37 unchanged sentences
• Declines in overall stock market values negatively affecting our equity portfolio and book value
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-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
24 unchanged sentences
◦ Impose new obligations on us that increase our expenses or change the assumptions underlying our critical accounting estimates
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
◦ Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations
16 unchanged sentences
The ultimate changes and eventual effects, if any, of these initiatives are uncertain.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
CORPORATE FINANCIAL HIGHLIGHTS
Net Income and Comprehensive Income Data
−Removed: (Dollars in millions, except per share data) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions, except per share data) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
8 unchanged sentences
Diluted weighted average shares outstanding 158.0 162.9 (3) 159.3 162.8 (2)
−Removed: Total revenues decreased $1.475 billion for the second quarter of 2022, compared with the second quarter of 2021, as a reduction in net investment gains offset increases in earned premiums and investment income.
−Removed: For the first six months of 2022, compared with the same period of 2021, total revenues decreased $2.487 billion, as higher earned premiums and investment income were offset by a reduction in net investment gains.
+Added: Total revenues decreased $377 million for the third quarter of 2022, compared with the third quarter of 2021, as a reduction in net investment gains offset increases in earned premiums and investment income.
+Added: For the first nine months of 2022, compared with the same period of 2021, total revenues decreased $2.864 billion, as higher earned premiums and investment income were offset by a reduction in net investment gains.
Premium and investment revenue trends are discussed further in the respective sections of Financial Results.
2 unchanged sentences
The change in fair value of securities is also generally independent of the insurance underwriting process.
−Removed: The net loss for the second quarter of 2022, compared with second-quarter 2021 net income, was a change of $1.511 billion, including a decrease of $1.323 billion in after-tax net investment gains and losses and a decrease of $216 million in after-tax property casualty underwriting income that offset an increase of $16 million in after-tax investment income.
−Removed: Catastrophe losses for the second quarter of 2022, mostly weather related, were $119 million higher after taxes and unfavorably affected both net income and property casualty underwriting income.
−Removed: Life insurance segment results on a pretax basis increased by $15 million compared with the second quarter of 2021.
−Removed: For the first six months of 2022, net income decreased $2.404 billion, compared with the first six months of 2021,
−Removed: including decreases of $2.247 billion in after-tax investment gains and losses and $190 million in after-tax property casualty underwriting income that offset an increase of $25 million in after-tax investment income.
+Added: The net loss for the third quarter of 2022, compared with third-quarter 2021 net income, was a change of $571 million, including a decrease of $476 million in after-tax net investment gains and losses and a decrease of $114 million in after-tax property casualty underwriting income that offset an increase of $12 million in after-tax investment income.
+Added: Catastrophe losses for the third quarter of 2022, mostly weather related, were $19 million higher after taxes and unfavorably affected both net income and property casualty underwriting income.
+Added: Life insurance segment results on a pretax basis increased by $16 million compared with the third quarter of 2021.
+Added: Third-quarter 2022 net income included a $34 million benefit from the release of an uncertain tax position related to the IRS examination of the tax year ended December 31, 2018, and is part of after-tax property casualty underwriting income.
+Added: For the first nine months of 2022, net income decreased $2.975 billion, compared with the first nine months of 2021, including decreases of $2.723 billion in after-tax investment gains and losses and $305 million in after-tax property casualty underwriting income that offset an increase of $36 million in after-tax investment income.
The property casualty underwriting income decrease included an unfavorable $40 million after-tax effect from higher catastrophe losses.
Life insurance segment results increased by $31 million on a pretax basis.
+Added: The nine-month 2022 net income and after-tax property casualty underwriting income included the $34 million benefit from the release of an uncertain tax position noted above.
The decrease in property casualty underwriting income for both 2022 periods also included higher insured loss experience before catastrophe effects, partly from elevated paid losses reflecting economic or other forms of inflation.
2 unchanged sentences
Until longer-term paid loss cost trends become more clear, we intend to remain prudent in reserving for estimated ultimate losses.
−Removed: As a result, first-half 2022 incurred losses for several lines of business were higher than in recent periods and are discussed in Financial Results by property casualty insurance segment.
−Removed: During the first six 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.
−Removed: We believe it did not have a significant effect on our premium revenues during the first six months of 2022 and there were no material changes to our estimates for incurred losses and expenses related to the pandemic.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: As a result, incurred losses for the first nine months of 2022 for several lines of business were higher than in prior periods and are discussed in Financial Results by property casualty insurance segment.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
+Added: During the first nine 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.
+Added: We believe it did not have a significant effect on our premium revenues during the first nine 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.
4 unchanged sentences
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.
−Removed: During the first six months of 2022, cash dividends declared by the company increased 10% compared with the same period of 2021.
+Added: During the first nine 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.
1 unchanged sentence
Balance Sheet Data and Performance Measures
−Removed: (Dollars in millions, except share data) At June 30, At December 31,
+Added: (Dollars in millions, except share data) At September 30, At December 31,
Total investments $ 20,988 $ 24,666
5 unchanged sentences
Debt-to-total-capital ratio 8.1 % 6.0 %
−Removed: Total assets at June 30, 2022, decreased 7% compared with year-end 2021, and included an 11% decrease in total investments that reflected net purchases that were offset by lower fair values for many securities in our portfolio.
−Removed: Shareholders' equity decreased 19% and book value per share also decreased 19% during the first six months of 2022.
+Added: Total assets at September 30, 2022, decreased 10% compared with year-end 2021, and included a 15% decrease in total investments that reflected net purchases that were offset by lower fair values for many securities in our portfolio.
+Added: Shareholders' equity decreased 28% and book value per share decreased 27% during the first nine 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.
−Removed: That ratio was negative 17.2% for the first six months of 2022, and was less than the same period in 2021 primarily due to a reduction in overall net gains from our investment portfolio.
−Removed: The $15.42 decrease in book value per share during the first six months of 2022 contributed negative 18.9 percentage points to the value creation ratio, while dividends declared at $1.38 per share contributed positive 1.7 points.
+Added: That ratio was negative 24.0% for the first nine months of 2022, and was less than the same period in 2021 primarily due to a reduction in overall net gains from our investment portfolio.
+Added: The $21.71 decrease in book value per share during the first nine months of 2022 contributed negative 26.5 percentage points to the value creation ratio, while dividends declared at $2.07 per share contributed positive 2.5 points.
Value creation ratios by major components and in total, along with calculations from per-share amounts, are shown in the tables below.
−Removed: Three months ended June 30, Six months ended June 30,
+Added: Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
5 unchanged sentences
Value creation ratio (8.4) % 0.7 % (24.0) % 12.4 %
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
−Removed: (Dollars are per share) Three months ended June 30, Six months ended June 30,
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
+Added: (Dollars are per share) Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
5 unchanged sentences
Total value creation $ (5.60) $ 0.55 $ (19.64) $ 8.34
−Removed: Value creation ratio from change in book value** (12.1) % 6.4 % (18.9) % 9.7 %
+Added: Value creation ratio from change in book
+Added: value** (9.4) % (0.1) % (26.5) % 9.6 %
Value creation ratio from dividends declared to shareholders*** 1.0 0.8 2.5 2.8
7 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.
−Removed: At June 30, 2022, we actively marketed through 1,948 agencies located in 46 states.
+Added: At September 30, 2022, we actively marketed through 1,971 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.
−Removed: For the first six months of 2022, our consolidated property casualty net written premium year-over-year growth was 13%.
−Removed: As of February 2022, A.M.
−Removed: Best projected the industry's full-year 2022 written premium growth at approximately 6%.
+Added: For the first nine months of 2022, our consolidated property casualty net written premium year-over-year growth was 14%, comparing favorably with the industry's 11% growth rate reported by A.M.
+Added: Best for the first six months of 2022.
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%.
−Removed: For the first six months of 2022, our GAAP combined ratio was 96.7%, including 8.6 percentage points of current accident year catastrophe losses partially offset by 3.0 percentage points of favorable loss reserve development on prior accident years.
−Removed: Our statutory combined ratio was 95.3% for the first six months of 2022.
−Removed: As of February 2022, A.M.
−Removed: 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.
+Added: For the first nine months of 2022, our GAAP combined ratio was 99.2%, including 10.9 percentage points of current accident year catastrophe losses partially offset by 2.8 percentage points of favorable loss reserve development on prior accident years.
+Added: Our statutory combined ratio was 98.1% for the first nine months of 2022, comparing favorably with the industry's 100.0% reported by A.M.
