CINCINNATI FINANCIAL CORP (CINF) FY 2024 MD&A

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).

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 2024, 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.

•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.

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Executive Summary

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

We are targeting an annual value creation ratio averaging 10% to 13% over the next five-year period. At 19.8% for 2024, our performance was above the high end of that range. It was below the low end of the range for the three-year period and at the high end of the range for the five-year period, both that ended in December 2024.

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.

The 2024 value creation ratio improved by 0.3 percentage points, compared with 2023, and again included a significant contribution from operating results, as shown in the table above, that was 0.8 percentage-points higher than last year. The 2024 ratio improvement from operating results was partially offset by a reduction in overall net gains from our investment portfolio and other items, including a reduction of 2.5 percentage points from our fixed-maturity securities investment portfolio. The increase in 2023, compared with 2022, was primarily due to an increase in overall net gains from our investment portfolio.

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

* 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 10.9% over the five-year period 2020 through 2024, exceeding the 7.9% estimated growth rate for the property casualty insurance industry, with 2024 representing industry data reported through the first nine months of 2024. 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. Our GAAP combined ratio averaged 94.6% over the five-year period 2020 through 2024, within the performance target range. Performance as measured by the combined ratio is discussed in Consolidated Property Casualty Insurance Results. Our statutory combined ratio averaged 94.0% over the five-year period 2020 through 2024, compared with an estimated 100.7% for the property casualty industry, with 2024 representing industry data reported through the first nine months of 2024. 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 9.7% over the five-year period 2020 through 2024.

◦Over the five years ended December 31, 2024, our equity portfolio compound annual total return was 12.2% compared with a compound annual total return of 14.5% for the Index. Our equity portfolio favors larger-capitalization, high-quality, dividend-growing stocks with a slight value orientation. For the year 2024, our equity portfolio total return was 16.5%, compared with 25.0% for the Index.

The board of directors is committed to rewarding shareholders directly through cash dividends and share repurchase authorizations. Through 2024, the company has increased the annual cash dividend rate for 64 consecutive years, a record we believe is matched by only seven other publicly traded U.S. companies.

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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 2024 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.

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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

Total investments increased by 12% during 2024 on a fair value basis. Entering 2025, 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 11%, compared with year-end 2023. Shareholders’ equity increased by 15% and book value per share increased by 16%, for reasons discussed in the preceding Executive Summary.

The amount of our debt obligations at year-end 2024 matched year-end 2023. Our 5.5% ratio of debt to total capital (debt plus shareholders’ equity) at year-end 2024 decreased by 0.8 percentage points compared with the prior-year ratio.

Income Statement and Per Share Data

Net income rose by $449 million in 2024, compared with 2023, including a $204 million increase in net investment gains on an after-tax basis. The improved 2024 net income also included an increase in property casualty underwriting income of $141 million after taxes, as discussed below, and a $104 million increase in investment income after taxes. Our investment operation’s performance is discussed further in Investments Results. Net income of $1.843 billion in 2023, representing a $2.330 billion increase compared with net income for 2022, included a $2.050 billion increase in net investment gains after taxes. The improved 2023 net income also included an increase in property casualty underwriting income of $206 million after taxes and a $91 million increase in investment income after taxes.

During 2024, 2023 and 2022, there were no material changes to our estimates for incurred losses and expenses related to the pandemic related to SARS-CoV-2, also known as COVID-19. Factors used in estimating reserves for business interruption losses or 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

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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. Also, there could be losses or legal expenses that increase due to inflation, pandemic effects or other factors.

Contribution from Insurance Operations

Property casualty net written premiums grew 15% and earned premiums grew 12% in 2024. 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 1 percentage point from Cincinnati Re and Cincinnati Global in total. Growth in 2023 net written premiums and earned premiums was driven by factors similar to 2024. 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 2024. Underwriting results improved in both 2024 and 2023, compared with the respective prior-year period. For both years, the underwriting profit increase included 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 is discussed further in Financial Results for our property casualty business and related segments. The $179 million increase in 2024 underwriting profit, compared with 2023, included a $66 million increase in losses from natural catastrophe events and $27 million less benefit from net favorable reserve development on prior accident years before catastrophe losses. The $261 million increase in 2023, compared with 2022, included a $31 million increase in losses from catastrophe events and $81 million more 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 2024, 2023 and 2022, 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 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 $57 million in 2024, $41 million in 2023 and $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 and losses from the life insurance investment portfolio are also included in our investments segment results.

