What changed in this filing

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Item 1. Financial Statements

2023-04-27 compared with 2022-10-31 · 334 added, 225 removed, 546 unchanged (51% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

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

Fixed maturities, at fair value (amortized cost:

41 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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

2022 2021 2022 2021

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

Earned premiums $ 1,918 $ 1,693

20 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Net Income (Loss) $ 225 $ ( 266 )

1 unchanged sentence

Change in unrealized gains and losses on investments, net of tax (benefit) of $ 35 and $( 157 ), respectively

( 405 ) ( 69 ) ( 1,477 ) ( 119 )

Amortization of pension actuarial loss and prior service cost, net of tax of $ 0 , $ 1 , $ 0 and $ 2 , respectively

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

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

Amortization of pension actuarial loss and prior service cost, net of tax (benefit) of $( 1 ) and $ 0 , respectively

Change in life policy reserves, reinsurance recoverable and other, net of tax (benefit) of $( 9 ) and $ 41 , respectively

Other comprehensive income (loss) 87 ( 434 )

Comprehensive Income (Loss) $ 312 $ ( 700 )

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Beginning of period $ 397 $ 397

5 unchanged sentences

Share-based compensation 12 11

Other 2 1 5 4

End of period 1,398 1,354

1 unchanged sentence

Beginning of period 11,711 12,625

Cumulative effect of change in accounting for long-duration insurance contracts (Note 1) — 10

Adjusted beginning of period 11,711 12,635

Net income (loss) 225 ( 266 )

1 unchanged sentence

End of period 11,818 12,258

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income (Loss)

Beginning of period ( 614 ) 648

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

Cumulative effect of change in accounting for long-duration insurance contracts (Note 1) — ( 352 )

Adjusted beginning of period ( 614 ) 296

Other comprehensive income (loss) 87 ( 434 )

End of period ( 527 ) ( 138 )

4 unchanged sentences

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

Other — — 1 1

End of period ( 2,345 ) ( 1,959 )

8 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) Nine months ended September 30,

(Dollars in millions) Three months ended March 31,

Cash Flows From Operating Activities

1 unchanged sentence

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

Depreciation and amortization 81 69

Depreciation, amortization and other 40 37

Investment gains and losses, net ( 93 ) 674

Share-based compensation 29 25

Interest credited to contract holders 10 12

Deferred income tax expense 27 ( 126 )

Investment income receivable ( 8 ) ( 6 )

Premiums and reinsurance receivable ( 229 ) ( 182 )

8 unchanged sentences

Cash Flows From Investing Activities

Sale of fixed maturities 93 88

Call or maturity of fixed maturities 818 1,049

Sale, call or maturity of fixed maturities 303 351

Sale of equity securities 4 56

1 unchanged sentence

Purchase of equity securities ( 22 ) ( 90 )

Investment in finance receivables ( 18 ) ( 30 )

Collection of finance receivables 30 28

Changes in finance receivables ( 3 ) 6

Investment in building and equipment ( 4 ) ( 4 )

21 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6 unchanged sentences

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

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

Our March 31, 2023, condensed consolidated financial statements are unaudited.

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

3 unchanged sentences

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

Pending Accounting Updates

Adopted Accounting Updates

ASU 2018-12, Financial Services - Insurance (Topic 944):

4 unchanged sentences

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

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

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

3 unchanged sentences

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

Based on current conditions, management estimates at September 30, 2022, that adoption would not have a material impact and would have resulted in an after-tax increase to shareholders' equity of approximately $ 50 million.

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

We adopted these ASUs on a modified retrospective basis on January 1, 2023, resulting in an after-tax increase to shareholders' equity of $ 31 million.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The following table illustrates the effect of adopting ASU 2018-12 in the condensed consolidated balance sheets:

(Dollars in millions) March 31, 2023 December 31, 2022

As originally reported As adjusted Difference

Reinsurance recoverable $ 698 $ 640 $ 665 $ 25

Prepaid reinsurance premiums 57 79 51 ( 28 )

Deferred policy acquisition costs 1,048 1,014 1,013 ( 1 )

Total assets 30,474 29,736 29,732 ( 4 )

Life policy and investment contract reserves 3,059 3,059 3,015 ( 44 )

Deferred income tax 1,104 1,045 1,054 9

Total liabilities 19,733 19,205 19,170 ( 35 )

Retained earnings 11,818 11,702 11,711 9

Accumulated other comprehensive income ( 527 ) ( 636 ) ( 614 ) 22

Total shareholders' equity 10,741 10,531 10,562 31

Total liabilities and shareholders' equity 30,474 29,736 29,732 ( 4 )