+Added: Best for the first six months of 2022.
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.
−Removed: For the first six months of 2022, pretax investment income was $380 million, up 9% compared with the same period in 2021.
+Added: For the first nine months of 2022, pretax investment income was $573 million, up 9% 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.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
Financial Strength
4 unchanged sentences
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.
−Removed: At June 30, 2022, we held $4.450 billion of our cash and cash equivalents and invested assets at the parent-company level, of which $3.922 billion, or 88.1%, was invested in common stocks, and $392 million, or 8.8%, was cash or cash equivalents.
−Removed: Our debt-to-total-capital ratio was 7.3% at June 30, 2022.
−Removed: Another important indicator of financial strength is our ratio of property casualty net written premiums to statutory surplus, which was 1.1-to-1 for the 12 months ended June 30, 2022, compared with 0.9-to-1 at year-end 2021.
+Added: At September 30, 2022, we held $3.888 billion of our cash and cash equivalents and invested assets at the parent-company level, of which $3.648 billion, or 93.8%, was invested in common stocks, and $105 million, or 2.7%, was cash or cash equivalents.
+Added: Our debt-to-total-capital ratio was 8.1% at September 30, 2022.
+Added: Another important indicator of financial strength is our ratio of property casualty net written premiums to statutory surplus, which was 1.1-to-1 for the 12 months ended September 30, 2022, compared with 0.9-to-1 at year-end 2021.
Financial strength ratings assigned to us by independent rating firms also are important.
4 unchanged sentences
please see each rating agency's website for its most recent report on our ratings.
−Removed: At July 26, 2022, our insurance subsidiaries continued to be highly rated.
+Added: At October 28, 2022, our insurance subsidiaries continued to be highly rated.
Insurer Financial Strength Ratings
10 unchanged sentences
A+ Strong 5 of 21 A+ Strong 5 of 21 - - - Stable
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
CONSOLIDATED PROPERTY CASUALTY INSURANCE HIGHLIGHTS
1 unchanged sentence
SM (Cincinnati Global).
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
6 unchanged sentences
Prior accident years before catastrophe losses (20) (112) 82 (74) (282) 74
−Removed: Prior accident years catastrophe losses (25) (29) 14 (46) (59) 22
+Added: Prior accident years catastrophe losses (23) 10 nm (69) (49) (41)
Loss and loss expenses 1,348 988 36 3,544 2,741 29
13 unchanged sentences
Combined ratio before catastrophe losses and prior years reserve development 91.1 % 85.4 % 5.7 91.1 % 86.3 % 4.8
−Removed: Our consolidated property casualty insurance operations generated an underwriting loss of $52 million for the second quarter of 2022 and an underwriting profit of $113 million for the first six months of 2022.
−Removed: The second-quarter change of $273 million from an underwriting profit for the same period a year ago included an unfavorable increase of $151 million in losses from catastrophes, mostly caused by severe weather.
−Removed: The six-month underwriting profit decrease of $241 million, compared with the first six months of 2021, included an unfavorable increase of $27 million in losses from catastrophes.
+Added: Our consolidated property casualty insurance operations generated an underwriting loss of $66 million for the third quarter of 2022 and an underwriting profit of $47 million for the first nine months of the year.
+Added: The third-quarter 2022 change of $187 million from an underwriting profit for the same period a year ago included an unfavorable increase of $24 million in losses from catastrophes, mostly caused by severe weather.
+Added: The nine-month underwriting profit decrease of $428 million, compared with the first nine months of 2021, included an unfavorable increase of $51 million in losses from catastrophes.
Both 2022 periods also experienced higher current accident year loss and loss expenses before catastrophe losses and lower amounts of favorable reserve development on prior accident years.
5 unchanged sentences
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.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
−Removed: For all property casualty lines of business in aggregate, net loss and loss expense reserves at June 30, 2022, were $414 million, or 6%, higher than at year-end 2021, including an increase of $240 million for the incurred but not reported (IBNR) portion.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
+Added: For all property casualty lines of business in aggregate, net loss and loss expense reserves at September 30, 2022, were $814 million, or 12%, higher than at year-end 2021, including an increase of $620 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.
2 unchanged sentences
A combined ratio above 100% indicates that an insurance company's losses and expenses exceeded premiums.
−Removed: Our consolidated property casualty combined ratio for the second quarter of 2022 rose by 17.7 percentage points, compared with the same period of 2021, including 8.5 points from higher catastrophe losses and loss expenses.
−Removed: For the first six months of 2022, compared with the 2021 six-month period, our combined ratio rose by 8.4 percentage points, including an increase of 0.1 point from catastrophe losses and loss expenses.
−Removed: Other combined ratio components that increased are discussed below and in further detail in Financial Results by property casualty insurance segment.
+Added: Our consolidated property casualty combined ratio for the third quarter of 2022 rose by 11.3 percentage points, compared with the same period of 2021, including a decrease of 0.3 points from higher catastrophe losses and loss expenses that were outpaced by growth in earned premiums.
+Added: For the first nine months of 2022, compared with the 2021 nine-month period, our combined ratio rose by 9.4 percentage points, including a decrease of 0.1 point from higher catastrophe losses and loss expenses that were outpaced by growth in earned premiums.
+Added: Combined ratio components that increased are discussed below and in further detail in Financial Results by property casualty insurance segment.
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.
−Removed: Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 3.0 percentage points in the first six months of 2022, compared with 7.7 percentage points in the same period of 2021.
+Added: Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 2.8 percentage points in the first nine months of 2022, compared with 7.7 percentage points in the same period of 2021.
Net favorable development is discussed in further detail in Financial Results by property casualty insurance segment.
−Removed: The ratio for current accident year loss and loss expenses before catastrophe losses increased in the first six months of 2022.
−Removed: That 60.6% ratio was 3.4 percentage points higher, compared with the 57.2% accident year 2021 ratio measured as of June 30, 2021, including an increase of 2.4 points in the ratio for large losses of $1 million or more per claim, discussed below.
−Removed: The underwriting expense ratio decreased for the second quarter and increased for the first six months of 2022, compared with the same periods a year ago.
−Removed: The second-quarter 2022 decrease was primarily due to a decrease in profit-sharing commissions for agencies and related expenses, while the six-month increase was primarily due to an increase in commissions for agencies.
+Added: The ratio for current accident year loss and loss expenses before catastrophe losses increased in the first nine months of 2022.
+Added: That 61.0% ratio was 4.7 percentage points higher, compared with the 56.3% accident year 2021 ratio measured as of September 30, 2021, including an increase of 2.3 points in the ratio for large losses of $1 million or more per claim, discussed below.
+Added: The underwriting expense ratio decreased for the third quarter and increased slightly for the first nine months of 2022, compared with the same periods a year ago.
+Added: The third-quarter 2022 decrease was primarily due to a decrease in profit-sharing commissions for agencies, while the nine-month increase was primarily due to an increase in commissions for agencies.
The ratios also included ongoing expense management efforts and higher earned premiums.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
Consolidated Property Casualty Insurance Premiums
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
7 unchanged sentences
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.
−Removed: Consolidated property casualty net written premiums for the three and six months ended June 30, 2022, grew $250 million and $456 million compared with the same periods of 2021.
+Added: Consolidated property casualty net written premiums for the three and nine months ended September 30, 2022, grew $212 million and $668 million compared with the same periods 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.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
−Removed: Consolidated property casualty agency new business written premiums increased by $51 million and $75 million for the second quarter and first six months of 2022, compared with the same periods of 2021.
−Removed: New agency appointments during 2022 and 2021 produced a $25 million increase in standard lines new business for the first six months of 2022 compared with the same period of 2021.
+Added: Consolidated property casualty agency new business written premiums increased by $34 million and $109 million for the third quarter and first nine months of 2022, compared with the same periods of 2021.
+Added: New agency appointments during 2022 and 2021 produced an $11 million increase in standard lines new business for the first nine 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.
1 unchanged sentence
We believe these seasoned accounts tend to be priced more accurately than business that may be less familiar to our agent upon obtaining it from a competing agent.
−Removed: Net written premiums for Cincinnati Re, included in other written premiums, increased by $42 million and $100 million for the three months and six months ended June 30, 2022, compared with the same periods of 2021, to $178 million and $432 million, respectively.
+Added: Net written premiums for Cincinnati Re, included in other written premiums, increased by $29 million and $129 million for the three months and nine months ended September 30, 2022, compared with the same periods of 2021, to $86 million and $518 million, respectively.
