# CINCINNATI FINANCIAL CORP (CINF) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CINCINNATI FINANCIAL CORP's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/20286/000002028624000014/cinf-20231231.htm
Accession: 0000020286-24-000014
Filing date: 2024-02-26
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CINF/
All MD&A years: /company/CINF/mda/
Previous year: /company/CINF/mda/fy2022/ (FY 2022)
Next year: /company/CINF/mda/fy2024/ (FY 2024)

ITEM 7.    Management's Discussion and Analysis of Financial Condition and

Results of Operations

Introduction

The purpose of Management’s Discussion and Analysis is to provide an understanding of Cincinnati Financial Corporation’s consolidated results of operations and financial condition. Our Management’s Discussion and Analysis should be read in conjunction with Item 8, Consolidated Financial Statements and related Notes. We present per share data on a diluted basis unless otherwise noted, adjusting those amounts for all stock splits and stock dividends.

We begin with an executive summary of our results of operations, followed by other highlights and details about critical accounting estimates. In several instances, we refer to estimated industry data so that we can provide information on our performance within the context of the overall insurance industry. Unless otherwise noted, the industry data is prepared by A.M. Best, a leading insurance industry statistical, analytical and financial strength rating organization. Information from A.M. Best is presented on a statutory accounting basis for insurance company regulation in the United States of America. When we provide our results on a comparable statutory accounting 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 8, Note 1, Summary of Significant Accounting Policies, 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.

Through The Cincinnati Insurance Company, Cincinnati Financial Corporation is one of the 25 largest property casualty insurers in the nation, based on net written premium volume for the first nine months of 2023, among approximately 2,000 U.S. stock and mutual insurer groups. We market our insurance products through a select group of independent insurance agencies in 46 states as discussed in Item 1, Our Business and Our Strategy.

The U.S. economy, the insurance industry and our company continue to face many challenges. Our long-term perspective has allowed us to address immediate challenges while also focusing on the major decisions that best position the company for success through all market cycles. We believe that this forward-looking view consistently benefits our shareholders, agents, policyholders and associates.

To measure our progress, we have defined a measure of value creation that we believe captures the contribution of our insurance operations, the success of our investment strategy and the importance we place on paying cash dividends to shareholders. We refer to this measure as our value creation ratio (VCR) and it is made up of two primary components: (1) our rate of growth in book value per share plus (2) the ratio of dividends declared per share to beginning book value per share. This measure, intended to be all-inclusive regarding changes in book value per share, uses originally reported book value per share in cases where book value per share has been adjusted, such as after the adoption of Accounting Standards Updates with a cumulative effect of a change in accounting.

The primary sources of our company’s net income are summarized below. We discuss contributions to net income and VCR by source in Corporate Financial Highlights, followed by more detailed discussion in Financial Results.

•Underwriting profit (loss) – Includes revenues from earned premiums for insurance and reinsurance policies or contracts, reduced by losses and loss expenses from associated insurance coverages. Those revenues are further reduced by underwriting expenses associated with marketing policies or related to administration of our insurance operations. The net result represents an underwriting profit when revenues exceed losses and expenses.

•Investment income – Is generated primarily from investing the premiums collected for insurance policies sold, until funds are needed to pay losses for insurance claims or other expenses. Interest income from bonds or dividend income from stocks are the main categories of our investment income, with additional contribution from compounding effects over time.

Cincinnati Financial Corporation - 2023 10-K - Page 47

Table of Contents

•Investment gains and losses – Occur from appreciation or depreciation of invested assets over time. Gains or losses are generally recognized from changes in market values of equity securities without a sale or when invested assets are sold or become impaired.

Executive Summary

Our value creation ratio, defined above, is our primary performance target. VCR trends are shown in the table below.

[[GREPCENT_TABLE]]
[["","","One year","","Three-year % average","","Five-year % average"],["Value creation ratio:"],["As of December 31, 2023","","19.5","%","","10.2","%","","15.2","%"],["As of December 31, 2022","","(14.6)","","","8.6","","","11.2"],["As of December 31, 2021","","25.7","","","23.6","","","18.7"]]
[[/GREPCENT_TABLE]]

We are targeting an annual value creation ratio averaging 10% to 13% over the next five-year period. At 19.5% for 2023, our performance was above the high end of that range. It was within the range for the three-year period and above the high end of the range for the five-year period, both that ended in December 2023.

The table below shows the primary contributors of our value creation ratio on a percentage basis. Analysis of the contributors aids understanding of our financial performance. Our financial results are further analyzed in the Corporate Financial Highlights section below.

[[GREPCENT_TABLE]]
[["","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Pt. Change","","Pt. Change"],["Value creation ratio major contributors:"],["Net income before investment gains","","9.1","%","","5.2","%","","9.7","%","","3.9","","","(4.5)"],["Change in fixed-maturity securities, realized and unrealized gains","","1.9","","","(10.1)","","","(1.5)","","","12.0","","","(8.6)"],["Change in equity securities, investment gains","","8.6","","","(9.3)","","","16.8","","","17.9","","","(26.1)"],["Other","","(0.1)","","","(0.4)","","","0.7","","","0.3","","","(1.1)"],["Value creation ratio","","19.5","%","","(14.6)","%","","25.7","%","","34.1","","","(40.3)"]]
[[/GREPCENT_TABLE]]

The 2023 value creation ratio improved by 34.1 percentage points, compared with 2022, and again included a significant contribution from operating results, as shown in the table above, that was 3.9 percentage-points higher than last year. The 2023 ratio improvement was primarily due to a higher valuation for our investment portfolio, with increases of 17.9 percentage-points from our equity securities investment portfolio and 12.0 points from our fixed-maturity securities investment portfolio. The decrease in 2022, compared with 2021, was primarily due to a reduction in overall net gains from our investment portfolio.

Cincinnati Financial Corporation - 2023 10-K - Page 48

Table of Contents

We believe our value creation ratio is a useful measure. The table below shows calculations for VCR.

[[GREPCENT_TABLE]]
[["(Dollars are per share)","","Years ended December 31,"],["","","2023","","2022","","2021"],["Book value change per share"],["Book value as originally reported December 31, 2022","","","","$","67.01"],["Cumulative effect of change in accounting for long-duration insurance contracts, net of tax","","","","0.20"],["Book value as adjusted December 31, 2022","","","","$","67.21"],["Value creation ratio:"],["End of period book value*","","$","77.06","","","$","67.01","","","$","81.72"],["Less beginning of period book value","","67.01","","","81.72","","","67.04"],["Change in book value","","10.05","","","(14.71)","","","14.68"],["Dividend declared to shareholders","","3.00","","","2.76","","","2.52"],["Total value creation","","$","13.05","","","$","(11.95)","","","$","17.20"],["Value creation ratio from change in book value**","","15.0","%","","(18.0)","%","","21.9","%"],["Value creation ratio from dividends declared to shareholders***","","4.5","","","3.4","","","3.8"],["Value creation ratio","","19.5","%","","(14.6)","%","","25.7","%"]]
[[/GREPCENT_TABLE]]

* 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 year book value

*** Dividend declared to shareholders divided by beginning of year book value

When looking at our longer-term objectives, we see three primary performance drivers for our value creation ratio: 

•Premium growth – We believe over any five-year period our agency relationships and initiatives can lead to a property casualty written premium growth rate that exceeds the industry average. The compound annual growth rate of our net written premiums was 9.9% over the five-year period 2019 through 2023, exceeding the 6.9% estimated growth rate for the property casualty insurance industry, with 2023 representing industry data reported through the first nine months of 2023. The industry’s growth rate excludes its mortgage and financial guaranty lines of business.

•Combined ratio – We believe our underwriting philosophy and initiatives can drive performance to achieve our underwriting profitability target of a GAAP combined ratio over any five-year period that consistently averages within the range of 92% to 98% in the future, better than our target of 95% to 100% during 2012 through 2023. We changed the target because we believe we can continue to perform at a high level. Our GAAP combined ratio averaged 94.6% over the five-year period 2019 through 2023, slightly better than the performance target range for that period. Performance as measured by the combined ratio is discussed in Consolidated Property Casualty Insurance Results. Our statutory combined ratio averaged 94.1% over the five-year period 2019 through 2023, compared with an estimated 101.1% for the property casualty industry, with 2023 representing industry data reported through the first nine months of 2023. The industry’s ratio again excludes its mortgage and financial guaranty lines of business.

•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 total return of the S&P 500 Index.

◦Investment income growth, on a pretax basis, had a compound annual growth rate of 7.6% over the five-year period 2019 through 2023.

◦Over the five years ended December 31, 2023, our equity portfolio compound annual total return was 15.0% compared with a compound annual total return of 15.7% for the Index. Our equity portfolio favors larger-capitalization, high-quality, dividend-growing stocks with a slight value orientation. For the year 2023, our equity portfolio total return was 15.2%, compared with 26.3% for the Index.

Cincinnati Financial Corporation - 2023 10-K - Page 49

Table of Contents

The board of directors is committed to rewarding shareholders directly through cash dividends and share repurchase authorizations. Through 2023, the company has increased the annual cash dividend rate for 63 consecutive years, a record we believe is matched by only seven other publicly traded U.S. companies. In addition to regular dividends, strong capital and excellent company performance has provided opportunities to further reward shareholders. The board regularly evaluates relevant factors in dividend-related decisions, and the 2023 increase to the regular dividend reflected confidence in our outstanding capital, liquidity and financial flexibility, as well as progress of our initiatives to improve earnings performance while growing insurance premium revenues. We discuss our financial position in more detail in Liquidity and Capital Resources. 

Our view of the shareholder value we can create over the next five years relies largely on three assumptions – each highly dependent on the external environment. First, we anticipate our property casualty average insurance prices will increase in proportion to, or in excess of, our loss cost trends. Second, we assume that the economy can maintain a long-term growth track. Third, we assume that valuations of our marketable securities will vary within a typical range over time, based on historical trends. If those assumptions prove to be inaccurate, we may not be able to achieve our performance targets even if we accomplish our strategic objectives.

We discuss in Item 1A, Risk Factors, many potential risks to our business and our ability to achieve our qualitative and quantitative objectives.

Cincinnati Financial Corporation - 2023 10-K - Page 50

Table of Contents

Corporate Financial Highlights

In addition to the value creation ratio discussion and analysis in the Executive Summary, we further analyze our financial results in the sections below.

Balance Sheet Data

[[GREPCENT_TABLE]]
[["(Dollars in millions, except share data)","","At December 31,","","At December 31,"],["","","2023","","2022"],["Total investments","","$","25,357","","","$","22,425"],["Total assets","","32,769","","","29,732"],["Short-term debt","","25","","","50"],["Long-term debt","","790","","","789"],["Shareholders' equity","","12,098","","","10,562"],["Book value per share","","77.06","","","67.21"],["Debt-to-total-capital ratio","","6.3","%","","7.4","%"]]
[[/GREPCENT_TABLE]]

Total investments increased by 13% during 2023 on a fair value basis, and included an increase in our securities portfolio valuation that added to an 8% increase in its cost basis. Entering 2024, we believe the portfolio continues to be well diversified and is well positioned to withstand short-term fluctuations. We discuss our investment strategy in Item 1, Investments Segment, and results for the segment in Investments Results. Total assets increased by 10%, compared with year-end 2022. Shareholders’ equity increased by 15% and book value per share also increased by 15%, for reasons discussed in the preceding Executive Summary.

The amount of our debt obligations decreased by $24 million in 2023, compared with 2022. Our 6.3% ratio of debt to total capital (debt plus shareholders’ equity) at year-end 2023 decreased by 1.1 percentage points compared with the prior-year ratio.

Income Statement and Per Share Data

[[GREPCENT_TABLE]]
[["(In millions, except per share data)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Earned premiums","","$","7,958","","","$","7,225","","","$","6,478","","","10","","","12"],["Investment income, net of expenses (pretax)","","894","","","781","","","714","","","14","","","9"],["Investment gains and losses, net (pretax)","","1,127","","","(1,467)","","","2,409","","","nm","","nm"],["Total revenues","","10,013","","","6,563","","","9,626","","","53","","","(32)"],["Net income (loss)","","1,843","","","(487)","","","2,968","","","nm","","nm"],["Comprehensive income (loss)","","2,022","","","(1,398)","","","2,930","","","nm","","nm"],["Net income (loss) per share - diluted","","11.66","","","(3.06)","","","18.24","","","nm","","nm"],["Cash dividends declared per share","","3.00","","","2.76","","","2.52","","","9","","","10"],["Diluted weighted average shares outstanding","","158.1","","","158.8","","","162.7","","","0","","","(2)"]]
[[/GREPCENT_TABLE]]

Net income rose by $2.330 billion in 2023, compared with net a net loss for 2022, including a $2.050 billion increase in net investment gains on an after-tax basis. The improved 2023 net income also included an increase in property casualty underwriting income of $206 million after taxes, as discussed below, and a $91 million increase in investment income after taxes. Our investment operation’s performance is discussed further in Investments Results. A net loss of $487 million in 2022, representing a $3.455 billion decrease compared with net income for 2021, included a $3.062 billion reduction in net investment gains after taxes. The reduced 2022 net income also included a decrease in property casualty underwriting income of $467 million after taxes and a $55 million increase in investment income after taxes.

During 2021 through 2023, SARS-CoV-2, also known as COVID-19 and recognized as a pandemic 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 or investment revenues during 2023, 2022 or 2021. For future periods, renewal premium or new business premium amounts could decline due to reduced spending by businesses or consumers,

Cincinnati Financial Corporation - 2023 10-K - Page 51

Table of Contents

or if the basis for policy premiums, such as sales and payrolls of businesses we insure, decrease as a result of a weakening economy, pandemic or other reasons. Premium growth by segment is discussed below in Financial Results.

During 2023, 2022 and 2021, there were no material changes to our estimates for incurred losses and expenses related to the pandemic. Factors used in estimating reserves for business interruption legal expenses related to the pandemic included estimates for attorney fees associated with the defense of such lawsuits filed against the company; litigation trends of such cases, including responding to amended and replead cases and cases on appeal; and trends in judicial decisions in cases filed against the company and other insurers. Loss experience for our insurance operations is influenced by many factors, as discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves. Because of various factors that affect exposure to certain insurance losses, such as less miles driven for vehicles or reduced sales and payrolls for businesses, there could be a reduction in future losses, and in some cases a generally corresponding reduction in premiums. Also, there could be losses or legal expenses that increase or otherwise occur independently of changes in the economy or changes in sales or payrolls of businesses we insure, due to inflation, pandemic effects or other factors.

Contribution from Insurance Operations

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Consolidated property casualty data:"],["Net written premiums","","$","8,046","","","$","7,307","","","$","6,479","","","10","","","13"],["Earned premiums","","7,645","","","6,924","","","6,184","","","10","","","12"],["Underwriting profit","","401","","","140","","","731","","","186","","","(81)"],["","","","","","","","","Pt. Change","","Pt. Change"],["GAAP combined ratio","","94.9","%","","98.1","%","","88.3","%","","(3.2)","","","9.8"],["Statutory combined ratio","","94.6","","","97.7","","","87.9","","","(3.1)","","","9.8"],["Written premium to statutory surplus","","1.1","","","1.1","","","0.9","","","0.0","","","0.2"]]
[[/GREPCENT_TABLE]]

Property casualty net written premiums grew 10% and earned premiums also grew 10% in 2023. The growth reflected average renewal price increases, premium growth initiatives and a higher level of insured exposures, including a contribution to net written premium growth of less than 1 percentage point from Cincinnati Re and Cincinnati Global in total. Growth in 2022 net written premiums and earned premiums was driven by factors similar to 2023. Trends and related factors are discussed in Commercial Lines, Personal Lines and Excess and Surplus Lines Insurance Results.

Our property casualty insurance operations generated an underwriting profit for each of the three years ending in 2023. Underwriting results improved in 2023, compared with 2022, due to improved overall insured loss experience before catastrophe effects, as price increases helped to offset elevated losses reflecting economic or other forms of inflation that increased our uncertainty regarding ultimate losses. Loss experience in 2022 was much worse than in 2021, including higher current accident year loss and loss expenses before catastrophe losses that rose 20%, exceeding earned premium growth of 12%. Loss experience is discussed further in Financial Results for our property casualty business and related segments. The $261 million improvement in 2023 underwriting profit, compared with 2022, also included a $31 million increase in losses from natural catastrophe events and $81 million more benefit from net favorable reserve development on prior accident years before catastrophe losses. The $591 million decrease in 2022, compared with excellent results in 2021, included a $135 million increase in losses from catastrophe events and $276 million less benefit from net favorable reserve development on prior accident years before catastrophe losses.

We measure property casualty underwriting profitability primarily by the combined ratio. Our combined ratio measures the percentage of each earned premium dollar spent on claims plus all expenses related to our property casualty operations, all on a pretax basis. A lower ratio indicates more favorable results and better underlying performance. A ratio below 100% represents an underwriting profit. Initiatives to improve our combined ratio are discussed in Item 1, Our Business and Our Strategy, Strategic Initiatives. In 2023, 2022 and 2021, favorable development on reserves for claims that occurred in prior accident years helped offset other incurred losses and loss expenses. Reserve development is discussed further in Property Casualty Loss and Loss Expense

Cincinnati Financial Corporation - 2023 10-K - Page 52

Table of Contents

Obligations and Reserves. Losses from weather-related catastrophes are another important item influencing the combined ratio and are discussed along with other factors in Financial Results for our property casualty business and related segments.

Our life insurance segment reported a profit of $41 million in 2023 and profit of $27 million in 2022. We discuss results for the segment in Life Insurance Results. Most of this segment’s investment income is included in our investments segment results. In addition to investment income, investment gains from the life insurance investment portfolio are also included in our investments segment results.

Critical Accounting Estimates

Cincinnati Financial Corporation’s financial statements are prepared using U.S. GAAP. These principles require management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. Actual results could differ materially from those estimates.

The significant accounting policies used in the preparation of the financial statements are discussed in Item 8, Note 1 of the Consolidated Financial Statements. In conjunction with that discussion, material implications of uncertainties associated with the methods, assumptions and estimates underlying the company’s critical accounting policies are discussed below. The audit committee of the board of directors reviews the annual financial statements with management and the independent registered public accounting firm. These discussions cover: the quality of earnings; review of reserves and accruals; reconsideration of the suitability of accounting principles; review of highly judgmental areas including critical accounting estimates; audit adjustments; and such other inquiries as may be appropriate.

Property Casualty Insurance Loss and Loss Expense Reserves

We establish loss and loss expense reserves for our property casualty insurance business as balance sheet liabilities. Unpaid loss and loss expenses are the estimated amounts necessary to pay for and settle all outstanding insured claims, including incurred but not reported (IBNR) claims. These reserves account for unpaid loss and loss expenses as of a financial statement date.

For some lines of business that we write, a considerable and uncertain amount of time can elapse between the occurrence, reporting and payment of insured claims. The amount we will actually have to pay for such claims also can be highly uncertain. This uncertainty, together with the size of our reserves, makes the loss and loss expense reserves our most significant estimate. Gross loss and loss expense reserves were $8.975 billion at year-end 2023 compared with $8.336 billion at year-end 2022.

How Reserves Are Established

Our field claims representatives establish case reserves when claims are reported to the company to provide for our unpaid loss and loss expense obligation associated with known claims. Field claims managers supervise and review all claims with case reserves less than $100,000. Additionally, a headquarters supervisor and regional claims manager review claims under $100,000 if litigation or a certain specialty claim is involved. All claims with case reserves of $100,000 or greater are reviewed and approved by experienced headquarters supervisors and regional claims managers. Upper-level headquarters claims managers also review case reserves of $175,000 or more.

Our claims representatives base their case reserve estimates primarily upon case-by-case evaluations that consider:

•type of claim involved

•circumstances surrounding each claim

•policy provisions pertaining to each claim

•potential for subrogation or salvage recoverable

•general insurance reserving practices

Case reserves of all sizes are generally reviewed on a 90-day cycle, or more frequently if new information about a loss becomes available. As part of the review process, we monitor industry trends, cost trends, relevant court cases, legislative activity and other current events in an effort to ascertain new or additional loss exposures.

Cincinnati Financial Corporation - 2023 10-K - Page 53

Table of Contents

We also establish IBNR reserves to provide for all unpaid loss and loss expenses not accounted for by case reserves:

•For events designated as natural catastrophes resulting in losses incurred related to premiums written on a direct basis by The Cincinnati Insurance Companies, we calculate IBNR reserves directly as a result of an estimated IBNR claim count and an estimated average claim amount for each event. Once case reserves are established for a catastrophe event, we reduce the IBNR reserves. Our claims department management coordinates the assessment of these events and prepares the related IBNR reserve estimates. Such an assessment involves a comprehensive analysis of the nature of the event, of policyholder exposures within the affected geographic area and of available claims intelligence. Depending on the nature of the event, available claims intelligence could include surveys of field claims representatives within the affected geographic area, feedback from a catastrophe claims team sent into the area, as well as data on claims reported as of the financial statement date.

To determine whether an event is designated as a catastrophe, related to premiums written on a direct basis by The Cincinnati Insurance Companies, we generally use the catastrophe definition provided by Property Claims Service (PCS), a division of Insurance Services Office. PCS defines a catastrophe as an event that causes U.S., Puerto Rico and U.S. Virgin Islands damage of $25 million or more in insured property losses and affects a significant number of policyholders and insureds.

