UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, ~~2022.~~2023.

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _____________________ to _____________________.

Commission file number 0-4604

CINCINNATI FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Ohio

31-0746871

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

6200 S. Gilmore Road,

Fairfield,

Ohio

45014-5141

(Address of principal executive offices)

(Zip code)

Registrant's telephone number, including area code: (513) 870-2000

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock

CINF

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

☑ Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☐ Smaller reporting company

☐ Emerging growth company

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

☐Yes ☑ No

As of April ~~22, 2022,~~21, 2023, there were ~~160,355,247~~157,212,708 shares of common stock outstanding.

CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTER ENDED March 31, ~~2022~~2023

TABLE OF CONTENTS


Part I – Financial Information			3

Item 1. Financial Statements (unaudited)			3

Condensed Consolidated Balance Sheets			3

Condensed Consolidated Statements of Income			4

Condensed Consolidated Statements of Comprehensive Income			5

Condensed Consolidated Statements of Shareholders’ Equity			6

Condensed Consolidated Statements of Cash Flows			7

Notes to Condensed Consolidated Financial Statements (unaudited)			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2632

Safe Harbor Statement			2632

Corporate Financial Highlights			2935

Financial Results			3642

Liquidity and Capital Resources			5157

Other Matters			5561

Item 3. Quantitative and Qualitative Disclosures about Market Risk			5561

Item 4. Controls and Procedures			6167

Part II – Other Information			6369

Item 1. Legal Proceedings			6369

Item 1A. Risk Factors			6369

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6470

Item 6. Exhibits			6571

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 2

Part I – Financial Information

Item 1. Financial Statements (unaudited)

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Balance Sheets


(Dollars in millions, except per share data)	(Dollars in millions, except per share data)	March 31,		December 31,		(Dollars in millions, except per share data)	March 31,		December 31,
		2022		2021			2023		2022
Assets	Assets					Assets
Investments	Investments					Investments
Fixed maturities, at fair value (amortized cost: 2022—$12,330; 2021—$12,230)		$	12,376	$	13,022
Equity securities, at fair value (cost: 2022—$4,167; 2021—$4,121)		10,675		11,315
Fixed maturities, at fair value (amortized cost: 2023—$13,362; 2022—$12,979)						Fixed maturities, at fair value (amortized cost: 2023—$13,362; 2022—$12,979)	$	12,678	$	12,132
Equity securities, at fair value (cost: 2023—$4,311; 2022—$4,294)						Equity securities, at fair value (cost: 2023—$4,311; 2022—$4,294)	9,967		9,841

Other invested assets	Other invested assets	348		329		Other invested assets	478		452
Total investments	Total investments	23,399		24,666		Total investments	23,123		22,425
Cash and cash equivalents	Cash and cash equivalents	987		1,139		Cash and cash equivalents	955		1,264

Investment income receivable	Investment income receivable	147		144		Investment income receivable	160		160
Finance receivable	Finance receivable	92		98		Finance receivable	94		92
Premiums receivable	Premiums receivable	2,248		2,053		Premiums receivable	2,509		2,322
Reinsurance recoverable	Reinsurance recoverable	556		570		Reinsurance recoverable	698		665
Prepaid reinsurance premiums	Prepaid reinsurance premiums	79		78		Prepaid reinsurance premiums	57		51
Deferred policy acquisition costs	Deferred policy acquisition costs	979		905		Deferred policy acquisition costs	1,048		1,013
Land, building and equipment, net, for company use (accumulated depreciation: 2022—$309; 2021—$303)		203		205
Land, building and equipment, net, for company use (accumulated depreciation: 2023—$326; 2022—$322)						Land, building and equipment, net, for company use (accumulated depreciation: 2023—$326; 2022—$322)	199		202
Other assets	Other assets	657		570		Other assets	732		646
Separate accounts	Separate accounts	903		959		Separate accounts	899		892
Total assets	Total assets	$	30,250	$	31,387	Total assets	$	30,474	$	29,732

Liabilities	Liabilities					Liabilities
Insurance reserves	Insurance reserves					Insurance reserves
Loss and loss expense reserves	Loss and loss expense reserves	$	7,366	$	7,305	Loss and loss expense reserves	$	8,693	$	8,400
Life policy and investment contract reserves	Life policy and investment contract reserves	3,027		3,014		Life policy and investment contract reserves	3,059		3,015
Unearned premiums	Unearned premiums	3,560		3,271		Unearned premiums	3,890		3,689
Other liabilities	Other liabilities	952		1,092		Other liabilities	1,193		1,229
Deferred income tax	Deferred income tax	1,460		1,744		Deferred income tax	1,104		1,054
Note payable	Note payable	49		54		Note payable	50		50
Long-term debt and lease obligations	Long-term debt and lease obligations	841		843		Long-term debt and lease obligations	845		841
Separate accounts	Separate accounts	903		959		Separate accounts	899		892
Total liabilities	Total liabilities	18,158		18,282		Total liabilities	19,733		19,170

Commitments and contingent liabilities (Note 12)	Commitments and contingent liabilities (Note 12)	0		0		Commitments and contingent liabilities (Note 12)

Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Common stock, par value—$2 per share; (authorized: 2022 and 2021—500 million shares; issued: 2022 and 2021—198.3 million shares)		397		397
Common stock, par value—$2 per share; (authorized: 2023 and 2022—500 million shares; issued: 2023 and 2022—198.3 million shares)						Common stock, par value—$2 per share; (authorized: 2023 and 2022—500 million shares; issued: 2023 and 2022—198.3 million shares)	397		397
Paid-in capital	Paid-in capital	1,354		1,356		Paid-in capital	1,398		1,392
Retained earnings	Retained earnings	12,241		12,625		Retained earnings	11,818		11,711
Accumulated other comprehensive income	Accumulated other comprehensive income	59		648		Accumulated other comprehensive income	(527)		(614)
Treasury stock at cost (2022—38.0 million shares and 2021—38.0 million shares)		(1,959)		(1,921)
Treasury stock at cost (2023—41.1 million shares and 2022—41.2 million shares)						Treasury stock at cost (2023—41.1 million shares and 2022—41.2 million shares)	(2,345)		(2,324)
Total shareholders' equity	Total shareholders' equity	12,092		13,105		Total shareholders' equity	10,741		10,562
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	30,250	$	31,387	Total liabilities and shareholders' equity	$	30,474	$	29,732

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

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 3

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Income


(Dollars in millions, except per share data)	(Dollars in millions, except per share data)	Three months ended March 31,			(Dollars in millions, except per share data)				Three months ended March 31,
			2022			2021				2023		2022
Revenues	Revenues							Revenues
Earned premiums	Earned premiums		$	1,690		$	1,544	Earned premiums		$	1,918	$	1,693
Investment income, net of expenses	Investment income, net of expenses		185			174		Investment income, net of expenses		210		185
Investment gains and losses, net	Investment gains and losses, net		(666)			504		Investment gains and losses, net		106		(666)
Fee revenues	Fee revenues		4			3		Fee revenues		4		4
Other revenues	Other revenues		2			2		Other revenues		3		2
Total revenues	Total revenues		1,215			2,227		Total revenues		2,241		1,218
Benefits and Expenses	Benefits and Expenses							Benefits and Expenses
Insurance losses and contract holders' benefits	Insurance losses and contract holders' benefits		1,039			1,003		Insurance losses and contract holders' benefits		1,398		1,032
Underwriting, acquisition and insurance expenses	Underwriting, acquisition and insurance expenses		519			439		Underwriting, acquisition and insurance expenses		556		520
Interest expense	Interest expense		13			13		Interest expense		14		13
Other operating expenses	Other operating expenses		4			4		Other operating expenses		5		4
Total benefits and expenses	Total benefits and expenses		1,575			1,459		Total benefits and expenses		1,973		1,569
Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes		(360)			768		Income (Loss) Before Income Taxes		268		(351)
Provision (Benefit) for Income Taxes	Provision (Benefit) for Income Taxes							Provision (Benefit) for Income Taxes
Current	Current		41			36		Current		16		41
Deferred	Deferred		(128)			112		Deferred		27		(126)
Total provision (benefit) for income taxes	Total provision (benefit) for income taxes		(87)			148		Total provision (benefit) for income taxes		43		(85)
Net Income (Loss)	Net Income (Loss)		$	(273)		$	620	Net Income (Loss)		$	225	$	(266)
Per Common Share	Per Common Share							Per Common Share
Net income (loss)—basic	Net income (loss)—basic		$	(1.70)		$	3.85	Net income (loss)—basic		$	1.43	$	(1.66)
Net income (loss)—diluted	Net income (loss)—diluted		(1.70)			3.82		Net income (loss)—diluted		1.42		(1.66)

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

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Net Income (Loss)	Net Income (Loss)		$	(273)		$	620	Net Income (Loss)		$	225	$	(266)
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)							Other Comprehensive Income (Loss)
Change in unrealized gains and losses on investments, net of tax (benefit) of $(157) and $(41), respectively			(589)			(155)
Amortization of pension actuarial loss and prior service cost, net of tax of $0 and $1, respectively			—			3
Change in life deferred acquisition costs, life policy reserves and other, net of tax of $0 and $2, respectively			—			8
Change in unrealized gains and losses on investments, net of tax (benefit) of $35 and $(157), respectively								Change in unrealized gains and losses on investments, net of tax (benefit) of $35 and $(157), respectively		128		(589)
Amortization of pension actuarial loss and prior service cost, net of tax (benefit) of $(1) and $0, respectively								Amortization of pension actuarial loss and prior service cost, net of tax (benefit) of $(1) and $0, respectively		(5)		—
Change in life policy reserves, reinsurance recoverable and other, net of tax (benefit) of $(9) and $41, respectively								Change in life policy reserves, reinsurance recoverable and other, net of tax (benefit) of $(9) and $41, respectively		(36)		155
Other comprehensive income (loss)	Other comprehensive income (loss)		(589)			(144)		Other comprehensive income (loss)		87		(434)
Comprehensive Income (Loss)	Comprehensive Income (Loss)		$	(862)		$	476	Comprehensive Income (Loss)		$	312	$	(700)

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

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity

(Dollars in millions) Three months ended March 31,
2022 2021
Common Stock
   Beginning of period $ 397 $ 397
   Share-based awards — —
   End of period 397 397
Paid-In Capital
   Beginning of period 1,356 1,328
   Share-based awards (14) (16)
   Share-based compensation 11 9
   Other 1 1
   End of period 1,354 1,322
Retained Earnings
   Beginning of period 12,625 10,085
   Net income (loss) (273) 620
Dividends declared (111) (102)
   End of period 12,241 10,603
Accumulated Other Comprehensive Income
   Beginning of period 648 769
   Other comprehensive loss (589) (144)
   End of period 59 625
Treasury Stock
   Beginning of period (1,921) (1,790)
   Share-based awards 9 12
   Shares acquired - share repurchase authorization (45) (28)
   Shares acquired - share-based compensation plans (2) (3)
   End of period (1,959) (1,809)
      Total Shareholders' Equity $ 12,092 $ 11,138
(In millions, except per common share)
Common Stock - Shares Outstanding
   Beginning of period 160.3 160.9
   Share-based awards 0.4 0.4
   Shares acquired - share repurchase authorization (0.4) (0.3)
   End of period 160.3 161.0
Dividends declared per common share $ 0.69 $ 0.63


(Dollars in millions)	Three months ended March 31,
		2023		2022
Common Stock
Beginning of period		$	397	$	397
Share-based awards		—		—
End of period		397		397

Paid-In Capital
Beginning of period		1,392		1,356
Share-based awards		(6)		(14)
Share-based compensation		12		11
Other		—		1
End of period		1,398		1,354

Retained Earnings
Beginning of period		11,711		12,625
Cumulative effect of change in accounting for long-duration insurance contracts (Note 1)		—		10
Adjusted beginning of period		11,711		12,635
Net income (loss)		225		(266)
Dividends declared		(118)		(111)
End of period		11,818		12,258

Accumulated Other Comprehensive Income (Loss)
Beginning of period		(614)		648
Cumulative effect of change in accounting for long-duration insurance contracts (Note 1)		—		(352)
Adjusted beginning of period		(614)		296
Other comprehensive income (loss)		87		(434)
End of period		(527)		(138)

Treasury Stock
Beginning of period		(2,324)		(1,921)
Share-based awards		7		9
Shares acquired - share repurchase authorization		(25)		(45)
Shares acquired - share-based compensation plans		(3)		(2)

End of period		(2,345)		(1,959)

Total Shareholders' Equity		$	10,741	$	11,912

(In millions, except per common share)
Common Stock - Shares Outstanding
Beginning of period		157.1		160.3
Share-based awards		0.3		0.4
Shares acquired - share repurchase authorization		(0.2)		(0.4)


End of period		157.2		160.3

Dividends declared per common share		$	0.75	$	0.69

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

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 6

Cincinnati Financial Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,				(Dollars in millions)	Three months ended March 31,
		2022		2021			2023		2022
Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net income (loss)	Net income (loss)	$	(273)	$	620	Net income (loss)	$	225	$	(266)
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29		23
Depreciation, amortization and other						Depreciation, amortization and other	40		37
Investment gains and losses, net	Investment gains and losses, net	674		(501)		Investment gains and losses, net	(93)		674
Share-based compensation		11		9

Interest credited to contract holders	Interest credited to contract holders	12		11		Interest credited to contract holders	10		12
Deferred income tax expense	Deferred income tax expense	(128)		112		Deferred income tax expense	27		(126)
Changes in:	Changes in:					Changes in:
Investment income receivable		(3)		2

Premiums and reinsurance receivable	Premiums and reinsurance receivable	(182)		(166)		Premiums and reinsurance receivable	(229)		(182)
Deferred policy acquisition costs	Deferred policy acquisition costs	(68)		(49)		Deferred policy acquisition costs	(36)		(67)
Other assets	Other assets	(20)		(33)		Other assets	(24)		(20)
Loss and loss expense reserves	Loss and loss expense reserves	61		204		Loss and loss expense reserves	293		61
Life policy and investment contract reserves	Life policy and investment contract reserves	17		15		Life policy and investment contract reserves	25		7
Unearned premiums	Unearned premiums	289		221		Unearned premiums	201		289
Other liabilities	Other liabilities	(136)		(80)		Other liabilities	(121)		(136)
Current income tax receivable/payable	Current income tax receivable/payable	(85)		(34)		Current income tax receivable/payable	(68)		(85)
Net cash provided by operating activities	Net cash provided by operating activities	198		354		Net cash provided by operating activities	250		198
Cash Flows From Investing Activities	Cash Flows From Investing Activities					Cash Flows From Investing Activities
Sale of fixed maturities		55		30
Call or maturity of fixed maturities		296		300
Sale, call or maturity of fixed maturities						Sale, call or maturity of fixed maturities	303		351

Sale of equity securities	Sale of equity securities	56		65		Sale of equity securities	4		56
Purchase of fixed maturities	Purchase of fixed maturities	(460)		(467)		Purchase of fixed maturities	(606)		(460)
Purchase of equity securities	Purchase of equity securities	(90)		(78)		Purchase of equity securities	(22)		(90)

Investment in finance receivables		(3)		(12)
Collection of finance receivables		9		8
Changes in finance receivables						Changes in finance receivables	(3)		6

Investment in building and equipment	Investment in building and equipment	(4)		(5)		Investment in building and equipment	(4)		(4)
Change in other invested assets, net	Change in other invested assets, net	(21)		6		Change in other invested assets, net	(34)		(21)
Net cash used in investing activities	Net cash used in investing activities	(162)		(153)		Net cash used in investing activities	(362)		(162)
Cash Flows From Financing Activities	Cash Flows From Financing Activities					Cash Flows From Financing Activities
Payment of cash dividends to shareholders	Payment of cash dividends to shareholders	(99)		(95)		Payment of cash dividends to shareholders	(106)		(99)
Shares acquired - share repurchase authorization	Shares acquired - share repurchase authorization	(45)		(28)		Shares acquired - share repurchase authorization	(25)		(45)
Changes in note payable	Changes in note payable	(5)		3		Changes in note payable	—		(5)
Proceeds from stock options exercised	Proceeds from stock options exercised	4		4		Proceeds from stock options exercised	5		4
Contract holders' funds deposited	Contract holders' funds deposited	18		27		Contract holders' funds deposited	20		18
Contract holders' funds withdrawn	Contract holders' funds withdrawn	(32)		(33)		Contract holders' funds withdrawn	(58)		(32)
Other	Other	(29)		(32)		Other	(33)		(29)
Net cash used in financing activities	Net cash used in financing activities	(188)		(154)		Net cash used in financing activities	(197)		(188)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(152)		47		Net change in cash and cash equivalents	(309)		(152)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	1,139		900		Cash and cash equivalents at beginning of year	1,264		1,139
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	987	$	947	Cash and cash equivalents at end of period	$	955	$	987
Supplemental Disclosures of Cash Flow Information:	Supplemental Disclosures of Cash Flow Information:					Supplemental Disclosures of Cash Flow Information:

Interest paid						Interest paid	$	1	$	—
Income taxes paid	Income taxes paid	121		66		Income taxes paid	76		121
Noncash Activities	Noncash Activities					Noncash Activities

Equipment acquired under finance lease obligations	Equipment acquired under finance lease obligations	$	2	$	3	Equipment acquired under finance lease obligations	$	1	$	2
Share-based compensation	Share-based compensation	16		16		Share-based compensation	11		16
Other assets and other liabilities	Other assets and other liabilities	10		44		Other assets and other liabilities	96		10

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

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 7

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 March 31, ~~2022,~~2023, condensed consolidated financial statements are unaudited. We believe that we have made all adjustments, consisting only of normal recurring accruals, that are necessary for fair presentation. These condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our ~~2021~~2022 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.

The company continues to monitor the impact of the coronavirus (SARS-CoV-2 or COVID-19) pandemic outbreak. The company cannot predict the impact the pandemic will have on its future consolidated financial position, results of operations and cash flows, however the impact could be material.

~~Pending~~Adopted Accounting Updates

ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. ASU 2018-12 requires changes to the measurement and disclosure of long-duration insurance contracts. In November 2020, the FASB issued an ASU that delayed the effective date of ASU 2018-12 to interim and annual reporting periods beginning after December 15, 2022. ~~We plan to adopt these ASUs on a modified retrospective basis on January 1, 2023, with a transition date of January 1, 2021.~~

Related to the company's term and whole life products included in life policy and investment contract reserves, the new guidance requires that cash flow assumptions be reviewed at least annually to determine any necessary updates. Additionally, the discount rate assumption is required to be updated quarterly based on upper-medium grade fixed-income instrument yields (market value discount rates). The life policy and investment contract reserves balance is adjusted through insurance losses and contract holders' benefits for cash flow assumption updates and through accumulated other comprehensive income (AOCI) for discount rate updates.

These ASUs also amend the previous guidance related to life deferred policy acquisition costs by requiring amortization of those costs on a constant level basis for a group of contracts that approximates straight-line and the removal of shadow deferred policy acquisition costs for universal life and deferred annuity products. These ASUs also require entities to provide additional disclosures including disaggregated rollforwards of the life policy and investment contract reserves, separate account liabilities and life deferred policy acquisition costs.

Management has identified that the requirement to measure term and whole life policy reserves using updated discount rates is expected to have a material impact on shareholders' equity, through an increase to life policy and investment contract reserves and a decrease to AOCI, at the transition date. The company is in the process of addressing necessary implementation-related items, including modifications to reporting and analysis capabilities as well as actuarial systems and associated data processes. Further, the company continues to refine its accounting policy decisions associated with the new guidance. Additional impacts ofWe adopted these ASUs on ~~our company's consolidated financial position, results~~a modified retrospective basis on January 1, 2023, resulting in an after-tax increase to shareholders' equity of ~~operations and cash flows are being further evaluated by management~~$31 million.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 8

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


(Dollars in millions)	March 31, 2023		December 31, 2022
			As originally reported		As adjusted		Difference
Reinsurance recoverable	$	698	$	640	$	665	$	25
Prepaid reinsurance premiums	57		79		51		(28)
Deferred policy acquisition costs	1,048		1,014		1,013		(1)
Total assets	30,474		29,736		29,732		(4)
Life policy and investment contract reserves	3,059		3,059		3,015		(44)
Deferred income tax	1,104		1,045		1,054		9
Total liabilities	19,733		19,205		19,170		(35)
Retained earnings	11,818		11,702		11,711		9
Accumulated other comprehensive income	(527)		(636)		(614)		22
Total shareholders' equity	10,741		10,531		10,562		31
Total liabilities and shareholders' equity	30,474		29,736		29,732		(4)

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


(Dollars in millions, except per share data)	Three months ended March 31,
	2023		2022
			As originally reported		As adjusted		Difference
Earned premiums	$	1,918	$	1,690	$	1,693	$	3

Insurance losses and contract holders' benefits	1,398		1,039		1,032		(7)
Underwriting, acquisition and insurance expenses	556		519		520		1

Deferred income tax expense	27		(128)		(126)		2

Net Income (Loss)	225		(273)		(266)		7
Change in life policy reserves, reinsurance recoverable and other, net of tax	(36)		—		155		155
Other comprehensive income (loss)	87		(589)		(434)		155
Comprehensive Income (Loss)	312		(862)		(700)		162
Net income (loss) per share:
Basic	$	1.43	$	(1.70)	$	(1.66)	$	0.04
Diluted	1.42		(1.70)		(1.66)		0.04

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 9

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)	(Dollars in millions)	Amortized cost			Gross unrealized					Fair value		(Dollars in millions)	Amortized cost			Gross unrealized								Fair value
At March 31, 2022				gains			losses
Fixed maturity securities:
At March 31, 2023												At March 31, 2023		Amortized cost			gains				losses				Fair value
Fixed-maturity securities:												Fixed-maturity securities:
Corporate	Corporate	$	7,131		$	184		$	166	$	7,149	Corporate	$		7,568			$	49			$	526			$	7,091
States, municipalities and political subdivisions	States, municipalities and political subdivisions	4,780			106			76		4,810		States, municipalities and political subdivisions	4,933			42				226				4,749
Government-sponsored enterprises												Government-sponsored enterprises	390			1				4				387
Commercial mortgage-backed	Commercial mortgage-backed	267			1			2		266		Commercial mortgage-backed	241			—				16				225
United States government	United States government	113			—			1		112		United States government	199			—				4				195
Foreign government	Foreign government	25			—			—		25		Foreign government	31			—				—				31
Government-sponsored enterprises		14			—			—		14

Total	Total	$	12,330		$	291		$	245	$	12,376	Total	$	13,362		$	92			$	776			$	12,678

At December 31, 2021
Fixed maturity securities:
At December 31, 2022												At December 31, 2022
Fixed-maturity securities:												Fixed-maturity securities:
Corporate	Corporate	$	7,043		$	467		$	13	$	7,497	Corporate	$	7,412		$	37			$	580			$	6,869
States, municipalities and political subdivisions	States, municipalities and political subdivisions	4,768			330			3		5,095		States, municipalities and political subdivisions	4,901			24				303				4,622
Government-sponsored enterprises												Government-sponsored enterprises	186			—				3				183
Commercial mortgage-backed	Commercial mortgage-backed	264			9			—		273		Commercial mortgage-backed	250			—				16				234
United States government	United States government	121			2			—		123		United States government	196			—				5				191
Foreign government	Foreign government	26			—			—		26		Foreign government	34			—				1				33
Government-sponsored enterprises		8			—			—		8

Total	Total	$	12,230		$	808		$	16	$	13,022	Total	$	12,979		$	61			$	908			$	12,132

~~The decrease in~~The net unrealized investment ~~gains~~losses in our fixed-maturity portfolio at March 31, ~~2022, is~~2023, are primarily due to an increase in U.S. Treasury yields and a widening of corporate credit ~~spreads.~~spreads. Our commercial mortgage-backed securities had an average rating of Aa2/AAAA- at March 31, ~~2022,~~2023, and December 31, ~~2021.~~2022.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 910

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)	(Dollars in millions)	Less than 12 months				12 months or more				Total				(Dollars in millions)	Less than 12 months				12 months or more				Total
At March 31, 2022		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed maturity securities:
At March 31, 2023														At March 31, 2023	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed-maturity securities:														Fixed-maturity securities:
Corporate	Corporate	$	2,603	$	157	$	78	$	9	$	2,681	$	166	Corporate	$	3,910	$	158	$	2,273	$	368	$	6,183	$	526
States, municipalities and political subdivisions	States, municipalities and political subdivisions	977		72		21		4		998		76		States, municipalities and political subdivisions	1,287		48		890		178		2,177		226
Government-sponsored enterprises														Government-sponsored enterprises	263		3		7		1		270		4
Commercial mortgage-backed	Commercial mortgage-backed	128		2		10		—		138		2		Commercial mortgage-backed	107		5		116		11		223		16
United States government	United States government	72		1		—		—		72		1		United States government	121		1		52		3		173		4
Foreign government	Foreign government	7		—		—		—		7		—		Foreign government	10		—		2		—		12		—
Government-sponsored enterprises		10		—		3		—		13		—
Total	Total	$	3,797	$	232	$	112	$	13	$	3,909	$	245	Total	$	5,698	$	215	$	3,340	$	561	$	9,038	$	776

At December 31, 2021
Fixed maturity securities:
At December 31, 2022														At December 31, 2022
Fixed-maturity securities:														Fixed-maturity securities:
Corporate	Corporate	$	861	$	13	$	15	$	—	$	876	$	13	Corporate	$	5,651	$	412	$	661	$	168	$	6,312	$	580
States, municipalities and political subdivisions	States, municipalities and political subdivisions	105		2		2		1		107		3		States, municipalities and political subdivisions	2,600		274		77		29		2,677		303
Government-sponsored enterprises														Government-sponsored enterprises	123		3		3		—		126		3
Commercial mortgage-backed	Commercial mortgage-backed	10		—		11		—		21		—		Commercial mortgage-backed	215		13		14		3		229		16
United States government	United States government	48		—		—		—		48		—		United States government	146		3		41		2		187		5
Foreign government	Foreign government	16		—		—		—		16		—		Foreign government	25		1		4		—		29		1
Government-sponsored enterprises		7		—		—		—		7		—

Total	Total	$	1,047	$	15	$	28	$	1	$	1,075	$	16	Total	$	8,760	$	706	$	800	$	202	$	9,560	$	908

Contractual maturity dates for fixed-maturities securities were:


(Dollars in millions)	(Dollars in millions)	Amortized cost		Fair value		% of fair value		(Dollars in millions)	Amortized cost				Fair value				% of fair value
At March 31, 2022
At March 31, 2023								At March 31, 2023	Amortized cost				Fair value				% of fair value
Maturity dates:	Maturity dates:											Maturity dates:
Due in one year or less	Due in one year or less	$	686	$	690	5.6	%	Due in one year or less		$	728				$	725				5.7	%
Due after one year through five years	Due after one year through five years	3,636		3,690		29.8		Due after one year through five years	4,139					4,003				31.6
Due after five years through ten years	Due after five years through ten years	3,460		3,525		28.5		Due after five years through ten years	3,583				3,447				27.2
Due after ten years	Due after ten years	4,548		4,471		36.1		Due after ten years	4,912				4,503				35.5
Total	Total	$	12,330	$	12,376	100.0	%	Total	$	13,362			$	12,678			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 First-Quarter ~~2022~~2023 10-Q

Page 1011

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


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Investment income:	Investment income:							Investment income:
Interest	Interest		$	123		$	118	Interest		$	140	$	123
Dividends	Dividends		65			58		Dividends		66		65
Other	Other		1			2		Other		7		1
Total	Total		189			178		Total		213		189
Less investment expenses	Less investment expenses		4			4		Less investment expenses		3		4
Total	Total		$	185		$	174	Total		$	210	$	185

Investment gains and losses, net:	Investment gains and losses, net:							Investment gains and losses, net:
Equity securities:	Equity securities:							Equity securities:
Investment gains and losses on securities sold, net	Investment gains and losses on securities sold, net		$	8		$	4	Investment gains and losses on securities sold, net		$	(1)	$	8
Unrealized gains and losses on securities still held, net	Unrealized gains and losses on securities still held, net		(683)			487		Unrealized gains and losses on securities still held, net		106		(683)

Subtotal	Subtotal		(675)			491		Subtotal		105		(675)
Fixed maturities:
Fixed-maturity securities:								Fixed-maturity securities:
Gross realized gains	Gross realized gains		4			3		Gross realized gains		1		4
Gross realized losses	Gross realized losses		(1)			—		Gross realized losses		(1)		(1)

Subtotal	Subtotal		3			3		Subtotal		—		3

Other	Other		6			10		Other		1		6

Total	Total		$	(666)		$	504	Total		$	106	$	(666)

The fair value of our equity portfolio was ~~$10.675~~$9.967 billion and ~~$11.315~~$9.841 billion at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively. ~~At March 31, 2022, and December 31, 2021,~~ Apple Inc. (Nasdaq:AAPL), an equity holding, was our largest single investment holding with a fair value of ~~$848~~$758 million and ~~$862~~$597 million, which was ~~8.3%~~7.9% and ~~7.9%~~6.3% of our publicly traded common equities portfolio and ~~3.7%~~3.3% and ~~3.5%~~2.7% of the total investment portfolio at March 31, 2023, and December 31, 2022, respectively.

AtThe allowance for credit losses was $1 million at both March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022. Changes in the allowance for credit losses ~~including changes in the amount during each period, was~~were less than $1 ~~million. During~~million for both the three months ended March 31, ~~2022, there was 1 fixed-maturity security that was written down to fair value due to an intention to be sold resulting in an impairment charge of less than $1 million.~~ ~~During the three months ended March 31, 2021, there~~2023 and 2022. There were no fixed-maturity securities that were written down to fair value due to an intention to be ~~sold.~~sold during the three months ended March 31, 2023. There was one fixed-maturity security that was written down to fair value due to an intention to be sold during the three months ended March 31, 2022, resulting in an impairment charge of less than $1 million.

~~At March 31, 2022, 1,377~~There were 2,900 fixed-maturity securities with a total unrealized loss of ~~$245~~$776 million, which were in an unrealized loss ~~position.~~position at March 31, 2023. Of that total, no ~~fixed-maturity securities~~ ~~had fair values below 70% of amortized cost. At December 31, 2021, 278 fixed-maturity securities with a total unrealized loss of $16 million were in an unrealized loss position. Of that total, no~~26 fixed-maturity securities had fair values below 70% of amortized cost.

There were 3,272 fixed-maturity securities with a total unrealized loss of $908 million, which were in an unrealized loss position at December 31, 2022. Of that total, 49 fixed-maturity securities had fair values below 70% of amortized cost.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 1112

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, ~~2021,~~2022, and ultimately management determines fair value. See our ~~2021~~2022 Annual Report on Form 10-K, Item 8, Note 3, Fair Value Measurements, Page 137, 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 March 31, ~~2022,~~2023, and December 31, ~~2021.~~2022. We do not have any liabilities carried at fair value.


(Dollars in millions)	(Dollars in millions)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total		(Dollars in millions)	Level 1			Level 2			Level 3				Total
At March 31, 2022
At March 31, 2023										At March 31, 2023	Level 1			Level 2			Level 3				Total
Fixed maturities, available for sale:	Fixed maturities, available for sale:																			Fixed maturities, available for sale:
Corporate	Corporate	$	—	$	7,149	$	—	$	7,149	Corporate		$	—		$	7,091		$	—				$	7,091
States, municipalities and political subdivisions	States, municipalities and political subdivisions	—		4,810		—		4,810		States, municipalities and political subdivisions	—			4,749			—					4,749
Government-sponsored enterprises										Government-sponsored enterprises	—			387			—				387
Commercial mortgage-backed	Commercial mortgage-backed	—		266		—		266		Commercial mortgage-backed	—			225			—				225
United States government	United States government	112		—		—		112		United States government	195			—			—				195
Foreign government	Foreign government	—		25		—		25		Foreign government	—			31			—				31
Government-sponsored enterprises		—		14		—		14

Subtotal	Subtotal	112		12,264		—		12,376		Subtotal	195			12,483			—				12,678
Common equities	Common equities	10,245		—		—		10,245		Common equities	9,589			—			—				9,589
Nonredeemable preferred equities	Nonredeemable preferred equities	—		430		—		430		Nonredeemable preferred equities	—			378			—				378

Separate accounts taxable fixed maturities	Separate accounts taxable fixed maturities	—		887		—		887		Separate accounts taxable fixed maturities	—			836			—				836
Top Hat savings plan mutual funds and common equity (included in Other assets)	Top Hat savings plan mutual funds and common equity (included in Other assets)	70		—		—		70		Top Hat savings plan mutual funds and common equity (included in Other assets)	64			—			—				64
Total	Total	$	10,427	$	13,581	$	—	$	24,008	Total	$	9,848		$	13,697		$	—			$	23,545

At December 31, 2021
At December 31, 2022										At December 31, 2022
Fixed maturities, available for sale:	Fixed maturities, available for sale:									Fixed maturities, available for sale:
Corporate	Corporate	$	—	$	7,497	$	—	$	7,497	Corporate	$	—		$	6,869		$	—			$	6,869
States, municipalities and political subdivisions	States, municipalities and political subdivisions	—		5,095		—		5,095		States, municipalities and political subdivisions	—			4,622			—				4,622
Government-sponsored enterprises										Government-sponsored enterprises	—			183			—				183
Commercial mortgage-backed	Commercial mortgage-backed	—		273		—		273		Commercial mortgage-backed	—			234			—				234
United States government	United States government	123		—		—		123		United States government	191			—			—				191
Foreign government	Foreign government	—		26		—		26		Foreign government	—			33			—				33
Government-sponsored enterprises		—		8		—		8

Subtotal	Subtotal	123		12,899		—		13,022		Subtotal	191			11,941			—				12,132
Common equities	Common equities	10,862		—		—		10,862		Common equities	9,454			—			—				9,454
Nonredeemable preferred equities	Nonredeemable preferred equities	—		453		—		453		Nonredeemable preferred equities	—			387			—				387
Separate accounts taxable fixed maturities	Separate accounts taxable fixed maturities	—		948		—		948		Separate accounts taxable fixed maturities	—			815			—				815
Top Hat savings plan mutual funds and common equity (included in Other assets)	Top Hat savings plan mutual funds and common equity (included in Other assets)	64		—		—		64		Top Hat savings plan mutual funds and common equity (included in Other assets)	57			—			—				57
Total	Total	$	11,049	$	14,300	$	—	$	25,349	Total	$	9,702		$	13,143		$	—			$	22,845

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 12~~

We also held Level 1 cash and cash equivalents of ~~$987~~$955 million and ~~$1.139~~$1.264 billion at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 13

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)	(Dollars in millions)					Book value								Principal amount						(Dollars in millions)						Book value				Principal amount
Interest rate	Interest rate	Year of issue				March 31,				December 31,				March 31,				December 31,		Interest rate			Year of issue			March 31,		December 31,		March 31,		December 31,
					2022			2021				2022				2021									2023	2022		2023		2022
6.900%	6.900%		1998		Senior debentures, due 2028			$	27			$	27			$	28				$	28		6.900%	1998	Senior debentures, due 2028		$	27	$	27	$	28	$	28
6.920%	6.920%	2005		Senior debentures, due 2028		391				391				391				391		6.920%			2005		Senior debentures, due 2028	391		391		391		391
6.125%	6.125%	2004		Senior notes, due 2034		371				371				374				374		6.125%			2004		Senior notes, due 2034	371		371		374		374
Total	Total					$	789			$	789			$	793			$	793	Total						$	789	$	789	$	793	$	793

The following table shows fair values of our note payable and long-term debt:


(Dollars in millions)	(Dollars in millions)	Quoted prices in active markets for identical assets (Level 1)				Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)				Total		(Dollars in millions)			Level 1		Level 2				Level 3			Total
At March 31, 2022
At March 31, 2023														At March 31, 2023			Level 1		Level 2				Level 3			Total
Note payable	Note payable			$	—					$	49				$	—					$	49			Note payable
6.900% senior debentures, due 2028	6.900% senior debentures, due 2028	—				32		—				32		6.900% senior debentures, due 2028			—			30				—				30
6.920% senior debentures, due 2028	6.920% senior debentures, due 2028	—				466		—				466		6.920% senior debentures, due 2028			—		435				—				435
6.125% senior notes, due 2034	6.125% senior notes, due 2034	—				462		—				462		6.125% senior notes, due 2034			—		408				—			408
Total	Total	$	—			$	1,009	$	—			$	1,009	Total			$	—	$	923			$	—		$	923

At December 31, 2021
At December 31, 2022														At December 31, 2022
Note payable	Note payable	$	—			$	54	$	—			$	54	Note payable			$	—	$	50			$	—		$	50
6.900% senior debentures, due 2028	6.900% senior debentures, due 2028	—				34		—				34		6.900% senior debentures, due 2028			—		29				—			29
6.920% senior debentures, due 2028	6.920% senior debentures, due 2028	—				501		—				501		6.920% senior debentures, due 2028			—		418				—			418
6.125% senior notes, due 2034	6.125% senior notes, due 2034	—				510		—				510		6.125% senior notes, due 2034			—		388				—			388
Total	Total	$	—			$	1,099	$	—			$	1,099	Total			$	—	$	885			$	—		$	885

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 13~~

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)	(Dollars in millions)	Quoted prices in active markets for identical assets (Level 1)				Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)				Total		(Dollars in millions)			Level 1		Level 2				Level 3			Total
At March 31, 2022
At March 31, 2023														At March 31, 2023			Level 1		Level 2				Level 3			Total
Life policy loans	Life policy loans			$	—					$	��				$	40					$	40			Life policy loans

Deferred annuities	Deferred annuities	—				—		704				704		Deferred annuities			—			—				608				608
Structured settlements	Structured settlements	—				177		—				177		Structured settlements			—		144				—				144
Total	Total	$	—			$	177	$	704			$	881	Total			$	—	$	144			$	608		$	752

At December 31, 2021
At December 31, 2022														At December 31, 2022
Life policy loans	Life policy loans	$	—			$	—	$	44			$	44	Life policy loans			$	—	$	—			$	37		$	37

Deferred annuities	Deferred annuities	—				—		778				778		Deferred annuities			—		—				621			621
Structured settlements	Structured settlements	—				201		—				201		Structured settlements			—		143				—			143
Total	Total	$	—			$	201	$	778			$	979	Total			$	—	$	143			$	621		$	764

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 14

Outstanding principal and interest for these life policy loans totaled $30 million and $31 million at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively.

Recorded reserves for the deferred annuities were ~~$757~~$711 million and ~~$762~~$734 million at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively. Recorded reserves for the structured settlements were ~~$135~~$128 million and ~~$136~~$129 million at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 1415

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)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Gross loss and loss expense reserves, beginning of period	Gross loss and loss expense reserves, beginning of period		$	7,229		$	6,677	Gross loss and loss expense reserves, beginning of period		$	8,336	$	7,229
Less reinsurance recoverable	Less reinsurance recoverable		327			277		Less reinsurance recoverable		405		327
Net loss and loss expense reserves, beginning of period	Net loss and loss expense reserves, beginning of period		6,902			6,400		Net loss and loss expense reserves, beginning of period		7,931		6,902

Net incurred loss and loss expenses related to:	Net incurred loss and loss expenses related to:							Net incurred loss and loss expenses related to:
Current accident year	Current accident year		997			1,033		Current accident year		1,376		997
Prior accident years	Prior accident years		(41)			(110)		Prior accident years		(59)		(41)
Total incurred	Total incurred		956			923		Total incurred		1,317		956
Net paid loss and loss expenses related to:	Net paid loss and loss expenses related to:							Net paid loss and loss expenses related to:
Current accident year	Current accident year		169			143		Current accident year		187		169
Prior accident years	Prior accident years		721			562		Prior accident years		859		721
Total paid	Total paid		890			705		Total paid		1,046		890
Net loss and loss expense reserves, end of period	Net loss and loss expense reserves, end of period		6,968			6,618		Net loss and loss expense reserves, end of period		8,202		6,968
Plus reinsurance recoverable	Plus reinsurance recoverable		319			262		Plus reinsurance recoverable		424		319
Gross loss and loss expense reserves, end of period	Gross loss and loss expense reserves, end of period		$	7,287		$	6,880	Gross loss and loss expense reserves, end of period		$	8,626	$	7,287

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 $67 million at March 31, 2023, and $79 million at March 31, 2022, ~~and $70 million at March 31, 2021,~~ for certain life and health loss and loss expense reserves.

~~For~~We experienced $59 million of favorable development on prior accident years, including $32 million of favorable development in commercial lines, $31 million of favorable development in personal lines and $9 million of favorable development in excess and surplus lines for the three months ended March 31, ~~2022,~~2023. Within commercial lines, we recognized favorable reserve development of $16 million for the commercial property line and $15 million for the workers' compensation 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 $27 million for the homeowner line.

We experienced $41 million of favorable development on prior accident years, including $18 million of favorable development in commercial lines, $34 million of favorable development in personal lines and $5 million of favorable development in excess and surplus ~~lines.~~lines for the three months ended March 31, 2022. Within commercial lines, we recognized favorable reserve development of $10 million for the workers' compensation line and $6 million for the commercial auto 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 $31 million for the homeowner line.

For the three months ended March 31, 2021, we experienced $110 million of favorable development on prior accident years, including $83 million of favorable development in commercial lines, $20 million of favorable development in personal lines and $4 million of unfavorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $25 million for the workers' compensation line, $24 million for the commercial auto 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. Within personal lines, we recognized favorable reserve development of $15 million in personal auto.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 1516

NOTE 5 – Life Policy and Investment Contract Reserves

In the first quarter of 2023, we adopted ASU 2018-12 which resulted in changes to the life policy and investment contract reserves and the expansion of required disclosures. The below disclosures represent application of the updated guidance. See Note 1, Accounting Policies, for further discussion.

We establish the reserves for traditional life ~~insurance~~ policies including term, whole life and other products based on certain cash flow assumptions including expected expenses, mortality, morbidity, withdrawal rates and timing of claim ~~presentation and investment yields, including a provision for uncertainty. Once these~~presentation. These assumptions are established based on our current expectations and are reviewed annually to determine any necessary updates. Assumptions are also updated on an interim basis if evidence suggests that they ~~generally are maintained throughout the lives of the contracts.~~should be revised. We use both our own experience and industry experience, adjusted for historical trends, in arriving at our assumptions for expected mortality, morbidity and withdrawal rates. These reserves also include a discount rate assumption that is based on market value discount rates ~~as well as for expected expenses. We base our~~and is updated quarterly. Changes in the inputs, judgments and assumptions ~~for expected investment income~~during the period and the related measurement impact on ~~our own experience adjusted for current and future economic conditions.~~the liability are reflected in the below tables. There were no significant changes in the cash flow assumptions during the period.

We establish reserves for the company's deferred annuity, universal life and structured settlement policies 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.

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


(Dollars in millions)	(Dollars in millions)	March 31, 2022		December 31, 2021		(Dollars in millions)	March 31, 2023		December 31, 2022
Life policy reserves:	Life policy reserves:					Life policy reserves:
Ordinary/traditional life		$	1,395	$	1,376
Term						Term	$	1,011	$	961
Whole life						Whole life	427		408
Other	Other	52		52		Other	94		94
Subtotal	Subtotal	1,447		1,428		Subtotal	1,532		1,463
Investment contract reserves:	Investment contract reserves:					Investment contract reserves:
Deferred annuities	Deferred annuities	757		762		Deferred annuities	711		734
Universal life	Universal life	680		679		Universal life	583		578
Structured settlements	Structured settlements	135		136		Structured settlements	128		129
Other	Other	8		9		Other	105		111
Subtotal	Subtotal	1,580		1,586		Subtotal	1,527		1,552
Total life policy and investment contract reserves	Total life policy and investment contract reserves	$	3,027	$	3,014	Total life policy and investment contract reserves	$	3,059	$	3,015

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 1617

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


(Dollars in millions)	Term		Whole life		Deferred annuity		Universal life		Other		Total
At January 1, 2021
Balance, pre-adoption at December 31, 2020	$	901	$	363	$	761	$	567	$	323	$	2,915
Removal of shadow adjustments	—		—		—		—		13		13
Net premiums in excess of gross premiums	14		1		—		—		—		15
Remeasurement at market value discount rates	372		245		—		—		—		617
Balance, post-adoption at January 1, 2021	$	1,287	$	609	$	761	$	567	$	336	$	3,560

The table below shows the ASU 2018-12 adoption impacts to the life reinsurance recoverable asset as of January 1, 2021, pre-tax:


(Dollars in millions)	Term		Whole life		Deferred annuity		Universal life		Other		Total
At January 1, 2021
Balance, pre-adoption at December 31, 2020	$	113	$	26	$	—	$	—	$	78	$	217
Remeasurement at market value discount rates	29		18		—		—		—		47
Other adjustments	20		1		—		2		—		23
Balance, post-adoption at January 1, 2021	$	162	$	45	$	—	$	2	$	78	$	287

Other above includes structured settlements, other life policy reserves and other investment contract reserves. The removal of shadow adjustments above represents an increase to the life policy and investment contract reserve balance as it is no longer required under ASU 2018-12 for liabilities amortized in accordance with deferred acquisition costs. Shadow adjustments were historically included to present the carrying amount of the liability as if unrealized holding gains and losses had been realized. The net premiums in excess of gross premiums adjustment represents an increase to the liability as the remeasured net premiums, calculated as the present value of future benefits and related expenses using updated cash flow assumptions as of the transition date less the carrying amount of the liability prior to transition, exceeded the present value of future gross premiums. For purposes of calculating the updated present value of future benefits and related expenses above, the discount rate assumption that was used prior to adoption of ASU 2018-12 was retained. The remeasurement at market value discount rates adjustment represents the increase to the liability as a result of updating the discount rate assumption for our term and whole life products from the rates used prior to adoption of ASU 2018-12 to market value discount rates that existed at the transition date. As the discount rate assumption decreased significantly from the date the contracts were initially made, this adjustment represents the largest impact on the liability as a result of the initial adoption of ASU 2018-12. The life reinsurance recoverable asset is included in the remeasurement as the assumptions used in estimating the life reinsurance recoverable are consistent with those used in estimating the related liabilities. Other adjustments includes a reclassification from prepaid reinsurance premiums to reinsurance recoverable.

The shadow removal and remeasurement at market value discount rates adjustments were recorded as an increase to the life policy and investment contract reserves liability and a decrease to opening AOCI as of the transition date. The net premiums in excess of gross premiums adjustment was recorded as an increase to the life policy and investment contract reserves liability and a decrease to the opening balance of retained earnings as of the transition date.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 18

The following table shows the balances and changes in the term and whole life policy reserves included in life policy and investment contract reserves:


(Dollars in millions)	Three months ended March 31,
	2023				2022
	Term		Whole life		Term		Whole life
Present value of expected net premiums:
Balance, beginning of period	$	1,643	$	208	$	1,801	$	241
Beginning balance at original discount rate	1,708		217		1,503		201
Effect of changes in cash flow assumptions	—		—		(4)		—
Effect of actual variances from expected experience	(3)		1		11		—
Adjusted beginning of period balance	1,705		218		1,510		201
Issuances	38		7		59		11
Interest accrual	18		2		15		2
Net premiums collected	(46)		(7)		(42)		(7)
Ending balance at original discount rate	1,715		220		1,542		207
Effect of changes in discount rate assumptions	(16)		(3)		144		19
Balance, end of period	1,699		217		1,686		226

Present value of expected future policy benefits:
Balance, beginning of period	2,584		614		2,993		826
Beginning balance at original discount rate	2,692		607		2,425		577
Effect of changes in cash flow assumptions	—		—		(4)		—
Effect of actual variances from expected experience	(2)		1		18		—
Adjusted beginning of period balance	2,690		608		2,439		577
Issuances	38		6		59		11
Interest accrual	30		8		27		7
Benefits paid	(46)		(8)		(62)		(9)
Ending balance at original discount rate	2,712		614		2,463		586
Effect of changes in discount rate assumptions	(21)		30		282		150
Balance, end of period	2,691		644		2,745		736

Net liability for future policy benefits:
Present value of expected future policy benefits less expected net premiums	992		427		1,059		510
Impact of flooring at cohort level	19		—		20		—
Net life policy reserves	1,011		427		1,079		510
Less reinsurance recoverable at original discount rate	(96)		(25)		(100)		(27)
Less effect of discount rate assumption changes on reinsurance recoverable	(10)		(6)		(14)		(11)
Net life policy reserves, after reinsurance recoverable	$	905	$	396	$	965	$	472

Weighted-average duration of the net life policy reserves	12		16		12		18

The total impact of flooring at cohort level in the above table includes the effect of discount rate assumption changes of $5 million and $6 million for the three months ended March 31, 2023 and 2022, respectively.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 19

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 March 31,
	2023				2022
	Undiscounted		Discounted		Undiscounted		Discounted
Term
Expected future benefit payments	$	4,696	$	2,691	$	4,128	$	2,745
Expected future gross premiums	4,470		2,674		4,000		2,754
Whole life
Expected future benefit payments	$	1,586	$	644	$	1,511	$	736
Expected future gross premiums	618		384		580		400

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 March 31,
	2023		2022
Gross premiums
Term	$	73	$	69
Whole life	12		12

Total	$	85	$	81
Interest accretion
Term	$	12	$	12
Whole life	6		5

Total	$	18	$	17

Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums was immaterial for the three months ended March 31, 2023.

