CINCINNATI FINANCIAL CORP 10-Q

Item 1. Financial Statements (unaudited) Cincinnati Financial Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Dollars in millions, except per share data) June 30, December 31, 2024 2023 Assets Investments Fixed maturities, at fair value (amortized cost: 2024—$ 15,109 ; 2023—$ 14,361 ) $ 14,409 $ 13,791 Equity securities, at fair value (cost: 2024—$ 4,278 ; 2023—$ 4,282 ) 11,634 10,989 Other invested assets 641 577 Total investments 26,684 25,357 Cash and cash equivalents 771 907 Investment income receivable 201 192 Finance receivable 111 108 Premiums receivable 3,091 2,592 Reinsurance recoverable 546 651 Prepaid reinsurance premiums 121 55 Deferred policy acquisition costs 1,229 1,093 Land, building and equipment, net, for company use (accumulated depreciation: 2024—$ 337 ; 2023—$ 337 ) 213 208 Other assets 887 681 Separate accounts 948 925 Total assets $ 34,802 $ 32,769 Liabilities Insurance reserves Loss and loss expense reserves $ 9,555 $ 9,050 Life policy and investment contract reserves 2,966 3,068 Unearned premiums 4,826 4,119 Other liabilities 1,391 1,311 Deferred income tax 1,465 1,324 Note payable 25 25 Long-term debt and lease obligations 849 849 Separate accounts 948 925 Total liabilities 22,025 20,671 Commitments and contingent liabilities (Note 12) Shareholders' Equity Common stock, par value—$ 2 per share; (authorized: 2024 and 2023— 500 million shares; issued: 2024 and 2023— 198.3 million shares) 397 397 Paid-in capital 1,466 1,437 Retained earnings 13,897 13,084 Accumulated other comprehensive loss ( 470 ) ( 435 ) Treasury stock at cost (2024— 42.1 million shares and 2023— 41.3 million shares) ( 2,513 ) ( 2,385 ) Total shareholders' equity 12,777 12,098 Total liabilities and shareholders' equity $ 34,802 $ 32,769 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 3 Table of Contents 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, 2024 2023 2024 2023 Revenues Earned premiums $ 2,156 $ 1,943 $ 4,227 $ 3,861 Investment income, net of expenses 242 220 487 430 Investment gains and losses, net 137 434 749 540 Fee revenues 5 6 9 10 Other revenues 4 2 7 5 Total revenues 2,544 2,605 5,479 4,846 Benefits and Expenses Insurance losses and contract holders' benefits 1,480 1,340 2,829 2,738 Underwriting, acquisition and insurance expenses 655 579 1,271 1,135 Interest expense 14 13 27 27 Other operating expenses 9 7 13 12 Total benefits and expenses 2,158 1,939 4,140 3,912 Income Before Income Taxes 386 666 1,339 934 Provision for Income Taxes Current 61 51 122 67 Deferred 13 81 150 108 Total provision for income taxes 74 132 272 175 Net Income $ 312 $ 534 $ 1,067 $ 759 Per Common Share Net income — basic $ 1.99 $ 3.40 $ 6.82 $ 4.83 Net income — diluted 1.98 3.38 6.77 4.80 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 4 Table of Contents Cincinnati Financial Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Dollars in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Net Income $ 312 $ 534 $ 1,067 $ 759 Other Comprehensive Income (Loss) Change in unrealized gains and losses on investments, net of tax (benefit) of $( 17 ), $( 32 ), $( 28 ) and $ 3 , respectively ( 58 ) ( 122 ) ( 102 ) 6 Amortization of pension actuarial loss (gain) and prior service cost, net of tax (benefit) of $ 0 , $( 1 ), $ 0 and $( 2 ), respectively 1 — 1 ( 5 ) Change in life policy reserves, reinsurance recoverable and other, net of tax (benefit) of $ 8 , $ 6 , $ 18 and $( 3 ), respectively 29 23 66 ( 13 ) Other comprehensive loss ( 28 ) ( 99 ) ( 35 ) ( 12 ) Comprehensive Income $ 284 $ 435 $ 1,032 $ 747 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 5 Table of Contents Cincinnati Financial Corporation and Subsidiaries Condensed Consolidated Statements of Shareholders' Equity (Dollars in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Common Stock Beginning of period $ 397 $ 397 $ 397 $ 397 Share-based awards — — — — End of period 397 397 397 397 Paid-In Capital Beginning of period 1,446 1,398 1,437 1,392 Share-based awards 6 — — ( 6 ) Share-based compensation 12 10 26 22 Other 2 2 3 2 End of period 1,466 1,410 1,466 1,410 Retained Earnings Beginning of period 13,712 11,818 13,084 11,711 Net income 312 534 1,067 759 Dividends declared ( 127 ) ( 117 ) ( 254 ) ( 235 ) End of period 13,897 12,235 13,897 12,235 Accumulated Other Comprehensive Loss Beginning of period ( 442 ) ( 527 ) ( 435 ) ( 614 ) Other comprehensive loss ( 28 ) ( 99 ) ( 35 ) ( 12 ) End of period ( 470 ) ( 626 ) ( 470 ) ( 626 ) Treasury Stock Beginning of period ( 2,459 ) ( 2,345 ) ( 2,385 ) ( 2,324 ) Share-based awards 4 — 12 7 Shares acquired - share repurchase authorization ( 46 ) ( 42 ) ( 121 ) ( 67 ) Shares acquired - share-based compensation plans ( 12 ) — ( 19 ) ( 3 ) Other — 1 — 1 End of period ( 2,513 ) ( 2,386 ) ( 2,513 ) ( 2,386 ) Total Shareholders' Equity $ 12,777 $ 11,030 $ 12,777 $ 11,030 (In millions, except per common share) Common Stock - Shares Outstanding Beginning of period 156.5 157.2 157.0 157.1 Share-based awards 0.1 — 0.4 0.3 Shares acquired - share repurchase authorization ( 0.4 ) ( 0.4 ) ( 1.1 ) ( 0.6 ) Shares acquired - share-based compensation plans — — ( 0.1 ) — End of period 156.2 156.8 156.2 156.8 Dividends declared per common share $ 0.81 $ 0.75 $ 1.62 $ 1.50 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 6 Table of Contents Cincinnati Financial Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (Dollars in millions) Six months ended June 30, 2024 2023 Cash Flows From Operating Activities Net income $ 1,067 $ 759 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other 76 74 Investment gains and losses, net ( 744 ) ( 526 ) Interest credited to contract holders 22 21 Deferred income tax expense 150 108 Changes in: Premiums and reinsurance receivable ( 464 ) ( 504 ) Deferred policy acquisition costs ( 136 ) ( 96 ) Other assets ( 16 ) ( 17 ) Loss and loss expense reserves 505 473 Life policy and investment contract reserves 34 56 Unearned premiums 707 533 Other liabilities ( 34 ) ( 27 ) Current income tax receivable/payable ( 72 ) ( 29 ) Net cash provided by operating activities 1,095 825 Cash Flows From Investing Activities Sale, call or maturity of fixed maturities 852 581 Sale of equity securities 347 4 Purchase of fixed maturities ( 1,623 ) ( 1,313 ) Purchase of equity securities ( 256 ) ( 97 ) Changes in finance receivables ( 4 ) ( 6 ) Investment in building and equipment ( 12 ) ( 8 ) Change in other invested assets, net ( 44 ) ( 81 ) Net cash used in investing activities ( 740 ) ( 920 ) Cash Flows From Financing Activities Payment of cash dividends to shareholders ( 241 ) ( 223 ) Shares acquired - share repurchase authorization ( 121 ) ( 66 ) Changes in note payable — ( 25 ) Proceeds from stock options