What changed in this filing

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

2025-10-27 compared with 2025-07-28 · 52 added, 55 removed, 179 unchanged (37% of the section changed)

5 unchanged sentences

Our view of potential risks and our sensitivity to such risks is discussed in our 2024 Annual Report on Form 10-K, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, Page 112.

The fair value of our investment portfolio was $28.826 billion at June 30, 2025, up $1.161 billion from year-end 2024, including a $895 million increase in the fixed-maturity portfolio, a $464 million increase in the equity portfolio and a $198 million decrease in short-term investments.

(Dollars in millions) At June 30, 2025 At December 31, 2024

The fair value of our investment portfolio was $30.326 billion at September 30, 2025, up $2.661 billion from year-end 2024, including a $1.448 billion increase in the fixed-maturity portfolio, a $1.362 billion increase in the equity portfolio and a $149 million decrease in short-term investments.

(Dollars in millions) At September 30, 2025 At December 31, 2024

amortized cost Percent

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Total $ 22,150 100.0 % $ 30,326 100.0 % $ 20,986 100.0 % $ 27,665 100.0 %

At June 30, 2025, substantially all of our consolidated investment portfolio, measured at fair value, is classified as Level 1 or Level 2.

At September 30, 2025, substantially all of our consolidated investment portfolio, measured at fair value, is classified as Level 1 or Level 2.

See Item 1, Note 3, Fair Value Measurements, for additional discussion of our valuation techniques.

In addition to our investment portfolio, the total investments amount reported in our condensed consolidated balance sheets includes Other invested assets.

Other invested assets included $594 million of private equity investments, $99 million of real estate through direct property ownership and development projects in the United States, $36 million of life policy loans and $14 million in Lloyd's deposit at June 30, 2025.

Cincinnati Financial Corporation Second-Quarter 2025 10-Q

Other invested assets included $623 million of private equity investments, $99 million of real estate through direct property ownership and development projects in the United States, $37 million of life policy loans and $14 million in Lloyd's deposit at September 30, 2025.

Cincinnati Financial Corporation Third-Quarter 2025 10-Q

FIXED-MATURITY SECURITIES INVESTMENTS

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By regularly investing in the bond market, we build a broad, diversified portfolio that we believe mitigates the impact of adverse economic factors.

In the first six months of 2025, the increase in fair value of our fixed-maturity portfolio was due to net purchases of securities, plus a decrease in our net unrealized loss position that reflected a decrease in U.S.

Treasury yields partially offset by a slight widening of corporate credit spreads.

At June 30, 2025, our fixed-maturity portfolio with an average rating of A2/A+ was valued at 97.4% of its amortized cost, compared with 96.7% at December 31, 2024.

At June 30, 2025, our investment-grade fixed-maturity securities represented 97.9% of the portfolio based on ratings provided by nationally recognized statistical rating organizations or the Securities Valuation Office of the National Association of Insurance Commissioners.

In the first nine months of 2025, the increase in fair value of our fixed-maturity portfolio was due to net purchases of securities, plus a decrease in our net unrealized loss position that reflected a decrease in U.S.

Treasury yields and a slight tightening of corporate credit spreads.

At September 30, 2025, our fixed-maturity portfolio with an average rating of A2/A+ was valued at 98.8% of its amortized cost, compared with 96.7% at December 31, 2024.

At September 30, 2025, our investment-grade fixed-maturity securities represented 97.4% of the portfolio based on ratings provided by nationally recognized statistical rating organizations or the Securities Valuation Office of the National Association of Insurance Commissioners.

Attributes of the fixed-maturity portfolio include:

At June 30, 2025 At December 31, 2024

At September 30, 2025 At December 31, 2024

Weighted average yield-to-amortized cost 5.10 % 5.06 %

2 unchanged sentences

We discuss maturities of our fixed-maturity portfolio in our 2024 Annual Report on Form 10-K, Item 8, Note 2, Investments, Page 135, and in this quarterly report Item 2, Investments Results.

