What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-27 compared with 2022-10-31 · 298 added, 352 removed, 622 unchanged (51% of the section changed)

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all other company data is presented in accordance with accounting principles generally accepted in the United States of America (GAAP).

As discussed in Item 1, Note 1, Accounting Policies, Page 8, effective January 1, 2023, we adopted ASU 2018-12, Financial Services - Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts.

We adjusted applicable financial statements.

Related financial data shown in Management's Discussion and Analysis of Financial Condition and Results of Operations also have been adjusted.

We present per share data on a diluted basis unless otherwise noted, adjusting those amounts for all stock splits and dividends.

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

• Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance, due to inflationary trends or other causes

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

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

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

• Interest rate fluctuations or other factors that could significantly affect:

• Our ability to generate growth in investment income

• Values of our fixed-maturity investments, including accounts in which we hold bank-owned life insurance contract assets

• Our traditional life policy reserves

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

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

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

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

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

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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

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

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

• Adverse outcomes from litigation or administrative proceedings, including effects of social inflation and third-party litigation funding on the size of litigation awards

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

• Unforeseen departure of certain executive officers or other key employees due to retirement, health or other causes that could interrupt progress toward important strategic goals or diminish the effectiveness of certain longstanding relationships with insurance agents and others

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

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

• Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location or work effectively in a remote environment

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

CORPORATE FINANCIAL HIGHLIGHTS

Net Income and Comprehensive Income Data

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

2022 2021 % Change 2022 2021 % Change

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

2023 2022 % Change

Earned premiums $ 1,918 $ 1,693 13

Investment income, net of expenses (pretax) 210 185 14

Investment gains and losses, net (pretax) (674) (70) nm (2,494) 954 nm

Investment gains and losses, net (pretax) 106 (666) nm

Total revenues 2,241 1,218 84

Net income (loss) (418) 153 nm (1,499) 1,476 nm

Comprehensive income (loss) (823) 85 nm (2,975) 1,370 nm

Net income (loss) per share—diluted (2.64) 0.94 nm (9.41) 9.07 nm

Net income (loss) 225 (266) nm

Comprehensive income (loss) 312 (700) nm

Net income (loss) per share—diluted 1.42 (1.66) nm

Cash dividends declared per share 0.75 0.69 9

Diluted weighted average shares outstanding 158.5 160.4 (1)

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.

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.

Total revenues increased $1.023 billion for the first quarter of 2023, compared with the first quarter of 2022, primarily due to net investment gains in addition to higher earned premiums and investment income.

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

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

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.

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.

Life insurance segment results on a pretax basis increased by $16 million compared with the third quarter of 2021.

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.

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.

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.

Various pandemic effects are also increasing our uncertainty regarding ultimate losses.

We believe the past two years distorted paid loss cost trends for reasons such as slowed activity for many businesses, reduced driving and closed courts that delayed progress on some litigated insurance claims.

Net income for the first quarter of 2023, compared with a net loss in first-quarter 2022 of $266 million, was a change of $491 million, including an increase of $610 million in after-tax net investment gains and losses and an increase of $20 million in after-tax investment income that offset a decrease of $138 million in after-tax property casualty underwriting income.

Catastrophe losses for the first quarter of 2023, mostly weather related, were $163 million higher after taxes and unfavorably affected both net income and property casualty underwriting income.

Life insurance segment results matched the first quarter of 2022.

The first-quarter 2023 decrease in property casualty underwriting income also included higher insured loss experience before catastrophe effects, partly from elevated paid losses reflecting economic or other forms of inflation that are increasing our uncertainty regarding ultimate losses.

Until longer-term paid loss cost trends become more clear, we intend to remain prudent in reserving for estimated ultimate losses.

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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.

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.

As a result, incurred losses for the first three months of 2023 for several lines of business were higher than in prior periods and are discussed in Financial Results by property casualty insurance segment.

Performance by segment is discussed below in Financial Results.

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publicly traded companies.

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

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

In January 2023, the board of directors increased the regular quarterly dividend to 75 cents per share, setting the stage for our 63 rd consecutive year of increasing cash dividends.

During the first three months of 2023, cash dividends declared by the company increased 9% compared with the same period of 2022.

Our board regularly evaluates relevant factors in decisions related to dividends and share repurchases.

The 2023 dividend increase reflected our strong operating performance and signaled management's and the board's positive outlook and confidence in our outstanding capital, liquidity and financial flexibility.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Balance Sheet Data and Performance Measures

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

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

Total investments $ 23,123 $ 22,425

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Debt-to-total-capital ratio 7.2 % 7.4 %

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.

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.

Total assets at March 31, 2023, increased 2% compared with year-end 2022, and included a 3% increase in total investments that reflected net purchases and higher fair values for many securities in our portfolio.

Shareholders' equity increased 2% and book value per share also increased 2% during the first three months of 2023.

Our debt-to-total-capital ratio (capital is the sum of debt plus shareholders' equity) decreased compared with year-end 2022.

Our value creation ratio is our primary performance metric.

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.

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.

That ratio was 3.1% for the first three months of 2023, and was more than the same period in 2022 primarily due to a higher amount in overall net gains from our investment portfolio.

Book value per share increased $1.12 during the first three months of 2023 and contributed 2.0 percentage points to the value creation ratio, while dividends declared at $0.75 per share contributed positive 1.1 points.

Value creation ratios by major components and in total, along with calculations from per-share amounts, are shown in the tables below.

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Three months ended March 31,

Value creation ratio major components:

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Value creation ratio 3.1 % (6.9) %

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

(Dollars are per share) Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

Book value change per share

Book value as originally December 31, 2022 $ 67.01

Cumulative effect of change in accounting for long-duration

insurance contracts, net of tax 0.20

Book value as adjusted December 31, 2022 $ 67.21

Value creation ratio:

End of period book value* $ 60.01 $ 73.49 $ 60.01 $ 73.49

Less beginning of period book value 66.30 73.57 81.72 67.04

Change in book value (6.29) (0.08) (21.71) 6.45

End of period book value*- as originally reported $ 68.33 $ 75.43

Less beginning of period book value - as originally reported 67.01 81.72

Change in book value - as originally reported 1.32 (6.29)

Dividend declared to shareholders 0.75 0.69

Total value creation $ 2.07 $ (5.60)

Value creation ratio from change in book

value** (9.4) % (0.1) % (26.5) % 9.6 %

Value creation ratio from change in book value** 2.0 % (7.7) %

Value creation ratio from dividends declared to shareholders*** 1.1 0.8

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We market our insurance products through a select group of independent insurance agencies as discussed in our 2022 Annual Report on Form 10-K, Item 1, Our Business and Our Strategy, Page 6.