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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 $9.937 billion at year-end 2024 compared with $8.975 billion at year-end 2023.

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.

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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.

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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

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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.

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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.

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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 $1.456 billion, or 49.2%, of total life policy and investment contract reserves at December 31, 2024. 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:

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 $1.276 billion, or 43.1%, of total life policy and investment contract reserves, at December 31, 2024.

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 $130 million, or 4.4%, of total life policy and investment contract reserves at December 31, 2024, 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.

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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 less than $1 million in 2024, $4 million in 2023 and $5 million in 2022. 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 2024 or 2023.

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 2024 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.

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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 $27.665 billion of securities in our investment portfolio at year-end 2024, 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.

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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.

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Consolidated Property Casualty Insurance Results

Earned and net written premiums for our consolidated property casualty operations grew in 2024, 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 2024, 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 2024 underwriting profit of $580 million was $179 million more than in 2023, including a $66 million unfavorable effect from a higher amount of catastrophe losses, mostly caused by severe weather. Prior accident year loss experience before catastrophes during 2024 was $27 million less favorable than in 2023. 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

Performance highlights for consolidated property casualty operations include:

•Premiums – Agency renewal written premiums increased $819 million or 13% in 2024, compared with 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.

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New business written premiums produced through agencies increased $364 million in 2024, compared with 2023. Agents appointed during 2024 or 2023 produced a 2024 increase in standard lines new business of $116 million. Growth initiatives also favorably affect growth in subsequent years, particularly as newer agency relationships mature over time.

Cincinnati Re produced $597 million of 2024 net written premiums and contributed $39 million to growth in other written premiums, compared with 2023. 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 2024, earned premiums for Cincinnati Re totaled $573 million.

Cincinnati Global also contributed to the increase in other written premiums. Net written premiums were $303 million in 2024, and contributed $23 million of the growth in other written premiums, compared with 2023. In 2024, earned premiums for Cincinnati Global totaled $271 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 $49 million in 2024.

The table below analyzes premium revenue components and trends.

•Combined ratio – The combined ratio improved by 1.5 percentage points in 2024, compared with 2023, including a 0.2 percentage-point decrease in the ratio for catastrophe losses. The 2024 ratio for current accident year losses and loss expenses before catastrophes decreased by 1.8 percentage points. That ratio improvement included an increase of 1.4 points for the IBNR portion and a decrease of 3.2 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 2024 grew faster than those losses and loss expenses. The remainder of the 2024 combined ratio improvement included a decrease of 0.1 percentage points in the ratio for underwriting expenses, offset by 0.6 percentage points less 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 92.9% in 2024 compared with 94.6% in 2023 and 97.7% in 2022. 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 2024, was 97.9% in 2024, 103.7% in 2023 and 103.1% in 2022. The contribution of catastrophe losses to our statutory combined ratio was 8.4 percentage points in 2024, 8.8 percentage points in 2023 and 8.9 percentage points in 2022, compared with industry estimates of 8.8, 7.8 and 6.7 percentage points, respectively, with 2024 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 8.0 percentage points at December 31, 2024. Our five-year average was 9.2 percentage points.

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Effective June 1, 2024, we restructured our reinsurance program for Cincinnati Re only, providing retrocession coverages with various triggers, exclusions and unique features. The program included property catastrophe excess of loss coverage with a total available aggregate limit of $60 million in excess of $80 million per occurrence. During 2024, there was no recovery from reinsurers for losses pertaining to this program. See Item 7, Liquidity and Capital Resources, 2025 Reinsurance Ceded Programs, for a discussion of other reinsurance coverage.