•For events designated as natural catastrophes resulting in losses for Cincinnati Re and Cincinnati Global, we begin with a review of in-force policies, treaties and related limits likely to be affected by each event. For both Cincinnati Re and Cincinnati Global, use of information from third-party catastrophe models, industry estimates, and our own proprietary adjustments are used for the estimate of ultimate losses for each catastrophe event. Incurred losses from catastrophe events for both Cincinnati Re and Cincinnati Global can be designated catastrophes by PCS, or deemed as a catastrophe by the international insurance industry or, for Cincinnati Re, as reported by ceding companies. IBNR reserves are calculated as the difference between the estimate of the ultimate loss and loss expenses and the sum of total loss and loss expense payments and total case reserves.

•For asbestos and environmental claims, we calculate IBNR reserves by deriving an actuarially-based estimate of total unpaid loss and loss expenses. We then reduce the estimate by total case reserves. We discuss the reserve analysis that applies to asbestos and environmental reserves in Liquidity and Capital Resources, Asbestos and Environmental Loss and Loss Expense Reserves.

•For loss expenses that pertain primarily to salaries and other costs related to our claims associates, also referred to as adjusting and other expense or AOE, we calculate reserves based on an analysis of the relationship between paid losses and paid AOE. Reserves for AOE are allocated to company, line of business and accident year based on a claim count algorithm. Claim counts reported and used in the reserving process are primarily measured by insurance coverages that are triggered when a loss occurs and a reserve is established. Coverages are defined as unique combinations of certain attributes such as line of business and cause of loss. Claims that are opened and closed without payment are included in the reported claim counts. Claim counts are presented on a direct basis only and do not reflect any assumed or ceded reinsurance.

•For all other claims and events, including reinsurance assumed or ceded, IBNR reserves are calculated as the difference between an actuarial estimate of the ultimate cost of total loss and loss expenses incurred reduced by the sum of total loss and loss expense payments and total case reserves estimated for individual claims. Reserve amounts for those other claims and events are significant, and represent the majority of amounts shown as IBNR reserves and loss expense reserves in the table included in Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves. We discuss below the development of actuarially based estimates of the ultimate cost of total loss and loss expenses incurred.

Our actuarial staff applies significant judgment in selecting models and estimating model parameters when preparing reserve analyses. Unpaid loss and loss expenses are inherently uncertain as to timing and amount. Uncertainties relating to model appropriateness, parameter estimates and actual loss and loss expense amounts are referred to as model, parameter and process uncertainty, respectively. Our management and actuarial staff address these uncertainties in the reserving process in a variety of ways.

Cincinnati Financial Corporation - 2023 10-K - Page 54

Table of Contents

Our actuarial staff bases its IBNR reserve estimates for these losses primarily on the indications of methods and models that analyze accident year data. Accident year is the year in which an insured claim, loss or loss expense occurred. The specific methods and models that our actuaries have used for the past several years are:

•paid and reported loss development methods

•paid and reported loss Bornhuetter-Ferguson methods

•individual and multiple probabilistic trend family models

Our actuarial staff uses diagnostics to evaluate the appropriateness of the models and methods listed above. The appropriateness of these models and methods for estimating IBNR reserves tends to depend on the tail for a line of business. Tail refers to the time interval between a typical claim’s occurrence and its settlement. The loss development and Bornhuetter-Ferguson methods, particularly the reported loss variations, tend to produce more appropriate IBNR reserve estimates for our short-tail lines such as homeowner and commercial property. For our mid-tail and long-tail lines, all models and methods provide useful insights.

Our actuarial staff also devotes significant time and effort to the estimation of model and method parameters. The loss development and Bornhuetter-Ferguson methods require the estimation of numerous loss development factors. The Bornhuetter-Ferguson methods also involve the estimation of numerous expected loss ratios by accident year. Models from the probabilistic trend family require the estimation of development trends, calendar year inflation trends and exposure levels. Consequently, our actuarial staff monitors a number of trends and measures to gain key business insights necessary for exercising appropriate judgment when estimating the parameters mentioned, such as: 

•company and industry pricing

•company and industry exposure

•company and industry loss frequency and severity

•past large loss events

•company and industry premium

•company in-force policy count

These trends and measures also support the estimation of expected accident year loss ratios needed for applying the Bornhuetter-Ferguson methods and for assessing the reasonability of all IBNR reserve estimates computed. Our actuarial staff reviews these trends and measures quarterly, updating parameters derived from them as necessary.

Quarterly, our actuarial staff summarizes their reserve analysis by preparing an actuarial best estimate and a range of reasonable IBNR reserves intended to reflect the uncertainty of the estimate. An inter-departmental committee that includes our actuarial management team reviews the results of each quarterly reserve analysis. The committee establishes management’s best estimate of IBNR reserves, which is the amount that is included in each period’s financial statements. In addition to the information provided by actuarial staff, the committee also considers factors such as:

•large loss activity and trends in large losses

•new business activity

•judicial decisions

•general economic trends such as inflation

•trends in litigiousness and legal expenses

•product and underwriting changes

•changes in claims practices

Cincinnati Financial Corporation - 2023 10-K - Page 55

Table of Contents

The determination of management’s best estimate, like the preparation of the reserve analysis that supports it, involves considerable judgment. Changes in reserving data or the trends and factors that influence reserving data may signal fundamental shifts or may simply reflect single-period anomalies. Even if a change reflects a fundamental shift, the full extent of the change may not become evident until years later. Moreover, since our methods and models do not explicitly relate many of the factors we consider directly to reserve levels, we typically cannot quantify the precise impact of such factors on the adequacy of reserves prospectively or retrospectively.

Due to the uncertainties described above, our ultimate loss experience could prove better or worse than our carried reserves reflect. To the extent that reserves are inadequate and increased, the amount of the increase is a charge in the period that the deficiency is recognized, raising our loss and loss expense ratio and reducing earnings. To the extent that reserves are redundant and released, the amount of the release is a credit in the period that the redundancy is recognized, reducing our loss and loss expense ratio and increasing earnings.

Key Assumptions – Loss Reserving

Our actuarial staff makes a number of key assumptions when using their methods and models to derive IBNR reserve estimates. Appropriate reliance on these key assumptions essentially entails determinations of the likelihood that statistically significant patterns in historical data may extend into the future. The four most significant of the key assumptions used by our actuarial staff and approved by management are:

•Emergence of loss and defense and cost containment expenses, also referred to as DCCE, on an accident year basis. Historical paid loss, reported loss and paid DCCE data for the business lines we analyze contain patterns that reflect how unpaid losses, unreported losses and unpaid DCCE as of a financial statement date will emerge in the future. Unless our actuarial staff or management identifies reasons or factors that invalidate the extension of historical patterns into the future, these patterns can be used to make projections necessary for estimating IBNR reserves. Our actuaries significantly rely on this assumption in the application of all methods and models mentioned above.

•Calendar year inflation. For long-tail and mid-tail business lines, calendar year inflation trends for future paid losses and paid DCCE do not vary significantly from a stable, long-term average. Our actuaries base reserve estimates derived from probabilistic trend family models on this assumption.

•Exposure levels. Historical earned premiums, when adjusted to reflect common levels of product pricing and loss cost inflation, can serve as a proxy for historical exposures. Our actuaries require this assumption to estimate expected loss ratios and expected DCCE ratios used by the Bornhuetter-Ferguson reserving methods. They may also use this assumption to establish exposure levels for recent accident years, characterized by “green” or immature data, when working with probabilistic trend family models.

•Claims having atypical emergence patterns. Characteristics of certain subsets of claims, such as high frequency, high severity, or mass tort claims, have the potential to distort patterns contained in historical paid loss, reported loss and paid DCCE data. When testing indicates this to be the case for a particular subset of claims, our actuaries segregate these claims from the data and analyze them separately. Subsets of claims that could fall into this category include hurricane claims or claims for other weather events where total losses we incurred were very large, individual large claims and asbestos and environmental claims.

These key assumptions have not changed since 2005, when our actuarial staff began using probabilistic trend family models to estimate IBNR reserves.

Paid losses, reported losses and paid DCCE are subject to random as well as systematic influences. As a result, actual paid losses, reported losses and paid DCCE are virtually certain to differ from projections. Such differences are consistent with what specific models for our business lines predict and with the related patterns in the historical data used to develop these models. As a result, management does not closely monitor statistically insignificant differences between actual and projected data.

Cincinnati Financial Corporation - 2023 10-K - Page 56

Table of Contents

Reserve Estimate Variability

Management believes that the standard error of a reserve estimate, a measure of the estimate’s variability, provides the most appropriate measure of the estimate’s sensitivity. The reserves we establish depend on the models we use and the related parameters we estimate in the course of conducting reserve analyses. However, the actual amount required to settle all outstanding insured claims, including IBNR claims, as of a financial statement date depends on stochastic, or random, elements as well as the systematic elements captured by our models and estimated model parameters. For the lines of business we write, process uncertainty – the inherent variability of loss and loss expense payments – typically contributes more to the imprecision of a reserve estimate than parameter uncertainty.

Consequently, a sensitivity measure that ignores process uncertainty would provide an incomplete picture of the reserve estimate’s sensitivity. Since a reserve estimate’s standard error accounts for both process and parameter uncertainty, it reflects the estimate’s full sensitivity to a range of reasonably likely scenarios.

The table below provides standard errors and reserve ranges by major property casualty lines of business and in total for net loss and loss expense reserves as well as the potential effects on our net income, assuming a 21% federal tax rate. Standard errors and reserve ranges for assorted groupings of these lines of business cannot be computed by simply adding the standard errors and reserve ranges of the component lines of business, since such an approach would ignore the effects of product diversification. See Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves, Range of Reasonable Reserves, for more details on our total reserve range. While the table reflects our assessment of the most likely range within which each line’s actual unpaid loss and loss expenses may fall, one or more lines’ actual unpaid loss and loss expenses could nonetheless fall outside of the indicated ranges.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Net loss and loss expense range of reserves"],["","","Carried reserves","","Low point","","High point","","Standard error","","Net income effect"],["At December 31, 2023"],["Total","","$","8,613","","","$","7,926","","","$","8,704","","","$","389","","","$","307"],["Commercial casualty","","$","3,090","","","$","2,661","","","$","3,272","","","$","305","","","$","241"],["Commercial property","","509","","","382","","","589","","","103","","","81"],["Commercial auto","","859","","","803","","","896","","","46","","","36"],["Workers' compensation","","1,005","","","900","","","1,064","","","82","","","65"],["Personal auto","","344","","","320","","","369","","","24","","","19"],["Homeowners","","381","","","351","","","408","","","29","","","23"],["Excess and surplus","","898","","","852","","","944","","","49","","","39"]]
[[/GREPCENT_TABLE]]

 .

Cincinnati Financial Corporation - 2023 10-K - Page 57

Table of Contents

Life Policy and Investment Contract Reserves

We establish the reserves for traditional life policies, including term, whole life and other products based on certain cash flow assumptions including mortality and lapse rates. These assumptions are established based on our current expectations and are reviewed annually to determine any necessary updates. They are also updated on an interim basis if evidence suggests that they should be revised. We use both our own experience and industry experience, adjusted for historical trends, in arriving at our cash flow assumptions. These reserves also include a discount rate assumption that is based on upper-medium grade fixed-income instrument yields (market value discount rates) and is updated quarterly.

The gross reserve balance for term and whole life policy reserves was $1.500 billion, or 48.9%, of total life policy and investment contract reserves at December 31, 2023. The following table summarizes the sensitivity, on a net basis, of our term and whole life policy reserves and reinsurance recoverable amounts to hypothetical changes in key assumptions and the resulting increase/(decrease) to pretax net income and pretax other comprehensive income:

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","","","","","At December 31, 2023"],["","","","","","","Pretax Net Income","","Pretax Other Comprehensive Income"],["Assumptions set by actuaries and approved by management:"],["Mortality"],["Effect of a 1% increase","","","","","","$","(4)","","","$","\u2014"],["Effect of a 1% decrease","","","","","","4","","","\u2014"],["Lapse rates"],["Effect of a 10% increase","","","","","","$","13","","","$","\u2014"],["Effect of a 10% decrease","","","","","","(13)","","","\u2014"],["Assumptions set by market values:"],["Market value discount rate"],["Effect of a 100 basis point increase","","","","","","$","\u2014","","","$","162"],["Effect of a 100 basis point decrease","","","","","","\u2014","","","(200)"]]
[[/GREPCENT_TABLE]]

We establish reserves for our universal life, deferred annuity and other investment contracts, equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals. Charges include surrender and contract administration charges as well as asset-based fees. The reserve balance for these contracts was $1.343 billion, or 43.8%, of total life policy and investment contract reserves, at December 31, 2023.

Some of our universal life insurance policies contain no-lapse guarantee provisions. For these policies, we establish a reserve, or other additional liability, in addition to the account balance based on expected no-lapse guarantee benefits and expected policy assessments. Key assumptions used to establish this other additional liability reserve are expected investment returns and projected lapse rates. These assumptions, and other relevant inputs, are reviewed annually and on an interim basis in line with the process described above for traditional life policies. The reserve balance was $128 million, or 4.2%, of total life policy and investment contract reserves at December 31, 2023, and is included as a component of universal life reserves in Item 8, Note 5 of the Consolidated Financial Statements.

Asset Impairment

Our investment portfolio is our largest asset. We monitor the fixed-maturity portfolio and all other assets for signs of credit-related or other impairment. We monitor decreases in the fair value of invested assets and the need for an allowance for credit losses for our fixed-maturity portfolio; allowances for expected credit losses on receivable and recoverable assets considering past events, current conditions and reasonable and supportable forecasts; an accumulation of company costs in excess of the amount originally expected to acquire or construct an asset; or other factors such as bankruptcy, deterioration of creditworthiness or failure to pay interest; and changes in legal factors or in the business climate.

Cincinnati Financial Corporation - 2023 10-K - Page 58

Table of Contents

The application of our invested assets impairment policy resulted in write-downs of impaired securities intended to be sold that reduced our income before income taxes by $4 million in 2023, $5 million in 2022 and $1 million in 2021. Write-downs represent noncash charges to income and are reported as investment losses. The application of our noninvested assets impairment policy did not have a material effect on our financial condition in 2023 or 2022.

Our internal investment portfolio managers monitor their assigned portfolios. If a fixed-maturity security is valued below amortized cost, the portfolio managers undertake additional reviews. Such declines often occur in conjunction with events taking place in the overall economy and market, combined with events specific to the industry or operations of the issuing organization. Managers review quantitative measurements such as a declining trend in fair value and the extent of the fair value decline, as well as qualitative measures such as pending events, credit ratings and issuer liquidity. We are even more proactive when these declines in valuation are greater than might be anticipated when viewed in the context of overall economic and market conditions. We provide detailed information about fixed-maturity securities fair valued in a continuous loss position at year-end 2023 in Item 7A, Quantitative and Qualitative Disclosures About Market Risk.

An available for sale fixed maturity is impaired if the fair value of the security is below amortized cost. The impaired loss is charged to net income when we have the intent to sell the security or it is more likely than not we will be required to sell the security before recovery of the amortized cost. For impaired securities we intend to hold, an allowance for credit related losses is recorded in investment losses when the company determines a credit loss has been incurred based on certain factors such as adverse conditions, credit rating downgrades or failure of the issuer to make scheduled principal or interest payments. A credit loss is determined using a discounted cash flow analysis by comparing the present value of expected cash flows with the amortized cost basis, limited to the difference between fair value and amortized cost. Noncredit losses are recognized in other comprehensive income as a change in unrealized gains and losses on investments. We provide information about valuations of our invested assets in Item 8, Note 2 of the Consolidated Financial Statements.

Cincinnati Financial Corporation - 2023 10-K - Page 59

Table of Contents

Fair Value Measurements

Valuation of Financial Instruments

Fair value is defined as the exit price or the amount that would be (1) received to sell an asset or (2) paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date. When determining an exit price, we must, whenever possible, rely upon observable market data.

We have categorized our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level that is significant to the fair value measurement of the instrument. While we consider pricing data from outside services, we ultimately determine whether the data or inputs used by these outside services are observable or unobservable.

Financial assets and liabilities recorded in the Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as described in Item 8, Note 3 of the Consolidated Financial Statements.

Level 1 and Level 2 Valuation Techniques

Substantially all of the $24.780 billion of securities in our investment portfolio at year-end 2023, measured at fair value, are classified as Level 1 or Level 2. Financial assets that fall within Level 1 and Level 2 are priced according to observable data from identical or similar securities that have traded in the marketplace. Also within Level 2 are securities that are valued by outside services or brokers where we have evaluated and verified the pricing methodology and determined that the inputs are observable.

Recent Accounting Pronouncements

Information about recent accounting pronouncements is provided in Item 8, Note 1 of the Consolidated Financial Statements.

Cincinnati Financial Corporation - 2023 10-K - Page 60

Table of Contents

Financial Results

Consolidated financial results primarily reflect the results of our five reporting segments. These segments are defined based on financial information we use to evaluate performance and to determine the allocation of assets.

•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. In addition, Other includes the financial results of our reinsurance assumed operations, known as Cincinnati Re®, and our London-based global specialty underwriter, known as Cincinnati Global Underwriting Ltd.SM (Cincinnati Global).

We measure profit or loss for our commercial lines, personal lines, excess and surplus lines and life insurance segments based upon underwriting results (profit or loss), which represent net earned premium less loss and loss expenses, or contract holders’ benefits incurred, and underwriting expenses on a pretax basis. We also evaluate results for our consolidated property casualty insurance operations. That is the total of our standard market segments (commercial lines and personal lines), our excess and surplus lines insurance segment, Cincinnati Re and Cincinnati Global. For analysis of our consolidated property casualty insurance results, it is important to include the earned premiums, loss and loss expenses and also underwriting expenses reported as Other. Underwriting results and segment pretax operating income are not substitutes for net income determined in accordance with GAAP.

For our consolidated property casualty insurance operations as well as the insurance segments, statutory accounting data and ratios are key performance indicators that we use to assess business trends and to make comparisons to industry results, since GAAP-based industry data generally is not as readily available.

Investments held by the parent company and the investment portfolios for the insurance subsidiaries are managed and reported as the investments segment, separate from our underwriting business. Net investment income and net investment gains and losses for our investment portfolios are discussed in the Investments Results.

The calculations of segment data are described in more detail in Item 8, Note 18, of the Consolidated Financial Statements. The following sections provide analysis and discussion of results of operations for each of the five segments.

Cincinnati Financial Corporation - 2023 10-K - Page 61

Table of Contents

Consolidated Property Casualty Insurance Results

Earned and net written premiums for our consolidated property casualty operations grew in 2023, reflecting average renewal price increases, a higher level of insured exposures and strategic initiatives for targeted growth. A key measure of property casualty profitability is underwriting profit or loss. Profit increased in 2023, reflecting improved overall insured loss experience before catastrophe effects, as price increases helped to offset elevated losses reflecting economic or other forms of inflation that increased our uncertainty regarding ultimate losses. Our 2023 underwriting profit of $401 million was $261 million more than in 2022, including a $31 million unfavorable effect from a higher amount of catastrophe losses, mostly caused by severe weather. Prior accident year loss experience before catastrophes during 2023 was more favorable than in 2022, and represented $81 million of the 2023 underwriting profit increase. We continue working to improve underwriting profitability, such as through higher pricing and our ongoing initiatives to improve pricing precision and loss experience related to claims and loss control practices. Underwriting profit trends are discussed further below.

The table below highlights property casualty results, with analysis and discussion in the sections that follow. That analysis and discussion includes sections by segment.

Overview – Three-Year Highlights

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Earned premiums","","$","7,645","","","$","6,924","","","$","6,184","","","10","","","12"],["Fee revenues","","11","","","10","","","10","","","10","","","0"],["Total revenues","","7,656","","","6,934","","","6,194","","","10","","","12"],["Loss and loss expenses from:"],["Current accident year before catastrophe losses","","4,463","","","4,171","","","3,462","","","7","","","20"],["Current accident year catastrophe losses","","710","","","704","","","562","","","1","","","25"],["Prior accident years before catastrophe losses","","(168)","","","(87)","","","(363)","","","(93)","","","76"],["Prior accident years catastrophe losses","","(47)","","","(72)","","","(65)","","","35","","","(11)"],["Loss and loss expenses","","4,958","","","4,716","","","3,596","","","5","","","31"],["Underwriting expenses","","2,297","","","2,078","","","1,867","","","11","","","11"],["Underwriting profit","","$","401","","","$","140","","","$","731","","","186","","","(81)"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year before catastrophe losses","","58.4","%","","60.2","%","","56.0","%","","(1.8)","","","4.2"],["Current accident year catastrophe losses","","9.3","","","10.2","","","9.1","","","(0.9)","","","1.1"],["Prior accident years before catastrophe losses","","(2.2)","","","(1.3)","","","(5.9)","","","(0.9)","","","4.6"],["Prior accident years catastrophe losses","","(0.6)","","","(1.0)","","","(1.1)","","","0.4","","","0.1"],["Loss and loss expenses","","64.9","","","68.1","","","58.1","","","(3.2)","","","10.0"],["Underwriting expenses","","30.0","","","30.0","","","30.2","","","0.0","","","(0.2)"],["Combined ratio","","94.9","%","","98.1","%","","88.3","%","","(3.2)","","","9.8"],["Combined ratio:","","94.9","%","","98.1","%","","88.3","%","","(3.2)","","","9.8"],["Contribution from catastrophe losses and prior years reserve development","","6.5","","","7.9","","","2.1","","","(1.4)","","","5.8"],["Combined ratio before catastrophe losses and prior years reserve development","","88.4","%","","90.2","%","","86.2","%","","(1.8)","","","4.0"]]
[[/GREPCENT_TABLE]]

Performance highlights for consolidated property casualty operations include:

•Premiums – Agency renewal written premiums rose $596 million or 11% in 2023 and continued to contribute to growth in earned premiums and net written premiums that rose in each of our property casualty insurance segments. The renewal premium increase was largely due to average renewal price increases and a higher level of insured exposures. Price increases with enhanced precision continue to benefit operating results.

