What changed in this filing

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Item 1. Financial Statements

2023-10-26 compared with 2023-07-27 · 136 added, 131 removed, 865 unchanged (24% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

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

Fixed maturities, at fair value (amortized cost:

41 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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

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

2023 2022 2023 2022

21 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

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

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

2023 2022 2023 2022

1 unchanged sentence

Other Comprehensive Income (Loss)

Change in unrealized gains and losses on investments, net of tax (benefit) of $( 32 ), $( 127 ), $ 3 and $( 284 ), respectively

Change in unrealized gains and losses on investments, net of benefit of $( 79 ), $( 109 ), $( 76 ) and $( 393 ), respectively

( 290 ) ( 405 ) ( 284 ) ( 1,477 )

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

Change in life policy reserves, reinsurance recoverable and other, net of tax (benefit) of $ 6 , $ 38 , $( 3 ) and $ 79 , respectively

23 143 ( 13 ) 298

Other comprehensive income (loss) ( 99 ) ( 340 ) ( 12 ) ( 774 )

Change in life policy reserves, reinsurance recoverable and other, net of tax of $ 22 , $ 25 , $ 19 and $ 104 , respectively

Other comprehensive loss ( 201 ) ( 310 ) ( 213 ) ( 1,084 )

Comprehensive Income (Loss) $ ( 300 ) $ ( 726 ) $ 447 $ ( 2,584 )

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity

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

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

2023 2022 2023 2022

34 unchanged sentences

Shares acquired - share repurchase authorization — ( 2.1 ) ( 0.6 ) ( 3.7 )

Other 0.1 — 0.1 —

End of period 156.9 157.1 156.9 157.1

1 unchanged sentence

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) Six months ended June 30,

(Dollars in millions) Nine months ended September 30,

Cash Flows From Operating Activities

44 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6 unchanged sentences

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

Our June 30, 2023, condensed consolidated financial statements are unaudited.

Our September 30, 2023, condensed consolidated financial statements are unaudited.

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

14 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

(Dollars in millions) June 30, 2023 December 31, 2022

(Dollars in millions) September 30, 2023 December 31, 2022

As originally reported As adjusted Difference

11 unchanged sentences

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

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

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

As originally reported As adjusted Difference

10 unchanged sentences

Diluted ( 0.63 ) ( 2.64 ) ( 2.63 ) 0.01

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

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

As originally reported As adjusted Difference

11 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 2 – Investments

2 unchanged sentences

cost Gross unrealized Fair value

At June 30, 2023 gains losses

At September 30, 2023 gains losses

Fixed-maturity securities:

2 unchanged sentences

Government-sponsored enterprises 897 — 23 874

Commercial mortgage-backed 227 — 17 210

United States government 223 — 6 217

Commercial mortgage-backed 214 — 18 196

Foreign government 19 — — 19

5 unchanged sentences

Government-sponsored enterprises 186 — 3 183

Commercial mortgage-backed 250 — 16 234

United States government 196 — 5 191

Commercial mortgage-backed 250 — 16 234

Foreign government 34 — 1 33

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

Th e net unrealized investment losses in our fixed-maturity portfolio at June 30, 2023, are primarily due to an increase in U.S.

Treasury yields and a widening of corporate credit spreads .

Our commercial mortgage-backed securities had an average rating of Aa2/AA- at June 30, 2023, and December 31, 2022.

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Th e net unrealized investment losses in our fixed-maturity portfolio at September 30, 2023, are primarily due to an increase in U.S.

Treasury yields, partially offset by a tightening of corporate credit spreads .

Our commercial mortgage-backed securities had an average rating of Aa3/AA- and Aa2/AA- at September 30, 2023, and December 31, 2022, respectively.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

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

At June 30, 2023 Fair

At September 30, 2023 Fair

value Unrealized

5 unchanged sentences

Government-sponsored enterprises 742 17 95 6 837 23

Commercial mortgage-backed 1 — 208 17 209 17

United States government 80 1 130 5 210 6

Commercial mortgage-backed 1 — 194 18 195 18

Foreign government 9 — 5 — 14 —

5 unchanged sentences

Government-sponsored enterprises 123 3 3 — 126 3

Commercial mortgage-backed 215 13 14 3 229 16

United States government 146 3 41 2 187 5

Commercial mortgage-backed 215 13 14 3 229 16

Foreign government 25 1 4 — 29 1

3 unchanged sentences

value % of fair

At June 30, 2023

At September 30, 2023

Maturity dates:

5 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

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

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

2023 2022 2023 2022

18 unchanged sentences

Total $ ( 456 ) $ ( 674 ) $ 84 $ ( 2,494 )

The fair value of our equity portfolio was $ 10.502 billion and $ 9.841 billion at June 30, 2023, and December 31, 2022, respectively.

(Nasdaq:AAPL), an equity holding, was our largest single investment holding with a fair value of $ 892 million and $ 597 million, which was 8.8 % and 6.3 % of our publicly traded common equities portfolio and 3.8 % and 2.7 % of the total investment portfolio at June 30, 2023, and December 31, 2022, respectively.

The allowance for credit losses was $ 4 million and $ 1 million at June 30, 2023, and December 31, 2022, respectively.

Changes in the allowance were $ 3 million for both the three and six months ended June 30, 2023 and

less than $ 1 million for both the three and six months ended June 30, 2022.

There were 3,452 fixed-maturity securities with a total unrealized loss of $ 900 million, which were in an unrealized loss position at June 30, 2023.

The fair value of our equity portfolio was $ 10.031 billion and $ 9.841 billion at September 30, 2023, and December 31, 2022, respectively.

(Nasdaq:AAPL), an equity holding, was our largest single investment holding with a fair value of $ 764 million and $ 597 million, which was 7.9 % and 6.3 % of our publicly traded common equities portfolio and 3.3 % and 2.7 % of the total investment portfolio at September 30, 2023, and December 31, 2022, respectively.

The allowance for credit losses was $ 3 million and $ 1 million at September 30, 2023, and December 31, 2022, respectively.

Changes decreased the allowance $ 1 million for the three months ended September 30, 2023, and increased the allowance $ 2 million for the nine months ended September 30, 2023.

Changes were less than $ 1 million for both the three and nine months ended September 30, 2022.

There were 4,490 fixed-maturity securities with a total unrealized loss of $ 1.236 billion, which were in an unrealized loss position at September 30, 2023.

Of that total, 202 fixed-maturity securities had fair values below 70 % of amortized cost.

1 unchanged sentence

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 3 – Fair Value Measurements

5 unchanged sentences

Fair Value Disclosures for Assets

The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at June 30, 2023, and December 31, 2022.

The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at September 30, 2023, and December 31, 2022.

We do not have any liabilities carried at fair value.

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

At June 30, 2023

At September 30, 2023

Fixed maturities, available for sale:

2 unchanged sentences

Government-sponsored enterprises — 874 — 874

Commercial mortgage-backed — 210 — 210

United States government 217 — — 217

Commercial mortgage-backed — 196 — 196

Foreign government — 19 — 19

11 unchanged sentences

Government-sponsored enterprises — 183 — 183

Commercial mortgage-backed — 234 — 234

United States government 191 — — 191

Commercial mortgage-backed — 234 — 234

Foreign government — 33 — 33

6 unchanged sentences

Total $ 9,702 $ 13,143 $ — $ 22,845

We also held Level 1 cash and cash equivalents of $ 748 million and $ 1.264 billion at June 30, 2023, and December 31, 2022, respectively.

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

We also held Level 1 cash and cash equivalents of $ 899 million and $ 1.264 billion at September 30, 2023, and December 31, 2022, respectively.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

2 unchanged sentences

(Dollars in millions) Book value Principal amount

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

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

2023 2022 2023 2022

5 unchanged sentences

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

At June 30, 2023

At September 30, 2023

Note payable $ — $ 25 $ — $ 25

11 unchanged sentences

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

At June 30, 2023

At September 30, 2023

Life policy loans $ — $ — $ 36 $ 36

7 unchanged sentences

Total $ — $ 143 $ 621 $ 764

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

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

Recorded reserves for the deferred annuities were $ 696 million and $ 734 million at June 30, 2023, and December 31, 2022, respectively.

Recorded reserves for the structured settlements were $ 126 million and $ 129 million at June 30, 2023, and December 31, 2022, respectively.

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

Recorded reserves for the deferred annuities were $ 680 million and $ 734 million at September 30, 2023, and December 31, 2022, respectively.

Recorded reserves for the structured settlements were $ 124 million and $ 129 million at September 30, 2023, and December 31, 2022, respectively.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 4 – Property Casualty Loss and Loss Expenses

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

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

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

2023 2022 2023 2022

18 unchanged sentences

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

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 66 million at both June 30, 2023, and 2022, for certain life and health loss and loss expense reserves.

We experienced $ 101 million of favorable development on prior accident years, including $ 59 million of favorable development in commercial lines, $ 15 million of favorable development in personal lines and $ 5 million of favorable development in excess and surplus lines for the three months ended June 30, 2023.

Within commercial lines, we recognized favorable reserve development of $ 34 million for the commercial casualty line and $ 11 million for the workers' compensation line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

We experienced $ 160 million of favorable development on prior accident years, including $ 91 million of favorable development in commercial lines, $ 46 million of favorable development in personal lines and $ 14 million of favorable development in excess and surplus lines for the six months ended June 30, 2023.

Within commercial lines, we recognized favorable reserve development of $ 36 million for the commercial casualty line, $ 26 million for the workers' compensation line and $ 25 million for the commercial property due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 35 million for the homeowner line and $ 12 million for the personal auto line.

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

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

The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 72 million and $ 68 million at September 30, 2023, and 2022, respectively, for certain life and health loss and loss expense reserves.

We experienced $ 53 million of favorable development on prior accident years, including $ 34 million of favorable development in commercial lines, $ 8 million of favorable development in personal lines and no net development in excess and surplus lines for the three months ended September 30, 2023.

Within commercial lines, we recognized favorable reserve development of $ 20 million for the workers' compensation line and $ 11 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

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

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

We experienced $ 213 million of favorable development on prior accident years, including $ 125 million of favorable development in commercial lines, $ 54 million of favorable development in personal lines and $ 14 million of favorable development in excess and surplus lines for the nine months ended September 30, 2023.

Within commercial lines, we recognized favorable reserve development of $ 46 million for the workers' compensation line and $ 36 million for both the commercial property and commercial casualty lines due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines.

Within personal lines, we recognized favorable reserve development of $ 44 million for the homeowner line and $ 12 million for the personal auto line.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

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

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

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

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

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

Within personal lines, we recognized favorable reserve development of $ 51 million for the homeowner line.

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 5 – Life Policy and Investment Contract Reserves

2 unchanged sentences

See Note 1, Accounting Policies, for further discussion.

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

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

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

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

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

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

5 unchanged sentences

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

(Dollars in millions) June 30,

(Dollars in millions) September 30,

2023 December 31,

10 unchanged sentences

Total life policy and investment contract reserves $ 2,920 $ 3,015

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

24 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

The balances and changes in the term and whole life policy reserves included in life policy and investment contract reserves is as follows:

(Dollars in millions) Three months ended June 30,

(Dollars in millions) Three months ended September 30,

Term Whole life Term Whole life

31 unchanged sentences

Weighted-average duration of the net life policy reserves in years 11 16 11 16

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

(Dollars in millions) Six months ended June 30,

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

(Dollars in millions) Nine months ended September 30,

Term Whole life Term Whole life

31 unchanged sentences

Weighted-average duration of the net life policy reserves in years 11 16 11 16

The total impact of flooring at cohort level in the above tables includes the effect of discount rate assumption change s of $ 3 million and $ 10 million at June 30, 2023 and 2022, respectively.

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

The total impact of flooring at cohort level in the above tables includes the effect of discount rate assumption change s of $ 5 million and $ 13 million at September 30, 2023 and 2022, respectively.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

(Dollars in millions) At June 30,

(Dollars in millions) At September 30,

Undiscounted Discounted Undiscounted Discounted

4 unchanged sentences

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

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

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

2023 2022 2023 2022

7 unchanged sentences

Total $ 18 $ 17 $ 53 $ 51

Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums was immaterial for the three and six months ended June 30, 2023, and 2022.

Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums w as immaterial for the three and nine months ended September 30, 2023, and 2022.

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

At September 30,

Interest accretion rate 5.29 % 5.15 %

3 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

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

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

2023 2022 2023 2022

13 unchanged sentences

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

At June 30, 2023

At September 30, 2023

Deferred annuity

7 unchanged sentences

Total $ 396 $ — $ 57 $ 3 $ 456

At June 30, 2022

At September 30, 2022

Deferred annuity

7 unchanged sentences

Total $ 399 $ 46 $ 8 $ 2 $ 455

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

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

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

2023 2022 2023 2022

14 unchanged sentences

Weighted-average duration of the other additional liability in years 32 34 32 34

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

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

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

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

2023 2022 2023 2022

1 unchanged sentence

Interest credited before policy charges 11 9 31 29

Change in unrealized gains and losses impacting separate account liabilities — ( 53 ) — ( 105 )

Change in unrealized gains and losses impacting separate accounts liabilities — 20 — ( 85 )

Benefit payments ( 3 ) — ( 6 ) ( 10 )

2 unchanged sentences

Cash surrender value $ 912 $ 886 $ 912 $ 886

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 6 – Deferred Policy Acquisition Costs

5 unchanged sentences

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

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

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

2023 2022 2023 2022

14 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

(Dollars in millions)

Three months ended June 30, 2023 Term Whole life Deferred annuity Universal life Total

Three months ended September 30, 2023 Term Whole life Deferred annuity Universal life Total

Balance, beginning of period $ 233 $ 45 $ 8 $ 52 $ 338

2 unchanged sentences

Balance, end of period $ 234 $ 47 $ 8 $ 52 $ 341

Three months ended June 30, 2022

Three months ended September 30, 2022

Balance, beginning of period $ 222 $ 40 $ 7 $ 54 $ 323

3 unchanged sentences

(Dollars in millions)

Six months ended June 30, 2023 Term Whole life Deferred annuity Universal life Total

Nine months ended September 30, 2023 Term Whole life Deferred annuity Universal life Total

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

2 unchanged sentences

Balance, end of period $ 234 $ 47 $ 8 $ 52 $ 341

Six months ended June 30, 2022

Nine months ended September 30, 2022

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

3 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 7 – Accumulated Other Comprehensive Income

2 unchanged sentences

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

(Dollars in millions) Three months ended June 30,

(Dollars in millions) Three months ended September 30,

Before tax Income tax Net Before tax Income tax Net

23 unchanged sentences

AOCI, end of period $ ( 1,054 ) $ ( 227 ) $ ( 827 ) $ ( 998 ) $ ( 210 ) $ ( 788 )

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

(Dollars in millions) Six months ended June 30,

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

(Dollars in millions) Nine months ended September 30,

Before tax Income tax Net Before tax Income tax Net

28 unchanged sentences

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

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

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

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 8 – Reinsurance

3 unchanged sentences

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

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

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

2023 2022 2023 2022

13 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

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

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

2023 2022 2023 2022

6 unchanged sentences

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

The allowance for uncollectible property casualty premiums was $ 14 million and $ 13 million at June 30, 2023, and December 31, 2022, respectively.

The allowances for credit losses on other premiums receivable and reinsurance recoverable assets were immaterial at June 30, 2023, and December 31, 2022.

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

The allowance for uncollectible property casualty premiums was $ 16 million and $ 13 million at September 30, 2023, and December 31, 2022, respectively.

The allowances for credit losses on other premiums receivable and reinsurance recoverable assets were immaterial at September 30, 2023, and December 31, 2022.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 9 – Income Taxes

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

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

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

2023 2022 2023 2022

4 unchanged sentences

Dividend received exclusion ( 5 ) 3.4 ( 5 ) 0.9 ( 16 ) ( 2.0 ) ( 15 ) 0.8

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

Other ( 8 ) 5.3 5 ( 0.8 ) ( 8 ) ( 1.1 ) ( 1 ) —

4 unchanged sentences

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

domestic operations at June 30, 2023, and December 31, 2022.

domestic operations at September 30, 2023, and December 31, 2022.

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

SM (Cincinnati Global).

Unrecognized Tax Benefits

During the third quarter of 2022, we received favorable guidance from the Internal Revenue Service (IRS) supporting our tax position related to our unrecognized tax benefit set up in 2018.

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

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

Cincinnati Global

As a result of operations for the three and six months ended June 30, 2023, Cincinnati Global decreased its net deferred tax assets by $ 5 million and $ 10 million with an offsettin g decrease of $ 5 million and $ 10 million to the valuation allowance.

Cincinnati Global had a net deferred tax asset of $ 21 million and an offsetting valuation allowance of $ 21 million at June 30, 2023.

As a result of operations for the three and nine months ended September 30, 2023, Cincinnati Global decreased its net deferred tax assets by $ 10 million and $ 20 million, respectively, with an offsettin g decrease of $ 10 million and $ 20 million, respectively, to the valuation allowance.

Cincinnati Global had a net deferred tax asset of $ 11 million and an offsetting valuation allowance of $ 11 million at September 30, 2023.

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

After considering all positive and negative evidence, we continue to believe it is appropriate to carry a valuation allowance at June 30, 2023.

Cincinnati Global had operating loss carryforwards in the United States of $ 6 million and $ 5 million and in the United Kingdom of $ 101 million and $ 109 million at June 30, 2023, and December 31, 2022, respectively.

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

After considering all positive and negative evidence, we continue to believe it is appropriate to carry a valuation allowance at September 30, 2023.

Cincinnati Global had operating loss carryforwards in the United States of $ 6 million and $ 5 million and in the United Kingdom of $ 99 million and $ 109 million at September 30, 2023, and December 31, 2022, respectively.

These Cincinnati Global losses can only be utilized within the Cincinnati Global group.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

NOTE 10 – Net Income (Loss) Per Common Share

2 unchanged sentences

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

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

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

2023 2022 2023 2022

10 unchanged sentences

Number of anti-dilutive share-based awards 2.4 2.3 1.3 1.9

The above table shows the number of anti-dilutive share-based awards for the three and six months ended June 30, 2023 and 2022.

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

The above table shows the number of anti-dilutive share-based awards for the three and nine months ended September 30, 2023 and 2022.

In accordance with Accounting Standards Codification 260, Earnings per Share , the assumed exercise of share-based awards was excluded from the computation of diluted loss per share for the three months ended September 30, 2023 and for the three and nine months ended September 30, 2022, because their exercise would have anti-dilutive effects.

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

1 unchanged sentence

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

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

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

2023 2022 2023 2022

9 unchanged sentences

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

We made matching contributions totaling $ 6 million to our 401(k) and Top Hat savings plans during both the second quarter of 2023 and 2022 and contributions of $ 14 million for both the first half of 2023 and 2022.

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

We made matching contributions totaling $ 6 million to our 401(k) and Top Hat savings plans during both the third quarter of 2023 and 2022 and contributions of $ 20 million for both the first nine months of 2023 and 2022.

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

NOTE 12 – Commitments and Contingent Liabilities

5 unchanged sentences

Some of the lawsuits also allege that the insurance claims were denied in bad faith or otherwise in violation of state laws and seek extra-contractual or punitive damages.

The company denies the allegations in these lawsuits and intends to continue to vigorously defend the lawsuits.

The company denies the allegations in these lawsuits and continues to vigorously defend them.

The company maintains that it has no coverage obligations with respect to these lawsuits for business income allegedly lost by the plaintiffs due to the COVID-19 pandemic based on the terms of the applicable insurance policies.

4 unchanged sentences

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

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

many that have been dismissed;

several that may be refiled;

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

Most of these lawsuits have been dismissed, both by courts and by plaintiffs, but some have been appealed and a few others remain pending in trial courts.

Appellate decisions issued to date generally have been favorable for the insurance industry, and the company has received numerous favorable rulings on appeal with no adverse appellate rulings to date.

9 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

On a quarterly basis, we review these outstanding matters.

16 unchanged sentences

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

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

Segment information is summarized in the following table:

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

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

2023 2022 2023 2022

38 unchanged sentences

Identifiable assets:

September 30,

2023 December 31,

4 unchanged sentences

Total $ 30,915 $ 29,732

Cincinnati Financial Corporation Second-Quarter 2023 10-Q

Cincinnati Financial Corporation Third-Quarter 2023 10-Q

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

What changed 10-Q

Item 1. Financial Statements