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) September 30, December 31, 2024 2023 Assets Investments Fixed maturities, at fair value (amortized cost: 2024—$ 16,074 ; 2023—$ 14,361 ) $ 15,871 $ 13,791 Equity securities, at fair value (cost: 2024—$ 4,034 ; 2023—$ 4,282 ) 11,570 10,989 Other invested assets 663 577 Total investments 28,104 25,357 Cash and cash equivalents 1,752 907 Investment income receivable 199 192 Finance receivable 116 108 Premiums receivable 3,012 2,592 Reinsurance recoverable 548 651 Prepaid reinsurance premiums 94 55 Deferred policy acquisition costs 1,241 1,093 Land, building and equipment, net, for company use (accumulated depreciation: 2024—$ 342 ; 2023—$ 337 ) 215 208 Other assets 785 681 Separate accounts 943 925 Total assets $ 37,009 $ 32,769 Liabilities Insurance reserves Loss and loss expense reserves $ 9,928 $ 9,050 Life policy and investment contract reserves 3,069 3,068 Unearned premiums 4,874 4,119 Other liabilities 1,917 1,311 Deferred income tax 1,600 1,324 Note payable 25 25 Long-term debt and lease obligations 849 849 Separate accounts 943 925 Total liabilities 23,205 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 1,482 1,437 Retained earnings 14,591 13,084 Accumulated other comprehensive loss ( 150 ) ( 435 ) Treasury stock at cost (2024— 42.0 million shares and 2023— 41.3 million shares) ( 2,516 ) ( 2,385 ) Total shareholders' equity 13,804 12,098 Total liabilities and shareholders' equity $ 37,009 $ 32,769 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Revenues Earned premiums $ 2,297 $ 2,033 $ 6,524 $ 5,894 Investment income, net of expenses 258 225 745 655 Investment gains and losses, net 758 ( 456 ) 1,507 84 Fee revenues 4 6 13 16 Other revenues 3 3 10 8 Total revenues 3,320 1,811 8,799 6,657 Benefits and Expenses Insurance losses and contract holders' benefits 1,578 1,332 4,407 4,070 Underwriting, acquisition and insurance expenses 683 609 1,954 1,744 Interest expense 13 13 40 40 Other operating expenses 6 5 19 17 Total benefits and expenses 2,280 1,959 6,420 5,871 Income (Loss) Before Income Taxes 1,040 ( 148 ) 2,379 786 Provision (Benefit) for Income Taxes Current 171 57 293 124 Deferred 49 ( 106 ) 199 2 Total provision (benefit) for income taxes 220 ( 49 ) 492 126 Net Income (Loss) $ 820 $ ( 99 ) $ 1,887 $ 660 Per Common Share Net income (loss) — basic $ 5.25 $ ( 0.63 ) $ 12.06 $ 4.20 Net income (loss) — diluted 5.20 ( 0.63 ) 11.97 4.17 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Net Income (Loss) $ 820 $ ( 99 ) $ 1,887 $ 660 Other Comprehensive Income (Loss) Change in unrealized gains and losses on investments, net of tax (benefit) of $ 106 , $( 79 ), $ 78 and $( 76 ), respectively 391 ( 290 ) 289 ( 284 ) Amortization of pension actuarial loss (gain) and prior service cost, net of tax (benefit) of $ 0 , $ 0 , $ 0 and $( 2 ), respectively — — 1 ( 5 ) Change in life policy reserves, reinsurance recoverable and other, net of tax (benefit) of $( 20 ), $ 22 , $( 2 ) and $ 19 , respectively ( 71 ) 89 ( 5 ) 76 Other comprehensive income (loss) 320 ( 201 ) 285 ( 213 ) Comprehensive Income (Loss) $ 1,140 $ ( 300 ) $ 2,172 $ 447 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 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 1,466 1,410 1,437 1,392 Share-based awards 4 1 4 ( 5 ) Share-based compensation 10 9 36 31 Other 2 2 5 4 End of period 1,482 1,422 1,482 1,422 Retained Earnings Beginning of period 13,897 12,235 13,084 11,711 Net income (loss) 820 ( 99 ) 1,887 660 Dividends declared ( 126 ) ( 118 ) ( 380 ) ( 353 ) End of period 14,591 12,018 14,591 12,018 Accumulated Other Comprehensive Loss Beginning of period ( 470 ) ( 626 ) ( 435 ) ( 614 ) Other comprehensive income (loss) 320 ( 201 ) 285 ( 213 ) End of period ( 150 ) ( 827 ) ( 150 ) ( 827 ) Treasury Stock Beginning of period ( 2,513 ) ( 2,386 ) ( 2,385 ) ( 2,324 ) Share-based awards 3 1 15 8 Shares acquired - share repurchase authorization — — ( 121 ) ( 67 ) Shares acquired - share-based compensation plans ( 7 ) ( 2 ) ( 26 ) ( 5 ) Other 1 1 1 2 End of period ( 2,516 ) ( 2,386 ) ( 2,516 ) ( 2,386 ) Total Shareholders' Equity $ 13,804 $ 10,624 $ 13,804 $ 10,624 (In millions, except per common share) Common Stock - Shares Outstanding Beginning of period 156.2 156.8 157.0 157.1 