New business written premiums produced through agencies increased $145 million in 2023, compared with 2022. Agents appointed during 2023 or 2022 produced a 2023 increase in standard lines new business of $65 million.

Cincinnati Financial Corporation - 2023 10-K - Page 62

Table of Contents

Growth initiatives also favorably affect growth in subsequent years, particularly as newer agency relationships mature over time.

Cincinnati Re produced $558 million of 2023 net written premiums and had a negative contribution of $27 million to growth in other written premiums, compared with 2022. Cincinnati Re assumes 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. In 2023, earned premiums for Cincinnati Re totaled $529 million.

Cincinnati Global had a positive contribution to the increase in other written premiums. Net written premiums were $280 million in 2023, and contributed $50 million of the growth in other written premiums, compared with 2022. In 2023, earned premiums for Cincinnati Global totaled $266 million.

Other written premiums also include premiums ceded to reinsurers as part of our ceded reinsurance program. An increase in ceded premiums, other than Cincinnati Re and Cincinnati Global premiums, reduced net written premium growth by $18 million in 2023.

The table below analyzes premium revenue components and trends.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Agency renewal written premiums","","$","6,261","","","$","5,665","","","$","5,091","","","11","","","11"],["Agency new business written premiums","","1,177","","","1,032","","","897","","","14","","","15"],["Other written premiums","","608","","","610","","","491","","","0","","","24"],["Net written premiums","","8,046","","","7,307","","","6,479","","","10","","","13"],["Unearned premium change","","(401)","","","(383)","","","(295)","","","(5)","","","(30)"],["Earned premiums","","$","7,645","","","$","6,924","","","$","6,184","","","10","","","12"]]
[[/GREPCENT_TABLE]]

•Combined ratio – The combined ratio improved by 3.2 percentage points in 2023, compared with 2022, including a 0.5 percentage-point decrease in the ratio for catastrophe losses. The 2023 ratio for current accident year losses and loss expenses before catastrophes decreased by 1.8 percentage points. That ratio improvement included an increase of 1.9 points for the IBNR portion and a decrease of 3.7 points for the case incurred portion. Price increases and other underwriting efforts have helped to offset losses that have elevated significantly since 2021 due to inflation effects discussed below, as earned premiums in 2023 grew faster than those losses and loss expenses. The remainder of the 2023 combined ratio improvement included 0.9 percentage points more benefit in the ratio for prior accident year losses and loss expenses before catastrophes. We further discuss ratios related to reserve development in the sections that follow the Catastrophe Losses Incurred table below.

Elevated inflation since 2021 has resulted in higher losses and loss expenses 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. Higher losses and loss expenses for various lines of business reflect increased uncertainty of estimated ultimate losses. Until longer-term paid loss cost trends become more clear, we intend to remain prudent in reserving for estimated ultimate losses. 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.

Our statutory combined ratio was 94.6% in 2023 compared with 97.7% in 2022 and 87.9% in 2021. The estimated statutory combined ratio for the property casualty industry, with the industry’s ratio excluding its mortgage and financial guaranty lines of business and based on industry data reported through the first nine months of 2023, was 103.4% in 2023, 104.0% in 2022 and 100.0% in 2021. The contribution of catastrophe losses to our statutory combined ratio was 8.8 percentage points in 2023, 8.9 percentage points in 2022 and 7.6 percentage points in 2021, compared with industry estimates of 9.8, 6.8 and 7.4 percentage points, respectively, with 2023 representing industry data reported through the first nine months of 2023. Components of the combined ratio are discussed below.

Catastrophe loss trends are an important factor in assessing trends for overall underwriting results. Our 10-year historical annual average contribution of catastrophe losses to the combined ratio was 7.7 percentage points at December 31, 2023. Our five-year average was 8.8 percentage points.

Cincinnati Financial Corporation - 2023 10-K - Page 63

Table of Contents

Effective June 1, 2023, we restructured our reinsurance program for Cincinnati Re that included property catastrophe excess of loss coverage. The restructured treaties are for a period of one year and provide $40 million of coverage for various combinations of occurrences for business written in North America on a direct basis and by Cincinnati Re. Cincinnati Global catastrophe losses are not applicable to the treaty. There is a per occurrence limit of $20 million for Cincinnati Re catastrophe losses in excess of $80 million per event. The remaining coverage is for business written by Cincinnati Re and on a direct basis that applies to catastrophe losses in excess of $600 million per event. During 2023, there was no recovery from reinsurers for losses pertaining to these treaties.

The following table shows catastrophe losses incurred for the past two calendar years, net of reinsurance, as well as the effect of loss development on prior period catastrophe reserves. We individually list declared catastrophe events for which our incurred losses reached or exceeded $25 million.

Catastrophe Losses Incurred

[[GREPCENT_TABLE]]
[["(Dollars in millions, net of reinsurance)","","","","","","Excess and surplus lines"],["","","","Commercial lines","","Personal lines"],["Dates","Events","Regions","","","","Other","","Total"],["2023"],["Mar. 1-4","Flood, Lightning, Wind","Midwest, Northeast, South","$","25","","","$","26","","","$","1","","","$","2","","","$","54"],["Mar. 23-28","Flood, Lightning, Wind","Midwest, Northeast, South","21","","","23","","","\u2014","","","\u2014","","","44"],["Mar. 30 - Apr. 1","Flood, Lightning, Wind","Midwest, Northeast, South","58","","","31","","","\u2014","","","\u2014","","","89"],["Apr. 3-7","Flood, Lightning, Wind","Midwest, Northeast, South","12","","","33","","","\u2014","","","\u2014","","","45"],["May 2-9","Flood, Lightning, Wind","Midwest, South","22","","","7","","","\u2014","","","\u2014","","","29"],["Jun. 21-27","Flood, Lightning, Wind","Midwest, Northeast, South, West","21","","","18","","","\u2014","","","\u2014","","","39"],["Jun. 28 - Jul. 4","Flood, Lightning, Wind","Midwest, Northeast, South, West","9","","","16","","","\u2014","","","\u2014","","","25"],["Dec. 9-11","Flood, Lightning, Wind","Northeast, South","23","","","14","","","\u2014","","","\u2014","","","37"],["All other 2023 catastrophes","","125","","","184","","","3","","","36","","","348"],["Development on 2022 and prior catastrophes","(11)","","","(44)","","","\u2014","","","8","","","(47)"],["Calendar year incurred total","","$","305","","","$","308","","","$","4","","","$","46","","","$","663"],["2022"],["Jun. 11-17","Flood, Hail, Wind","Midwest, Northeast, South","$","18","","","$","18","","","$","\u2014","","","$","\u2014","","","$","36"],["Sep. 27 - Oct. 1","Flood, Hail, Wind","South (Ian)","28","","","42","","","\u2014","","","133","","","203"],["Dec. 21-31","Flood, Freeze, Ice, Snow, Wind","Midwest, Northeast, South, West","110","","","46","","","2","","","3","","","161"],["All other 2022 catastrophes","","151","","","130","","","3","","","20","","","304"],["Development on 2021 and prior catastrophes","(23)","","","(44)","","","(1)","","","(4)","","","(72)"],["Calendar year incurred total","","$","284","","","$","192","","","$","4","","","$","152","","","$","632"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 64

Table of Contents

Consolidated Property Casualty Insurance Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses as well as the associated loss expenses. For all property casualty lines of business in aggregate, net loss and loss expense reserves at December 31, 2023, were $682 million higher than at year-end 2022, including $634 million for incurred but not reported (IBNR) reserves. The $682 million reserve increase raised year-end 2022 net loss and loss expense reserves by 9%, compared with a 10% increase in 2023 earned premiums.

Most of the incurred losses and loss expenses shown in the consolidated property casualty insurance results three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since less than half of our consolidated property casualty current accident year incurred losses and loss expenses represents net paid amounts, the majority represents reserves for our estimate of ultimate losses and loss expenses. These reserves develop over time, and we re-estimate previously reported reserves as we learn more about the development of the related claims. The table below illustrates that development. For example, the 70.4% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 2.0 percentage points to 68.4% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2023. Accident years 2022 and 2021 have both developed favorably, as indicated by the progression over time for the ratios in the table.

[[GREPCENT_TABLE]]
[["(Dollars in millions)"],["Accident year loss and loss expenses incurred and ratios to earned premiums:"],["Accident year:","","2023","","2022","","2021","","2023","","2022","","2021"],["as of December 31, 2023","","$","5,173","","","$","4,737","","","$","3,906","","","67.7","%","","68.4","%","","63.2","%"],["as of December 31, 2022","","","","4,875","","","3,928","","","","","70.4","","","63.5"],["as of December 31, 2021","","","","","","4,024","","","","","","","65.1"]]
[[/GREPCENT_TABLE]]

Catastrophe loss trends, discussed above, accounted for some of the movement in the current accident year loss and loss expense ratio for 2023, compared with 2022. Catastrophe losses added 9.3 percentage points in 2023, 10.2 points in 2022 and 9.1 points in 2021 to the respective consolidated property casualty current accident year loss and loss expense ratios in the table above.

The 58.4% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 decreased 1.8 percentage points compared with the 60.2% accident year 2022 ratio measured as of December 31, 2022. The decrease included a 0.3 percentage-point decrease in the ratio for current accident year losses of $2 million or more per claim, shown in the table below.

Reserve development on prior accident years continued to net to a favorable amount in 2023, and was primarily due to less-than-anticipated loss emergence on known claims. We recognized $215 million of favorable development in 2023, compared with $159 million in 2022 and $428 million in 2021. Of the $56 million increase in 2023, compared with 2022, $45 million was attributable to our commercial auto and personal auto lines of business. Approximately 80% of our net favorable reserve development on prior accident years recognized during 2023 occurred in our workers' compensation, commercial property and homeowner lines of business. In 2022, our workers' compensation and homeowner lines of business were responsible for approximately 74% of the favorable reserve development. As discussed in Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves, Property Casualty Insurance Development of Estimated Reserves by Accident Year, commercial casualty and workers' compensation are considered long-tail lines with the potential for revisions inherent in estimating reserves. Favorable development recognized during 2021 was primarily from our commercial casualty, commercial property and workers’ compensation lines of business. Development by accident year is further discussed in Liquidity and Capital Resources, Property Casualty Insurance Development of Estimated Reserves by Accident Year.

Cincinnati Financial Corporation - 2023 10-K - Page 65

Table of Contents

Consolidated Property Casualty Insurance Losses by Size

[[GREPCENT_TABLE]]
[["(Dollars in millions, net of reinsurance)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Current accident year losses greater than $5,000,000","","$","141","","","$","143","","","$","112","","","(1)","","","28"],["Current accident year losses $2,000,000-$5,000,000","","144","","","135","","","97","","","7","","","39"],["Large loss prior accident year reserve development","","94","","","30","","","77","","","213","","","(61)"],["Total large losses incurred","","379","","","308","","","286","","","23","","","8"],["Losses incurred but not reported","","596","","","377","","","(19)","","","58","","","nm"],["Other losses excluding catastrophe losses","","2,571","","","2,737","","","2,240","","","(6)","","","22"],["Catastrophe losses","","634","","","612","","","472","","","4","","","30"],["Total losses incurred","","$","4,180","","","$","4,034","","","$","2,979","","","4","","","35"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year losses greater than $5,000,000","","1.9","%","","2.1","%","","1.8","%","","(0.2)","","","0.3"],["Current accident year losses $2,000,000-$5,000,000","","1.9","","","2.0","","","1.6","","","(0.1)","","","0.4"],["Large loss prior accident year reserve development","","1.2","","","0.4","","","1.2","","","0.8","","","(0.8)"],["Total large loss ratio","","5.0","","","4.5","","","4.6","","","0.5","","","(0.1)"],["Losses incurred but not reported","","7.8","","","5.5","","","(0.3)","","","2.3","","","5.8"],["Other losses excluding catastrophe losses","","33.6","","","39.5","","","36.3","","","(5.9)","","","3.2"],["Catastrophe losses","","8.3","","","8.8","","","7.6","","","(0.5)","","","1.2"],["Total loss ratio","","54.7","%","","58.3","%","","48.2","%","","(3.6)","","","10.1"]]
[[/GREPCENT_TABLE]]

In 2023, total large losses incurred increased by $71 million, or 23%, net of reinsurance, primarily due to an increase for our commercial lines insurance segment. The corresponding 2023 ratio increased 0.5 percentage points, compared with 2022. The large loss data included in the table above does not include Cincinnati Re and Cincinnati Global. Our analysis of large losses incurred indicated no unexpected concentration of these losses and reserve increases by geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility 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 volatility in addition to general inflationary trends in loss costs.

Cincinnati Financial Corporation - 2023 10-K - Page 66

Table of Contents

Consolidated Property Casualty Insurance Underwriting Expenses

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Commission expenses","","$","1,438","","","$","1,319","","","$","1,168","","","9","","","13"],["Other underwriting expenses","","854","","","753","","","694","","","13","","","9"],["Policyholder dividends","","5","","","6","","","5","","","(17)","","","20"],["Total underwriting expenses","","$","2,297","","","$","2,078","","","$","1,867","","","11","","","11"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Commission expenses","","18.8","%","","19.1","%","","18.9","%","","(0.3)","","","0.2"],["Other underwriting expenses","","11.1","","","10.8","","","11.2","","","0.3","","","(0.4)"],["Policyholder dividends","","0.1","","","0.1","","","0.1","","","0.0","","","0.0"],["Total underwriting expense ratio","","30.0","%","","30.0","%","","30.2","%","","0.0","","","(0.2)"]]
[[/GREPCENT_TABLE]]

Consolidated property casualty commission expenses rose $119 million, or 9%, in 2023, with profit-sharing commissions for agencies increasing by $10 million. The 2023 ratio of commission expenses as a percent of earned premiums decreased by 0.3 percentage points, compared with 2022. The 2023 ratio for other underwriting expenses increased by 0.3 percentage points, compared with 2022. Earned premiums rose at a slower pace than other underwriting expenses during 2023, and we continued to carefully manage expenses while also making strategic investments that include enhancement of underwriting expertise.

Commission expenses include our profit-sharing commissions, which are primarily based on one-year and three-year profitability of an agency’s business. The aggregate profit trend for agencies that earn these profit-based commissions can differ from the aggregate profit trend for all agencies reflected in our consolidated property casualty results.

Salaries, benefits and payroll taxes for our associates account for approximately half of our property casualty other underwriting expenses. Most of our associates either provide direct service to the property casualty portion of our agencies’ businesses or provide support to those associates.

Discussions below of our property casualty insurance segments provide additional details about our results.

Cincinnati Financial Corporation - 2023 10-K - Page 67

Table of Contents

Commercial Lines Insurance Results

Overview – Three-Year Highlights

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Earned premiums","","$","4,264","","","$","4,024","","","$","3,674","","","6","","","10"],["Fee revenues","","4","","","4","","","4","","","0","","","0"],["Total revenues","","4,268","","","4,028","","","3,678","","","6","","","10"],["Loss and loss expenses from:"],["Current accident year before catastrophe losses","","2,594","","","2,530","","","2,125","","","3","","","19"],["Current accident year catastrophe losses","","316","","","307","","","168","","","3","","","83"],["Prior accident years before catastrophe losses","","(112)","","","(53)","","","(309)","","","(111)","","","83"],["Prior accident years catastrophe losses","","(11)","","","(23)","","","(44)","","","52","","","48"],["Loss and loss expenses","","2,787","","","2,761","","","1,940","","","1","","","42"],["Underwriting expenses","","1,313","","","1,229","","","1,140","","","7","","","8"],["Underwriting profit","","$","168","","","$","38","","","$","598","","","342","","","(94)"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year before catastrophe losses","","60.8","%","","62.9","%","","57.8","%","","(2.1)","","","5.1"],["Current accident year catastrophe losses","","7.4","","","7.6","","","4.6","","","(0.2)","","","3.0"],["Prior accident years before catastrophe losses","","(2.6)","","","(1.3)","","","(8.4)","","","(1.3)","","","7.1"],["Prior accident years catastrophe losses","","(0.2)","","","(0.6)","","","(1.2)","","","0.4","","","0.6"],["Loss and loss expenses","","65.4","","","68.6","","","52.8","","","(3.2)","","","15.8"],["Underwriting expenses","","30.8","","","30.6","","","31.0","","","0.2","","","(0.4)"],["Combined ratio","","96.2","%","","99.2","%","","83.8","%","","(3.0)","","","15.4"],["Combined ratio:","","96.2","%","","99.2","%","","83.8","%","","(3.0)","","","15.4"],["Contribution from catastrophe losses and prior years reserve development","","4.6","","","5.7","","","(5.0)","","","(1.1)","","","10.7"],["Combined ratio before catastrophe losses and prior years reserve development","","91.6","%","","93.5","%","","88.8","%","","(1.9)","","","4.7"]]
[[/GREPCENT_TABLE]]

Performance highlights for the commercial lines insurance segment include:

•Premiums – Earned premiums and net written premiums rose in 2023, including a $204 million, or 6%, increase in renewal written premiums that continued to include higher average pricing and a higher level of insured exposures. New business written premiums in 2023 decreased $16 million, or 3%, compared with 2022, reflecting pricing discipline in a highly competitive environment.

•Combined ratio – The 2023 combined ratio improved by 3.0 percentage points compared with 2022, despite a 0.2 percentage-point increase in the ratio component for catastrophe losses. Development on prior accident years loss and loss expense reserves before catastrophes during 2023 was 1.3 percentage points more favorable than in 2022. The 2023 combined ratio also improved by 2.1 points due to a lower ratio for current accident year loss and loss expenses before catastrophe losses, compared with 2022. That ratio improvement included an increase of 2.4 points for the IBNR portion and a decrease of 4.5 points for the case incurred portion. Price increases and other underwriting actions have helped offset losses that have elevated significantly since 2021 due to inflation effects, as earned premiums in 2023 grew faster than those losses and loss expenses.

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 since 2021 has resulted in 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.

Cincinnati Financial Corporation - 2023 10-K - Page 68

Table of Contents

Commercial umbrella coverages are part of our commercial casualty line of business that help protect businesses against liability from occurrences such as accidents or injuries. Following a significantly unfavorable effect on our 2022 ratios for losses and expenses, commercial umbrella contributed a favorable decrease of approximately 2.2 percentage points to the commercial lines segment 2023 ratio for loss and loss expenses decrease of 3.2% shown in the table above. Incurred losses and loss expenses for commercial umbrella coverages of $346 million in 2023 decreased $70 million, or 17%, compared with 2022, including an increase in net paid losses of $7 million. The $70 million decrease in losses and loss expenses included a decrease of $39 million or 24% for the IBNR portion, while earned premiums of $502 million increased 1%. The estimated combined ratio for commercial umbrella for 2023 was 98%, compared with an estimated 112% for 2022, and its 2023 earned premiums represented approximately 34% of our commercial casualty premiums. Severe losses from commercial auto accidents were the primary source of our commercial umbrella claims during 2023 and also in recent years.

Pricing precision and other initiatives to improve commercial lines underwriting profitability complement our business practices that continue to leverage the local presence of our field associates. Field marketing representatives meet with local agencies to assess each risk, determine limits of insurance and establish appropriate terms and conditions. They underwrite new business, with collaboration and expertise from headquarters associates as needed, while field loss control, machinery and equipment and claims representatives conduct on-site inspections. Field claims representatives also assist underwriters by preparing full reports on their first-hand observations of risk quality.

Our commercial lines statutory combined ratio was 95.6% in 2023, compared with 98.5% in 2022 and 83.2% in 2021. The contribution of catastrophe losses to our commercial lines statutory combined ratio was 7.2 percentage points in 2023, 7.0 percentage points in 2022 and 3.4 percentage points in 2021.

Commercial Lines Insurance Premiums

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Agency renewal written premiums","","$","3,876","","","$","3,672","","","$","3,334","","","6","","","10"],["Agency new business written premiums","","584","","","600","","","571","","","(3)","","","5"],["Other written premiums","","(124)","","","(113)","","","(94)","","","(10)","","","(20)"],["Net written premiums","","4,336","","","4,159","","","3,811","","","4","","","9"],["Unearned premium change","","(72)","","","(135)","","","(137)","","","47","","","1"],["Earned premiums","","$","4,264","","","$","4,024","","","$","3,674","","","6","","","10"]]
[[/GREPCENT_TABLE]]

We continue to refine our use of predictive analytics tools to improve pricing precision as we further segment commercial lines policies, emphasizing identification and retention of policies we believe have relatively stronger price adequacy. These tools better align individual insurance policy pricing to risk attributes, providing our underwriters with enhanced abilities to target profitability and to discuss pricing impacts with our agencies. We also continue to leverage our local relationships with agents through the efforts of our teams that work closely with them. We believe our field focus is unique and has several advantages, including providing us with quality intelligence on local market conditions. We seek to maintain appropriate pricing discipline for both new and renewal business as management continues to emphasize the importance of our agencies and underwriters assessing account quality to make careful decisions on a case-by-case basis whether to write as new business or renew a policy. Premium rate credits may be used to retain renewals of quality business and to earn new business, but we do so selectively in order to avoid commercial accounts that we believe have insufficient profit margins.