The following table illustrates the effect of adopting ASU 2018-12 in the condensed consolidated statements of income and condensed consolidated statements of comprehensive income:

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

As originally reported As adjusted Difference

Earned premiums $ 1,918 $ 1,690 $ 1,693 $ 3

Insurance losses and contract holders' benefits 1,398 1,039 1,032 ( 7 )

Underwriting, acquisition and insurance expenses 556 519 520 1

Deferred income tax expense 27 ( 128 ) ( 126 ) 2

Net Income (Loss) 225 ( 273 ) ( 266 ) 7

Change in life policy reserves, reinsurance recoverable and other, net of tax ( 36 ) — 155 155

Other comprehensive income (loss) 87 ( 589 ) ( 434 ) 155

Comprehensive Income (Loss) 312 ( 862 ) ( 700 ) 162

Net income (loss) per share:

Basic $ 1.43 $ ( 1.70 ) $ ( 1.66 ) $ 0.04

Diluted 1.42 ( 1.70 ) ( 1.66 ) 0.04

The adoption of ASU 2018-12 did not have a material impact on the company's condensed consolidated cash flows.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 2 – Investments

2 unchanged sentences

cost Gross unrealized Fair value

At September 30, 2022 gains losses

At March 31, 2023 gains losses

Fixed-maturity securities:

1 unchanged sentence

States, municipalities and political subdivisions 4,933 42 226 4,749

Government-sponsored enterprises 390 1 4 387

Commercial mortgage-backed 241 — 16 225

United States government 199 — 4 195

Government-sponsored enterprises 122 — 3 119

Foreign government 31 — — 31

4 unchanged sentences

States, municipalities and political subdivisions 4,901 24 303 4,622

Government-sponsored enterprises 186 — 3 183

Commercial mortgage-backed 250 — 16 234

United States government 196 — 5 191

Government-sponsored enterprises 8 — — 8

Foreign government 34 — 1 33

Total $ 12,979 $ 61 $ 908 $ 12,132

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

Th e net unrealized investment losses in our fixed-maturity portfolio at March 31, 2023, are primarily due to an increase in U.S.

Treasury yields and a widening of corporate credit spreads .

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Our commercial mortgage-backed securities had an average rating of Aa2/AA- at March 31, 2023, and December 31, 2022.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

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

At September 30, 2022 Fair

At March 31, 2023 Fair

value Unrealized

4 unchanged sentences

States, municipalities and political subdivisions 1,287 48 890 178 2,177 226

Government-sponsored enterprises 263 3 7 1 270 4

Commercial mortgage-backed 107 5 116 11 223 16

United States government 121 1 52 3 173 4

Government-sponsored enterprises 101 3 3 — 104 3

Foreign government 10 — 2 — 12 —

4 unchanged sentences

States, municipalities and political subdivisions 2,600 274 77 29 2,677 303

Government-sponsored enterprises 123 3 3 — 126 3

Commercial mortgage-backed 215 13 14 3 229 16

United States government 146 3 41 2 187 5

Government-sponsored enterprises 7 — — — 7 —

Foreign government 25 1 4 — 29 1

3 unchanged sentences

value % of fair

At September 30, 2022

At March 31, 2023

Maturity dates:

5 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Investment income:

1 unchanged sentence

Dividends 66 65

Other 3 1 6 4

Total 213 189

6 unchanged sentences

Subtotal 105 ( 675 )

Fixed maturities:

Fixed-maturity securities:

Gross realized gains 1 4

Gross realized losses ( 1 ) ( 1 )

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

Subtotal — 8 3 20

Other 15 27 37 59

Total $ 106 $ ( 666 )

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

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

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

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

$ 1 million, respectively.

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

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

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

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

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

The fair value of our equity portfolio was $ 9.967 billion and $ 9.841 billion at March 31, 2023, and December 31, 2022, respectively.

(Nasdaq:AAPL), an equity holding, was our largest single investment holding with a fair value of $ 758 million and $ 597 million, which was 7.9 % and 6.3 % of our publicly traded common equities portfolio and 3.3 % and 2.7 % of the total investment portfolio at March 31, 2023, and December 31, 2022, respectively.

The allowance for credit losses was $ 1 million at both March 31, 2023, and December 31, 2022.

Changes in the allowance for credit losses were less than $ 1 million for both the three months ended March 31, 2023 and 2022.

There were no fixed-maturity securities that were written down to fair value due to an intention to be sold during the three months ended March 31, 2023.