Cincinnati Re assumes risks through reinsurance treaties and in some cases cedes part of the risk and related premiums to one or more unaffiliated reinsurance companies through transactions known as retrocessions.
Cincinnati Global is also included in other written premiums.
−Removed: Net written premiums increased, by $22 million and $32 million, for the three and six months ended June 30, 2022, compared with the same periods of 2021, to $69 million and $120 million, respectively.
+Added: Net written premiums increased, by $10 million and $42 million, for the three and nine months ended September 30, 2022, compared with the same periods of 2021, to $57 million and $177 million, respectively.
Other written premiums also include premiums ceded to reinsurers as part of our reinsurance ceded program.
−Removed: An increase in ceded premiums reduced net written premiums by $8 million and $15 million for the second quarter and first six months of 2022, compared with the same periods of 2021.
+Added: An increase in ceded premiums reduced net written premiums by $11 million and $26 million for the third quarter and first nine months of 2022, compared with the same periods of 2021.
Catastrophe losses and loss expenses typically have a material effect on property casualty results and can vary significantly from period to period.
−Removed: Losses from catastrophes contributed 12.4 and 7.2 percentage points to the combined ratio in the second quarter and first six months of 2022, compared with 3.9 and 7.1 percentage points in the same period of 2021.
+Added: Losses from catastrophes contributed 13.9 and 9.5 percentage points to the combined ratio in the third quarter and first nine months of 2022, compared with 14.2 and 9.6 percentage points in the same period of 2021.
Effective June 1, 2022, we restructured our reinsurance program for Cincinnati Re only, providing retrocession coverages with various triggers and unique features.
That program included property catastrophe excess of loss coverage with a total available aggregate limit of $30 million in excess of $100 million per loss.
−Removed: Coverage for Cincinnati Re only with a total available aggregate limit of $48 million in excess of $80 million per loss expired during the second quarter of 2022.
+Added: Losses estimated for Hurricane Ian as of September 30, 2022, did not reach a level applicable for reinsurance recovery.
+Added: Ultimate loss experience could be lower or higher than that estimate and higher amounts could exceed our loss retention amount of $100 million, triggering the retrocession coverage in the future.
+Added: 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, and Item 1A, Risk Factors, Page 32.
+Added: Losses estimated for
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
+Added: Hurricane Ian as of September 30, 2022, included a high degree of reliance on third-party catastrophe models and industry estimates because the event occurred near the end of the third-quarter 2022 reporting period.
+Added: Our own proprietary adjustments and ultimate loss estimates will develop as more information is reported by affected ceding companies.
Effective in May 2022, to provide more capacity to retain risks, we added a quota share reinsurance arrangement for our personal lines risks in California that we insure through excess and surplus lines policies.
Approximately 26% of the risk is reinsured through ceded premiums.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
The following table shows consolidated property casualty insurance catastrophe losses and loss expenses incurred, net of reinsurance, as well as the effect of loss development on prior period catastrophe events.
1 unchanged sentence
Consolidated Property Casualty Insurance Catastrophe Losses and Loss Expenses Incurred
−Removed: (Dollars in millions, net of reinsurance) Three months ended June 30, Six months ended June 30,
+Added: (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
−Removed: Ongoing International (Ukraine) $ — $ — $ — $ 6 $ 6 $ — $ — $ — $ 11 $ 11
−Removed: 29 - Apr.1 Midwest, Northeast, South 6 6 — — 12 6 6 — — 12
−Removed: 10-14 Midwest, West, South 17 10 1 — 28 17 10 1 — 28
+Added: 10-14 Midwest, South, West $ (4) $ (2) $ — $ — $ (6) $ 13 $ 9 $ — $ — $ 22
15-19 Northeast, South (2) (1) — — (3) 14 2 — — 16
−Removed: May 1-3 Midwest, West, South 8 8 — — 16 8 8 — — 16
+Added: May 1-3 Midwest, South, West — — — — — 8 9 — — 17
May 9-10 Midwest 1 — — — 1 20 4 — — 24
1 unchanged sentence
May 19-22 Midwest, Northeast, South 1 4 — — 5 7 15 — — 22
−Removed: 4-8 Midwest, West, South 13 4 — — 17 13 4 — — 17
+Added: 4-8 Midwest, South, West 1 (1) — — — 14 3 — — 17
11-17 Midwest, Northeast, South 1 (2) — — (1) 18 17 — — 35
+Added: 1 South (Ian) 26 51 — 143 220 26 51 — 143 220
All other 2022 catastrophes 25 27 — 6 58 67 79 3 19 168
7 unchanged sentences
17-20 Midwest 6 2 — — 8 12 16 — — 28
+Added: 1 Midwest, Northeast, South, West 3 6 — — 9 5 12 — — 17
+Added: 10-13 Midwest, Northeast, South 6 9 — — 15 6 9 — — 15
+Added: 2 Northeast, South (Ida) 18 42 — 109 169 18 42 — 109 169
All other 2021 catastrophes 10 24 1 5 40 34 53 1 5 93
1 unchanged sentence
Calendar year incurred total $ 32 $ 78 $ 1 $ 117 $ 228 $ 98 $ 193 $ 2 $ 147 $ 440
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-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
−Removed: (Dollars in millions, net of reinsurance) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions, net of reinsurance) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
18 unchanged sentences
Our analysis continues to indicate no unexpected concentration of large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory.
−Removed: The second-quarter 2022 property casualty total large losses incurred of $153 million, net of reinsurance, were higher than the $116 million quarterly average during full-year 2021 and the $102 million experienced for the second quarter of 2021.
−Removed: The ratio for these large losses was 2.2 percentage points higher compared with last year's second quarter.
−Removed: The second-quarter 2022 amount of total large losses incurred helped contribute to the increase in the six-month 2022 total large loss ratio, compared with 2021, in addition to a first-quarter 2022 ratio that was 3.9 points higher than the first quarter of 2021.
−Removed: We believe results for the three- and six-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.
+Added: The third-quarter 2022 property casualty total large losses incurred of $146 million, net of reinsurance, were higher than the $116 million quarterly average during full-year 2021 and the $116 million experienced for the third quarter of 2021.
+Added: The ratio for these large losses was 0.8 percentage points higher compared with last year's third quarter.
+Added: The third-quarter 2022 amount of total large losses incurred helped contribute to the increase in the nine-month 2022 total large loss ratio, compared with 2021, in addition to a first-half 2022 ratio that was 3.1 points higher than the first half of 2021.
+Added: We believe results for the three- and nine-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.
Losses by size are discussed in further detail in results of operations by property casualty insurance segment.
6 unchanged sentences
• Investments
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
COMMERCIAL LINES INSURANCE RESULTS
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
9 unchanged sentences
Underwriting expenses 308 298 3 916 839 9
−Removed: Underwriting profit (loss) $ (62) $ 145 nm $ 14 $ 275 (95)
+Added: Underwriting profit $ 11 $ 182 (94) $ 25 $ 457 (95)
Ratios as a percent of earned premiums:
11 unchanged sentences
Performance highlights for the commercial lines segment include:
−Removed: • Premiums – Earned premiums and net written premiums for the commercial lines segment grew during the three and six months ended June 30, 2022, compared with the same periods a year ago, primarily due to renewal written premium growth that continued to include higher average pricing and a higher level of insured exposures.
+Added: • Premiums – Earned premiums and net written premiums for the commercial lines segment grew during the three and nine months ended September 30, 2022, compared with the same periods a year ago, primarily due to renewal written premium growth that continued to include higher average pricing and a higher level of insured exposures.
The table below analyzes the primary components of premiums.
1 unchanged sentence
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.
−Removed: Agency renewal written premiums increased by 10% for the second quarter and 9% for the first six months of 2022, compared with the same periods of 2021, including price increases.
−Removed: During the second quarter of 2022, our overall standard commercial lines policies averaged estimated renewal price increases at percentages in the mid-single-digit range.
+Added: Agency renewal written premiums increased by 11% for the third quarter and 9% for the first nine months of 2022, compared with the same periods of 2021, including price increases.
+Added: During the third quarter of 2022, our overall standard commercial lines policies averaged estimated renewal price increases at percentages in the mid-single-digit range, somewhat higher than in the second quarter.
We continue to segment commercial lines policies, emphasizing identification and retention of those we believe have relatively stronger pricing.
1 unchanged sentence
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.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
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.
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.
−Removed: For commercial lines policies that did expire and were then renewed during the second quarter of 2022, we estimate that our average percentage price increases were in the mid-single-digit range for commercial property, commercial auto and commercial casualty.