At September 30, 2022, we actively marketed through 1,971 agencies located in 46 states.

At March 31, 2023, we actively marketed through 1,998 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.

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• Premium growth – We believe our agency relationships and initiatives can lead to a property casualty written premium growth rate over any five-year period that exceeds the industry average.

For the first nine months of 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.

Best for the first six months of 2022.

For the first three months of 2023, our consolidated property casualty net written premium year-over-year growth was 6%.

As of March 2023, A.M.

Best projected the industry's full-year 2023 written premium growth at approximately 8%.

For the five-year period 2018 through 2022, our growth rate exceeded that of the industry.

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• Combined ratio – We believe our underwriting philosophy and initiatives can generate a GAAP combined ratio over any five-year period that is consistently within the range of 95% to 100%.

For the first nine months of 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.

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.

Best for the first six months of 2022.

For the first three months of 2023, our GAAP combined ratio was 100.7%, including 13.8 percentage points of current accident year catastrophe losses partially offset by 3.2 percentage points of favorable loss reserve development on prior accident years.

Our statutory combined ratio was 99.6% for the first three months of 2023.

As of March 2023, A.M.

Best projected the industry's full-year 2023 statutory combined ratio at approximately 102%, including approximately 6 percentage points of catastrophe losses and a favorable effect of approximately 1 percentage point of loss reserve development on prior accident years.

The industry's ratio again excludes its mortgage and financial guaranty lines of business.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

• Investment contribution – We believe our investment philosophy and initiatives can drive investment income growth and lead to a total return on our equity investment portfolio over a five-year period that exceeds the five-year return of the Standard & Poor's 500 Index.

For the first nine months of 2022, pretax investment income was $573 million, up 9% compared with the same period in 2021.

For the first three months of 2023, pretax investment income was $210 million, up 14% compared with the same period in 2022.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Financial Strength

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Our strong parent-company liquidity and financial strength increase our flexibility to maintain a cash dividend through all periods and to continue to invest in and expand our insurance operations.

At September 30, 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.

Our debt-to-total-capital ratio was 8.1% at September 30, 2022.

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.

At March 31, 2023, we held $4.373 billion of our cash and cash equivalents and invested assets at the parent-company level, of which $4.121 billion, or 94.2%, was invested in common stocks, and $119 million, or 2.7%, was cash or cash equivalents.

Our debt-to-total-capital ratio was 7.2% at March 31, 2023.

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 March 31, 2023, matching year-end 2022.

Financial strength ratings assigned to us by independent rating firms also are important.

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please see each rating agency's website for its most recent report on our ratings.

At October 28, 2022, our insurance subsidiaries continued to be highly rated.

At April 26, 2023, our insurance subsidiaries continued to be highly rated.

Insurer Financial Strength Ratings

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

CONSOLIDATED PROPERTY CASUALTY INSURANCE HIGHLIGHTS

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SM (Cincinnati Global).

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Earned premiums $ 1,841 $ 1,618 14

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Prior accident years before catastrophe losses (41) (20) (105)

Prior accident years catastrophe losses (23) 10 nm (69) (49) (41)

Prior accident years catastrophe losses (18) (21) 14

Loss and loss expenses 1,317 956 38

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Contribution from catastrophe losses and prior years reserve development 10.6 0.6 10.0

12.8 7.2 5.6 8.1 3.5 4.6

Combined ratio before catastrophe losses and prior years reserve development 90.1 % 89.3 % 0.8

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.

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.

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.

Elevated inflation was a driver of higher losses and loss expenses as costs have increased significantly to repair damaged autos or other property that we insure.

In addition to inflation affecting historic 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.

We also experienced higher losses for liability coverages for some of our lines of business, particularly for commercial umbrella insurance.

Our consolidated property casualty insurance operations generated an underwriting loss of $10 million for the first quarter of 2023.

Compared with a first-quarter 2022 underwriting profit of $165 million, the first-quarter 2023 change of $175 million included an unfavorable increase of $206 million in losses from catastrophes, mostly caused by severe weather.

The first-quarter 2023 change in underwriting profitability also included higher current accident year loss and loss expenses before catastrophe losses that were partially offset by higher amounts of favorable reserve development on prior accident years.

Elevated inflation was a driver of higher losses and loss expenses in 2023 as costs have increased significantly to repair damaged autos or other property that we insure.

We also experienced higher losses for liability coverages for some of our lines of business.

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.

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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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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.

For all property casualty lines of business in aggregate, net loss and loss expense reserves at March 31, 2023, were $271 million, or 3%, higher than at year-end 2022, including an increase of $266 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.

The GAAP-basis combined ratio is the percentage of incurred losses plus all expenses per each earned premium dollar – the lower the ratio, the better the performance.

An underwriting profit results when the combined ratio is below 100%.

An underwriting profit results when the combined

Cincinnati Financial Corporation First-Quarter 2023 10-Q

ratio is below 100%.

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

Our consolidated property casualty combined ratio for the third quarter of 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.

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.

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

Our consolidated property casualty combined ratio for the first quarter of 2023 rose by 10.8 percentage points, compared with the same period of 2022, including an increase of 11.0 points from higher catastrophe losses and loss expenses.

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

The combined ratio can be affected significantly by natural catastrophe losses and other large losses as discussed in detail below.

The combined ratio can also be affected by updated estimates of loss and loss expense reserves established for claims that occurred in prior periods, referred to as prior accident years.

Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 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 on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 3.2 percentage points in the first three months of 2023, compared with 2.5 percentage points in the same period of 2022.

Net favorable development is discussed in further detail in Financial Results by property casualty insurance segment.

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

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.

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.

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

The ratio for current accident year loss and loss expenses before catastrophe losses increased in the first three months of 2023.