Share-based awards 0.1 — 0.5 0.3 Shares acquired - share repurchase authorization — — ( 1.1 ) ( 0.6 ) Shares acquired - share-based compensation plans ( 0.1 ) — ( 0.2 ) — Other 0.1 0.1 0.1 0.1 End of period 156.3 156.9 156.3 156.9 Dividends declared per common share $ 0.81 $ 0.75 $ 2.43 $ 2.25 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Third-Quarter 2024 10-Q Page 6 Table of Contents Cincinnati Financial Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (Dollars in millions) Nine months ended September 30, 2024 2023 Cash Flows From Operating Activities Net income $ 1,887 $ 660 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other 115 88 Investment gains and losses, net ( 1,499 ) ( 69 ) Interest credited to contract holders 34 33 Deferred income tax expense 199 2 Changes in: Premiums and reinsurance receivable ( 356 ) ( 392 ) Deferred policy acquisition costs ( 148 ) ( 88 ) Other assets ( 8 ) ( 30 ) Loss and loss expense reserves 878 677 Life policy and investment contract reserves 54 73 Unearned premiums 755 506 Other liabilities 55 8 Current income tax receivable/payable 41 7 Net cash provided by operating activities 2,007 1,475 Cash Flows From Investing Activities Sale, call or maturity of fixed maturities 2,354 826 Sale of equity securities 1,332 68 Purchase of fixed maturities ( 3,797 ) ( 1,853 ) Purchase of equity securities ( 282 ) ( 157 ) Changes in finance receivables ( 10 ) ( 10 ) Investment in building and equipment ( 18 ) ( 10 ) Change in other invested assets, net ( 68 ) ( 102 ) Net cash used in investing activities ( 489 ) ( 1,238 ) Cash Flows From Financing Activities Payment of cash dividends to shareholders ( 365 ) ( 338 ) Shares acquired - share repurchase authorization ( 121 ) ( 67 ) Changes in note payable — ( 25 ) Proceeds from stock options exercised 7 7 Contract holders' funds deposited 58 67 Contract holders' funds withdrawn ( 152 ) ( 165 ) Other ( 100 ) ( 81 ) Net cash used in financing activities ( 673 ) ( 602 ) Net change in cash and cash equivalents 845 ( 365 ) Cash and cash equivalents at beginning of year 907 1,264 Cash and cash equivalents at end of period $ 1,752 $ 899 Supplemental Disclosures of Cash Flow Information: Interest paid $ 27 $ 28 Income taxes paid 221 94 Noncash Activities Equipment acquired under finance lease obligations $ 13 $ 10 Share-based compensation 41 15 Other assets and other liabilities 562 120 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements. Cincinnati Financial Corporation Third-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 September 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 Third-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 September 30, 2024 gains losses Fixed-maturity securities: Corporate $ 8,407 $ 150 $ 218 $ 8,339 States, municipalities and political subdivisions 4,944 41 176 4,809 Government-sponsored enterprises 2,147 5 1 2,151 Asset-backed 317 4 7 314 United States government 228 1 2 227 Foreign government 31 — — 31 Total $ 16,074 $ 201 $ 404 $ 15,871 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 decrease in net unrealized investment losses in our fixed-maturity portfolio at September 30, 2024, is primarily due to a decrease in U.S. Treasury yields and a tightening of corporate credit spreads as well as realized losses on sales of some lower-yielding fixed maturities. Our asset-backed securities had an average rating of Aa2/AA- and Aa3/AA- at September 30, 2024, and December 31, 2023, respectively. Cincinnati Financial Corporation Third-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 September 30, 2024 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses Fixed-maturity securities: Corporate $ 402 $ 5 $ 3,937 $ 213 $ 4,339 $ 218 States, municipalities and political subdivisions 287 4 2,000 172 2,287 176 Government-sponsored enterprises 715 1 128 — 843 1 Asset-backed 48 — 99 7 147 7 United States government — — 103 2 103 2 Foreign government — — 5 — 5 — Total $ 1,452 $ 10 $ 6,272 $ 394 $ 7,724 $ 404 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 September 30, 2024 Maturity dates: Due in one year or less $ 1,198 $ 1,194 7.5 % Due after one year through five years 4,011 3,993 25.2 Due after five years through ten years 3,554 3,542 22.3 Due after ten years 7,311 7,142 45.0 Total $ 16,074 $ 15,871 100.0 % 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 Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Investment income: Interest $ 187 $ 154 $ 529 $ 441 Dividends 68 69 209 205 Other 7 5 18 18 Total 262 228 756 664 Less investment expenses 4 3 11 9 Total $ 258 $ 225 $ 745 $ 655 Investment gains and losses, net: Equity securities: Investment gains and losses on securities sold, net $ 24 $ ( 5 ) $ 146 $ 2 Unrealized gains and losses on securities still held, net 817 ( 458 ) 1,446 99 Subtotal 841 ( 463 ) 1,592 101 Fixed-maturity securities: Gross realized gains 1 1 5 2 Gross realized losses ( 87 ) ( 1 ) ( 94 ) ( 2 ) Change in allowance for credit losses, net — 1 ( 25 ) ( 2 ) Write-down of impaired securities with intent to sell — — — ( 4 ) Subtotal ( 86 ) 1 ( 114 ) ( 6 ) Other 3 6 29 ( 11 ) Total $ 758 $ ( 456 ) $ 1,507 $ 84 The fair value of our equity portfolio was $ 11.570 billion and $ 10.989 billion at September 30, 2024, and December 31, 2023, respectively. Apple, Inc. (Nasdaq:AAPL) and Microsoft Corporation (Nasdaq:MSFT), equity holdings, were our largest single investment holdings with a fair value of $ 885 million and $ 842 million, which was 7.9 % and 7.9 % of our publicly traded common equities portfolio and 3.2 % and 3.4 % of the total investment portfolio at September 30, 2024, and December 31, 2023, respectively. The allowance for credit losses on fixed-maturity securities was $ 39 million and $ 18 million at September 30, 2024, and December 31, 2023, respectively. There were 2,495 and 2,840 fixed-maturity securities in a total unrealized loss position of $ 404 million and $ 687 million at September 30, 2024, and December 31, 2023, respectively. Of those totals, 5 and 20 fixed-maturity securities had fair values below 70 % of amortized cost at September 30, 2024, and December 31, 2023, respectively. Cincinnati Financial Corporation Third-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 September 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 September 30, 2024 Fixed maturities, available for sale: Corporate $ — $ 8,339 $ — $ 8,339 States, municipalities and political subdivisions — 4,809 — 4,809 Government-sponsored enterprises — 2,151 — 2,151 Asset-backed — 314 — 314 United States government 227 — — 227 Foreign government — 31 — 31 Subtotal 227 15,644 — 15,871 Common equities 11,200 — — 11,200 Nonredeemable preferred equities — 370 — 370 Separate accounts taxable fixed maturities — 894 — 894 Top Hat savings plan mutual funds and common equity (included in Other assets) 84 — — 84 Total $ 11,511 $ 16,908 $ — $ 28,419 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 $ 1.752 billion and $ 907 million at September 30, 2024, and December 31, 2023, respectively. Cincinnati Financial Corporation Third-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 September 30, December 31, September 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 September 30, 2024 Note payable $ — $ 25 $ — $ 25 6.900 % senior debentures, due 2028 — 30 — 30 6.920 % senior debentures, due 2028 — 427 — 427 6.125 % senior notes, due 2034 — 407 — 407 Total $ — $ 889 $ — $ 889 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 September 30, 2024 Life policy loans $ — $ — $ 41 $ 41 Deferred annuities $ — $ — $ 576 $ 576 Structured settlements — 136 — 136 Total $ — $ 136 $ 576 $ 712 At December 31, 2023 Life policy loans $ — $ — $ 39 $ 39 Deferred annuities $ — $ — $ 603 $ 603 Structured settlements — 141 — 141 Total $ — $ 141 $ 603 $ 744 Cincinnati Financial Corporation Third-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 September 30, 2024, and December 31, 2023, respectively. Recorded reserves for the deferred annuities were $ 605 million and $ 656 million at September 30, 2024, and December 31, 2023, respectively. Recorded reserves for the structured settlements were $ 118 million and $ 123 million at September 30, 2024, and December 31, 2023, respectively. Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Gross loss and loss expense reserves, beginning of period $ 9,494 $ 8,807 $ 8,975 $ 8,336 Less reinsurance recoverable 303 424 362 405 Net loss and loss expense reserves, beginning of period 9,191 8,383 8,613 7,931 Net incurred loss and loss expenses related to: Current accident year 1,570 1,314 4,392 4,053 Prior accident years ( 71 ) ( 53 ) ( 211 ) ( 213 ) Total incurred 1,499 1,261 4,181 3,840 Net paid loss and loss expenses related to: Current accident year 574 597 1,262 1,286 Prior accident years 540 461 1,956 1,899 Total paid 1,114 1,058 3,218 3,185 Net loss and loss expense reserves, end of period 9,576 8,586 9,576 8,586 Plus reinsurance recoverable 290 419 290 419 Gross loss and loss expense reserves, end of period $ 9,866 $ 9,005 $ 9,866 $ 9,005 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 $ 62 million and $ 72 million at September 30, 2024, and 2023, respectively, for certain life and health loss and loss expense reserves. We experienced $ 71 million of favorable development on prior accident years, including $ 50 million of favorable development in commercial lines, less than $ 1 million of unfavorable development in personal lines and $ 5 million of unfavorable development in excess and surplus lines for the three months ended September 30, 2024. Within commercial lines, we recognized favorable reserve development of $ 33 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. We experienced $ 211 million of favorable development on prior accident years, including $ 117 million of favorable development in commercial lines, $ 27 million of favorable development in personal lines and $ 5 million of unfavorable development in excess and surplus lines for the nine months ended September 30, 2024. Within commercial lines, we recognized favorable reserve development of $ 76 million for the commercial property line, $ 56 million for the workers' compensation line and $ 10 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 $ 27 million for the commercial casualty line. Within personal lines, we recognized favorable reserve development of $ 37 million for the homeowner line. Cincinnati Financial Corporation Third-Quarter 2024 10-Q Page 15 Table of Contents 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. 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 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) September 30, 2024 December 31, 2023 Life policy reserves: Term $ 1,108 $ 1,066 Whole life 441 434 Other 100 97 Subtotal 1,649 1,597 Investment contract reserves: Deferred annuities 605 656 Universal life 590 585 Structured settlements 118 123 Other 107 107 Subtotal 1,420 1,471 Total life policy and investment contract reserves $ 3,069 $ 3,068 Cincinnati Financial Corporation Third-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 September 30, 2024 2023 Term Whole life Term Whole life Present value of expected net premiums: Balance, beginning of period $ 1,620 $ 215 $ 1,664 $ 212 Beginning balance at original discount rate 1,701 225 1,712 219 Effect of changes in cash flow assumptions ( 1 ) ( 1 ) — ( 1 ) Effect of actual variances from expected experience ( 4 ) — ( 3 ) 2 Adjusted beginning of period balance 1,696 224 1,709 220 Issuances 34 9 33 7 Interest accrual 20 2 18 3 Net premiums collected ( 45 ) ( 8 ) ( 45 ) ( 7 ) Ending balance at original discount rate 1,705 227 1,715 223 Effect of changes in discount rate assumptions 3 — ( 133 ) ( 17 ) Balance, end of period 1,708 227 1,582 206 Present value of expected future policy benefits: Balance, beginning of period 2,634 619 2,662 633 Beginning balance at original discount rate 2,772 636 2,737 615 Effect of changes in cash flow assumptions ( 1 ) ( 2 ) — — Effect of actual variances from expected experience ( 7 ) ( 1 ) ( 6 ) 2 Adjusted beginning of period balance 2,764 633 2,731 617 Issuances 34 8 33 7 Interest accrual 32 8 30 8 Benefits paid ( 48 ) ( 8 ) ( 39 ) ( 9 ) Ending balance at original discount rate 2,782 641 2,755 623 Effect of changes in discount rate assumptions 12 27 ( 234 ) ( 37 ) Balance, end of period 2,794 668 2,521 586 Net liability for future policy benefits: Present value of expected future policy benefits less expected net premiums 1,086 441 939 380 Impact of flooring at cohort level 22 — 17 1 Net life policy reserves 1,108 441 956 381 Less reinsurance recoverable at original discount rate ( 92 ) ( 25 ) ( 99 ) ( 25 ) Less effect of discount rate assumption changes on reinsurance recoverable ( 10 ) ( 5 ) ( 7 ) ( 3 ) Net life policy reserves, after reinsurance recoverable $ 1,006 $ 