exercised 4 6 Contract holders' funds deposited 39 45 Contract holders' funds withdrawn ( 105 ) ( 113 ) Other ( 67 ) ( 45 ) Net cash used in financing activities ( 491 ) ( 421 ) Net change in cash and cash equivalents ( 136 ) ( 516 ) Cash and cash equivalents at beginning of year 907 1,264 Cash and cash equivalents at end of period $ 771 $ 748 Supplemental Disclosures of Cash Flow Information: Interest paid $ 27 $ 27 Income taxes paid 174 79 Noncash Activities Equipment acquired under finance lease obligations $ 9 $ 4 Share-based compensation 33 13 Other assets and other liabilities 217 65 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 7 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 — Accounting Policies The condensed consolidated financial statements include the accounts of Cincinnati Financial Corporation and its consolidated subsidiaries, each of which is wholly owned. These statements are presented in conformity with accounting principles generally accepted in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Our actual results could differ from those estimates. 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, 2024, 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. These condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our 2023 Annual Report on Form 10-K. The results of operations for interim periods do not necessarily indicate results to be expected for the full year. Pending Accounting Updates ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances reportable segment disclosures by requiring entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within the reported measure of profit or loss. This ASU also requires disclosure of the title and position of the CODM as well as a description of how the reported measure of profit or loss is used to assess segment performance and allocate resources. The effective date of ASU 2023-07 is for annual reporting periods beginning after December 15, 2023, and interim reporting periods within annual periods beginning after December 15, 2024, and should be applied retrospectively to all prior periods presented. The ASU has not yet been adopted and will not have a material impact on our company’s consolidated financial position, results of operations or cash flows, but the ASU will require additional disclosures in our annual and interim financial statements. ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures by requiring entities to disclose specific categories within their rate reconciliation as well as additional items within those categories above a prescribed threshold. This ASU also requires disclosure of the amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes as well as additional items within those categories above a prescribed threshold. The effective date of ASU 2023-09 is for annual reporting periods beginning after December 15, 2024, and should be applied prospectively with retrospective application permitted. The ASU has not yet been adopted and will not have a material impact on our company’s consolidated financial position, results of operations or cash flows, but the ASU will require additional disclosures in our annual financial statements . Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 8 Table of Contents NOTE 2 – Investments The following table provides amortized cost, gross unrealized gains, gross unrealized losses and fair value for our fixed-maturity securities: (Dollars in millions) Amortized cost Gross unrealized Fair value At June 30, 2024 gains losses Fixed-maturity securities: Corporate $ 8,151 $ 49 $ 475 $ 7,725 States, municipalities and political subdivisions 4,867 17 273 4,611 Government-sponsored enterprises 1,611 1 5 1,607 Asset-backed 257 — 10 247 United States government 190 — 4 186 Foreign government 33 — — 33 Total $ 15,109 $ 67 $ 767 $ 14,409 At December 31, 2023 Fixed-maturity securities: Corporate $ 7,836 $ 70 $ 454 $ 7,452 States, municipalities and political subdivisions 4,867 44 208 4,703 Government-sponsored enterprises 1,227 3 6 1,224 Asset-backed 203 — 16 187 United States government 203 — 3 200 Foreign government 25 — — 25 Total $ 14,361 $ 117 $ 687 $ 13,791 The increase in net unrealized investment losses in our fixed-maturity portfolio at June 30, 2024, is primarily due to an increase in U.S. Treasury yields. Our asset-backed securities had an average rating of Aa3/AA- at both June 30, 2024, and December 31, 2023. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 9 Table of Contents 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, 2024 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses Fixed-maturity securities: Corporate $ 1,004 $ 17 $ 5,413 $ 458 $ 6,417 $ 475 States, municipalities and political subdivisions 1,390 20 2,090 253 3,480 273 Government-sponsored enterprises 819 2 242 3 1,061 5 Asset-backed 54 — 119 10 173 10 United States government 78 — 101 4 179 4 Foreign government 25 — 7 — 32 — Total $ 3,370 $ 39 $ 7,972 $ 728 $ 11,342 $ 767 At December 31, 2023 Fixed-maturity securities: Corporate $ 379 $ 13 $ 5,560 $ 441 $ 5,939 $ 454 States, municipalities and political subdivisions 313 2 1,932 206 2,245 208 Government-sponsored enterprises 652 3 113 3 765 6 Asset-backed 5 — 172 16 177 16 United States government 32 — 129 3 161 3 Foreign government 3 — 6 — 9 — Total $ 1,384 $ 18 $ 7,912 $ 669 $ 9,296 $ 687 Contractual maturity dates for fixed-maturities securities were: (Dollars in millions) Amortized cost Fair value % of fair value At June 30, 2024 Maturity dates: Due in one year or less $ 1,181 $ 1,171 8.1 % Due after one year through five years 4,243 4,118 28.6 Due after five years through ten years 3,544 3,399 23.6 Due after ten years 6,141 5,721 39.7 Total $ 15,109 $ 14,409 100.0 % 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 2024 10-Q Page 10 Table of Contents 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, 2024 2023 2024 2023 Investment income: Interest $ 173 $ 147 $ 342 $ 287 Dividends 69 70 141 136 Other 4 6 11 13 Total 246 223 494 436 Less investment expenses 4 3 7 6 Total $ 242 $ 220 $ 487 $ 430 Investment gains and losses, net: Equity securities: Investment gains and losses on securities sold, net $ 7 $ — $ 4 $ ( 4 ) Unrealized gains and losses on securities still held, net 142 459 747 568 Subtotal 149 459 751 564 Fixed-maturity securities: Gross realized gains 4 — 4 1 Gross realized losses ( 6 ) — ( 7 ) ( 1 ) Change in allowance for credit losses, net ( 16 ) ( 3 ) ( 25 ) ( 3 ) Write-down of impaired securities with intent to sell — ( 4 ) — ( 4 ) Subtotal ( 18 ) ( 7 ) ( 28 ) ( 7 ) Other 6 ( 18 ) 26 ( 17 ) Total $ 137 $ 434 $ 749 $ 540 The fair value of our equity portfolio was $ 11.634 billion and $ 10.989 billion at June 30, 2024, and December 31, 2023, respectively. Microsoft Corporation (Nasdaq:MSFT), an equity holding, was our largest single investment holding with a fair value of $ 1.001 billion and $ 842 million, which was 8.9 % and 7.9 % of our publicly traded common equities portfolio and 3.8 % and 3.4 % of the total investment portfolio at June 30, 2024, and December 31, 2023, respectively. The allowance for credit losses on fixed-maturity securities was $ 43 million and $ 18 million at June 30, 2024, and December 31, 2023, respectively. There were 3,784 and 2,840 fixed-maturity securities in a total unrealized loss position of $ 767 million and $ 687 million at June 30, 2024, and December 31, 2023, respectively. Of those totals, 16 and 20 fixed-maturity securities had fair values below 70 % of amortized cost at June 30, 2024, and December 31, 2023, respectively. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 11 Table of Contents NOTE 3 – Fair Value Measurements In accordance with accounting guidance for fair value measurements and disclosures, we categorized our financial instruments, based on the priority of the observable and market-based data for the valuation technique used, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within different levels of the fair value hierarchy, the lowest observable input that has a significant impact on fair value measurement is used. Our valuation techniques have not changed from those used at December 31, 2023, and ultimately management determines fair value. See our 2023 Annual Report on Form 10-K, Item 8, Note 3, Fair Value Measurements, Page 139, for information on characteristics and valuation techniques used in determining fair value. 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, 2024, and December 31, 2023. We do not have any liabilities carried at fair value. (Dollars in millions) Level 1 Level 2 Level 3 Total At June 30, 2024 Fixed maturities, available for sale: Corporate $ — $ 7,725 $ — $ 7,725 States, municipalities and political subdivisions — 4,611 — 4,611 Government-sponsored enterprises — 1,607 — 1,607 Asset-backed — 247 — 247 United States government 186 — — 186 Foreign government — 33 — 33 Subtotal 186 14,223 — 14,409 Common equities 11,283 — — 11,283 Nonredeemable preferred equities — 351 — 351 Separate accounts taxable fixed maturities — 882 — 882 Top Hat savings plan mutual funds and common equity (included in Other assets) 77 — — 77 Total $ 11,546 $ 15,456 $ — $ 27,002 At December 31, 2023 Fixed maturities, available for sale: Corporate $ — $ 7,452 $ — $ 7,452 States, municipalities and political subdivisions — 4,703 — 4,703 Government-sponsored enterprises — 1,224 — 1,224 Asset-backed — 187 — 187 United States government 200 — — 200 Foreign government — 25 — 25 Subtotal 200 13,591 — 13,791 Common equities 10,641 — — 10,641 Nonredeemable preferred equities — 348 — 348 Separate accounts taxable fixed maturities — 854 — 854 Top Hat savings plan mutual funds and common equity (included in Other assets) 67 — — 67 Total $ 10,908 $ 14,793 $ — $ 25,701 We also held Level 1 cash and cash equivalents of $ 771 million and $ 907 million at June 30, 2024, and December 31, 2023, respectively. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 12 Table of Contents Fair Value Disclosures for Assets and Liabilities Not Carried at Fair Value The disclosures below are presented to provide information about the effects of current market conditions on financial instruments that are not reported at fair value in our condensed consolidated financial statements. This table summarizes the book value and principal amounts of our long-term debt: (Dollars in millions) Book value Principal amount Interest rate Year of issue June 30, December 31, June 30, December 31, 2024 2023 2024 2023 6.900 % 1998 Senior debentures, due 2028 $ 27 $ 27 $ 28 $ 28 6.920 % 2005 Senior debentures, due 2028 391 391 391 391 6.125 % 2004 Senior notes, due 2034 372 372 374 374 Total $ 790 $ 790 $ 793 $ 793 The following table shows fair values of our note payable and long-term debt: (Dollars in millions) Level 1 Level 2 Level 3 Total At June 30, 2024 Note payable $ — $ 25 $ — $ 25 6.900 % senior debentures, due 2028 — 29 — 29 6.920 % senior debentures, due 2028 — 414 — 414 6.125 % senior notes, due 2034 — 390 — 390 Total $ — $ 858 $ — $ 858 At December 31, 2023 Note payable $ — $ 25 $ — $ 25 6.900 % senior debentures, due 2028 — 29 — 29 6.920 % senior debentures, due 2028 — 420 — 420 6.125 % senior notes, due 2034 — 394 — 394 Total $ — $ 868 $ — $ 868 The following table shows the fair value of our life policy loans included in other invested assets and the fair values of our deferred annuities and structured settlements included in life policy and investment contract reserves: (Dollars in millions) Level 1 Level 2 Level 3 Total At June 30, 2024 Life policy loans $ — $ — $ 40 $ 40 Deferred annuities — — 574 574 Structured settlements — 131 — 131 Total $ — $ 131 $ 574 $ 705 At December 31, 2023 Life policy loans $ — $ — $ 39 $ 39 Deferred annuities — — 603 603 Structured settlements — 141 — 141 Total $ — $ 141 $ 603 $ 744 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 13 Table of Contents Outstanding principal and interest for these life policy loans totaled $ 35 million and $ 33 million at June 30, 2024, and December 31, 2023, respectively. Recorded reserves for the deferred annuities were $ 618 million and $ 656 million at June 30, 2024, and December 31, 2023, respectively. Recorded reserves for the structured settlements were $ 119 million and $ 123 million at June 30, 2024, and December 31, 2023, respectively. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 14 Table of Contents 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, 2024 2023 2024 2023 Gross loss and loss expense reserves, beginning of period $ 9,178 $ 8,626 $ 8,975 $ 8,336 Less reinsurance recoverable 332 424 362 405 Net loss and loss expense reserves, beginning of period 8,846 8,202 8,613 7,931 Net incurred loss and loss expenses related to: Current accident year 1,452 1,363 2,822 2,739 Prior accident years ( 40 ) ( 101 ) ( 140 ) ( 160 ) Total incurred 1,412 1,262 2,682 2,579 Net paid loss and loss expenses related to: Current accident year 483 502 688 689 Prior accident years 584 579 1,416 1,438 Total paid 1,067 1,081 2,104 2,127 Net loss and loss expense reserves, end of period 9,191 8,383 9,191 8,383 Plus reinsurance recoverable 303 424 303 424 Gross loss and loss expense reserves, end of period $ 9,494 $ 8,807 $ 9,494 $ 8,807 We use actuarial methods, models and judgment to estimate, as of a financial statement date, the property casualty loss and loss expense reserves required to pay for and settle all outstanding insured claims, including incurred but not reported (IBNR) claims, as of that date. The actuarial estimate is subject to review and adjustment by an inter-departmental committee that includes actuarial, claims, underwriting, loss prevention and accounting management. This committee is familiar with relevant company and industry business, claims and underwriting trends, as well as general economic and legal trends that could affect future loss and loss expense payments. The amount we will actually have to pay for claims can be highly uncertain. 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 $ 61 million and $ 66 million at June 30, 2024, and 2023, respectively, for certain life and health loss and loss expense reserves. We experienced $ 40 million of favorable development on prior accident years, including $ 29 million of favorable development in commercial lines, $ 6 million of unfavorable development in personal lines and $ 3 million of unfavorable development in excess and surplus lines for the three months ended June 30, 2024. Within commercial lines, we recognized favorable reserve development of $ 28 million for the workers' compensation line and $ 21 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 $ 28 million for the commercial casualty line. Within personal lines, we recognized unfavorable reserve development of $ 12 million for the personal auto line. We experienced $ 140 million of favorable development on prior accident years, including $ 67 million of favorable development in commercial lines, $ 27 million of favorable development in personal lines and no net development in excess and surplus lines for the six months ended June 30, 2024. Within commercial lines, we recognized favorable reserve development of $ 44 million for the commercial property line, $ 40 million for the workers' compensation line and $ 11 million for the commercial auto 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 $ 29 million for the commercial casualty line. Within personal lines, we recognized favorable reserve development of $ 27 million for the homeowner line. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 15 Table of Contents 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 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 $ 35 million for the homeowner line and $ 12 million for the personal auto line. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 16 Table of Contents NOTE 5 – Life Policy and Investment Contract Reserves We establish the reserves for traditional life policies including term, whole life and other products based on the present value of future benefits and claim expenses less the present value of future net premiums. Net premium is the portion of gross premium required to pro vide for all benefits and claim expenses. We estimate future benefits and claim expenses and net premium using certain cash flow assumptions including mortality, morbidity and lapse rates as well as a discount rate assumption. The cash flow assumptions are established based on our current expectations and are reviewed annually to determine any necessary updates. These 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 cash flow assumptions. The discount rate assumption is based on upper-medium grade fixed-income instrument yields (market value discount rates) and is updated quarterly. Certain assumptions, including the mortality, lapse and long-term interest rate reversion targets, were updated in the second quarter of 2024 as part of our annual assumption unlocking. Changes in the inputs, judgments and assumptions during the period and the related measurement impact on the liability are reflected in the below tables. We establish reserves for our universal life, deferred annuity and other investment contracts equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals. Some of our universal life policies contain no-lapse guarantee provisions. For these policies, we establish a reserve in addition to the account balance, based on expected no-lapse guarantee benefits and expected policy assessments. 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, 2024 December 31, 2023 Life policy reserves: Term $ 1,035 $ 1,066 Whole life 404 434 Other 99 97 Subtotal 1,538 1,597 Investment contract reserves: Deferred annuities 618 656 Universal life 584 585 Structured settlements 119 123 Other 107 107 Subtotal 1,428 1,471 Total life policy and investment contract reserves $ 2,966 $ 3,068 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 17 Table of Contents 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, 2024 2023 Term Whole life Term Whole life Present value of expected net premiums: Balance, beginning of period $ 1,660 $ 219 $ 1,699 $ 217 Beginning balance at original discount rate 1,710 225 1,715 220 Effect of changes in cash flow assumptions ( 12 ) 1 ( 5 ) ( 6 ) Effect of actual variances from expected experience ( 10 ) ( 3 ) ( 9 ) — Adjusted beginning of period balance 1,688 223 1,701 214 Issuances 41 6 40 10 Interest accrual 18 3 17 2 Net premiums collected ( 46 ) ( 7 ) ( 46 ) ( 7 ) Ending balance at original discount rate 1,701 225 1,712 219 Effect of changes in discount rate assumptions ( 81 ) ( 10 ) ( 48 ) ( 7 ) Balance, end of period 1,620 215 1,664 212 Present value of expected future policy benefits: Balance, beginning of period 2,698 637 2,691 644 Beginning balance at original discount rate 2,780 633 2,712 614 Effect of changes in cash flow assumptions ( 29 ) 2 5 ( 10 ) Effect of actual variances from expected experience ( 14 ) ( 4 ) ( 11 ) — Adjusted beginning of period balance 2,737 631 2,706 604 Issuances 41 7 40 11 Interest accrual 31 8 30 7 Benefits paid ( 37 ) ( 10 ) ( 39 ) ( 7 ) Ending balance at original discount rate 2,772 636 2,737 615 Effect of changes in discount rate assumptions ( 138 ) ( 17 ) ( 75 ) 18 Balance, end of period 2,634 619 2,662 633 Net liability for future policy benefits: Present value of expected future policy benefits less expected net premiums 1,014 404 998 421 Impact of flooring at cohort level 21 — 17 — Net life policy reserves 1,035 404 1,015 421 Less reinsurance recoverable at original discount rate ( 95 ) ( 24 ) ( 100 ) ( 25 ) Less effect of discount rate assumption changes on reinsurance recoverable ( 7 ) ( 4 ) ( 8 ) ( 5 ) Net life policy reserves, after reinsurance recoverable $ 933 $ 376 $ 907 $ 391 Weighted-average duration of the net life policy reserves in years 11 15 12 16 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 18 Table of Contents (Dollars in millions) Six months ended June 30, 2024 2023 Term Whole life Term Whole life Present value of expected net premiums: Balance, beginning of period $ 1,700 $ 223 $ 1,643 $ 208 Beginning balance at original discount rate 1,712 225 1,708 217 Effect of changes in cash flow assumptions ( 12 ) 1 ( 5 ) ( 6 ) Effect of actual variances from expected experience ( 19 ) ( 3 ) ( 12 ) 1 Adjusted beginning of period balance 1,681 223 1,691 212 Issuances 76 11 78 17 Interest accrual 36 5 35 4 Net premiums collected ( 92 ) ( 14 ) ( 92 ) ( 14 ) Ending balance at original discount rate 1,701 225 1,712 219 Effect of changes in discount rate assumptions ( 81 ) ( 10 ) ( 48 ) ( 7 ) Balance, end of period 1,620 215 1,664 212 Present value of expected future policy benefits: Balance, beginning of period 2,751 657 2,584 614 Beginning balance at original discount rate 2,765 628 2,692 607 Effect of changes in cash flow assumptions ( 29 ) 2 5 ( 10 ) Effect of actual variances from expected experience ( 28 ) ( 4 ) ( 13 ) 1 Adjusted beginning of period balance 2,708 626 2,684 598 Issuances 76 12 78 17 Interest accrual 62 16 60 15 Benefits paid ( 74 ) ( 18 ) ( 85 ) ( 15 ) Ending balance at original discount rate 2,772 636 2,737 615 Effect of changes in discount rate assumptions ( 138 ) ( 17 ) ( 75 ) 18 Balance, end of period 2,634 619 2,662 633 Net liability for future policy benefits: Present value of expected future policy benefits less expected net premiums 1,014 404 998 421 Impact of flooring at cohort level 21 — 17 — Net life policy reserves 1,035 404 1,015 421 Less reinsurance recoverable at original discount rate ( 95 ) ( 24 ) ( 100 ) ( 25 ) Less effect of discount rate assumption changes on reinsurance recoverable ( 7 ) ( 4 ) ( 8 ) ( 5 ) Net life policy reserves, after reinsurance recoverable $ 933 $ 376 $ 907 $ 391 Weighted-average duration of the net life policy reserves in years 11 15 12 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 at both June 30, 2024 and 2023. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 19 Table of Contents 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, 2024 2023 Undiscounted Discounted Undiscounted Discounted Term Expected future benefit payments $ 4,819 $ 2,634 $ 4,738 $ 2,662 Expected future gross premiums 4,513 2,597 4,345 2,583 Whole life Expected future benefit payments $ 1,680 $ 619 $ 1,610 $ 633 Expected future gross premiums 675 401 641 390 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, 2024 2023 2024 2023 Gross premiums Term $ 75 $ 73 $ 149 $ 146 Whole life 13 13 26 25 Total $ 88 $ 86 $ 175 $ 171 Interest accretion Term $ 13 $ 12 $ 26 $ 24 Whole life 5 5 11 11 Total $ 18 $ 17 $ 37 $ 35 Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums w as immaterial for the six months ended June 30, 2024, and 2023 . The following table shows the weighted-average interest rate for our term and whole life products : At June 30, 2024 2023 Term Interest accretion rate 5.22 % 5.29 % Current discount rate 5.24 5.11 Whole life Interest accretion rate 5.90 % 5.93 % Current discount rate 5.67 5.22 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 2024 10-Q Page 20 Table of Contents 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, 2024 2023 2024 2023 Deferred annuity Universal life Deferred annuity Universal life Deferred annuity Universal life Deferred annuity Universal life Balance, beginning of period $ 631 $ 456 $ 711 $ 458 $ 656 $ 457 $ 734 $ 457 Premiums received 10 9 15 9 19 19 25 20 Policy charges — ( 10 ) — ( 10 ) — ( 20 ) — ( 20 ) Surrenders and withdrawals ( 26 ) ( 3 ) ( 32 ) ( 4 ) ( 63 ) ( 7 ) ( 68 ) ( 7 ) Benefit payments ( 2 ) ( 1 ) ( 3 ) ( 2 ) ( 5 ) ( 3 ) ( 6 ) ( 4 ) Interest credited 5 5 5 5 11 10 11 10 Balance, end of period $ 618 $ 456 $ 696 $ 456 $ 618 $ 456 $ 696 $ 456 Weighted average crediting rate 3.59 % 4.33 % 3.41 % 4.29 % 3.59 % 4.33 % 3.41 % 4.29 % Net amount at risk $ — $ 3,892 $ — $ 4,030 $ — $ 3,892 $ — $ 4,030 Cash surrender value 612 425 691 423 612 425 691 423 The net amount at risk above represents the guaranteed benefit amount in excess of the current account balances. The following table shows the balance of account values by range of guaranteed minimum crediting rates, in basis points, and the related range of the difference between rates being credited to policyholders and the respective guaranteed minimums for our deferred annuity and universal life contracts: (Dollars in millions) At guaranteed minimum 1 to 50 basis points above 51-150 basis points above Greater than 150 basis points Total At June 30, 2024 Deferred annuity 1.00-3.00% $ 4 $ 324 $ 14 $ 228 $ 570 3.01-4.00% 48 — — — 48 Total $ 52 $ 324 $ 14 $ 228 $ 618 Universal life 1.00-3.00% $ — $ 60 $ 59 $ 4 $ 123 3.01-4.00% 49 5 — — 54 Greater than 4.00% 279 — — — 279 Total $ 328 $ 65 $ 59 $ 4 $ 456 At June 30, 2023 Deferred annuity 1.00-3.00% $ 5 $ 400 $ 17 $ 224 $ 646 3.01-4.00% 50 — — — 50 Total $ 55 $ 400 $ 17 $ 224 $ 696 Universal life 1.00-3.00% $ 61 $ — $ 56 $ 3 $ 120 3.01-4.00% 53 — — — 53 Greater than 4.00% 283 — — — 283 Total $ 397 $ — $ 56 $ 3 $ 456 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 21 Table of Contents 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, 2024 2023 2024 2023 Balance, beginning of period $ 129 $ 125 $ 128 $ 121 Balance, beginning of period before shadow reserve adjustments 130 127 129 123 Effect of changes in cash flow assumptions ( 2 ) ( 5 ) ( 2 ) ( 5 ) Effect of actual variances from expected experience — — — ( 1 ) Adjusted beginning of period balance 128 122 127 117 Interest accrual 1 1 2 2 Excess death benefits ( 1 ) ( 2 ) ( 3 ) ( 2 ) Attributed assessments 3 3 6 6 Effect of changes in interest rate assumptions ( 1 ) — ( 2 ) 1 Balance, end of period before shadow reserve adjustments 130 124 130 124 Shadow reserve adjustments ( 2 ) ( 2 ) ( 2 ) ( 2 ) Balance, end of period 128 122 128 122 Less reinsurance recoverable, end of period 6 7 6 7 Net other additional liability, after reinsurance recoverable $ 134 $ 129 $ 134 $ 129 Weighted-average duration of the other additional liability in years 29 32 29 32 The following table shows balances and changes in separate accounts balances during the period: (Dollars in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Balance, beginning of period $ 927 $ 899 $ 925 $ 892 Interest credited before policy charges 11 10 21 20 Benefit payments ( 3 ) ( 1 ) ( 3 ) ( 3 ) Other 13 3 5 2 Balance, end of period $ 948 $ 911 $ 948 $ 911 Cash surrender value $ 932 $ 906 $ 932 $ 906 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 22 Table of Contents NOTE 6 – Deferred Policy Acquisition Costs Expenses directly related to successfully acquired insurance policies – primarily commissions, premium taxes and underwriting costs – are deferred and amortized over the terms of the policies. We update our acquisition cost assumptions periodically to reflect actual experience. For property casualty, we evaluate the costs for recoverability. 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. 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, 2024 2023 2024 2023 Property casualty: Deferred policy acquisition costs asset, beginning of period $ 796 $ 714 $ 749 $ 682 Capitalized deferred policy acquisition costs 475 407 882 779 Amortized deferred policy acquisition costs ( 393 ) ( 350 ) ( 753 ) ( 690 ) Deferred policy acquisition costs asset, end of period $ 878 $ 771 $ 878 $ 771 Life: Deferred policy acquisition costs asset, beginning of period $ 347 $ 334 $ 344 $ 331 Capitalized deferred policy acquisition costs 12 11 22 22 Amortized deferred policy acquisition costs ( 8 ) ( 7 ) ( 15 ) ( 15 ) Deferred policy acquisition costs asset, end of period $ 351 $ 338 $ 351 $ 338 Consolidated: Deferred policy acquisition costs asset, beginning of period $ 1,143 $ 1,048 $ 1,093 $ 1,013 Capitalized deferred policy acquisition costs 487 418 904 801 Amortized deferred policy acquisition costs ( 401 ) ( 357 ) ( 768 ) ( 705 ) Deferred policy acquisition costs asset, end of period $ 1,229 $ 1,109 $ 1,229 $ 1,109 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 23 Table of Contents The table below shows the life deferred policy acquisition costs asset by product: (Dollars in millions) Three months ended June 30, 2024 Term Whole life Deferred annuity Universal life Total Balance, beginning of period $ 238 $ 49 $ 8 $ 52 $ 347 Capitalized deferred policy acquisition costs 8 2 1 1 12 Amortized deferred policy acquisition costs ( 5 ) ( 1 ) ( 1 ) ( 1 ) ( 8 ) Balance, end of period $ 241 $ 50 $ 8 $ 52 $ 351 Three months ended June 30, 2023 Balance, beginning of period $ 231 $ 44 $ 7 $ 52 $ 334 Capitalized deferred policy acquisition costs 7 2 1 1 11 Amortized deferred policy acquisition costs ( 5 ) ( 1 ) — ( 1 ) ( 7 ) Balance, end of period $ 233 $ 45 $ 8 $ 52 $ 338 (Dollars in millions) Six months ended June 30, 2024 Term Whole life Deferred annuity Universal life Total Balance, beginning of period $ 236 $ 48 $ 8 $ 52 $ 344 Capitalized deferred policy acquisition costs 16 4 1 1 22 Amortized deferred policy acquisition costs ( 11 ) ( 2 ) ( 1 ) ( 1 ) ( 15 ) Balance, end of period $ 241 $ 50 $ 8 $ 52 $ 351 Six months ended June 30, 2023 Balance, beginning of period $ 228 $ 43 $ 7 $ 53 $ 331 Capitalized deferred policy acquisition costs 16 4 1 1 22 Amortized deferred policy acquisition costs ( 11 ) ( 2 ) — ( 2 ) ( 15 ) Balance, end of period $ 233 $ 45 $ 8 $ 52 $ 338 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 24 Table of Contents NOTE 7 – Accumulated Other Comprehensive Income Accumulated other comprehensive income (AOCI) includes changes in unrealized gains and losses on investments, changes in pension obligations and changes in life policy reserves, reinsurance recoverable and other as follows: (Dollars in millions) Three months ended June 30, 2024 2023 Before tax Income tax Net Before tax Income tax Net Investments: AOCI, beginning of period $ ( 625 ) $ ( 134 ) $ ( 491 ) $ ( 684 ) $ ( 147 ) $ ( 537 ) OCI before investment gains and losses, net, recognized in net income ( 93 ) ( 21 ) ( 72 ) ( 158 ) ( 34 ) ( 124 ) Investment gains and losses, net, recognized in net income 18 4 14 4 2 2 OCI ( 75 ) ( 17 ) ( 58 ) ( 154 ) ( 32 ) ( 122 ) AOCI, end of period $ ( 700 ) $ ( 151 ) $ ( 549 ) $ ( 838 ) $ ( 179 ) $ ( 659 ) Pension obligations: AOCI, beginning of period $ 30 $ 8 $ 22 $ 30 $ 8 $ 22 OCI excluding amortization recognized in net income — — — — — — Amortization recognized in net income 1 — 1 ( 1 ) ( 1 ) — OCI 1 — 1 ( 1 ) ( 1 ) — AOCI, end of period $ 31 $ 8 $ 23 $ 29 $ 7 $ 22 Life policy reserves, reinsurance recoverable and other: AOCI, beginning of period $ 34 $ 7 $ 27 $ ( 16 ) $ ( 4 ) $ ( 12 ) OCI before investment gains and losses, net, recognized in net income 37 8 29 29 6 23 Investment gains and losses, net, recognized in net income — — — — — — OCI 37 8 29 29 6 23 AOCI, end of period $ 71 $ 15 $ 56 $ 13 $ 2 $ 11 Summary of AOCI: AOCI, beginning of period $ ( 561 ) $ ( 119 ) $ ( 442 ) $ ( 670 ) $ ( 143 ) $ ( 527 ) Investments OCI ( 75 ) ( 17 ) ( 58 ) ( 154 ) ( 32 ) ( 122 ) Pension obligations OCI 1 — 1 ( 1 ) ( 1 ) — Life policy reserves, reinsurance recoverable and other OCI 37 8 29 29 6 23 Total OCI ( 37 ) ( 9 ) ( 28 ) ( 126 ) ( 27 ) ( 99 ) AOCI, end of period $ ( 598 ) $ ( 128 ) $ ( 470 ) $ ( 796 ) $ ( 170 ) $ ( 626 ) Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 25 Table of Contents (Dollars in millions) Six months ended June 30, 2024 2023 Before tax Income tax Net Before tax Income tax Net Investments: AOCI, beginning of period $ ( 570 ) $ ( 123 ) $ ( 447 ) $ ( 847 ) $ ( 182 ) $ ( 665 ) OCI before investment gains and losses, net, recognized in net income ( 158 ) ( 34 ) ( 124 ) 5 1 4 Investment gains and losses, net, recognized in net income 28 6 22 4 2 2 OCI ( 130 ) ( 28 ) ( 102 ) 9 3 6 AOCI, end of period $ ( 700 ) $ ( 151 ) $ ( 549 ) $ ( 838 ) $ ( 179 ) $ ( 659 ) Pension obligations: AOCI, beginning of period $ 30 $ 8 $ 22 $ 36 $ 9 $ 27 OCI excluding amortization recognized in net income — — — ( 5 ) ( 1 ) ( 4 ) Amortization recognized in net income 1 — 1 ( 2 ) ( 1 ) ( 1 ) OCI 1 — 1 ( 7 ) ( 2 ) ( 5 ) AOCI, end of period $ 31 $ 8 $ 23 $ 29 $ 7 $ 22 Life policy reserves, reinsurance recoverable and other: AOCI, beginning of period $ ( 13 ) $ ( 3 ) $ ( 10 ) $ 29 $ 5 $ 24 OCI before investment gains and losses, net, recognized in net income 84 18 66 ( 16 ) ( 3 ) ( 13 ) Investment gains and losses, net, recognized in net income — — — — — — OCI 84 18 66 ( 16 ) ( 3 ) ( 13 ) AOCI, end of period $ 71 $ 15 $ 56 $ 13 $ 2 $ 11 Summary of AOCI: AOCI, beginning of period $ ( 553 ) $ ( 118 ) $ ( 435 ) $ ( 782 ) $ ( 168 ) $ ( 614 ) Investments OCI ( 130 ) ( 28 ) ( 102 ) 9 3 6 Pension obligations OCI 1 — 1 ( 7 ) ( 2 ) ( 5 ) Life policy reserves, reinsurance recoverable and other OCI 84 18 66 ( 16 ) ( 3 ) ( 13 ) Total OCI ( 45 ) ( 10 ) ( 35 ) ( 14 ) ( 2 ) ( 12 ) AOCI, end of period $ ( 598 ) $ ( 128 ) $ ( 470 ) $ ( 796 ) $ ( 170 ) $ ( 626 ) 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 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 Second-Quarter 2024 10-Q Page 26 Table of Contents NOTE 8 – Reinsurance Primary components of our property casualty reinsurance assumed operations include involuntary and voluntary assumed as well as contracts from our reinsurance assumed operations, known as Cincinnati Re. Primary components of our ceded reinsurance include a property per risk treaty, property excess treaty, casualty per occurrence treaty, casualty excess treaty, property catastrophe treaty and retrocessions on our reinsurance assumed operations. Management’s decisions about the appropriate level of risk retention are affected by various factors, including changes in our underwriting practices, capacity to retain risks and reinsurance market conditions. The table below summarizes our consolidated property casualty insurance net written premiums, earned premiums and incurred loss and loss expenses: (Dollars in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Direct written premiums $ 2,362 $ 2,071 $ 4,487 $ 3,930 Assumed written premiums 236 194 475 438 Ceded written premiums ( 139 ) ( 115 ) ( 255 ) ( 199 ) Net written premiums $ 2,459 $ 2,150 $ 4,707 $ 4,169 Direct earned premiums $ 2,015 $ 1,806 $ 3,949 $ 3,566 Assumed earned premiums 155 134 307 293 Ceded earned premiums ( 95 ) ( 77 ) ( 189 ) ( 155 ) Earned premiums $ 2,075 $ 1,863 $ 4,067 $ 3,704 Direct incurred loss and loss expenses $ 1,352 $ 1,265 $ 2,545 $ 2,564 Assumed incurred loss and loss expenses 63 58 139 134 Ceded incurred loss and loss expenses ( 3 ) ( 61 ) ( 2 ) ( 119 ) Incurred loss and loss expenses $ 1,412 $ 1,262 $ 2,682 $ 2,579 Our life insurance company purchases reinsurance for protection of a portion of the risks that are written. 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 2024 10-Q Page 27 Table of Contents 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, 2024 2023 2024 2023 Direct earned premiums $ 101 $ 100 $ 200 $ 196 Ceded earned premiums ( 20 ) ( 20 ) ( 40 ) ( 39 ) Earned premiums $ 81 $ 80 $ 160 $ 157 Direct contract holders' benefits incurred $ 76 $ 100 $ 170 $ 197 Ceded contract holders' benefits incurred ( 8 ) ( 22 ) ( 23 ) ( 38 ) Contract holders' benefits incurred $ 68 $ 78 $ 147 $ 159 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 $ 18 million and $ 16 million at June 30, 2024, and December 31, 2023, respectively. The allowances for credit losses on other premiums receivable and reinsurance recoverable assets were immaterial at June 30, 2024, and December 31, 2023. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 28 Table of Contents 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, 2024 2023 2024 2023 Tax at statutory rate: $ 81 21.0 % $ 140 21.0 % $ 281 21.0 % $ 196 21.0 % Increase (decrease) resulting from: Tax-exempt income from municipal bonds ( 6 ) ( 1.6 ) ( 5 ) ( 0.8 ) ( 11 ) ( 0.8 ) ( 10 ) ( 1.1 ) Dividend received exclusion ( 5 ) ( 1.3 ) ( 6 ) ( 0.9 ) ( 10 ) ( 0.7 ) ( 11 ) ( 1.2 ) Other 4 1.1 3 0.5 12 0.8 — — Provision for income taxes $ 74 19.2 % $ 132 19.8 % $ 272 20.3 % $ 175 18.7 % The provision for federal income taxes is based upon filing a consolidated income tax return for the company and its domestic subsidiaries. We continue to believe that after considering all positive and negative evidence of taxable income in the carryback and carryforward periods as permitted by law, it is more likely than not that all of the deferred tax assets on our U.S. domestic operations and those related to Cincinnati Global Underwriting Ltd. SM (Cincinnati Global) will be realized. As a result, we have no valuation allowance for our U.S. domestic operations or Cincinnati Global at both June 30, 2024, and December 31, 2023. Cincinnati Global Cincinnati Global had no operating loss carryforwards in the United States and $ 85 million and $ 100 million in the United Kingdom at June 30, 2024, and December 31, 2023, respectively. These Cincinnati Global losses can only be utilized within the Cincinnati Global group. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 29 Table of Contents NOTE 10 – Net Income Per Common Share Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share are computed based on the weighted average number of common and dilutive potential common shares outstanding using the treasury stock method. 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, 2024 2023 2024 2023 Numerator: Net income—basic and diluted $ 312 $ 534 $ 1,067 $ 759 Denominator: Basic weighted-average common shares outstanding 156.3 157.0 156.6 157.1 Effect of share-based awards: Stock options 0.7 0.6 0.7 0.8 Nonvested shares 0.5 0.4 0.4 0.4 Diluted weighted-average shares 157.5 158.0 157.7 158.3 Earnings per share: Basic $ 1.99 $ 3.40 $ 6.82 $ 4.83 Diluted $ 1.98 $ 3.38 $ 6.77 $ 4.80 Number of anti-dilutive share-based awards 1.2 1.5 1.3 1.5 The source of dilution of our common shares are certain equity-based awards. See our 2023 Annual Report on Form 10-K, Item 8, Note 17, Share-Based Associate Compensation Plans, Page 177, for information about share-based awards. The above table shows the number of anti-dilutive share-based awards for the three and six months ended June 30, 2024 and 2023. NOTE 11 – Employee Retirement Benefits 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, 2024 2023 2024 2023 Service cost $ 2 $ 2 $ 3 $ 3 Non-service (benefit) costs: Interest cost 3 3 6 6 Expected return on plan assets ( 6 ) ( 5 ) ( 11 ) ( 10 ) Amortization of actuarial loss (gain) and prior service cost 1 ( 1 ) 1 ( 2 ) Other — — — ( 5 ) Total non-service benefit ( 2 ) ( 3 ) ( 4 ) ( 11 ) Net periodic benefit $ — $ ( 1 ) $ ( 1 ) $ ( 8 ) See our 2023 Annual Report on Form 10-K, Item 8, Note 13, Employee Retirement Benefits, Page 170, for information on our retirement benefits. 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 2024 and 2023. We made matching contributions totaling $ 7 million and $ 6 million to our 401(k) and Top Hat savings plans during the second quarter of 2024 and 2023, respectively, and contributions of $ 16 million and $ 14 million for the first half of 2024 and 2023, respectively. We made no contributions to our qualified pension plan during the first six months of 2024. Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 30 Table of Contents NOTE 12 – Commitments and Contingent Liabilities The company, through its insurance subsidiaries, is involved in claims litigation arising in the ordinary course of conducting its business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The company accounts for such activity through the establishment of unpaid loss and loss expense reserves. Subject to the uncertainties discussed in Note 4, Property Casualty Loss and Loss Expenses, and in the discussion in the balance of this Note, we believe that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses, costs of defense, and reinsurance recoveries, is immaterial to our consolidated financial position, results of operations and cash flows. Beginning in April 2020, like many companies in the property casualty insurance industry, the company’s property casualty subsidiaries were named as defendants in lawsuits seeking insurance coverage under commercial property insurance policies issued by the company for alleged losses resulting from the shutdown or suspension of their businesses due to the COVID-19 pandemic. Although the allegations vary, the plaintiffs generally seek a declaration of insurance coverage, damages for breach of contract in unspecified amounts for claim denials, interest and attorney fees. 