−Removed: The estimated average percentage price change for workers' compensation was a decrease in the mid-single-digit range.
+Added: For commercial lines policies that did expire and were then renewed during the third quarter of 2022, we estimate that our average percentage price increases were in the mid-single-digit range for commercial property, commercial auto and commercial casualty.
+Added: The estimated average percentage price change for workers' compensation was a decrease near the low end of the mid-single-digit range.
+Added: Our nine-month 2022 increase of 9% for the commercial lines segment's agency renewal written premiums also included a higher level of insured exposures.
+Added: Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged commercial structures.
+Added: We use building valuation software to automate much of that underwriting process and may also manually adjust premiums to reflect property costs.
+Added: For our commercial property line of business, premium adjustments for such costs during the first nine months of 2022 are about double the level they were for the same period a year ago.
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.
−Removed: Audits completed during the first six months of 2022 contributed $45 million to net written premiums, compared with $18 million for the same period of 2021.
−Removed: New business written premiums for commercial lines increased $19 million and $30 million during the second quarter and first six months of 2022, compared with the same periods of 2021.
+Added: Audits completed during the first nine months of 2022 contributed $72 million to net written premiums, compared with $31 million for the same period of 2021.
+Added: New business written premiums for commercial lines increased $4 million and $34 million during the third quarter and first nine months of 2022, compared with the same periods 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.
1 unchanged sentence
Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program.
−Removed: For our commercial lines insurance segment, an increase in ceded premiums reduced net written premiums by $3 million and $9 million for the second quarter and first six months of 2022, compared with the same periods of 2021.
+Added: For our commercial lines insurance segment, an increase in ceded premiums reduced net written premiums by $5 million and $14 million for the third quarter and first nine months of 2022, compared with the same periods of 2021.
Commercial Lines Insurance Premiums
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
5 unchanged sentences
Earned premiums $ 1,028 $ 930 11 $ 2,984 $ 2,727 9
−Removed: • Combined ratio – The commercial lines combined ratio for the second quarter of 2022 increased by 22.1 percentage points, compared with the second quarter of 2021, including an increase of 9.4 points in losses from catastrophes.
−Removed: The second-quarter combined ratio also increased 6.9 points from current accident year loss and loss expenses before catastrophe losses, including 5.4 points from commercial umbrella coverages discussed below.
−Removed: For the first six months of 2022, the combined ratio increased by 14.6 percentage points, compared with the same period a year ago, including an increase of 3.4 points in losses from catastrophes and an increase of 4.1 points from current accident year loss and loss expenses before catastrophe losses, including 3.4 points from commercial umbrella.
+Added: • Combined ratio – The third-quarter 2022 commercial lines combined ratio increased by 18.4 percentage points, compared with the third quarter of 2021, including an increase of 1.2 points in losses from catastrophes.
+Added: The third-quarter combined ratio also increased 8.4 points from current accident year loss and loss expenses before catastrophe losses, including 4.4 points from commercial umbrella coverages discussed below.
+Added: For the first nine months of 2022, the combined ratio increased by 15.9 percentage points, compared with the same period a year ago, including an increase of 2.6 points in losses from catastrophes and an increase of 5.6 points from current accident year loss and loss expenses before catastrophe losses, including 3.8 points from commercial umbrella.
Underwriting results also included a lower level of favorable reserve development on prior accident years.
−Removed: Those current accident year ratios were measured as of June 30 of the respective years and included a second-quarter 2022 decrease of 0.7 percentage points and a six-month increase of 2.2 points in the ratio for large losses of $1 million or more per claim, discussed below.
+Added: Those current accident year ratios were measured as of September 30 of the respective years and included a third-quarter 2022 increase of 3.1 percentage points and a nine-month increase of 2.6 points in the ratio for large losses of $1 million or more per claim, discussed below.
When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends for inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company.
Elevated inflation was a driver of higher losses and loss expenses as costs have increased significantly to repair damaged business property or autos that we insure.
−Removed: In addition to inflation causing deviations from historical loss patterns, we believe reduced driving during the pandemic resulted in a relatively low level of loss activity in 2021, distorting paid loss cost trends for autos.
+Added: In addition to inflation causing deviations from historical loss patterns, we believe reduced driving during the pandemic resulted in a relatively
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
+Added: low level of loss activity in 2021, distorting paid loss cost trends for autos.
Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear.
−Removed: Commercial umbrella coverages, part of our commercial casualty line of business that help protect businesses against liability from occurrences such as accidents or injuries, contributed significantly to the increase in 2022 ratios for losses and expenses.
−Removed: For the first six months of 2022, incurred losses and loss expenses for
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
−Removed: commercial umbrella coverages of $198 million increased $114 million or 137%, compared with the same period of 2021, in part due to paid losses of $112 million increasing $45 million or 68% while earned premiums rose 10%.
+Added: Commercial umbrella coverages, part of our commercial casualty line of business that help protect businesses against liability from occurrences such as accidents or injuries, contributed significantly to the increase in nine-month 2022 ratios for losses and expenses.
+Added: For the first nine months of 2022, incurred losses and loss expenses for commercial umbrella coverages of $316 million increased $195 million or 161%, compared with the same period of 2021, in part due to paid losses of $177 million increasing $97 million or 121% while earned premiums rose 10%.
+Added: Severe losses from commercial auto accidents were the primary source of our commercial umbrella claims during the first nine months of 2022 and also in recent years.
Commercial umbrella paid loss experience is inherently variable.
For example, paid losses rose 80% in 2019 while decreasing by 35% in both 2018 and 2020.
−Removed: Commercial umbrella net earned premiums were $243 million for the first six months of 2022 and represented approximately 35% of our commercial casualty premiums for the first half of both 2022 and 2021.
−Removed: The profile of coverage limits for policies in force at the beginning of second-quarter 2022 included 43% with $1 million of coverage per policy, 91% with $5 million or less and 98% with less than $10 million of coverage.
+Added: Commercial umbrella net earned premiums were $370 million for the first nine months of 2022 and represented approximately 35% of our commercial casualty premiums for the first half of both 2022 and 2021.
+Added: The profile of coverage limits for policies in force at the beginning of second-quarter 2022 included 43% with $1 million of coverage per policy, 91% with $5 million or less and 98% with $10 million or less of coverage.
Our commercial umbrella insurance coverages have a strong record of profitability for us, including an estimated combined ratio below 80% in each of the past five years.
−Removed: Catastrophe losses and loss expenses accounted for 12.6 and 7.1 percentage points of the combined ratio for the second quarter and first six months of 2022, compared with 3.2 and 3.7 percentage points for the same periods a year ago.
+Added: Catastrophe losses and loss expenses accounted for 4.5 and 6.2 percentage points of the combined ratio for the third quarter and first nine months of 2022, compared with 3.3 and 3.6 percentage points for the same periods 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.
−Removed: The net effect of reserve development on prior accident years during the second quarter and first six months of 2022 was favorable for commercial lines overall by $29 million and $47 million, compared with $86 million and $169 million for the same periods in 2021.
−Removed: For the first six months of 2022, our workers' compensation and commercial property lines of business were the main contributors to the commercial lines net favorable reserve development on prior accident years, while our commercial casualty line of business included net unfavorable development of $25 million from commercial umbrella coverages.
−Removed: The net favorable reserve development recognized during the first six 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.
+Added: The net effect of reserve development on prior accident years during the third quarter and first nine months of 2022 was favorable for commercial lines overall by $4 million and $51 million, compared with $107 million and $276 million for the same periods in 2021.
+Added: For the first nine months of 2022, our workers' compensation and commercial property lines of business were the main contributors to the commercial lines net favorable reserve development on prior accident years, while our commercial casualty line of business included net unfavorable development of $25 million, including $41 million from commercial umbrella coverages.
+Added: The net favorable reserve development recognized during the first nine 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.
−Removed: The commercial lines underwriting expense ratio decreased for the second quarter and increased for the first six months of 2022, compared with the same periods a year ago.
−Removed: The second-quarter 2022 decrease was primarily due to a decrease in profit-sharing commissions for agencies and related expenses, while the six-month increase was primarily due to an increase in commissions for agencies.
+Added: The commercial lines underwriting expense ratio decreased for the third quarter of 2022 and was essentially unchanged for the first nine months of 2022, compared with the same periods a year ago.
+Added: The third-quarter 2022 decrease was primarily due to a decrease in profit-sharing commissions for agencies.
The ratios also included ongoing expense management efforts and higher earned premiums.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
Commercial Lines Insurance Losses Incurred by Size
−Removed: (Dollars in millions, net of reinsurance) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions, net of reinsurance) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
−Removed: Current accident year losses greater than $5 million $ 15 $ 38 (61) $ 31 $ 43 (28)
+Added: Current accident year losses greater than $5 million $ 30 $ 4 nm $ 61 $ 47 30
Current accident year losses $1 million - $5 million 72 60 20 192 115 67
14 unchanged sentences
Total loss ratio 58.4 % 38.5 % 19.9 57.7 % 42.2 % 15.5
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 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.
−Removed: The second-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 $81 million of total large losses incurred for the second quarter of 2021.
−Removed: The increase in commercial lines large losses for the first six months of 2022 was primarily due to our commercial casualty and commercial property lines of business.
−Removed: The second-quarter 2022 ratio for commercial lines total large losses was 1.6 percentage points higher than last year's second-quarter ratio.
−Removed: The second-quarter 2022 amount of total large losses incurred helped contribute to the increase in the six-month 2022 total large loss ratio, compared with 2021, in addition to a first-quarter 2022 ratio that was 4.2 points higher than the first quarter of 2021.
−Removed: We believe results for the three- and six-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: The third-quarter 2022 commercial lines total large losses incurred of $114 million, net of reinsurance, were higher than the quarterly average of $95 million during full-year 2021 and the $93 million of total large losses incurred for the third quarter of 2021.
+Added: The increase in commercial lines large losses for the first nine months of 2022 was primarily due to our commercial casualty and commercial property lines of business.
+Added: The third-quarter 2022 ratio for commercial lines total large losses was 1.1 percentage points higher than last year's third-quarter ratio.
+Added: The third-quarter 2022 amount of total large losses incurred helped contribute to the increase in the nine-month 2022 total large loss ratio, compared with 2021, in addition to a first-half 2022 ratio that was 2.9 points higher than the first half of 2021.
+Added: 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.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
PERSONAL LINES INSURANCE RESULTS
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
23 unchanged sentences
Performance highlights for the personal lines segment include:
−Removed: • Premiums – Personal lines earned premiums and net written premiums continued to grow during the second quarter and first six months of 2022, including increased new business and renewal written premiums that included higher average pricing.
−Removed: Personal lines net written premiums from high net worth policies totaled approximately $259 million and $435 million for the second quarter and first six months of 2022, compared with $177 million and $310 million for the same periods of 2021.
+Added: • Premiums – Personal lines earned premiums and net written premiums continued to grow during the third quarter and first nine months of 2022, including increased new business and renewal written premiums that included higher average pricing.
+Added: Personal lines net written premiums from high net worth policies totaled approximately $249 million and $685 million for the third quarter and first nine months of 2022, compared with $180 million and $490 million for the same periods of 2021.
The table below analyzes the primary components of premiums.
−Removed: Agency renewal written premiums increased 10% for both the second quarter and first six months of 2022, reflecting rate increases in selected states, a higher level of insured exposures and other factors such as changes in policy deductibles or mix of business.
−Removed: 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 six months of 2022.
+Added: Agency renewal written premiums increased 11% for both the third quarter and first nine months of 2022, reflecting rate increases in selected states, a higher level of insured exposures and other factors such as changes in policy deductibles or mix of business.
+Added: Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged homes.
+Added: In recent years, prior to 2022, our homeowner policies used inflation factors that adjusted premiums for such costs annually and averaged increases in the mid-single-digit percentage range.
+Added: Beginning in 2022, the adjustment occurred quarterly and the inflation factors were in the high-single digit percentage range for both the second and third quarters.
+Added: 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 nine months of 2022.
We plan to increase rates more aggressively in future quarters.
−Removed: For our homeowner line of business, we estimate that premium rates for the first six months of 2022 increased at average percentages in the mid-single-digit range.
+Added: We expect full-year 2023 written premiums will include an average rate increase of approximately 10% for our personal auto line of business.
+Added: For our homeowner line of business, we estimate that premium rates for the first nine months of 2022 increased at average percentages in the mid-single-digit range.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
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.
−Removed: Personal lines new business written premiums increased $35 million or 66% for the second quarter of 2022 and $41 million, including $38 million from high net worth policies, for the first six months, compared with the same periods of 2021.
−Removed: Approximately $12 million of the second-quarter 2022 increase was from excess and surplus lines homeowner policies and $21 million was from other high net worth policies.
−Removed: We believe underwriting and
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
−Removed: pricing discipline were maintained in recent quarters, and growth was also supported by expanded use of enhanced pricing precision tools.
+Added: Personal lines new business written premiums increased $28 million or 53% for the third quarter of 2022 and $69 million, including $60 million from high net worth policies, for the first nine months, compared with the same periods of 2021.
+Added: Approximately $3 million of the third-quarter 2022 increase was from excess and surplus lines homeowner policies and $19 million was from other high net worth policies.
+Added: We believe underwriting and pricing discipline were maintained in recent quarters, and growth was also supported by expanded use of enhanced pricing precision tools.
Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program.
−Removed: For our personal lines insurance segment, an increase in 2022 ceded premiums reduced net written premiums by $4 million for both the second quarter and first six months, compared with the same periods of 2021.
+Added: For our personal lines insurance segment, an increase in 2022 ceded premiums reduced net written premiums by $6 million for the third quarter and $10 million for the first nine months, compared with the same periods of 2021.
Personal Lines Insurance Premiums
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
5 unchanged sentences
Earned premiums $ 431 $ 388 11 $ 1,246 $ 1,146 9
−Removed: • Combined ratio – Our personal lines combined ratio for the second quarter of 2022 increased by 19.4 percentage points, compared with second-quarter 2022, including an increase of 8.5 points in losses from catastrophes and an increase of 8.2 points from current accident year loss and loss expenses before catastrophe losses.
−Removed: For the first six months of 2022, the combined ratio increased by 1.4 percentage points, compared with the same period a year ago, including a decrease of 4.7 points in losses from catastrophes and an increase of 3.0 points from current accident year loss and loss expenses before catastrophe losses, with our personal auto and homeowner lines of business each representing approximately 1 point.
−Removed: Those current accident year ratios were measured as of June 30 of the respective years and included a second-quarter 2022 increase of 5.3 percentage points and a six-month increase of 4.4 points in the ratio for large losses of $1 million or more per claim, discussed below.
+Added: • Combined ratio – Our personal lines combined ratio for the third quarter of 2022 increased by 1.8 percentage points, compared with third-quarter 2021, including a decrease of 4.1 points in losses from catastrophes and an increase of 6.4 points from current accident year loss and loss expenses before catastrophe losses.
+Added: For the first nine months of 2022, the combined ratio increased by 1.6 percentage points, compared with the same period a year ago, including a decrease of 4.4 points in losses from catastrophes.
+Added: The nine-month 2022 combined ratio also included an increase of 4.2 points from current accident year loss and loss expenses before catastrophe losses, with our personal auto line of business representing approximately 1 point and our homeowner line of business representing approximately 2 points.
+Added: Those current accident year ratios were measured as of September 30 of the respective years and included a third-quarter 2022 increase of 0.1 percentage points and a nine-month increase of 2.9 points in the ratio for large losses of $1 million or more per claim, discussed below.
When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends in inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company.
2 unchanged sentences
Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear.
−Removed: For example, for the first six months of 2022, personal auto incurred loss and loss expenses before catastrophe losses increased $48 million or 27%, compared with the same period of 2021, in part due to paid losses increasing $38 million or 22% while earned premiums rose 1%.
−Removed: Catastrophe losses and loss expenses accounted for 19.1 and 10.5 percentage points of the combined ratio for the second quarter and first six months of 2022, compared with 10.6 and 15.2 percentage points for the same period a year ago.
+Added: For example, for the first nine months of 2022, personal auto incurred loss and loss expenses before catastrophe losses increased $39 million or 13%, compared with the same period of 2021, in part due to paid losses increasing $25 million or 17% while earned premiums rose 2%.
+Added: Catastrophe losses and loss expenses accounted for 15.9 and 12.4 percentage points of the combined ratio for the third quarter and first nine months of 2022, compared with 20.0 and 16.8 percentage points for the same periods 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.
2 unchanged sentences
In addition, greater geographic diversification is expected to reduce the volatility of homeowner loss ratios attributable to weather-related catastrophe losses over time.
−Removed: The net effect of reserve development on prior accident years during the second quarter and first six months of 2022 was favorable for personal lines overall by $14 million and $48 million, compared with $12 million and $32 million of favorable development for the same periods of 2021.
−Removed: Our homeowner line of business was the primary contributor to the personal lines net favorable reserve development for the first six months of 2022.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
+Added: The net effect of reserve development on prior accident years during the third quarter and first nine months of 2022 was favorable for personal lines overall by $8 million and $56 million, compared with $3 million and $35 million of favorable development for the same periods of 2021.
+Added: Our homeowner line of business was the primary contributor to the personal lines net favorable reserve development for the first nine months of 2022.
The net favorable reserve development 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.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
−Removed: The personal lines underwriting expense ratio increased for the second quarter and first six months of 2022, compared with the same periods a year ago, primarily due to an increase in commissions for agencies.
+Added: The personal lines underwriting expense ratio decreased for the third quarter and increased slightly for the first nine months of 2022, compared with the same periods a year ago.
+Added: The third-quarter decrease was primarily due to a decrease in profit-sharing commissions for agencies, while the nine-month increase was primarily due to an increase in commissions for agencies.
The ratios also included ongoing expense management efforts and higher earned premiums.
Personal Lines Insurance Losses Incurred by Size
−Removed: (Dollars in millions, net of reinsurance) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions, net of reinsurance) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
−Removed: Current accident year losses greater than $5 million $ 23 $ — nm $ 30 $ — nm
+Added: Current accident year losses greater than $5 million $ 8 $ 10 (20) $ 38 $ 10 280
Current accident year losses $1 million - $5 million 17 12 42 43 31 39
−Removed: Large loss prior accident year reserve development 1 (2) nm 5 (3) nm
+Added: Large loss prior accident year reserve development (1) (1) — 4 (4) nm
Total large losses incurred 24 21 14 85 37 130
−Removed: Losses incurred but not reported 12 (4) nm (2) 37 nm
+Added: Losses incurred but not reported 9 — nm 7 37 (81)
Other losses excluding catastrophe losses 183 154 19 524 442 19
12 unchanged sentences
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.
−Removed: In the second quarter of 2022, the personal lines total large loss ratio, net of reinsurance, was 5.9 percentage points higher than last year's second quarter.
−Removed: The increase in personal lines large losses for the first six months of 2022 occurred primarily for our homeowner line of business and for umbrella coverage in our other personal line of business.
−Removed: The second-quarter 2022 amount of total large losses incurred helped contribute to the increase in the six-month 2022 total large loss ratio, compared with 2021, in addition to a first-quarter 2022 ratio that was 4.6 points higher than the first quarter of 2021.
−Removed: We believe results for the three- and six-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: In the third quarter of 2022, the personal lines total large loss ratio, net of reinsurance, was 0.3 percentage points higher than last year's third quarter.
+Added: The increase in personal lines large losses for the first nine months of 2022 occurred primarily for our homeowner line of business.
+Added: The third-quarter 2022 amount of total large losses incurred helped contribute to the increase in the nine-month 2022 total large loss ratio, compared with 2021, in addition to a first-half 2022 ratio that was 5.3 points higher than the first half of 2021.
+Added: 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.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
EXCESS AND SURPLUS LINES INSURANCE RESULTS
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
4 unchanged sentences
Current accident year before catastrophe losses 93 66 41 236 179 32
−Removed: Current accident year catastrophe losses 2 — nm 3 1 200
−Removed: Prior accident years before catastrophe losses (1) (1) 0 (6) 3 nm
+Added: Current accident year catastrophe losses — 1 (100) 3 2 50
+Added: Prior accident years before catastrophe losses (7) 3 nm (13) 6 nm
Prior accident years catastrophe losses — — 0 — — 0
15 unchanged sentences
Performance highlights for the excess and surplus lines segment include:
−Removed: • Premiums – Excess and surplus lines net written premiums continued to grow during the second quarter and first six months of 2022, compared with the same period a year ago, primarily due to an increase in agency renewal written premiums.
−Removed: Renewal written premiums rose 31% and 28% for the three and six months ended June 30, 2022, compared with the same periods of 2021, reflecting the opportunity to renew many accounts for the first time, as well as higher renewal pricing.
−Removed: For the first six months of 2022, excess and surplus lines policy renewals experienced estimated average price increases at percentages in the high-single-digit range.
+Added: • Premiums – Excess and surplus lines net written premiums continued to grow during the third quarter and first nine months of 2022, compared with the same period a year ago, primarily due to an increase in agency renewal written premiums.
+Added: Renewal written premiums rose 22% and 26% for the three and nine months ended September 30, 2022, compared with the same periods of 2021, reflecting the opportunity to renew many accounts for the first time, as well as higher renewal pricing.
+Added: For the first nine 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.
−Removed: New business written premiums produced by agencies decreased by 8% for the second quarter and increased 6% for the first six months of 2022 compared with the same periods of 2021.
−Removed: As we continued to carefully underwrite each policy in a highly competitive market, competition for larger policies was particularly strong during the second quarter.
+Added: New business written premiums produced by agencies increased by 6% for both the third quarter and first nine months of 2022 compared with the same periods of 2021.
+Added: Competition for larger policies has been particularly strong during the first nine months of 2022, as we continued to carefully underwrite each policy in this 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.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
Excess and Surplus Lines Insurance Premiums
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
5 unchanged sentences
Earned premiums $ 125 $ 105 19 $ 361 $ 289 25
−Removed: • Combined ratio – The excess and surplus lines combined ratio improved by 4.4 for the second quarter and 5.2 percentage points for the first six months of 2022, compared with the same periods of 2021, primarily due to a lower second-quarter 2022 underwriting expense ratio and favorable reserve development on prior accident years before catastrophe losses for the six-month period.
−Removed: The ratio for current accident year loss and loss expenses before catastrophe losses for excess and surplus lines improved in the first six months of 2022.
−Removed: That 60.6% ratio was 0.9 percentage points lower, compared with the 61.5% accident year 2021 ratio measured as of June 30, 2021, including an increase of 1.3 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.
−Removed: Excess and surplus lines net reserve development on prior accident years, as a ratio to earned premiums, was a favorable 0.5% for the second quarter and 2.6% for the first six months of 2022, compared with favorable 1.4% for the second quarter of 2021 and unfavorable net reserve development of 1.4% for the first six months of 2021.
−Removed: The $6 million of net favorable reserve development recognized during the first six months of 2022 was primarily for accident years prior to 2021.
+Added: • Combined ratio – The excess and surplus lines combined ratio improved by 0.2 percentage points for the third quarter of 2022 and by 3.5 points for the first nine months, compared with the same periods of 2021, primarily due to favorable reserve development on prior accident years before catastrophe losses.
+Added: The ratio for current accident year loss and loss expenses before catastrophe losses for excess and surplus lines rose for both the third quarter and first nine months of 2022.
+Added: That 65.4% nine-month ratio was 3.5 percentage points higher, compared with the 61.9% accident year 2021 ratio measured as of September 30, 2021, including an increase of 2.4 percentage points in the ratio for large losses of $1 million or more per claim, discussed below.
+Added: Excess and surplus lines net reserve development on prior accident years, as a ratio to earned premiums, was a favorable 6.0% for the third quarter and 3.8% for the first nine months of 2022, compared with unfavorable net reserve development of 3.2% for the third quarter of 2021 and 2.0% for the first nine months of 2021.
+Added: The $13 million of net favorable reserve development recognized during the first nine months of 2022 was primarily for accident year 2020.
The favorable reserve development was due primarily 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.
−Removed: The excess and surplus lines underwriting expense ratio decreased for the second quarter and first six months of 2022, compared with the same periods of 2021, largely due to a decrease in commissions for agencies and related expenses.
+Added: The excess and surplus lines underwriting expense ratio decreased for the third quarter and first nine months of 2022, compared with the same periods of 2021, largely due to a decrease in profit-sharing commissions for agencies.
The ratios also included ongoing expense management efforts and higher earned premiums.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
Excess and Surplus Lines Insurance Losses Incurred by Size
−Removed: (Dollars in millions, net of reinsurance) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions, net of reinsurance) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
−Removed: Current accident year losses greater than $5 million $ — $ — nm $ — $ — 0
−Removed: Current accident year losses $1 million - $5 million 9 7 29 13 8 63
−Removed: Large loss prior accident year reserve development 1 1 0 1 — nm
+Added: Current accident year losses greater than $5 million $ — $ — nm $ — $ — nm
+Added: Current accident year losses $1 million - $5 million 6 — nm 19 8 138
+Added: Large loss prior accident year reserve development 2 2 0 3 2 50
Total large losses incurred 8 2 300 22 10 120
14 unchanged sentences
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.
−Removed: In the second quarter of 2022, the excess and surplus lines total ratio for large losses, net of reinsurance, was 0.6 percentage points lower than last year's second quarter.
−Removed: The second-quarter 2022 amount of total large losses incurred contributed to the increase in the six-month 2022 total large loss ratio, compared with 2021, in addition to a first-quarter 2022 ratio that was 4.4 points higher than the first quarter of 2021.
−Removed: We believe results for the three- and six-month periods largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1 million.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: In the third quarter of 2022, the excess and surplus lines total ratio for large losses, net of reinsurance, was 4.3 percentage points higher than last year's third quarter.
+Added: The third-quarter 2022 amount of total large losses incurred contributed to the increase in the nine-month 2022 total large loss ratio, compared with 2021, in addition to a first-half 2022 ratio that was 1.8 points higher than the first half of 2021.
+Added: 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.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
LIFE INSURANCE RESULTS
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
7 unchanged sentences
Life insurance segment profit (loss) $ 11 $ (5) nm $ 22 $ (9) nm
−Removed: The COVID-19 pandemic did not have a significant effect on our life insurance segment earned premiums or expenses for the first six months of 2022.
+Added: 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 2022.
However, the pandemic did contribute to a moderate increase in death claims, primarily in the first three months of 2022.
1 unchanged sentence
Performance highlights for the life insurance segment include:
−Removed: • Revenues – Revenues decreased by less than $1 million for the six months ended June 30, 2022, compared with the same period a year ago, driven by favorable impacts in the same period of 2021 from the unlocking of interest rate and other actuarial assumptions.
−Removed: Earned premiums from term life insurance, our largest life insurance product line, increased over the same period of 2021.
−Removed: Net in-force life insurance policy face amounts increased 2% to $79.155 billion at June 30, 2022, from $77.493 billion at year-end 2021.
−Removed: Fixed annuity deposits received for the three and six months ended June 30, 2022, were $5 million and $13 million, compared with $10 million and $27 million for the same periods of 2021.
+Added: • Revenues – Revenues increased slightly for the nine months ended September 30, 2022, compared with the same period a year ago, driven by higher earned premiums from term life insurance, our largest life insurance product line.
+Added: Net in-force life insurance policy face amounts increased 3% to $79.883 billion at September 30, 2022, from $77.493 billion at year-end 2021.
+Added: Fixed annuity deposits received for the three and nine months ended September 30, 2022, were $10 million and $23 million, compared with $8 million and $35 million for the same periods of 2021.
Fixed annuity deposits have a minimal impact to earned premiums because deposits received are initially recorded as liabilities.
2 unchanged sentences
Life Insurance Premiums
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
5 unchanged sentences
We include only investment income credited to contract holders (including interest assumed in life insurance policy reserve calculations) in our life insurance segment results.
−Removed: A profit of $11 million for our life insurance segment in the first six months of 2022, compared with a $4 million loss for the same period of 2021, was primarily due to more favorable impacts from the unlocking of interest rate and other actuarial assumptions.
+Added: A profit of $22 million for our life insurance segment in the first nine months of 2022, compared with a $9 million loss for the same period of 2021, was primarily due to more favorable impacts from the unlocking of interest rate and other actuarial assumptions and more favorable mortality experience.
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.
−Removed: Total benefits decreased in the first six months of 2022.
+Added: Total benefits decreased in the first nine months of 2022.
Life policy and investment contract reserves increased with continued growth in net in-force life insurance policy face amounts and were partially offset by favorable effects from the unlocking of interest rate and other actuarial assumptions.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
−Removed: Mortality results increased marginally compared with the same period of 2021 and were above our 2022 projections, due in part to pandemic-related death claims incurred in the first three months of 2022.
−Removed: Underwriting expenses for the first six months of 2022 were slightly higher compared to the same period a year ago, as higher commission and general expense levels compared to the same period of 2021 were mostly offset by favorable impacts from the unlocking of interest rate and other actuarial assumptions.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
+Added: Mortality results decreased compared with the same period of 2021, but were above our 2022 projections, due to pandemic-related death claims incurred in the first three months of 2022.
+Added: Underwriting expenses for the first nine months of 2022 were slightly lower compared to the same period a year ago, as favorable impacts from the unlocking of interest rate and other actuarial assumptions more than offset 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.
−Removed: 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 $21 million and $31 million for the three and six months ended June 30, 2022, compared with $14 million and $24 million for the three and six months ended June 30, 2021.
−Removed: The life insurance company portfolio had net after-tax investment gains and net after-tax investment losses of less than $1 million for the three and six months ended June 30, 2022, respectively, compared with net after-tax investment gains of $3 million for the three and six months ended June 30, 2021.
+Added: 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 $21 million and $52 million for the three and nine months ended September 30, 2022, respectively, compared with $11 million and $35 million for the three and nine months ended September 30, 2021.
+Added: The life insurance company portfolio had net after-tax investment losses of less than $1 million for the three and nine months ended September 30, 2022, compared with net after-tax investment gains of $3 million and $6 million for the three and nine months ended September 30, 2021.
INVESTMENTS RESULTS
2 unchanged sentences
Investment Income
−Removed: Pretax investment income grew 11% for the second quarter and 9% for the first six months of 2022, compared with the same periods of 2021.
−Removed: Interest income increased by $7 million and $12 million for the three and six months ended June 30, 2022, as net purchases of fixed-maturity securities in recent quarters generally offset effects of the low interest rate environment of the past several years.
−Removed: Higher dividend income reflected rising dividend rates and net purchases of equity securities in recent quarters, helping dividend income to grow by $12 million and $19 million for the three and six months ended June 30, 2022.
+Added: Pretax investment income grew 8% for the third quarter and 9% for the first nine months of 2022, compared with the same periods of 2021.
+Added: Interest income increased by $8 million and $20 million for the three and nine months ended September 30, 2022, as net purchases of fixed-maturity securities in recent quarters and rising bond yields are working to generally offset effects of the low interest rate environment of the past several years.
+Added: Higher dividend income reflected dividend rates that are increasing more slowly, minor asset allocation adjustments in our equity portfolio and net purchases of equity securities in recent quarters, helping dividend income to grow by $5 million and $24 million for the three and nine months ended September 30, 2022.
Investments Results
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
3 unchanged sentences
Investments profit (loss), pretax $ (508) $ 83 nm $ (2,003) $ 1,403 nm
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
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.
3 unchanged sentences
(Dollars in millions) % Yield Principal redemptions
−Removed: At June 30, 2022
+Added: At September 30, 2022
Fixed-maturity pretax yield profile:
3 unchanged sentences
Average yield and total expected maturities from the remainder of 2022 through 2024 4.01 $ 1,979
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
The table below shows the average pretax yield-to-amortized cost for fixed-maturity securities acquired during the periods indicated.
−Removed: The average yield for total fixed-maturity securities acquired during the first six months of 2022 was higher than the 4.02% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2021.
−Removed: Our fixed-maturity portfolio's average yield of 4.00% for the first six months of 2022, from the investment income table below, was lower than the 4.02% yield for the year-end 2021 fixed-maturities portfolio.
−Removed: Three months ended June 30, Six months ended June 30,
+Added: The average yield for total fixed-maturity securities acquired during the first nine months of 2022 was higher than the 4.02% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2021.
+Added: Our fixed-maturity portfolio's average yield of 4.00% for the first nine months of 2022, from the investment income table below, was lower than the 4.02% yield for the year-end 2021 fixed-maturities portfolio.
+Added: Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
6 unchanged sentences
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.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 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.
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
19 unchanged sentences
Effective tax rate 17.1 16.9 17.1 16.8
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
Total Investment Gains and Losses
3 unchanged sentences
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.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
The table below summarizes total investment gains and losses, before taxes.
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
7 unchanged sentences
Gross realized losses — (1) (3) (3)
+Added: Write-down of impaired securities — (1) — (1)
Subtotal — 8 3 20
4 unchanged sentences
Total $ (1,188) $ (158) $ (4,364) $ 802
−Removed: Of the 4,420 fixed-maturity securities in the portfolio, seven securities were trading below 70% of amortized cost at June 30, 2022.
+Added: Of the 4,495 fixed-maturity securities in the portfolio, 118 securities were trading below 70% of amortized cost at September 30, 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.
−Removed: 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 six months of 2022.
−Removed: 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 six months of 2021.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: 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 nine months of 2022.
+Added: We had five fixed-maturity securities written down to fair value due to an intention to be sold, as disclosed in the table below, and no allowance for credit losses for the first nine months of 2021.
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
+Added: 2022 2021 2022 2021
+Added: Fixed maturities:
+Added: Municipal $ — $ 1 $ — $ 1
+Added: Total fixed maturities $ — $ 1 $ — $ 1
+Added: Cincinnati Financial Corporation Third-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.
−Removed: Total revenues for the first six 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 $46 million and $12 million, respectively.
−Removed: Total expenses for Other increased for the first six months of 2022, primarily due to loss and loss expenses and also underwriting expenses from Cincinnati Re and Cincinnati Global.
+Added: Total revenues for the first nine 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 $93 million and $17 million, respectively.
+Added: Total expenses for Other increased for the first nine months of 2022, primarily due to loss and loss expenses and also underwriting expenses from Cincinnati Re and Cincinnati Global.
Other profit in the table below represents profit or losses before income taxes.
−Removed: For all periods shown, underwriting profit in aggregate from Cincinnati Re and Cincinnati Global offset interest expense from debt of the parent company.
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: For all periods shown, total other loss was driven by a combination of underwriting loss in aggregate from Cincinnati Re and Cincinnati Global plus interest expense from debt of the parent company.
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
8 unchanged sentences
Total expenses 311 249 25 606 499 21
−Removed: Total other profit $ 25 $ 22 14 $ 18 $ 5 260
−Removed: We had $233 million and $320 million of income tax benefit for the three and six months ended June 30, 2022, compared with $169 million and $317 million of income tax expense for the same periods of 2021.
−Removed: The effective tax rate for the three and six months ended June 30, 2022, was 22.4% and 22.8% compared with 19.4% and 19.3% for the same periods last year.
−Removed: 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.
+Added: Total other loss $ (84) $ (73) (15) $ (66) $ (68) 3
+Added: We had $161 million and $481 million of income tax benefit for the three and nine months ended September 30, 2022, compared with $31 million and $348 million of income tax expense for the same periods of 2021.
+Added: The effective tax rate for the three and nine months ended September 30, 2022, was 27.8% and 24.3% compared with 16.8% and 19.1% for the same periods last year.
+Added: 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, changes in underwriting income and a $34 million release of our unrecognized tax benefit.
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.
4 unchanged sentences
Details about our effective tax rate are in this quarterly report Item 1, Note 9, Income Taxes.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
LIQUIDITY AND CAPITAL RESOURCES
−Removed: At June 30, 2022, shareholders' equity was $10.553 billion, compared with $13.105 billion at December 31, 2021.
−Removed: Total debt was $833 million at June 30, 2022, down $10 million from December 31, 2021.
−Removed: At June 30, 2022, cash and cash equivalents totaled $1.098 billion, compared with $1.139 billion at December 31, 2021.
−Removed: The pandemic did not have a significant effect on our cash flows for the first half of 2022.
+Added: At September 30, 2022, shareholders' equity was $9.431 billion, compared with $13.105 billion at December 31, 2021.
+Added: Total debt was $833 million at September 30, 2022, down $10 million from December 31, 2021.
+Added: At September 30, 2022, cash and cash equivalents totaled $1.083 billion, compared with $1.139 billion at December 31, 2021.
+Added: The pandemic did not have a significant effect on our cash flows for the first nine 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.
2 unchanged sentences
Subsidiary Dividends
−Removed: Our lead insurance subsidiary declared dividends of $504 million to the parent company in the first half of 2022, compared with $258 million for the same period of 2021.
+Added: Our lead insurance subsidiary declared dividends of $504 million to the parent company in the first nine months of 2022, compared with $358 million for the same period of 2021.
For full-year 2021, our lead insurance subsidiary paid dividends totaling $583 million to the parent company.
12 unchanged sentences
The table below shows a summary of the operating cash flow for property casualty insurance (direct method):
−Removed: (Dollars in millions) Three months ended June 30, Six months ended June 30,
+Added: (Dollars in millions) Three months ended September 30, Nine months ended September 30,
2022 2021 % Change 2022 2021 % Change
5 unchanged sentences
Cash flow from operations $ 524 $ 564 (7) $ 1,285 $ 1,420 (10)
−Removed: Collected premiums for property casualty insurance rose $386 million during the first six months of 2022, compared with the same period in 2021.
+Added: Collected premiums for property casualty insurance rose $570 million during the first nine months of 2022, compared with the same period in 2021.
Loss and loss expenses paid for the 2022 perio d increased $493 million.
Commissions and other underwriting expenses pai d increased $240 million.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-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
−Removed: At June 30, 2022, our debt-to-total-capital ratio was 7.3%, considerably below our 35% covenant threshold, with $789 million in long-term debt and $44 million in borrowing on our revolving short-term line of credit.
−Removed: At June 30, 2022, $256 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.
−Removed: Based on our capital requirements at June 30, 2022, we do not anticipate a material increase in debt levels exceeding the available line of credit amount during the year.
+Added: At September 30, 2022, our debt-to-total-capital ratio was 8.1%, considerably below our 35% covenant threshold, with $789 million in long-term debt and $44 million in borrowing on our revolving short-term line of credit.
+Added: At September 30, 2022, $256 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.
+Added: Based on our capital requirements at September 30, 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.
−Removed: The amount of this unsecured letter of credit agreement w as $94 m illion at June 30, 2022, with no amounts drawn.
+Added: The amount of this unsecured letter of credit agreement w a s $94 million at September 30, 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.
1 unchanged sentence
Four independent ratings firms award insurer financial strength ratings to our property casualty insurance companies and three firms rate our life insurance company.
−Removed: Those firms made no changes to our parent company debt ratings during the first six months of 2022.
+Added: Those firms made no changes to our parent company debt ratings during the first nine 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.
10 unchanged sentences
In addition to our contractual obligations, we have other property casualty operational commitments.
−Removed: • Commissions – Commissions paid were $812 million in the first half of 2022.
+Added: • Commissions – Commissions paid were $1.105 billion in the first nine 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.
−Removed: Noncommission underwriting expenses paid were $388 million in the first half of 2022.
−Removed: There were no contributions to our qualified pension plan during the first half of 2022.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Noncommission underwriting expenses paid were $569 million in the first nine months of 2022.
+Added: There were no contributions to our qualified pension plan during the first nine months of 2022.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
Investing Activities
2 unchanged sentences
Uses of Capital
−Removed: Uses of cash to enhance shareholder return include dividends to shareholders.
+Added: Uses of cash to enhance shareholder return include dividends to shareholders and shares acquired under our repurchase program.
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.
−Removed: During the first six months of 2022, we used $208 million to pay cash dividends to shareholders.
+Added: During the first nine months of 2022, we used $316 million to pay cash dividends to shareholders.
PROPERTY CASUALTY INSURANCE LOSS AND LOSS EXPENSE RESERVES
1 unchanged sentence
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.
−Removed: Total gross reserves at June 30, 2022, increased $374 million compared with December 31, 2021.
+Added: Total gross reserves at September 30, 2022, increased $816 million compared with December 31, 2021.
Case loss reserves increased by $171 million, IBNR loss reserves increased by $576 million and loss expense reserves increased by $69 million.
−Removed: The total gross increase was primarily due to our commercial casualty and commercial property lines of business, our excess and surplus lines insurance segment and also Cincinnati Re.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: The total gross increase was primarily due to our commercial casualty line of business, our excess and surplus lines insurance segment and also Cincinnati Re and Cincinnati Global.
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
Property Casualty Gross Reserves
1 unchanged sentence
Case reserves IBNR reserves Percent of total
−Removed: At June 30, 2022
+Added: At September 30, 2022
Commercial lines insurance:
32 unchanged sentences
LIFE POLICY AND INVESTMENT CONTRACT RESERVES
−Removed: Gross life policy and investment contract reserves were $3.041 billion at June 30, 2022, compared with $3.014 billion at year-end 2021, reflecting continued growth in life insurance policies in force.
+Added: Gross life policy and investment contract reserves were $3.053 billion at September 30, 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.
−Removed: Cincinnati Financial Corporation Second-Quarter 2022 10-Q
+Added: Cincinnati Financial Corporation Third-Quarter 2022 10-Q
OTHER MATTERS
4 unchanged sentences
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.