411 $ 850 $ 353 Weighted-average duration of the net life policy reserves in years 11 16 11 16 Cincinnati Financial Corporation Third-Quarter 2024 10-Q Page 18 Table of Contents (Dollars in millions) Nine months ended September 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 ( 13 ) — ( 5 ) ( 7 ) Effect of actual variances from expected experience ( 23 ) ( 3 ) ( 15 ) 3 Adjusted beginning of period balance 1,676 222 1,688 213 Issuances 110 20 111 24 Interest accrual 56 7 53 7 Net premiums collected ( 137 ) ( 22 ) ( 137 ) ( 21 ) Ending balance at original discount rate 1,705 227 1,715 223 Effect of changes in discount rate assumptions 3 — ( 133 ) ( 17 ) Balance, end of period 1,708 227 1,582 206 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 ( 30 ) — 5 ( 10 ) Effect of actual variances from expected experience ( 35 ) ( 5 ) ( 19 ) 3 Adjusted beginning of period balance 2,700 623 2,678 600 Issuances 110 20 111 24 Interest accrual 94 24 90 23 Benefits paid ( 122 ) ( 26 ) ( 124 ) ( 24 ) Ending balance at original discount rate 2,782 641 2,755 623 Effect of changes in discount rate assumptions 12 27 ( 234 ) ( 37 ) Balance, end of period 2,794 668 2,521 586 Net liability for future policy benefits: Present value of expected future policy benefits less expected net premiums 1,086 441 939 380 Impact of flooring at cohort level 22 — 17 1 Net life policy reserves 1,108 441 956 381 Less reinsurance recoverable at original discount rate ( 92 ) ( 25 ) ( 99 ) ( 25 ) Less effect of discount rate assumption changes on reinsurance recoverable ( 10 ) ( 5 ) ( 7 ) ( 3 ) Net life policy reserves, after reinsurance recoverable $ 1,006 $ 411 $ 850 $ 353 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 $ 5 million at September 30, 2024 and 2023, respectively. Cincinnati Financial Corporation Third-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 September 30, 2024 2023 Undiscounted Discounted Undiscounted Discounted Term Expected future benefit payments $ 4,840 $ 2,794 $ 4,768 $ 2,521 Expected future gross premiums 4,524 2,736 4,364 2,464 Whole life Expected future benefit payments $ 1,702 $ 668 $ 1,631 $ 586 Expected future gross premiums 687 428 653 379 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Gross premiums Term $ 72 $ 71 $ 221 $ 217 Whole life 15 14 41 39 Total $ 87 $ 85 $ 262 $ 256 Interest accretion Term $ 12 $ 13 $ 38 $ 37 Whole life 6 5 17 16 Total $ 18 $ 18 $ 55 $ 53 Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums w as immaterial for the nine months ended September 30, 2024, and 2023 . The following table shows the weighted-average interest rate for our term and whole life products : At September 30, 2024 2023 Term Interest accretion rate 5.21 % 5.29 % Current discount rate 4.53 5.73 Whole life Interest accretion rate 5.89 % 5.92 % Current discount rate 5.14 5.95 The discount rate assumption was developed by calculating forward rates from market yield curves of upper-medium grade fixed-income instruments. Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 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 $ 618 $ 456 $ 696 $ 456 $ 656 $ 457 $ 734 $ 457 Premiums received 10 9 13 8 29 28 38 28 Policy charges — ( 10 ) — ( 9 ) — ( 30 ) — ( 29 ) Surrenders and withdrawals ( 25 ) ( 2 ) ( 32 ) ( 2 ) ( 88 ) ( 9 ) ( 100 ) ( 9 ) Benefit payments ( 4 ) ( 1 ) ( 3 ) ( 1 ) ( 9 ) ( 4 ) ( 9 ) ( 5 ) Interest credited 6 4 6 4 17 14 17 14 Balance, end of period $ 605 $ 456 $ 680 $ 456 $ 605 $ 456 $ 680 $ 456 Weighted average crediting rate 3.64 % 4.36 % 3.45 % 4.29 % 3.64 % 4.36 % 3.45 % 4.29 % Net amount at risk $ — $ 3,865 $ — $ 3,989 $ — $ 3,865 $ — $ 3,989 Cash surrender value 599 426 675 424 599 426 675 424 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 September 30, 2024 Deferred annuity 1.00-3.00% $ 4 $ 309 $ 14 $ 231 $ 558 3.01-4.00% 47 — — — 47 Total $ 51 $ 309 $ 14 $ 231 $ 605 Universal life 1.00-3.00% $ — $ 55 $ 64 $ 5 $ 124 3.01-4.00% 50 — 4 — 54 Greater than 4.00% 278 — — — 278 Total $ 328 $ 55 $ 68 $ 5 $ 456 At September 30, 2023 Deferred annuity 1.00-3.00% $ 5 $ 380 $ 16 $ 229 $ 630 3.01-4.00% 50 — — — 50 Total $ 55 $ 380 $ 16 $ 229 $ 680 Universal life 1.00-3.00% $ 60 $ — $ 57 $ 3 $ 120 3.01-4.00% 54 — — — 54 Greater than 4.00% 282 — — — 282 Total $ 396 $ — $ 57 $ 3 $ 456 Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Balance, beginning of period $ 128 $ 122 $ 128 $ 121 Balance, beginning of period before shadow reserve adjustments 130 124 129 123 Effect of changes in cash flow assumptions — — ( 2 ) ( 5 ) Effect of actual variances from expected experience — 2 — 1 Adjusted beginning of period balance 130 126 127 119 Interest accrual 1 1 3 3 Excess death benefits ( 2 ) ( 4 ) ( 5 ) ( 6 ) Attributed assessments 3 3 9 9 Effect of changes in interest rate assumptions 3 ( 5 ) 1 ( 4 ) Balance, end of period before shadow reserve adjustments 135 121 135 121 Shadow reserve adjustments ( 1 ) ( 2 ) ( 1 ) ( 2 ) Balance, end of period 134 119 134 119 Less reinsurance recoverable, end of period 6 7 6 7 Net other additional liability, after reinsurance recoverable $ 140 $ 126 $ 140 $ 126 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Balance, beginning of period $ 948 $ 911 $ 925 $ 892 Interest credited before policy charges 10 11 31 31 Benefit payments — ( 3 ) ( 3 ) ( 6 ) Other ( 15 ) ( 1 ) ( 10 ) 1 Balance, end of period $ 943 $ 918 $ 943 $ 918 Cash surrender value $ 941 $ 912 $ 941 $ 912 Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Property casualty: Deferred policy acquisition costs asset, beginning of period $ 878 $ 771 $ 749 $ 682 Capitalized deferred policy acquisition costs 436 355 1,318 1,134 Amortized deferred policy acquisition costs ( 427 ) ( 366 ) ( 1,180 ) ( 1,056 ) Deferred policy acquisition costs asset, end of period $ 887 $ 760 $ 887 $ 760 Life: Deferred policy acquisition costs asset, beginning of period $ 351 $ 338 $ 344 $ 331 Capitalized deferred policy acquisition costs 11 10 33 32 Amortized deferred policy acquisition costs ( 8 ) ( 7 ) ( 23 ) ( 22 ) Deferred policy acquisition costs asset, end of period $ 354 $ 341 $ 354 $ 341 Consolidated: Deferred policy acquisition costs asset, beginning of period $ 1,229 $ 1,109 $ 1,093 $ 1,013 Capitalized deferred policy acquisition costs 447 365 1,351 1,166 Amortized deferred policy acquisition costs ( 435 ) ( 373 ) ( 1,203 ) ( 1,078 ) Deferred policy acquisition costs asset, end of period $ 1,241 $ 1,101 $ 1,241 $ 1,101 Cincinnati Financial Corporation Third-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 September 30, 2024 Term Whole life Deferred annuity Universal life Total Balance, beginning of period $ 241 $ 50 $ 8 $ 52 $ 351 Capitalized deferred policy acquisition costs 9 1 — 1 11 Amortized deferred policy acquisition costs ( 7 ) — — ( 1 ) ( 8 ) Balance, end of period $ 243 $ 51 $ 8 $ 52 $ 354 Three months ended September 30, 2023 Balance, beginning of period $ 233 $ 45 $ 8 $ 52 $ 338 Capitalized deferred policy acquisition costs 8 2 — — 10 Amortized deferred policy acquisition costs ( 7 ) — — — ( 7 ) Balance, end of period $ 234 $ 47 $ 8 $ 52 $ 341 (Dollars in millions) Nine months ended September 30, 2024 Term Whole life Deferred annuity Universal life Total Balance, beginning of period $ 236 $ 48 $ 8 $ 52 $ 344 Capitalized deferred policy acquisition costs 25 5 1 2 33 Amortized deferred policy acquisition costs ( 18 ) ( 2 ) ( 1 ) ( 2 ) ( 23 ) Balance, end of period $ 243 $ 51 $ 8 $ 52 $ 354 Nine months ended September 30, 2023 Balance, beginning of period $ 228 $ 43 $ 7 $ 53 $ 331 Capitalized deferred policy acquisition costs 24 6 1 1 32 Amortized deferred policy acquisition costs ( 18 ) ( 2 ) — ( 2 ) ( 22 ) Balance, end of period $ 234 $ 47 $ 8 $ 52 $ 341 Cincinnati Financial Corporation Third-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 September 30, 2024 2023 Before tax Income tax Net Before tax Income tax Net Investments: AOCI, beginning of period $ ( 700 ) $ ( 151 ) $ ( 549 ) $ ( 838 ) $ ( 179 ) $ ( 659 ) OCI before investment gains and losses, net, recognized in net income 411 88 323 ( 369 ) ( 79 ) ( 290 ) Investment gains and losses, net, recognized in net income 86 18 68 — — — OCI 497 106 391 ( 369 ) ( 79 ) ( 290 ) AOCI, end of period $ ( 203 ) $ ( 45 ) $ ( 158 ) $ ( 1,207 ) $ ( 258 ) $ ( 949 ) Pension obligations: AOCI, beginning of period $ 31 $ 8 $ 23 $ 29 $ 7 $ 22 OCI excluding amortization recognized in net income — — — — — — Amortization recognized in net income — — — — — — OCI — — — — — — AOCI, end of period $ 31 $ 8 $ 23 $ 29 $ 7 $ 22 Life policy reserves, reinsurance recoverable and