Our 6% increase in 2023 agency renewal written premiums included higher average pricing. We measure average changes in commercial lines renewal pricing as the 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. In 2023, our standard commercial lines policies averaged an estimated pricing change at a percentage near the low end of the high-single-digit range. Our average commercial lines pricing change includes the flat pricing effect of certain coverages within package policies written for a three-year term that were in force but did not expire during the period being measured. Therefore, the average commercial lines pricing change we report reflects a blend of policies that did not expire and other policies that did expire during the measurement period.

Cincinnati Financial Corporation - 2023 10-K - Page 69

Table of Contents

For only those commercial lines policies that did expire and were then renewed during 2023, we estimate that the average price increase was at a percentage in the high-single-digit range. During 2023, we continued to further segment our commercial lines policies, emphasizing identification and retention of policies we believed had relatively stronger price adequacy. Conversely, we continued to seek more aggressive renewal terms and conditions on policies we believed had relatively weaker pricing, in turn retaining fewer of those policies.

Our 2023 increase of 6% for the commercial lines segment's agency renewal written premiums also included a higher level of insured exposures, in addition to other factors such as changes in policy retention rates or changes in mix of business that can cause variation in average premiums per policy. Part of the 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.

Changes in the economy can affect insured exposures that directly relate to premium amounts charged for some policies. For commercial accounts, we usually calculate initial estimates for general liability premiums based on estimated sales or payroll volume, while we calculate workers’ compensation premiums based on estimated payroll volume. A change in sales or payroll volume generally indicates a change in demand for a business’s goods or services, as well as a change in its exposure to risk. Policyholders who experience sales or payroll volume changes due to economic factors may also have other exposures requiring insurance, such as commercial auto or commercial property. Premium levels for these other types of coverages generally are not linked directly to sales or payroll volumes.

Premiums resulting from audits of actual sales or payrolls that confirmed or adjusted initial premium estimates are part of net written premiums and earned premiums. The contribution to our commercial lines earned premiums was $157 million, $127 million and $47 million in 2023, 2022 and 2021, respectively. The contribution on a net written premium basis was $136 million, $101 million and $44 million in 2023, 2022 and 2021, respectively. These net written premium amounts are included with agency renewal written premiums in the Commercial Lines Insurance Premiums table above.

In 2023, our commercial lines new business premiums written by our agencies decreased $16 million, or 3%, compared with 2022, reflecting pricing discipline in a highly competitive environment. New business premium volume in recent years has been significantly influenced by new agency appointments. Agencies appointed since the beginning of 2022 produced commercial lines new business written premiums of $47 million, in aggregate, during 2023, up $34 million from what they produced during 2022. All other agencies contributed the remaining $537 million, down $50 million from the $587 million they produced in 2022.

For new business, our field associates are frequently meeting with our agents to: help judge the quality of each account; emphasize the Cincinnati value proposition; call on sales prospects with those agents; and provide appropriate quotes after carefully evaluating risk exposures. Some of our new business comes from accounts that are not new to the agent. We believe these seasoned accounts tend to be priced more accurately than business that is new to us and the agency. As we appoint new agencies who choose to move accounts to us, we report these accounts as new business to us.

Other written premiums primarily consist of premiums that are ceded to reinsurers and lower our net written premiums. An increase in ceded premiums reduced net written premium growth by $11 million in 2023.

Cincinnati Financial Corporation - 2023 10-K - Page 70

Table of Contents

Commercial Lines Insurance Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses as well as the associated loss expenses. Most of the incurred losses and loss expenses shown in the commercial lines insurance segment three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since less than half of our commercial lines insurance segment current accident year incurred losses and loss expenses represents net paid amounts, the majority represents reserves for our estimate of ultimate losses and loss expenses. These reserves develop over time, and we re-estimate previously reported reserves as we learn more about development on the related claims. The table below illustrates that development. For example, the 70.5% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 1.7 percentage points to 68.8% due to claims settling for less than previously estimated, or due to updates to reserve estimates for unpaid claims, as of December 31, 2023. Accident years 2022 and 2021 for the commercial lines insurance segment have both developed favorably, as indicated by the progression over time of the ratios in the table.

[[GREPCENT_TABLE]]
[["(Dollars in millions)"],["Accident year loss and loss expenses incurred and ratios to earned premiums:"],["Accident year:","","2023","","2022","","2021","","2023","","2022","","2021"],["as of December 31, 2023","","$","2,910","","","$","2,769","","","$","2,204","","","68.2","%","","68.8","%","","60.0","%"],["as of December 31, 2022","","","","2,837","","","2,234","","","","","70.5","","","60.8"],["as of December 31, 2021","","","","","","2,293","","","","","","","62.4"]]
[[/GREPCENT_TABLE]]

Catastrophe losses, as discussed in Consolidated Property Casualty Insurance Results, explain some of the movement in the current accident year loss and loss expense ratio for accident year 2023, compared with 2022. Catastrophe losses added 7.4 percentage points in 2023, 7.6 points in 2022 and 4.6 points in 2021 to the respective commercial lines current accident year loss and loss expense ratios in the table above.

The 60.8% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 decreased 2.1 percentage points compared with the 62.9% accident year 2022 ratio measured as of December 31, 2022. The decrease included an increase in large losses incurred, described below including a table with corresponding ratios for new losses above $2 million, with a 0.2 percentage-point decrease in the 2023 ratio. Other contributions to the ratio decrease of 2.1 percentage points included inflation effects that were offset by the favorable impact from various initiatives, such as those to improve pricing precision, risk selection and loss experience related to claims and loss control practices.

Commercial lines reserve development on prior accident years of $123 million in 2023 continued to net to a favorable amount and provided a larger benefit than the $76 million recognized in 2022. The $47 million net increase in 2023, compared with 2022, included $28 million and $11 million from our commercial auto and commercial property lines of business, respectively. Most of our commercial lines net favorable reserve development on prior accident years recognized during 2023 occurred in our workers’ compensation and commercial property lines of business. Favorable development recognized during 2022 was mostly from our workers’ compensation and commercial property lines of business and during 2021 it was mostly from our commercial casualty, commercial property and workers' compensation lines of business. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable historical paid loss patterns are a key assumption used to make projections necessary for estimating IBNR reserves. Development by accident year and other trends for commercial lines loss and loss expenses and the related ratios are further discussed in Liquidity and Capital Resources, Property Casualty Insurance Development of Estimated Reserves by Accident Year.

Cincinnati Financial Corporation - 2023 10-K - Page 71

Table of Contents

Commercial Lines Insurance Losses by Size

[[GREPCENT_TABLE]]
[["(Dollars in millions, net of reinsurance)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Current accident year losses greater than $5,000,000","","$","109","","","$","95","","","$","97","","","15","","","(2)"],["Current accident year losses $2,000,000-$5,000,000","","99","","","103","","","76","","","(4)","","","36"],["Large loss prior accident year reserve development","","89","","","26","","","82","","","242","","","(68)"],["Total large losses incurred","","297","","","224","","","255","","","33","","","(12)"],["Losses incurred but not reported","","328","","","304","","","(83)","","","8","","","nm"],["Other losses excluding catastrophe losses","","1,393","","","1,535","","","1,254","","","(9)","","","22"],["Catastrophe losses","","291","","","275","","","116","","","6","","","137"],["Total losses incurred","","$","2,309","","","$","2,338","","","$","1,542","","","(1)","","","52"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year losses greater than $5,000,000","","2.5","%","","2.4","%","","2.6","%","","0.1","","","(0.2)"],["Current accident year losses $2,000,000-$5,000,000","","2.3","","","2.6","","","2.1","","","(0.3)","","","0.5"],["Large loss prior accident year reserve development","","2.1","","","0.6","","","2.2","","","1.5","","","(1.6)"],["Total large loss ratio","","6.9","","","5.6","","","6.9","","","1.3","","","(1.3)"],["Losses incurred but not reported","","7.7","","","7.6","","","(2.3)","","","0.1","","","9.9"],["Other losses excluding catastrophe losses","","32.7","","","38.1","","","34.2","","","(5.4)","","","3.9"],["Catastrophe losses","","6.8","","","6.8","","","3.2","","","0.0","","","3.6"],["Total loss ratio","","54.1","%","","58.1","%","","42.0","%","","(4.0)","","","16.1"]]
[[/GREPCENT_TABLE]]

In 2023, total large losses incurred increased by $73 million, or 33%, net of reinsurance. The corresponding 2023 ratio increased 1.3 percentage points, compared with 2022. The 2023 increase on a dollar basis was primarily due to an increase of $71 million for our commercial property line of business. In 2022, total large losses incurred and the corresponding ratio were lower than in 2021, largely due to lower amounts of large losses for our workers' compensation and commercial property lines of business. Our analysis indicated no unexpected concentration of these losses and reserve increases by geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility 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 volatility in addition to general inflationary trends in loss costs.

Commercial Lines Insurance Underwriting Expenses

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Commission expenses","","$","780","","","$","741","","","$","684","","","5","","","8"],["Other underwriting expenses","","528","","","482","","","451","","","10","","","7"],["Policyholder dividends","","5","","","6","","","5","","","(17)","","","20"],["Total underwriting expenses","","$","1,313","","","$","1,229","","","$","1,140","","","7","","","8"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Commission expenses","","18.3","%","","18.4","%","","18.6","%","","(0.1)","","","(0.2)"],["Other underwriting expenses","","12.4","","","12.0","","","12.2","","","0.4","","","(0.2)"],["Policyholder dividends","","0.1","","","0.2","","","0.2","","","(0.1)","","","0.0"],["Total underwriting expense ratio","","30.8","%","","30.6","%","","31.0","%","","0.2","","","(0.4)"]]
[[/GREPCENT_TABLE]]

Commercial lines commission expenses as a percent of earned premiums decreased slightly in 2023, compared with 2022. The ratio for 2022 decreased compared with 2021, reflecting a decrease in the ratio for profit-sharing commissions for agencies. In 2023, other underwriting expenses as a percent of earned premiums increased, compared with 2022, as earned premiums rose at a slower pace than other underwriting expenses. In 2022, other underwriting expenses as a percent of earned premiums decreased, compared with 2021, reflecting ongoing expense management efforts and premium growth outpacing growth in expenses.

Cincinnati Financial Corporation - 2023 10-K - Page 72

Table of Contents

Commercial Lines Insurance Outlook

Renewal and new business pricing for commercial risks continues to experience significant inflationary and competitive pressure, and we continue to respond with enhanced pricing analytics and careful risk selection. Despite challenging market conditions, we believe we can successfully manage our business and execute strategic initiatives to offset market pressures and profitably grow our commercial lines insurance segment.

We intend to grow our commercial lines segment through additional agency appointments, expansion of our local field presence, enhanced expertise and product expansion that meets the needs of an even larger percentage of our agencies' total commercial portfolio. Our goal is to provide flexibility in our process so that we can deliver an industry-leading agency experience to all of our agents as we work to be the first and last solution when they are considering business placement.

We intend to keep marketing our products to a broad range of business classes with a total account approach, while also continuing improvement of our pricing precision and further segmentation among commercial lines policies. Underwriters continue to emphasize underwriting discipline and careful management of rate levels as well as our programs that seek to accurately match exposures with appropriate premiums. We work to evaluate each risk on a policy-by-policy basis, making decisions about rates, terms and conditions based on each account’s individual characteristics. We believe that our initiatives to improve pricing precision and lower loss costs will continue to benefit commercial lines profitability during 2024, and that recent-year premium growth initiatives will produce profitable commercial lines premium growth.

Cincinnati Financial Corporation - 2023 10-K - Page 73

Table of Contents

Personal Lines Insurance Results

Overview – Three-Year Highlights

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Earned premiums","","$","2,044","","","$","1,689","","","$","1,542","","","21","","","10"],["Fee revenues","","4","","","4","","","4","","","0","","","0"],["Total revenues","","2,048","","","1,693","","","1,546","","","21","","","10"],["Loss and loss expenses from:"],["Current accident year before catastrophe losses","","1,154","","","991","","","824","","","16","","","20"],["Current accident year catastrophe losses","","352","","","236","","","218","","","49","","","8"],["Prior accident years before catastrophe losses","","(20)","","","(17)","","","(43)","","","(18)","","","60"],["Prior accident years catastrophe losses","","(44)","","","(44)","","","(7)","","","0","","","(529)"],["Loss and loss expenses","","1,442","","","1,166","","","992","","","24","","","18"],["Underwriting expenses","","610","","","509","","","457","","","20","","","11"],["Underwriting profit (loss)","","$","(4)","","","$","18","","","$","97","","","nm","","(81)"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year before catastrophe losses","","56.4","%","","58.7","%","","53.4","%","","(2.3)","","","5.3"],["Current accident year catastrophe losses","","17.3","","","14.0","","","14.2","","","3.3","","","(0.2)"],["Prior accident years before catastrophe losses","","(1.0)","","","(1.0)","","","(2.8)","","","0.0","","","1.8"],["Prior accident years catastrophe losses","","(2.2)","","","(2.6)","","","(0.5)","","","0.4","","","(2.1)"],["Loss and loss expenses","","70.5","","","69.1","","","64.3","","","1.4","","","4.8"],["Underwriting expenses","","29.9","","","30.1","","","29.7","","","(0.2)","","","0.4"],["Combined ratio","","100.4","%","","99.2","%","","94.0","%","","1.2","","","5.2"],["Combined ratio:","","100.4","%","","99.2","%","","94.0","%","","1.2","","","5.2"],["Contribution from catastrophe losses and prior years reserve development","","14.1","","","10.4","","","10.9","","","3.7","","","(0.5)"],["Combined ratio before catastrophe losses and prior years reserve development","","86.3","%","","88.8","%","","83.1","%","","(2.5)","","","5.7"]]
[[/GREPCENT_TABLE]]

Performance highlights for the personal lines insurance segment include:

•Premiums – Earned premiums and net written premiums continued to grow in 2023, due to increases in new business written premiums and renewal written premiums that included higher average pricing and a higher level of insured exposures. Renewal written premiums rose $356 million, or 22%, in 2023, compared with 2022, while new business written premiums rose $120 million, or 41%. Cincinnati Private ClientSM net written premiums, included in the personal lines insurance segment, rose $338 million, or 37%, to approximately $1.257 billion in 2023, representing 54.6% of the segment's 2023 net written premiums. Cincinnati Private Client net written premiums included excess and surplus lines homeowner policies with premiums totaling $109 million in 2023 and $63 million in 2022.

•Combined ratio – The 2023 combined ratio increased by 1.2 percentage points, compared with 2022, including a 3.7 percentage-point increase in the ratio for catastrophe losses. Development on prior accident years’ loss and loss expense reserves before catastrophes during 2023 matched 2022. The 2023 combined ratio improved by 2.3 points due to a lower ratio for current accident year loss and loss expenses before catastrophe losses, compared with 2022. That ratio improvement included an increase of 2.2 points for the IBNR portion and a decrease of 4.5 points for the case incurred portion. Price increases and other underwriting efforts have helped to offset losses that have elevated significantly since 2021 due to inflation effects, as earned premiums in 2023 grew faster than those losses and loss expenses.

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 since 2021 has resulted in higher losses and loss expenses as costs have increased

Cincinnati Financial Corporation - 2023 10-K - Page 74

Table of Contents

significantly to repair damaged autos or homes 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.

We have increased our pricing precision and implemented numerous rate increases in recent years to improve our personal lines insurance segment results. In addition, we have made greater use of higher minimum loss deductibles and enhanced our property inspection processes to verify condition and insurance to value. We have worked to improve our geographic diversification by expanding our personal lines operation to several states less prone to catastrophes.

Our personal lines statutory combined ratio was 98.3% in 2023, compared with 97.7% in 2022 and 93.5% in 2021. The contribution of catastrophe losses to our personal lines statutory combined ratio was 15.1 percentage points in 2023, 11.4 percentage points in 2022 and 13.7 percentage points in 2021.

Personal Lines Insurance Premiums

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Agency renewal written premiums","","$","1,957","","","$","1,601","","","$","1,434","","","22","","","12"],["Agency new business written premiums","","416","","","296","","","202","","","41","","","47"],["Other written premiums","","(71)","","","(66)","","","(42)","","","(8)","","","(57)"],["Net written premiums","","2,302","","","1,831","","","1,594","","","26","","","15"],["Unearned premium change","","(258)","","","(142)","","","(52)","","","(82)","","","(173)"],["Earned premiums","","$","2,044","","","$","1,689","","","$","1,542","","","21","","","10"]]
[[/GREPCENT_TABLE]]

Personal lines insurance is a strategic component of our overall relationship with most of our agencies and is an important component of our agencies’ relationships with their clients. We believe agents recommend our personal insurance products to their clients who seek to balance quality and price and who are attracted by our superior claims service and the benefits of our package approach. We also believe our continuing efforts to improve pricing precision are helping us attract and retain more of our agencies’ preferred business, while also obtaining higher rates for more thinly priced business.

The 22% increase in agency renewal written premiums in 2023 included the effect of various rate changes. We estimate that premium rates for our personal auto line of business increased at an average of approximately 10% during 2023, with some individual policies experiencing lower or higher rate changes based on enhanced pricing precision enabled by predictive models that consider characteristics of specific risks. For our homeowner line of business, we estimate that rate increases during 2023 averaged near the high end of the mid-single-digit range. Similar to our personal auto line of business, that average varied widely by state, and some individual policies experienced lower or higher rate changes based on pricing precision and current rate level indications that helped determine appropriate premium rates.

The 22% increase in agency renewal written premiums in 2023 also included a higher level of insured exposures and other factors such as 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.

Personal lines new business written premiums grew by $120 million, or 41%, during 2023, compared with 2022, including approximately $42 million from Cincinnati Private Client policies and $78 million from middle-market policies. We believe we maintained underwriting and pricing discipline across all personal lines markets as we expanded use of enhanced pricing precision tools. 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.

Other written premiums primarily consist of premiums that are ceded to reinsurers and lower our net written premiums. An increase in ceded premiums reduced net written premium growth by $8 million in 2023.

Cincinnati Financial Corporation - 2023 10-K - Page 75

Table of Contents

Personal Lines Insurance Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses as well as the associated loss expenses. Most of the incurred losses and loss expenses shown in the personal lines insurance segment three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since approximately two-thirds of our personal lines current accident year incurred losses and loss expenses represent net paid amounts, the remaining one-third represents reserves for our estimate of ultimate losses and loss expenses. These reserves develop over time, and we re-estimate previously reported reserves as we learn more about the development on the related claims. The table below illustrates that development. For example, the 72.7% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 2.7 percentage points to 70.0% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2023. Accident years 2022 and 2021 for the personal lines insurance segment have both developed favorably, as indicated by the progression over time for the ratios in the table.

[[GREPCENT_TABLE]]
[["(Dollars in millions)"],["Accident year loss and loss expenses incurred and ratios to earned premiums:"],["Accident year:","","2023","","2022","","2021","","2023","","2022","","2021"],["as of December 31, 2023","","$","1,506","","","$","1,182","","","$","986","","","73.7","%","","70.0","%","","63.9","%"],["as of December 31, 2022","","","","1,227","","","990","","","","","72.7","","","64.2"],["as of December 31, 2021","","","","","","1,042","","","","","","","67.6"]]
[[/GREPCENT_TABLE]]

Catastrophe losses, as discussed in Consolidated Property Casualty Insurance Results, explain some of the movement in the current accident year loss and loss expense ratio for accident year 2023, compared with accident year 2022. Catastrophe losses added 17.3 percentage points in 2023, 14.0 points in 2022 and 14.2 points in 2021 to the respective personal lines current accident year loss and loss expense ratios in the table above. Personal lines catastrophe losses for 2023 resulted in a ratio higher than our 10.6% 10-year annual average for personal lines. Personal lines catastrophe losses are inherently volatile, as discussed above and in Consolidated Property Casualty Insurance Results.

The 56.4% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 decreased 2.3 percentage points compared with the 58.7% accident year 2022 ratio measured as of December 31, 2022. The decrease included a decrease in large losses incurred, described below, and the corresponding ratios for new losses above $2 million, with a 0.8 percentage-point decrease in the 2023 ratio. Other contributions included inflation effects that were offset by the favorable impact from various initiatives, such as those to improve pricing precision, risk selection and loss experience related to claims and loss control practices.

Personal lines loss and loss expense reserve development on prior accident years recognized in 2023 was favorable by $64 million, in aggregate, compared with $61 million in 2022. The 2023 net favorable reserve development included $53 million for our homeowner line of business and $15 million for our personal auto line of business. The 2022 net favorable reserve development included $54 million for our homeowner line of business. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable historical paid loss patterns are a key assumption used to make projections necessary for estimating IBNR reserves. Development by accident year and other trends for personal lines loss and loss expenses and the related ratios are further discussed in Liquidity and Capital Resources, Property Casualty Insurance Development of Estimated Reserves by Accident Year.

Cincinnati Financial Corporation - 2023 10-K - Page 76

Table of Contents

Personal Lines Insurance Losses by Size

[[GREPCENT_TABLE]]
[["(Dollars in millions, net of reinsurance)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Current accident year losses greater than $5,000,000","","$","32","","","$","48","","","$","15","","","(33)","","","220"],["Current accident year losses $2,000,000-$5,000,000","","45","","","30","","","21","","","50","","","43"],["Large loss prior accident year reserve development","","7","","","4","","","(5)","","","75","","","nm"],["Total large losses incurred","","84","","","82","","","31","","","2","","","165"],["Losses incurred but not reported","","65","","","5","","","11","","","nm","","(55)"],["Other losses excluding catastrophe losses","","809","","","738","","","624","","","10","","","18"],["Catastrophe losses","","298","","","186","","","198","","","60","","","(6)"],["Total losses incurred","","$","1,256","","","$","1,011","","","$","864","","","24","","","17"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year losses greater than $5,000,000","","1.6","%","","2.8","%","","1.0","%","","(1.2)","","","1.8"],["Current accident year losses $2,000,000-$5,000,000","","2.2","","","1.8","","","1.3","","","0.4","","","0.5"],["Large loss prior accident year reserve development","","0.3","","","0.3","","","(0.3)","","","0.0","","","0.6"],["Total large loss ratio","","4.1","","","4.9","","","2.0","","","(0.8)","","","2.9"],["Losses incurred but not reported","","3.2","","","0.3","","","0.7","","","2.9","","","(0.4)"],["Other losses excluding catastrophe losses","","39.5","","","43.7","","","40.5","","","(4.2)","","","3.2"],["Catastrophe losses","","14.6","","","11.0","","","12.8","","","3.6","","","(1.8)"],["Total loss ratio","","61.4","%","","59.9","%","","56.0","%","","1.5","","","3.9"]]
[[/GREPCENT_TABLE]]

In 2023, personal lines total large losses incurred increased by $2 million, or 2%, net of reinsurance. The corresponding 2023 ratio decreased 0.8 percentage points, compared with 2022. The 2023 increase was primarily due to a higher amount for our homeowner line of business. In 2022, total large losses increased, compared with 2021, primarily due to higher amounts for both our homeowner line of business and umbrella coverage in our other personal line of business. Our analysis indicated no unexpected concentration of these losses and reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility 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 volatility in addition to general inflationary trends in loss costs.

Personal Lines Insurance Underwriting Expenses

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Commission expenses","","$","391","","","$","327","","","$","292","","","20","","","12"],["Other underwriting expenses","","219","","","182","","","165","","","20","","","10"],["Total underwriting expenses","","$","610","","","$","509","","","$","457","","","20","","","11"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Commission expenses","","19.2","%","","19.4","%","","19.0","%","","(0.2)","","","0.4"],["Other underwriting expenses","","10.7","","","10.7","","","10.7","","","0.0","","","0.0"],["Total underwriting expense ratio","","29.9","%","","30.1","%","","29.7","%","","(0.2)","","","0.4"]]
[[/GREPCENT_TABLE]]

Personal lines commission expense as a percent of earned premiums decreased slightly in 2023, compared with 2022, as earned premiums rose at a faster pace than commission expenses. The ratio for 2022 increased compared with 2021, primarily due to an increase in commissions for agencies other than profit-sharing commissions. In both 2023 and 2022, other underwriting expenses as a percent of earned premiums matched the prior year, reflecting ongoing expense management efforts, as the pace of premium growth was in line with growth in other expenses.

Cincinnati Financial Corporation - 2023 10-K - Page 77

Table of Contents

Personal Lines Insurance Outlook

The U.S. property casualty industry continued to experience challenges in 2023, including elevated inflation, increasing loss costs and pricing pressures as insurers pursued rate adequacy. Our response continues to include rate increases, pricing precision for individual risks and use of inflation factors that respond to higher costs to repair property. We believe we can continue to profitably grow premiums in our personal lines insurance segment through new agency appointments and an ongoing focus on diversification of product and geography. We serve middle market, mass affluent and high net worth clients, helping us grow across the U.S. and spreading our catastrophe risk. Drivers of profitable growth for our Cincinnati Private Client business also include selectively using non-admitted insurance property forms and rates in certain catastrophe-prone states and geographies.

Our high net worth initiative, along with various other actions to improve performance in our personal lines insurance segment, is discussed in greater detail in Personal Lines Insurance Results and also in Item 1, Our Business and Our Strategy, Strategic Initiatives and Our Segments, Personal Lines Insurance Segment.

Cincinnati Financial Corporation - 2023 10-K - Page 78

Table of Contents

Excess and Surplus Lines Insurance Results

Overview – Three-Year Highlights

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Earned premiums","","$","542","","","$","485","","","$","398","","","12","","","22"],["Fee revenues","","3","","","2","","","2","","","50","","","0"],["Total revenues","","545","","","487","","","400","","","12","","","22"],["Loss and loss expenses from:"],["Current accident year before catastrophe losses","","357","","","319","","","240","","","12","","","33"],["Current accident year catastrophe losses","","4","","","5","","","3","","","(20)","","","67"],["Prior accident years before catastrophe losses","","(11)","","","(8)","","","7","","","(38)","","","nm"],["Prior accident years catastrophe losses","","\u2014","","","(1)","","","\u2014","","","nm","","nm"],["Loss and loss expenses","","350","","","315","","","250","","","11","","","26"],["Underwriting expenses","","141","","","124","","","106","","","14","","","17"],["Underwriting profit","","$","54","","","$","48","","","$","44","","","13","","","9"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year before catastrophe losses","","65.9","%","","65.7","%","","60.3","%","","0.2","","","5.4"],["Current accident year catastrophe losses","","0.7","","","1.0","","","0.6","","","(0.3)","","","0.4"],["Prior accident years before catastrophe losses","","(2.0)","","","(1.7)","","","1.9","","","(0.3)","","","(3.6)"],["Prior accident years catastrophe losses","","(0.1)","","","(0.2)","","","0.0","","","0.1","","","(0.2)"],["Loss and loss expenses","","64.5","","","64.8","","","62.8","","","(0.3)","","","2.0"],["Underwriting expenses","","26.1","","","25.6","","","26.7","","","0.5","","","(1.1)"],["Combined ratio","","90.6","%","","90.4","%","","89.5","%","","0.2","","","0.9"],["Combined ratio:","","90.6","%","","90.4","%","","89.5","%","","0.2","","","0.9"],["Contribution from catastrophe losses and prior years reserve development","","(1.4)","","","(0.9)","","","2.5","","","(0.5)","","","(3.4)"],["Combined ratio before catastrophe losses and prior years reserve development","","92.0","%","","91.3","%","","87.0","%","","0.7","","","4.3"]]
[[/GREPCENT_TABLE]]

Our excess and surplus lines insurance segment includes results of The Cincinnati Specialty Underwriters Insurance Company and CSU Producer Resources Inc. Performance highlights for this segment include:

•Premiums – Earned premiums and net written premiums continued to grow during 2023, including higher renewal written premiums that included average renewal estimated price increases in the high-single-digit range. New business written premiums rose 30% in 2023, compared with 2022, and also contributed significantly to premium growth.

•Combined ratio – The combined ratio increased by 0.2 percentage points in 2023, driven by an increase underwriting expenses. Approximately 91% of our 2023 earned premiums for the excess and surplus lines insurance segment provided commercial casualty coverages for various insured liability claims that have experienced higher losses reflecting elevated inflation. Due to 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 2023 ratio for current accident year loss and loss expenses before catastrophe losses was 0.2 percentage points higher, compared with the 65.7% accident year 2022 ratio measured as of December 31, 2022, including an increase of 5.7 points for the IBNR portion and a decrease of 5.5 points for the case incurred portion. The 2023 ratio for prior accident year loss and loss expenses before catastrophe losses was slightly more favorable than in 2022. In 2022, the ratio for current accident year loss and loss expenses before catastrophe losses increased significantly, reflecting incurred losses and loss expenses for excess and surplus lines commercial casualty coverages of $302 million in 2022 that increased $69 million or 30%, compared with 2021, while earned premiums rose 23%.

Cincinnati Financial Corporation - 2023 10-K - Page 79

Table of Contents

Excess and Surplus Lines Insurance Premiums

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Agency renewal written premiums","","$","428","","","$","392","","","$","323","","","9","","","21"],["Agency new business written premiums","","177","","","136","","","124","","","30","","","10"],["Other written premiums","","(35)","","","(26)","","","(21)","","","(35)","","","(24)"],["Net written premiums","","570","","","502","","","426","","","14","","","18"],["Unearned premium change","","(28)","","","(17)","","","(28)","","","(65)","","","39"],["Earned premiums","","$","542","","","$","485","","","$","398","","","12","","","22"]]
[[/GREPCENT_TABLE]]

The $36 million increase in 2023 renewal premiums largely reflected higher renewal pricing. Average renewal estimated price increases were in the high-single-digit range during 2023. We measure average changes in excess and surplus lines renewal pricing as the 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 in 2023 grew by $41 million, or 30%, compared with 2022, as we continued to carefully underwrite each policy in a highly competitive market. Other written premiums in 2023 reduced net written premium growth by $9 million more than in 2022 and are primarily premiums that are ceded to reinsurers and therefore reduce our net written premiums.

Excess and Surplus Lines Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses, as well as the associated loss expenses. The majority of the total incurred losses and loss expenses shown above in the three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since less than 20% of our excess and surplus lines current accident year incurred losses and loss expenses represents net paid amounts, a large majority represents reserves for our estimate of unpaid losses and loss expenses. These reserves develop over time, and we update our estimates of previously reported reserves as we learn more about the development on the related claims. The table below illustrates that development. For example, the 66.7% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 3.4 percentage points to 63.3% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2023. Accident year 2021 for this segment developed unfavorably by less than $1 million during 2023, after developing unfavorably during 2022, as indicated by the progression over time of the ratios in the table.

[[GREPCENT_TABLE]]
[["(Dollars in millions)"],["Accident year loss and loss expenses incurred and ratios to earned premiums:"],["Accident year:","","2023","","2022","","2021","","2023","","2022","","2021"],["as of December 31, 2023","","$","361","","","$","307","","","$","257","","","66.6","%","","63.3","%","","64.5","%"],["as of December 31, 2022","","","","324","","","257","","","","","66.7","","","64.5"],["as of December 31, 2021","","","","","","243","","","","","","","60.9"]]
[[/GREPCENT_TABLE]]

Catastrophe losses, as discussed in Consolidated Property Casualty Insurance Results, explain some of the movement among components of the current accident year loss and loss expense ratio for accident year 2023, compared with 2022. Catastrophe losses added 0.7 percentage points in 2023, 1.0 percentage point in 2022 and 0.6 percentage points in 2021 to the respective excess and surplus lines current accident year loss and loss expense ratios in the table above.

The 65.9% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 increased by 0.2 percentage points compared with the 65.7% accident year 2022 ratio measured as of December 31, 2022. The increase included a 0.4 percentage-point decrease in the ratio for current accident year losses of $2 million or more per claim, shown in the table below.

Cincinnati Financial Corporation - 2023 10-K - Page 80

Table of Contents

Excess and surplus lines reserve development on prior accident years was a net favorable $11 million for 2023 and $9 million for 2022. The net favorable amount for 2023 was primarily for accident year 2022 and was due primarily to lower-than-anticipated loss emergence on known claims.

We believe the loss and loss expense reserves for our excess and surplus lines business are adequate. The amount of outstanding reserves for our excess and surplus lines operation can be seen in a table in Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves. One indication of how long it takes for most of the outstanding reserves to be settled is to measure outstanding reserves by accident year at different points in time, using Item 8, Note 4 of the Consolidated Financial Statements. For example, for accident years 2016, 2015 and 2014, in aggregate, after subtracting cumulative paid amounts from incurred amounts at December 31, 2016, reserves for estimated unpaid losses, plus the portion of loss expenses known as ALAE, equaled $193 million. For those same accident years, at December 31, 2023, the reserve estimate for the remaining unpaid amount equaled $11 million. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable historical paid loss patterns are a key assumption used to make projections necessary for estimating IBNR reserves. The inherent uncertainty in estimating reserves is discussed in Liquidity and Capital Resources, Property Casualty Insurance Loss and Loss Expense Obligations and Reserves. Development trends by accident year are further discussed in Property Casualty Insurance Development of Estimated Reserves by Accident Year.

Excess and Surplus Lines Insurance Losses by Size

[[GREPCENT_TABLE]]
[["(Dollars in millions, net of reinsurance)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Current accident year losses greater than $5,000,000","","$","\u2014","","","$","\u2014","","","$","\u2014","","","nm","","nm"],["Current accident year losses $2,000,000-$5,000,000","","\u2014","","","2","","","\u2014","","","(100)","","","nm"],["Large loss prior accident year reserve development","","(2)","","","\u2014","","","\u2014","","","nm","","nm"],["Total large losses incurred","","(2)","","","2","","","\u2014","","","nm","","nm"],["Losses incurred but not reported","","79","","","68","","","53","","","16","","","28"],["Other losses excluding catastrophe losses","","170","","","153","","","116","","","11","","","32"],["Catastrophe losses","","3","","","4","","","2","","","(25)","","","100"],["Total losses incurred","","$","250","","","$","227","","","$","171","","","10","","","33"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Current accident year losses greater than $5,000,000","","0.0","%","","0.0","%","","0.0","%","","0.0","","","0.0"],["Current accident year losses $2,000,000-$5,000,000","","0.0","","","0.4","","","0.0","","","(0.4)","","","0.4"],["Large loss prior accident year reserve development","","(0.3)","","","0.0","","","0.0","","","(0.3)","","","0.0"],["Total large loss ratio","","(0.3)","","","0.4","","","0.0","","","(0.7)","","","0.4"],["Losses incurred but not reported","","14.6","","","14.0","","","13.4","","","0.6","","","0.6"],["Other losses excluding catastrophe losses","","31.3","","","31.6","","","29.0","","","(0.3)","","","2.6"],["Catastrophe losses","","0.5","","","0.8","","","0.6","","","(0.3)","","","0.2"],["Total loss ratio","","46.1","%","","46.8","%","","43.0","%","","(0.7)","","","3.8"]]
[[/GREPCENT_TABLE]]

In 2023, total large losses decreased by $4 million, net of reinsurance. The ratio for 2023 large losses as a percent of earned premiums decreased by 0.7 percentage points, compared with 2022. That ratio for 2022 increased by 0.4 points, compared with 2021. Our analysis indicated no unexpected concentration of these losses and reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility 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 volatility in addition to general inflationary trends in loss costs.

Cincinnati Financial Corporation - 2023 10-K - Page 81

Table of Contents

Excess and Surplus Lines Insurance Underwriting Expenses

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Commission expenses","","$","93","","","$","81","","","$","70","","","15","","","16"],["Other underwriting expenses","","48","","","43","","","36","","","12","","","19"],["Total underwriting expenses","","$","141","","","$","124","","","$","106","","","14","","","17"],["Ratios as a percent of earned premiums:","","","","","","","","Pt. Change","","Pt. Change"],["Commission expenses","","17.1","%","","16.7","%","","17.5","%","","0.4","","","(0.8)"],["Other underwriting expenses","","9.0","","","8.9","","","9.2","","","0.1","","","(0.3)"],["Total underwriting expenses ratio","","26.1","%","","25.6","%","","26.7","%","","0.5","","","(1.1)"]]
[[/GREPCENT_TABLE]]

Excess and surplus lines commission expense as a percent of earned premiums for 2023 increased compared with 2022, including increases in the ratios for reinsurance commissions and profit-sharing commissions for agencies. The ratio for 2022 decreased compared with 2021, largely due to a decrease in the ratio for profit-sharing commissions for agencies. The ratio for other underwriting expenses increased slightly in 2023 and decreased in 2022, and continued to reflect ongoing expense management efforts and changes in the pace of premium growth.

Excess and Surplus Lines Insurance Outlook

The excess and surplus lines market is expected to see the magnitude of rate increases moderate for risks that are casualty-driven, according to industry publications. For property risks involving catastrophe exposures, premium rates in the foreseeable future are expected to be firm. New business opportunities are expected to increase as standard market insurance companies continue to re-underwrite business they previously took from the excess and surplus lines market and as larger excess and surplus lines companies re-underwrite their business with an emphasis on underwriting profitability.

Industry reports continue to suggest that there are opportunities for profitability and growth through greater use of technology. Technology and data are also being used by excess and surplus lines insurance companies to identify new exposures in emerging businesses that need insurance protection or other value-added services.

As we continue to execute our strategy of providing superior service, we expect another year of profitable growth for our excess and surplus lines insurance segment despite challenging market conditions. Our experienced excess and surplus lines underwriters in the field intend to carefully select and price risks, providing prompt delivery of insurance quotes and policies, as they work with other local field associates who provide outstanding claims and loss control service while also handling standard lines business for their assigned agencies. These local representatives are supported by headquarters underwriters and claims managers who specialize in excess and surplus lines.

Cincinnati Financial Corporation - 2023 10-K - Page 82

Table of Contents

Life Insurance Results

Overview – Three-Year Highlights

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Earned premiums","","$","313","","","$","301","","","$","294","","","4","","","2"],["Fee revenues","","10","","","4","","","5","","","150","","","(20)"],["Total revenues","","323","","","305","","","299","","","6","","","2"],["Contract holders' benefits incurred","","316","","","303","","","313","","","4","","","(3)"],["Investment interest credited to contract holders","","(121)","","","(109)","","","(105)","","","(11)","","","(4)"],["Underwriting expenses incurred","","87","","","84","","","79","","","4","","","6"],["Total benefits and expenses","","282","","","278","","","287","","","1","","","(3)"],["Life insurance segment profit","","$","41","","","$","27","","","$","12","","","52","","","125"]]
[[/GREPCENT_TABLE]]

Performance highlights for the life insurance segment include:

•Revenues – Earned premiums increased 4% for the year 2023, as shown in the table below that includes details by major line of business. Our largest life insurance product line, term life insurance, rose 3%. Net in-force policy face amounts rose 2% to $82.361 billion at year-end 2023 from $80.482 billion at year-end 2022 and $77.493 billion at year-end 2021.

•Profitability – Our life insurance segment typically reports a smaller profit compared with the life insurance subsidiary because profits from investment income spreads are included in our investments segment results. We include only investment income credited to contract holders (including interest assumed in life insurance policy reserve calculations) in life insurance segment results. A profit of $41 million for our life insurance segment in 2023, compared with $27 million in 2022, was primarily due to increased earned premiums and fee revenues along with favorable mortality experience. A profit of $27 million in 2022 compared with $12 million in 2021 was primarily due to more favorable impacts from the unlocking of interest rate and other actuarial assumptions.

Earned premiums increased $12 million in 2023, primarily due to a $7 million increase in term life insurance earned premiums, as shown in the table below.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Term life insurance","","$","227","","","$","220","","","$","210","","","3","","","5"],["Whole life insurance","","50","","","46","","","46","","","9","","","0"],["Universal life and other","","36","","","35","","","38","","","3","","","(8)"],["Net earned premiums","","$","313","","","$","301","","","$","294","","","4","","","2"]]
[[/GREPCENT_TABLE]]

Products we market include term, whole and universal life insurance and also fixed annuities. In addition, we offer term and whole life insurance to employees at their worksite. These products provide our property casualty agency force with excellent cross-serving opportunities for both commercial and personal accounts.

Over the past several years, we have worked to maintain a portfolio of simple, yet competitive, products. Our product development efforts emphasize death benefit protection and guarantees. Distribution expansion within our property casualty insurance agencies remains a high priority. Our 37 life field marketing representatives work in partnership with our property casualty field marketing representatives. Approximately 61% of our term and other life insurance product premiums were generated through our property casualty insurance agency relationships.

Life insurance segment expenses consist principally of:

•Contract holders’ benefits incurred (net of investment interest credited to contract holders), related to traditional life and interest-sensitive products, accounted for 78.4% of 2023 total benefits and expenses compared with 78.3% in 2022 and 79.8% in 2021. Total contract holders’ benefits increased slightly in 2023, compared with 2022, largely due to less favorable impacts from the unlocking of interest rate and other actuarial assumptions. Total contract holder benefits decreased in 2022 compared with 2021 due to more favorable unlocking impacts.

Cincinnati Financial Corporation - 2023 10-K - Page 83

Table of Contents

Mortality experience was more favorable in 2023, compared with 2022, and net death claims were below our mortality projections.

•Underwriting expenses incurred, net of deferred acquisition costs, accounted for 21.6% of 2023 total benefits and expenses compared with 21.7% in 2022 and 20.2% in 2021. Expenses in 2023 increased 4%, compared with 4% growth in earned premiums. Expenses in 2022 increased 6%, compared with 2% growth in earned premiums. The 2023 increase in underwriting expenses, compared with the same period a year ago, was largely due to higher general insurance expense levels and increased amortization of deferred policy acquisition costs. The 2022 increase in underwriting expenses was largely due to the same factors as impacted the 2023 increase.