That 61.0% ratio was 2.5 percentage points higher, compared with the 58.5% accident year 2022 ratio measured as of March 31, 2022, including a decrease of 1.1 points in the ratio for large losses of $2 million or more per claim, discussed below.

The ratio increase of 2.5 percentage points included an increase of 9.2 points for the IBNR portion and a decrease of 6.7 points for the case incurred portion.

The underwriting expense ratio decreased for the first quarter of 2023, compared with the same period a year ago, primarily due to a decrease in profit-sharing commissions for agencies.

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

Consolidated Property Casualty Insurance Premiums

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Agency renewal written premiums $ 1,535 $ 1,397 10

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Price change trends that heavily influence renewal written premium increases or decreases, along with other premium growth drivers for 2023, are discussed in more detail by segment below in Financial Results.

Consolidated property casualty net written premiums for the three and nine months ended September 30, 2022, grew $212 million and $668 million compared with the same periods of 2021.

Consolidated property casualty net written premiums for the three months ended March 31, 2023, grew $120 million compared with the same period of 2022.

Our premium growth initiatives from prior years have provided an ongoing favorable effect on growth during the current year, particularly as newer agency relationships mature over time.

Consolidated property casualty agency new business written premiums increased by $34 million and $109 million for the third quarter and first nine months of 2022, compared with the same periods of 2021.

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.

Consolidated property casualty agency new business written premiums increased by $7 million for the first three months of 2023, compared with the same period of 2022.

New agency appointments during 2023 and 2022 produced a $12 million increase in standard lines new business for the first three months of 2023 compared with the same period of 2022.

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

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We believe these seasoned accounts tend to be priced more accurately than business that may be less familiar to our agent upon obtaining it from a competing agent.

Net written premiums for Cincinnati Re, included in other written premiums, increased by $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.

Net written premiums for Cincinnati Re, included in other written premiums, decreased by $24 million for the three months ended March 31, 2023, compared with the same period of 2022, to $230 million.

Cincinnati Re assumes

Cincinnati Financial Corporation First-Quarter 2023 10-Q

risks through reinsurance treaties and in some cases cedes part of the risk and related premiums to one or more unaffiliated reinsurance companies through transactions known as retrocessions.

Cincinnati Global is also included in other written premiums.

Net written premiums increased, by $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.

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.

Net written premiums increased for Cincinnati Global by $13 million for the three months ended March 31, 2023, compared with the same period of 2022, to $64 million.

Other written premiums includes premiums ceded to reinsurers as part of our reinsurance ceded program.

An increase in ceded premiums reduced net written premiums by $17 million for the first three months of 2023, compared with the same period of 2022.

Catastrophe losses and loss expenses typically have a material effect on property casualty results and can vary significantly from period to period.

Losses from catastrophes contributed 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.

Losses estimated for Hurricane Ian as of September 30, 2022, did not reach a level applicable for reinsurance recovery.

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.

Losses from catastrophes contributed 12.8 percentage points to the combined ratio in the first three months of 2023, compared with 1.8 percentage points in the same period of 2022.

The reinsurance program for Cincinnati Re that provides retrocession coverage on an excess of loss basis has a total available aggregate limit of $30 million in excess of $100 million per loss.

Losses estimated for Hurricane Ian, as of March 31, 2023, resulted in an estimated reinsurance recovery of $14 million, compared with $19 million as of December 31, 2022.

Reserve estimates are inherently uncertain as described in our 2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 53, and Item 1A, Risk Factors, Page 32.

Losses estimated for

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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.

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.

The following table shows consolidated property casualty insurance catastrophe losses and loss expenses incurred, net of reinsurance, as well as the effect of loss development on prior period catastrophe events.

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Consolidated Property Casualty Insurance Catastrophe Losses and Loss Expenses Incurred

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

Dates Region lines lines lines Other Total lines lines lines Other Total

10-14 Midwest, South, West $ (4) $ (2) $ — $ — $ (6) $ 13 $ 9 $ — $ — $ 22

15-19 Northeast, South (2) (1) — — (3) 14 2 — — 16

May 1-3 Midwest, South, West — — — — — 8 9 — — 17

May 9-10 Midwest 1 — — — 1 20 4 — — 24

May 11-12 Midwest, South 1 — — — 1 14 5 — — 19

May 19-22 Midwest, Northeast, South 1 4 — — 5 7 15 — — 22

4-8 Midwest, South, West 1 (1) — — — 14 3 — — 17

11-17 Midwest, Northeast, South 1 (2) — — (1) 18 17 — — 35

1 South (Ian) 26 51 — 143 220 26 51 — 143 220

All other 2022 catastrophes 25 27 — 6 58 67 79 3 19 168

Development on 2021 and prior catastrophes (4) (7) — (12) (23) (17) (40) — (12) (69)

Calendar year incurred total $ 46 $ 69 $ — $ 137 $ 252 $ 184 $ 154 $ 3 $ 150 $ 491

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

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

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

Dates Region lines lines lines Other Total

1-4 Midwest, Northeast, South $ 30 $ 34 $ 1 $ — $ 65

23-28 Midwest, Northeast, South 13 27 1 — 41

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

17-20 Midwest 6 2 — — 8 12 16 — — 28

1 Midwest, Northeast, South, West 3 6 — — 9 5 12 — — 17

1 Midwest, Northeast, South 42 24 — — 66

2 Northeast, South (Ida) 18 42 — 109 169 18 42 — 109 169

All other 2023 catastrophes 21 55 — 5 81

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Calendar year incurred total $ 110 $ 115 $ 1 $ 9 $ 235

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

2022 catastrophes $ 16 $ 28 $ 1 $ 5 $ 50

Development on 2021 and prior catastrophes (3) (21) — 3 (21)

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The following table includes data for losses incurred of $2 million or more per claim, net of reinsurance.

Consolidated Property Casualty Insurance Losses Incurred by Size

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

2022 2021 % Change 2022 2021 % Change

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

2023 2022 % Change

Current accident year losses greater than $5 million $ 36 $ 23 57

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Total large losses incurred 60 71 (15)

Losses incurred but not reported 131 (13) nm 241 52 363

Losses incurred but not reported 179 36 397

Other losses excluding catastrophe losses 641 651 (2)

Catastrophe losses 246 215 14 478 421 14

Catastrophe losses 227 24 nm

Total losses incurred $ 1,107 $ 782 42

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Our analysis continues to indicate no unexpected concentration of large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory.