other: AOCI, beginning of period $ 71 $ 15 $ 56 $ 13 $ 2 $ 11 OCI before investment gains and losses, net, recognized in net income ( 91 ) ( 20 ) ( 71 ) 111 22 89 Investment gains and losses, net, recognized in net income — — — — — — OCI ( 91 ) ( 20 ) ( 71 ) 111 22 89 AOCI, end of period $ ( 20 ) $ ( 5 ) $ ( 15 ) $ 124 $ 24 $ 100 Summary of AOCI: AOCI, beginning of period $ ( 598 ) $ ( 128 ) $ ( 470 ) $ ( 796 ) $ ( 170 ) $ ( 626 ) Investments OCI 497 106 391 ( 369 ) ( 79 ) ( 290 ) Pension obligations OCI — — — — — — Life policy reserves, reinsurance recoverable and other OCI ( 91 ) ( 20 ) ( 71 ) 111 22 89 Total OCI 406 86 320 ( 258 ) ( 57 ) ( 201 ) AOCI, end of period $ ( 192 ) $ ( 42 ) $ ( 150 ) $ ( 1,054 ) $ ( 227 ) $ ( 827 ) Cincinnati Financial Corporation Third-Quarter 2024 10-Q Page 25 Table of Contents (Dollars in millions) Nine months ended September 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 253 54 199 ( 364 ) ( 77 ) ( 287 ) Investment gains and losses, net, recognized in net income 114 24 90 4 1 3 OCI 367 78 289 ( 360 ) ( 76 ) ( 284 ) AOCI, end of period $ ( 203 ) $ ( 45 ) $ ( 158 ) $ ( 1,207 ) $ ( 258 ) $ ( 949 ) Pension obligations: AOCI, beginning of period $ 30 $ 8 $ 22 $ 36 $ 9 $ 27 OCI excluding amortization recognized in net income — — — ( 5 ) ( 2 ) ( 3 ) Amortization recognized in net income 1 — 1 ( 2 ) — ( 2 ) 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 ( 7 ) ( 2 ) ( 5 ) 95 19 76 Investment gains and losses, net, recognized in net income — — — — — — OCI ( 7 ) ( 2 ) ( 5 ) 95 19 76 AOCI, end of period $ ( 20 ) $ ( 5 ) $ ( 15 ) $ 124 $ 24 $ 100 Summary of AOCI: AOCI, beginning of period $ ( 553 ) $ ( 118 ) $ ( 435 ) $ ( 782 ) $ ( 168 ) $ ( 614 ) Investments OCI 367 78 289 ( 360 ) ( 76 ) ( 284 ) Pension obligations OCI 1 — 1 ( 7 ) ( 2 ) ( 5 ) Life policy reserves, reinsurance recoverable and other OCI ( 7 ) ( 2 ) ( 5 ) 95 19 76 Total OCI 361 76 285 ( 272 ) ( 59 ) ( 213 ) AOCI, end of period $ ( 192 ) $ ( 42 ) $ ( 150 ) $ ( 1,054 ) $ ( 227 ) $ ( 827 ) 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 Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Direct written premiums $ 2,285 $ 1,939 $ 6,772 $ 5,869 Assumed written premiums 102 89 577 527 Ceded written premiums ( 94 ) ( 71 ) ( 349 ) ( 270 ) Net written premiums $ 2,293 $ 1,957 $ 7,000 $ 6,126 Direct earned premiums $ 2,179 $ 1,912 $ 6,128 $ 5,478 Assumed earned premiums 159 142 466 435 Ceded earned premiums ( 121 ) ( 97 ) ( 310 ) ( 252 ) Earned premiums $ 2,217 $ 1,957 $ 6,284 $ 5,661 Direct incurred loss and loss expenses $ 1,415 $ 1,220 $ 3,960 $ 3,784 Assumed incurred loss and loss expenses 103 82 242 216 Ceded incurred loss and loss expenses ( 19 ) ( 41 ) ( 21 ) ( 160 ) Incurred loss and loss expenses $ 1,499 $ 1,261 $ 4,181 $ 3,840 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 Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Direct earned premiums $ 101 $ 97 $ 301 $ 293 Ceded earned premiums ( 21 ) ( 21 ) ( 61 ) ( 60 ) Earned premiums $ 80 $ 76 $ 240 $ 233 Direct contract holders' benefits incurred $ 92 $ 92 $ 262 $ 289 Ceded contract holders' benefits incurred ( 13 ) ( 21 ) ( 36 ) ( 59 ) Contract holders' benefits incurred $ 79 $ 71 $ 226 $ 230 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 $ 17 million and $ 16 million at September 30, 2024, and December 31, 2023, respectively. The allowances for credit losses on other premiums receivable and reinsurance recoverable assets were immaterial at September 30, 2024, and December 31, 2023. Cincinnati Financial Corporation Third-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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Tax at statutory rate: $ 219 21.0 % $ ( 31 ) 21.0 % $ 500 21.0 % $ 165 21.0 % Increase (decrease) resulting from: Tax-exempt income from municipal bonds ( 5 ) ( 0.5 ) ( 5 ) 3.4 ( 16 ) ( 0.7 ) ( 15 ) ( 1.9 ) Dividend received exclusion ( 6 ) ( 0.6 ) ( 5 ) 3.4 ( 16 ) ( 0.7 ) ( 16 ) ( 2.0 ) Other 12 1.3 ( 8 ) 5.3 24 1.1 ( 8 ) ( 1.1 ) Provision (benefit) for income taxes $ 220 21.2 % $ ( 49 ) 33.1 % $ 492 20.7 % $ 126 16.0 % The provision (benefit) 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 September 30, 2024, and December 31, 2023. During the third quarter of 2024, we were notified by the Internal Revenue Service (IRS) that the audit of tax years ended December 31, 2021 and 2020, has concluded. Despite this, the statute of limitations remains open through September of 2025. Cincinnati Global Cincinnati Global had no operating loss carryforwards in the United States and $ 85 million and $ 100 million in the United Kingdom at September 30, 2024, and December 31, 2023, respectively. These Cincinnati Global losses can only be utilized within the Cincinnati Global group. Cincinnati Financial Corporation Third-Quarter 2024 10-Q Page 29 Table of Contents NOTE 10 – Net Income (Loss) 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Numerator: Net income (loss)—basic and diluted $ 820 $ ( 99 ) $ 1,887 $ 660 Denominator: Basic weighted-average common shares outstanding 156.2 156.9 156.5 157.0 Effect of share-based awards: Stock options 0.9 — 0.7 0.7 Nonvested shares 0.6 — 0.5 0.5 Diluted weighted-average shares 157.7 156.9 157.7 158.2 Earnings (loss) per share: Basic $ 5.25 $ ( 0.63 ) $ 12.06 $ 4.20 Diluted $ 5.20 $ ( 0.63 ) $ 11.97 $ 4.17 Number of anti-dilutive share-based awards 0.6 2.4 1.3 1.3 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 nine months ended September 30, 2024 and 2023. 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 because their exercise would have anti-dilutive effects. 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Service cost $ 1 $ 1 $ 4 $ 4 Non-service (benefit) costs: Interest cost 4 3 10 9 Expected return on plan assets ( 5 ) ( 5 ) ( 16 ) ( 15 ) Amortization of actuarial loss (gain) and prior service cost — — 1 ( 2 ) Other — — — ( 5 ) Total non-service benefit ( 1 ) ( 2 ) ( 5 ) ( 13 ) Net periodic benefit $ — $ ( 1 ) $ ( 1 ) $ ( 9 ) 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. Cincinnati Financial Corporation Third-Quarter 2024 10-Q Page 30 Table of Contents We made matching contributions totaling $ 7 million and $ 6 million to our 401(k) and Top Hat savings plans during the third quarter of 2024 and 2023, respectively, and contributions of $ 23 million and $ 20 million for the first nine months of 2024 and 2023, respectively. We made no contributions to our qualified pension plan during the first nine months of 2024. 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. 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. 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 Third-Quarter 2024 10-Q Page 31 Table of Contents Segment information is summarized in the following table: (Dollars in millions) Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Revenues: Commercial lines insurance Commercial casualty $ 381 $ 365 $ 1,118 $ 1,115 Commercial property 361 321 1,045 933 Commercial auto 231 216 679 644 Workers' compensation 61 66 182 212 Other commercial 103 94 302 280 Commercial lines insurance premiums 1,137 1,062 3,326 3,184 Fee revenues 1 1 3 3 Total commercial lines insurance 1,138 1,063 3,329 3,187 Personal lines insurance Personal auto 242 185 674 524 Homeowner 352 271 981 755 Other personal 84 71 242 205 Personal lines insurance premiums 678 527 1,897 1,484 Fee revenues 2 1 4 3 Total personal lines insurance 680 528 1,901 1,487 Excess and surplus lines insurance 157 135 447 394 Fee revenues — 1 2 2 Total excess and surplus lines insurance 157 136 449 396 Life insurance premiums 80 76 240 233 Fee revenues 1 3 4 8 Total life insurance 81 79 244 241 Investments Investment income, net of expenses 258 225 745 655 Investment gains and losses, net 758 ( 456 ) 1,507 84 Total investment revenue 1,016 ( 231 ) 2,252 739 Other Premiums 245 233 614 599 Other 3 3 10 8 Total other revenues 248 236 624 607 Total revenues $ 3,320 $ 1,811 $ 8,799 $ 6,657 Income (loss) before income taxes: Insurance underwriting results Commercial lines insurance $ 81 $ 52 $ 130 $ 83 Personal lines insurance ( 69 ) 1 ( 74 ) ( 92 ) Excess and surplus lines insurance 8 14 28 38 Life insurance 10 17 42 38 Investments 984 ( 262 ) 2,158 648 Other 26 30 95 71 Total income (loss) before income taxes $ 1,040 $ ( 148 ) $ 2,379 $ 786 Identifiable assets: September 30, 2024 December 31, 2023 Property casualty insurance $ 6,223 $ 5,294 Life insurance 1,654 1,562 Investments 27,640 24,999 Other 1,492 914 Total $ 37,009 $ 32,769 Cincinnati Financial Corporation Third-Quarter 2024 10-Q Page 32 Table of Contents