Cincinnati Financial Corporation Second-Quarter 2025 10-Q

Cincinnati Financial Corporation Third-Quarter 2025 10-Q

TAXABLE FIXED MATURITIES

Our taxable fixed-maturity portfolio, with a fair value of $13.166 billion at June 30, 2025, included:

(Dollars in millions) At June 30, 2025 At December 31, 2024

Our taxable fixed-maturity portfolio, with a fair value of $13.593 billion at September 30, 2025, included:

(Dollars in millions) At September 30, 2025 At December 31, 2024

Investment-grade corporate $ 9,140 $ 8,070

2 unchanged sentences

Asset-backed 778 551

Noninvestment-grade corporate 271 310

United States government 274 226

Noninvestment-grade corporate 223 310

Foreign government 23 30

1 unchanged sentence

Our strategy is to buy, and typically hold, fixed-maturity investments to maturity, but we monitor credit profiles and fair value movements when determining holding periods for individual securities.

With the exception of United States agency issues that include government-sponsored enterprises, no individual issuer's securities accounted for more than 0.8% of the taxable fixed-maturity portfolio at June 30, 2025.

Our investment-grade corporate bonds had an average rating of Baa1 by Moody's or BBB+ by S&P Global Ratings and represented 66.2% of the taxable fixed-maturity portfolio's fair value at June 30, 2025, compared with 65.9% at year-end 2024.

Our investment-grade corporate bonds had an average rating of Baa1 by Moody's or BBB+ by S&P Global Ratings and represented 67.2% of the taxable fixed-maturity portfolio's fair value at September 30, 2025, compared with 65.9% at year-end 2024.

The heaviest concentration in our investment-grade corporate bond portfolio, based on fair value at

June 30, 2025, was the financial sector.

September 30, 2025, was the financial sector.

It represented 30.3% of our investment-grade corporate bond portfolio, compared with 33.8% at year-end 2024.

3 unchanged sentences

See risk factors entitled “Financial disruption or a prolonged economic downturn could affect our investment performance” and “Our ability to achieve our performance objectives could be affected by changes in the financial, credit and capital markets or the general economy.”

Our taxable fixed-maturity portfolio at June 30, 2025, included $732 million of asset-backed securities at fair value with an average rating of Aa2/AA.

Our taxable fixed-maturity portfolio at September 30, 2025, included $778 million of asset-backed securities at fair value with an average rating of Aa2/AA.

TAX-EXEMPT FIXED MATURITIES

At June 30, 2025, we had $3.911 billion of tax-exempt fixed-maturity securities at fair value with an average rating of Aa2/AA by Moody's and S&P Global Ratings.

At September 30, 2025, we had $4.037 billion of tax-exempt fixed-maturity securities at fair value with an average rating of Aa2/AA by Moody's and S&P Global Ratings.

We traditionally have purchased municipal bonds focusing on general obligation and essential services issues, such as water, waste disposal or others.

The portfolio is well diversified among approximately 1,900 municipal bond issuers.

No single municipal issuer accounted for more than 0.6% of the tax-exempt fixed-maturity portfolio at June 30, 2025.

No single municipal issuer accounted for more than 0.6% of the tax-exempt fixed-maturity portfolio at September 30, 2025.

INTEREST RATE SENSITIVITY ANALYSIS

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As part of this model, the effective duration of the fixed-maturity portfolio is continually monitored by our investment department to evaluate the theoretical impact of interest rate movements.

Cincinnati Financial Corporation Second-Quarter 2025 10-Q

Cincinnati Financial Corporation Third-Quarter 2025 10-Q

The table below summarizes the effect of hypothetical changes in interest rates on the fair value of the fixed-maturity portfolio:

1 unchanged sentence

-200 -100 — 100 200

At June 30, 2025 $ 18,906 $ 17,985 $ 17,077 $ 16,093 $ 15,100

At September 30, 2025 $ 19,606 $ 18,610 $ 17,630 $ 16,563 $ 15,495

At December 31, 2024 $ 17,750 $ 16,967 $ 16,182 $ 15,317 $ 14,433

The effective duration of the fixed-maturity portfolio as of June 30, 2025, was 5.3 years, up from 5.0 years at year-end 2024.

The effective duration of the fixed-maturity portfolio as of September 30, 2025, was 5.6 years, up from 5.0 years at year-end 2024.

The above table is a theoretical presentation showing that an instantaneous, parallel shift in the yield curve of 100 basis points could produce an approximately 5.8% change in the fair value of the fixed-maturity portfolio.

7 unchanged sentences

We make short-term investments primarily with funds to be used to make upcoming cash payments, such as dividends, taxes or other corporate purposes.

At June 30, 2025, we had $100 million of short-term investments.

At September 30, 2025, we had $149 million of short-term investments.

EQUITY INVESTMENTS

Our equity investments, with a fair value totaling $11.649 billion at June 30, 2025, included $11.309 billion of common stock securities of companies generally with strong indications of paying and growing their dividends.

Our equity investments, with a fair value totaling $12.547 billion at September 30, 2025, included $12.209 billion of common stock securities of companies generally with strong indications of paying and growing their dividends.

Other criteria we evaluate include increasing sales and earnings, proven management and a favorable outlook.

5 unchanged sentences

-30% -20% -10% — 10% 20% 30%

At June 30, 2025 $ 8,154 $ 9,319 $ 10,484 $ 11,649 $ 12,814 $ 13,979 $ 15,144

At September 30, 2025 $ 8,783 $ 10,038 $ 11,292 $ 12,547 $ 13,802 $ 15,056 $ 16,311

At December 31, 2024 $ 7,830 $ 8,948 $ 10,067 $ 11,185 $ 12,304 $ 13,422 $ 14,541

At June 30, 2025, Microsoft (Nasdaq:MSFT) was our largest single common stock holding with a fair value of $903 million, or 8.0% of our publicly traded common stock portfolio and 3.1% of the total investment portfolio.

At September 30, 2025, Microsoft (Nasdaq:MSFT) was our largest single common stock holding with a fair value of $940 million, or 7.7% of our publicly traded common stock portfolio and 3.1% of the total investment portfolio.

Forty-two holdings (among nine different sectors) each had a fair value greater than $100 million.

Cincinnati Financial Corporation Second-Quarter 2025 10-Q

Cincinnati Financial Corporation Third-Quarter 2025 10-Q

Common Stock Portfolio Industry Sector Distribution

Percent of common stock portfolio

At June 30, 2025 At December 31, 2024

At September 30, 2025 At December 31, 2024

Financial S&P 500 Industry

5 unchanged sentences

Healthcare 10.2 8.9 10.8 10.1

Consumer staples 7.5 5.5 6.9 5.5

Consumer discretionary 7.5 10.5 7.6 11.2

Materials 4.1 1.9 4.7 1.9

Consumer staples 6.6 4.9 6.9 5.5

Energy 4.3 2.9 4.2 3.2

Materials 3.8 1.8 4.7 1.9

Utilities 3.1 2.3 3.1 2.3

3 unchanged sentences

UNREALIZED INVESTMENT GAINS AND LOSSES

At June 30, 2025, unrealized investment gains before taxes for the fixed-maturity portfolio totaled $124 million and unrealized investment losses amounted to $582 million before taxes.

The $458 million net unrealized loss position in our fixed-maturity portfolio at June 30, 2025, decreased in the first six months of 2025, primarily due to a decrease in U.S.

Treasury yields partially offset by a slight widening of corporate credit spreads.

At September 30, 2025, unrealized investment gains before taxes for the fixed-maturity portfolio totaled $212 million and unrealized investment losses amounted to $429 million before taxes.

The $217 million net unrealized loss position in our fixed-maturity portfolio at September 30, 2025, decreased in the first nine months of 2025, primarily due to a decrease in U.S.

Treasury yields and a slight tightening of corporate credit spreads.

The net loss position for our current fixed-maturity holdings will naturally decline over time as individual securities approach maturity.

2 unchanged sentences

We believe that the appreciated value of equity securities, compared with the cost of securities that is generally used as a tax basis, is a useful measure to help evaluate how fair value can change over time.

On this basis, the net unrealized investment gains at June 30, 2025, consisted of a net gain position in our equity portfolio of $7.637 billion.

On this basis, the net unrealized investment gains at September 30, 2025, consisted of a net gain position in our equity portfolio of $8.393 billion.

Events or factors such as economic growth or recession can affect the fair value and unrealized investment gains of our equity securities.

The five largest holdings in our common stock portfolio at June 30, 2025, were Microsoft, Apple (Nasdaq:AAPL), Broadcom Inc.

The five largest holdings in our common stock portfolio at September 30, 2025, were Microsoft, Apple (Nasdaq:AAPL), Broadcom Inc.

(Nasdaq:AVGO), JPMorgan Chase & Co (NYSE:JPM), and Abbvie Inc.

3 unchanged sentences

Further, amortized costs for some securities are revised through write-downs recognized in prior periods.