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

There were 2,900 fixed-maturity securities with a total unrealized loss of $ 776 million, which were in an unrealized loss position at March 31, 2023.

Of that total, 26 fixed-maturity securities had fair values below 70 % of amortized cost.

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

There were 3,272 fixed-maturity securities with a total unrealized loss of $ 908 million, which were in an unrealized loss position at December 31, 2022.

Of that total, 49 fixed-maturity securities had fair values below 70 % of amortized cost.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 3 – Fair Value Measurements

5 unchanged sentences

Fair Value Disclosures for Assets

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

The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at March 31, 2023, and December 31, 2022.

We do not have any liabilities carried at fair value.

(Dollars in millions) Quoted prices in

active markets for

identical assets

(Level 1) Significant other

observable inputs (Level 2) Significant

(Level 3) Total

At September 30, 2022

(Dollars in millions) Level 1 Level 2 Level 3 Total

At March 31, 2023

Fixed maturities, available for sale:

1 unchanged sentence

States, municipalities and political subdivisions — 4,749 — 4,749

Government-sponsored enterprises — 387 — 387

Commercial mortgage-backed — 225 — 225

United States government 195 — — 195

Government-sponsored enterprises — 119 — 119

Foreign government — 31 — 31

10 unchanged sentences

States, municipalities and political subdivisions — 4,622 — 4,622

Government-sponsored enterprises — 183 — 183

Commercial mortgage-backed — 234 — 234

United States government 191 — — 191

Government-sponsored enterprises — 8 — 8

Foreign government — 33 — 33

6 unchanged sentences

Total $ 9,702 $ 13,143 $ — $ 22,845

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

We also held Level 1 cash and cash equivalents of $ 1.083 billion and $ 1.139 billion at September 30, 2022, and December 31, 2021, respectively.

We also held Level 1 cash and cash equivalents of $ 955 million and $ 1.264 billion at March 31, 2023, and December 31, 2022, respectively.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

2 unchanged sentences

(Dollars in millions) Book value Principal amount

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

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

2023 2022 2023 2022

4 unchanged sentences

The following table shows fair values of our note payable and long-term debt:

(Dollars in millions) Quoted prices in

active markets for

identical assets

(Level 1) Significant other observable inputs (Level 2) Significant

(Level 3) Total

At September 30, 2022

(Dollars in millions) Level 1 Level 2 Level 3 Total

At March 31, 2023

Note payable $ — $ 50 $ — $ 50

9 unchanged sentences

Total $ — $ 885 $ — $ 885

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

(Dollars in millions) Quoted prices in

active markets for

identical assets

(Level 1) Significant other

observable inputs (Level 2) Significant

(Level 3) Total

At September 30, 2022

(Dollars in millions) Level 1 Level 2 Level 3 Total

At March 31, 2023

Life policy loans $ — $ — $ 37 $ 37

7 unchanged sentences

Total $ — $ 143 $ 621 $ 764

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

December 31, 2021.

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Outstanding principal and interest for these life policy loans totaled $ 30 million and $ 31 million at March 31, 2023, and December 31, 2022, respectively.

Recorded reserves for the deferred annuities were $ 711 million and $ 734 million at March 31, 2023, and December 31, 2022, respectively.

Recorded reserves for the structured settlements were $ 128 million and $ 129 million at March 31, 2023, and December 31, 2022, respectively.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 4 – Property Casualty Loss and Loss Expenses

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

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Gross loss and loss expense reserves, beginning of period $ 8,336 $ 7,229

17 unchanged sentences

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

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

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

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 67 million at March 31, 2023, and $ 79 million at March 31, 2022, for certain life and health loss and loss expense reserves.

We experienced $ 59 million of favorable development on prior accident years, including $ 32 million of favorable development in commercial lines, $ 31 million of favorable development in personal lines and $ 9 million of favorable development in excess and surplus lines for the three months ended March 31, 2023.

Within commercial lines, we recognized favorable reserve development of $ 16 million for the commercial property line and $ 15 million for the workers' compensation line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

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

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

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

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

Within personal lines, we recognized favorable reserve development of $ 27 million for the homeowner line.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

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

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

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

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

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 5 – Life Policy and Investment Contract Reserves

We establish the reserves for traditional life insurance policies based on expected expenses, mortality, morbidity, withdrawal rates, timing of claim presentation and investment yields, including a provision for uncertainty.

Once these assumptions are established, they generally are maintained throughout the lives of the contracts.

We use both our own experience and industry experience, adjusted for historical trends, in arriving at our assumptions for expected mortality, morbidity and withdrawal rates as well as for expected expenses.

We base our assumptions for expected investment income on our own experience adjusted for current and future economic conditions.

In the first quarter of 2023, we adopted ASU 2018-12 which resulted in changes to the life policy and investment contract reserves and the expansion of required disclosures.

The below disclosures represent application of the updated guidance.

See Note 1, Accounting Policies, for further discussion.

We establish the reserves for traditional life policies including term, whole life and other products based on certain cash flow assumptions including expected expenses, mortality, morbidity, withdrawal rates and timing of claim presentation.

These assumptions are established based on our current expectations and are reviewed annually to determine any necessary updates.

Assumptions are also updated on an interim basis if evidence suggests that they should be revised.

We use both our own experience and industry experience, adjusted for historical trends, in arriving at our assumptions for expected mortality, morbidity and withdrawal rates.

These reserves also include a discount rate assumption that is based on market value discount rates and is updated quarterly.

Changes in the inputs, judgments and assumptions during the period and the related measurement impact on the liability are reflected in the below tables.

There were no significant changes in the cash flow assumptions during the period.

We establish reserves for the company's deferred annuity, universal life and structured settlement policies equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals.

1 unchanged sentence

For these policies, we establish a reserve in addition to the account balance, based on expected no-lapse guarantee benefits and expected policy assessments.

This table summarizes our life policy and investment contract reserves:

(Dollars in millions) September 30,

The following table summarizes our life policy and investment contract reserves and provides a reconciliation of the balances described in the below tables to those in the condensed consolidated balance sheets:

(Dollars in millions) March 31,

2023 December 31,

Life policy reserves:

Ordinary/traditional life $ 1,432 $ 1,376

Term $ 1,011 $ 961

Whole life 427 408

Subtotal 1,532 1,463

3 unchanged sentences

Structured settlements 128 129

Other 105 111

Subtotal 1,527 1,552

Total life policy and investment contract reserves $ 3,059 $ 3,015

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The table below shows the ASU 2018-12 adoption impacts to the life policy and investment contract reserves as of January 1, 2021 (transition date), pre-tax:

(Dollars in millions) Term Whole life Deferred annuity Universal life Other Total

At January 1, 2021

Balance, pre-adoption at December 31, 2020 $ 901 $ 363 $ 761 $ 567 $ 323 $ 2,915

Removal of shadow adjustments — — — — 13 13

Net premiums in excess of gross premiums 14 1 — — — 15

Remeasurement at market value discount rates 372 245 — — — 617

Balance, post-adoption at January 1, 2021 $ 1,287 $ 609 $ 761 $ 567 $ 336 $ 3,560

The table below shows the ASU 2018-12 adoption impacts to the life reinsurance recoverable asset as of January 1, 2021, pre-tax:

(Dollars in millions) Term Whole life Deferred annuity Universal life Other Total

At January 1, 2021

Balance, pre-adoption at December 31, 2020 $ 113 $ 26 $ — $ — $ 78 $ 217

Remeasurement at market value discount rates 29 18 — — — 47

Other adjustments 20 1 — 2 — 23

Balance, post-adoption at January 1, 2021 $ 162 $ 45 $ — $ 2 $ 78 $ 287

Other above includes structured settlements, other life policy reserves and other investment contract reserves.

The removal of shadow adjustments above represents an increase to the life policy and investment contract reserve balance as it is no longer required under ASU 2018-12 for liabilities amortized in accordance with deferred acquisition costs.

Shadow adjustments were historically included to present the carrying amount of the liability as if unrealized holding gains and losses had been realized.

The net premiums in excess of gross premiums adjustment represents an increase to the liability as the remeasured net premiums, calculated as the present value of future benefits and related expenses using updated cash flow assumptions as of the transition date less the carrying amount of the liability prior to transition, exceeded the present value of future gross premiums.

For purposes of calculating the updated present value of future benefits and related expenses above, the discount rate assumption that was used prior to adoption of ASU 2018-12 was retained.

The remeasurement at market value discount rates adjustment represents the increase to the liability as a result of updating the discount rate assumption for our term and whole life products from the rates used prior to adoption of ASU 2018-12 to market value discount rates that existed at the transition date.

As the discount rate assumption decreased significantly from the date the contracts were initially made, this adjustment represents the largest impact on the liability as a result of the initial adoption of ASU 2018-12.

The life reinsurance recoverable asset is included in the remeasurement as the assumptions used in estimating the life reinsurance recoverable are consistent with those used in estimating the related liabilities.

Other adjustments includes a reclassification from prepaid reinsurance premiums to reinsurance recoverable.

The shadow removal and remeasurement at market value discount rates adjustments were recorded as an increase to the life policy and investment contract reserves liability and a decrease to opening AOCI as of the transition date.

The net premiums in excess of gross premiums adjustment was recorded as an increase to the life policy and investment contract reserves liability and a decrease to the opening balance of retained earnings as of the transition date.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The following table shows the balances and changes in the term and whole life policy reserves included in life policy and investment contract reserves:

(Dollars in millions) Three months ended March 31,

Term Whole life Term Whole life

Present value of expected net premiums:

Balance, beginning of period $ 1,643 $ 208 $ 1,801 $ 241

Beginning balance at original discount rate 1,708 217 1,503 201

Effect of changes in cash flow assumptions — — ( 4 ) —

Effect of actual variances from expected experience ( 3 ) 1 11 —

Adjusted beginning of period balance 1,705 218 1,510 201

Issuances 38 7 59 11

Interest accrual 18 2 15 2

Net premiums collected ( 46 ) ( 7 ) ( 42 ) ( 7 )

Ending balance at original discount rate 1,715 220 1,542 207

Effect of changes in discount rate assumptions ( 16 ) ( 3 ) 144 19

Balance, end of period 1,699 217 1,686 226

Present value of expected future policy benefits:

Balance, beginning of period 2,584 614 2,993 826

Beginning balance at original discount rate 2,692 607 2,425 577

Effect of changes in cash flow assumptions — — ( 4 ) —

Effect of actual variances from expected experience ( 2 ) 1 18 —

Adjusted beginning of period balance 2,690 608 2,439 577

Issuances 38 6 59 11

Interest accrual 30 8 27 7

Benefits paid ( 46 ) ( 8 ) ( 62 ) ( 9 )

Ending balance at original discount rate 2,712 614 2,463 586

Effect of changes in discount rate assumptions ( 21 ) 30 282 150

Balance, end of period 2,691 644 2,745 736

Net liability for future policy benefits:

Present value of expected future policy benefits less expected net premiums 992 427 1,059 510

Impact of flooring at cohort level 19 — 20 —

Net life policy reserves 1,011 427 1,079 510

Less reinsurance recoverable at original discount rate ( 96 ) ( 25 ) ( 100 ) ( 27 )

Less effect of discount rate assumption changes on reinsurance recoverable ( 10 ) ( 6 ) ( 14 ) ( 11 )

Net life policy reserves, after reinsurance recoverable $ 905 $ 396 $ 965 $ 472

Weighted-average duration of the net life policy reserves 12 16 12 18

The total impact of flooring at cohort level in the above table includes the effect of discount rate assumption changes of $ 5 million and $ 6 million for the three months ended March 31, 2023 and 2022, respectively.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The following table shows the amount of undiscounted and discounted expected future benefit payments and expected gross premiums for our term and whole life policies:

(Dollars in millions) At March 31,

Undiscounted Discounted Undiscounted Discounted

Expected future benefit payments $ 4,696 $ 2,691 $ 4,128 $ 2,745

Expected future gross premiums 4,470 2,674 4,000 2,754

Expected future benefit payments $ 1,586 $ 644 $ 1,511 $ 736

Expected future gross premiums 618 384 580 400

The following table shows the amount of revenue and interest recognized in the condensed consolidated statements of income related to our term and whole life policies:

(Dollars in millions) Three months ended March 31,

Gross premiums

Term $ 73 $ 69

Whole life 12 12

Total $ 85 $ 81

Interest accretion

Term $ 12 $ 12

Whole life 6 5

Total $ 18 $ 17

Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums was immaterial for the three months ended March 31, 2023 .

The following table shows the weighted-average interest rate for our term and whole life products :

Interest accretion rate 5.32 % 5.37 %

Current discount rate 4.81 3.40

Interest accretion rate 5.94 % 5.98 %

Current discount rate 5.06 3.77

The discount rate assumption was developed by calculating forward rates from market yield curves of upper-medium grade fixed-income instruments.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The following table shows the balances and changes in policyholders' account balances included in investment contract reserves:

(Dollars in millions) Three months ended March 31,

Deferred annuity Universal life Deferred annuity Universal life

Balance, beginning of period $ 734 $ 457 $ 763 $ 454

Premiums received 10 11 6 11

Policy charges — ( 10 ) — ( 10 )

Surrenders and withdrawals ( 36 ) ( 3 ) ( 12 ) ( 3 )

Benefit payments ( 3 ) ( 2 ) ( 6 ) ( 1 )

Interest credited 6 5 5 5

Balance, end of period $ 711 $ 458 $ 756 $ 456

Weighted average crediting rate 3.36 % 4.26 % 2.95 % 4.25 %

Net amount at risk $ — $ 4,064 $ — $ 4,172

Cash surrender value 706 424 752 421

The net amount at risk above represents the guaranteed benefit amount in excess of the current account balances.

The following table shows the balance of account values by range of guaranteed minimum crediting rates, in basis points, and the related range of the difference between rates being credited to policyholders and the respective guaranteed minimums for our deferred annuity and universal life contracts:

(Dollars in millions) At guaranteed minimum 1 to 50 basis points above 51-150 basis points above Greater than 150 basis points Total

At March 31, 2023

Deferred annuity

1.00-3.00% $ 9 $ 423 $ 17 $ 212 661

3.01-4.00% 50 — — — 50

Total $ 59 $ 423 $ 17 $ 212 $ 711

Universal life

1.00-3.00% $ 60 $ 47 $ 9 $ 2 $ 118

3.01-4.00% 53 — — — 53

Greater than 4.00% 287 — — — 287

Total $ 400 $ 47 $ 9 $ 2 $ 458

At March 31, 2022

Deferred annuity

1.00-3.00% $ 479 $ — $ 177 $ 50 $ 706

3.01-4.00% 50 — — — 50

Total $ 529 $ — $ 177 $ 50 $ 756

Universal life

1.00-3.00% $ 61 $ 44 $ 7 $ 1 $ 113

3.01-4.00% 51 — — — 51

Greater than 4.00% 292 — — — 292

Total $ 404 $ 44 $ 7 $ 1 $ 456

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The following table shows the balances and changes i n the other additional liability related to the no-lapse guarantees contained within our universal life contracts:

(Dollars in millions) Three months ended March 31,

Balance, beginning of period $ 121 $ 133

Balance, beginning of period before shadow reserve adjustments 123 131

Effect of changes in cash flow assumptions — —

Effect of actual variances from expected experience ( 1 ) 3

Adjusted beginning of period balance 122 134

Interest accrual 1 1

Excess death benefits — ( 8 )

Attributed assessments 3 3

Effect of changes in interest rate assumptions 1 ( 3 )

Balance, end of period before shadow reserve adjustments 127 127

Shadow reserve adjustments ( 2 ) —

Balance, end of period 125 127

Less reinsurance recoverable, end of period 6 5

Net other additional liability, after reinsurance recoverable $ 131 $ 132

Weighted-average duration of the other additional liability 34 35

The following table shows balances and changes in separate account balances during the period:

(Dollars in millions) Three months ended March 31,

Balance, beginning of period $ 892 $ 959

Interest credited before policy charges 10 10

Change in unrealized gains and losses impacting separate account liabilities — ( 52 )

Benefit payments ( 2 ) ( 10 )

Other ( 1 ) ( 4 )

Balance, end of period $ 899 $ 903

Cash surrender value $ 896 $ 869

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 6 – Deferred Policy Acquisition Costs

Expenses directly related to successfully acquired insurance policies – primarily commissions, premium taxes and underwriting costs – are deferred and amortized over the terms of the policies.

We update our acquisition cost assumptions periodically to reflect actual experience, and we evaluate the costs for recoverability.

We update our acquisition cost assumptions periodically to reflect actual experience.

For property casualty, we evaluate the costs for recoverability.

The adoption of ASU 2018-12 on January 1, 2023 resulted in a simplified amortization of life deferred acquisition costs and the removal of shadow deferred acquisition costs.

See Note 1, Accounting Policies, for further discussion.

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

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Property casualty:

6 unchanged sentences

Amortized deferred policy acquisition costs ( 8 ) ( 7 )

Shadow deferred policy acquisition costs 4 1 14 26

Deferred policy acquisition costs asset, end of period $ 334 $ 319

3 unchanged sentences

Amortized deferred policy acquisition costs ( 348 ) ( 308 )

Shadow deferred policy acquisition costs 4 1 14 26

Deferred policy acquisition costs asset, end of period $ 1,048 $ 984

The removal of shadow deferred policy acquisition costs as a result of the adoption of ASU 2018-12 resulted in a $ 33 million increase, across all products, from $ 263 million pre-adoption at December 31, 2020, to $ 296 million post-adoption at January 1, 2021.

The table below shows the life deferred policy acquisition costs asset by product:

(Dollars in millions)

Three months ended March 31, 2023 Term Whole life Deferred annuity Universal life Total

Balance, beginning of period $ 228 $ 43 $ 7 $ 53 $ 331

Capitalized deferred policy acquisition costs 9 2 — — 11

Amortized deferred policy acquisition costs ( 6 ) ( 1 ) — ( 1 ) ( 8 )

Balance, end of period $ 231 $ 44 $ 7 $ 52 $ 334

Three months ended March 31, 2022

Balance, beginning of period $ 215 $ 38 $ 7 $ 54 $ 314

Capitalized deferred policy acquisition costs 10 2 — — $ 12

Amortized deferred policy acquisition costs ( 5 ) ( 1 ) — ( 1 ) $ ( 7 )

Balance, end of period $ 220 $ 39 $ 7 $ 53 $ 319

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 7 – Accumulated Other Comprehensive Income

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

(Dollars in millions) Three months ended September 30,

Before tax Income tax Net Before tax Income tax Net

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

OCI before investment gains and losses, net, recognized in net income ( 514 ) ( 109 ) ( 405 ) ( 80 ) ( 18 ) ( 62 )

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

OCI ( 514 ) ( 109 ) ( 405 ) ( 88 ) ( 19 ) ( 69 )

AOCI, end of period $ ( 1,078 ) $ ( 228 ) $ ( 850 ) $ 874 $ 182 $ 692

Pension obligations:

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

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

Amortization recognized in net income — — — 2 1 1

OCI — — — 2 1 1

AOCI, end of period $ 27 $ 7 $ 20 $ ( 34 ) $ ( 5 ) $ ( 29 )

Life deferred acquisition costs, life policy reserves and other:

AOCI, beginning of period $ 2 $ — $ 2 $ — $ — $ —

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

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

OCI — — — — — —

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

Summary of AOCI:

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

Investments OCI ( 514 ) ( 109 ) ( 405 ) ( 88 ) ( 19 ) ( 69 )

Pension obligations OCI — — — 2 1 1

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

Total OCI ( 514 ) ( 109 ) ( 405 ) ( 86 ) ( 18 ) ( 68 )

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

(Dollars in millions) Nine months ended September 30,

The adoption of ASU 2018-12 on January 1, 2023 resulted in restatement of certain amounts below.

See Note 1, Accounting Policies, for further discussion.

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

(Dollars in millions) Three months ended March 31,

Before tax Income tax Net Before tax Income tax Net

10 unchanged sentences

AOCI, end of period $ 30 $ 8 $ 22 $ 27 $ 7 $ 20

Life deferred acquisition costs, life policy reserves and other:

Life policy reserves, reinsurance recoverable and other:

AOCI, beginning of period $ 29 $ 5 $ 24 $ 1 $ — $ 1

Cumulative effect of change in accounting for long duration insurance contracts — — — ( 445 ) ( 93 ) ( 352 )

Adjusted AOCI, beginning of period 29 5 24 ( 444 ) ( 93 ) ( 351 )

OCI before investment gains and losses, net, recognized in net income ( 45 ) ( 9 ) ( 36 ) 196 41 155

4 unchanged sentences

AOCI, beginning of period $ ( 782 ) $ ( 168 ) $ ( 614 ) $ 820 $ 172 $ 648

Cumulative effect of change in accounting for long duration insurance contracts — — — ( 445 ) ( 93 ) ( 352 )

Adjusted AOCI, beginning of period ( 782 ) ( 168 ) ( 614 ) 375 79 296

Investments OCI 163 35 128 ( 746 ) ( 157 ) ( 589 )

Pension obligations OCI ( 6 ) ( 1 ) ( 5 ) — — —

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

Life policy reserves, reinsurance recoverable and other OCI ( 45 ) ( 9 ) ( 36 ) 196 41 155

Total OCI 112 25 87 ( 550 ) ( 116 ) ( 434 )

AOCI, end of period $ ( 670 ) $ ( 143 ) $ ( 527 ) $ ( 175 ) $ ( 37 ) $ ( 138 )

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

Investment gains and losses, net, and other investment gains and losses, net, are recorded in the investment gains and losses, net, line item in the condensed consolidated statements of income.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 8 – Reinsurance

3 unchanged sentences

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

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Direct written premiums $ 1,859 $ 1,703

12 unchanged sentences

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Direct earned premiums $ 96 $ 93

5 unchanged sentences

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

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

The allowance for uncollectible property casualty premiums was $ 13 million at both March 31, 2023, and December 31, 2022.