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

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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, 2024, were $1.055 billion higher than at year-end 2023, including $998 million for incurred but not reported (IBNR) reserves. The $1.055 billion reserve increase raised year-end 2023 net loss and loss expense reserves by 12%, matching a 12% increase in 2024 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 67.7% accident year 2023 loss and loss expense ratio reported as of December 31, 2023, developed favorably by 4.9 percentage points to 62.8% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2024. Accident years 2023 and 2022 have both developed favorably, as indicated by the progression over time for the ratios in the table.

Catastrophe loss trends, discussed above, accounted for some of the movement in the current accident year loss and loss expense ratio for 2024, compared with 2023. Catastrophe losses added 9.6 percentage points in 2024, 9.3 points in 2023 and 10.2 points in 2022 to the respective consolidated property casualty current accident year loss and loss expense ratios in the table above.

The 56.6% ratio for current accident year loss and loss expenses before catastrophe losses for 2024 decreased 1.8 percentage points compared with the 58.4% accident year 2023 ratio measured as of December 31, 2023. The decrease included a 1.4 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 2024, and was primarily due to less-than-anticipated loss emergence on known claims. We recognized $236 million of favorable development in 2024, compared with $215 million in 2023 and $159 million in 2022. Of the $21 million increase in 2024, compared with 2023, $19 million was attributable to our commercial property line of business. Approximately 89% of our net favorable reserve development on prior accident years recognized during 2024 occurred in our workers' compensation, commercial property and homeowner lines of business. In 2023, our workers' compensation, commercial property and homeowner lines of business were responsible for approximately 80% 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 2022 was primarily from our workers’ compensation and homeowner 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.

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Consolidated Property Casualty Insurance Losses by Size

In 2024, total large losses incurred decreased by $98 million, or 26%, net of reinsurance, primarily due to a decrease for our commercial lines insurance segment. The corresponding 2024 ratio decreased 1.7 percentage points, compared with 2023. 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.

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Consolidated Property Casualty Insurance Underwriting Expenses

Consolidated property casualty commission expenses rose $167 million, or 12%, in 2024, with profit-sharing commissions for agencies increasing by $18 million. The 2024 ratio of commission expenses as a percent of earned premiums decreased by 0.1 percentage points, compared with 2023. The ratio for 2023 decreased compared with 2022. In 2024, other underwriting expenses as a percent of earned premiums matched 2023, as earned premiums kept pace with other underwriting expenses. 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. The three-year period ending in 2024 also included ongoing expense management efforts.

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.

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Commercial Lines Insurance Results

Overview – Three-Year Highlights

Performance highlights for the commercial lines insurance segment include:

•Premiums – Earned premiums and net written premiums rose in 2024, including a $211 million, or 5%, increase in renewal written premiums that continued to include higher average pricing and a higher level of insured exposures. New business written premiums in 2024 increased $157 million, or 27%, compared with 2023, as we continued to carefully underwrite each policy in a highly competitive market.

•Combined ratio – The 2024 combined ratio improved by 3.0 percentage points compared with 2023, including a 1.8 percentage-point decrease in the ratio component for catastrophe losses. The 2024 combined ratio also improved by 1.5 points due to a lower ratio for current accident year loss and loss expenses before catastrophe losses, compared with 2023. That ratio improvement included an increase of 2.9 points for the IBNR portion and a decrease of 4.4 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 2024 grew faster than those losses and loss expenses. Development on prior accident years loss and loss expense reserves before catastrophes during 2024 was 0.2 percentage points less favorable than in 2023, as discussed below.

When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends for inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company. Elevated inflation 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.

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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 92.2% in 2024, compared with 95.6% in 2023 and 98.5% in 2022. The contribution of catastrophe losses to our commercial lines statutory combined ratio was 5.4 percentage points in 2024, 7.2 percentage points in 2023 and 7.0 percentage points in 2022.

Commercial Lines Insurance Premiums

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 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 5% increase in 2024 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 2024, 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.

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For only those commercial lines policies that did expire and were then renewed during 2024, we estimate that the average price increase was at a percentage in the high-single-digit range. During 2024, 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 2024 increase of 5% 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 variations 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. They also contribute to increases or decreases in our agency renewal written premiums. The contribution to our commercial lines earned premiums was $107 million, $157 million and $127 million in 2024, 2023 and 2022, respectively. The contribution on a net written premium basis was $108 million, $136 million and $101 million in 2024, 2023 and 2022, respectively. These net written premium amounts are included with agency renewal written premiums in the Commercial Lines Insurance Premiums table above.

In 2024, our commercial lines new business premiums written by our agencies increased $157 million, or 27%, compared with 2023, as we continued to carefully underwrite each policy in a highly competitive market. New business premium volume in recent years has been significantly influenced by new agency appointments. Agencies appointed since the beginning of 2023 produced commercial lines new business written premiums of $72 million, in aggregate, during 2024, up $56 million from what they produced during 2023. All other agencies contributed the remaining $669 million, up $101 million from the $568 million they produced in 2023.

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 $20 million in 2024.

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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 68.2% accident year 2023 loss and loss expense ratio reported as of December 31, 2023, developed favorably by 5.0 percentage points to 63.2% due to claims settling for less than previously estimated, or due to updates to reserve estimates for unpaid claims, as of December 31, 2024. Accident years 2023 and 2022 for the commercial lines insurance segment have both developed favorably, as indicated by the progression over time of the ratios in the 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 2024, compared with 2023. Catastrophe losses added 6.1 percentage points in 2024, 7.4 points in 2023 and 7.6 points in 2022 to the respective commercial lines current accident year loss and loss expense ratios in the table above.

The 59.3% ratio for current accident year loss and loss expenses before catastrophe losses for 2024 decreased 1.5 percentage points compared with the 60.8% accident year 2023 ratio measured as of December 31, 2023. The change included a decrease in large losses incurred, described below including a table with corresponding ratios for new losses above $2 million, with a 2.2 percentage-point decrease in the 2024 ratio. Contributions to the ratio decrease 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 $138 million in 2024 continued to net to a favorable amount and provided a larger benefit than the $123 million recognized in 2023. The $15 million net increase in 2024, compared with 2023, included $19 million from our commercial property line of business and $17 million from our workers' compensation line of business, partially offset by an $11 million decrease from our commercial casualty line of business. Most of our commercial lines net favorable reserve development on prior accident years recognized during 2024 occurred in our workers’ compensation and commercial property lines of business. Favorable development recognized during 2023 and 2022 was also mostly from our workers’ compensation and commercial property lines of business. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable paid and reported 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.

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Commercial Lines Insurance Losses by Size

In 2024, total large losses incurred decreased by $103 million, or 35%, net of reinsurance. The corresponding 2024 ratio decreased 2.6 percentage points, compared with 2023. The 2024 decrease on a dollar basis was primarily due to a decrease of $116 million for our commercial property line of business. In 2023, total large losses incurred and the corresponding ratio were higher than in 2022, largely due to higher amounts of large losses for our commercial property line 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

Commercial lines commission expenses as a percent of earned premiums decreased slightly in 2024, compared with 2023, reflecting a decrease in the ratio for profit-sharing commissions for agencies. The ratio for 2023 decreased slightly compared with 2022. In 2024, other underwriting expenses as a percent of earned premiums increased, compared with 2023, as earned premiums rose at a slower pace than other underwriting expenses, primarily employee-related expenses. 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. The three-year period ending in 2024 also included ongoing expense management efforts.

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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. We are committed to our agencies and focus on a long-term strategy when considering how to successfully navigate changing, and often challenging, market pressures and conditions while profitably growing our commercial lines insurance segment.

We intend to grow 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 to diversify our book of business. Work continues to improve our pricing precision and further segment commercial risks as underwriters emphasize underwriting discipline and careful management of rate levels. They seek to accurately match exposures with appropriate premiums, evaluating each risk on a policy-by-policy basis for 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 2025.

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Personal Lines Insurance Results

Overview – Three-Year Highlights

Performance highlights for the personal lines insurance segment include:

•Premiums – Earned premiums and net written premiums continued to grow in 2024, 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 $538 million, or 27%, in 2024, compared with 2023, while new business written premiums rose $188 million, or 45%. Cincinnati Private ClientSM net written premiums, included in the personal lines insurance segment, rose $462 million, or 37%, to approximately $1.719 billion in 2024, representing 57.3% of the segment's 2024 net written premiums. Cincinnati Private Client net written premiums included excess and surplus lines homeowner policies with premiums totaling $166 million in 2024 and $109 million in 2023.

•Combined ratio – The 2024 combined ratio improved by 2.9 percentage points, compared with 2023, including a decrease of 1.2 points in the ratio for catastrophe losses. The improvement also included 2.5 points from a lower ratio for current accident year loss and loss expenses before catastrophe losses. That ratio decrease included an increase of 2.0 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 2024 grew faster than those losses and loss expenses. The ratio decreases for catastrophe losses and current accident year results were partially offset by an increase of 1.7 points from reserve development on prior accident year loss and loss expenses before catastrophes during 2024 that was unfavorable by 0.7 points compared with favorable development of 1.0 points in 2023.

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

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company. Elevated inflation since 2021 has resulted in higher losses and loss expenses as costs have increased 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 additional states as the type of catastrophe risk can vary by state.

Our personal lines statutory combined ratio was 95.5% in 2024, compared with 98.3% in 2023 and 97.7% in 2022. The contribution of catastrophe losses to our personal lines statutory combined ratio was 13.9 percentage points in 2024, 15.1 percentage points in 2023 and 11.4 percentage points in 2022.

Personal Lines Insurance Premiums

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 27% increase in agency renewal written premiums in 2024 included the effect of various rate changes. We estimate that premium rates for our personal auto line of business increased at an average percentage in the low-double-digit range during 2024, 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 price increases during 2024 averaged a percentage in the high-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 increase in agency renewal written premiums in 2024 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 $188 million, or 45%, during 2024, compared with 2023, including approximately $89 million from Cincinnati Private Client policies and $99 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 $28 million in 2024.

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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 73.7% accident year 2023 loss and loss expense ratio reported as of December 31, 2023, developed favorably by 2.6 percentage points to 71.1% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2024. Accident year 2022 for the personal lines segment developed favorably for the two-year period ending December 31, 2024, as indicated by the progression over time for the ratios in the table. It experienced a small amount of unfavorable development during 2024, driven by the personal auto line of business as described below, and favorable development during 2023.

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 2024, compared with accident year 2023. Catastrophe losses added 15.6 percentage points in 2024, 17.3 points in 2023 and 14.0 points in 2022 to the respective personal lines current accident year loss and loss expense ratios in the table above. Personal lines catastrophe losses for 2024 resulted in a ratio higher than our 11.4% 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 53.9% ratio for current accident year loss and loss expenses before catastrophe losses for 2024 improved 2.5 percentage points compared with the 56.4% accident year 2023 ratio measured as of December 31, 2023. The decrease included an improvement in the ratios for new losses above $2 million, with a 0.7 percentage-point decrease in the 2024 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 2024 was favorable by $26 million, in aggregate, compared with $64 million in 2023. The 2024 net favorable reserve development included $54 million for our homeowner line of business offset by $20 million of unfavorable development for our personal auto line of business. 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. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable paid and reported 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.

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Personal Lines Insurance Losses by Size

In 2024, personal lines total large losses incurred decreased by $1 million, or 1%, net of reinsurance. The corresponding 2024 ratio decreased 0.9 percentage points, compared with 2023. The 2024 decrease was primarily due to a lower amount for our homeowner line of business. In 2023, total large losses increased, compared with 2022, primarily due to higher amounts for our homeowner 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

Personal lines commission expense as a percent of earned premiums decreased slightly in 2024 compared with 2023, as earned premiums rose at a faster pace than commission expenses. The ratio for 2023 decreased slightly compared with 2022, as earned premiums rose at a faster pace than commission expenses. Other underwriting expenses as a percent of earned premiums in 2024 decreased, compared with 2023, reflecting ongoing expense management efforts, as premium growth outpaced growth in other underwriting expenses. In 2023, other underwriting expenses as a percent of earned premiums matched the 2022 percentage, reflecting ongoing expense management efforts, as the pace of premium growth was in line with growth in other expenses.

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Personal Lines Insurance Outlook

The personal lines market of the U.S. property casualty industry continued to experience challenges in 2024, 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.

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Excess and Surplus Lines Insurance Results

Overview – Three-Year Highlights

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 2024, primarily due to higher renewal written premiums that included average renewal estimated price increases in the high-single-digit range. New business written premiums rose 11% in 2024, compared with 2023, and also contributed to premium growth.

•Combined ratio – The combined ratio increased by 3.4 percentage points in 2024, compared with 2023, primarily due to unfavorable reserve development on prior accident year loss and loss expenses that offset a lower ratio for current accident year loss and loss expenses before catastrophe losses. Approximately 89% of our 2024 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 higher 2024 combined ratio also included increases in ratios for underwriting expenses and catastrophe losses.

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Excess and Surplus Lines Insurance Premiums

The $70 million increase in 2024 renewal premiums largely reflected higher renewal pricing. Average renewal estimated price increases were in the high-single-digit range during 2024. 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 2024 grew by $19 million, or 11%, compared with 2023, as we continued to carefully underwrite each policy in a highly competitive market. Other written premiums in 2024 reduced net written premium growth by $5 million more than in 2023 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 66.6% accident year 2023 loss and loss expense ratio reported as of December 31, 2023, developed favorably by 10.5 percentage points to 56.1% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2024. Accident year 2022 for the segment developed favorably for the two-year period ending December 31, 2024, as indicated by the progression over time for the ratios in the table. It experienced unfavorable development during 2024 and favorable development during 2023.

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 2024, compared with 2023. Catastrophe losses added 1.3 percentage points in 2024, 0.7 points in 2023 and 1.0 points in 2022 to the respective excess and surplus lines current accident year loss and loss expense ratios in the table above.

The 64.2% ratio for current accident year loss and loss expenses before catastrophe losses for 2024 improved by 1.7 percentage points compared with the 65.9% accident year 2023 ratio measured as of December 31, 2023. The improvement was partially offset by a 0.7 percentage-point increase in the ratio for current accident year losses of $2 million or more per claim, shown in the table below.

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Excess and surplus lines reserve development on prior accident years was a net unfavorable $8 million for 2024 and a net favorable $11 million for 2023. The net unfavorable amount for 2024 was primarily for accident years 2021 and prior and was due primarily to higher-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 2017, 2016 and 2015, in aggregate, after subtracting cumulative paid amounts from incurred amounts at December 31, 2017, reserves for estimated unpaid losses, plus the portion of loss expenses known as ALAE, equaled $203 million. For those same accident years, at December 31, 2024, the reserve estimate for the remaining unpaid amount equaled $18 million. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable paid and reported 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

In 2024, total large losses increased by $6 million, net of reinsurance. The ratio for 2024 large losses as a percent of earned premiums increased by 1.0 percentage points, compared with 2023. That ratio for 2023 decreased by 0.7 points, compared with 2022. 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.

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Excess and Surplus Lines Insurance Underwriting Expenses

Excess and surplus lines commission expense as a percent of earned premiums for 2024 increased compared with 2023, primarily from an increase in the ratio for profit-sharing commissions for agencies. The ratio for 2023 increased compared with 2022, including increases in the ratios for reinsurance commissions and profit-sharing commissions for agencies. The ratio for other underwriting expenses increased in 2024 largely due to increases in employee-related expenses. The ratio for other underwriting expenses increased slightly in 2023. The three-year period ending in 2024 also reflected 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 property-driven risks, except for catastrophe exposures, according to industry publications. For casualty-driven risks, premium rates in the foreseeable future are expected to be firm, primarily driven by social inflation and litigation funding impacts. 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. We have implemented artificial intelligence technology that has reduced data entry time and improved the quality of our data analytics and expect ongoing benefits in the future.

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.

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Life Insurance Results

Overview – Three-Year Highlights

Performance highlights for the life insurance segment include:

•Revenues – Earned premiums increased 3% for the year 2024, 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 $84.245 billion at year-end 2024 from $82.361 billion at year-end 2023 and $80.482 billion at year-end 2022.

•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 $57 million for our life insurance segment in 2024, compared with $41 million in 2023, was primarily due to more favorable unlocking of interest rate and other actuarial adjustments and more favorable mortality experience. A profit of $41 million in 2023 compared with $27 million in 2022 was primarily due to increased earned premiums and fee revenues along with favorable mortality experience.

Earned premiums increased $8 million in 2024, primarily due to a $6 million increase in term life insurance earned premiums, as shown in the table below.

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 60% 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, related to traditional life and interest-sensitive products, accounted for 76.4% of 2024 total benefits and expenses (inclusive of investment interest credited to contract holders) compared with 78.4% in 2023 and 78.3% in 2022. Total contract holders’ benefits decreased in 2024, compared with 2023, largely due to more favorable impacts from the unlocking of interest rate and other actuarial assumptions. Total

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contract holder benefits increased slightly in 2023, compared with 2022, largely due to less favorable impacts from the unlocking of interest rate and other actuarial assumptions. Mortality experience was more favorable in 2024, compared with 2023, and net death claims were below our mortality projections.

•Underwriting expenses incurred, net of deferred acquisition costs, accounted for 23.6% of 2024 total benefits and expenses (inclusive of investment interest credited to contract holders) compared with 21.6% in 2023 and 21.7% in 2022. Expenses in 2024 increased 7%, compared with 3% growth in earned premiums. Expenses in 2023 increased 4%, compared with 4% growth in earned premiums. The 2024 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 2023 increase in underwriting expenses was largely due to the same factors that impacted the 2024 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 $91 million in 2024, compared with $75 million in 2023 and $65 million in 2022. The life insurance subsidiary portfolio had after-tax net investment losses of $6 million in 2024 compared with $7 million in 2023 and $2 million in 2022. 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. Life insurance ownership remains low compared to historical levels. While people like to research life insurance online, we believe they prefer to speak to a professional agent before making a purchase. Our strong agency relationships and expanding base of agencies gives us a competitive edge in satisfying the life insurance needs that exist for so many Americans.

Artificial intelligence and improved computing power will continue to allow us to improve our efficiency in writing new business and servicing it. Underwriting in particular will continue to evolve as we work to prudently adopt new, and refine existing models, to evaluate mortality risk without requiring invasive and time intensive traditional medical exams. We believe this improved buying experience will encourage more of our agencies to offer a life insurance product to their property casualty customers.

Within the life insurance market, we view the voluntary life space as particularly attractive. With our large commercial lines presence, our agencies have tremendous opportunities to serve the employees of these businesses with a simple, voluntary life product. We are enhancing our ability to enroll this business and service it more efficiently, including hiring dedicated associates to augment our agencies’ ability to conduct the enrollments. These accounts often lead to business life insurance opportunities that are designed to ensure the viability of the businesses in the event of a death of a key employee or business owner.

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Investments Results

Overview – Three-Year Highlights

Investments Results

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 $131 million, or 15%, in 2024, due to increases from both interest income and dividends. Interest income grew 22% in 2024, compared with 2023, 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 less than 1% in 2024, compared with 2023. Dividend rates generally have increased, although more slowly than in prior years. Minor asset allocation adjustments in our equity portfolio, including larger than usual net sales of equity securities during the second half of 2024, unfavorably affected dividend income. Pretax investment income rose 14% in 2023, 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 2024 and 2023, 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.

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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 9.3% in 2024 was lower than the 9.9% return in 2023. The 2024 contribution from the investment income component was enhanced by the net favorable effect of the investment gains and losses components. Comparing contributions for 2024 with 2023, investment income rose $131 million, investment gains increased by $264 million and the invested assets net change in unrealized gains and losses decreased by $260 million. The base component of the return calculation, annual average invested assets, was up 13% in 2024. For 2023 compared with 2022, total investment return of 9.9% in 2023 was significantly more than the negative 9.2% return in 2022, as the 2023 contribution from the investment income component was enhanced by the net favorable effect of the investment gains and losses components. The base component of the return calculation, annual average invested assets, decreased 8% in 2023.