The third-quarter 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.

The ratio for these large losses was 0.8 percentage points higher compared with last year's third quarter.

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.

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

The first-quarter 2023 property casualty total large losses incurred of $60 million, net of reinsurance, was lower than the $77 million quarterly average during full-year 2022 and the $71 million experienced for the first quarter of 2022.

The ratio for these large losses was 1.2 percentage points lower compared with last year's first quarter.

We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $2 million.

Losses by size are discussed in further detail in results of operations by property casualty insurance segment.

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• Investments

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

COMMERCIAL LINES INSURANCE RESULTS

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Earned premiums $ 1,056 $ 962 10

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Prior accident years before catastrophe losses (36) (15) (140)

Prior accident years catastrophe losses (4) (5) 20 (17) (32) 47

Prior accident years catastrophe losses 4 (3) nm

Loss and loss expenses 748 586 28

Underwriting expenses 311 301 3

Underwriting profit $ 11 $ 182 (94) $ 25 $ 457 (95)

Underwriting profit (loss) $ (2) $ 76 nm

Ratios as a percent of earned premiums:

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Contribution from catastrophe losses and prior years reserve development 7.0 (0.2) 7.2

4.5 (7.6) 12.1 5.1 (5.3) 10.4

Combined ratio before catastrophe losses and prior years reserve development 93.4 % 92.5 % 0.9

Performance highlights for the commercial lines segment include:

• 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.

• Premiums – Earned premiums and net written premiums for the commercial lines segment grew during the first quarter of 2023, compared with the same period a year ago, reflecting 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.

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We seek to maintain appropriate pricing discipline for both new and renewal business as our agents and underwriters assess account quality to make careful decisions on a policy-by-policy basis whether to write or renew a policy.

Agency renewal written premiums increased by 11% for the third quarter and 9% for the first nine months of 2022, compared with the same periods of 2021, including price increases.

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.

Agency renewal written premiums increased by 7% for the first three months of 2023, compared with the same period of 2022, including price increases.

During the first quarter of 2023, our overall standard commercial lines policies averaged estimated renewal price increases at percentages near the high end of the mid-single-digit range.

We continue to segment commercial lines policies, emphasizing identification and retention of those we believe have relatively stronger pricing.

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We measure average changes in commercial lines renewal pricing as the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for the respective policies.

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.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

the period being measured.

Therefore, our reported change in average commercial lines renewal pricing reflects a blend of three-year policies that did not expire and other policies that did expire during the measurement period.

For commercial lines policies that did expire and were then renewed during the third quarter of 2022, we estimate that our average percentage price increases were in the mid-single-digit range for commercial property, commercial auto and commercial casualty.

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

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.

For commercial lines policies that did expire and were then renewed during the first quarter of 2023, we estimate that our average percentage price increases were in the high-single-digit range for commercial property and commercial auto and near the high end of the mid-single-digit range for commercial casualty.

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

Our first-quarter 2023 increase for the commercial lines segment's agency renewal written premiums also included a higher level of insured exposures.

Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged commercial structures.

We use building valuation software to automate much of that underwriting process and may also manually adjust premiums to reflect property costs.

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.

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.

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.

Audits completed during the first three months of 2023 contributed $35 million to net written premiums, compared with $21 million for the same period of 2022.

New business written premiums for commercial lines decreased $22 million during the first three months of 2023, compared with the same period of 2022.

Trend analysis for year-over-year comparisons of individual quarters is more difficult to assess for commercial lines new business written premiums, due to inherent variability.

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Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program.

For our commercial lines insurance segment, an increase in ceded premiums 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.

For our commercial lines insurance segment, an increase in ceded premiums reduced net written premiums by $7 million for the first three months of 2023, compared with the same period of 2022.

Commercial Lines Insurance Premiums

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Agency renewal written premiums $ 1,041 $ 970 7

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Earned premiums $ 1,056 $ 962 10

• 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.

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.

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.

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.

• Combined ratio – The first-quarter 2023 commercial lines combined ratio increased by 8.1 percentage points, compared with the first quarter of 2022, including an increase of 9.0 points in losses from catastrophes.

The first-quarter combined ratio also increased 2.7 points from current accident year loss and loss expenses before catastrophe losses, including an increase of 11.1 points in the IBNR portion and a decrease of 8.4 points for the case incurred portion.

Underwriting results also included a higher level of favorable reserve development on prior accident years and favorable effects from the underwriting expense ratio, as discussed below.

The current accident year ratios were measured as of March 31 of the respective years and included a first-quarter 2023 decrease of 1.6 percentage points in the ratio for large losses of $2 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.

In addition to inflation causing deviations from historical loss patterns, we believe reduced driving during the pandemic resulted in a relatively

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

low level of loss activity in 2021, distorting paid loss cost trends for autos.

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, in addition to higher losses for liability coverages for some of our lines of business.

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.

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.

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%.

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 coverages, part of our commercial casualty line of business that help protect businesses against liability from occurrences such as accidents or injuries, contributed approximately 1 percentage point of the commercial lines segment three-month 2023 ratio for loss and loss expenses increase of 9.9% shown in the table above.

For the first three months of 2023, incurred losses and loss expenses for commercial umbrella

Cincinnati Financial Corporation First-Quarter 2023 10-Q

coverages of $89 million increased $19 million or 27%, compared with the same period of 2022, including an increase of $15 million or 33% for the IBNR portion, while earned premiums of $127 million rose 10%.

The first-quarter 2023 estimated combined ratio for commercial umbrella was 98%, compared with an estimated 90% for first-quarter 2022.

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.

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.

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.

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.

The profile of coverage limits for policies in force at the end of 2022 included 43% with $1 million of coverage per policy, 91% with $5 million or less and 99% 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 averaging below 85% for the five years ending in 2022.

Catastrophe losses and loss expenses accounted for 10.4 percentage points of the combined ratio for the first three months of 2023, compared with 1.4 percentage points for the same period a year ago.

Through 2022, 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 6.2 percentage points.

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.

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.

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.