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 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. Although the policy terms vary, in general, the claims at issue in these lawsuits were denied because the policyholder identified no direct physical loss or damage to property at the insured premises, and the governmental orders that led to the complete or partial shutdown of the business were not due to the existence of any direct physical loss or damage to property in the immediate vicinity of the insured premises and did not prohibit access to the insured premises, as required by the terms of the insurance policies. Depending on the individual policy, additional policy terms and conditions may also prohibit coverage, such as exclusions for pollutants, ordinance or law, loss of use, and acts or decisions. The company’s standard commercial property insurance policies generally did not contain a specific virus exclusion. In addition to the inherent difficulty in predicting litigation outcomes, the COVID-19 pandemic business income coverage lawsuits present a number of uncertainties and contingencies that are not yet known, including how many policyholders will ultimately file claims, the extent to which any class may be certified, and the size and scope of any such classes. The legal theories advanced by plaintiffs vary by case as do the state laws that govern the policy interpretation. 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. Some cases remain to be decided and in some jurisdictions, cases have been stayed pending appellate decisions in their state or federal circuit. Accordingly, little discovery has occurred on pending cases. In addition, business income calculations depend upon a wide range of factors that are particular to the circumstances of each individual policyholder and, here, virtually none of the plaintiffs have submitted proofs of loss or otherwise quantified or factually supported any allegedly covered loss. Moreover, the company’s experience shows that demands for damages often bear little relation to a reasonable estimate of potential loss. Accordingly, management cannot now reasonably estimate the possible loss or range of loss, if any. Nonetheless, given the number of claims and potential claims, the indeterminate amounts sought, and the inherent unpredictability of litigation, it is possible that adverse outcomes, if any, in the aggregate could have a material adverse effect on the company’s consolidated financial position, results of operations and cash flows. The company and its subsidiaries also are occasionally involved in other legal and regulatory proceedings, some of which assert claims for substantial amounts. These actions include, among others, putative class actions seeking certification of state or national classes. Such proceedings have alleged, for example, improper depreciation of labor costs in repair estimates. The company’s insurance subsidiaries also are occasionally parties to individual actions in 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 2024 10-Q Page 31 Table of Contents On a quarterly basis, we review these outstanding matters. Under current accounting guidance, we establish accruals when it is probable that a covered loss has been incurred and we can reasonably estimate its potential exposure. The company accounts for such probable and estimable losses, if any, through the establishment of legal expense reserves. Based on our quarterly review, we believe that our accruals for probable and estimable losses are reasonable and that the amounts accrued do not have a material effect on our consolidated financial position, results of operations and cash flows. However, if any one or more of these matters results in a judgment against us or settlement for an amount that is significantly greater than the amount accrued, the resulting liability could have a material effect on the company’s consolidated financial position, results of operations and cash flows. Based on our most recent review, our estimate for any other matters for which the risk of loss is not probable, but more than remote, is immaterial. NOTE 13 – Segment Information We operate primarily in two industries, property casualty insurance and life insurance. Our CODM regularly reviews our reporting segments to make decisions about allocating resources and assessing performance. Our reporting segments are: • Commercial lines insurance • Personal lines insurance • Excess and surplus lines insurance • Life insurance • Investments We report as Other the noninvestment operations of the parent company and its noninsurer subsidiary, CFC Investment Company. We also report as Other the underwriting results of Cincinnati Re and Cincinnati Global. See our 2023 Annual Report on Form 10-K, Item 8, Note 18, Segment Information, Page 180, 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 2024 10-Q Page 32 Table of Contents Segment information is summarized in the following table: (Dollars in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Revenues: Commercial lines insurance Commercial casualty $ 372 $ 373 $ 737 $ 750 Commercial property 348 312 684 611 Commercial auto 228 214 448 428 Workers' compensation 59 72 120 146 Other commercial 100 95 200 187 Commercial lines insurance premiums 1,107 1,066 2,189 2,122 Fee revenues 1 1 2 2 Total commercial lines insurance 1,108 1,067 2,191 2,124 Personal lines insurance Personal auto 224 173 432 339 Homeowner 326 251 629 484 Other personal 81 69 158 134 Personal lines insurance premiums 631 493 1,219 957 Fee revenues 1 1 2 2 Total personal lines insurance 632 494 1,221 959 Excess and surplus lines insurance 151 132 290 259 Fee revenues 1 1 2 1 Total excess and surplus lines insurance 152 133 292 260 Life insurance premiums 81 80 160 157 Fee revenues 2 3 3 5 Total life insurance 83 83 163 162 Investments Investment income, net of expenses 242 220 487 430 Investment gains and losses, net 137 434 749 540 Total investment revenue 379 654 1,236 970 Other Premiums 186 172 369 366 Other 4 2 7 5 Total other revenues 190 174 376 371 Total revenues $ 2,544 $ 2,605 $ 5,479 $ 4,846 Income (loss) before income taxes: Insurance underwriting results Commercial lines insurance $ 10 $ 33 $ 49 $ 31 Personal lines insurance ( 42 ) ( 36 ) ( 5 ) ( 93 ) Excess and surplus lines insurance 8 11 20 24 Life insurance 22 13 32 21 Investments 348 624 1,174 910 Other 40 21 69 41 Total income before income taxes $ 386 $ 666 $ 1,339 $ 934 Identifiable assets: June 30, 2024 December 31, 2023 Property casualty insurance $ 5,864 $ 5,294 Life insurance 1,600 1,562 Investments 26,285 24,999 Other 1,053 914 Total $ 34,802 $ 32,769 Cincinnati Financial Corporation Second-Quarter 2024 10-Q Page 33 Table of Contents