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


	At March 31,
	2023		2022
Term
Interest accretion rate	5.32	%	5.37	%
Current discount rate	4.81		3.40
Whole life
Interest accretion rate	5.94	%	5.98	%
Current discount rate	5.06		3.77

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 20

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


(Dollars in millions)	Three months ended March 31,
	2023						2022
	Deferred annuity			Universal life			Deferred annuity			Universal life
Balance, beginning of period	$	734		$	457		$	763		$	454
Premiums received	10			11			6			11
Policy charges	—			(10)			—			(10)
Surrenders and withdrawals	(36)			(3)			(12)			(3)
Benefit payments	(3)			(2)			(6)			(1)
Interest credited	6			5			5			5

Balance, end of period	$	711		$	458		$	756		$	456

Weighted average crediting rate	3.36		%	4.26		%	2.95		%	4.25		%
Net amount at risk	$	—		$	4,064		$	—		$	4,172
Cash surrender value	706			424			752			421

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 March 31, 2023
Deferred annuity
1.00-3.00%	$	9	$	423	$	17	$	212	661
3.01-4.00%	50		—		—		—		50

Total	$	59	$	423	$	17	$	212	$	711
Universal life
1.00-3.00%	$	60	$	47	$	9	$	2	$	118
3.01-4.00%	53		—		—		—		53
Greater than 4.00%	287		—		—		—		287
Total	$	400	$	47	$	9	$	2	$	458

At March 31, 2022
Deferred annuity
1.00-3.00%	$	479	$	—	$	177	$	50	$	706
3.01-4.00%	50		—		—		—		50

Total	$	529	$	—	$	177	$	50	$	756
Universal life
1.00-3.00%	$	61	$	44	$	7	$	1	$	113
3.01-4.00%	51		—		—		—		51
Greater than 4.00%	292		—		—		—		292
Total	$	404	$	44	$	7	$	1	$	456

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 21

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 March 31,
	2023		2022
Balance, beginning of period	$	121	$	133

Balance, beginning of period before shadow reserve adjustments	123		131
Effect of changes in cash flow assumptions	—		—
Effect of actual variances from expected experience	(1)		3
Adjusted beginning of period balance	122		134
Interest accrual	1		1
Excess death benefits	—		(8)
Attributed assessments	3		3
Effect of changes in interest rate assumptions	1		(3)
Balance, end of period before shadow reserve adjustments	127		127
Shadow reserve adjustments	(2)		—
Balance, end of period	125		127
Less reinsurance recoverable, end of period	6		5

Net other additional liability, after reinsurance recoverable	$	131	$	132

Weighted-average duration of the other additional liability	34		35

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


(Dollars in millions)	Three months ended March 31,
	2023		2022
Balance, beginning of period	$	892	$	959
Interest credited before policy charges	10		10
Change in unrealized gains and losses impacting separate account liabilities	—		(52)
Benefit payments	(2)		(10)




Other	(1)		(4)
Balance, end of period	$	899	$	903

Cash surrender value	$	896	$	869

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 22

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, and~~experience. For property casualty, we evaluate the costs for recoverability. The adoption of ASU 2018-12 on January 1, 2023 resulted in a simplified amortization of life deferred acquisition costs and the removal of shadow deferred acquisition costs. See Note 1, Accounting Policies, for further discussion. The table below shows the deferred policy acquisition costs and asset reconciliation.


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Property casualty:	Property casualty:							Property casualty:
Deferred policy acquisition costs asset, beginning of period	Deferred policy acquisition costs asset, beginning of period		$	602		$	542	Deferred policy acquisition costs asset, beginning of period		$	682	$	602
Capitalized deferred policy acquisition costs	Capitalized deferred policy acquisition costs		364			312		Capitalized deferred policy acquisition costs		372		364
Amortized deferred policy acquisition costs	Amortized deferred policy acquisition costs		(301)			(268)		Amortized deferred policy acquisition costs		(340)		(301)
Deferred policy acquisition costs asset, end of period	Deferred policy acquisition costs asset, end of period		$	665		$	586	Deferred policy acquisition costs asset, end of period		$	714	$	665

Life:	Life:							Life:
Deferred policy acquisition costs asset, beginning of period	Deferred policy acquisition costs asset, beginning of period		$	303		$	263	Deferred policy acquisition costs asset, beginning of period		$	331	$	314
Capitalized deferred policy acquisition costs	Capitalized deferred policy acquisition costs		15			14		Capitalized deferred policy acquisition costs		11		12
Amortized deferred policy acquisition costs	Amortized deferred policy acquisition costs		(10)			(9)		Amortized deferred policy acquisition costs		(8)		(7)
Shadow deferred policy acquisition costs			6			26

Deferred policy acquisition costs asset, end of period	Deferred policy acquisition costs asset, end of period		$	314		$	294	Deferred policy acquisition costs asset, end of period		$	334	$	319

Consolidated:	Consolidated:							Consolidated:
Deferred policy acquisition costs asset, beginning of period	Deferred policy acquisition costs asset, beginning of period		$	905		$	805	Deferred policy acquisition costs asset, beginning of period		$	1,013	$	916
Capitalized deferred policy acquisition costs	Capitalized deferred policy acquisition costs		379			326		Capitalized deferred policy acquisition costs		383		376
Amortized deferred policy acquisition costs	Amortized deferred policy acquisition costs		(311)			(277)		Amortized deferred policy acquisition costs		(348)		(308)
Shadow deferred policy acquisition costs			6			26

Deferred policy acquisition costs asset, end of period	Deferred policy acquisition costs asset, end of period		$	979		$	880	Deferred policy acquisition costs asset, end of period		$	1,048	$	984

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

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


(Dollars in millions)
Three months ended March 31, 2023	Term		Whole life		Deferred annuity		Universal life		Total
Balance, beginning of period	$	228	$	43	$	7	$	53	$	331
Capitalized deferred policy acquisition costs	9		2		—		—		11
Amortized deferred policy acquisition costs	(6)		(1)		—		(1)		(8)
Balance, end of period	$	231	$	44	$	7	$	52	$	334

Three months ended March 31, 2022
Balance, beginning of period	$	215	$	38	$	7	$	54	$	314
Capitalized deferred policy acquisition costs	10		2		—		—		$	12
Amortized deferred policy acquisition costs	(5)		(1)		—		(1)		$	(7)
Balance, end of period	$	220	$	39	$	7	$	53	$	319

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

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 1723

NOTE 7 – Accumulated Other Comprehensive Income

The adoption of ASU 2018-12 on January 1, 2023 resulted in restatement of certain amounts below. See Note 1, Accounting Policies, for further discussion. Accumulated other comprehensive income (AOCI) includes changes in unrealized gains and losses on investments, changes in pension obligations and changes in life ~~deferred acquisition costs, life~~ policy reserves, reinsurance recoverable and other as follows:


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,												(Dollars in millions)	Three months ended March 31,
		2022						2021							2023						2022
		Before tax		Income tax		Net		Before tax		Income tax		Net			Before tax		Income tax		Net		Before tax		Income tax		Net
Investments:	Investments:													Investments:
AOCI, beginning of period	AOCI, beginning of period	$	792	$	165	$	627	$	1,026	$	215	$	811	AOCI, beginning of period	$	(847)	$	(182)	$	(665)	$	792	$	165	$	627

OCI before investment gains and losses, net, recognized in net income	OCI before investment gains and losses, net, recognized in net income	(743)		(157)		(586)		(193)		(41)		(152)		OCI before investment gains and losses, net, recognized in net income	163		35		128		(743)		(157)		(586)
Investment gains and losses, net, recognized in net income	Investment gains and losses, net, recognized in net income	(3)		—		(3)		(3)		—		(3)		Investment gains and losses, net, recognized in net income	—		—		—		(3)		—		(3)
OCI	OCI	(746)		(157)		(589)		(196)		(41)		(155)		OCI	163		35		128		(746)		(157)		(589)
AOCI, end of period	AOCI, end of period	$	46	$	8	$	38	$	830	$	174	$	656	AOCI, end of period	$	(684)	$	(147)	$	(537)	$	46	$	8	$	38

Pension obligations:	Pension obligations:													Pension obligations:
AOCI, beginning of period	AOCI, beginning of period	$	27	$	7	$	20	$	(41)	$	(7)	$	(34)	AOCI, beginning of period	$	36	$	9	$	27	$	27	$	7	$	20
OCI excluding amortization recognized in net income	OCI excluding amortization recognized in net income	—		—		—		2		1		1		OCI excluding amortization recognized in net income	(5)		(1)		(4)		—		—		—
Amortization recognized in net income	Amortization recognized in net income	—		—		—		2		—		2		Amortization recognized in net income	(1)		—		(1)		—		—		—
OCI	OCI	—		—		—		4		1		3		OCI	(6)		(1)		(5)		—		—		—
AOCI, end of period	AOCI, end of period	$	27	$	7	$	20	$	(37)	$	(6)	$	(31)	AOCI, end of period	$	30	$	8	$	22	$	27	$	7	$	20

Life deferred acquisition costs, life policy reserves and other:
Life policy reserves, reinsurance recoverable and other:														Life policy reserves, reinsurance recoverable and other:
AOCI, beginning of period	AOCI, beginning of period	$	1	$	—	$	1	$	(10)	$	(2)	$	(8)	AOCI, beginning of period	$	29	$	5	$	24	$	1	$	—	$	1
Cumulative effect of change in accounting for long duration insurance contracts														Cumulative effect of change in accounting for long duration insurance contracts	—		—		—		(445)		(93)		(352)
Adjusted AOCI, beginning of period														Adjusted AOCI, beginning of period	29		5		24		(444)		(93)		(351)
OCI before investment gains and losses, net, recognized in net income	OCI before investment gains and losses, net, recognized in net income	—		—		—		10		2		8		OCI before investment gains and losses, net, recognized in net income	(45)		(9)		(36)		196		41		155
Investment gains and losses, net, recognized in net income	Investment gains and losses, net, recognized in net income	—		—		—		—		—		—		Investment gains and losses, net, recognized in net income	—		—		—		—		—		—
OCI	OCI	—		—		—		10		2		8		OCI	(45)		(9)		(36)		196		41		155
AOCI, end of period	AOCI, end of period	$	1	$	—	$	1	$	—	$	—	$	—	AOCI, end of period	$	(16)	$	(4)	$	(12)	$	(248)	$	(52)	$	(196)

Summary of AOCI:	Summary of AOCI:													Summary of AOCI:
AOCI, beginning of period	AOCI, beginning of period	$	820	$	172	$	648	$	975	$	206	$	769	AOCI, beginning of period	$	(782)	$	(168)	$	(614)	$	820	$	172	$	648

Cumulative effect of change in accounting for long duration insurance contracts														Cumulative effect of change in accounting for long duration insurance contracts	—		—		—		(445)		(93)		(352)
Adjusted AOCI, beginning of period														Adjusted AOCI, beginning of period	(782)		(168)		(614)		375		79		296
Investments OCI	Investments OCI	(746)		(157)		(589)		(196)		(41)		(155)		Investments OCI	163		35		128		(746)		(157)		(589)
Pension obligations OCI	Pension obligations OCI	—		—		—		4		1		3		Pension obligations OCI	(6)		(1)		(5)		—		—		—
Life deferred acquisition costs, life policy reserves and other OCI		—		—		—		10		2		8
Life policy reserves, reinsurance recoverable and other OCI														Life policy reserves, reinsurance recoverable and other OCI	(45)		(9)		(36)		196		41		155
Total OCI	Total OCI	(746)		(157)		(589)		(182)		(38)		(144)		Total OCI	112		25		87		(550)		(116)		(434)
AOCI, end of period	AOCI, end of period	$	74	$	15	$	59	$	793	$	168	$	625	AOCI, end of period	$	(670)	$	(143)	$	(527)	$	(175)	$	(37)	$	(138)

Investment gains and losses, net, ~~and life deferred acquisition costs, life policy reserves~~ and other investment gains and losses, net, are recorded in the investment gains and losses, net, line item in the condensed consolidated statements of income. Amortization on pension obligations is recorded in the insurance losses and contract holders' benefits and underwriting, acquisition and insurance expenses line items in the condensed consolidated statements of income.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 1824

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 ~~catastrophe bonds 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)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Direct written premiums	Direct written premiums		$	1,703		$	1,545	Direct written premiums		$	1,859	$	1,703
Assumed written premiums	Assumed written premiums		263			205		Assumed written premiums		244		263
Ceded written premiums	Ceded written premiums		(67)			(57)		Ceded written premiums		(84)		(67)
Net written premiums	Net written premiums		$	1,899		$	1,693	Net written premiums		$	2,019	$	1,899

Direct earned premiums	Direct earned premiums		$	1,561		$	1,429	Direct earned premiums		$	1,760	$	1,561
Assumed earned premiums	Assumed earned premiums		121			101		Assumed earned premiums		159		121
Ceded earned premiums	Ceded earned premiums		(64)			(55)		Ceded earned premiums		(78)		(64)
Earned premiums	Earned premiums		$	1,618		$	1,475	Earned premiums		$	1,841	$	1,618

Direct incurred loss and loss expenses	Direct incurred loss and loss expenses		$	895		$	868	Direct incurred loss and loss expenses		$	1,299	$	895
Assumed incurred loss and loss expenses	Assumed incurred loss and loss expenses		73			78		Assumed incurred loss and loss expenses		76		73
Ceded incurred loss and loss expenses	Ceded incurred loss and loss expenses		(12)			(23)		Ceded incurred loss and loss expenses		(58)		(12)
Incurred loss and loss expenses	Incurred loss and loss expenses		$	956		$	923	Incurred loss and loss expenses		$	1,317	$	956

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 First-Quarter ~~2022~~2023 10-Q

Page 1925

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


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Direct earned premiums	Direct earned premiums		$	90		$	87	Direct earned premiums		$	96	$	93

Ceded earned premiums	Ceded earned premiums		(18)			(18)		Ceded earned premiums		(19)		(18)
Earned premiums	Earned premiums		$	72		$	69	Earned premiums		$	77	$	75

Direct contract holders' benefits incurred	Direct contract holders' benefits incurred		114			107		Direct contract holders' benefits incurred		97		103

Ceded contract holders' benefits incurred	Ceded contract holders' benefits incurred		(31)			(27)		Ceded contract holders' benefits incurred		(16)		(27)
Contract holders' benefits incurred	Contract holders' benefits incurred		$	83		$	80	Contract holders' benefits incurred		$	81	$	76

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

~~At March 31, 2022, and December 31, 2021, the~~The allowance for uncollectible property casualty premiums was ~~$14 million. At~~$13 million at both March 31, ~~2022,~~2023, and December 31, ~~2021, the~~2022. The allowances for credit losses on other premiums receivable and reinsurance recoverable assets were ~~immaterial.~~immaterial at March 31, 2023, and December 31, 2022.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 2026

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)	(Dollars in millions)	Three months ended March 31,				(Dollars in millions)					Three months ended March 31,
			2022	2021											2023	2022
Tax at statutory rate:	Tax at statutory rate:			$	(76)		21.0	%	$	161		21.0	%	Tax at statutory rate:			$	56	21.0	%	$	(74)	21.0	%
Increase (decrease) resulting from:	Increase (decrease) resulting from:													Increase (decrease) resulting from:
Tax-exempt income from municipal bonds	Tax-exempt income from municipal bonds			(5)			1.4		(5)			(0.7)		Tax-exempt income from municipal bonds			(5)		(1.9)		(5)		1.4
Dividend received exclusion	Dividend received exclusion			(5)			1.4		(5)			(0.7)		Dividend received exclusion			(5)		(1.9)		(5)		1.4

Other	Other			(1)			0.4		(3)			(0.3)		Other			(3)		(1.2)		(1)		0.4
Provision (benefit) for income taxes	Provision (benefit) for income taxes			$	(87)		24.2	%	$	148		19.3	%	Provision (benefit) for income taxes			$	43	16.0	%	$	(85)	24.2	%

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 will be realized. As a result, we have no valuation allowance for our U.S. domestic operations at March 31, ~~2022,~~2023, and December 31, ~~2021.~~2022. As more fully discussed below, we do carry a valuation allowance on the deferred tax assets related to Cincinnati Global Underwriting Ltd.SM (Cincinnati Global).

~~Unrecognized Tax Benefits~~

At March 31, 2022, and December 31, 2021, we had a gross unrecognized tax benefit of $34 million. There were no changes to this amount during the first quarter of 2022. It is reasonably possible that within the next 12 months, our unrecognized tax benefit could change when the IRS completes its examination of the tax year ended December 31, 2018.

Cincinnati Global

As a result of operations for the three months ended March 31, ~~2022,~~2023, Cincinnati Global decreased its net deferred tax assets by $3$5 million with an ~~offsetting~~offsetting decrease of $3$5 million to the valuation allowance. ~~At March 31, 2022,~~ Cincinnati Global had a net deferred tax asset of ~~$50~~$26 million and an offsetting valuation allowance of ~~$50 million.~~$26 million at March 31, 2023.

Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized. After considering all positive and negative evidence, we continue to believe it is appropriate to carry a valuation allowance at March 31, ~~2022.~~2023.

~~At March 31, 2022, and December 31, 2021,~~ Cincinnati Global had operating loss carryforwards in the United States of $6 million and $8$5 million ~~respectively,~~ and in the United Kingdom of ~~$130~~$105 million ~~for both periods.~~and $109 million at March 31, 2023, and December 31, 2022, respectively. These Cincinnati Global losses can only be utilized within the Cincinnati Global group in both the United States and in the United Kingdom and cannot offset the income of our domestic operations in the United States.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 2127

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)	(In millions, except per share data)	Three months ended March 31,			(In millions, except per share data)				Three months ended March 31,
			2022			2021		(In millions, except per share data)		2023		2022
Numerator:	Numerator:
Net income (loss)—basic and diluted	Net income (loss)—basic and diluted		$	(273)		$	620	Net income (loss)—basic and diluted		$	225	$	(266)
Denominator:	Denominator:							Denominator:
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding		160.4			161.0		Basic weighted-average common shares outstanding		157.2		160.4
Effect of share-based awards:	Effect of share-based awards:							Effect of share-based awards:
Stock options	Stock options		—			0.9		Stock options		0.8		—
Nonvested shares	Nonvested shares		—			0.6		Nonvested shares		0.5		—
Diluted weighted-average shares	Diluted weighted-average shares		160.4			162.5		Diluted weighted-average shares		158.5		160.4
Earnings (loss) per share:	Earnings (loss) per share:							Earnings (loss) per share:
Basic	Basic		$	(1.70)		$	3.85	Basic		$	1.43	$	(1.66)
Diluted	Diluted		$	(1.70)		$	3.82	Diluted		$	1.42	$	(1.66)
Number of anti-dilutive share-based awards	Number of anti-dilutive share-based awards		2.3			1.0		Number of anti-dilutive share-based awards		1.0		2.3

The above table shows the number of anti-dilutive share-based awards for the three months ended March 31, 2023 and 2022. In accordance with Accounting Standards Codification 260, Earnings per Share, the assumed exercise of share-based awards ~~were~~was excluded from the computation of diluted loss per share for the three months ended March 31, ~~2022.~~2022, because their exercise would have anti-dilutive effects. See our ~~2021~~2022 Annual Report on Form 10-K, Item 8, Note 17, Share-Based Associate Compensation Plans, Page ~~169,~~170, for information about share-based awards. The above table shows the number of anti-dilutive share-based awards for the three months ended March 31, 2022 and 2021. These share-based awards were not included in the computation of net income (loss) per common share (diluted) because their exercise would have anti-dilutive effects.

NOTE 11 – Employee Retirement Benefits

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


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Service cost	Service cost		$	2		$	2	Service cost		$	1	$	2
Non-service (benefit) costs:	Non-service (benefit) costs:							Non-service (benefit) costs:
Interest cost	Interest cost		3			2		Interest cost		3		3
Expected return on plan assets	Expected return on plan assets		(6)			(5)		Expected return on plan assets		(5)		(6)
Amortization of actuarial loss and prior service cost	Amortization of actuarial loss and prior service cost		—			2		Amortization of actuarial loss and prior service cost		(1)		—
Other	Other		—			2		Other		(5)		—
Total non-service (benefit) cost			(3)			1
Net periodic (benefit) cost			$	(1)		$	3
Total non-service benefit								Total non-service benefit		(8)		(3)
Net periodic benefit								Net periodic benefit		$	(7)	$	(1)

See our ~~2021~~2022 Annual Report on Form 10-K, Item 8, Note 13, Employee Retirement Benefits, Page ~~162,~~163, for information on our retirement benefits. ~~Service costs and non-service costs (benefit) are~~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 ~~2022~~2023 and ~~2021.~~2022.

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 22~~

We made matching contributions totaling $8 ~~million and $6~~ million to our 401(k) and Top Hat savings plans during both the first quarter of ~~2022~~2023 and ~~2021, respectively.~~2022.

We made no contributions to our qualified pension plan during the first three months of ~~2022.~~2023.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 28

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 intends to continue to vigorously defend the lawsuits. 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 number of lawsuits that will be filed, 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. These lawsuits are at various stages of ~~litigation; many complaints~~litigation, including several that continue to be amended; ~~several~~many that have been ~~dismissed voluntarily and~~dismissed; several that may be refiled; and others that have been dismissed by trial courts and appealed. While ~~early~~ appellate decisions issued to date generally have been favorable for the insurance industry and the company, many remain to be decided. In some jurisdictions, many 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 astate or national ~~class.~~classes. Such proceedings have alleged, for example, ~~breach~~improper depreciation of ~~an alleged duty to search national databases to ascertain unreported deaths of insureds under life insurance policies.~~labor costs in repair estimates. The company’s insurance subsidiaries also are occasionally parties to individual actions in which extra-contractual damages,

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 23~~

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 First-Quarter 2023 10-Q

Page 29

On a quarterly basis, we review these outstanding matters. Under current accounting guidance, we establish accruals when it is probable that a 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 2two industries, property casualty insurance and life insurance. Our chief operating decision maker 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 ~~2021~~2022 Annual Report on Form 10-K, Item 8, Note 18, Segment Information, Page ~~172,~~173, for a description of revenue, income or loss before income taxes and identifiable assets for each of the 5five segments.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 2430

Segment information is summarized in the following table:


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Revenues:	Revenues:							Revenues:
Commercial lines insurance	Commercial lines insurance							Commercial lines insurance
Commercial casualty	Commercial casualty		$	336		$	303	Commercial casualty		$	377	$	336
Commercial property	Commercial property		274			253		Commercial property		299		274
Commercial auto	Commercial auto		205			193		Commercial auto		213		205
Workers' compensation	Workers' compensation		67			67		Workers' compensation		74		67
Other commercial	Other commercial		80			70		Other commercial		93		80
Commercial lines insurance premiums	Commercial lines insurance premiums		962			886		Commercial lines insurance premiums		1,056		962
Fee revenues	Fee revenues		1			1		Fee revenues		1		1
Total commercial lines insurance	Total commercial lines insurance		963			887		Total commercial lines insurance		1,057		963

Personal lines insurance	Personal lines insurance							Personal lines insurance
Personal auto	Personal auto		152			152		Personal auto		166		152
Homeowner	Homeowner		195			174		Homeowner		232		195
Other personal	Other personal		55			50		Other personal		66		55
Personal lines insurance premiums	Personal lines insurance premiums		402			376		Personal lines insurance premiums		464		402
Fee revenues	Fee revenues		1			1		Fee revenues		1		1
Total personal lines insurance	Total personal lines insurance		403			377		Total personal lines insurance		465		403

Excess and surplus lines insurance	Excess and surplus lines insurance		112			89		Excess and surplus lines insurance		127		112
Fee revenues	Fee revenues		1			—		Fee revenues		—		1
Total excess and surplus lines insurance	Total excess and surplus lines insurance		113			89		Total excess and surplus lines insurance		127		113

Life insurance premiums	Life insurance premiums		72			69		Life insurance premiums		77		75
Fee revenues	Fee revenues		1			1		Fee revenues		2		1
Total life insurance	Total life insurance		73			70		Total life insurance		79		76

Investments	Investments							Investments
Investment income, net of expenses	Investment income, net of expenses		185			174		Investment income, net of expenses		210		185
Investment gains and losses, net	Investment gains and losses, net		(666)			504		Investment gains and losses, net		106		(666)
Total investment revenue	Total investment revenue		(481)			678		Total investment revenue		316		(481)

Other	Other							Other
Premiums	Premiums		142			124		Premiums		194		142

Other	Other		2			2		Other		3		2
Total other revenues	Total other revenues		144			126		Total other revenues		197		144
Total revenues	Total revenues		$	1,215		$	2,227	Total revenues		$	2,241	$	1,218

Income (loss) before income taxes:	Income (loss) before income taxes:							Income (loss) before income taxes:
Insurance underwriting results	Insurance underwriting results							Insurance underwriting results
Commercial lines insurance	Commercial lines insurance		$	76		$	130	Commercial lines insurance		$	(2)	$	76
Personal lines insurance	Personal lines insurance		65			(3)		Personal lines insurance		(57)		65
Excess and surplus lines insurance	Excess and surplus lines insurance		16			8		Excess and surplus lines insurance		13		16
Life insurance	Life insurance		(2)			(2)		Life insurance		8		7
Investments	Investments		(508)			652		Investments		286		(508)
Other	Other		(7)			(17)		Other		20		(7)
Total income (loss) before income taxes	Total income (loss) before income taxes		$	(360)		$	768	Total income (loss) before income taxes		$	268	$	(351)


Identifiable assets:	Identifiable assets:	March 31, 2022		December 31, 2021		Identifiable assets:	March 31, 2023		December 31, 2022
Property casualty insurance	Property casualty insurance	$	4,607	$	4,421	Property casualty insurance	$	5,229	$	5,178
Life insurance	Life insurance	1,577		1,590		Life insurance	1,529		1,518
Investments	Investments	23,201		24,481		Investments	22,805		22,133
Other	Other	865		895		Other	911		903
Total	Total	$	30,250	$	31,387	Total	$	30,474	$	29,732

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 2531

Item 2. Management’s Discussion and Analysis of Financial Condition and

Results of Operations

The following discussion highlights significant factors influencing the condensed consolidated results of operations and financial position of Cincinnati Financial Corporation. It should be read in conjunction with the consolidated financial statements and related notes included in our ~~2021~~2022 Annual Report on Form 10-K. Unless otherwise noted, the industry data is prepared by A.M. Best Co., a leading insurance industry statistical, analytical and financial strength rating organization. Information from A.M. Best is presented on a statutory basis for insurance company regulation in the United States of America. When we provide our results on a comparable statutory basis, we label it as such; all other company data is presented in accordance with accounting principles generally accepted in the United States of America (GAAP).

As discussed in Item 1, Note 1, Accounting Policies, Page 8, effective January 1, 2023, we adopted ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. We adjusted applicable financial statements. Related financial data shown in Management's Discussion and Analysis of Financial Condition and Results of Operations also have been adjusted.

We present per share data on a diluted basis unless otherwise noted, adjusting those amounts for all stock splits and dividends. Dollar amounts are rounded to millions; calculations of percent changes are based on dollar amounts rounded to the nearest million. Certain percentage changes are identified as not meaningful (nm).

SAFE HARBOR STATEMENT

This is our “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our ~~2021~~2022 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 32.

Factors that could cause or contribute to such differences include, but are not limited to:

•Effects of the COVID-19 pandemic that could affect results for reasons such as:

◦Securities market disruption or volatility and related effects such as decreased economic activity and continued supply chain disruptions that affect our investment portfolio and book value

◦An unusually high level of claims in our insurance or reinsurance operations that increase litigation-related expenses

◦An unusually high level of insurance losses, including risk of legislation or court decisions extending business interruption insurance in commercial property coverage forms to cover claims for pure economic loss related to the COVID-19 pandemic

◦Decreased premium revenue and cash flow from disruption to our distribution channel of independent agents, consumer self-isolation, travel limitations, business restrictions and decreased economic activity

◦Inability of our workforce, agencies or vendors to perform necessary business functions

•Ongoing developments concerning business interruption insurance claims and litigation related to the COVID-19 pandemic that affect our estimates of losses and loss adjustment expenses or our ability to reasonably estimate such losses, such as:

◦The continuing duration of the pandemic and governmental actions to limit the spread of the virus that may produce additional economic losses

◦The number of policyholders that will ultimately submit claims or file lawsuits

◦The lack of submitted proofs of loss for allegedly covered claims

◦Judicial rulings in similar litigation involving other companies in the insurance industry

◦Differences in state laws and developing case law

◦Litigation trends, including varying legal theories advanced by policyholders

◦Whether and to what degree any class of policyholders may be certified

◦The inherent unpredictability of litigation

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 32

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

•Inadequate estimates or assumptions, or reliance on third-party data used for critical accounting estimates

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

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 26~~

•~~Prolonged low interest~~Interest rate ~~environment~~fluctuations or other factors that ~~limit our~~could significantly affect:

•Our ability to generate growth in investment income ~~or interest rate fluctuations that result in declining values~~

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

•Our traditional life policy reserves

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

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

◦Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities

◦Significant rise in losses from surety or director and officer policies written for financial institutions or other insured entities

•Our inability to manage Cincinnati Global or other subsidiaries to produce related business opportunities and growth prospects for our ongoing operations

•Recession, prolonged elevated inflation or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies

•Ineffective information technology systems or discontinuing to develop and implement improvements in technology may impact our success and profitability

•Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our or our agents' ability to conduct business; disrupt our relationships with agents, policyholders and others; cause reputational damage, mitigation expenses and data loss and expose us to liability under federal and state laws

•Difficulties with our operations and technology that may negatively impact our ability to conduct business, including cloud-based data information storage, data security, cyberattacks, remote working capabilities, and/or outsourcing relationships and third-party operations and data security

•Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products

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

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

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

•Inability to obtain adequate ceded reinsurance on acceptable terms, amount of reinsurance coverage purchased, financial strength of reinsurers and the potential for nonpayment or delay in payment by reinsurers

•Inability to defer policy acquisition costs for any business segment if pricing and loss trends would lead management to conclude that segment could not achieve sustainable profitability

•Inability of our subsidiaries to pay dividends consistent with current or past levels

•Events or conditions that could weaken or harm our relationships with our independent agencies and hamper opportunities to add new agencies, resulting in limitations on our opportunities for growth, such as:

◦Downgrades of our financial strength ratings

◦Concerns that doing business with us is too difficult

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 33

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

•Actions of insurance departments, state attorneys general or other regulatory agencies, including a change to a federal system of regulation from a state-based system, that:

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

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 27~~

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

◦Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business

◦Add assessments for guaranty funds, other insurance‑related assessments or mandatory reinsurance arrangements; or that impair our ability to recover such assessments through future surcharges or other rate changes

◦Increase our provision for federal income taxes due to changes in tax law

◦Increase our other expenses

◦Limit our ability to set fair, adequate and reasonable rates

◦Place us at a disadvantage in the marketplace

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

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

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

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

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

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

Further, our insurance businesses are subject to the effects of changing social, global, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. We also are subject to public and regulatory initiatives that can affect the market value for our common stock, such as measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 2834

CORPORATE FINANCIAL HIGHLIGHTS

Net Income and Comprehensive Income Data


(Dollars in millions, except per share data)	(Dollars in millions, except per share data)	Three months ended March 31,			(Dollars in millions, except per share data)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Earned premiums	Earned premiums		$	1,690		$	1,544	9		Earned premiums	$	1,918	$	1,693	13
Investment income, net of expenses (pretax)	Investment income, net of expenses (pretax)		185			174		6		Investment income, net of expenses (pretax)	210		185		14
Investment gains and losses, net (pretax)	Investment gains and losses, net (pretax)		(666)			504		nm		Investment gains and losses, net (pretax)	106		(666)		nm
Total revenues	Total revenues		1,215			2,227		(45)		Total revenues	2,241		1,218		84
Net income (loss)	Net income (loss)		(273)			620		nm		Net income (loss)	225		(266)		nm
Comprehensive income (loss)	Comprehensive income (loss)		(862)			476		nm		Comprehensive income (loss)	312		(700)		nm
Net income (loss) per share—diluted	Net income (loss) per share—diluted		(1.70)			3.82		nm		Net income (loss) per share—diluted	1.42		(1.66)		nm
Cash dividends declared per share	Cash dividends declared per share		0.69			0.63		10		Cash dividends declared per share	0.75		0.69		9
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding		160.4			162.5		(1)		Diluted weighted average shares outstanding	158.5		160.4		(1)

Total revenues ~~decreased 45%~~increased $1.023 billion for the first quarter of ~~2022,~~2023, compared with the first quarter of ~~2021, as a reduction in~~2022, primarily due to net investment gains ~~offset increases~~ in addition to higher earned premiums and investment income. Premium and investment revenue trends are discussed further in the respective sections of Financial Results.

Investment gains and losses are recognized on the sales of investments, on certain changes in fair values of securities even though we continue to hold the securities or as otherwise required by GAAP. We have substantial discretion in the timing of investment sales, and that timing generally is independent of the insurance underwriting process. The change in fair value of securities is also generally independent of the insurance underwriting process.

~~The net loss~~Net income for the first quarter of ~~2022,~~2023, compared with a net loss in first-quarter ~~2021 net income,~~2022 of $266 million, was a change of ~~$893~~$491 million, including ~~a decrease~~an increase of ~~$924~~$610 million in after-tax net investment gains and losses and an increase of $20 million in after-tax investment income that offset ~~increases~~a decrease of ~~$25~~$138 million in after-tax property casualty underwriting ~~income and $9 million in after-tax investment~~ income. Catastrophe losses for the first quarter of ~~2022,~~2023, mostly weather related, were ~~$98~~$163 million ~~lower~~higher after taxes and ~~favorably~~unfavorably affected both net income and property casualty underwriting income. Life insurance segment results ~~on a pretax basis~~ matched ~~first-quarter 2021.~~the first quarter of 2022.

~~During~~The first-quarter 2023 decrease in property casualty underwriting income also included higher insured loss experience before catastrophe effects, partly from elevated paid losses reflecting economic or other forms of inflation that are increasing our uncertainty regarding ultimate losses. Until longer-term paid loss cost trends become more clear, we intend to remain prudent in reserving for estimated ultimate losses. As a result, incurred losses for the first three months of ~~2022, SARS-CoV-2, also known as COVID-19~~2023 for several lines of business were higher than in prior periods and ~~recognized as a pandemic~~are discussed in Financial Results by the World Health Organization, continued to cause various effects in parts of the world. We believe it did not have a significant effect on our premium revenues during the first three months of 2022 and there were no material changes to our estimates for incurred losses and expenses related to the pandemic.property casualty insurance segment.

Performance by segment is discussed below in Financial Results. As discussed in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Executive Summary, Page ~~47,~~48, there are several reasons why our performance during ~~2022~~2023 may be below our long-term targets.

The board of directors is committed to rewarding shareholders directly through cash dividends and through share repurchase authorizations. Through ~~2021,~~2022, the company had increased the annual cash dividend rate for 6162 consecutive years, a record we believe is matched by only seven other U.S. publicly traded companies. In January ~~2022,~~2023, the board of directors increased the regular quarterly dividend to 6975 cents per share, setting the stage for our 6263ndrd consecutive year of increasing cash dividends. During the first three months of ~~2022,~~2023, cash dividends declared by the company increased ~~10%~~9% compared with the same period of ~~2021.~~2022. Our board regularly evaluates relevant factors in decisions related to dividends and share repurchases. The ~~2022~~2023 dividend increase reflected our strong operating performance and signaled management's and the board's positive outlook and confidence in our outstanding capital, liquidity and financial flexibility.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 2935

Balance Sheet Data and Performance Measures


(Dollars in millions, except share data)	(Dollars in millions, except share data)	At March 31,			At December 31,			(Dollars in millions, except share data)	At March 31,			At December 31,
		2022			2021				2023			2022
Total investments	Total investments	$	23,399		$	24,666		Total investments	$	23,123		$	22,425
Total assets	Total assets	30,250			31,387			Total assets	30,474			29,732
Short-term debt	Short-term debt	49			54			Short-term debt	50			50
Long-term debt	Long-term debt	789			789			Long-term debt	789			789
Shareholders' equity	Shareholders' equity	12,092			13,105			Shareholders' equity	10,741			10,562
Book value per share	Book value per share	75.43			81.72			Book value per share	68.33			67.21
Debt-to-total-capital ratio	Debt-to-total-capital ratio	6.5		%	6.0		%	Debt-to-total-capital ratio	7.2		%	7.4		%

Total assets at March 31, ~~2022, decreased 4%~~2023, increased 2% compared with year-end ~~2021,~~2022, and included a ~~5% decrease~~3% increase in total investments that reflected net purchases ~~that were offset by lower~~and higher fair values for many securities in our portfolio. Shareholders' equity ~~decreased 8%~~increased 2% and book value per share also ~~decreased 8%~~increased 2% during the first three months of ~~2022.~~2023. Our debt-to-total-capital ratio (capital is the sum of debt plus shareholders' equity) ~~increased~~decreased compared with year-end ~~2021.~~2022.

Our value creation ratio is our primary performance metric. That ratio was ~~negative 6.9%~~3.1% for the first three months of ~~2022,~~2023, and was ~~less~~more than the same period in ~~2021~~2022 primarily due to a ~~reduction~~higher amount in overall net gains from our investment portfolio. ~~The $6.29 decrease in book~~Book value per share increased $1.12 during the first three months of ~~2022~~2023 and contributed ~~negative 7.7~~2.0 percentage points to the value creation ratio, while dividends declared at ~~$0.69~~$0.75 per share contributed positive ~~0.8~~1.1 points. Value creation ratios by major components and in total, along with calculations from per-share amounts, are shown in the tables below.


		Three months ended March 31,						Three months ended March 31,
			2022		2021				2023		2022
Value creation ratio major components:	Value creation ratio major components:						Value creation ratio major components:
Net income before investment gains	Net income before investment gains		1.9	%	2.1	%	Net income before investment gains		1.3	%	1.9	%
Change in fixed-maturity securities, realized and unrealized gains	Change in fixed-maturity securities, realized and unrealized gains		(4.5)		(1.4)		Change in fixed-maturity securities, realized and unrealized gains		1.2		(4.5)
Change in equity securities, investment gains	Change in equity securities, investment gains		(4.1)		3.6		Change in equity securities, investment gains		0.7		(4.1)
Other	Other		(0.2)		(0.2)		Other		(0.1)		(0.2)
Value creation ratio	Value creation ratio		(6.9)	%	4.1	%	Value creation ratio		3.1	%	(6.9)	%

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 3036


(Dollars are per share)	(Dollars are per share)	Three months ended March 31,					(Dollars are per share)					Three months ended March 31,
				2022				2021					2023			2022
Book value change per share											Book value change per share
Book value as originally December 31, 2022											Book value as originally December 31, 2022		$	67.01
Cumulative effect of change in accounting for long-duration insurance contracts, net of tax											Cumulative effect of change in accounting for long-duration insurance contracts, net of tax		0.20
Book value as adjusted December 31, 2022											Book value as adjusted December 31, 2022		$	67.21

Value creation ratio:	Value creation ratio:										Value creation ratio:
End of period book value*				$	75.43			$	69.16
Less beginning of period book value				81.72				67.04
Change in book value				(6.29)				2.12
End of period book value*- as originally reported											End of period book value*- as originally reported		$	68.33		$	75.43
Less beginning of period book value - as originally reported											Less beginning of period book value - as originally reported		67.01			81.72
Change in book value - as originally reported											Change in book value - as originally reported		1.32			(6.29)
Dividend declared to shareholders	Dividend declared to shareholders			0.69				0.63			Dividend declared to shareholders		0.75			0.69
Total value creation	Total value creation			$	(5.60)			$	2.75		Total value creation		$	2.07		$	(5.60)

Value creation ratio from change in book value**	Value creation ratio from change in book value**			(7.7)		%		3.2		%	Value creation ratio from change in book value**		2.0		%	(7.7)		%
Value creation ratio from dividends declared to shareholders***	Value creation ratio from dividends declared to shareholders***			0.8				0.9			Value creation ratio from dividends declared to shareholders***		1.1			0.8
Value creation ratio	Value creation ratio			(6.9)		%		4.1		%	Value creation ratio		3.1		%	(6.9)		%

* Book value per share is calculated by dividing end of period total shareholders' equity by end of period shares outstanding	* Book value per share is calculated by dividing end of period total shareholders' equity by end of period shares outstanding		* Book value per share is calculated by dividing end of period total shareholders' equity by end of period shares outstanding
** Change in book value divided by the beginning of period book value	** Change in book value divided by the beginning of period book value		** Change in book value divided by the beginning of period book value
*** Dividend declared to shareholders divided by beginning of period book value	*** Dividend declared to shareholders divided by beginning of period book value		*** Dividend declared to shareholders divided by beginning of period book value

DRIVERS OF LONG-TERM VALUE CREATION

Operating through The Cincinnati Insurance Company, Cincinnati Financial Corporation is one of the 25 largest property casualty insurers in the nation, based on ~~2021~~2022 net written premiums for approximately 2,000 U.S. stock and mutual insurer groups. We market our insurance products through a select group of independent insurance agencies as discussed in our ~~2021~~2022 Annual Report on Form 10-K, Item 1, Our Business and Our Strategy, Page 6. At March 31, ~~2022,~~2023, we actively marketed through ~~1,946~~1,998 agencies located in 46 states. We maintain a long-term perspective that guides us in addressing immediate challenges or opportunities while focusing on the major decisions that best position our company for success through all market cycles.

To measure our long-term progress in creating shareholder value, our value creation ratio is our primary financial performance target. As discussed in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Executive Summary, Page ~~47,~~48, management believes this measure is a meaningful indicator of our long-term progress in creating shareholder value and has three primary performance drivers:

•Premium growth – We believe our agency relationships and initiatives can lead to a property casualty written premium growth rate over any five-year period that exceeds the industry average. For the first three months of ~~2022,~~2023, our consolidated property casualty net written premium year-over-year growth was ~~12%~~6%. As of ~~February 2022,~~March 2023, A.M. Best projected the industry's full-year ~~2022~~2023 written premium growth at approximately 6%8%. For the five-year period ~~2017~~2018 through ~~2021,~~2022, our growth rate exceeded that of the industry. The industry's growth rate excludes its mortgage and financial guaranty lines of business.

•Combined ratio – We believe our underwriting philosophy and initiatives can generate a GAAP combined ratio over any five-year period that is consistently within the range of 95% to 100%. For the first three months of ~~2022,~~2023, our GAAP combined ratio was ~~89.9%~~100.7%, including ~~3.1~~13.8 percentage points of current accident year catastrophe losses partially offset by ~~2.5~~3.2 percentage points of favorable loss reserve development on prior accident years. Our statutory combined ratio was ~~88.0%~~99.6% for the first three months of ~~2022.~~2023. As of ~~February 2022,~~March 2023, A.M. Best projected the industry's full-year ~~2022~~2023 statutory combined ratio at approximately ~~101%~~102%, including approximately 76 percentage points of catastrophe losses and ~~less than~~a favorable effect of approximately 1 percentage point of loss reserve development on prior accident years. The industry's ratio again excludes its mortgage and financial guaranty lines of business.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 37

•Investment contribution – We believe our investment philosophy and initiatives can drive investment income growth and lead to a total return on our equity investment portfolio over a five-year period that exceeds the five-year return of the Standard & Poor's 500 Index. For the first three months of ~~2022,~~2023, pretax investment income was ~~$185~~$210 million, up 6%14% compared with the same period in ~~2021.~~2022. We believe our investment portfolio mix provides an appropriate balance of income stability and growth with capital appreciation potential.

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 31~~

Financial Strength

An important part of our long-term strategy is financial strength, which is described in our ~~2021~~2022 Annual Report on Form 10-K, Item 1, Our Business and Our Strategy, Financial Strength, Page 8. One aspect of our financial strength is prudent use of reinsurance ceded to help manage financial performance variability due to catastrophe loss experience. A description of how we use reinsurance ceded is included in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Liquidity and Capital Resources, ~~2022~~2023 Reinsurance Ceded Programs, Page 104. Another aspect of our financial strength is our investment portfolio, which remains well-diversified as discussed in this quarterly report in Item 3, Quantitative and Qualitative Disclosures About Market Risk. Our strong parent-company liquidity and financial strength increase our flexibility to maintain a cash dividend through all periods and to continue to invest in and expand our insurance operations.

At March 31, ~~2022,~~2023, we held ~~$4.777~~$4.373 billion of our cash and cash equivalents and invested assets at the parent-company level, of which ~~$4.509~~$4.121 billion, or ~~94.4%~~94.2%, was invested in common stocks, and ~~$137~~$119 million, or ~~2.9%~~2.7%, was cash or cash equivalents. Our debt-to-total-capital ratio was ~~6.5%~~7.2% at March 31, ~~2022.~~2023. Another important indicator of financial strength is our ratio of property casualty net written premiums to statutory surplus, which was ~~1.0-to-1~~1.1-to-1 for the 12 months ended March 31, ~~2022, compared with 0.9-to-1 at~~2023, matching year-end ~~2021.~~2022.

Financial strength ratings assigned to us by independent rating firms also are important. In addition to rating our parent company's senior debt, four firms award insurer financial strength ratings to one or more of our insurance subsidiary companies based on their quantitative and qualitative analyses. These ratings primarily assess an insurer's ability to meet financial obligations to policyholders and do not necessarily address all of the matters that may be important to investors. Ratings are under continuous review and subject to change or withdrawal at any time by the rating agency. Each rating should be evaluated independently of any other rating; please see each rating agency's website for its most recent report on our ratings.

At April ~~27, 2022,~~26, 2023, our insurance subsidiaries continued to be highly rated.

Insurer Financial Strength Ratings

Rating
agency

Standard market property casualty insurance subsidiaries

Life insurance
subsidiary

Excess and surplus lines insurance subsidiary

Outlook

Rating
tier

A.M. Best Co.

ambest.com

A+

Superior

2 of 16

A+

Superior

2 of 16

A+

Superior

2 of 16

Stable

Fitch Ratings

fitchratings.com

A+

Strong

5 of 21

A+

Strong

5 of 21

Stable

Moody's Investors Service

moodys.com

Good

5 of 21

Stable

S&P Global Ratings

spratings.com

A+

Strong

5 of 21

A+

Strong

5 of 21

Stable

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 3238

CONSOLIDATED PROPERTY CASUALTY INSURANCE HIGHLIGHTS

Consolidated property casualty insurance results include premiums and expenses for our standard market insurance segments (commercial lines and personal lines), our excess and surplus lines segment, Cincinnati Re® and our London-based global specialty underwriter Cincinnati Global Underwriting Ltd.SM (Cincinnati Global).


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,				(Dollars in millions)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Earned premiums	Earned premiums		$	1,618			$	1,475		10		Earned premiums	$	1,841		$	1,618		14
Fee revenues	Fee revenues		3				2			50		Fee revenues	2			3			(33)
Total revenues	Total revenues		1,621				1,477			10		Total revenues	1,843			1,621			14
Loss and loss expenses from:	Loss and loss expenses from:											Loss and loss expenses from:
Current accident year before catastrophe losses	Current accident year before catastrophe losses		947				850			11		Current accident year before catastrophe losses	1,123			947			19
Current accident year catastrophe losses	Current accident year catastrophe losses		50				183			(73)		Current accident year catastrophe losses	253			50			406
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(20)				(80)			75		Prior accident years before catastrophe losses	(41)			(20)			(105)
Prior accident years catastrophe losses	Prior accident years catastrophe losses		(21)				(30)			30		Prior accident years catastrophe losses	(18)			(21)			14
Loss and loss expenses	Loss and loss expenses		956				923			4		Loss and loss expenses	1,317			956			38
Underwriting expenses	Underwriting expenses		500				421			19		Underwriting expenses	536			500			7
Underwriting profit			$	165			$	133		24
Underwriting profit (loss)												Underwriting profit (loss)	$	(10)		$	165		nm

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year before catastrophe losses	Current accident year before catastrophe losses		58.5		%		57.6		%	0.9		Current accident year before catastrophe losses	61.0		%	58.5		%	2.5
Current accident year catastrophe losses	Current accident year catastrophe losses		3.1				12.4			(9.3)		Current accident year catastrophe losses	13.8			3.1			10.7
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(1.2)				(5.4)			4.2		Prior accident years before catastrophe losses	(2.2)			(1.2)			(1.0)
Prior accident years catastrophe losses	Prior accident years catastrophe losses		(1.3)				(2.0)			0.7		Prior accident years catastrophe losses	(1.0)			(1.3)			0.3
Loss and loss expenses	Loss and loss expenses		59.1				62.6			(3.5)		Loss and loss expenses	71.6			59.1			12.5
Underwriting expenses	Underwriting expenses		30.8				28.6			2.2		Underwriting expenses	29.1			30.8			(1.7)
Combined ratio	Combined ratio		89.9		%		91.2		%	(1.3)		Combined ratio	100.7		%	89.9		%	10.8

Combined ratio	Combined ratio		89.9		%		91.2		%	(1.3)		Combined ratio	100.7		%	89.9		%	10.8
Contribution from catastrophe losses and prior years reserve development	Contribution from catastrophe losses and prior years reserve development		0.6				5.0			(4.4)		Contribution from catastrophe losses and prior years reserve development	10.6			0.6			10.0
Combined ratio before catastrophe losses and prior years reserve development	Combined ratio before catastrophe losses and prior years reserve development		89.3		%		86.2		%	3.1		Combined ratio before catastrophe losses and prior years reserve development	90.1		%	89.3		%	0.8

Our consolidated property casualty insurance operations generated an underwriting loss of $10 million for the first quarter of 2023. Compared with a first-quarter 2022 underwriting profit of $165 million, ~~for~~ the ~~first three months~~first-quarter 2023 change of ~~2022. The improvement~~$175 million included an unfavorable increase of ~~$32 million, compared with the same period of 2021, included a favorable decrease of $124~~$206 million in losses from catastrophes, mostly caused by severe weather. The first-quarter 2023 change in underwriting profitability also included higher current accident year loss and loss expenses before catastrophe losses that were partially offset by higher amounts of favorable reserve development on prior accident years.

Elevated inflation was a driver of higher losses and loss expenses in 2023 as costs have increased significantly to repair damaged autos or other property that we insure. We also experienced higher losses for liability coverages for some of our lines of business. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear. The higher loss experience is discussed in Financial Results by property casualty insurance segment. We believe future property casualty underwriting results will continue to benefit from price increases and our ongoing initiatives to improve pricing precision and loss experience related to claims and loss control practices.

For all property casualty lines of business in aggregate, net loss and loss expense reserves at March 31, ~~2022,~~2023, were ~~$66~~$271 million, or 1%3%, higher than at year-end ~~2021,~~2022, including an increase of ~~$69~~$266 million for the incurred but not reported (IBNR) portion.

We measure and analyze property casualty underwriting results primarily by the combined ratio and its component ratios. The GAAP-basis combined ratio is the percentage of incurred losses plus all expenses per each earned premium dollar – the lower the ratio, the better the performance. An underwriting profit results when the combined

Cincinnati Financial Corporation First-Quarter 2023 10-Q

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

Our consolidated property casualty combined ratio for the first quarter of ~~2022 improved~~2023 rose by ~~1.3~~10.8 percentage points, compared with the same period of ~~2021,~~2022, including ~~a decrease~~an increase of ~~8.6~~11.0 points from ~~lower~~higher catastrophe losses and loss expenses. Other combined ratio components that increased are discussed below and in further detail in Financial Results by property casualty insurance segment.

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The combined ratio can be affected significantly by natural catastrophe losses and other large losses as discussed in detail below. The combined ratio can also be affected by updated estimates of loss and loss expense reserves established for claims that occurred in prior periods, referred to as prior accident years. Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by ~~2.5~~3.2 percentage points in the first three months of ~~2022,~~2023, compared with ~~7.4~~2.5 percentage points in the same period of ~~2021.~~2022. Net favorable development is discussed in further detail in Financial Results by property casualty insurance segment.

The ratio for current accident year loss and loss expenses before catastrophe losses increased in the first three months of ~~2022.~~2023. That ~~58.5%~~61.0% ratio was ~~0.9~~2.5 percentage points higher, compared with the ~~57.6%~~58.5% accident year ~~2021~~2022 ratio measured as of March 31, ~~2021,~~2022, including ~~an increase~~a decrease of ~~4.0~~1.1 points in the ratio for large losses of $1$2 million or more per claim, discussed below. The ratio increase of 2.5 percentage points included an increase of 9.2 points for the IBNR portion and a decrease of 6.7 points for the case incurred portion.

The underwriting expense ratio ~~increased~~decreased for the first quarter of ~~2022,~~2023, compared with the same period a year ago, primarily due to ~~an increase~~a decrease in profit-sharing commissions for ~~agencies and related expenses.~~agencies. The ratio also included ongoing expense management efforts and higher earned premiums.

Consolidated Property Casualty Insurance Premiums


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Agency renewal written premiums	Agency renewal written premiums		$	1,397		$	1,276	9		Agency renewal written premiums	$	1,535	$	1,397	10
Agency new business written premiums	Agency new business written premiums		244			220		11		Agency new business written premiums	251		244		3

Other written premiums	Other written premiums		258			197		31		Other written premiums	233		258		(10)
Net written premiums	Net written premiums		1,899			1,693		12		Net written premiums	2,019		1,899		6
Unearned premium change	Unearned premium change		(281)			(218)		(29)		Unearned premium change	(178)		(281)		37
Earned premiums	Earned premiums		$	1,618		$	1,475	10		Earned premiums	$	1,841	$	1,618	14

The trends in net written premiums and earned premiums summarized in the table above include the effects of price increases. Price change trends that heavily influence renewal written premium increases or decreases, along with other premium growth drivers for ~~2022,~~2023, are discussed in more detail by segment below in Financial Results.

Consolidated property casualty net written premiums for the three months ended March 31, ~~2022,~~2023, grew ~~$206~~$120 million compared with the same period of ~~2021.~~2022. Our premium growth initiatives from prior years have provided an ongoing favorable effect on growth during the current year, particularly as newer agency relationships mature over time.

Consolidated property casualty agency new business written premiums increased by ~~$24~~$7 million for the first ~~quarter~~three months of ~~2022,~~2023, compared with the same period of ~~2021.~~2022. New agency appointments during ~~2022~~2023 and ~~2021~~2022 produced a ~~$13~~$12 million increase in standard lines new business for the first three months of ~~2022~~2023 compared with the same period of ~~2021.~~2022. As we appoint new agencies that choose to move accounts to us, we report these accounts as new business. While this business is new to us, in many cases it is not new to the agent. We believe these seasoned accounts tend to be priced more accurately than business that may be less familiar to our agent upon obtaining it from a competing agent.

Net written premiums for Cincinnati Re, included in other written premiums, ~~increased~~decreased by ~~$58~~$24 million for the three months ended March 31, ~~2022,~~2023, compared with the same period of ~~2021,~~2022, to ~~$254~~$230 million. Cincinnati Re assumes

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

Cincinnati Global is also included in other written premiums. Net written premiums increased for Cincinnati Global by ~~$10~~$13 million for the three months ended March 31, ~~2022,~~2023, compared with the same period of ~~2021,~~2022, to ~~$51~~$64 million.

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~~Page 34~~

Other written premiums ~~also include~~includes premiums ceded to reinsurers as part of our reinsurance ceded program. An increase in ceded premiums ~~decreased~~reduced net written premiums by $7$17 million for the first three months of ~~2022,~~2023, compared with the same period of ~~2021.~~2022.

Catastrophe losses and loss expenses typically have a material effect on property casualty results and can vary significantly from period to period. Losses from catastrophes contributed ~~1.8~~12.8 percentage points to the combined ratio in the first three months of ~~2022,~~2023, compared with ~~10.4~~1.8 percentage points in the same period of ~~2021.~~2022.

The reinsurance program for Cincinnati Re ~~which went into effect~~that provides retrocession coverage on ~~June 1, 2021, provided no additional recoveries during the first three months of 2022. As of March 31, 2022, it provided~~ an estimated recovery of $14 million from Hurricane Ida, with a net incurred loss of $80 million for Cincinnati Re, excluding the benefit of reinstatement premiums estimated at approximately $11 million. Before any recoveries, the program included property catastrophe excess of loss ~~coverage with an annual~~basis has a total available aggregate limit of ~~$48~~$30 million in excess of ~~$80~~$100 million per loss. Losses estimated for Hurricane Ian, as of March 31, 2023, resulted in an estimated reinsurance recovery of $14 million, compared with $19 million as of December 31, 2022. Reserve estimates are inherently uncertain as described in our 2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 53, and Item 1A, Risk Factors, Page 32.

The following table shows consolidated property casualty insurance catastrophe losses and loss expenses incurred, net of reinsurance, as well as the effect of loss development on prior period catastrophe events. We individually list declared catastrophe events for which our incurred losses reached or exceeded ~~$10~~$25 million.

Consolidated Property Casualty Insurance Catastrophe Losses and Loss Expenses Incurred

(Dollars in millions, net of reinsurance) Three months ended March 31,
Comm. Pers. E&S
Dates Region lines lines lines Other Total
2022
Jan. 15-17 Northeast, South $ 4 $ 6 $ 1 $ — $ 11
All other 2022 catastrophes 12 22 — 5 39
Development on 2021 and prior catastrophes (3) (21) — 3 (21)
Calendar year incurred total $ 13 $ 7 $ 1 $ 8 $ 29
2021
Feb. 12-15 South, West $ 10 $ 6 $ — $ 49 $ 65
Feb. 16-20 Midwest, Northeast, South 22 37 1 1 61
Mar. 24-26 Midwest, Northeast, South 8 19 — — 27
Mar. 27-29 Midwest, Northeast, South 4 8 — — 12
All other 2021 catastrophes 10 8 — — 18
Development on 2020 and prior catastrophes (17) (3) — (10) (30)
Calendar year incurred total $ 37 $ 75 $ 1 $ 40 $ 153


(Dollars in millions, net of reinsurance)		Three months ended March 31,
					Comm.				Pers.				E&S
Dates	Region				lines				lines				lines				Other				Total
2023
Mar. 1-4	Midwest, Northeast, South				$	30			$	34			$	1			$	—			$	65
Mar. 23-28	Midwest, Northeast, South				13				27				1				—				41
Mar. 30 - Apr. 1	Midwest, Northeast, South				42				24				—				—				66













All other 2023 catastrophes			21				55				—				5				81
Development on 2022 and prior catastrophes			4				(25)				(1)				4				(18)
Calendar year incurred total			$	110			$	115			$	1			$	9			$	235

2022









2022 catastrophes			$	16			$	28			$	1			$	5			$	50
Development on 2021 and prior catastrophes			(3)				(21)				—				3				(21)
Calendar year incurred total			$	13			$	7			$	1			$	8			$	29

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Page 3541

The following table includes data for losses incurred of $1$2 million or more per claim, net of reinsurance.

Consolidated Property Casualty Insurance Losses Incurred by Size


(Dollars in millions, net of reinsurance)	(Dollars in millions, net of reinsurance)	Three months ended March 31,				(Dollars in millions, net of reinsurance)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		$	23			$	5		360		Current accident year losses greater than $5 million	$	36		$	23		57
Current accident year losses $1 million - $5 million			82				31			165
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	15			39			(62)
Large loss prior accident year reserve development	Large loss prior accident year reserve development		25				24			4		Large loss prior accident year reserve development	9			9			—
Total large losses incurred	Total large losses incurred		130				60			117		Total large losses incurred	60			71			(15)
Losses incurred but not reported	Losses incurred but not reported		36				102			(65)		Losses incurred but not reported	179			36			397
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		592				451			31		Other losses excluding catastrophe losses	641			651			(2)
Catastrophe losses	Catastrophe losses		24				150			(84)		Catastrophe losses	227			24			nm
Total losses incurred	Total losses incurred		$	782			$	763		2		Total losses incurred	$	1,107		$	782		42

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		1.4		%		0.3		%	1.1		Current accident year losses greater than $5 million	1.9		%	1.4		%	0.5
Current accident year losses $1 million - $5 million			5.1				2.2			2.9
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	0.8			2.4			(1.6)
Large loss prior accident year reserve development	Large loss prior accident year reserve development		1.5				1.6			(0.1)		Large loss prior accident year reserve development	0.5			0.6			(0.1)
Total large loss ratio	Total large loss ratio		8.0				4.1			3.9		Total large loss ratio	3.2			4.4			(1.2)
Losses incurred but not reported	Losses incurred but not reported		2.2				6.9			(4.7)		Losses incurred but not reported	9.7			2.2			7.5
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		36.6				30.5			6.1		Other losses excluding catastrophe losses	34.9			40.2			(5.3)
Catastrophe losses	Catastrophe losses		1.5				10.2			(8.7)		Catastrophe losses	12.3			1.5			10.8
Total loss ratio	Total loss ratio		48.3		%		51.7		%	(3.4)		Total loss ratio	60.1		%	48.3		%	11.8

We believe the inherent variability of aggregate loss experience for our portfolio of larger policies is greater than that of our portfolio of smaller policies, and we continue to monitor the variability in addition to general inflationary trends in loss costs. Our analysis continues to indicate no unexpected concentration of large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. The first-quarter ~~2022~~2023 property casualty total large losses incurred of ~~$130~~$60 million, net of reinsurance, ~~were higher~~was lower than the ~~$116~~$77 million quarterly average during full-year ~~2021~~2022 and the ~~$60~~$71 million experienced for the first quarter of ~~2021.~~2022. The ratio for these large losses was ~~3.9~~1.2 percentage points ~~higher~~lower compared with last year's first quarter. We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1$2 million. Losses by size are discussed in further detail in results of operations by property casualty insurance segment.

FINANCIAL RESULTS

Consolidated results reflect the operating results of each of our five segments along with the parent company, Cincinnati Re, Cincinnati Global and other activities reported as "Other." The five segments are:

•Commercial lines insurance

•Personal lines insurance

•Excess and surplus lines insurance

•Life insurance

•Investments

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 3642

COMMERCIAL LINES INSURANCE RESULTS


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,				(Dollars in millions)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Earned premiums	Earned premiums		$	962			$	886		9		Earned premiums	$	1,056		$	962		10
Fee revenues	Fee revenues		1				1			0		Fee revenues	1			1			0
Total revenues	Total revenues		963				887			9		Total revenues	1,057			963			10
Loss and loss expenses from:	Loss and loss expenses from:											Loss and loss expenses from:
Current accident year before catastrophe losses	Current accident year before catastrophe losses		588				532			11		Current accident year before catastrophe losses	674			588			15
Current accident year catastrophe losses	Current accident year catastrophe losses		16				54			(70)		Current accident year catastrophe losses	106			16			563
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(15)				(66)			77		Prior accident years before catastrophe losses	(36)			(15)			(140)
Prior accident years catastrophe losses	Prior accident years catastrophe losses		(3)				(17)			82		Prior accident years catastrophe losses	4			(3)			nm
Loss and loss expenses	Loss and loss expenses		586				503			17		Loss and loss expenses	748			586			28
Underwriting expenses	Underwriting expenses		301				254			19		Underwriting expenses	311			301			3
Underwriting profit			$	76			$	130		(42)
Underwriting profit (loss)												Underwriting profit (loss)	$	(2)		$	76		nm

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year before catastrophe losses	Current accident year before catastrophe losses		61.2		%		60.0		%	1.2		Current accident year before catastrophe losses	63.9		%	61.2		%	2.7
Current accident year catastrophe losses	Current accident year catastrophe losses		1.7				6.1			(4.4)		Current accident year catastrophe losses	10.0			1.7			8.3
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(1.6)				(7.5)			5.9		Prior accident years before catastrophe losses	(3.4)			(1.6)			(1.8)
Prior accident years catastrophe losses	Prior accident years catastrophe losses		(0.3)				(1.9)			1.6		Prior accident years catastrophe losses	0.4			(0.3)			0.7
Loss and loss expenses	Loss and loss expenses		61.0				56.7			4.3		Loss and loss expenses	70.9			61.0			9.9
Underwriting expenses	Underwriting expenses		31.3				28.7			2.6		Underwriting expenses	29.5			31.3			(1.8)
Combined ratio	Combined ratio		92.3		%		85.4		%	6.9		Combined ratio	100.4		%	92.3		%	8.1

Combined ratio	Combined ratio		92.3		%		85.4		%	6.9		Combined ratio	100.4		%	92.3		%	8.1
Contribution from catastrophe losses and prior years reserve development	Contribution from catastrophe losses and prior years reserve development		(0.2)				(3.3)			3.1		Contribution from catastrophe losses and prior years reserve development	7.0			(0.2)			7.2
Combined ratio before catastrophe losses and prior years reserve development	Combined ratio before catastrophe losses and prior years reserve development		92.5		%		88.7		%	3.8		Combined ratio before catastrophe losses and prior years reserve development	93.4		%	92.5		%	0.9

Overview

Performance highlights for the commercial lines segment include:

•Premiums – Earned premiums and net written premiums for the commercial lines segment grew during the first ~~three months~~quarter of ~~2022,~~2023, compared with the same period a year ago, ~~primarily due to~~reflecting renewal written premium growth that continued to include higher average ~~pricing.~~pricing and a higher level of insured exposures. The table below analyzes the primary components of premiums. We continue to use predictive analytics tools to improve pricing precision and segmentation while leveraging our local relationships with agents through the efforts of our teams that work closely with them. We seek to maintain appropriate pricing discipline for both new and renewal business as our agents and underwriters assess account quality to make careful decisions on a policy-by-policy basis whether to write or renew a policy.

Agency renewal written premiums increased by 8%7% for the first ~~quarter~~three months of ~~2022,~~2023, compared with the same period of ~~2021.~~2022, including price increases. During the first quarter of ~~2022,~~2023, our overall standard commercial lines policies averaged estimated renewal price increases at percentages innear the high end of the mid-single-digit range. We continue to segment commercial lines policies, emphasizing identification and retention of those we believe have relatively stronger pricing. Conversely, we have been seeking stricter renewal terms and conditions on policies we believe have relatively weaker pricing, thus retaining fewer of those policies. We measure average changes in commercial lines renewal pricing as the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for the respective policies.

Our average overall commercial lines renewal pricing change includes the impact of flat pricing for certain coverages within package policies written for a three-year term that were in force but did not expire during

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the period being measured. Therefore, our reported change in average commercial lines renewal pricing reflects a blend of three-year policies that did not expire and other policies that did expire during the measurement period. For commercial lines policies that did expire and were then renewed during the first quarter of ~~2022,~~2023, we estimate that our average percentage price increases were ~~as follows:~~in the high-single-digit range for commercial property inand commercial auto and near the high end of the mid-single-digit range for commercial ~~auto in the mid-single-digit range and commercial casualty in the mid-single-digit range.~~casualty. The estimated average percentage price change for workers' compensation was a decrease ~~near~~in the ~~high end~~low-single-digit range.

Our first-quarter 2023 increase for the commercial lines segment's agency renewal written premiums also included a higher level of insured exposures. Part of the ~~low-single-digit range.~~insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged commercial structures. We use building valuation software to automate much of that underwriting process and may also manually adjust premiums to reflect property costs.

Renewal premiums for certain policies, primarily our commercial casualty and workers' compensation lines of business, include the results of policy audits that adjust initial premium amounts based on differences between estimated and actual sales or payroll related to a specific policy. Audits completed during the first three months of ~~2022~~2023 contributed ~~$21~~$35 million to net written premiums, compared with ~~$11~~$21 million for the same period of ~~2021.~~2022.

New business written premiums for commercial lines ~~increased $11~~decreased $22 million during the first three months of ~~2022,~~2023, compared with the same period of ~~2021.~~2022. Trend analysis for year-over-year comparisons of individual quarters is more difficult to assess for commercial lines new business written premiums, due to inherent variability. That variability is often driven by larger policies with annual premiums greater than $100,000.

Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program. For our commercial lines insurance segment, an increase in ceded premiums ~~decreased~~reduced net written premiums by $7 million for the first three months of ~~2022,~~2023, compared with the same period of ~~2021.~~2022.

Commercial Lines Insurance Premiums


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Agency renewal written premiums	Agency renewal written premiums		$	970		$	898	8		Agency renewal written premiums	$	1,041	$	970	7
Agency new business written premiums	Agency new business written premiums		156			145		8		Agency new business written premiums	134		156		(14)
Other written premiums	Other written premiums		(30)			(24)		(25)		Other written premiums	(34)		(30)		(13)
Net written premiums	Net written premiums		1,096			1,019		8		Net written premiums	1,141		1,096		4
Unearned premium change	Unearned premium change		(134)			(133)		(1)		Unearned premium change	(85)		(134)		37
Earned premiums	Earned premiums		$	962		$	886	9		Earned premiums	$	1,056	$	962	10

•Combined ratio – The first-quarter 2023 commercial lines combined ratio ~~for~~increased by 8.1 percentage points, compared with the first quarter of 2022, ~~increased by 6.9 percentage points, compared with first-quarter 2021,~~ including ~~a decrease~~an increase of ~~2.8~~9.0 points in losses from catastrophes. ~~Underwriting results~~The first-quarter combined ratio also ~~included a higher ratio for loss experience for the current accident year and a lower level of favorable reserve development on prior accident years.~~

~~The ratio for~~increased 2.7 points from current accident year loss and loss expenses before catastrophe losses, ~~for commercial lines increased~~including an increase of 11.1 points in the ~~first three months~~IBNR portion and a decrease of ~~2022. That 61.2%~~8.4 points for the case incurred portion. Underwriting results also included a higher level of favorable reserve development on prior accident years and favorable effects from the underwriting expense ratio, ~~was 1.2 percentage points higher, compared with the 60.0%~~as discussed below. The current accident year ~~2021 ratio~~ratios were measured as of March 31 ~~2021, including an increase~~ of ~~5.1~~the respective years and included a first-quarter 2023 decrease of 1.6 percentage points in the ratio for large losses of $1$2 million or more per claim, discussed below.

When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends for inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company. Elevated inflation was a driver of higher losses and loss expenses as costs have increased significantly to repair damaged business property or autos that we insure, in addition to higher losses for liability coverages for some of our lines of business. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear.

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

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Page 44

coverages of $89 million increased $19 million or 27%, compared with the same period of 2022, including an increase of $15 million or 33% for the IBNR portion, while earned premiums of $127 million rose 10%. The first-quarter 2023 estimated combined ratio for commercial umbrella was 98%, compared with an estimated 90% for first-quarter 2022.

Commercial umbrella paid loss experience is inherently variable. The profile of coverage limits for policies in force at the end of 2022 included 43% with $1 million of coverage per policy, 91% with $5 million or less and 99% with $10 million or less of coverage. Our commercial umbrella insurance coverages have a strong record of profitability for us, including an estimated combined ratio averaging below 85% for the five years ending in 2022.

Catastrophe losses and loss expenses accounted for ~~1.4~~10.4 percentage points of the combined ratio for the first three months of ~~2022,~~2023, compared with ~~4.2~~1.4 percentage points for the same period a year ago. Through ~~2021,~~2022, the 10-year annual average for that catastrophe measure for the commercial lines segment was 5.5 percentage points, and the five-year annual average was ~~5.8~~6.2 percentage points.

The net effect of reserve development on prior accident years during the first three months of ~~2022~~2023 was favorable for commercial lines overall by ~~$18~~$32 million, compared with ~~$83~~$18 million for the same period in ~~2021.~~2022. For the first three months of ~~2022,~~2023, our workers' compensation and commercial ~~auto~~property lines of business were the main contributors to the commercial lines net favorable reserve development on prior accident years. The net favorable reserve development recognized during the first three months of ~~2022~~2023 for our commercial lines insurance segment was primarily for accident years ~~2020~~2022 and 2021 and was primarily due to lower-than-anticipated loss emergence on known claims. Reserve estimates are inherently uncertain as described in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page ~~52.~~53.

The commercial lines underwriting expense ratio ~~increased~~decreased for the first quarter of ~~2022,~~2023, compared with the same period a year ~~ago,~~ago. The decrease was primarily due to ~~an increase~~a decrease in profit-sharing commissions for ~~agencies and related expenses.~~agencies. The ratio also included ongoing expense management efforts and higher earned premiums.

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 38~~

Commercial Lines Insurance Losses Incurred by Size


(Dollars in millions, net of reinsurance)	(Dollars in millions, net of reinsurance)	Three months ended March 31,				(Dollars in millions, net of reinsurance)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		$	16			$	5		220		Current accident year losses greater than $5 million	$	30		$	16		88
Current accident year losses $1 million - $5 million			67				26			158
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	12			37			(68)
Large loss prior accident year reserve development	Large loss prior accident year reserve development		21				26			(19)		Large loss prior accident year reserve development	3			7			(57)
Total large losses incurred	Total large losses incurred		104				57			82		Total large losses incurred	45			60			(25)
Losses incurred but not reported	Losses incurred but not reported		38				39			(3)		Losses incurred but not reported	125			38			229
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		318				261			22		Other losses excluding catastrophe losses	335			362			(7)
Catastrophe losses	Catastrophe losses		11				35			(69)		Catastrophe losses	106			11			nm
Total losses incurred	Total losses incurred		$	471			$	392		20		Total losses incurred	$	611		$	471		30

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		1.7		%		0.6		%	1.1		Current accident year losses greater than $5 million	2.8		%	1.7		%	1.1
Current accident year losses $1 million - $5 million			6.9				2.9			4.0
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	1.1			3.8			(2.7)
Large loss prior accident year reserve development	Large loss prior accident year reserve development		2.1				3.0			(0.9)		Large loss prior accident year reserve development	0.3			0.7			(0.4)
Total large loss ratio	Total large loss ratio		10.7				6.5			4.2		Total large loss ratio	4.2			6.2			(2.0)
Losses incurred but not reported	Losses incurred but not reported		4.0				4.3			(0.3)		Losses incurred but not reported	11.8			4.0			7.8
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		33.0				29.4			3.6		Other losses excluding catastrophe losses	31.9			37.5			(5.6)
Catastrophe losses	Catastrophe losses		1.2				4.0			(2.8)		Catastrophe losses	10.0			1.2			8.8
Total loss ratio	Total loss ratio		48.9		%		44.2		%	4.7		Total loss ratio	57.9		%	48.9		%	9.0

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 45

We continue to monitor new losses and case reserve increases greater than $1$2 million for trends in factors such as initial reserve levels, loss cost inflation and claim settlement expenses. Our analysis continues to indicate no unexpected concentration of these large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. The first-quarter ~~2022~~2023 commercial lines total large losses incurred of ~~$104~~$45 million, net of reinsurance, ~~were higher~~was lower than the quarterly average of ~~$95~~$56 million during full-year ~~2021~~2022 and the ~~$57~~$60 million of total large losses incurred for the first quarter of ~~2021.~~2022. The ~~increase~~decrease in commercial lines large losses for the first three months of ~~2022~~2023 was primarily due to our commercial property line of business. The first-quarter ~~2022~~2023 ratio for commercial lines total large losses was ~~4.2~~2.0 percentage points ~~higher~~lower than last year's first-quarter ratio. We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1$2 million.

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 39~~

PERSONAL LINES INSURANCE RESULTS


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,				(Dollars in millions)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Earned premiums	Earned premiums		$	402			$	376		7		Earned premiums	$	464		$	402		15
Fee revenues	Fee revenues		1				1			0		Fee revenues	1			1			0
Total revenues	Total revenues		403				377			7		Total revenues	465			403			15
Loss and loss expenses from:	Loss and loss expenses from:											Loss and loss expenses from:
Current accident year before catastrophe losses	Current accident year before catastrophe losses		221				215			3		Current accident year before catastrophe losses	277			221			25
Current accident year catastrophe losses	Current accident year catastrophe losses		28				78			(64)		Current accident year catastrophe losses	140			28			400
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(13)				(17)			24		Prior accident years before catastrophe losses	(6)			(13)			54
Prior accident years catastrophe losses	Prior accident years catastrophe losses		(21)				(3)			(600)		Prior accident years catastrophe losses	(25)			(21)			(19)
Loss and loss expenses	Loss and loss expenses		215				273			(21)		Loss and loss expenses	386			215			80
Underwriting expenses	Underwriting expenses		123				107			15		Underwriting expenses	136			123			11
Underwriting profit (loss)	Underwriting profit (loss)		$	65			$	(3)		nm		Underwriting profit (loss)	$	(57)		$	65		nm

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year before catastrophe losses	Current accident year before catastrophe losses		55.0		%		57.3		%	(2.3)		Current accident year before catastrophe losses	59.9		%	55.0		%	4.9
Current accident year catastrophe losses	Current accident year catastrophe losses		6.9				20.6			(13.7)		Current accident year catastrophe losses	30.1			6.9			23.2
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(3.2)				(4.5)			1.3		Prior accident years before catastrophe losses	(1.3)			(3.2)			1.9
Prior accident years catastrophe losses	Prior accident years catastrophe losses		(5.2)				(0.8)			(4.4)		Prior accident years catastrophe losses	(5.4)			(5.2)			(0.2)
Loss and loss expenses	Loss and loss expenses		53.5				72.6			(19.1)		Loss and loss expenses	83.3			53.5			29.8
Underwriting expenses	Underwriting expenses		30.4				28.5			1.9		Underwriting expenses	29.2			30.4			(1.2)
Combined ratio	Combined ratio		83.9		%		101.1		%	(17.2)		Combined ratio	112.5		%	83.9		%	28.6

Combined ratio	Combined ratio		83.9		%		101.1		%	(17.2)		Combined ratio	112.5		%	83.9		%	28.6
Contribution from catastrophe losses and prior years reserve development	Contribution from catastrophe losses and prior years reserve development		(1.5)				15.3			(16.8)		Contribution from catastrophe losses and prior years reserve development	23.4			(1.5)			24.9
Combined ratio before catastrophe losses and prior years reserve development	Combined ratio before catastrophe losses and prior years reserve development		85.4		%		85.8		%	(0.4)		Combined ratio before catastrophe losses and prior years reserve development	89.1		%	85.4		%	3.7

Overview

Performance highlights for the personal lines segment include:

•Premiums – Personal lines earned premiums and net written premiums continued to grow during the first three months of ~~2022,~~2023, including increased new business and renewal written premiums that included higher average pricing. ~~Personal lines~~Cincinnati Private ClientSM net written premiums ~~from high net worth policies~~included in the personal lines insurance segment results totaled approximately ~~$176~~$233 million for the first ~~three months~~quarter of ~~2022,~~2023, compared with ~~$133~~$176 million for the same period of ~~2021.~~2022. Included in Cincinnati Private Client net written premiums for the respective periods were $19 million and $15 million from excess and surplus lines homeowner policies. The table below analyzes the primary components of premiums.

Agency renewal written premiums increased ~~10%~~17% for the first three months of ~~2022,~~2023, reflecting rate increases in selected states, a higher level of insured exposures and other factors such as higher policy retention rates and

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 46

changes in policy deductibles or mix of business. Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged homes.

We estimate that premium rates for our personal auto line of business increased at average percentages in the ~~low-single-digit~~mid-single-digit range during the first three months of ~~2022.~~2023. We plan to increase rates more aggressively in future quarters and we expect full-year 2023 written premiums will include an average rate increase of approximately 10% for our personal auto line of business. For our homeowner line of business, we estimate that premium rates for the first three months of ~~2022~~2023 increased at average percentages in the mid-single-digit range. For both our personal auto and homeowner lines of business, some individual policies experienced lower or higher rate changes based on each risk's specific characteristics and enhanced pricing precision enabled by predictive models.

Personal lines new business written premiums increased ~~13%~~$27 million or 52% for the first ~~three months~~quarter of ~~2022,~~2023, compared with the same period of ~~2021.~~2022. Approximately $13 million of the increase was from Cincinnati Private Client policies. We believe we maintained underwriting and pricing discipline ~~was maintained~~ in ~~recent quarters,~~Cincinnati Private Client markets and ~~growth was supported by~~in other personal lines markets as we expanded use of enhanced pricing precision ~~tools, including excess and surplus lines homeowner policies.~~tools.

Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program. For our personal lines insurance segment, an increase in 2023 ceded premiums ~~decreased~~reduced net written premiums by ~~less than $1~~$9 million for the first three months, ~~of 2022,~~ compared with the same period of ~~2021.~~

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 40~~

~~We continue working to enhance our responsiveness to marketplace changes and to help achieve our long-term objectives for personal lines growth and profitability.~~2022.

Personal Lines Insurance Premiums


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Agency renewal written premiums	Agency renewal written premiums		$	333		$	302	10		Agency renewal written premiums	$	388	$	333	17
Agency new business written premiums	Agency new business written premiums		52			46		13		Agency new business written premiums	79		52		52
Other written premiums	Other written premiums		(11)			(10)		(10)		Other written premiums	(19)		(11)		(73)
Net written premiums	Net written premiums		374			338		11		Net written premiums	448		374		20
Unearned premium change	Unearned premium change		28			38		(26)		Unearned premium change	16		28		(43)
Earned premiums	Earned premiums		$	402		$	376	7		Earned premiums	$	464	$	402	15

•Combined ratio – Our personal lines combined ratio for the first quarter of ~~2022 improved~~2023 increased by ~~17.2~~28.6 percentage points, compared with first-quarter ~~2021,~~2022, including ~~a lower~~an increase of 23.0 points in losses from catastrophes. The first-quarter 2023 combined ratio ~~for~~also included an increase of 4.9 percentage points from current accident year loss and loss expenses before catastrophe losses, with our personal auto and ~~a decrease~~other personal lines of ~~18.1 points in losses from catastrophes.~~

~~The ratio for~~business each representing approximately 2 points. Those current accident year loss and loss expenses before catastrophe losses for personal lines improved in the first three months of 2022. That 55.0% ratio was 2.3 percentage points lower, compared with the 57.3% accident year 2021 ratioratios were measured as of March 31 ~~2021, including an increase~~ of ~~3.2 percentage~~the respective years and included a three-month decrease of 0.3 points in the ratio for large losses of $1$2 million or more per claim, discussed below.

When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends in inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company. Elevated inflation was a driver of higher losses and loss expenses as costs have increased significantly to repair damaged autos or homes that we insure. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear. For example, for the first three months of 2023, personal auto incurred loss and loss expenses before catastrophe losses increased $24 million or 22%, compared with the same period of 2022, in part due to paid losses increasing $15 million or 18% while earned premiums rose 9%.

Catastrophe losses and loss expenses accounted for ~~1.7~~24.7 percentage points of the combined ratio for the first three months of ~~2022,~~2023, compared with ~~19.8 percentage~~1.7 points for the same period a year ago. The 10-year annual average catastrophe loss ratio for the personal lines segment through ~~2021~~2022 was ~~10.8~~10.6 percentage points, and the five-year annual average was 12.0 percentage points.

In addition to the average rate increases discussed above, we continue to refine our pricing to better match premiums to the risk of loss on individual policies. Improved pricing precision and broad-based rate increases are expected to help position the combined ratio at a profitable level over the long term. In addition, greater geographic diversification is expected to reduce the volatility of homeowner loss ratios attributable to weather-related catastrophe losses over time.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 47

The net effect of reserve development on prior accident years during the first ~~quarter~~three months of ~~2022~~2023 was favorable for personal lines overall by ~~$34~~$31 million, compared with ~~$20~~$34 million of favorable development for the ~~first three months~~same period of ~~2021.~~2022. Our homeowner line of business was the primary contributor to the personal lines net favorable reserve development for the first three months of ~~2022.~~2023. The net favorable reserve development was primarily due to lower-than-anticipated loss emergence on known claims. Reserve estimates are inherently uncertain as described in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page ~~52.~~53.

The personal lines underwriting expense ratio ~~increased~~decreased for the first ~~quarter~~three months of ~~2022,~~2023, compared with the same period a year ~~ago,~~ago. The decrease was primarily due to ~~an increase~~a decrease in profit-sharing commissions for ~~agencies and related expenses.~~agencies. The ~~ratio~~ratios also included ongoing expense management efforts and higher earned premiums.

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 41~~

Personal Lines Insurance Losses Incurred by Size


(Dollars in millions, net of reinsurance)	(Dollars in millions, net of reinsurance)	Three months ended March 31,				(Dollars in millions, net of reinsurance)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		$	7			$	—		nm		Current accident year losses greater than $5 million	$	6		$	7		(14)
Current accident year losses $1 million - $5 million			11				4			175
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	3			2			50
Large loss prior accident year reserve development	Large loss prior accident year reserve development		4				(1)			nm		Large loss prior accident year reserve development	6			2			200
Total large losses incurred	Total large losses incurred		22				3			nm		Total large losses incurred	15			11			36
Losses incurred but not reported	Losses incurred but not reported		(14)				41			nm		Losses incurred but not reported	27			(14)			nm
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		165				130			27		Other losses excluding catastrophe losses	187			176			6
Catastrophe losses	Catastrophe losses		6				74			(92)		Catastrophe losses	113			6			nm
Total losses incurred	Total losses incurred		$	179			$	248		(28)		Total losses incurred	$	342		$	179		91

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		1.7		%		—		%	1.7		Current accident year losses greater than $5 million	1.3		%	1.7		%	(0.4)
Current accident year losses $1 million - $5 million			2.7				1.2			1.5
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	0.6			0.5			0.1
Large loss prior accident year reserve development	Large loss prior accident year reserve development		1.1				(0.3)			1.4		Large loss prior accident year reserve development	1.4			0.5			0.9
Total large loss ratio	Total large loss ratio		5.5				0.9			4.6		Total large loss ratio	3.3			2.7			0.6
Losses incurred but not reported	Losses incurred but not reported		(3.6)				11.0			(14.6)		Losses incurred but not reported	5.9			(3.6)			9.5
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		41.2				34.4			6.8		Other losses excluding catastrophe losses	40.2			44.0			(3.8)
Catastrophe losses	Catastrophe losses		1.4				19.6			(18.2)		Catastrophe losses	24.3			1.4			22.9
Total loss ratio	Total loss ratio		44.5		%		65.9		%	(21.4)		Total loss ratio	73.7		%	44.5		%	29.2

We continue to monitor new losses and case reserve increases greater than $1$2 million for trends in factors such as initial reserve levels, loss cost inflation and claim settlement expenses. Our analysis continues to indicate no unexpected concentration of these large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. In the first quarter of ~~2022,~~2023, the personal lines total large loss ratio, net of reinsurance, was ~~4.6~~0.6 percentage points higher than last year's first quarter. The increase in personal lines large losses for the first three months of ~~2022~~2023 occurred primarily for umbrella coverage in our ~~homeowner~~other personal line of business. We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $1$2 million.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4248

EXCESS AND SURPLUS LINES INSURANCE RESULTS


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,				(Dollars in millions)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Earned premiums	Earned premiums		$	112			$	89		26		Earned premiums	$	127		$	112		13
Fee revenues	Fee revenues		1				—			nm		Fee revenues	—			1			(100)
Total revenues	Total revenues		113				89			27		Total revenues	127			113			12

Loss and loss expenses from:	Loss and loss expenses from:											Loss and loss expenses from:
Current accident year before catastrophe losses	Current accident year before catastrophe losses		70				54			30		Current accident year before catastrophe losses	88			70			26
Current accident year catastrophe losses	Current accident year catastrophe losses		1				1			0		Current accident year catastrophe losses	2			1			100
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(5)				4			nm		Prior accident years before catastrophe losses	(8)			(5)			(60)
Prior accident years catastrophe losses	Prior accident years catastrophe losses		—				—			0		Prior accident years catastrophe losses	(1)			—			nm
Loss and loss expenses	Loss and loss expenses		66				59			12		Loss and loss expenses	81			66			23
Underwriting expenses	Underwriting expenses		31				22			41		Underwriting expenses	33			31			6
Underwriting profit	Underwriting profit		$	16			$	8		100		Underwriting profit	$	13		$	16		(19)

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year before catastrophe losses	Current accident year before catastrophe losses		61.8		%		61.0		%	0.8		Current accident year before catastrophe losses	69.2		%	61.8		%	7.4
Current accident year catastrophe losses	Current accident year catastrophe losses		1.5				1.3			0.2		Current accident year catastrophe losses	1.5			1.5			0.0
Prior accident years before catastrophe losses	Prior accident years before catastrophe losses		(4.6)				4.7			(9.3)		Prior accident years before catastrophe losses	(6.2)			(4.6)			(1.6)
Prior accident years catastrophe losses	Prior accident years catastrophe losses		(0.4)				(0.3)			(0.1)		Prior accident years catastrophe losses	(0.3)			(0.4)			0.1
Loss and loss expenses	Loss and loss expenses		58.3				66.7			(8.4)		Loss and loss expenses	64.2			58.3			5.9
Underwriting expenses	Underwriting expenses		27.6				25.3			2.3		Underwriting expenses	25.7			27.6			(1.9)
Combined ratio	Combined ratio		85.9		%		92.0		%	(6.1)		Combined ratio	89.9		%	85.9		%	4.0

Combined ratio	Combined ratio		85.9		%		92.0		%	(6.1)		Combined ratio	89.9		%	85.9		%	4.0
Contribution from catastrophe losses and prior years reserve development	Contribution from catastrophe losses and prior years reserve development		(3.5)				5.7			(9.2)		Contribution from catastrophe losses and prior years reserve development	(5.0)			(3.5)			(1.5)
Combined ratio before catastrophe losses and prior years reserve development	Combined ratio before catastrophe losses and prior years reserve development		89.4		%		86.3		%	3.1		Combined ratio before catastrophe losses and prior years reserve development	94.9		%	89.4		%	5.5

Overview

Performance highlights for the excess and surplus lines segment include:

•Premiums – Excess and surplus lines net written premiums continued to grow during the first three months of ~~2022,~~2023, compared with the same period a year ago, primarily due to an increase in agency renewal written premiums. Renewal written premiums rose ~~24%~~13% for the three months ended March 31, ~~2022,~~2023, compared with the same period of ~~2021, reflecting the opportunity~~2022, largely due to ~~renew many accounts for the first time, as well as~~ higher renewal pricing. For the first three months of ~~2022,~~2023, excess and surplus lines policy renewals experienced estimated average price increases at percentages in the high-single-digit range. We measure average changes in excess and surplus lines renewal pricing as the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies.

New business written premiums produced by agencies increased by ~~24%~~6% for the first ~~quarter~~three months of ~~2022~~2023 compared with the same period of ~~2021,~~2022, as we continued to carefully underwrite each policy in a highly competitive market. Some of what we report as new business came from accounts that were not new to our agents. We believe our agents' seasoned accounts tend to be priced more accurately than business that may be less familiar to them.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4349

Excess and Surplus Lines Insurance Premiums


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Agency renewal written premiums	Agency renewal written premiums		$	94		$	76	24		Agency renewal written premiums	$	106	$	94	13
Agency new business written premiums	Agency new business written premiums		36			29		24		Agency new business written premiums	38		36		6
Other written premiums	Other written premiums		(6)			(6)		0		Other written premiums	(8)		(6)		(33)
Net written premiums	Net written premiums		124			99		25		Net written premiums	136		124		10
Unearned premium change	Unearned premium change		(12)			(10)		(20)		Unearned premium change	(9)		(12)		25
Earned premiums	Earned premiums		$	112		$	89	26		Earned premiums	$	127	$	112	13

•Combined ratio – The excess and surplus lines combined ratio ~~improved~~increased by ~~6.1~~4.0 percentage points for the first quarter of ~~2022,~~2023, compared with the same period of ~~2021,~~2022, primarily due to ~~favorable reserve development on prior~~higher current accident ~~years. The IBNR portion of the total~~year loss and loss ~~expense ratio~~expenses before catastrophe losses was 20.8 percentage points lower for the first three months of 2022, compared with the same period a year ago, while the paid portion was 10.0 points lower and the case incurred portion was 12.3 points higher.

losses. The ratio for current accident year loss and loss expenses before catastrophe losses ~~for excess and surplus lines increased in the first three months of 2022. That 61.8% ratio~~ was ~~0.8~~7.4 percentage points higher, compared with the ~~61.0%~~61.8% accident year ~~2021~~2022 ratio measured as of March 31, ~~2021,~~2022, including an increase of ~~2.4 percentage~~13.1 points infor the ~~ratio~~IBNR portion and a decrease of 5.7 points for ~~large losses of $1 million or more per claim, discussed below.~~the case incurred portion.

Excess and surplus lines net reserve development on prior accident years, as a ratio to earned premiums, was a favorable 6.5% for the first three months of 2023, compared with 5.0% for the first three months of ~~2022, compared with unfavorable net reserve development of 4.4% for the first three months of 2021.~~2022. The $5$9 million of net favorable reserve development recognized during the first three months of ~~2022~~2023 was primarily for accident ~~years prior to 2021.~~year 2022. The favorable reserve development was due primarily to lower-than-anticipated loss emergence on known claims. Reserve estimates are inherently uncertain as described in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page ~~52.~~53.

The excess and surplus lines underwriting expense ratio ~~increased~~decreased for the first three months of ~~2022,~~2023, compared with the same period of ~~2021, primarily~~2022, largely due to ~~an increase in commissions for agencies and related expenses. The ratio also included~~ ongoing expense management efforts and ~~higher earned premiums.~~premium growth outpacing growth in expenses.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4450

Excess and Surplus Lines Insurance Losses Incurred by Size


(Dollars in millions, net of reinsurance)	(Dollars in millions, net of reinsurance)	Three months ended March 31,				(Dollars in millions, net of reinsurance)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		$	—			$	—		0		Current accident year losses greater than $5 million	$	—		$	—		nm
Current accident year losses $1 million - $5 million			4				1			300
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	—			—			nm
Large loss prior accident year reserve development	Large loss prior accident year reserve development		—				(1)			100		Large loss prior accident year reserve development	—			—			nm
Total large losses incurred	Total large losses incurred		4				—			nm		Total large losses incurred	—			—			nm
Losses incurred but not reported	Losses incurred but not reported		12				22			(45)		Losses incurred but not reported	27			12			125
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		32				15			113		Other losses excluding catastrophe losses	28			36			(22)
Catastrophe losses	Catastrophe losses		1				1			0		Catastrophe losses	1			1			0
Total losses incurred	Total losses incurred		$	49			$	38		29		Total losses incurred	$	56		$	49		14

Ratios as a percent of earned premiums:	Ratios as a percent of earned premiums:									Pt. Change		Ratios as a percent of earned premiums:							Pt. Change
Current accident year losses greater than $5 million	Current accident year losses greater than $5 million		—		%		—		%	0.0		Current accident year losses greater than $5 million	—		%	—		%	0.0
Current accident year losses $1 million - $5 million			3.6				1.2			2.4
Current accident year losses $2 million - $5 million												Current accident year losses $2 million - $5 million	—			—			0.0
Large loss prior accident year reserve development	Large loss prior accident year reserve development		0.3				(1.7)			2.0		Large loss prior accident year reserve development	(0.3)			—			(0.3)
Total large loss ratio	Total large loss ratio		3.9				(0.5)			4.4		Total large loss ratio	(0.3)			—			(0.3)
Losses incurred but not reported	Losses incurred but not reported		10.6				24.8			(14.2)		Losses incurred but not reported	21.3			10.6			10.7
Other losses excluding catastrophe losses	Other losses excluding catastrophe losses		27.4				17.8			9.6		Other losses excluding catastrophe losses	22.2			31.3			(9.1)
Catastrophe losses	Catastrophe losses		1.1				1.0			0.1		Catastrophe losses	1.1			1.1			0.0
Total loss ratio	Total loss ratio		43.0		%		43.1		%	(0.1)		Total loss ratio	44.3		%	43.0		%	1.3

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4551

LIFE INSURANCE RESULTS


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Earned premiums	Earned premiums		$	72		$	69	4		Earned premiums	$	77	$	75	3
Fee revenues	Fee revenues		1			1		0		Fee revenues	2		1		100
Total revenues	Total revenues		73			70		4		Total revenues	79		76		4
Contract holders' benefits incurred	Contract holders' benefits incurred		83			80		4		Contract holders' benefits incurred	81		76		7
Investment interest credited to contract holders	Investment interest credited to contract holders		(27)			(26)		(4)		Investment interest credited to contract holders	(30)		(27)		(11)
Underwriting expenses incurred	Underwriting expenses incurred		19			18		6		Underwriting expenses incurred	20		20		0
Total benefits and expenses	Total benefits and expenses		75			72		4		Total benefits and expenses	71		69		3
Life insurance segment loss			$	(2)		$	(2)	0
Life insurance segment profit										Life insurance segment profit	$	8	$	7	14

Overview

The COVID-19 pandemic did not have a significant effect on our life insurance segment earned premiums or expenses for the first three months of 2022. However, the pandemic did contribute to a moderate increase in death claims in that time period. It is possible we may continue to experience higher than projected future death claims due to the pandemic.

Performance highlights for the life insurance segment include:

•Revenues – Revenues increased for the three months ended March 31, ~~2022,~~2023, compared with the same period a year ago, driven by higher earned premiums from term life insurance, our largest life insurance product line.

Net in-force life insurance policy face amounts increased 1% to ~~$78.372~~$81.057 billion at March 31, ~~2022,~~2023, from ~~$77.493~~$80.482 billion at year-end ~~2021.~~2022.

Fixed annuity deposits received for the three months ended March 31, ~~2022,~~2023, were $8$10 million, compared with ~~$17~~$8 million for the same period of ~~2021.~~2022. Fixed annuity deposits have a minimal impact to earned premiums because deposits received are initially recorded as liabilities. Profit is earned over time by way of interest rate spreads. We do not write variable or equity-indexed annuities.

Life Insurance Premiums


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Term life insurance	Term life insurance		$	54		$	51	6		Term life insurance	$	56	$	54	4
Whole life insurance	Whole life insurance		11			11		0		Whole life insurance	12		11		9
Universal life and other	Universal life and other		7			7		0		Universal life and other	9		10		(10)
Net earned premiums	Net earned premiums		$	72		$	69	4		Net earned premiums	$	77	$	75	3

•Profitability – Our life insurance segment typically reports a small profit or loss on a GAAP basis because profits from investment income spreads are included in our investment segment results. We include only investment income credited to contract holders (including interest assumed in life insurance policy reserve calculations) in our life insurance segment results. A $2profit of $8 million ~~loss~~ for our life insurance segment ~~was reported~~ in the first three months of ~~2022 and 2021. Favorable impacts from unlocking~~2023, compared with a profit of ~~interest rate actuarial assumptions in~~$7 million for the ~~first three months~~same period of 2022, ~~were mostly~~was primarily due to more favorable mortality experience, partially offset by less favorable ~~mortality experience compared to~~impacts from the ~~same period~~unlocking of ~~2021, due in part to pandemic-related death claims.~~market value discount rate assumptions associated with no-lapse guarantees.

Life insurance segment benefits and expenses consist principally of contract holders' (policyholders') benefits incurred related to traditional life and interest-sensitive products and operating expenses incurred, net of deferred acquisition costs. Total benefits increased in the first three months of ~~2022.~~2023 due to less favorable impacts from the unlocking of market value discount rate assumptions associated with no-lapse guarantees. Life policy and investment contract reserves increased with continued growth in net in-force life insurance policy face amounts ~~partially offset by favorable effects from the unlocking of interest rate actuarial assumptions.~~and a decrease in market value discount rates. Mortality results ~~increased,~~

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 46~~

decreased compared with the same period of ~~2021, and were above our~~ 2022, ~~projections, due~~ in part due to pandemic-related death ~~claims.~~claims incurred in the first three months of last year.

Underwriting expenses for the first three months of ~~2022 increased compared to~~2023 were consistent with the same period a year ~~ago, largely due to higher commission and general expense levels compared to the same period of 2021.~~ago.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 52

We recognize that assets under management, capital appreciation and investment income are integral to evaluating the success of the life insurance segment because of the long duration of life products. On a basis that includes investment income and investment gains or losses from life-insurance-related invested assets, the life insurance company reported net income of ~~$10~~$19 million for the three months ended March 31, ~~2022, and~~2023, compared with $17 million for the three months ended March 31, ~~2021.~~2022. The life insurance company portfolio had net after-tax investment gains of $1 million for the three months ended March 31, 2023, compared with net after-tax investment gains of less than $1 million for the three months ended March 31, 2022.

INVESTMENTS RESULTS

Overview

The investments segment contributes investment income and investment gains and losses to results of operations. Investments traditionally are our primary source of pretax and after-tax profits.

Investment Income

Pretax investment income grew 6%14% for the first quarter of ~~2022,~~2023, compared with the same period of ~~2021.~~2022. Interest income increased by $5$17 million for the first quarter, as net purchases of fixed-maturity securities in recent quarters and rising bond yields are working to generally offset ~~the continuing~~ effects of the low interest rate ~~environment. Higher~~environment of the past several years. Although dividend ~~income reflected rising dividend~~ rates generally are increasing more slowly, our minor asset allocation adjustments in our equity portfolio and net purchases of equity securities in recent quarters ~~helping~~helped dividend income to grow by $7$1 million for the three months ended March 31, ~~2022.~~2023.

Investments Results


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Total investment income, net of expenses	Total investment income, net of expenses		$	185		$	174	6		Total investment income, net of expenses	$	210	$	185	14
Investment interest credited to contract holders	Investment interest credited to contract holders		(27)			(26)		(4)		Investment interest credited to contract holders	(30)		(27)		(11)
Investment gains and losses, net	Investment gains and losses, net		(666)			504		nm		Investment gains and losses, net	106		(666)		nm
Investments profit (loss), pretax	Investments profit (loss), pretax		$	(508)		$	652	nm		Investments profit (loss), pretax	$	286	$	(508)	nm

We continue to consider the low interest rate environment that ~~has~~ prevailed in recent years as well as the potential for a continuation of ~~the recent spike in~~ both elevated inflation and higher bond yields as we position our portfolio. As bonds in our generally laddered portfolio mature or are called over the near term, we will reinvest with a balanced approach, keeping in mind our ~~long term~~long-term strategy and pursuing attractive risk-adjusted after-tax yields. The table below shows the average pretax yield-to-amortized cost associated with expected principal redemptions for our fixed-maturity portfolio. The expected principal redemptions are based on par amounts and include dated maturities, calls and prefunded municipal bonds that we expect will be called during each respective time period.

(Dollars in millions) % Yield Principal redemptions
At March 31, 2022
Fixed-maturity pretax yield profile:
Expected to mature during the remainder of 2022 3.69 % $ 554
Expected to mature during 2023 3.83 788
Expected to mature during 2024 4.31 1,001
Average yield and total expected maturities from the remainder of 2022 through 2024 4.00 $ 2,343


(Dollars in millions)	% Yield		Principal redemptions
At March 31, 2023
Fixed-maturity pretax yield profile:
Expected to mature during the remainder of 2023	4.00	%	$	559
Expected to mature during 2024	4.47		1,176
Expected to mature during 2025	4.65		1,321
Average yield and total expected maturities from the remainder of 2023 through 2025	4.46		$	3,056

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4753

The table below shows the average pretax yield-to-amortized cost for fixed-maturity securities acquired during the periods indicated. The average yield for total fixed-maturity securities acquired during the first three months of ~~2022~~2023 was ~~lower~~higher than the ~~4.02%~~4.22% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of ~~2021.~~2022. Our fixed-maturity portfolio's average yield of ~~4.01%~~4.25% for the first three months of ~~2022,~~2023, from the investment income table below, was also ~~lower~~higher than the ~~4.02%~~4.22% yield for the year-end ~~2021~~2022 fixed-maturities portfolio.


		Three months ended March 31,						Three months ended March 31,
			2022		2021				2023		2022
Average pretax yield-to-amortized cost on new fixed-maturities:	Average pretax yield-to-amortized cost on new fixed-maturities:						Average pretax yield-to-amortized cost on new fixed-maturities:
Acquired taxable fixed-maturities	Acquired taxable fixed-maturities		3.79	%	3.74	%	Acquired taxable fixed-maturities		6.55	%	3.79	%
Acquired tax-exempt fixed-maturities	Acquired tax-exempt fixed-maturities		2.71		2.94		Acquired tax-exempt fixed-maturities		4.20		2.71
Average total fixed-maturities acquired	Average total fixed-maturities acquired		3.64		3.71		Average total fixed-maturities acquired		6.18		3.64

While our bond portfolio more than covers our insurance reserve liabilities, we believe our diversified common stock portfolio of mainly blue chip, dividend-paying companies represents one of our best investment opportunities for the long term. We discussed our portfolio strategies in our ~~2021~~2022 Annual Report on Form 10-K, Item 1, Investments Segment, Page 24, and Item 7, Investments Outlook, Page 90. We discuss risks related to our investment income and our fixed-maturity and equity investment portfolios in this quarterly report Item 3, Quantitative and Qualitative Disclosures About Market Risk.

The table below provides details about investment income. Average yields in this table are based on the average invested asset and cash amounts indicated in the table, using fixed-maturity securities valued at amortized cost and all other securities at fair value.


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,				(Dollars in millions)					Three months ended March 31,
			2022				2021			% Change			2023			2022			% Change
Investment income:	Investment income:											Investment income:
Interest	Interest		$	123			$	118		4		Interest	$	140		$	123		14
Dividends	Dividends		65				58			12		Dividends	66			65			2
Other	Other		1				2			(50)		Other	7			1			600
Less investment expenses	Less investment expenses		4				4			0		Less investment expenses	3			4			(25)
Investment income, pretax	Investment income, pretax		185				174			6		Investment income, pretax	210			185			14
Less income taxes	Less income taxes		29				27			7		Less income taxes	34			29			17
Total investment income, after-tax	Total investment income, after-tax		$	156			$	147		6		Total investment income, after-tax	$	176		$	156		13

Investment returns:	Investment returns:											Investment returns:
Average invested assets plus cash and cash equivalents	Average invested assets plus cash and cash equivalents		$	24,677			$	21,776				Average invested assets plus cash and cash equivalents	$	24,649		$	24,677
Average yield pretax	Average yield pretax		3.00		%		3.20		%			Average yield pretax	3.41		%	3.00		%
Average yield after-tax	Average yield after-tax		2.53				2.70					Average yield after-tax	2.86			2.53
Effective tax rate	Effective tax rate		15.6				15.5					Effective tax rate	16.1			15.6

Fixed-maturity returns:	Fixed-maturity returns:											Fixed-maturity returns:
Average amortized cost	Average amortized cost		$	12,280			$	11,395				Average amortized cost	$	13,171		$	12,280
Average yield pretax	Average yield pretax		4.01		%		4.14		%			Average yield pretax	4.25		%	4.01		%
Average yield after-tax	Average yield after-tax		3.33				3.45					Average yield after-tax	3.52			3.33
Effective tax rate	Effective tax rate		17.0				16.7					Effective tax rate	17.3			17.0

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4854

Total Investment Gains and Losses

Investment gains and losses are recognized on the sale of investments, for certain changes in fair values of securities even though we continue to hold the securities or as otherwise required by GAAP. The change in fair value for equity securities still held are included in investment gains and losses and also in net income. The change in unrealized gains or losses for fixed-maturity securities are included as a component of other comprehensive income (OCI). Accounting requirements for the allowance for credit losses for the fixed-maturity portfolio are disclosed in our ~~2021~~2022 Annual Report on Form 10-K, Item 8, Note 1, Summary of Significant Accounting Policies, Page 127.

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


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021				2023		2022
Investment gains and losses:	Investment gains and losses:							Investment gains and losses:
Equity securities:	Equity securities:							Equity securities:
Investment gains and losses on securities sold, net	Investment gains and losses on securities sold, net		$	8		$	4	Investment gains and losses on securities sold, net		$	(1)	$	8
Unrealized gains and losses on securities still held, net	Unrealized gains and losses on securities still held, net		(683)			487		Unrealized gains and losses on securities still held, net		106		(683)

Subtotal	Subtotal		(675)			491		Subtotal		105		(675)
Fixed maturities:	Fixed maturities:							Fixed maturities:
Gross realized gains	Gross realized gains		4			3		Gross realized gains		1		4
Gross realized losses	Gross realized losses		(1)			—		Gross realized losses		(1)		(1)

Subtotal	Subtotal		3			3		Subtotal		—		3
Other	Other		6			10		Other		1		6
Total investment gains and losses reported in net income	Total investment gains and losses reported in net income		(666)			504		Total investment gains and losses reported in net income		106		(666)

Change in unrealized investment gains and losses:	Change in unrealized investment gains and losses:							Change in unrealized investment gains and losses:

Fixed maturities	Fixed maturities		(746)			(196)		Fixed maturities		163		(746)

Total	Total		$	(1,412)		$	308	Total		$	269	$	(1,412)

Of the ~~4,362~~4,606 fixed-maturity securities in the portfolio, ~~none~~26 securities were trading below 70% of amortized cost at March 31, ~~2022.~~2023. Our asset impairment committee regularly monitors the portfolio, including a quarterly review of the entire portfolio for potential credit ~~losses, resulting in charges disclosed in the table below.~~losses. We believe that if liquidity in the markets were to significantly deteriorate or economic conditions were to significantly weaken, we could experience declines in portfolio values and possibly increases in the allowance for credit losses or write-downs to fair value.

There were no fixed-maturity securities written down to fair value due to an intention to be sold and less than $1 million in changes in the allowance for credit losses for the first three months of 2023. Fixed-maturity securities written down to fair value due to an intention to be sold and changes in the allowance for credit losses were each less than $1 million for the first three months of 2022. ~~We had no fixed-maturity securities written down to fair value due to an intention to be sold and no allowance for credit losses for the first three months of 2021.~~

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 4955

OTHER

We report as Other the noninvestment operations of the parent company and a noninsurance subsidiary, CFC Investment Company. We also report as Other the underwriting results of Cincinnati Re and Cincinnati Global, including earned premiums, loss and loss expenses and underwriting expenses in the table below.

Total revenues for the first three months of ~~2022~~2023 for our Other operations increased, compared with the same period of ~~2021,~~2022, primarily due to earned premiums from Cincinnati Re and Cincinnati Global, with increases of ~~$18~~$40 million and ~~less than $1~~$12 million, respectively. Cincinnati Re had $150 million of earned premiums for the first three months of 2023 and generated an underwriting profit of $31 million. Cincinnati Global had $44 million of earned premiums for the first three months of 2023 and generated an underwriting profit of $5 million. Total expenses for Other increased for the first three months of ~~2022,~~2023, primarily due to loss and loss expenses and underwriting expenses in aggregate from Cincinnati Re and Cincinnati Global.

Other profit ~~or loss~~ in the table below represents profit or losses before income taxes. ~~Other~~For the first three months of 2022, total other loss ~~resulted primarily from~~was driven by interest expense from debt of the parent company.


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Interest and fees on loans and leases	Interest and fees on loans and leases		$	1		$	1	0		Interest and fees on loans and leases	$	2	$	1	100
Earned premiums	Earned premiums		142			124		15		Earned premiums	194		142		37
Other revenues	Other revenues		1			1		0		Other revenues	1		1		0
Total revenues	Total revenues		144			126		14		Total revenues	197		144		37
Interest expense	Interest expense		13			13		0		Interest expense	14		13		8
Loss and loss expenses	Loss and loss expenses		89			88		1		Loss and loss expenses	102		89		15
Underwriting expenses	Underwriting expenses		45			38		18		Underwriting expenses	56		45		24
Operating expenses	Operating expenses		4			4		0		Operating expenses	5		4		25
Total expenses	Total expenses		151			143		6		Total expenses	177		151		17
Total other loss			$	(7)		$	(17)	59
Total other income (loss)										Total other income (loss)	$	20	$	(7)	nm

TAXES

We had ~~$87~~$43 million of income tax expense for the three months ended March 31, 2023, compared with $85 million of income tax benefit for the ~~three months ended March 31, 2022, compared with $148 million of income tax expense for the~~ same period of ~~2021.~~2022. The effective tax rate for the three months ended March 31, ~~2022,~~2023, was ~~24.2%~~16.0% compared with ~~19.3%~~24.2% for the same period last year. The change in our effective tax rate between periods was primarily due to large changes in our net investment gains and losses included in income for the ~~periods.~~periods and changes in underwriting income.

Historically, we have pursued a strategy of investing some portion of cash flow in tax-advantaged fixed-maturity and equity securities to minimize our overall tax liability and maximize after-tax earnings. See Tax-Exempt Fixed Maturities in this quarterly report Item 3, Quantitative and Qualitative Disclosures About Market Risk for further discussion on municipal bond purchases in our fixed-maturity investment portfolio. For tax years after 2017, for our property casualty insurance subsidiaries, approximately 75% of interest from tax-advantaged, fixed-maturity investments and approximately 40% of dividends from qualified equities are exempt from federal tax after applying proration. For our noninsurance companies, the dividend received deduction exempts 50% of dividends from qualified equities. Our life insurance company does not own tax-advantaged, fixed-maturity investments or equities subject to the dividend received deduction. Details about our effective tax rate are in this quarterly report Item 1, Note 9, Income Taxes.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5056

LIQUIDITY AND CAPITAL RESOURCES

At March 31, ~~2022,~~2023, shareholders' equity was ~~$12.092~~$10.741 billion, compared with ~~$13.105~~$10.562 billion at December 31, ~~2021.~~2022. Total debt was ~~$838~~$839 million at March 31, ~~2022, down $5 million from~~2023, matching December 31, ~~2021.~~2022. At March 31, ~~2022,~~2023, cash and cash equivalents totaled ~~$987~~$955 million, compared with ~~$1.139~~$1.264 billion at December 31, ~~2021.~~2022.

~~The pandemic did not have a significant effect on our cash flows for the first three months of 2022.~~ In addition to our historically positive operating cash flow to meet the needs of operations, we have the ability to slow investing activities or sell a portion of our high-quality, liquid investment portfolio if such need arises. We also have additional capacity to borrow on our revolving short-term line of credit, as described further below.

SOURCES OF LIQUIDITY

Subsidiary Dividends

Our lead insurance subsidiary declared dividends of ~~$504~~$142 million to the parent company in the first three months of ~~2022,~~2023, compared with ~~$158~~$504 million for the same period of ~~2021.~~2022. For full-year ~~2021,~~2022, our lead insurance subsidiary paid dividends totaling ~~$583~~$729 million to the parent company. State of Ohio regulatory requirements restrict the dividends our insurance subsidiary can pay. For full-year ~~2022,~~2023, total dividends that our insurance subsidiary can pay to our parent company without regulatory approval are approximately ~~$929~~$651 million.

Investing Activities

Investment income is a source of liquidity for both the parent company and its insurance subsidiaries. We continue to focus on portfolio strategies to balance near-term income generation and long-term book value growth.

Parent company obligations can be funded with income on investments held at the parent-company level or through sales of securities in that portfolio, although our investment philosophy seeks to compound cash flows over the long term. These sources of capital can help minimize subsidiary dividends to the parent company, protecting insurance subsidiary capital.

For a discussion of our historic investment strategy, portfolio allocation and quality, see our ~~2021~~2022 Annual Report on Form 10-K, Item 1, Investments Segment, Page 24.

Insurance Underwriting

Our property casualty and life insurance underwriting operations provide liquidity because we generally receive premiums before paying losses under the policies purchased with those premiums. After satisfying our cash requirements, we use excess cash flows for investment, increasing future investment income.

Historically, cash receipts from property casualty and life insurance premiums, along with investment income, have been more than sufficient to pay claims, operating expenses and dividends to the parent company.

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


(Dollars in millions)	(Dollars in millions)	Three months ended March 31,			(Dollars in millions)				Three months ended March 31,
			2022			2021		% Change			2023		2022		% Change
Premiums collected	Premiums collected		$	1,714		$	1,523	13		Premiums collected	$	1,842	$	1,714	7
Loss and loss expenses paid	Loss and loss expenses paid		(890)			(705)		(26)		Loss and loss expenses paid	(1,046)		(890)		(18)
Commissions and other underwriting expenses paid	Commissions and other underwriting expenses paid		(711)			(571)		(25)		Commissions and other underwriting expenses paid	(710)		(711)		—
Cash flow from underwriting	Cash flow from underwriting		113			247		(54)		Cash flow from underwriting	86		113		(24)
Investment income received	Investment income received		128			121		6		Investment income received	147		128		15
Cash flow from operations	Cash flow from operations		$	241		$	368	(35)		Cash flow from operations	$	233	$	241	(3)

Collected premiums for property casualty insurance rose ~~$191~~$128 million during the first three months of ~~2022,~~2023, compared with the same period in ~~2021.~~2022. Loss and loss expenses paid for the ~~2022~~2023 period increased $$156~~185~~ million. Commissions and other underwriting expenses paid ~~increased~~ ~~$140~~ ~~million.~~remained relatively unchanged compared with 2022.

~~Cincinnati Financial Corporation First-Quarter 2022 10-Q~~

~~Page 51~~

We discuss our future obligations for claims payments and for underwriting expenses in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Obligations, Page 96.

Cincinnati Financial Corporation First-Quarter 2023 10-Q

Page 57

Capital Resources

At March 31, ~~2022,~~2023, our debt-to-total-capital ratio was ~~6.5%~~7.2%, considerably below our 35% covenant threshold, with $789 million in long-term debt and ~~$49~~$50 million in borrowing on our revolving short-term line of credit. At March 31, 2022, ~~$251~~$250 million was available for future cash management needs as part of the general provisions of the line of credit agreement, with another $300 million available as part of an accordion feature. Based on our capital requirements at March 31, ~~2022,~~2023, we do not anticipate a material increase in debt levels exceeding the available line of credit amount during the year. As a result, we expect changes in our debt-to-total-capital ratio to continue to be largely a function of the contribution of unrealized investment gains or losses to shareholders' equity. We have an unsecured letter of credit agreement which provides a portion of the capital needed to support Cincinnati Global's obligations at Lloyd's. The amount of this unsecured letter of credit agreement waswas $94 m~~illion~~million at March 31, ~~2022,~~2023, with no amounts drawn.

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

We provide details of our three long-term notes in this quarterly report Item 1, Note 3, Fair Value Measurements. None of the notes are encumbered by rating triggers.

Four independent ratings firms award insurer financial strength ratings to our property casualty insurance companies and three firms rate our life insurance company. Those firms made no changes to our parent company debt ratings during the first three months of ~~2022.~~2023. Our debt ratings are discussed in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Liquidity and Capital Resources, Long-Term Debt, Page 95.

Off-Balance Sheet Arrangements

We do not use any special-purpose financing vehicles or have any undisclosed off-balance sheet arrangements (as that term is defined in applicable SEC rules) that are reasonably likely to have a current or future material effect on the company's financial condition, results of operation, liquidity, capital expenditures or capital resources. Similarly, the company holds no fair-value contracts for which a lack of marketplace quotations would necessitate the use of fair-value techniques.

USES OF LIQUIDITY

Our parent company and insurance subsidiary have contractual obligations and other commitments. In addition, one of our primary uses of cash is to enhance shareholder return.

Contractual Obligations

We estimated our future contractual obligations as of December 31, ~~2021,~~2022, in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Contractual Obligations, Page 96. There have been no material changes to our estimates of future contractual obligations since our ~~2021~~2022 Annual Report on Form 10-K.

Other Commitments

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

•Commissions – Commissions paid were ~~$499 million~~$497 billion in the first three months of ~~2022.~~2023. Commission payments generally track with written premiums, except for annual profit-sharing commissions typically paid during the first quarter of the year.

•Other underwriting expenses – Many of our underwriting expenses are not contractual obligations, but reflect the ongoing expenses of our business. Noncommission underwriting expenses paid were ~~$212~~$213 million in the first three months of ~~2022.~~2023.

There were no contributions to our qualified pension plan during the first three months of ~~2022.~~2023.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5258

Investing Activities

After fulfilling operating requirements, we invest cash flows from underwriting, investment and other corporate activities in fixed-maturity and equity securities on an ongoing basis to help achieve our portfolio objectives. We discuss our investment strategy and certain portfolio attributes in this quarterly report Item 3, Quantitative and Qualitative Disclosures About Market Risk.

Uses of Capital

Uses of cash to enhance shareholder return include dividends to ~~shareholders.~~shareholders and shares acquired under our repurchase program. In January ~~2022,~~2023, the board of directors declared regular quarterly cash dividends of 6975 cents per share for an indicated annual rate of ~~$2.76~~$3.00 per share. During the first three months of ~~2022,~~2023, we used ~~$99~~$106 million to pay cash dividends to shareholders.

PROPERTY CASUALTY INSURANCE LOSS AND LOSS EXPENSE RESERVES

For the business lines in the commercial and personal lines insurance segments, and in total for the excess and surplus lines insurance segment and other property casualty insurance operations, the following table details gross reserves among case, IBNR (incurred but not reported) and loss expense reserves, net of salvage and subrogation reserves. Reserving practices are discussed in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Property Casualty Loss and Loss Expense Obligations and Reserves, Page 97.

Total gross reserves at March 31, ~~2022,~~2023, increased ~~$58~~$290 million compared with December 31, ~~2021.~~2022. Case loss reserves ~~decreased~~increased by $4$88 million, IBNR loss reserves increased by ~~$45~~$145 million and loss expense reserves increased by ~~$17~~$57 million. The total gross increase was primarily due to our commercial casualty, ~~line~~commercial property and homeowner lines of business and also ~~Cincinnati Re.~~our excess and surplus lines insurance segment.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5359

Property Casualty Gross Reserves


(Dollars in millions)	(Dollars in millions)	Loss reserves					Loss expense reserves				Total gross reserves						(Dollars in millions)			Loss reserves									Loss expense reserves			Total gross reserves
		Case reserves		IBNR reserves									Percent of total					Case reserves				IBNR reserves									Percent of total
At March 31, 2022						Total gross reserves
At March 31, 2023															At March 31, 2023					Case reserves					IBNR reserves							Loss expense reserves		Total gross reserves	Percent of total
Commercial lines insurance:	Commercial lines insurance:																														Commercial lines insurance:
Commercial casualty	Commercial casualty	$	1,045	$	791				$	710			$	2,546			34.9	%	Commercial casualty				$	1,117			$	1,046									$	746		33.7	%
Commercial property	Commercial property	348		52			68				468				6.4		Commercial property			427					191				69						687				8.0
Commercial auto	Commercial auto	420		218			123				761				10.5		Commercial auto			430					282				138				850			9.9
Workers' compensation	Workers' compensation	426		518			87				1,031				14.1		Workers' compensation			449					517				90			1,056			12.2
Other commercial	Other commercial	101		10			120				231				3.2		Other commercial			99					18				131			248			2.9
Subtotal	Subtotal	2,340		1,589			1,108				5,037				69.1		Subtotal			2,522					2,054				1,174			5,750			66.7
Personal lines insurance:	Personal lines insurance:																Personal lines insurance:
Personal auto	Personal auto	206		54			58				318				4.4		Personal auto			215					79				68			362			4.2
Homeowner	Homeowner	168		74			42				284				3.9		Homeowner			227					148				49			424			4.9
Other personal	Other personal	82		88			5				175				2.4		Other personal			91					97				5			193			2.3
Subtotal	Subtotal	456		216			105				777				10.7		Subtotal			533					324				122			979			11.4
Excess and surplus lines	Excess and surplus lines	249		198			163				610				8.4		Excess and surplus lines			306					282				208			796			9.2
Cincinnati Re	Cincinnati Re	133		483			4				620				8.5		Cincinnati Re			148					686				6			840			9.7
Cincinnati Global	Cincinnati Global	149		92			2				243				3.3		Cincinnati Global			155					103				3			261			3.0
Total	Total	$	3,327	$	2,578		$	1,382			$	7,287			100.0	%	Total			$	3,664				$	3,449			$	1,513		$	8,626		100.0		%
At December 31, 2021
At December 31, 2022																	At December 31, 2022
Commercial lines insurance:	Commercial lines insurance:																Commercial lines insurance:
Commercial casualty	Commercial casualty	$	1,059	$	734		$	704			$	2,497			34.5	%	Commercial casualty			$	1,163				$	938			$	722		$	2,823		33.9		%
Commercial property	Commercial property	357		82			62				501				6.9		Commercial property			301					256				71			628			7.5
Commercial auto	Commercial auto	419		220			124				763				10.6		Commercial auto			449					258				131			838			10.1
Workers' compensation	Workers' compensation	442		503			85				1,030				14.3		Workers' compensation			434					521				85			1,040			12.4
Other commercial	Other commercial	91		9			116				216				3.0		Other commercial			98					16				125			239			2.9
Subtotal	Subtotal	2,368		1,548			1,091				5,007				69.3		Subtotal			2,445					1,989				1,134			5,568			66.8
Personal lines insurance:	Personal lines insurance:																Personal lines insurance:
Personal auto	Personal auto	211		53			60				324				4.5		Personal auto			222					64				64			350			4.2
Homeowner	Homeowner	168		102			44				314				4.3		Homeowner			189					138				49			376			4.5
Other personal	Other personal	84		87			5				176				2.4		Other personal			99					86				5			190			2.3
Subtotal	Subtotal	463		242			109				814				11.2		Subtotal			510					288				118			916			11.0
Excess and surplus lines	Excess and surplus lines	233		186			158				577				8.0		Excess and surplus lines			302					256				195			753			9.0
Cincinnati Re	Cincinnati Re	117		460			5				582				8.1		Cincinnati Re			156					639				6			801			9.6
Cincinnati Global	Cincinnati Global	150		97			2				249				3.4		Cincinnati Global			163					132				3			298			3.6
Total	Total	$	3,331	$	2,533		$	1,365			$	7,229			100.0	%	Total			$	3,576				$	3,304			$	1,456		$	8,336		100.0		%

LIFE POLICY AND INVESTMENT CONTRACT RESERVES

Gross life policy and investment contract reserves were ~~$3.027~~$3.059 billion at March 31, ~~2022,~~2023, compared with ~~$3.014~~$3.015 billion at year-end ~~2021,~~2022, reflecting continued growth in life insurance policies in ~~force.~~force and a decrease in market value discount rates. We ~~discuss~~discussed our life insurance reserving practices in our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Life Insurance Policyholder Obligations and Reserves, Page ~~103.~~103, and updated that disclosure in this quarterly report Item 1, Note 1, Accounting Policies.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5460

OTHER MATTERS

SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are discussed in our ~~2021~~2022 Annual Report on Form 10-K, Item 8, Note 1, Summary of Significant Accounting Policies, Page 127, and updated in this quarterly report Item 1, Note 1, Accounting Policies.

In conjunction with those discussions, in the Management's Discussion and Analysis in the ~~2021~~2022 Annual Report on Form 10-K, management reviewed the estimates and assumptions used to develop reported amounts related to the most significant policies. Management discussed the development and selection of those accounting estimates with the audit committee of the board of directors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our greatest exposure to market risk is through our investment portfolio. Market risk is the potential for a decrease in securities' fair value resulting from broad yet uncontrollable forces such as: inflation, economic growth or recession, interest rates, world political conditions or other widespread unpredictable events. It is comprised of many individual risks that, when combined, create a macroeconomic impact.

Our view of potential risks and our sensitivity to such risks is discussed in our ~~2021~~2022 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 ~~$23.051~~$22.645 billion at March 31, ~~2022, down $1.286 billion~~2023, up $672 million from year-end ~~2021,~~2022, including a ~~$646~~$546 million ~~decrease~~increase in the fixed-maturity portfolio and a ~~$640~~$126 million ~~decrease~~increase in the equity portfolio.


(Dollars in millions)	(Dollars in millions)	At March 31, 2022								At December 31, 2021								(Dollars in millions)	At March 31, 2023								At December 31, 2022
		Cost or amortized cost		Percent of total		Fair value		Percent of total		Cost or amortized cost		Percent of total		Fair value		Percent of total			Cost or amortized cost		Percent of total		Fair value		Percent of total		Cost or amortized cost		Percent of total		Fair value		Percent of total
Taxable fixed maturities	Taxable fixed maturities	$	8,470	51.3	%	$	8,467	36.7	%	$	8,344	51.0	%	$	8,858	36.4	%	Taxable fixed maturities	$	9,367	53.0	%	$	8,749	38.6	%	$	9,020	52.2	%	$	8,299	37.8	%
Tax-exempt fixed maturities	Tax-exempt fixed maturities	3,860		23.4		3,909		17.0		3,886		23.8		4,164		17.1		Tax-exempt fixed maturities	3,995		22.6		3,929		17.4		3,959		22.9		3,833		17.4
Common equities	Common equities	3,743		22.7		10,245		44.4		3,697		22.6		10,862		44.6		Common equities	3,862		21.9		9,589		42.3		3,851		22.3		9,454		43.0
Nonredeemable preferred equities	Nonredeemable preferred equities	424		2.6		430		1.9		424		2.6		453		1.9		Nonredeemable preferred equities	449		2.5		378		1.7		443		2.6		387		1.8

Total	Total	$	16,497	100.0	%	$	23,051	100.0	%	$	16,351	100.0	%	$	24,337	100.0	%	Total	$	17,673	100.0	%	$	22,645	100.0	%	$	17,273	100.0	%	$	21,973	100.0	%

At March 31, ~~2022,~~2023, substantially all of our consolidated investment portfolio, measured at fair value, ~~are~~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 ~~$249~~$352 million of private equity investments, ~~$35~~$60 million of real estate through direct property ownership and development projects in the United States, ~~$34~~$36 million in Lloyd's deposits and $30 million of life policy loans at March 31, ~~2022.~~2023.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5561

FIXED-MATURITY SECURITIES INVESTMENTS

By maintaining a well-diversified fixed-maturity portfolio, we attempt to reduce overall risk. We invest new money in the bond market on a regular basis, targeting what we believe to be optimal risk-adjusted, after-tax yields. Risk, in this context, includes interest rate, call, reinvestment rate, credit and liquidity risk. We do not make a concerted effort to alter duration on a portfolio basis in response to anticipated movements in interest rates. 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 three months of ~~2022,~~2023, the ~~decrease~~increase in fair value of our fixed-maturity portfolio reflected net purchases of securities ~~offset by~~and a decrease in net unrealized ~~gains,~~losses, primarily due to ~~an increase~~a decrease in U.S. Treasury yields ~~and to a lesser degree~~that was partially offset by a widening of corporate credit spreads. At March 31, ~~2022,~~2023, our fixed-maturity portfolio with an average rating of ~~A3/~~A2/A was valued at ~~100.4%~~94.9% of its amortized cost, compared with ~~106.5%~~93.5% at December 31, ~~2021.~~2022.

At March 31, ~~2022,~~2023, our investment-grade and noninvestment-grade fixed-maturity securities represented ~~79.9%~~80.4% and ~~5.1%~~4.1% of the portfolio, respectively. The remaining ~~15.0%~~15.5% represented fixed-maturity securities that were not rated by Moody's or S&P Global Ratings.

Attributes of the fixed-maturity portfolio include:


		At March 31, 2022		At December 31, 2021			At March 31, 2023		At December 31, 2022
Weighted average yield-to-amortized cost	Weighted average yield-to-amortized cost	4.00	%	4.02	%	Weighted average yield-to-amortized cost	4.39	%	4.22	%
Weighted average maturity	Weighted average maturity	7.9	yrs	8.0	yrs	Weighted average maturity	7.6	yrs	7.4	yrs
Effective duration	Effective duration	4.9	yrs	4.8	yrs	Effective duration	4.6	yrs	4.7	yrs

We discuss maturities of our fixed-maturity portfolio in our ~~2021~~2022 Annual Report on Form 10-K, Item 8, Note 2, Investments, Page 134, and in this quarterly report Item 2, Investments Results.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5662

TAXABLE FIXED MATURITIES

Our taxable fixed-maturity portfolio, with a fair value of ~~$8.467~~$8.749 billion at March 31, ~~2022,~~2023, included:


(Dollars in millions)	(Dollars in millions)	At March 31, 2022		At December 31, 2021		(Dollars in millions)	At March 31, 2023		At December 31, 2022
Investment-grade corporate	Investment-grade corporate	$	6,535	$	6,807	Investment-grade corporate	$	6,579	$	6,369
States, municipalities and political subdivisions	States, municipalities and political subdivisions	901		931		States, municipalities and political subdivisions	820		789
Noninvestment-grade corporate	Noninvestment-grade corporate	614		690		Noninvestment-grade corporate	512		500
Government-sponsored enterprises						Government-sponsored enterprises	387		183
Commercial mortgage-backed	Commercial mortgage-backed	266		273		Commercial mortgage-backed	225		234
United States government	United States government	112		123		United States government	195		191
Foreign government	Foreign government	25		26		Foreign government	31		33
Government-sponsored enterprises		14		8

Total	Total	$	8,467	$	8,858	Total	$	8,749	$	8,299

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 ~~0.9%~~1.3% of the taxable fixed-maturity portfolio at March 31, ~~2022.~~2023. Our investment-grade corporate bonds had an average rating of ~~Baa2~~Baa1 by Moody's or BBB by S&P Global Ratings and represented ~~77.2%~~75.2% of the taxable fixed-maturity portfolio's fair value at March 31, ~~2022,~~2023, compared with ~~76.9%~~76.7% at year-end ~~2021.~~2022.

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

March 31, ~~2022,~~2023, was the financial sector. It represented ~~41.0%~~42.2% of our investment-grade corporate bond portfolio, compared with ~~41.4%~~42.7% at year-end ~~2021.~~2022. The energy sector represented ~~10.7%~~11.1% and was ~~less than 10%~~10.8% at year-end ~~2021.~~2022. No other sector exceeded 10% of our investment-grade corporate bond portfolio.

As discussed in our 2022 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 32, investments in the financial sector include various risks. See risk factors entitled “Financial disruption or a prolonged economic downturn could materially and adversely 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 March 31, ~~2022,~~2023, included ~~$266~~$225 million of commercial mortgage-backed securities with an average rating of Aa2/~~AA.~~AA-.

TAX-EXEMPT FIXED MATURITIES

At March 31, ~~2022,~~2023, we had ~~$3.909~~$3.929 billion of tax-exempt fixed-maturity securities 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 1,700 municipal bond issuers. No single municipal issuer accounted for more than 0.6% of the tax-exempt fixed-maturity portfolio at March 31, ~~2022.~~2023.

INTEREST RATE SENSITIVITY ANALYSIS

Because of our strong surplus, long-term investment horizon and ability to hold most fixed-maturity investments until maturity, we believe the company is adequately positioned if interest rates were to rise. Although the fair values of our existing holdings may suffer, a higher rate environment would provide the opportunity to invest cash flow in higher-yielding securities, while reducing the likelihood of untimely redemptions of currently callable securities. While higher interest rates would be expected to continue to increase the number of fixed-maturity holdings trading below 100% of amortized cost, we believe lower fixed-maturity security values due solely to interest rate changes would not signal a decline in credit quality. We continue to manage the portfolio with an eye toward both meeting current income needs and managing interest rate risk.

Our dynamic financial planning model uses analytical tools to assess market risks. 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 First-Quarter ~~2022~~2023 10-Q

Page 5763

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

(Dollars in millions) Effect from interest rate change in basis points
-200 -100 - 100 200
At March 31, 2022 $ 13,620 $ 12,989 $ 12,376 $ 11,763 $ 11,151
At December 31, 2021 $ 14,327 $ 13,656 $ 13,022 $ 12,399 $ 11,768


(Dollars in millions)	Effect from interest rate change in basis points
	-200		-100		—		100		200
At March 31, 2023	$	13,866	$	13,268	$	12,678	$	12,082	$	11,485
At December 31, 2022	$	13,300	$	12,714	$	12,132	$	11,548	$	10,974

The effective duration of the fixed-maturity portfolio as of March 31, ~~2022,~~2023, was ~~4.9~~4.6 years, updown from ~~4.8~~4.7 years at year-end ~~2021.~~2022. 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 ~~5.0%~~4.7% change in the fair value of the fixed-maturity portfolio. Generally speaking, the higher a bond is rated, the more directly correlated movements in its fair value are to changes in the general level of interest rates, exclusive of call features. The fair values of average- to lower-rated corporate bonds are additionally influenced by the expansion or contraction of credit spreads.

In our dynamic financial planning model, the selected interest rate change of 100 to 200 basis points represents our view of a shift in rates that is quite possible over a one-year period. The rates modeled should not be considered a prediction of future events as interest rates may be much more volatile in the future. The analysis is not intended to provide a precise forecast of the effect of changes in rates on our results or financial condition, nor does it take into account any actions that we might take to reduce exposure to such risks.

EQUITY INVESTMENTS

Our equity investments, with a fair value totaling ~~$10.675~~$9.967 billion at March 31, ~~2022,~~2023, included ~~$10.245~~$9.589 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. We believe our equity investment style is an appropriate long-term strategy. While our long-term financial position would be affected by prolonged changes in the market valuation of our investments, we believe our strong surplus position and cash flow provide a cushion against short-term fluctuations in valuation. Continued payment of cash dividends by the issuers of our common equity holdings can provide a floor to their valuation.

The table below summarizes the effect of hypothetical changes in market prices on fair value of our equity portfolio.

(Dollars in millions) Effect from market price change in percent
-30% -20% -10% — 10% 20% 30%
At March 31, 2022 $ 7,473 $ 8,540 $ 9,608 $ 10,675 $ 11,743 $ 12,810 $ 13,878
At December 31, 2021 $ 7,921 $ 9,052 $ 10,184 $ 11,315 $ 12,447 $ 13,578 $ 14,710


(Dollars in millions)	Effect from market price change in percent
		-30%		-20%		-10%		—		10%		20%		30%
At March 31, 2023		$	6,977	$	7,974	$	8,970	$	9,967	$	10,964	$	11,960	$	12,957
At December 31, 2022		$	6,889	$	7,873	$	8,857	$	9,841	$	10,825	$	11,809	$	12,793

At March 31, ~~2022,~~2023, Apple Inc. (Nasdaq:AAPL) was our largest single common stock holding with a fair value of ~~$848~~$758 million, or ~~8.3%~~7.9% of our publicly traded common stock portfolio and ~~3.7%~~3.3% of the total investment portfolio. ~~Forty-four~~Forty-one holdings among 10nine different sectors each had a fair value greater than $100 million.

Cincinnati Financial Corporation First-Quarter ~~2022~~2023 10-Q

Page 5864

Common Stock Portfolio Industry Sector Distribution


		Percent of common stock portfolio									Percent of common stock portfolio
		At March 31, 2022				At December 31, 2021					At March 31, 2023				At December 31, 2022
		Cincinnati Financial		S&P 500 Industry Weightings		Cincinnati Financial		S&P 500 Industry Weightings			Cincinnati Financial		S&P 500 Industry Weightings		Cincinnati Financial		S&P 500 Industry Weightings
Sector:	Sector:									Sector:
Information technology	Information technology	30.1	%	28.0	%	31.1	%	29.2	%	Information technology	29.3	%	26.1	%	26.5	%	25.7	%
Healthcare	Healthcare	14.2		13.6		13.5		13.3		Healthcare	13.1		14.2		15.0		15.8
Financial	Financial	13.9		11.1		14.2		10.7		Financial	12.6		12.9		13.6		11.7
Industrials	Industrials	11.0		7.9		11.1		7.8		Industrials	12.6		8.7		11.9		8.7
Consumer staples	Consumer staples	7.3		6.1		6.9		5.9		Consumer staples	8.7		7.2		8.8		7.2
Consumer discretionary	Consumer discretionary	7.1		12.0		8.3		12.5		Consumer discretionary	7.3		10.1		7.7		9.8
Energy	Energy	5.2		3.9		4.0��		2.7		Energy	4.9		4.6		5.0		5.2
Materials	Materials	4.1		2.6		4.4		2.5		Materials	4.8		2.6		5.0		2.7
Utilities	Utilities	2.9		2.7		2.2		2.5		Utilities	2.9		2.9		2.9		3.2
Real estate	Real estate	2.6		2.7		2.7		2.8		Real estate	2.4		2.6		2.3		2.7
Telecomm services	Telecomm services	1.6		9.4		1.6		10.1		Telecomm services	1.4		8.1		1.3		7.3
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%

UNREALIZED INVESTMENT GAINS AND LOSSES

At March 31, ~~2022,~~2023, unrealized investment gains before taxes for the fixed-maturity portfolio totaled ~~$291~~$92 million and unrealized investment losses amounted to ~~$245~~$776 million before taxes.

The ~~$46~~$684 million net unrealized ~~gain~~loss position in our fixed-maturity portfolio at March 31, ~~2022,~~2023, decreased in the first three months of ~~2022,~~2023, primarily due to ~~an increase~~a decrease in U.S. Treasury yields ~~and to a lesser degree~~that was partially offset by a widening of corporate credit spreads. The net ~~gain~~loss position for our current fixed-maturity holdings will naturally decline over time as individual securities ~~mature.~~approach maturity. In addition, changes in interest rates can cause rapid, significant changes in fair values of fixed-maturity securities and the net ~~gain~~loss position, as discussed in Quantitative and Qualitative Disclosures About Market Risk.

For federal income tax purposes, taxes on gains from appreciated investments generally are not due until securities are sold. 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 March 31, ~~2022,~~2023, consisted of a net gain position in our equity portfolio of ~~$6.508~~$5.656 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 were Apple, Microsoft (Nasdaq:MSFT), ~~Accenture Co. (NYSE:ACN)~~Broadcom Inc. (Nasdaq:AVGO), UnitedHealth Group Inc. (NYSE:UNH), and ~~BlackRock~~AbbVie Inc. (NYSE:~~BLK)~~ABBV), which had a combined fair value of ~~$2.633~~$2.411 billion.

Unrealized Investment Losses

We expect the number of fixed-maturity securities trading below amortized cost to fluctuate as interest rates rise or fall and credit spreads expand or contract due to prevailing economic conditions. Further, amortized costs for some securities are revised through write-downs recognized in prior periods. At March 31, ~~2022, 1,377~~2023, 2,900 of the ~~4,362~~4,606 fixed-maturity securities we owned had fair values below amortized cost, compared with ~~278~~3,272 of the ~~4,329~~4,521 securities we owned at year-end ~~2021.~~2022. The ~~1,377~~2,900 holdings with fair values below amortized cost at March 31, ~~2022,~~2023, represented ~~31.6%~~39.9% of the fair value of our fixed-maturity investment portfolio and ~~$245~~$776 million in unrealized losses.

•~~1,103~~1,905 of the ~~1,377~~2,900 holdings had fair value between 90% and 100% of amortized cost at March 31, ~~2022.~~2023. These primarily consist of securities whose current valuation is largely the result of interest rate factors. The fair value of these ~~1,103~~1,905 securities was ~~$3.063~~$6.595 billion, and they accounted for ~~$121~~$240 million in unrealized losses.

•~~274~~969 of the ~~1,377~~2,900 fixed-maturity holdings had fair value between 70% and 90% of amortized cost at
March 31, ~~2022.~~2023. We believe the ~~274~~969 fixed-maturity securities will continue to pay interest and ultimately pay

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principal upon maturity. The issuers of these ~~274~~969 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 ~~$846 million,~~$2.394 billion, and they accounted for ~~$124~~$511 million in unrealized losses.

•~~None~~26 of the 2,900 fixed-maturity holdings had fair value below 70% of amortized cost at March 31, ~~2022.~~2023. We believe these fixed-maturity securities will continue to pay interest and ultimately pay principal upon maturity. The fair value of these securities was $49 million, and they accounted for $25 million in unrealized losses.

The table below reviews fair values and unrealized losses by investment category and by the overall duration of the securities' continuous unrealized loss position.


(Dollars in millions)	(Dollars in millions)	Less than 12 months				12 months or more				Total				(Dollars in millions)	Less than 12 months				12 months or more				Total
At March 31, 2022		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed maturity securities:
At March 31, 2023														At March 31, 2023	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Fixed-maturity securities:														Fixed-maturity securities:
Corporate	Corporate	$	2,603	$	157	$	78	$	9	$	2,681	$	166	Corporate	$	3,910	$	158	$	2,273	$	368	$	6,183	$	526
States, municipalities and political subdivisions	States, municipalities and political subdivisions	977		72		21		4		998		76		States, municipalities and political subdivisions	1,287		48		890		178		2,177		226
Government-sponsored enterprises														Government-sponsored enterprises	263		3		7		1		270		4
Commercial mortgage-backed	Commercial mortgage-backed	128		2		10		—		138		2		Commercial mortgage-backed	107		5		116		11		223		16
United States government	United States government	72		1		—		—		72		1		United States government	121		1		52		3		173		4
Foreign government	Foreign government	7		—		—		—		7		—		Foreign government	10		—		2		—		12		—
Government-sponsored enterprises		10		—		3		—		13		—
Total	Total	$	3,797	$	232	$	112	$	13	$	3,909	$	245	Total	$	5,698	$	215	$	3,340	$	561	$	9,038	$	776

At December 31, 2021
Fixed maturity securities:
At December 31, 2022														At December 31, 2022
Fixed-maturity securities:														Fixed-maturity securities:
Corporate	Corporate	$	861	$	13	$	15	$	—	$	876	$	13	Corporate	$	5,651	$	412	$	661	$	168	$	6,312	$	580
States, municipalities and political subdivisions	States, municipalities and political subdivisions	105		2		2		1		107		3		States, municipalities and political subdivisions	2,600		274		77		29		2,677		303
Government-sponsored enterprises														Government-sponsored enterprises	123		3		3		—		126		3
Commercial mortgage-backed	Commercial mortgage-backed	10		—		11		—		21		—		Commercial mortgage-backed	215		13		14		3		229		16
United States government	United States government	48		—		—		—		48		—		United States government	146		3		41		2		187		5
Foreign government	Foreign government	16		—		—		—		16		—		Foreign government	25		1		4		—		29		1��
Government-sponsored enterprises		7		—		—		—		7		—

Total	Total	$	1,047	$	15	$	28	$	1	$	1,075	$	16	Total	$	8,760	$	706	$	800	$	202	$	9,560	$	908

At March 31, ~~2022,~~2023, applying our invested asset impairment policy, we determined that the total of ~~$245~~$776 million, for securities in an unrealized loss position in the table above, was not the result of a credit loss.

During the first three months of 2023, no fixed-maturity securities were written down to fair value, due to an intention to be sold. Changes in allowance for credit losses were less than $1 million during the first three months of 2023. During the first three months of 2022, one ~~fixed-maturity~~ security ~~that~~ was written down to fair value due to an intention to be sold, ~~and changes~~resulting in ~~allowance for credit losses were each~~ less than $1 ~~million. During the first three months~~million of ~~2021, no securities were written down~~noncash charges, in addition to ~~fair value due to an intention to be sold and we had no~~less than $1 million in changes in allowance for credit losses.

During the full year of ~~2021,~~2022, we wrote down ~~five~~three securities and recorded $1$5 million in impairment charges. At December 31, ~~2021, 278~~2022, 3,272 fixed-maturity securities with a total unrealized loss of ~~$16~~$908 million were in an unrealized loss position. Of that total, no49 fixed-maturity securities had fair values below 70% of amortized cost.

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Page 6066

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


(Dollars in millions)	(Dollars in millions)	Number of issues		Amortized cost		Fair value		Gross unrealized gain (loss)				Gross investment income		(Dollars in millions)			Number of issues	Amortized cost				Fair value			Gross unrealized gain (loss)			Gross investment income
At March 31, 2022
At March 31, 2023														At March 31, 2023			Number of issues	Amortized cost				Fair value			Gross unrealized gain (loss)			Gross investment income
Taxable fixed maturities:	Taxable fixed maturities:													Taxable fixed maturities:
Fair valued below 70% of amortized cost	Fair valued below 70% of amortized cost		—			$	—			$	—				$	—				$	—	Fair valued below 70% of amortized cost		19			$	57		$	38	$	(19)	$	1
Fair valued at 70% to less than 100% of amortized cost	Fair valued at 70% to less than 100% of amortized cost	974		3,607		3,403		(204)				32		Fair valued at 70% to less than 100% of amortized cost			1,935		8,215				7,563			(652)			90
Fair valued at 100% and above of amortized cost	Fair valued at 100% and above of amortized cost	1,146		4,863		5,064		201				58		Fair valued at 100% and above of amortized cost			306	1,095				1,148			53			16
Investment income on securities sold in current year	Investment income on securities sold in current year	—		—		—		—				2		Investment income on securities sold in current year			—	—				—			—			1
Total	Total	2,120		8,470		8,467		(3)				92		Total			2,260	9,367				8,749			(618)			108
Tax-exempt fixed maturities:	Tax-exempt fixed maturities:													Tax-exempt fixed maturities:
Fair valued below 70% of amortized cost	Fair valued below 70% of amortized cost	—		—		—		—				—		Fair valued below 70% of amortized cost			7	17				11			(6)			—
Fair valued at 70% to less than 100% of amortized cost	Fair valued at 70% to less than 100% of amortized cost	403		547		506		(41)				4		Fair valued at 70% to less than 100% of amortized cost			939	1,525				1,426			(99)			11
Fair valued at 100% and above of amortized cost	Fair valued at 100% and above of amortized cost	1,839		3,313		3,403		90				27		Fair valued at 100% and above of amortized cost			1,400	2,453				2,492			39			21
Investment income on securities sold in current year	Investment income on securities sold in current year	—		—		—		—				—		Investment income on securities sold in current year			—	—				—			—			—
Total	Total	2,242		3,860		3,909		49				31		Total			2,346	3,995				3,929			(66)			32

Fixed-maturities summary:	Fixed-maturities summary:													Fixed-maturities summary:
Fair valued below 70% of amortized cost	Fair valued below 70% of amortized cost	—		—		—		—				—		Fair valued below 70% of amortized cost			26	74				49			(25)			1
Fair valued at 70% to less than 100% of amortized cost	Fair valued at 70% to less than 100% of amortized cost	1,377		4,154		3,909		(245)				36		Fair valued at 70% to less than 100% of amortized cost			2,874	9,740				8,989			(751)			101
Fair valued at 100% and above of amortized cost	Fair valued at 100% and above of amortized cost	2,985		8,176		8,467		291				85		Fair valued at 100% and above of amortized cost			1,706	3,548				3,640			92			37
Investment income on securities sold in current year	Investment income on securities sold in current year	—		—		—		—				2		Investment income on securities sold in current year			—	—				—			—			1
Total	Total	4,362		$	12,330	$	12,376	$	46			$	123	Total			4,606	$	13,362			$	12,678		$	(684)		$	140

At December 31, 2021
At December 31, 2022														At December 31, 2022
Fixed-maturities summary:	Fixed-maturities summary:													Fixed-maturities summary:
Fair valued below 70% of amortized cost	Fair valued below 70% of amortized cost	—		$	—	$	—	$	—			$	—	Fair valued below 70% of amortized cost			49	$	91			$	61		$	(30)		$	3
Fair valued at 70% to less than 100% of amortized cost	Fair valued at 70% to less than 100% of amortized cost	278		1,091		1,075		(16)				17		Fair valued at 70% to less than 100% of amortized cost			3,223	10,377				9,499			(878)			392
Fair valued at 100% and above of amortized cost	Fair valued at 100% and above of amortized cost	4,051		11,139		11,947		808				427		Fair valued at 100% and above of amortized cost			1,249	2,511				2,572			61			92
Investment income on securities sold in current year	Investment income on securities sold in current year	—		—		—		—				33		Investment income on securities sold in current year			—	—				—			—			23
Total	Total	4,329		$	12,230	$	13,022	$	792			$	477	Total			4,521	$	12,979			$	12,132		$	(847)		$	510

See our ~~2021~~2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Asset Impairment, Page ~~57.~~58.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – The company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)).

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The company's management, with the participation of the company's chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of the company's disclosure controls and procedures as of March 31, ~~2022.~~2023. Based upon that evaluation, the company's chief executive officer and chief financial officer concluded that the design and operation of the company's disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to ensure:

•that information required to be disclosed in the company's reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and

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Page 6167

•that such information is accumulated and communicated to the company's management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting – During the three months ended March 31, ~~2022,~~2023, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~There was no significant impact to our internal controls over financial reporting while the majority of our associates were working remotely due to the COVID-19 pandemic.~~

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Page 6268

Part II – Other Information

Item 1. Legal Proceedings

Neither the company nor any of our subsidiaries are involved in any litigation believed to be material other than ordinary, routine litigation incidental to the nature of our business.

Item 1A. Risk Factors

Our risk factors have not changed materially since they were described in our ~~2021~~2022 Annual Report on Form 10-K filed February ~~24, 2022.~~23, 2023. Investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.

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Page 6369

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any of our shares that were not registered under the Securities Act during the first three months of ~~2022.~~2023. Our repurchase program does not have an expiration date. On January 26, 2018, an additional 15 million shares were authorized, which expanded our current repurchase program. We have ~~10,701,785~~7,124,911 shares available for purchase under our programs at March 31, ~~2022.~~2023.

Period Total number
of shares
purchased Average
price paid
per share Total number of shares purchased as part of
publicly announced
plans or programs Maximum number of
shares that may yet be
purchased under the
plans or programs
January 1-31, 2022 — — — 11,076,785
February 1-28, 2022 200,000 $ 120.06 200,000 10,876,785
March 1-31, 2022 175,000 120.03 175,000 10,701,785
Totals 375,000 120.05 375,000


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
January 1-31, 2023	—	—		—	7,326,785
February 1-28, 2023	201,874	$	123.84	201,874	7,124,911
March 1-31, 2023	—	—		—	7,124,911






Totals	201,874	123.84		201,874

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Page 6470

Item 6. Exhibits


Exhibit No.						Exhibit Description
3.1						Amended and Restated Articles of Incorporation of Cincinnati Financial Corporation (incorporated by reference to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, Exhibit 3.1)
3.2						Amended and Restated Code of Regulations of Cincinnati Financial Corporation, as of May 5, 2018 (incorporated by reference to the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, Exhibit 3.2)
10.1						Fifth Amendment of the Amended and Restated Credit Agreement by and among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A., as Administrative Agent, PNC Capital Markets, LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A. as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A. as Documentation Agents, dated March 23, 2023 (incorporated by reference to Exhibit 10.1 filed with the company’s Current Report on Form 8-K dated March 23, 2023
31A						Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002 – Chief Executive Officer
31B						Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002 – Chief Financial Officer
32						Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101.INS						The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


CINCINNATI FINANCIAL CORPORATION
Date: April ~~28, 2022~~27, 2023

/S/ Michael J. Sewell
Michael J. Sewell, CPA
Chief Financial Officer, ~~Senior~~Executive Vice President and Treasurer
(Principal Accounting Officer)

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