The net effect of reserve development on prior accident years during the first three months of 2023 was favorable for commercial lines overall by $32 million, compared with $18 million for the same period in 2022.

For the first three months of 2023, 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.

The net favorable reserve development recognized during the first three months of 2023 for our commercial lines insurance segment was primarily for accident years 2022 and 2021 and was primarily due to lower-than-anticipated loss emergence on known claims.

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.

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

The commercial lines underwriting expense ratio decreased for the first quarter of 2023, compared with the same period a year ago.

The decrease was primarily due to a decrease in profit-sharing commissions for agencies.

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

Commercial Lines Insurance Losses Incurred by Size

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

2022 2021 % Change 2022 2021 % Change

Current accident year losses greater than $5 million $ 30 $ 4 nm $ 61 $ 47 30

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

2023 2022 % Change

Current accident year losses greater than $5 million $ 30 $ 16 88

Current accident year losses $2 million - $5 million 12 37 (68)

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Total large losses incurred 45 60 (25)

Losses incurred but not reported 97 (35) nm 196 (30) nm

Losses incurred but not reported 125 38 229

Other losses excluding catastrophe losses 335 362 (7)

Catastrophe losses 44 30 47 179 92 95

Catastrophe losses 106 11 nm

Total losses incurred $ 611 $ 471 30

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Total loss ratio 57.9 % 48.9 % 9.0

Cincinnati Financial Corporation First-Quarter 2023 10-Q

We continue to monitor new losses and case reserve increases greater than $2 million for trends in factors such as initial reserve levels, loss cost inflation and claim settlement expenses.

Our analysis continues to indicate no unexpected concentration of these large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory.

The third-quarter 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.

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.

The third-quarter 2022 ratio for commercial lines total large losses was 1.1 percentage points higher than last year's third-quarter ratio.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

The first-quarter 2023 commercial lines total large losses incurred of $45 million, net of reinsurance, was lower than the quarterly average of $56 million during full-year 2022 and the $60 million of total large losses incurred for the first quarter of 2022.

The decrease in commercial lines large losses for the first three months of 2023 was primarily due to our commercial property line of business.

The first-quarter 2023 ratio for commercial lines total large losses was 2.0 percentage points lower than last year's first-quarter ratio.

We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $2 million.

PERSONAL LINES INSURANCE RESULTS

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Earned premiums $ 464 $ 402 15

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Prior accident years before catastrophe losses (6) (13) 54

Prior accident years catastrophe losses (7) — nm (40) (4) nm

Prior accident years catastrophe losses (25) (21) (19)

Loss and loss expenses 386 215 80

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Contribution from catastrophe losses and prior years reserve development 23.4 (1.5) 24.9

15.7 19.3 (3.6) 11.1 14.1 (3.0)

Combined ratio before catastrophe losses and prior years reserve development 89.1 % 85.4 % 3.7

Performance highlights for the personal lines segment include:

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

Personal lines net written premiums from high net worth policies totaled approximately $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.

• Premiums – Personal lines earned premiums and net written premiums continued to grow during the first three months of 2023, including increased new business and renewal written premiums that included higher average pricing.

Cincinnati Private Client SM net written premiums included in the personal lines insurance segment results totaled approximately $233 million for the first quarter of 2023, compared with $176 million for the same period of 2022.

Included in Cincinnati Private Client net written premiums for the respective periods were $19 million and $15 million from excess and surplus lines homeowner policies.

The table below analyzes the primary components of premiums.

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.

Agency renewal written premiums increased 17% for the first three months of 2023, reflecting rate increases in selected states, a higher level of insured exposures and other factors such as higher policy retention rates and

Cincinnati Financial Corporation First-Quarter 2023 10-Q

changes in policy deductibles or mix of business.

Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged homes.

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.

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.

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.

We expect full-year 2023 written premiums will include an average rate increase of approximately 10% for our personal auto line of business.

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

We estimate that premium rates for our personal auto line of business increased at average percentages in the mid-single-digit range during the first three months of 2023.

We plan to increase rates more aggressively in future quarters and we expect full-year 2023 written premiums will include an average rate increase of approximately 10% for our personal auto line of business.

For our homeowner line of business, we estimate that premium rates for the first three months of 2023 increased at average percentages in the mid-single-digit range.

For both our personal auto and homeowner lines of business, some individual policies experienced lower or higher rate changes based on each risk's specific characteristics and enhanced pricing precision enabled by predictive models.

Personal lines new business written premiums increased $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.

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.

We believe underwriting and pricing discipline were maintained in recent quarters, and growth was also supported by expanded use of enhanced pricing precision tools.

Personal lines new business written premiums increased $27 million or 52% for the first quarter of 2023, compared with the same period of 2022.

Approximately $13 million of the increase was from Cincinnati Private Client policies.

We believe we maintained underwriting and pricing discipline in Cincinnati Private Client markets and in other personal lines markets as we expanded use of enhanced pricing precision tools.

Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program.

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.

For our personal lines insurance segment, an increase in 2023 ceded premiums reduced net written premiums by $9 million for the first three months, compared with the same period of 2022.

Personal Lines Insurance Premiums

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Agency renewal written premiums $ 388 $ 333 17

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Earned premiums $ 464 $ 402 15

• 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.

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.

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.

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.

• Combined ratio – Our personal lines combined ratio for the first quarter of 2023 increased by 28.6 percentage points, compared with first-quarter 2022, including an increase of 23.0 points in losses from catastrophes.

The first-quarter 2023 combined ratio also included an increase of 4.9 percentage points from current accident year loss and loss expenses before catastrophe losses, with our personal auto and other personal lines of business each representing approximately 2 points.

Those current accident year ratios were measured as of March 31 of the respective years and included a three-month decrease of 0.3 points in the ratio for large losses of $2 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.

Elevated inflation was a driver of higher losses and loss expenses as costs have increased significantly to repair damaged autos or homes that we insure.

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.

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.

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%.

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.

For example, for the first three months of 2023, personal auto incurred loss and loss expenses before catastrophe losses increased $24 million or 22%, compared with the same period of 2022, in part due to paid losses increasing $15 million or 18% while earned premiums rose 9%.

Catastrophe losses and loss expenses accounted for 24.7 percentage points of the combined ratio for the first three months of 2023, compared with 1.7 points for the same period a year ago.

The 10-year annual average catastrophe loss ratio for the personal lines segment through 2022 was 10.6 percentage points, and the five-year annual average was 12.0 percentage points.

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In addition, greater geographic diversification is expected to reduce the volatility of homeowner loss ratios attributable to weather-related catastrophe losses over time.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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.

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The net effect of reserve development on prior accident years during the first three months of 2023 was favorable for personal lines overall by $31 million, compared with $34 million of favorable development for the same period of 2022.

Our homeowner line of business was the primary contributor to the personal lines net favorable reserve development for the first three months of 2023.

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

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.

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 personal lines underwriting expense ratio decreased for the first three months of 2023, compared with the same period a year ago.

The 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.

Personal Lines Insurance Losses Incurred by Size

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

2022 2021 % Change 2022 2021 % Change

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

2023 2022 % Change

Current accident year losses greater than $5 million $ 6 $ 7 (14)

Current accident year losses $2 million - $5 million 3 2 50

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

Large loss prior accident year reserve development 6 2 200

Total large losses incurred 15 11 36

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Other losses excluding catastrophe losses 187 176 6

Catastrophe losses 66 69 (4) 150 182 (18)

Catastrophe losses 113 6 nm

Total losses incurred $ 342 $ 179 91

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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.

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

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

In the first quarter of 2023, the personal lines total large loss ratio, net of reinsurance, was 0.6 percentage points higher than last year's first quarter.

The increase in personal lines large losses for the first three months of 2023 occurred primarily for umbrella coverage in our other personal line of business.

We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $2 million.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

EXCESS AND SURPLUS LINES INSURANCE RESULTS

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Earned premiums $ 127 $ 112 13

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Current accident year catastrophe losses 2 1 100

Prior accident years before catastrophe losses (7) 3 nm (13) 6 nm

Prior accident years catastrophe losses — — 0 — — 0

Prior accident years before catastrophe losses (8) (5) (60)

Prior accident years catastrophe losses (1) — nm

Loss and loss expenses 81 66 23

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Performance highlights for the excess and surplus lines segment include:

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

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.

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.

• Premiums – Excess and surplus lines net written premiums continued to grow during the first three months of 2023, compared with the same period a year ago, primarily due to an increase in agency renewal written premiums.

Renewal written premiums rose 13% for the three months ended March 31, 2023, compared with the same period of 2022, largely due to higher renewal pricing.

For the first three months of 2023, excess and surplus lines policy renewals experienced estimated average price increases at percentages in the high-single-digit range.

We measure average changes in excess and surplus lines renewal pricing as the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies.

New business written premiums produced by agencies increased by 6% for both the third quarter and first nine months of 2022 compared with the same periods of 2021.

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.

New business written premiums produced by agencies increased by 6% for the first three months of 2023 compared with the same period of 2022, as we continued to carefully underwrite each policy in a highly competitive market.

Some of what we report as new business came from accounts that were not new to our agents.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Excess and Surplus Lines Insurance Premiums

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Agency renewal written premiums $ 106 $ 94 13

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Earned premiums $ 127 $ 112 13

• 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.

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.

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.

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.

The $13 million of net favorable reserve development recognized during the first nine months of 2022 was primarily for accident year 2020.

• Combined ratio – The excess and surplus lines combined ratio increased by 4.0 percentage points for the first quarter of 2023, compared with the same period of 2022, primarily due to higher current accident year loss and loss expenses before catastrophe losses.

The ratio for current accident year loss and loss expenses before catastrophe losses was 7.4 percentage points higher, compared with the 61.8% accident year 2022 ratio measured as of March 31, 2022, including an increase of 13.1 points for the IBNR portion and a decrease of 5.7 points for the case incurred portion.

Excess and surplus lines net reserve development on prior accident years, as a ratio to earned premiums, was a favorable 6.5% for the first three months of 2023, compared with 5.0% for the first three months of 2022.

The $9 million of net favorable reserve development recognized during the first three months of 2023 was primarily for accident year 2022.

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

The excess and surplus lines underwriting expense ratio decreased for the third quarter and first nine months of 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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

The excess and surplus lines underwriting expense ratio decreased for the first three months of 2023, compared with the same period of 2022, largely due to ongoing expense management efforts and premium growth outpacing growth in expenses.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Excess and Surplus Lines Insurance Losses Incurred by Size

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

2022 2021 % Change 2022 2021 % Change

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

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

2023 2022 % Change

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

Current accident year losses $2 million - $5 million — — nm

Large loss prior accident year reserve development 2 2 0 3 2 50

Total large losses incurred 8 2 300 22 10 120

Large loss prior accident year reserve development — — nm

Total large losses incurred — — nm

Losses incurred but not reported 27 12 125

Other losses excluding catastrophe losses 28 36 (22)

Catastrophe losses (1) 1 nm 2 2 0

Catastrophe losses 1 1 0

Total losses incurred $ 56 $ 49 14

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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.

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.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

In the first quarter of 2023, the excess and surplus lines total ratio for large losses, net of reinsurance, was 0.3 percentage points lower than last year's first quarter.

We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $2 million.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

LIFE INSURANCE RESULTS

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Earned premiums $ 77 $ 75 3

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Total benefits and expenses 71 69 3

Life insurance segment profit (loss) $ 11 $ (5) nm $ 22 $ (9) nm

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

However, the pandemic did contribute to a moderate increase in death claims, primarily in the first three months of 2022.

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

Life insurance segment profit $ 8 $ 7 14

Performance highlights for the life insurance segment include:

• 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.

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.

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.

• Revenues – Revenues increased for the three months ended March 31, 2023, compared with the same period a year ago, driven by higher earned premiums from term life insurance, our largest life insurance product line.

Net in-force life insurance policy face amounts increased 1% to $81.057 billion at March 31, 2023, from $80.482 billion at year-end 2022.

Fixed annuity deposits received for the three months ended March 31, 2023, were $10 million, compared with $8 million for the same period of 2022.

Fixed annuity deposits have a minimal impact to earned premiums because deposits received are initially recorded as liabilities.

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Life Insurance Premiums

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Term life insurance $ 56 $ 54 4

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We include only investment income credited to contract holders (including interest assumed in life insurance policy reserve calculations) in our life insurance segment results.

A 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.

A profit of $8 million for our life insurance segment in the first three months of 2023, compared with a profit of $7 million for the same period of 2022, was primarily due to more favorable mortality experience, partially offset by less favorable impacts from the unlocking of market value discount rate assumptions associated with no-lapse guarantees.

Life insurance segment benefits and expenses consist principally of contract holders' (policyholders') benefits incurred related to traditional life and interest-sensitive products and operating expenses incurred, net of deferred acquisition costs.

Total benefits 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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

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.

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.

Total benefits increased in the first three months of 2023 due to less favorable impacts from the unlocking of market value discount rate assumptions associated with no-lapse guarantees.

Life policy and investment contract reserves increased with continued growth in net in-force life insurance policy face amounts and a decrease in market value discount rates.

Mortality results decreased compared with the same period of 2022, in part due to pandemic-related death claims incurred in the first three months of last year.

Underwriting expenses for the first three months of 2023 were consistent with the same period a year ago.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

We recognize that assets under management, capital appreciation and investment income are integral to evaluating the success of the life insurance segment because of the long duration of life products.

On a basis that includes investment income and investment gains or losses from life-insurance-related invested assets, the life insurance company reported net income of $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.

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.

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 $19 million for the three months ended March 31, 2023, compared with $17 million for the three months ended March 31, 2022.

The life insurance company portfolio had net after-tax investment gains of $1 million for the three months ended March 31, 2023, compared with net after-tax investment gains of less than $1 million for the three months ended March 31, 2022.

INVESTMENTS RESULTS

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Investment Income

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.

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.

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.

Pretax investment income grew 14% for the first quarter of 2023, compared with the same period of 2022.

Interest income increased by $17 million for the first quarter, 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.

Although dividend rates generally are increasing more slowly, our minor asset allocation adjustments in our equity portfolio and net purchases of equity securities in recent quarters helped dividend income to grow by $1 million for the three months ended March 31, 2023.

Investments Results

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Total investment income, net of expenses $ 210 $ 185 14

Investment interest credited to contract holders (30) (27) (11)

Investment gains and losses, net (674) (70) nm (2,494) 954 nm

Investments profit (loss), pretax $ (508) $ 83 nm $ (2,003) $ 1,403 nm

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.

Investment gains and losses, net 106 (666) nm

Investments profit (loss), pretax $ 286 $ (508) nm

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

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

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(Dollars in millions) % Yield Principal redemptions

At September 30, 2022

At March 31, 2023

Fixed-maturity pretax yield profile:

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Average yield and total expected maturities from the remainder of 2023 through 2025 4.46 $ 3,056

Cincinnati Financial Corporation First-Quarter 2023 10-Q

The table below shows the average pretax yield-to-amortized cost for fixed-maturity securities acquired during the periods indicated.

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

Our fixed-maturity portfolio's average yield of 4.00% 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.

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

The average yield for total fixed-maturity securities acquired during the first three months of 2023 was higher than the 4.22% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2022.

Our fixed-maturity portfolio's average yield of 4.25% for the first three months of 2023, from the investment income table below, was also higher than the 4.22% yield for the year-end 2022 fixed-maturities portfolio.

Three months ended March 31,

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

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We discuss risks related to our investment income and our fixed-maturity and equity investment portfolios in this quarterly report Item 3, Quantitative and Qualitative Disclosures About Market Risk.

Cincinnati Financial Corporation Third-Quarter 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.

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Investment income:

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Less income taxes

30 28 7 90 82 10

Total investment income, after-tax $ 176 $ 156 13

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Effective tax rate 17.3 17.0

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Total Investment Gains and Losses

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Accounting requirements for the allowance for credit losses for the fixed-maturity portfolio are disclosed in our 2022 Annual Report on Form 10-K, Item 8, Note 1, Summary of Significant Accounting Policies, Page 127.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

The table below summarizes total investment gains and losses, before taxes.

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

2022 2021 2022 2021

(Dollars in millions) Three months ended March 31,

Investment gains and losses:

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Gross realized losses (1) (1)

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

Subtotal — 8 3 20

Other 15 27 37 59

Total investment gains and losses reported in net income 106 (666)

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Total $ 269 $ (1,412)

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.

Of the 4,606 fixed-maturity securities in the portfolio, 26 securities were trading below 70% of amortized cost at March 31, 2023.

Our asset impairment committee regularly monitors the portfolio, including a quarterly review of the entire portfolio for potential credit losses.

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.

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.

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.

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

2022 2021 2022 2021

Fixed maturities:

Municipal $ — $ 1 $ — $ 1

Total fixed maturities $ — $ 1 $ — $ 1

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

There were no fixed-maturity securities written down to fair value due to an intention to be sold and less than $1 million in changes in the allowance for credit losses for the first three months of 2023.

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

We report as Other the noninvestment operations of the parent company and a noninsurance subsidiary, CFC Investment Company.

We also report as Other the underwriting results of Cincinnati Re and Cincinnati Global, including earned premiums, loss and loss expenses and underwriting expenses in the table below.

Total revenues for the first nine months of 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.

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.

Total revenues for the first three months of 2023 for our Other operations increased, compared with the same period of 2022, primarily due to earned premiums from Cincinnati Re and Cincinnati Global, with increases of $40 million and $12 million, respectively.

Cincinnati Re had $150 million of earned premiums for the first three months of 2023 and generated an underwriting profit of $31 million.

Cincinnati Global had $44 million of earned premiums for the first three months of 2023 and generated an underwriting profit of $5 million.

Total expenses for Other increased for the first three months of 2023, primarily due to loss and loss expenses and underwriting expenses in aggregate from Cincinnati Re and Cincinnati Global.

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

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.

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

2022 2021 % Change 2022 2021 % Change

For the first three months of 2022, total other loss was driven by interest expense from debt of the parent company.

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Interest and fees on loans and leases $ 2 $ 1 100

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Total expenses 177 151 17

Total other loss $ (84) $ (73) (15) $ (66) $ (68) 3

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.

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.

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.

Total other income (loss) $ 20 $ (7) nm

We had $43 million of income tax expense for the three months ended March 31, 2023, compared with $85 million of income tax benefit for the same period of 2022.