The allowances for credit losses on other premiums receivable and reinsurance recoverable assets were immaterial at March 31, 2023, and December 31, 2022.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 9 – Income Taxes

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

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Tax at statutory rate:

3 unchanged sentences

Dividend received exclusion ( 5 ) ( 1.9 ) ( 5 ) 1.4

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

Other ( 3 ) ( 1.2 ) ( 1 ) 0.4

4 unchanged sentences

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

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

domestic operations at March 31, 2023, and December 31, 2022.

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

SM (Cincinnati Global).

Enactment of the Inflation Reduction Act of 2022

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

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

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

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

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

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

Unrecognized Tax Benefits

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

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

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

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

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

2022 2021 2022 2021

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

Gross increase in prior year positions — — — —

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

Gross increase in current year positions — — — —

Settlements with tax authorities — — — —

Lapse of statute of limitations — — — —

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

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Global

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

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

As a result of operations for the three months ended March 31, 2023, Cincinnati Global decreased its net deferred tax assets by $ 5 million with an offsettin g decrease of $ 5 million to the valuation allowance.

Cincinnati Global had a net deferred tax asset of $ 26 million and an offsetting valuation allowance of $ 26 million at March 31, 2023.

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

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

At September 30, 2022, and December 31, 2021, Cincinnati Global had operating loss carryforwards in the United States of $ 6 million and $ 8 million, respectively, and in the United Kingdom of $ 123 million and $ 130 million, respectively.

After considering all positive and negative evidence, we continue to believe it is appropriate to carry a valuation allowance at March 31, 2023.

Cincinnati Global had operating loss carryforwards in the United States of $ 6 million and $ 5 million and in the United Kingdom of $ 105 million and $ 109 million at March 31, 2023, and December 31, 2022, respectively.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 10 – Net Income (Loss) Per Common Share

2 unchanged sentences

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

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

2022 2021 2022 2021

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

Net income (loss)—basic and diluted

9 unchanged sentences

Number of anti-dilutive share-based awards 1.0 2.3

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

In accordance with Accounting Standards Codification 260, Earnings per Share , the assumed exercise of share-based awards were excluded from the computation of diluted loss per share for the three and nine months ended September 30, 2022, because their exercise would have anti-dilutive effects.

The above table shows the number of anti-dilutive share-based awards for the three months ended March 31, 2023 and 2022.

In accordance with Accounting Standards Codification 260, Earnings per Share , the assumed exercise of share-based awards was excluded from the computation of diluted loss per share for the three months ended March 31, 2022, because their exercise would have anti-dilutive effects.

See our 2022 Annual Report on Form 10-K, Item 8, Note 17, Share-Based Associate Compensation Plans, Page 170, for information about share-based awards.

NOTE 11 – Employee Retirement Benefits

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

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

2022 2021 2022 2021

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

(Dollars in millions) Three months ended March 31,

Service cost $ 1 $ 2

5 unchanged sentences

Total non-service benefit ( 8 ) ( 3 )

Net periodic (benefit) cost $ ( 1 ) $ 1 $ ( 2 ) $ 5

Net periodic benefit $ ( 7 ) $ ( 1 )

See our 2022 Annual Report on Form 10-K, Item 8, Note 13, Employee Retirement Benefits, Page 163, for information on our retirement benefits.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

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

The net periodic benefit is allocated in the same proportion primarily to the underwriting, acquisition and insurance expenses line item with the remainder allocated to the insurance losses and contract holders' benefits line item on the condensed consolidated statements of income for both 2023 and 2022.

We made matching contributions totaling $ 8 million to our 401(k) and Top Hat savings plans during both the first quarter of 2023 and 2022.

We m ade no con tributions to our qualified pension plan during the first three months of 2023.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

NOTE 12 – Commitments and Contingent Liabilities

12 unchanged sentences

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

These lawsuits are at various stages of litigation:

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

several that have been dismissed voluntarily and may be refiled;

These lawsuits are at various stages of litigation, including several that continue to be amended;

many that have been dismissed;

several that may be refiled;

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

9 unchanged sentences

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

On a quarterly basis, we review these outstanding matters.

16 unchanged sentences

See our 2022 Annual Report on Form 10-K, Item 8, Note 18, Segment Information, Page 173, for a description of revenue, income or loss before income taxes and identifiable assets for each of the five segments.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Segment information is summarized in the following table:

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Commercial lines insurance

24 unchanged sentences

Premiums 194 142

Other 2 3 7 8

Total other revenues 197 144

10 unchanged sentences

Identifiable assets:

September 30,

2023 December 31,

4 unchanged sentences

Total $ 30,474 $ 29,732

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

What changed 10-Q

Item 1. Financial Statements