Life insurance segment profitability depends largely on premium levels, the adequacy of product pricing, underwriting skill and operating efficiencies. This segment’s results include only investment interest credited to contract holders (interest assumed in life insurance policy reserve calculations). The remaining investment income is reported in the investments segment results. The life investment portfolio is managed to earn target spreads between earned investment rates on general account assets and rates credited to policyholders. We consider the value of assets under management and investment income for the life investment portfolio as key performance indicators for the life insurance segment. We seek to maintain a competitive advantage with respect to benefits paid and reserve increases by consistently achieving better than average claims experience due to skilled underwriting.

We recognize that assets under management, capital appreciation and investment income are integral to evaluation of 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, our life insurance subsidiary reported net income of $75 million in 2023, compared with $65 million in 2022 and $66 million in 2021. The life insurance subsidiary portfolio had after-tax net investment losses of $7 million in 2023 and $2 million in 2022 and after-tax net investment gains of $8 million in 2021. Investment gains and losses are discussed under Investments Results. We exclude most of our life insurance company investment income from investments segment results.

Life Insurance Outlook

We believe the life insurance market remains attractive. With life insurance ownership still low compared to historical levels, we will see more opportunities for growth as our property casualty agency footprint continues to expand. Our expertise with large face amount cases has allowed us to increase our average premium and face amount per policy. As more of our agencies uncover business insurance opportunities, we expect this trend to continue.

Merger and acquisition activity in the independent agency channel can disrupt our ability to get consistent life insurance sales from affected agency relationships. We counter this by following the property casualty lead in assigning a local field representative to every relationship, and a sales leader to every national account. We are confident that our focus on building and strengthening these relationships will continue to lead to long-term profitable growth in the years ahead, despite any short-term disruptions.

The rising interest rate environment has benefited us. The higher yields available in the fixed income market have allowed us to reinvest securities at attractive rates, boosting our investment income. We will be paying close attention to any signals the Federal Reserve may send regarding the potential for rate cuts in 2024. A decision to significantly lower the overnight lending rate would likely lead to lower investment income for us over time.

Cincinnati Financial Corporation - 2023 10-K - Page 84

Table of Contents

Investments Results

Overview – Three-Year Highlights

Investments Results

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Total investment income, net of expenses","","$","894","","","$","781","","","$","714","","","14","","","9"],["Investment interest credited to contract holders","","(121)","","","(109)","","","(105)","","","(11)","","","(4)"],["Investment gains and losses, net","","1,127","","","(1,467)","","","2,409","","","nm","","nm"],["Investments profit (loss), pretax","","$","1,900","","","$","(795)","","","$","3,018","","","nm","","nm"]]
[[/GREPCENT_TABLE]]

The investments segment contributes investment income and investments gains and losses to results of operations. Investment income is generally our primary source of pretax and after-tax profits.

•Investment income – Pretax investment income grew $113 million, or 14%, in 2023, due to increases from both interest income and dividends. Interest income grew 18% in 2023, compared with 2022, as net purchases of fixed-maturity securities in recent years and higher average yields for bonds are working to generally offset effects of the low interest rate environment for several years prior to 2022. Dividend income grew 3% in 2023, reflecting dividend rates that generally have increased, although more slowly than in prior years, minor asset allocation adjustments in our equity portfolio and net purchases of equity securities from available funds. Pretax investment income rose 9% in 2022, including increases in interest and dividend income. Average yields in the investment income table below 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.

•Investment gains and losses – We reported an investment gain in 2023 and 2021, primarily due to favorable changes in fair values of equity securities even though we continue to hold the securities or as otherwise required by GAAP. We reported an investment loss in 2022, due to unfavorable changes in fair values of equity securities.

We believe it is useful to analyze our overall investment performance by using total investment return over several years. Total investment return considers changes in unrealized gains and losses that are not included in net income, in addition to net investment income and investment gains and losses that are included in net income. Changes in unrealized gains and losses shown in the table below include other invested assets. Considering total investment gains and losses over several years helps evaluate performance since gains and losses may experience typical variability during shorter periods of time.

Cincinnati Financial Corporation - 2023 10-K - Page 85

Table of Contents

The table below shows total return based on assumptions that simplify cash flow timing that is commonly used in total return measures. This simplified calculation uses data shown in our consolidated financial statements or notes to those statements. Added to invested asset amounts from our consolidated balance sheets are 50% of annual amounts pertaining to invested asset categories included in net cash used in investing activities from our consolidated statements of cash flows. The cash flow amounts are reduced by net gains from investment portfolio securities sales or called bonds, with the net result reduced by 50% to represent estimated new cash invested during each respective year. All new cash is assumed to be invested at the midpoint of the year.

Total investment return of 9.9% in 2023 was significantly more than the negative 9.2% return in 2022. The 2023 contribution from the investment income component was enhanced by the net favorable effect of the investment gains and losses components. Comparing contributions for 2023 with 2022, investment income rose $113 million, investment gains increased by $2.594 billion and the invested assets net change in unrealized gains and losses increased by $1.916 billion. The base component of the return calculation, annual average invested assets, was down 8% in 2023. For 2022 compared with 2021, total investment return of negative 9.2% in 2022 was significantly less than the positive return of 13.1% in 2021, as the 2022 contribution from the investment income component was offset by the net unfavorable effect of the investment gains and losses components. The base component of the return calculation, annual average invested assets, increased 14% in 2022.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Invested assets beginning balance:"],["Fixed maturities","","$","12,132","","","$","13,022","","","$","12,338","","","(7)","","","6"],["Equity securities","","9,841","","","11,315","","","8,856","","","(13)","","","28"],["Other invested assets","","452","","","329","","","348","","","37","","","(5)"],["Invested assets beginning balance","","22,425","","","24,666","","","21,542","","","(9)","","","15"],["Average acquisitions (dispositions), net","","779","","","472","","","538","","","65","","","(12)"],["Annual average invested assets","","$","23,204","","","$","25,138","","","$","22,080","","","(8)","","","14"],["Total investment return:"],["Investment income, net of expenses","","$","894","","","$","781","","","$","714","","","14","","","9"],["Investment gains and losses, net","","1,127","","","(1,467)","","","2,409","","","nm","","nm"],["Total invested assets change in unrealized gains and losses","","277","","","(1,639)","","","(234)","","","nm","","nm"],["Total","","$","2,298","","","$","(2,325)","","","$","2,889","","","nm","","nm"],["Total return on invested assets, pretax","","9.9","%","","(9.2)","%","","13.1","%"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 86

Table of Contents

Investment Income

The primary drivers of investment income are highlighted below, followed by additional details of our investment results.

•Interest income increased by $90 million, or 18%, in 2023, compared with 2022. The average fixed-maturity pretax yield increased by 34 basis points in addition to a larger fixed-maturity portfolio that rose 8% on an average amortized cost basis. Interest income in 2022 increased by $33 million, compared with 2021, when that yield decreased by less than 1 basis point while the portfolio rose 7% on an amortized cost basis.

•Dividend income rose $7 million, or 3%, in 2023, after rising 12% in 2022. The increases include dividend rates that generally have increased and minor asset allocation adjustments in our equity portfolio. An increase in funds invested in that portfolio during both 2023 and 2022 also favorably affected dividend income.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Investment income:"],["Interest","","$","600","","","$","510","","","$","477","","","18","","","7"],["Dividends","","282","","","275","","","246","","","3","","","12"],["Other","","25","","","11","","","5","","","127","","","120"],["Less investment expenses","","13","","","15","","","14","","","(13)","","","7"],["Investment income, pretax","","894","","","781","","","714","","","14","","","9"],["Less income taxes","","145","","","123","","","111","","","18","","","11"],["Total investment income, after-tax","","$","749","","","$","658","","","$","603","","","14","","","9"],["Investment returns:"],["Average invested assets plus cash and cash equivalents","","$","25,685","","","$","24,775","","","$","23,215"],["Average yield pretax","","3.48","%","","3.15","%","","3.08","%"],["Average yield after-tax","","2.92","","","2.66","","","2.60"],["Effective tax rate","","16.2","","","15.8","","","15.5"],["Fixed-maturity returns:"],["Average amortized cost","","$","13,670","","","$","12,605","","","$","11,771"],["Average yield pretax","","4.39","%","","4.05","%","","4.05","%"],["Average yield after-tax","","3.62","","","3.35","","","3.37"],["Effective tax rate","","17.5","","","17.1","","","16.8"]]
[[/GREPCENT_TABLE]]

In 2023, we continued to invest available cash flow in both fixed income and equity securities in a manner that we believe balances current income needs with longer-term invested asset growth goals. As bonds in our generally laddered portfolio mature or are called over the near term, we reinvest with a balanced approach, keeping in mind our long-term strategy and pursuing attractive risk-adjusted after-tax yields. 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 continually perform fundamental analysis of both industry and company-specific opportunities as well as the potential impact from changes in the interest rate environment and the potential for elevated inflation.

Cincinnati Financial Corporation - 2023 10-K - Page 87

Table of Contents

The table below summarizes pretax yield to amortized costs excluding any book value adjustments due to impairment for bonds in our fixed-maturity portfolio by various maturity periods.

[[GREPCENT_TABLE]]
[["At December 31, 2023","% Yield","","Principal redemptions"],["Fixed-maturity yield profile:"],["Expected to mature during 2024","4.36","%","","$","1,136"],["Expected to mature during 2025","4.76","","","1,401"],["Expected to mature during 2026","4.94","","","1,135"],["Average yield and total expected redemptions from 2024 through 2026","4.69","","","$","3,672"]]
[[/GREPCENT_TABLE]]

The average pretax yield of 6.13% for fixed-maturity securities acquired during 2023, shown in the table below, was higher than the 4.60% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2023.

[[GREPCENT_TABLE]]
[["","","Years ended December 31,"],["","","2023","","2022"],["Average pretax yield-to-amortized cost on new fixed maturities:"],["Acquired taxable fixed maturities","","6.36","%","","5.26","%"],["Acquired tax-exempt fixed maturities","","4.29","","","3.94"],["Average total fixed maturities acquired","","6.13","","","5.01"]]
[[/GREPCENT_TABLE]]

We discussed our portfolio strategies in Item 1, Investments Segment. We discuss risks related to our investment income and our fixed-maturity and equity investment portfolios in Item 7A, Quantitative and Qualitative Disclosures About Market Risk.

Cincinnati Financial Corporation - 2023 10-K - Page 88

Table of Contents

Total Investment Gains and Losses

Investment gains and losses are recognized on the sales 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 is reported in net income, as disclosed in Note 1, Summary of Significant Accounting Policies. Total investment gains and losses in 2023 included $1.168 billion of net gains from the recognition of fair value changes of equity securities still held that prior to 2018 would have been reported in other comprehensive income (OCI) instead of net income. Change in unrealized gains or losses for fixed-maturity securities are included as a component of OCI. Accounting requirements for the allowance for credit losses and impairment charges for write-downs of impaired securities in the fixed-maturity portfolio are disclosed in Item 8, Note 1, Summary of Significant Accounting Policies. The factors we consider when evaluating impairments are also discussed in Critical Accounting Estimates, Asset Impairment.

The timing of gains or losses from sales can have a material effect on results in any given period. However, such gains or losses usually have little, if any, effect on total shareholders’ equity because most equity and fixed-maturity investments are carried at fair value.

As appropriate, we buy, hold or sell both fixed-maturity and equity securities on an ongoing basis to help achieve our portfolio objectives. We generally purchase fixed-maturity securities with the intention to hold until maturity. If they no longer meet our investment criteria, they are divested. Sales of fixed-maturity securities are usually due to a change in credit fundamentals. Pretax total investment gains in 2023 and 2021 were largely due to favorable changes in fair values of equity securities, even though we continue to hold the securities, as shown in the table below. In 2022, the pretax total investment loss was due to unfavorable changes in fair values of equity securities and a net unfavorable change in unrealized gains or losses for fixed-maturity securities. Additional information about investment gains or losses is included in Item 8, Note 2 of the Consolidated Financial Statements.

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

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,"],["","","2023","","2022","","2021"],["Investment gains and losses"],["Equity securities:"],["Investment gains and losses on securities sold, net","","$","(17)","","","$","16","","","$","4"],["Unrealized gains and losses on securities still held, net","","1,168","","","(1,526)","","","2,278"],["Subtotal","","1,151","","","(1,510)","","","2,282"],["Fixed-maturity securities:"],["Gross realized gains","","4","","","6","","","36"],["Gross realized losses","","(5)","","","(4)","","","(5)"],["Change in allowance for credit losses, net","","(17)","","","\u2014","","","\u2014"],["Write-down of impaired securities","","(4)","","","(5)","","","(1)"],["Subtotal","","(22)","","","(3)","","","30"],["Other","","(2)","","","46","","","97"],["Total investment gains and losses reported in net income","","$","1,127","","","$","(1,467)","","","$","2,409"],["Change in unrealized investment gains and losses reported in OCI"],["Fixed-maturity securities","","277","","","(1,639)","","","(234)"],["Total","","$","1,404","","","$","(3,106)","","","$","2,175"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 89

Table of Contents

Write-downs of impaired securities from the investment portfolio by the asset classes we described in Item 1, Our Segments, Investments Segment, are summarized below:

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,"],["","","2023","","2022","","2021"],["Taxable fixed maturities:"],["Impairment amount","","$","4","","","$","5","","","$","\u2014"],["New amortized cost","","$","\u2014","","","$","8","","","$","\u2014"],["Percent to total amortized cost owned","","\u2014","%","","\u2014","%","","\u2014","%"],["Number of impaired securities written down","","1","","","2","","","\u2014"],["Percent to number of securities owned","","\u2014","%","","\u2014","%","","\u2014","%"],["Tax-exempt fixed maturities:"],["Impairment amount","","$","\u2014","","","$","\u2014","","","$","1"],["New amortized cost","","$","\u2014","","","$","1","","","$","2"],["Percent to total amortized cost owned","","\u2014","%","","\u2014","%","","\u2014","%"],["Number of impaired securities written down","","\u2014","","","1","","","5"],["Percent to number of securities owned","","\u2014","%","","\u2014","%","","\u2014","%"],["Totals:"],["Impairment amount","","$","4","","","$","5","","","$","1"],["New amortized cost","","$","\u2014","","","$","9","","","$","2"],["Percent to total amortized cost owned","","\u2014","%","","\u2014","%","","\u2014","%"],["Number of impaired securities written down","","1","","","3","","","5"],["Percent to number of securities owned","","\u2014","%","","\u2014","%","","\u2014","%"]]
[[/GREPCENT_TABLE]]

Additional details regarding write-downs of impaired securities from the investment portfolio are summarized below:

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,"],["","","2023","","2022","","2021"],["Fixed maturities:"],["Real estate","","$","4","","","$","5","","","$","\u2014"],["Municipal","","\u2014","","","\u2014","","","1"],["Total fixed maturities","","$","4","","","$","5","","","$","1"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 90

Table of Contents

Investments Outlook     

The pace and magnitude of Federal Reserve actions in 2023 softened as many of the economic data points (except labor measures) showed a slowdown from 2022 levels. Credit spreads tightened but the 10-year treasury yield remained unchanged year over year. A late year-end rally led to positive returns across most asset classes.

We continued to take advantage of interest rates that were higher than rates from maturing bonds during 2023 but maintained a balanced approach to our allocation between bonds and stocks. We will continue our focus on near-term income generation with an eye to long-term book value growth within the framework of our corporate liquidity as well as adherence to insurance department regulations and rating agency commentary. We discuss our portfolio strategies in Item 1, Our Segments, Investments Segment. 

Cincinnati Financial Corporation - 2023 10-K - Page 91

Table of Contents

Other

Total revenues in 2023 and 2022 for our Other operations increased, compared with the respective prior-year periods, primarily due to higher earned premiums from Cincinnati Re and Cincinnati Global in total. Other also includes noninvestment operations of the parent company and its commercial leasing and financial services subsidiary, CFC Investment Company. Total expenses for Other decreased in 2023 but increased in 2022, with the change for both years primarily due to losses and loss expenses and underwriting expenses from Cincinnati Re and Cincinnati Global.

Other income or loss in the table below represents profit or losses before income taxes. For 2023, Other income was driven by underwriting profit for Cincinnati Re and Cincinnati Global. For 2022 and 2021, Other loss was largely driven by interest expense from debt of the parent company. Net results for the combination of Cincinnati Re and Cincinnati Global were an underwriting profit of $183 million in 2023 and $36 million in 2022 and an underwriting loss of $8 million in 2021.

Cincinnati Re represented 67% of Other earned premiums in 2023 and 64% of underwriting profit. Earned premiums in 2023, compared with 2022, grew 2%. The mix of 2023 earned premiums for Cincinnati Re by primary type of insured exposures included 49% for casualty, 31% for property and 20% for specialty. Cincinnati Re in total generated an underwriting profit of $118 million in 2023 and $13 million in 2022 and had an underwriting loss of $32 million in 2021.

Cincinnati Global represented 33% of Other earned premiums in 2023 and 36% of underwriting profit. In 2023, earned premiums rose 29%, compared with 2022. Underwriting profit for Cincinnati Global was $65 million in 2023, $23 million in 2022 and $24 million in 2021.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,","","2023-2022","","2022-2021"],["","","2023","","2022","","2021","","Change %","","Change %"],["Interest and fees on loans and leases","","$","8","","","$","7","","","$","7","","","14","","","0"],["Earned premiums","","795","","","726","","","570","","","10","","","27"],["Other revenues","","5","","","3","","","3","","","67","","","0"],["Total revenues","","808","","","736","","","580","","","10","","","27"],["Interest expense","","54","","","53","","","53","","","2","","","0"],["Loss and loss expenses","","379","","","474","","","414","","","(20)","","","14"],["Underwriting expenses","","233","","","216","","","164","","","8","","","32"],["Operating expenses","","25","","","23","","","20","","","9","","","15"],["Total expenses","","691","","","766","","","651","","","(10)","","","18"],["Other income (loss)","","$","117","","","$","(30)","","","$","(71)","","","nm","","58"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 92

Table of Contents

Taxes

We had a $433 million income tax expense in 2023, compared with an income tax benefit of $207 million in 2022 and income tax expense of $730 million in 2021. The corporate effective tax rate for 2023 was 19.0% compared with 29.8% in 2022 and 19.7% in 2021.

The changes in our effective tax rate between periods were primarily due to large changes in our net investment gains and losses included in income for the periods, and changes in underwriting income and investment income.

Historically, we have pursued a strategy of investing some portion of cash flow in tax-advantaged, fixed-maturity securities and some in equity securities to minimize our overall tax liability and maximize after-tax earnings. See Item 1, Our Segments, Fixed-Maturity Securities Investments, 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.

Our effective tax rate reconciliation is found in Item 8, Note 11 of the Consolidated Financial Statements.

Cincinnati Financial Corporation - 2023 10-K - Page 93

Table of Contents

Liquidity and Capital Resources

We seek to maintain prudent levels of liquidity and financial strength for the protection of our policyholders, creditors and shareholders. We manage liquidity at two levels to meet the short- and long-term cash requirements of business obligations and growth needs. The first is the liquidity of the parent company. The second is the liquidity of our lead insurance subsidiary. Management of liquidity at both levels is essential because each has different funding needs and sources, and each is subject to certain regulatory guidelines and requirements.

In addition to our historically positive operating cash flow to meet the needs of operations, we have the ability to slow investing activities if such need arises or to sell a portion of our high-quality, liquid investment portfolio. We also have additional capacity to borrow on our revolving short-term line of credit, as described further below.

Parent Company Liquidity

At December 31, 2023, the parent company had $4.858 billion in cash and marketable securities, providing strong liquidity to fund cash outflows, as needed. The parent company’s primary sources of cash inflows are dividends from our lead insurance subsidiary, investment income and sale proceeds from investments. The parent company’s cash outflows are primarily interest and principal payments on long- and short-term debt, dividends to shareholders, common stock repurchases, deposits at Lloyd's and general operating expenses. To support our shareholders' dividend payment, we could use subsidiary dividends, our line of credit or sell a portion of our marketable securities.

The table below shows a summary, by the direct cash flow method, of the major sources and uses of cash flow of the parent company.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,"],["","","2023","","2022","","2021"],["Sources of liquidity:"],["Subsidiary dividends received","","$","526","","","$","729","","","$","598"],["Investment income received","","107","","","99","","","90"],["Proceeds from stock options exercised","","9","","","10","","","13"],["Return of funds on deposit from Lloyd's","","\u2014","","","\u2014","","","117"],["Uses of liquidity:"],["Shareholders' dividend payments","","$","454","","","$","423","","","$","395"],["Share repurchases","","67","","","410","","","144"],["Debt interest payments","","52","","","53","","","52"],["Payment of funds on deposit at Lloyd's","","\u2014","","","\u2014","","","14"]]
[[/GREPCENT_TABLE]]

Use of liquidity for share repurchases are discretionary depending on cash availability and capital management decisions. In addition, the subsidiaries have the discretion to pay dividends to the parent company. Cincinnati Global is required to maintain certain capital funding requirements with Lloyd’s, which the parent company may deposit on its behalf. These funding requirements may fluctuate based on the profitability of Cincinnati Global and syndicate solvency capital requirements as set by Lloyd's, which may result in return of funds on deposit. Other than share repurchases and funding at Lloyd's, the majority of expenditures for the parent company have been consistent during the last three years, and we expect future expenditures to remain stable.

Cincinnati Financial Corporation - 2023 10-K - Page 94

Table of Contents

Insurance Subsidiary Liquidity

The parent company’s lead insurance subsidiary largely represents the operations of the property casualty segments. The primary sources of cash inflows are collection of premiums, investment income, maturity of fixed-income securities and sale proceeds from investments. Property casualty insurance premiums generally are received before losses are paid under the policies purchased with those premiums. Cash outflows are primarily loss and loss expenses, commissions, salaries, taxes, operating expenses and investment purchases. Over the three-year period ended December 31, 2023, premium receipts and investment income have been more than sufficient to pay claims and operating expenses. Excess cash flows were partially used to pay dividends to the parent company. We are not aware of any known trends that would materially change historical cash flow results, other than fluctuations in catastrophe claims and other large losses, either individually or in aggregate.

The table below shows a summary of operating cash flow for property casualty insurance (direct method). Historically, annual variation in operating cash flow has been largely related to changes in amounts of catastrophe losses.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Years ended December 31,"],["","","2023","","2022","","2021"],["Premiums collected","","$","7,785","","","$","7,054","","","$","6,309"],["Loss and loss expenses paid","","(4,276)","","","(3,687)","","","(3,094)"],["Commissions and other underwriting expenses paid","","(2,287)","","","(2,132)","","","(1,842)"],["Cash flow from underwriting","","1,222","","","1,235","","","1,373"],["Investment income received","","609","","","529","","","497"],["Cash flow from operations","","$","1,831","","","$","1,764","","","$","1,870"]]
[[/GREPCENT_TABLE]]

Other Sources of Liquidity

Cash in excess of operating requirements is invested in fixed-maturity and equity securities. Cash generated from investment income provides an important investment contribution to cash flow and liquidity. The sale of investments could provide an additional source of liquidity at either the parent company or insurance subsidiary level, if required. In addition to possible sales of investments, proceeds of calls or maturities of fixed-maturity securities also can provide liquidity. During the five-year period beginning in 2024, fair value of $5.268 billion, or 38.2%, of our fixed-maturity portfolio is scheduled to mature. At December 31, 2023, we had $10.641 billion of common stock securities, with $4.542 billion, or 43%, held by the parent company.

Financial resources of the parent company also could be made available to our insurance subsidiaries, if circumstances required it. This flexibility would include our ability to access the capital markets and short-term bank borrowings. We generally have minimized our reliance on debt financing, although we may use the line of credit to fund short-term cash needs.

Cincinnati Financial Corporation - 2023 10-K - Page 95

Table of Contents

Long-Term Debt

We provide details of our three long-term notes in Item 8, Note 8 of the Consolidated Financial Statements. None of the notes are encumbered by rating triggers. The total principal amount of our long-term debt at December 31, 2023, was $793 million and included:

•$28 million aggregate principal amount of 6.900% senior debentures due 2028.

•$391 million aggregate principal amount of 6.920% senior debentures due 2028.

•$374 million aggregate principal amount of 6.125% senior debentures due 2034.

The company’s senior debt is rated investment grade by four independent rating agencies. None of the rating agencies made changes to our debt ratings in 2023. At February 23, 2024, our debt ratings from the rating agencies were: a from A.M. Best, A- from Fitch, A3 from Moody’s and BBB+ from S&P.

Note Payable

At December 31, 2023, we had a $300 million line of credit with commercial banks, with $25 million and $50 million borrowed at December 31, 2023 and 2022, respectively. That unsecured revolving line of credit has an accordion feature giving us the option to double the $300 million amount, under the same terms and conditions. Terms and conditions of the agreement include a debt-to-total capital maximum of 35% and the agreement has no net worth covenant. It was due to expire on February 4, 2024, with the option of two one-year extensions. We exercised both one-year options to extend the term of the line of credit by two additional years to February 4, 2026.

At year-end 2023, we were in compliance with all covenants under the credit agreement and believe we will remain in compliance. The credit agreement provides alternative interest charges based on the type of borrowing and our debt rating. On March 23, 2023, we amended our line of credit agreement to replace LIBOR with the Secured Overnight Financing Rate (SOFR) plus a credit spread adjustment.

Capital Resources

Capital resources, consisting of shareholders’ equity and total debt, represent our overall financial strength to support current obligations and growth in our insurance businesses. At December 31, 2023, we had total capital of $12.913 billion. Shareholders’ equity was $12.098 billion, an increase of $1.536 billion, or 15%, from the prior year. Our total debt was $815 million, down $24 million from a year ago. We seek to maintain a solid financial position and provide capital flexibility by keeping our ratio of debt to total capital moderate. At year-end 2023, the ratio was 6.3%, compared with 7.4% at year-end 2022.

At times we enter into letter of credit agreements to support our Cincinnati Re and Cincinnati Global operations. We have an unsecured letter of credit agreement to provide a portion of the capital needed to support Cincinnati Global's obligations at Lloyd's. The amount of this unsecured letter of credit agreement was $94 million with no amounts drawn at December 31, 2023.

At the discretion of the board of directors, the company can return capital directly to shareholders as discussed below.

•Dividends to shareholders – The ability of our company to continue paying cash dividends is subject to factors the board of directors deems relevant. While the board and management believe there is merit to sustaining the company’s long record of dividend increases, our first priority is the company’s financial strength. Over the past 10 years, the company has paid an average of 34% of net income as dividends. Through 2023, the board had increased our cash dividend for 63 consecutive years. The board's decision in January 2024 to increase the dividend demonstrated confidence in the company’s strong capital, liquidity, financial flexibility and initiatives to grow earnings.

•Common stock repurchase – Generally, our board believes that share repurchases can help fulfill our commitment to enhancing shareholder value. Consequently, the board has authorized the repurchase of outstanding shares, giving management discretion to purchase shares at reasonable prices in light of circumstances at the time of purchase. Our approach has been to hold capital adequate to support future growth of our insurance operations and repurchase shares at management's discretion. Repurchases are intended to offset the issuance of shares through equity compensation plans, primarily due to vesting of service-based restricted stock units of equity awards granted in the past. The amount of future repurchases may be more, or less, than the past, depending on circumstances and discretion exercised by management. Our corporate Code of Conduct restricts repurchases during certain time periods. The details of the repurchase authorizations and activity are described in

Cincinnati Financial Corporation - 2023 10-K - Page 96

Table of Contents

Item 5, Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Obligations

We pay obligations to customers, suppliers and associates in the normal course of our business operations. Some are contractual obligations that define the amount, circumstances and/or timing of payments. We have other commitments for business expenditures; such as $223 million we expect to fund for our private equity and real estate investments, however, the amount, circumstances and/or timing of our other commitments are not dictated by contractual arrangements.

Contractual Obligations

At December 31, 2023, we estimated our significant future contractual obligations as follows:

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Year","","Years","","","","There-"],["Payment due by period","","2024","","2025-2028","","","","after","","Total"],["Gross property casualty loss and loss expense payments","","$","2,963","","","$","4,742","","","","","$","1,270","","","$","8,975"],["Gross life policyholder obligations","","145","","","500","","","","","5,709","","","6,354"],["Long-term debt","","\u2014","","","\u2014","","","","","793","","","793"],["Interest on long-term debt","","52","","","193","","","","","126","","","371"],["Profit-sharing commissions","","208","","","\u2014","","","","","\u2014","","","208"],["Other liabilities","","123","","","83","","","","","1","","","207"],["Total","","$","3,491","","","$","5,518","","","","","$","7,899","","","$","16,908"]]
[[/GREPCENT_TABLE]]

Liquidity and Capital Resources Outlook

At December 31, 2023, we had $907 million in cash and cash equivalents. During 2024, our lead insurance subsidiary may pay a maximum of $729 million in dividends to our parent company without regulatory approval. That strong liquidity and our consistent cash flows give us the flexibility to meet current obligations and commitments while building value by prudently investing where we see potential for both current income and long-term return. Our cash and cash equivalents provide adequate financial cushion when short-term operating results do not meet our objectives.

A long-term perspective governs our liquidity and capital resources decisions, with the goal of benefiting our policyholders, agents, shareholders and associates over time. Our underwriting philosophy and initiatives can drive performance to achieve underwriting profit. Our GAAP combined ratio averaged 94.6% over the five-year period 2019 through 2023, resulting in strong underwriting profits.

In any year, we consider the most likely source of pressure on liquidity would be an unusually high level of catastrophe loss payments within a short period of time. There could be additional obligations for our insurance operations due to increasing severity or frequency of noncatastrophe claims. To address the risk of unusually large insurance loss obligations, including catastrophe events, we maintain property casualty reinsurance contracts with highly rated reinsurers, as discussed under 2024 Reinsurance Ceded Programs. We also monitor the financial condition of our reinsurers because their insolvency could jeopardize a portion of our $651 million reinsurance recoverable asset at December 31, 2023. Parent-company liquidity could also be constrained by Ohio regulatory requirements that restrict the dividends insurance subsidiaries can pay.

Economic weakness also has the potential to affect our liquidity and capital resources in a number of different ways, including delinquent payments from agencies, defaults on interest payments by fixed-maturity holdings in our portfolio, dividend reductions by holdings in our equity portfolio or declines in the market value of holdings in our portfolio.

Cincinnati Financial Corporation - 2023 10-K - Page 97

Table of Contents

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.

Property Casualty Loss and Loss Expense Obligations and Reserves

Our estimate of future gross property casualty loss and loss expense payments of $8.975 billion is lower than loss and loss expense reserves of $9.050 billion reported on our balance sheet at December 31, 2023. The $75 million difference is due to certain life and health loss reserves. Reserving practices are discussed in Critical Accounting Estimates, 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 for other parts of our property casualty insurance operations, the following table details gross reserves among case, IBNR and loss expense reserves, net of salvage and subrogation. The $639 million increase in total gross reserves included an $86 million increase in case loss reserves, a $395 million increase in IBNR loss reserves and a $158 million increase in loss expense reserves. The increase in total gross reserves included $285 million for our commercial casualty line of business, $179 million for excess and surplus lines and $110 million for Cincinnati Re.

Cincinnati Financial Corporation - 2023 10-K - Page 98

Table of Contents

Property Casualty Gross Loss and Loss Expense Reserves

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Loss reserves","","Loss expense reserves","","Total gross reserves"],["","","Case reserves","","IBNR reserves","","","","Percent of total"],["At December 31, 2023"],["Commercial lines insurance:"],["Commercial casualty","","$","1,111","","","$","1,205","","","$","792","","","$","3,108","","","34.6","%"],["Commercial property","","362","","","116","","","81","","","559","","","6.3"],["Commercial auto","","418","","","303","","","142","","","863","","","9.6"],["Workers' compensation","","431","","","540","","","89","","","1,060","","","11.8"],["Other commercial","","143","","","26","","","128","","","297","","","3.3"],["Subtotal","","2,465","","","2,190","","","1,232","","","5,887","","","65.6"],["Personal lines insurance:"],["Personal auto","","222","","","74","","","73","","","369","","","4.1"],["Homeowner","","215","","","122","","","58","","","395","","","4.4"],["Other personal","","101","","","119","","","6","","","226","","","2.5"],["Subtotal","","538","","","315","","","137","","","990","","","11.0"],["Excess and surplus lines","","360","","","336","","","236","","","932","","","10.4"],["Cincinnati Re","","158","","","747","","","6","","","911","","","10.2"],["Cincinnati Global","","141","","","111","","","3","","","255","","","2.8"],["Total","","$","3,662","","","$","3,699","","","$","1,614","","","$","8,975","","","100.0","%"],["At December 31, 2022"],["Commercial lines insurance:"],["Commercial casualty","","$","1,163","","","$","938","","","$","722","","","$","2,823","","","33.9","%"],["Commercial property","","301","","","256","","","71","","","628","","","7.5"],["Commercial auto","","449","","","258","","","131","","","838","","","10.1"],["Workers' compensation","","434","","","521","","","85","","","1,040","","","12.4"],["Other commercial","","98","","","16","","","125","","","239","","","2.9"],["Subtotal","","2,445","","","1,989","","","1,134","","","5,568","","","66.8"],["Personal lines insurance:"],["Personal auto","","222","","","64","","","64","","","350","","","4.2"],["Homeowner","","189","","","138","","","49","","","376","","","4.5"],["Other personal","","99","","","86","","","5","","","190","","","2.3"],["Subtotal","","510","","","288","","","118","","","916","","","11.0"],["Excess and surplus lines","","302","","","256","","","195","","","753","","","9.0"],["Cincinnati Re","","156","","","639","","","6","","","801","","","9.6"],["Cincinnati Global","","163","","","132","","","3","","","298","","","3.6"],["Total","","$","3,576","","","$","3,304","","","$","1,456","","","$","8,336","","","100.0","%"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 99

Table of Contents

Asbestos and Environmental Loss and Loss Expense Reserves

We carried $98 million of net loss and loss expense reserves for asbestos and environmental claims at year-end 2023, compared with $92 million at year-end 2022. The asbestos and environmental claims amounts for each respective year constituted less than 2.0% of total net loss and loss expense reserves at these year-end dates.

We believe our exposure to asbestos and environmental claims is limited, largely because our reinsurance retention was $500,000 or below prior to 1987. We also were predominantly a personal lines company in the 1960s and 1970s, when asbestos and pollution exclusions were not widely used by commercial lines insurers. During the 1980s and early 1990s, commercial lines grew as a percentage of our overall business and our exposure to asbestos and environmental claims grew accordingly. Over that period, we endorsed to or included in most policies an asbestos and environmental exclusion.

Additionally, since 2002, we have revised policy terms where permitted by state regulation to limit our exposure to mold claims prospectively and further reduce our exposure to other environmental claims generally. Finally, we have not engaged in any mergers or acquisitions through which such a liability could have been assumed. We continue to monitor our claims for evidence of material exposure to other mass tort classes, but we have found no such credible evidence to date.

Reserving data for asbestos and environmental claims has characteristics that limit the usefulness of the methods and models used to analyze loss and loss expense reserves for other claims. Specifically, asbestos and environmental loss and loss expenses for different accident years do not emerge independently of one another as loss development and Bornhuetter-Ferguson methods assume. In addition, asbestos and environmental loss and loss expense data available to date did not reflect a well-defined tail, greatly complicating the identification of an appropriate probabilistic trend family model. At year-end 2023, we used a weighted average of a paid survival ratio method and report year method to estimate reserves for IBNR asbestos and environmental claims. Our exposure to such claims is limited; we believe a weighted average of both methods produces a sufficient level of reserves.

Gross Property Casualty Loss and Loss Expense Payments

While we believe that historical performance of property casualty and life loss payment patterns is a reasonable source for projecting future claim payments, there is inherent uncertainty in this estimate of contractual obligations. We believe that we could meet our obligations under a significant and unexpected change in the timing of these payments because of the liquidity of our invested assets, strong financial position and access to lines of credit.

Our estimates of gross property casualty loss and loss expense payments do not include reinsurance receivables or ceded losses. As discussed in 2024 Reinsurance Ceded Programs, we purchase reinsurance to mitigate our property casualty risk exposure. Ceded property casualty reinsurance unpaid receivables of $362 million at year-end 2023 are an offset to our gross property casualty loss and loss expense obligations. Our reinsurance program mitigates the liquidity risk of a single large loss or an unexpected rise in claim severity or frequency due to a catastrophic event. Reinsurance does not relieve us of our obligation to pay covered claims. The financial strength of our reinsurers is important because our ability to recover losses under our reinsurance agreements depends on the financial viability of the reinsurers.

We direct our associates to settle claims and pay losses as quickly as is practical, and we made $4.276 billion of net claim payments during 2023. At year-end 2023, total net property casualty reserves of $8.613 billion reflected $3.442 billion in unpaid amounts on reported claims (case reserves), $1.601 billion in loss expense reserves and $3.570 billion in estimates of claims that were incurred but had not yet been reported (IBNR). The specific amounts and timing of obligations related to case reserves and associated loss expenses are not set contractually. The amounts and timing of obligations for IBNR claims and related loss expenses are unknown. We discuss our methods of establishing loss and loss expense reserves and our belief that reserves are adequate in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves.

Cincinnati Financial Corporation - 2023 10-K - Page 100

Table of Contents

The historical pattern of using premium receipts for the payment of loss and loss expenses has enabled us to extend slightly the maturities of our investment portfolio beyond the estimated settlement date of the loss reserves. The effective duration of our consolidated property casualty fixed-maturity portfolio was 4.3 years at year-end 2023. By contrast, the duration of our loss and loss expense reserves was approximately 3.2 years. We believe this difference in duration does not affect our ability to meet current obligations because cash flow from operations is sufficient to meet these obligations. In addition, investment holdings could be sold, if necessary, to meet higher than anticipated loss and loss expenses.

Range of Reasonable Reserves

The company established a reasonably likely range for net loss and loss expense reserves of $7.926 billion to $8.704 billion at year-end 2023, with the company carrying net reserves of $8.613 billion. The range was $7.393 billion to $8.099 billion at year-end 2022, with the company carrying net reserves of $7.931 billion. Our loss and loss expense reserves are not discounted for the time-value of money, but we have reduced the reserves by an estimate of the amount of salvage and subrogation payments we expect to recover.

The low point of each year’s range corresponds to approximately one standard error below each year’s mean reserve estimate, while the high point corresponds to approximately one standard error above each year’s mean reserve estimate. We discussed management’s reasons for basing reasonably likely reserve ranges on standard errors in Critical Accounting Estimates, Reserve Estimate Variability.

The ranges reflect our assessment of the most likely unpaid loss and loss expenses at year-end 2023 and 2022. However, actual unpaid loss and loss expenses could nonetheless fall outside of the indicated ranges.

Management’s best estimate of total loss and loss expense reserves as of year-end 2023 and 2022 was consistent with the corresponding actuarial best estimate.  

Cincinnati Financial Corporation - 2023 10-K - Page 101

Table of Contents

Property Casualty Insurance Development of Estimated Reserves by Accident Year

The following table shows net reserve changes at year-end 2023, 2022 and 2021 by property casualty segment and accident year:

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","Commercial","","Personal","","E&S"],["","","lines","","lines","","lines","","Other","","Totals"],["As of December 31, 2023"],["2022 accident year","","$","(67)","","","$","(45)","","","$","(16)","","","$","(9)","","","$","(137)"],["2021 accident year","","(29)","","","(5)","","","\u2014","","","13","","","(21)"],["2020 accident year","","(42)","","","(1)","","","(7)","","","(18)","","","(68)"],["2019 accident year","","5","","","(3)","","","4","","","\u2014","","","6"],["2018 accident year","","(3)","","","(3)","","","(1)","","","(1)","","","(8)"],["2017 accident year","","(6)","","","(5)","","","4","","","\u2014","","","(7)"],["2016 and prior accident years","","19","","","(2)","","","5","","","(2)","","","20"],["(Favorable)/unfavorable","","$","(123)","","","$","(64)","","","$","(11)","","","$","(17)","","","$","(215)"],["As of December 31, 2022"],["2021 accident year","","$","(59)","","","$","(52)","","","$","14","","","$","1","","","$","(96)"],["2020 accident year","","(85)","","","(15)","","","(14)","","","(10)","","","(124)"],["2019 accident year","","64","","","4","","","(2)","","","6","","","72"],["2018 accident year","","26","","","2","","","(1)","","","(5)","","","22"],["2017 accident year","","(5)","","","\u2014","","","(2)","","","(3)","","","(10)"],["2016 accident year","","(10)","","","(2)","","","(2)","","","(1)","","","(15)"],["2015 and prior accident years","","(7)","","","2","","","(2)","","","(1)","","","(8)"],["(Favorable)/unfavorable","","$","(76)","","","$","(61)","","","$","(9)","","","$","(13)","","","$","(159)"],["As of December 31, 2021"],["2020 accident year","","$","(215)","","","$","(52)","","","$","\u2014","","","$","(16)","","","$","(283)"],["2019 accident year","","(58)","","","\u2014","","","7","","","(5)","","","(56)"],["2018 accident year","","(42)","","","5","","","\u2014","","","(7)","","","(44)"],["2017 accident year","","(19)","","","4","","","1","","","2","","","(12)"],["2016 accident year","","(11)","","","(1)","","","1","","","(6)","","","(17)"],["2015 accident year","","\u2014","","","(1)","","","(1)","","","\u2014","","","(2)"],["2014 and prior accident years","","(8)","","","(5)","","","(1)","","","\u2014","","","(14)"],["(Favorable)/unfavorable","","$","(353)","","","$","(50)","","","$","7","","","$","(32)","","","$","(428)"]]
[[/GREPCENT_TABLE]]

Overall favorable development for consolidated property casualty reserves of $215 million in 2023 illustrated the potential for revisions inherent in estimating reserves, especially for long-tail lines such as commercial casualty and workers’ compensation. As noted in Critical Accounting Estimates, Key Assumptions Loss Reserving, our models predict that actual loss and loss expense emergence will differ from projections, and we do not attempt to monitor or identify such normal variations. The table in Property Casualty Loss and Loss Expense Obligations and Reserves shows reserves by segment and lines of business and the components of gross reserves among case, IBNR and loss expense reserves.

Cincinnati Financial Corporation - 2023 10-K - Page 102

Table of Contents

Favorable reserve development was $66 million for our workers' compensation line of business, $55 million for our commercial property line of business and $53 million for our homeowner line of business, together accounting for approximately 81% of the overall total. Unfavorable, or adverse, reserve development included $15 million for our commercial casualty line of business. Drivers of significant reserve development typically reflect loss emergence on known claims that was more favorable or less favorable than previously anticipated for various lines of business and are discussed below.

•Commercial casualty – During 2023, we experienced unfavorable development on prior accident years in aggregate, driven by general liability coverages. Loss emergence for general liability claims rose more than anticipated and reflected economic or other forms of inflation. 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. During 2022, commercial casualty net reserve development was also unfavorable, driven by commercial umbrella coverages. Loss emergence for commercial umbrella claims rose significantly, much more than anticipated. We continue to monitor activity for various commercial casualty coverages so we can detect changes in trends on a timely basis.

•Workers’ compensation – We continue to see favorable reserve development, for all prior accident years in aggregate. During 2023 and 2022, the trend for estimated payments to be made in future calendar years was stable compared with 2021. However, we continue to monitor this line of business closely, as a sudden increase in trend for future payments has a highly leveraged effect.

•Commercial auto – Ultimate losses developed favorably by a small amount during calendar year 2023, for all prior accident years in aggregate. We believe inflation in recent years and reduced driving during the pandemic caused deviations from historical loss patterns. 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. Net reserve development was unfavorable in 2022, reflecting inflation effects.

•Commercial property and homeowner – Loss emergence was less than anticipated for both 2023 and 2022. The majority of homeowner favorable reserve development for both years related to natural catastrophe events with inherently variable loss patterns. For commercial property, catastrophe events accounted for a significant portion, but less than half, of the favorable reserve development for both years.

In consideration of the data’s credibility, we analyze commercial and personal umbrella liability reserves together and then allocate the derived total reserve estimate to the commercial and personal coverages. Consequently, the umbrella factors that contributed to commercial lines reserve development also contributed to personal lines reserve development through the other personal line, of which personal umbrella coverages are a part.

For the excess and surplus lines insurance segment, the table showing reserves by segment and lines of business in Property Casualty Loss and Loss Expense Obligations and Reserves, shows the components of gross reserves among case, IBNR and loss expense reserves. Total gross reserves increased $179 million from year-end 2022, largely due to the increase in premiums and exposures for this segment, as we discussed in Excess and Surplus Lines Insurance Results. Net reserve development was a favorable $11 million during 2023 and $9 million during 2022, following adverse development of $7 million for 2021. Adverse reserve development during 2021 reflected more prudent reserving, as claims on average remained open longer than previously expected. Favorable reserve development following a period of adverse development, or vice-versa, shown in the table above, illustrates the potential for revisions inherent in estimating reserves.

Cincinnati Financial Corporation - 2023 10-K - Page 103

Table of Contents

Life Insurance Policyholder Obligations and Reserves

Gross Life Insurance Policyholder Obligations

Our estimates of life, annuity and disability policyholder obligations reflect future estimated cash payments to be made to policyholders for future policy benefits, policyholders’ account balances and separate account liabilities. These estimates include death and disability income claims, policy surrenders, policy maturities, annuity payments, minimum guarantees on separate account products, commissions and premium taxes offset by expected future deposits and premiums on in-force contracts. Further, these estimates are based on mortality, morbidity and lapse assumptions reflective of our recent experience and expectations of future payment obligations.

Our estimates of gross life, annuity and disability obligations do not reflect net recoveries from reinsurance agreements. Ceded life reinsurance receivables were $216 million at year-end 2023. As discussed in 2024 Reinsurance Programs, we purchase reinsurance to mitigate our life insurance risk exposure. At year-end 2023, ceded death benefits represented approximately 33% of our total gross policy face amounts in force.

These estimated cash outflows are undiscounted with respect to interest. As a result, the sum of the cash outflows for all years of $6.354 billion (total of life insurance obligations) exceeds the liabilities recorded in life policy and investment contract reserves and separate accounts for future policy benefits and claims of $3.985 billion (total of life insurance policy reserves and separate account policy reserves). A significant portion of the difference can be attributed to the time value of money.

We have made significant assumptions to determine the estimated undiscounted cash flows of these policies and contracts that include mortality, morbidity, future lapse rates and interest crediting rates. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results.

Life Insurance Reserves

Gross life policy and investment contract reserves were $3.068 billion at year-end 2023, compared with $3.015 billion at year-end 2022. The increase was primarily due to a decrease in market value discount rates and continued growth in net in-force life insurance policy face amounts. We establish reserves for traditional life insurance policies based on certain cash flow assumptions including mortality, morbidity and lapse rates as well as a discount rate assumption. The cash flow assumptions are based on our current expectations and are reviewed annually to determine any necessary updates. These assumptions are also updated on an interim basis if evidence suggests that they should be revised. The discount rate assumption is based on upper-medium grade fixed-income instrument yields (market value discount rates) and is updated quarterly. We use both our own experience and industry experience adjusted for historical trends in arriving at our cash flow assumptions.

We establish reserves for our universal life, deferred annuity and other investment contracts equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals. Some of our universal life insurance 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.

Cincinnati Financial Corporation - 2023 10-K - Page 104

Table of Contents

2024 Reinsurance Ceded Programs

A single large loss or an unexpected rise in claims severity or frequency due to a catastrophic event is a risk to the company's liquidity and financial strength. To control such losses, we limit marketing property casualty insurance in specific geographic areas and monitor our exposure in certain coastal regions. Examples of this include limiting our earthquake writings in the New Madrid region or leveraging more restrictive terms and conditions through the use of our excess and surplus company in higher risk areas for wildfire or hurricane. Loss exposures in these areas have been identified as a major contributor to our catastrophe probable maximum loss estimates. We also continually review aggregate exposures to large disasters and purchase reinsurance protection to cover these exposures. For business other than Cincinnati Re and Cincinnati Global, we use the Risk Management Solutions (RMS) and Applied Insurance Research (AIR) models to evaluate exposures to a once-in-a-100-year and a once-in-a-250-year event to help determine appropriate reinsurance coverage programs. In conjunction with these activities, we also continue to evaluate information provided by our reinsurance broker. Examples include deterministic modeling of probable maximum loss contribution from growth in new geographic territories.

To help determine appropriate reinsurance coverage for hurricane, earthquake and severe convective storm exposures, for business other than Cincinnati Re and Cincinnati Global we use the RMS and AIR models to estimate the probable maximum loss from a single event or multiple events occurring in a one-year period. The models are proprietary in nature, and the vendors that provide them periodically update the models, sometimes resulting in significant changes to their estimate of probable maximum loss. As of the end of 2023, both models indicated that a hurricane event represents our largest amount of exposure to losses. The table below summarizes estimated probabilities and the corresponding probable maximum loss from a single hurricane event occurring in a one-year period, for business other than Cincinnati Re and Cincinnati Global, and indicates the effect of such losses on consolidated shareholders’ equity at December 31, 2023. Net losses are net of reinsurance, estimated reinstatement premiums and income taxes, assuming a 21% federal tax rate, and assume our 2024 reinsurance programs apply.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","RMS Model","AIR Model"],["","","","Percent","","","Percent"],["","Gross","Net","of total","Gross","Net","of total"],["Probability at December 31, 2023","losses","losses","equity","losses","losses","equity"],["2.0% (1 in 50 year event)","$","572","","$","272","","2.2","%","$","597","","$","272","","2.2","%"],["1.0% (1 in 100 year event)","901","","342","","2.8","","923","","338","","2.8"],["0.4% (1 in 250 year event)","1,545","","647","","5.3","","1,495","","575","","4.8"],["0.2% (1 in 500 year event)","2,225","","1,217","","10.1","","2,007","","1,003","","8.3"]]
[[/GREPCENT_TABLE]]

The modeled losses according to RMS in the table are based on its RiskLink version 22 catastrophe model and use a long-term storm catalog methodology. The modeled losses according to AIR in the table are based on its AIR Touchstone® version 10.0 catastrophe model and use a long-term methodology. The AIR and RMS storm catalogs include decades of documented weather events used in simulations for probable maximum loss projections.

Reinsurance mitigates the risk of highly uncertain exposures and limits the maximum net loss that can arise from large risks or risks concentrated in areas of exposure. Management’s decisions about the appropriate structure of reinsurance protection and level of risk retention are affected by various factors, including changes in our underwriting practices, capacity to retain risks and reinsurance market conditions.

Reinsurance does not relieve us of our obligation to pay covered claims. The financial strength of our reinsurers is important because our ability to recover for losses covered under any reinsurance agreement depends on the financial viability of the reinsurer.

Cincinnati Financial Corporation - 2023 10-K - Page 105

Table of Contents

For 2024, the primary participants on our standard market property and casualty per-risk and per-occurrence reinsurance ceded programs include Hannover Ruck SE, Munich Reinsurance America, Partner Reinsurance Company of the U.S., Transatlantic Reinsurance Company and Swiss Reinsurance America Corporation, all of which had A.M. Best insurer financial strength ratings of A (Excellent) or better as of December 31, 2023. Our property catastrophe program is subscribed through a broker by reinsurers from the U.S., Bermuda, London and the European markets. The largest participant in our property catastrophe program, representing approximately 19% of total participation, is the Lloyd's of London placement that features numerous syndicates. Some of the other reinsurers with large participation in the program include Lancashire Insurance Company Limited, Mapfre Re, Partner Reinsurance Company Ltd., Everest Re Group Ltd. and Chubb Tempest Reinsurance Ltd.

The following table shows our five largest property casualty reinsurance receivable amounts by reinsurer at year-end 2023 and 2022. Michigan Catastrophic Claims Association is a mandatory nonprofit association which runs a reinsurance program funded by an annual premium assessment per vehicle. This assessment covers Michigan’s automobile no-fault policies, which provide unlimited lifetime coverage for medical expenses resulting from auto accidents. The A.M. Best insurer financial strength ratings as of the end of the two most recent years are also shown for each of those reinsurers that have an applicable rating.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","2023","","2022"],["Name of reinsurer","","Total receivable","","A.M. Best Rating","","Total receivable","","A.M. Best Rating"],["Munich Reinsurance America","","$","50","","","A+","","$","41","","","A+"],["Hannover Ruck SE","","47","","","A+","","24","","","A+"],["Swiss Reinsurance America Corporation","","42","","","A+","","34","","","A+"],["Hartford Steam Boiler Inspection & Insurance Company","","35","","","A++","","30","","","A++"],["Michigan Catastrophic Claims Association","","33","","","NA","","37","","","NA"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 106

Table of Contents

Primary components of the 2024 property and casualty reinsurance program are summarized below. The premium estimates below occurred near the beginning of each respective year, when direct written premiums that were subject to applicable reinsurance treaties were also estimated.

•Property per risk treaty – The primary purpose of the property treaty is to provide capacity up to $50 million, adequate for the majority of the risks we write. It also includes protection for extra-contractual liability coverage losses. We retain the first $10 million of each loss. Losses between $10 million and $50 million are reinsured at 100%. The 2024 ceded premium estimate was $71 million, compared with $54 million for the 2023 estimate.

•Property excess treaty – We purchased a property reinsurance treaty that provides an additional $50 million in protection for certain property losses. This treaty, along with the property per risk treaty, provides a total of $100 million of protection. The 2024 ceded premium estimate was approximately $9 million, compared with $6 million for the 2023 estimate.

•Casualty per occurrence treaty – The casualty treaty provides capacity up to $25 million. Similar to the property treaty, it provides sufficient capacity to cover the vast majority of casualty accounts we insure and also includes protection for extra-contractual liability coverage losses. We retain the first $10 million of each loss. Losses between $10 million and $25 million are reinsured at 100%. The 2024 ceded premium estimate was $20 million, compared with $19 million for the 2023 estimate.

•Casualty excess treaty – We purchase a casualty reinsurance treaty that provides an additional $45 million in protection for certain casualty losses. This treaty, along with the casualty per occurrence treaty, provides a total of $70 million of protection for workers’ compensation, extra-contractual liability coverage and clash coverage losses, which would apply when a single occurrence involves multiple policyholders of The Cincinnati Insurance Companies or multiple coverages for one insured. The 2024 ceded premium estimate was approximately $4 million, essentially unchanged from the 2023 estimate.

•Property catastrophe treaty – To protect against catastrophic events such as wind and hail, wildfires, winter storms, hurricanes or earthquakes, we purchased property catastrophe reinsurance with a limit up to $1.200 billion. This treaty and our property and casualty treaties contain exclusions for communicable disease and cyber losses. This treaty also contains an exclusion for terrorism, which varies in level of coverage across the program. Aggregation of losses into one event, sometimes referred to as an hours clause, varies by peril. For example, the general provision in this treaty is 168 hours, but it is 120 hours for a wind event and 96 hours for a riot or civil commotion event. Losses from the same occurrence can be aggregated into one limit over the hour period applicable to the peril causing the loss and applied to the treaty towards recovery. The treaty contains one reinstatement provision. The 2024 ceded premium estimate was $76 million, compared with $49 million for the 2023 estimate when the limit of coverage was $1.100 billion and we retained more risk for some of the layers described below. We retain the first $200 million of any loss, and a share of losses up to $1.200 billion. The percentage share we retain for each layer of coverage is indicated below:

◦60.1% of losses between $200 million and $300 million

◦24.8% of losses between $300 million and $400 million

◦18.6% of losses between $400 million and $600 million

◦10.6% of losses between $600 million and $800 million

◦20.4% of losses between $800 million and $1.000 billion

◦19.6% of losses between $1.000 billion and $1.200 billion

After reinsurance, including coverage of up to $25 million from the treaty effective June 1, 2023, described below, our maximum exposure to a catastrophic event that causes $1.200 billion in covered losses in 2024 would be $423 million, compared with retention of $617 million in 2023 for an event causing $1.200 billion in covered losses. The largest catastrophe loss event in our history occurred during 2022 from a December 21-31 winter storm system that affected many states in the U.S. Our losses from that storm were estimated to be $250 million, before reinsurance, as of December 31, 2023. The second largest catastrophe loss event in our history occurred during 2011 from a May 20-27 storm system that included a tornado in Joplin, Missouri, and that also included significant losses from hail in the Dayton, Ohio, area. Our losses from that storm were estimated to be $226 million, before reinsurance, based on updated estimates as of December 31, 2017.

Individual risks with insured values in excess of $100 million, as identified in the policy, are handled through a different reinsurance mechanism. We typically reinsure property coverage for individual risks with insured values between $100 million and $315 million under an automatic facultative agreement. For risks with property values exceeding $315 million, we negotiate the purchase of facultative coverage on an individual certificate basis.

Cincinnati Financial Corporation - 2023 10-K - Page 107

Table of Contents

For casualty coverage on individual risks with limits exceeding $25 million, facultative reinsurance coverage is placed on an individual certificate basis. For risks with casualty limits that are between $25 million and $27 million, we sometimes forego facultative reinsurance and retain an additional $2 million of loss exposure.

Terrorism coverage at various levels has been secured in most of our reinsurance agreements. The broadest coverage for this peril is found in the property and casualty working treaties, the property per risk treaty and the casualty per occurrence treaty, which provide coverage for commercial and personal risks. A portion of our property catastrophe treaty provides terrorism coverage for personal risks, and coverage for commercial risks with total insured values of $28 million or less. For insured values between $10 million and $100 million, there also may be coverage in the property working treaty.

A form of reinsurance is also provided through The Terrorism Risk Insurance Act of 2002 (TRIA). TRIA was originally signed into law on November 26, 2002, and extended on several occasions. The most recent extension was signed into law on December 20, 2019, and is scheduled to expire on December 31, 2027. TRIA provides a temporary federal backstop for losses related to the writing of the terrorism peril in property casualty insurance policies. Under regulations promulgated under this statute, insurers are required to offer terrorism coverage for certain lines of property casualty insurance, including property, commercial multi-peril, fire, ocean marine, inland marine, liability, aircraft and workers’ compensation. In the event of a terrorism event defined by TRIA, the federal government would reimburse terrorism claim payments subject to the insurer’s deductible. The deductible is calculated as a percentage of subject written premiums for the preceding calendar year. Our deductible in 2023 was $708 million (20% of 2022 subject premiums), and we estimate it is $763 million (20% of 2023 subject premiums) for 2024.

Reinsurance protection for the company’s surety business is covered under a separate treaty with many of the same reinsurers that write the property casualty working treaties.

Reinsurance protection for cyber coverage is also through a separate treaty. We offer cyber insurance as an affirmative coverage option on various insurance policies written on a direct basis and subsequently cede all of the related cyber insurance premiums to a reinsurer, therefore transferring substantially all of that risk.

Effective June 1, 2023, we restructured our reinsurance program for Cincinnati Re that included property catastrophe excess of loss coverage. The restructured treaties are for a period of one year and provide $40 million of coverage for various combinations of occurrences for business written in North America on a direct basis and by Cincinnati Re. Cincinnati Global catastrophe losses are not applicable to the treaty. There is a per occurrence limit of $20 million for Cincinnati Re catastrophe losses in excess of $80 million per event. The remaining coverage is for business written by Cincinnati Re and on a direct basis that applies to catastrophe losses in excess of $600 million per event.

Reinsurance protection for Cincinnati Global's business is also provided through separate treaties.

The Cincinnati Specialty Underwriters Insurance Company has separate property and casualty reinsurance treaties for 2024 through its parent, The Cincinnati Insurance Company. Primary components of the treaties include:

•Property per risk treaty – The property treaty provides limits up to $6 million, which is adequate capacity for the risk profile we insure. It also includes protection for extra-contractual liability coverage losses. Cincinnati Specialty Underwriters retains the first $2 million of any policy loss. Losses between $2 million and $6 million are reinsured at 100% by The Cincinnati Insurance Company.

•Casualty treaties – The casualty treaty is written on an excess of loss basis and provides limits up to $6 million, which is adequate capacity for the risk profile we insure. A second treaty layer of $5 million excess of $6 million is written to provide coverage for extra contractual obligations or clash exposures. The maximum retention for any one casualty loss is $2 million by Cincinnati Specialty Underwriters. Losses on a per occurrence basis between $2 million and $6 million and extra contractual and clash losses between $6 million and $11 million are reinsured at 100% by The Cincinnati Insurance Company.

•Basket retention – Cincinnati Specialty Underwriters has purchased this coverage to limit their retention to $2 million in the event that the same occurrence results in both a property and a casualty loss.

•Property catastrophe treaty – As a subsidiary of The Cincinnati Insurance Company, Cincinnati Specialty Underwriters is a named insured under our corporate property catastrophe treaty. All terms and conditions of this reinsurance coverage apply to policies underwritten by Cincinnati Specialty Underwriters.

Cincinnati Financial Corporation - 2023 10-K - Page 108

Table of Contents

For property risks with limits exceeding $6 million or casualty risks with limits exceeding $6 million, underwriters place facultative reinsurance coverage on an individual certificate basis.

Cincinnati Life, our life insurance subsidiary, purchases reinsurance under separate treaties with many of the same reinsurers that write the property casualty working treaties. Our corporate retention is $1 million on a single life. For our core term life insurance line of business, effective November 1, 2015, we increased our retention to $1 million for issue ages up to 61 years on new term life insurance sales, ceding the balance using excess over retention mortality coverage, and retaining the policy reserve. For issue ages 61 years or older, our retention is $500,000. Prior to November 1, 2015, and after 2004, we retain $500,000 per life. For term life insurance business written prior to 2005, we retain 10% to 25% of each term policy, not to exceed $500,000, ceding the balance of mortality risk and policy reserve.

We also have catastrophe reinsurance coverage on our life insurance operations that reimburses us for covered net losses in excess of $14 million. Our recovery is capped at $75 million for losses per occurrence.

The following table shows our five largest life reinsurance receivable amounts by reinsurer at year-end 2023 and 2022. Insurer financial strength ratings are also shown.

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","2023","","2022"],["Name of reinsurer","","Total receivable","","Rating agency","","Rating","","Total receivable","","Rating Agency","","Rating"],["Swiss Re Life & Health America, Inc.","","$","61","","","A.M. Best","","A+","","$","64","","","A.M. Best","","A+"],["General Re Life Corporation","","50","","","A.M. Best","","A++","","46","","","A.M. Best","","A++"],["Lincoln National Life Insurance Company","","28","","","A.M. Best","","A","","28","","","A.M. Best","","A"],["Employers Reassurance Corporation","","15","","","S&P","","BBB+","","15","","","S&P","","BBB+"],["Munich American Reassurance Company","","12","","","A.M. Best","","A+","","11","","","A.M. Best","","A+"]]
[[/GREPCENT_TABLE]]

Cincinnati Financial Corporation - 2023 10-K - Page 109

Table of Contents

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 Item 1A, Risk Factors.

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

•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

•Effects of any future pandemic, or the resurgence 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 court decisions extending business interruption insurance in commercial property coverage forms to cover claims for pure economic loss related to such 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

•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

•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

•Interest rate fluctuations or other factors that could significantly affect:

•Our ability to generate growth in investment income

•Values of our fixed-maturity investments, including 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, war in the Middle East and disruptions in the banking and financial services industry, resulting in insurance losses, 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

Cincinnati Financial Corporation - 2023 10-K - Page 110

Table of Contents

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

•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 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

◦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

◦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

Cincinnati Financial Corporation - 2023 10-K - Page 111

Table of Contents

◦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 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 - 2023 10-K - Page 112

Table of Contents