At June 30, 2025, 3,537 of the 5,278 fixed-maturity and short-term securities we owned had fair values below amortized cost, compared with 3,723 of the 5,090 securities we owned at year-end 2024.

The 3,537 holdings with fair values below amortized cost at June 30, 2025, represented 60.4% of the fair value of our fixed-maturity and short-term investments portfolio and $582 million in unrealized losses.

• 2,658 of the 3,537 holdings had fair value between 90% and 100% of amortized cost at June 30, 2025.

At September 30, 2025, 2,831 of the 5,331 fixed-maturity and short-term securities we owned had fair values below amortized cost, compared with 3,723 of the 5,090 securities we owned at year-end 2024.

The 2,831 holdings with fair values below amortized cost at September 30, 2025, represented 46.5% of the fair value of our fixed-maturity and short-term investments portfolio and $429 million in unrealized losses.

• 2,137 of the 2,831 holdings had fair value between 90% and 100% of amortized cost at September 30, 2025.

These primarily consist of securities whose current valuation is largely the result of interest rate factors.

The fair value of these 2,137 securities was $7.055 billion, and they accounted for $156 million in unrealized losses.

• 831 of the 3,537 holdings had fair value between 70% and 90% of amortized cost at

June 30, 2025.

We believe the 831 securities will continue to pay interest and ultimately pay principal upon

Cincinnati Financial Corporation Second-Quarter 2025 10-Q

• 677 of the 2,831 holdings had fair value between 70% and 90% of amortized cost at September 30, 2025.

We believe the 677 securities will continue to pay interest and ultimately pay principal upon maturity.

Cincinnati Financial Corporation Third-Quarter 2025 10-Q

The issuers of these 677 securities have strong cash flow to service their debt and meet their contractual obligation to make principal payments.

The fair value of these securities was $1.192 billion, and they accounted for $257 million in unrealized losses.

• 48 of the 3,537 holdings had fair value below 70% of amortized cost at June 30, 2025.

• 17 of the 2,831 holdings had fair value below 70% of amortized cost at September 30, 2025.

We believe these securities will continue to pay interest and ultimately pay principal upon maturity.

2 unchanged sentences

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

At June 30, 2025 Fair value Unrealized

At September 30, 2025 Fair value Unrealized

losses Fair value Unrealized

8 unchanged sentences

Total fixed-maturity 2,762 41 5,512 388 8,274 429

Short-term 100 — — — 100 —

Total fixed-maturity and short-term investments $ 5,007 $ 116 $ 5,363 $ 466 $ 10,370 $ 582

At December 31, 2024

9 unchanged sentences

Total fixed-maturity and short-term investments $ 6,683 $ 121 $ 5,823 $ 510 $ 12,506 $ 631

At June 30, 2025, applying our invested asset impairment policy, we determined that the total of $582 million, for securities in an unrealized loss position in the table above, was not the result of a credit loss.

During the first six months of 2025, no fixed maturity securities were written down to fair value, due to an intention to be sold.

The allowance for credit losses increased $14 million during the first six months of 2025.

During the first six months of 2024, no fixed maturity securities were written down to fair value, due to an intention to be sold.

The increase in the allowance for credit losses was $25 million during the first six months of 2024.

At September 30, 2025, applying our invested asset impairment policy, we determined that the total of $429 million, for securities in an unrealized loss position in the table above, was not the result of a credit loss.

During the first nine months of 2025, no fixed maturity securities were written down to fair value, due to an intention to be sold.

The allowance for credit losses increased $15 million during the first nine months of 2025.

During the first nine months of 2024, no fixed maturity securities were written down to fair value, due to an intention to be sold.

The increase in the allowance for credit losses was $25 million during the first nine months of 2024.

During the full year of 2024, no securities were written down to fair value.

1 unchanged sentence

Of that total, 19 securities had fair values below 70% of amortized cost.

Cincinnati Financial Corporation Second-Quarter 2025 10-Q

Cincinnati Financial Corporation Third-Quarter 2025 10-Q

The following table summarizes the investment portfolio by severity of decline:

3 unchanged sentences

gain (loss) Gross investment income

At June 30, 2025

At September 30, 2025

Taxable fixed maturities:

36 unchanged sentences

See our 2024 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Asset Impairment, Page 56.

Cincinnati Financial Corporation Second-Quarter 2025 10-Q

Cincinnati Financial Corporation Third-Quarter 2025 10-Q

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

What changed 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk