) Six months ended June 30,

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

(Dollars in millions) Nine months ended September 30,

Before tax Income tax Net Before tax Income tax Net

25 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

NOTE 8 – Reinsurance

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

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

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

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

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

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

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

2022 2021 2022 2021

13 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 Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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 June 30, Six months ended June 30,

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

2022 2021 2022 2021

6 unchanged sentences

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

At June 30, 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

At September 30, 2022, and December 31, 2021, the allowance for uncollectible property casualty premiums was $ 15 million and $ 14 million, respectively.

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

Cincinnati Financial Corporation Third-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 June 30, Six months ended June 30,

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

2022 2021 2022 2021

4 unchanged sentences

Dividend received exclusion ( 5 ) 0.9 ( 5 ) ( 2.7 ) ( 15 ) 0.8 ( 14 ) ( 0.8 )

Release of unrecognized tax benefit ( 34 ) 5.9 — — ( 34 ) 1.7 — —

Other 5 ( 0.9 ) 2 1.2 ( 1 ) — ( 6 ) ( 0.3 )

4 unchanged sentences

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

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

domestic operations at September 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.

SM (Cincinnati Global).

Enactment of the Inflation Reduction Act of 2022

The Inflation Reduction Act of 2022 (Tax Act) was enacted on August 16, 2022.

Along with other changes, the Tax Act created a new corporate alternative minimum tax (AMT) for certain corporations based on 15% of adjusted financial statement income for the taxable year.

In addition, the Tax Act imposes a 1% excise tax on corporate stock repurchases.

The effective date of these two provisions is January 1, 2023.

We do not expect the enactment of the Tax Act to have a material impact on our financial statements.

Any excise tax incurred on corporate stock repurchases will be recognized as part of the cost basis of the treasury stock acquired and not reported as part of income tax expense.

Unrecognized Tax Benefits

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.

During the current quarter, we received favorable guidance from the Internal Revenue Service (IRS) supporting our tax position related to our unrecognized tax benefit set up in 2018.

As a result of this guidance, we released our $34 million gross unrecognized tax benefit liability at September 30, 2022.

The $34 million release is recognized as an additional income tax benefit and is shown separately in our effective income tax rate reconciliation.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

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

2022 2021 2022 2021

Gross unrecognized tax benefits, beginning of period $ 34 $ 34 $ 34 $ 34

Gross increase in prior year positions — — — —

Gross decrease in prior year positions ( 34 ) — ( 34 ) —

Gross increase in current year positions — — — —

Settlements with tax authorities — — — —

Lapse of statute of limitations — — — —

Gross unrecognized tax benefits, end of period $ — $ 34 $ — $ 34

During the current quarter, the Congressional Joint Committee on Taxation completed review of our 2017 tax return and related carryback claims with no change to our returns as filed.

Our 2018 tax year remains open and we recently received notice from the IRS of their intent to audit tax year ended December 31, 2020.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Global

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.

As a result of operations for the three and nine months ended September 30, 2022, Cincinnati Global increased its net deferred tax assets by $ 7 million and decreased it by $ 4 million with an offsetting increase of $ 7 million and decrease of $ 4 million to the valuation allowance.

At September 30, 2022, Cincinnati Global had a net deferred tax asset of $ 49 million and an offsetting valuation allowance of $ 49 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 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.

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

At September 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 $ 123 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 Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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 June 30, Six months ended June 30,

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

2022 2021 2022 2021

10 unchanged sentences

Number of anti-dilutive share-based awards 2.3 0.4 1.9 0.9

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 and six months ended June 30, 2022.

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

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

The above table shows the number of anti-dilutive share-based awards for the three and 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.

NOTE 11 – Employee Retirement Benefits

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

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

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

2022 2021 2022 2021

9 unchanged sentences

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

We made matching contributions totaling $ 6 million and $ 7 million to our 401(k) and Top Hat savings plans during the third quarter of 2022 and 2021 and contributions of $ 20 million and $ 18 million for the first nine months of 2022 and 2021, respectively.

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

NOTE 12 – Commitments and Contingent Liabilities

24 unchanged sentences

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

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

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

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.

These actions include, among others, putative class actions seeking certification of state or national classes.

Such proceedings have alleged, for example, improper depreciation of labor costs in repair estimates.

The company’s insurance subsidiaries also are occasionally parties to individual actions in

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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 Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Segment information is summarized in the following table:

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

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

2022 2021 2022 2021

38 unchanged sentences

Identifiable assets:

September 30,

2022 December 31,

4 unchanged sentences

Total $ 28,199 $ 31,387

Cincinnati Financial Corporation Second-Quarter 2022 10-Q

Cincinnati Financial Corporation Third-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