The effective tax rate for the three months ended March 31, 2023, was 16.0% compared with 24.2% for the same period last year.

The change in our effective tax rate between periods was primarily due to large changes in our net investment gains and losses included in income for the periods and changes in underwriting income.

Historically, we have pursued a strategy of investing some portion of cash flow in tax-advantaged fixed-maturity and equity securities to minimize our overall tax liability and maximize after-tax earnings.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Cincinnati Financial Corporation First-Quarter 2023 10-Q

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2022, shareholders' equity was $9.431 billion, compared with $13.105 billion at December 31, 2021.

Total debt was $833 million at September 30, 2022, down $10 million from December 31, 2021.

At September 30, 2022, cash and cash equivalents totaled $1.083 billion, compared with $1.139 billion at December 31, 2021.

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

At March 31, 2023, shareholders' equity was $10.741 billion, compared with $10.562 billion at December 31, 2022.

Total debt was $839 million at March 31, 2023, matching December 31, 2022.

At March 31, 2023, cash and cash equivalents totaled $955 million, compared with $1.264 billion at December 31, 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.

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Subsidiary Dividends

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.

Our lead insurance subsidiary declared dividends of $142 million to the parent company in the first three months of 2023, compared with $504 million for the same period of 2022.

For full-year 2022, our lead insurance subsidiary paid dividends totaling $729 million to the parent company.

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The table below shows a summary of the operating cash flow for property casualty insurance (direct method):

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

2022 2021 % Change 2022 2021 % Change

(Dollars in millions) Three months ended March 31,

2023 2022 % Change

Premiums collected $ 1,842 $ 1,714 7

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Cash flow from operations $ 233 $ 241 (3)

Collected premiums for property casualty insurance rose $570 million during the first nine months of 2022, compared with the same period in 2021.

Collected premiums for property casualty insurance rose $128 million during the first three months of 2023, compared with the same period in 2022.

Loss and loss expenses paid for the 2023 perio d increased $156 million.

Commissions and other underwriting expenses pai d increased $240 million.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Commissions and other underwriting expenses pai d remained relatively unchanged compared with 2022.

We discuss our future obligations for claims payments and for underwriting expenses in our 2022 Annual Report on Form 10-K, Item 7, Obligations, Page 96.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Capital Resources

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.

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.

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.

At March 31, 2023, our debt-to-total-capital ratio was 7.2%, considerably below our 35% covenant threshold, with $789 million in long-term debt and $50 million in borrowing on our revolving short-term line of credit.

At March 31, 2022, $250 million was available for future cash management needs as part of the general provisions of the line of credit agreement, with another $300 million available as part of an accordion feature.

Based on our capital requirements at March 31, 2023, we do not anticipate a material increase in debt levels exceeding the available line of credit amount during the year.

As a result, we expect changes in our debt-to-total-capital ratio to continue to be largely a function of the contribution of unrealized investment gains or losses to shareholders' equity.

We have an unsecured letter of credit agreement which provides a portion of the capital needed to support Cincinnati Global's obligations at Lloyd's.

The amount of this unsecured letter of credit agreement w a s $94 million at September 30, 2022, with no amounts drawn.

The amount of this unsecured letter of credit agreement was $94 million at March 31, 2023, with no amounts drawn.

On March 23, 2023, we amended our line of credit agreement to replace LIBOR with SOFR plus a credit spread adjustment.

We provide details of our three long-term notes in this quarterly report Item 1, Note 3, Fair Value Measurements.

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Four independent ratings firms award insurer financial strength ratings to our property casualty insurance companies and three firms rate our life insurance company.

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

Those firms made no changes to our parent company debt ratings during the first three months of 2023.

Our debt ratings are discussed in our 2022 Annual Report on Form 10-K, Item 7, Liquidity and Capital Resources, Long-Term Debt, Page 95.

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

• Commissions – Commissions paid were $1.105 billion in the first nine months of 2022.

• Commissions – Commissions paid were $497 billion in the first three months of 2023.

Commission payments generally track with written premiums, except for annual profit-sharing commissions typically paid during the first quarter of the year.

• Other underwriting expenses – Many of our underwriting expenses are not contractual obligations, but reflect the ongoing expenses of our business.

Noncommission underwriting expenses paid were $569 million in the first nine months of 2022.

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

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Noncommission underwriting expenses paid were $213 million in the first three months of 2023.

There were no contributions to our qualified pension plan during the first three months of 2023.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Investing Activities

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In January 2023, the board of directors declared regular quarterly cash dividends of 75 cents per share for an indicated annual rate of $3.00 per share.

During the first nine months of 2022, we used $316 million to pay cash dividends to shareholders.

During the first three months of 2023, we used $106 million to pay cash dividends to shareholders.

PROPERTY CASUALTY INSURANCE LOSS AND LOSS EXPENSE RESERVES

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Reserving practices are discussed in our 2022 Annual Report on Form 10-K, Item 7, Property Casualty Loss and Loss Expense Obligations and Reserves, Page 97.

Total gross reserves at September 30, 2022, increased $816 million compared with December 31, 2021.

Total gross reserves at March 31, 2023, increased $290 million compared with December 31, 2022.

Case loss reserves increased by $88 million, IBNR loss reserves increased by $145 million and loss expense reserves increased by $57 million.

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

The total gross increase was primarily due to our commercial casualty, commercial property and homeowner lines of business and also our excess and surplus lines insurance segment.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Property Casualty Gross Reserves

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Case reserves IBNR reserves Percent of total

At September 30, 2022

At March 31, 2023

Commercial lines insurance:

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LIFE POLICY AND INVESTMENT CONTRACT RESERVES

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.

Cincinnati Financial Corporation Third-Quarter 2022 10-Q

Gross life policy and investment contract reserves were $3.059 billion at March 31, 2023, compared with $3.015 billion at year-end 2022, reflecting continued growth in life insurance policies in force and a decrease in market value discount rates.

We discussed our life insurance reserving practices in our 2022 Annual Report on Form 10-K, Item 7, Life Insurance Policyholder Obligations and Reserves, Page 103, and updated that disclosure in this quarterly report Item 1, Note 1, Accounting Policies.

Cincinnati Financial Corporation First-Quarter 2023 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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis