CINF 10-Q Quarterly Report March 31, 2023 | Alphaminr
CINCINNATI FINANCIAL CORP
ALPHAMINR

CINF 10-Q Quarter ended March 31, 2023

Balance Sheet
Cash Flow
Income Statement
CINCINNATI FINANCIAL CORP
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2023 .
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _____________________ to _____________________.
Commission file number 0-4604
CINCINNATI FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0746871
(State or other jurisdiction of
incorporation or organization) 		(I.R.S. Employer Identification No.)
6200 S. Gilmore Road, Fairfield, Ohio 45014-5141
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: ( 513 ) 870-2000
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock CINF Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
☑ Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☐ Smaller reporting company
☐ Emerging growth company
☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
☐ Yes ☑ No
As of April 21, 2023, there were 157,212,708 shares of common stock outstanding.


CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED March 31, 2023
TABLE OF CONTENTS

Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 2

Part I – Financial Information
Item 1.    Financial Statements (unaudited)
Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in millions, except per share data) March 31, December 31,
2023 2022
Assets
Investments
Fixed maturities, at fair value (amortized cost: 2023—$ 13,362 ; 2022—$ 12,979 )
$ 12,678 $ 12,132
Equity securities, at fair value (cost: 2023—$ 4,311 ; 2022—$ 4,294 )
9,967 9,841
Other invested assets 478 452
Total investments 23,123 22,425
Cash and cash equivalents 955 1,264
Investment income receivable 160 160
Finance receivable 94 92
Premiums receivable 2,509 2,322
Reinsurance recoverable 698 665
Prepaid reinsurance premiums 57 51
Deferred policy acquisition costs 1,048 1,013
Land, building and equipment, net, for company use (accumulated depreciation:
2023—$ 326 ; 2022—$ 322 )
199 202
Other assets 732 646
Separate accounts 899 892
Total assets $ 30,474 $ 29,732
Liabilities
Insurance reserves
Loss and loss expense reserves $ 8,693 $ 8,400
Life policy and investment contract reserves 3,059 3,015
Unearned premiums 3,890 3,689
Other liabilities 1,193 1,229
Deferred income tax 1,104 1,054
Note payable 50 50
Long-term debt and lease obligations 845 841
Separate accounts 899 892
Total liabilities 19,733 19,170
Commitments and contingent liabilities (Note 12)
Shareholders' Equity
Common stock, par value—$ 2 per share; (authorized: 2023 and 2022— 500 million
shares; issued: 2023 and 2022— 198.3 million shares)
397 397
Paid-in capital 1,398 1,392
Retained earnings 11,818 11,711
Accumulated other comprehensive income ( 527 ) ( 614 )
Treasury stock at cost (2023— 41.1 million shares and 2022— 41.2 million shares)
( 2,345 ) ( 2,324 )
Total shareholders' equity 10,741 10,562
Total liabilities and shareholders' equity $ 30,474 $ 29,732
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 3

Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Dollars in millions, except per share data) Three months ended March 31,
2023 2022
Revenues
Earned premiums $ 1,918 $ 1,693
Investment income, net of expenses 210 185
Investment gains and losses, net 106 ( 666 )
Fee revenues 4 4
Other revenues 3 2
Total revenues 2,241 1,218
Benefits and Expenses
Insurance losses and contract holders' benefits 1,398 1,032
Underwriting, acquisition and insurance expenses 556 520
Interest expense 14 13
Other operating expenses 5 4
Total benefits and expenses 1,973 1,569
Income (Loss) Before Income Taxes 268 ( 351 )
Provision (Benefit) for Income Taxes
Current 16 41
Deferred 27 ( 126 )
Total provision (benefit) for income taxes 43 ( 85 )
Net Income (Loss) $ 225 $ ( 266 )
Per Common Share
Net income (loss)—basic $ 1.43 $ ( 1.66 )
Net income (loss)—diluted 1.42 ( 1.66 )
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 4

Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Dollars in millions) Three months ended March 31,
2023 2022
Net Income (Loss) $ 225 $ ( 266 )
Other Comprehensive Income (Loss)
Change in unrealized gains and losses on investments, net of tax (benefit) of $ 35 and $( 157 ), respectively
128 ( 589 )
Amortization of pension actuarial loss and prior service cost, net of tax (benefit) of $( 1 ) and $ 0 , respectively
( 5 ) —
Change in life policy reserves, reinsurance recoverable and other, net of tax (benefit) of $( 9 ) and $ 41 , respectively
( 36 ) 155
Other comprehensive income (loss) 87 ( 434 )
Comprehensive Income (Loss) $ 312 $ ( 700 )
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 5

Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
(Dollars in millions) Three months ended March 31,
2023 2022
Common Stock
Beginning of period $ 397 $ 397
Share-based awards — —
End of period 397 397
Paid-In Capital
Beginning of period 1,392 1,356
Share-based awards ( 6 ) ( 14 )
Share-based compensation 12 11
Other — 1
End of period 1,398 1,354
Retained Earnings
Beginning of period 11,711 12,625
Cumulative effect of change in accounting for long-duration insurance contracts (Note 1) — 10
Adjusted beginning of period 11,711 12,635
Net income (loss) 225 ( 266 )
Dividends declared ( 118 ) ( 111 )
End of period 11,818 12,258
Accumulated Other Comprehensive Income (Loss)
Beginning of period ( 614 ) 648
Cumulative effect of change in accounting for long-duration insurance contracts (Note 1) — ( 352 )
Adjusted beginning of period ( 614 ) 296
Other comprehensive income (loss) 87 ( 434 )
End of period ( 527 ) ( 138 )
Treasury Stock
Beginning of period ( 2,324 ) ( 1,921 )
Share-based awards 7 9
Shares acquired - share repurchase authorization ( 25 ) ( 45 )
Shares acquired - share-based compensation plans ( 3 ) ( 2 )
End of period ( 2,345 ) ( 1,959 )
Total Shareholders' Equity $ 10,741 $ 11,912
(In millions, except per common share)
Common Stock - Shares Outstanding
Beginning of period 157.1 160.3
Share-based awards 0.3 0.4
Shares acquired - share repurchase authorization ( 0.2 ) ( 0.4 )
End of period 157.2 160.3
Dividends declared per common share $ 0.75 $ 0.69
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 6

Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in millions) Three months ended March 31,
2023 2022
Cash Flows From Operating Activities
Net income (loss) $ 225 $ ( 266 )
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other 40 37
Investment gains and losses, net ( 93 ) 674
Interest credited to contract holders 10 12
Deferred income tax expense 27 ( 126 )
Changes in:
Premiums and reinsurance receivable ( 229 ) ( 182 )
Deferred policy acquisition costs ( 36 ) ( 67 )
Other assets ( 24 ) ( 20 )
Loss and loss expense reserves 293 61
Life policy and investment contract reserves 25 7
Unearned premiums 201 289
Other liabilities ( 121 ) ( 136 )
Current income tax receivable/payable ( 68 ) ( 85 )
Net cash provided by operating activities 250 198
Cash Flows From Investing Activities
Sale, call or maturity of fixed maturities 303 351
Sale of equity securities 4 56
Purchase of fixed maturities ( 606 ) ( 460 )
Purchase of equity securities ( 22 ) ( 90 )
Changes in finance receivables ( 3 ) 6
Investment in building and equipment ( 4 ) ( 4 )
Change in other invested assets, net ( 34 ) ( 21 )
Net cash used in investing activities ( 362 ) ( 162 )
Cash Flows From Financing Activities
Payment of cash dividends to shareholders ( 106 ) ( 99 )
Shares acquired - share repurchase authorization ( 25 ) ( 45 )
Changes in note payable
— ( 5 )
Proceeds from stock options exercised 5 4
Contract holders' funds deposited 20 18
Contract holders' funds withdrawn ( 58 ) ( 32 )
Other ( 33 ) ( 29 )
Net cash used in financing activities ( 197 ) ( 188 )
Net change in cash and cash equivalents ( 309 ) ( 152 )
Cash and cash equivalents at beginning of year 1,264 1,139
Cash and cash equivalents at end of period $ 955 $ 987
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 1 $ —
Income taxes paid 76 121
Noncash Activities
Equipment acquired under finance lease obligations $ 1 $ 2
Share-based compensation 11 16
Other assets and other liabilities 96 10
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 — Accounting Policies
The condensed consolidated financial statements include the accounts of Cincinnati Financial Corporation and its consolidated subsidiaries, each of which is wholly owned. These statements are presented in conformity with accounting principles generally accepted in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Our actual results could differ from those estimates. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been condensed or omitted.
Our March 31, 2023, condensed consolidated financial statements are unaudited. We believe that we have made all adjustments, consisting only of normal recurring accruals, that are necessary for fair presentation. These condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our 2022 Annual Report on Form 10-K. The results of operations for interim periods do not necessarily indicate results to be expected for the full year.

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

Adopted Accounting Updates
ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts . ASU 2018-12 requires changes to the measurement and disclosure of long-duration insurance contracts. In November 2020, the FASB issued an ASU that delayed the effective date of ASU 2018-12 to interim and annual reporting periods beginning after December 15, 2022.

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

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

We adopted these ASUs on a modified retrospective basis on January 1, 2023, resulting in an after-tax increase to shareholders' equity of $ 31 million.










Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 8

The following table illustrates the effect of adopting ASU 2018-12 in the condensed consolidated balance sheets:
(Dollars in millions) March 31, 2023 December 31, 2022
As originally reported As adjusted Difference
Reinsurance recoverable $ 698 $ 640 $ 665 $ 25
Prepaid reinsurance premiums 57 79 51 ( 28 )
Deferred policy acquisition costs 1,048 1,014 1,013 ( 1 )
Total assets 30,474 29,736 29,732 ( 4 )
Life policy and investment contract reserves 3,059 3,059 3,015 ( 44 )
Deferred income tax 1,104 1,045 1,054 9
Total liabilities 19,733 19,205 19,170 ( 35 )
Retained earnings 11,818 11,702 11,711 9
Accumulated other comprehensive income ( 527 ) ( 636 ) ( 614 ) 22
Total shareholders' equity 10,741 10,531 10,562 31
Total liabilities and shareholders' equity 30,474 29,736 29,732 ( 4 )

The following table illustrates the effect of adopting ASU 2018-12 in the condensed consolidated statements of income and condensed consolidated statements of comprehensive income:
(Dollars in millions, except per share data) Three months ended March 31,
2023 2022
As originally reported As adjusted Difference
Earned premiums $ 1,918 $ 1,690 $ 1,693 $ 3
Insurance losses and contract holders' benefits 1,398 1,039 1,032 ( 7 )
Underwriting, acquisition and insurance expenses 556 519 520 1
Deferred income tax expense 27 ( 128 ) ( 126 ) 2
Net Income (Loss) 225 ( 273 ) ( 266 ) 7
Change in life policy reserves, reinsurance recoverable and other, net of tax ( 36 ) — 155 155
Other comprehensive income (loss) 87 ( 589 ) ( 434 ) 155
Comprehensive Income (Loss) 312 ( 862 ) ( 700 ) 162
Net income (loss) per share:
Basic $ 1.43 $ ( 1.70 ) $ ( 1.66 ) $ 0.04
Diluted 1.42 ( 1.70 ) ( 1.66 ) 0.04

The adoption of ASU 2018-12 did not have a material impact on the company's condensed consolidated cash flows.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 9

NOTE 2 – Investments
The following table provides amortized cost, gross unrealized gains, gross unrealized losses and fair value for our fixed-maturity securities:
(Dollars in millions) Amortized
cost 		Gross unrealized Fair value
At March 31, 2023 gains losses
Fixed-maturity securities:
Corporate $ 7,568 $ 49 $ 526 $ 7,091
States, municipalities and political subdivisions 4,933 42 226 4,749
Government-sponsored enterprises 390 1 4 387
Commercial mortgage-backed 241 — 16 225
United States government 199 — 4 195
Foreign government 31 — — 31
Total $ 13,362 $ 92 $ 776 $ 12,678
At December 31, 2022
Fixed-maturity securities:
Corporate $ 7,412 $ 37 $ 580 $ 6,869
States, municipalities and political subdivisions 4,901 24 303 4,622
Government-sponsored enterprises 186 — 3 183
Commercial mortgage-backed 250 — 16 234
United States government 196 — 5 191
Foreign government 34 — 1 33
Total $ 12,979 $ 61 $ 908 $ 12,132
Th e net unrealized investment losses in our fixed-maturity portfolio at March 31, 2023, are primarily due to an increase in U.S. Treasury yields and a widening of corporate credit spreads . Our commercial mortgage-backed securities had an average rating of Aa2/AA- at March 31, 2023, and December 31, 2022.

Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 10

The table below provides fair values and gross unrealized losses by investment category and by the duration of the securities' continuous unrealized loss positions:
(Dollars in millions) Less than 12 months 12 months or more Total
At March 31, 2023 Fair
value 		Unrealized
losses 		Fair
value 		Unrealized
losses 		Fair
value 		Unrealized
losses
Fixed-maturity securities:
Corporate $ 3,910 $ 158 $ 2,273 $ 368 $ 6,183 $ 526
States, municipalities and political subdivisions 1,287 48 890 178 2,177 226
Government-sponsored enterprises 263 3 7 1 270 4
Commercial mortgage-backed 107 5 116 11 223 16
United States government 121 1 52 3 173 4
Foreign government 10 — 2 — 12 —
Total $ 5,698 $ 215 $ 3,340 $ 561 $ 9,038 $ 776
At December 31, 2022
Fixed-maturity securities:
Corporate $ 5,651 $ 412 $ 661 $ 168 $ 6,312 $ 580
States, municipalities and political subdivisions 2,600 274 77 29 2,677 303
Government-sponsored enterprises 123 3 3 — 126 3
Commercial mortgage-backed 215 13 14 3 229 16
United States government 146 3 41 2 187 5
Foreign government 25 1 4 — 29 1
Total $ 8,760 $ 706 $ 800 $ 202 $ 9,560 $ 908

Contractual maturity dates for fixed-maturities securities were:
(Dollars in millions) Amortized
cost 		Fair
value 		% of fair
value
At March 31, 2023
Maturity dates:
Due in one year or less $ 728 $ 725 5.7 %
Due after one year through five years 4,139 4,003 31.6
Due after five years through ten years 3,583 3,447 27.2
Due after ten years 4,912 4,503 35.5
Total $ 13,362 $ 12,678 100.0 %

Actual maturities may differ from contractual maturities when there is a right to call or prepay obligations with or without call or prepayment penalties.

Cincinnati Financial Corporation First-Quarter 2023 10-Q
Page 11

The following table provides investment income and investment gains and losses, net:
(Dollars in millions) Three months ended March 31,
2023 2022
Investment income:
Interest $ 140 $ 123
Dividends 66 65
Other 7 1
Total 213 189
Less investment expenses 3 4
Total $ 210 $ 185
Investment gains and losses, net:
Equity securities:
Investment gains and losses on securities sold, net $ ( 1 ) $ 8
Unrealized gains and losses on securities still held, net 106 ( 683 )
Subtotal 105 ( 675 )
Fixed-maturity securities:
Gross realized gains 1 4
Gross realized losses ( 1 ) ( 1 )
Subtotal — 3
Other 1 6
Total $ 106 $ ( 666 )
The fair value of our equity portfolio was $ 9.967 billion and $ 9.841 billion at March 31, 2023, and December 31, 2022, respectively. Apple Inc. (Nasdaq:AAPL), an equity holding, was our largest single investment holding with a fair value of $ 758 million and $ 597 million, which was 7.9 % and 6.3 % of our publicly traded common equities portfolio and 3.3 % and 2.7 % of the total investment portfolio at March 31, 2023, and December 31, 2022, respectively.

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

There were 2,900 fixed-maturity securities with a total unrealized loss of $ 776 million, which were in an unrealized loss position at March 31, 2023. Of that total, 26 fixed-maturity securities had fair values below 70 % of amortized cost. There were 3,272 fixed-maturity securities with a total unrealized loss of $ 908 million, which were in an unrealized loss position at December 31, 2022. Of that total, 49 fixed-maturity securities had fair values below 70 % of amortized cost.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
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NOTE 3 – Fair Value Measurements
In accordance with accounting guidance for fair value measurements and disclosures, we categorized our financial instruments, based on the priority of the observable and market-based data for the valuation technique used, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within different levels of the fair value hierarchy, the lowest observable input that has a significant impact on fair value measurement is used. Our valuation techniques have not changed from those used at December 31, 2022, and ultimately management determines fair value. See our 2022 Annual Report on Form 10-K, Item 8, Note 3, Fair Value Measurements, Page 137, for information on characteristics and valuation techniques used in determining fair value.

Fair Value Disclosures for Assets
The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at March 31, 2023, and December 31, 2022. We do not have any liabilities carried at fair value.
(Dollars in millions) Level 1 Level 2 Level 3 Total
At March 31, 2023
Fixed maturities, available for sale:
Corporate $ — $ 7,091 $ — $ 7,091
States, municipalities and political subdivisions — 4,749 — 4,749
Government-sponsored enterprises — 387 — 387
Commercial mortgage-backed — 225 — 225
United States government 195 — — 195
Foreign government — 31 — 31
Subtotal 195 12,483 — 12,678
Common equities 9,589 — — 9,589
Nonredeemable preferred equities — 378 — 378
Separate accounts taxable fixed maturities — 836 — 836
Top Hat savings plan mutual funds and common
equity (included in Other assets) 		64 — — 64
Total $ 9,848 $ 13,697 $ — $ 23,545
At December 31, 2022
Fixed maturities, available for sale:
Corporate $ — $ 6,869 $ — $ 6,869
States, municipalities and political subdivisions — 4,622 — 4,622
Government-sponsored enterprises — 183 — 183
Commercial mortgage-backed — 234 — 234
United States government 191 — — 191
Foreign government — 33 — 33
Subtotal 191 11,941 — 12,132
Common equities 9,454 — — 9,454
Nonredeemable preferred equities — 387 — 387
Separate accounts taxable fixed maturities — 815 — 815
Top Hat savings plan mutual funds and common
equity (included in Other assets) 		57 — — 57
Total $ 9,702 $ 13,143 $ — $ 22,845
We also held Level 1 cash and cash equivalents of $ 955 million and $ 1.264 billion at March 31, 2023, and December 31, 2022, respectively.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
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Fair Value Disclosures for Assets and Liabilities Not Carried at Fair Value
The disclosures below are presented to provide information about the effects of current market conditions on financial instruments that are not reported at fair value in our condensed consolidated financial statements.
This table summarizes the book value and principal amounts of our long-term debt:
(Dollars in millions) Book value Principal amount
Interest
rate 		Year of
issue 		March 31, December 31, March 31, December 31,
2023 2022 2023 2022
6.900 % 1998 Senior debentures, due 2028 $ 27 $ 27 $ 28 $ 28
6.920 % 2005 Senior debentures, due 2028 391 391 391 391
6.125 % 2004 Senior notes, due 2034 371 371 374 374
Total $ 789 $ 789 $ 793 $ 793
The following table shows fair values of our note payable and long-term debt:
(Dollars in millions) Level 1 Level 2 Level 3 Total
At March 31, 2023
Note payable $ — $ 50 $ — $ 50
6.900 % senior debentures, due 2028
— 30 — 30
6.920 % senior debentures, due 2028
— 435 — 435
6.125 % senior notes, due 2034
— 408 — 408
Total $ — $ 923 $ — $ 923
At December 31, 2022
Note payable $ — $ 50 $ — $ 50
6.900 % senior debentures, due 2028
— 29 — 29
6.920 % senior debentures, due 2028
— 418 — 418
6.125 % senior notes, due 2034
— 388 — 388
Total $ — $ 885 $ — $ 885
The following table shows the fair value of our life policy loans included in other invested assets and the fair values of our deferred annuities and structured settlements included in life policy and investment contract reserves:
(Dollars in millions) Level 1 Level 2 Level 3 Total
At March 31, 2023
Life policy loans $ — $ — $ 37 $ 37
Deferred annuities — — 608 608
Structured settlements — 144 — 144
Total $ — $ 144 $ 608 $ 752
At December 31, 2022
Life policy loans $ — $ — $ 37 $ 37
Deferred annuities — — 621 621
Structured settlements — 143 — 143
Total $ — $ 143 $ 621 $ 764
Cincinnati Financial Corporation First-Quarter 2023 10-Q
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Outstanding principal and interest for these life policy loans totaled $ 30 million and $ 31 million at March 31, 2023, and December 31, 2022, respectively.
Recorded reserves for the deferred annuities were $ 711 million and $ 734 million at March 31, 2023, and December 31, 2022, respectively. Recorded reserves for the structured settlements were $ 128 million and $ 129 million at March 31, 2023, and December 31, 2022, respectively.


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NOTE 4 – Property Casualty Loss and Loss Expenses
This table summarizes activity for our consolidated property casualty loss and loss expense reserves:
(Dollars in millions) Three months ended March 31,
2023 2022
Gross loss and loss expense reserves, beginning of period $ 8,336 $ 7,229
Less reinsurance recoverable 405 327
Net loss and loss expense reserves, beginning of period 7,931 6,902
Net incurred loss and loss expenses related to:
Current accident year 1,376 997
Prior accident years ( 59 ) ( 41 )
Total incurred 1,317 956
Net paid loss and loss expenses related to:
Current accident year 187 169
Prior accident years 859 721
Total paid 1,046 890
Net loss and loss expense reserves, end of period 8,202 6,968
Plus reinsurance recoverable 424 319
Gross loss and loss expense reserves, end of period $ 8,626 $ 7,287
We use actuarial methods, models and judgment to estimate, as of a financial statement date, the property casualty loss and loss expense reserves required to pay for and settle all outstanding insured claims, including incurred but not reported (IBNR) claims, as of that date. The actuarial estimate is subject to review and adjustment by an inter-departmental committee that includes actuarial, claims, underwriting, loss prevention and accounting management. This committee is familiar with relevant company and industry business, claims and underwriting trends, as well as general economic and legal trends that could affect future loss and loss expense payments. The amount we will actually have to pay for claims can be highly uncertain. This uncertainty, together with the size of our reserves, makes the loss and loss expense reserves our most significant estimate. The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $ 67 million at March 31, 2023, and $ 79 million at March 31, 2022, for certain life and health loss and loss expense reserves.

We experienced $ 59 million of favorable development on prior accident years, including $ 32 million of favorable development in commercial lines, $ 31 million of favorable development in personal lines and $ 9 million of favorable development in excess and surplus lines for the three months ended March 31, 2023. Within commercial lines, we recognized favorable reserve development of $ 16 million for the commercial property line and $ 15 million for the workers' compensation line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. Within personal lines, we recognized favorable reserve development of $ 27 million for the homeowner line.

We experienced $ 41 million of favorable development on prior accident years, including $ 18 million of favorable development in commercial lines, $ 34 million of favorable development in personal lines and $ 5 million of favorable development in excess and surplus lines for the three months ended March 31, 2022. Within commercial lines, we recognized favorable reserve development of $ 10 million for the workers' compensation line and $ 6 million for the commercial auto line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. Within personal lines, we recognized favorable reserve development of $ 31 million for the homeowner line.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
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NOTE 5 – Life Policy and Investment Contract Reserves
In the first quarter of 2023, we adopted ASU 2018-12 which resulted in changes to the life policy and investment contract reserves and the expansion of required disclosures. The below disclosures represent application of the updated guidance. See Note 1, Accounting Policies, for further discussion.

We establish the reserves for traditional life policies including term, whole life and other products based on certain cash flow assumptions including expected expenses, mortality, morbidity, withdrawal rates and timing of claim presentation. These assumptions are established based on our current expectations and are reviewed annually to determine any necessary updates. Assumptions are also updated on an interim basis if evidence suggests that they should be revised. We use both our own experience and industry experience, adjusted for historical trends, in arriving at our assumptions for expected mortality, morbidity and withdrawal rates. These reserves also include a discount rate assumption that is based on market value discount rates and is updated quarterly. Changes in the inputs, judgments and assumptions during the period and the related measurement impact on the liability are reflected in the below tables. There were no significant changes in the cash flow assumptions during the period.
We establish reserves for the company's deferred annuity, universal life and structured settlement policies equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals. Some of our universal life policies contain no-lapse guarantee provisions. For these policies, we establish a reserve in addition to the account balance, based on expected no-lapse guarantee benefits and expected policy assessments.

The following table summarizes our life policy and investment contract reserves and provides a reconciliation of the balances described in the below tables to those in the condensed consolidated balance sheets:
(Dollars in millions) March 31,
2023 		December 31,
2022
Life policy reserves:
Term $ 1,011 $ 961
Whole life 427 408
Other 94 94
Subtotal 1,532 1,463
Investment contract reserves:
Deferred annuities 711 734
Universal life 583 578
Structured settlements 128 129
Other 105 111
Subtotal 1,527 1,552
Total life policy and investment contract reserves $ 3,059 $ 3,015

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The table below shows the ASU 2018-12 adoption impacts to the life policy and investment contract reserves as of January 1, 2021 (transition date), pre-tax:
(Dollars in millions) Term Whole life Deferred annuity Universal life Other Total
At January 1, 2021
Balance, pre-adoption at December 31, 2020 $ 901 $ 363 $ 761 $ 567 $ 323 $ 2,915
Removal of shadow adjustments — — — — 13 13
Net premiums in excess of gross premiums 14 1 — — — 15
Remeasurement at market value discount rates 372 245 — — — 617
Balance, post-adoption at January 1, 2021 $ 1,287 $ 609 $ 761 $ 567 $ 336 $ 3,560

The table below shows the ASU 2018-12 adoption impacts to the life reinsurance recoverable asset as of January 1, 2021, pre-tax:
(Dollars in millions) Term Whole life Deferred annuity Universal life Other Total
At January 1, 2021
Balance, pre-adoption at December 31, 2020 $ 113 $ 26 $ — $ — $ 78 $ 217
Remeasurement at market value discount rates 29 18 — — — 47
Other adjustments 20 1 — 2 — 23
Balance, post-adoption at January 1, 2021 $ 162 $ 45 $ — $ 2 $ 78 $ 287

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

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

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The following table shows the balances and changes in the term and whole life policy reserves included in life policy and investment contract reserves:
(Dollars in millions) Three months ended March 31,
2023 2022
Term Whole life Term Whole life
Present value of expected net premiums:
Balance, beginning of period $ 1,643 $ 208 $ 1,801 $ 241
Beginning balance at original discount rate 1,708 217 1,503 201
Effect of changes in cash flow assumptions — — ( 4 ) —
Effect of actual variances from expected experience ( 3 ) 1 11 —
Adjusted beginning of period balance 1,705 218 1,510 201
Issuances 38 7 59 11
Interest accrual 18 2 15 2
Net premiums collected ( 46 ) ( 7 ) ( 42 ) ( 7 )
Ending balance at original discount rate 1,715 220 1,542 207
Effect of changes in discount rate assumptions ( 16 ) ( 3 ) 144 19
Balance, end of period 1,699 217 1,686 226
Present value of expected future policy benefits:
Balance, beginning of period 2,584 614 2,993 826
Beginning balance at original discount rate 2,692 607 2,425 577
Effect of changes in cash flow assumptions — — ( 4 ) —
Effect of actual variances from expected experience ( 2 ) 1 18 —
Adjusted beginning of period balance 2,690 608 2,439 577
Issuances 38 6 59 11
Interest accrual 30 8 27 7
Benefits paid ( 46 ) ( 8 ) ( 62 ) ( 9 )
Ending balance at original discount rate 2,712 614 2,463 586
Effect of changes in discount rate assumptions ( 21 ) 30 282 150
Balance, end of period 2,691 644 2,745 736
Net liability for future policy benefits:
Present value of expected future policy benefits less expected net premiums 992 427 1,059 510
Impact of flooring at cohort level 19 — 20 —
Net life policy reserves 1,011 427 1,079 510
Less reinsurance recoverable at original discount rate ( 96 ) ( 25 ) ( 100 ) ( 27 )
Less effect of discount rate assumption changes on reinsurance recoverable ( 10 ) ( 6 ) ( 14 ) ( 11 )
Net life policy reserves, after reinsurance recoverable $ 905 $ 396 $ 965 $ 472
Weighted-average duration of the net life policy reserves 12 16 12 18

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

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The following table shows the amount of undiscounted and discounted expected future benefit payments and expected gross premiums for our term and whole life policies:
(Dollars in millions) At March 31,
2023 2022
Undiscounted Discounted Undiscounted Discounted
Term
Expected future benefit payments $ 4,696 $ 2,691 $ 4,128 $ 2,745
Expected future gross premiums 4,470 2,674 4,000 2,754
Whole life
Expected future benefit payments $ 1,586 $ 644 $ 1,511 $ 736
Expected future gross premiums 618 384 580 400

The following table shows the amount of revenue and interest recognized in the condensed consolidated statements of income related to our term and whole life policies:
(Dollars in millions) Three months ended March 31,
2023 2022
Gross premiums
Term $ 73 $ 69
Whole life 12 12
Total $ 85 $ 81
Interest accretion
Term $ 12 $ 12
Whole life 6 5
Total $ 18 $ 17

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

The following table shows the weighted-average interest rate for our term and whole life products :
At March 31,
2023 2022
Term
Interest accretion rate 5.32 % 5.37 %
Current discount rate 4.81 3.40
Whole life
Interest accretion rate 5.94 % 5.98 %
Current discount rate 5.06 3.77

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

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The following table shows the balances and changes in policyholders' account balances included in investment contract reserves:
(Dollars in millions) Three months ended March 31,
2023 2022
Deferred annuity Universal life Deferred annuity Universal life
Balance, beginning of period $ 734 $ 457 $ 763 $ 454
Premiums received 10 11 6 11
Policy charges — ( 10 ) — ( 10 )
Surrenders and withdrawals ( 36 ) ( 3 ) ( 12 ) ( 3 )
Benefit payments ( 3 ) ( 2 ) ( 6 ) ( 1 )
Interest credited 6 5 5 5
Balance, end of period $ 711 $ 458 $ 756 $ 456
Weighted average crediting rate 3.36 % 4.26 % 2.95 % 4.25 %
Net amount at risk $ — $ 4,064 $ — $ 4,172
Cash surrender value 706 424 752 421

The net amount at risk above represents the guaranteed benefit amount in excess of the current account balances.

The following table shows the balance of account values by range of guaranteed minimum crediting rates, in basis points, and the related range of the difference between rates being credited to policyholders and the respective guaranteed minimums for our deferred annuity and universal life contracts:
(Dollars in millions) At guaranteed minimum 1 to 50 basis points above 51-150 basis points above Greater than 150 basis points Total
At March 31, 2023
Deferred annuity
1.00-3.00% $ 9 $ 423 $ 17 $ 212 661
3.01-4.00% 50 — — — 50
Total $ 59 $ 423 $ 17 $ 212 $ 711
Universal life
1.00-3.00% $ 60 $ 47 $ 9 $ 2 $ 118
3.01-4.00% 53 — — — 53
Greater than 4.00% 287 — — — 287
Total $ 400 $ 47 $ 9 $ 2 $ 458
At March 31, 2022
Deferred annuity
1.00-3.00% $ 479 $ — $ 177 $ 50 $ 706
3.01-4.00% 50 — — — 50
Total $ 529 $ — $ 177 $ 50 $ 756
Universal life
1.00-3.00% $ 61 $ 44 $ 7 $ 1 $ 113
3.01-4.00% 51 — — — 51
Greater than 4.00% 292 — — — 292
Total $ 404 $ 44 $ 7 $ 1 $ 456

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The following table shows the balances and changes i n the other additional liability related to the no-lapse guarantees contained within our universal life contracts:
(Dollars in millions) Three months ended March 31,
2023 2022
Balance, beginning of period $ 121 $ 133
Balance, beginning of period before shadow reserve adjustments 123 131
Effect of changes in cash flow assumptions — —
Effect of actual variances from expected experience ( 1 ) 3
Adjusted beginning of period balance 122 134
Interest accrual 1 1
Excess death benefits — ( 8 )
Attributed assessments 3 3
Effect of changes in interest rate assumptions 1 ( 3 )
Balance, end of period before shadow reserve adjustments 127 127
Shadow reserve adjustments ( 2 ) —
Balance, end of period 125 127
Less reinsurance recoverable, end of period 6 5
Net other additional liability, after reinsurance recoverable $ 131 $ 132
Weighted-average duration of the other additional liability 34 35

The following table shows balances and changes in separate account balances during the period:
(Dollars in millions) Three months ended March 31,
2023 2022
Balance, beginning of period $ 892 $ 959
Interest credited before policy charges 10 10
Change in unrealized gains and losses impacting separate account liabilities — ( 52 )
Benefit payments ( 2 ) ( 10 )
Other ( 1 ) ( 4 )
Balance, end of period $ 899 $ 903
Cash surrender value $ 896 $ 869
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NOTE 6 – Deferred Policy Acquisition Costs
Expenses directly related to successfully acquired insurance policies – primarily commissions, premium taxes and underwriting costs – are deferred and amortized over the terms of the policies. We update our acquisition cost assumptions periodically to reflect actual experience. For property casualty, we evaluate the costs for recoverability. The adoption of ASU 2018-12 on January 1, 2023 resulted in a simplified amortization of life deferred acquisition costs and the removal of shadow deferred acquisition costs. See Note 1, Accounting Policies, for further discussion. The table below shows the deferred policy acquisition costs and asset reconciliation.
(Dollars in millions) Three months ended March 31,
2023 2022
Property casualty:
Deferred policy acquisition costs asset, beginning of period $ 682 $ 602
Capitalized deferred policy acquisition costs 372 364
Amortized deferred policy acquisition costs ( 340 ) ( 301 )
Deferred policy acquisition costs asset, end of period $ 714 $ 665
Life:
Deferred policy acquisition costs asset, beginning of period $ 331 $ 314
Capitalized deferred policy acquisition costs 11 12
Amortized deferred policy acquisition costs ( 8 ) ( 7 )
Deferred policy acquisition costs asset, end of period $ 334 $ 319
Consolidated:
Deferred policy acquisition costs asset, beginning of period $ 1,013 $ 916
Capitalized deferred policy acquisition costs 383 376
Amortized deferred policy acquisition costs ( 348 ) ( 308 )
Deferred policy acquisition costs asset, end of period $ 1,048 $ 984

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

The table below shows the life deferred policy acquisition costs asset by product:
(Dollars in millions)
Three months ended March 31, 2023 Term Whole life Deferred annuity Universal life Total
Balance, beginning of period $ 228 $ 43 $ 7 $ 53 $ 331
Capitalized deferred policy acquisition costs 9 2 — — 11
Amortized deferred policy acquisition costs ( 6 ) ( 1 ) — ( 1 ) ( 8 )
Balance, end of period $ 231 $ 44 $ 7 $ 52 $ 334
Three months ended March 31, 2022
Balance, beginning of period $ 215 $ 38 $ 7 $ 54 $ 314
Capitalized deferred policy acquisition costs 10 2 — — $ 12
Amortized deferred policy acquisition costs ( 5 ) ( 1 ) — ( 1 ) $ ( 7 )
Balance, end of period $ 220 $ 39 $ 7 $ 53 $ 319

No premium deficiencies were recorded in the condensed consolidated statements of income, as the sum of the anticipated loss and loss expenses, policyholder dividends and unamortized deferred acquisition expenses did not exceed the related unearned premiums and anticipated investment income.
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NOTE 7 – Accumulated Other Comprehensive Income
The adoption of ASU 2018-12 on January 1, 2023 resulted in restatement of certain amounts below. See Note 1, Accounting Policies, for further discussion. Accumulated other comprehensive income (AOCI) includes changes in unrealized gains and losses on investments, changes in pension obligations and changes in life policy reserves, reinsurance recoverable and other as follows:
(Dollars in millions) Three months ended March 31,
2023 2022
Before tax Income tax Net Before tax Income tax Net
Investments:
AOCI, beginning of period $ ( 847 ) $ ( 182 ) $ ( 665 ) $ 792 $ 165 $ 627
OCI before investment gains and losses, net, recognized in net income 163 35 128 ( 743 ) ( 157 ) ( 586 )
Investment gains and losses, net, recognized in net income — — — ( 3 ) — ( 3 )
OCI 163 35 128 ( 746 ) ( 157 ) ( 589 )
AOCI, end of period $ ( 684 ) $ ( 147 ) $ ( 537 ) $ 46 $ 8 $ 38
Pension obligations:
AOCI, beginning of period $ 36 $ 9 $ 27 $ 27 $ 7 $ 20
OCI excluding amortization recognized in net income ( 5 ) ( 1 ) ( 4 ) — — —
Amortization recognized in net income ( 1 ) — ( 1 ) — — —
OCI ( 6 ) ( 1 ) ( 5 ) — — —
AOCI, end of period $ 30 $ 8 $ 22 $ 27 $ 7 $ 20
Life policy reserves, reinsurance recoverable and other:
AOCI, beginning of period $ 29 $ 5 $ 24 $ 1 $ — $ 1
Cumulative effect of change in accounting for long duration insurance contracts — — — ( 445 ) ( 93 ) ( 352 )
Adjusted AOCI, beginning of period 29 5 24 ( 444 ) ( 93 ) ( 351 )
OCI before investment gains and losses, net, recognized in net income ( 45 ) ( 9 ) ( 36 ) 196 41 155
Investment gains and losses, net, recognized in net income — — — — — —
OCI ( 45 ) ( 9 ) ( 36 ) 196 41 155
AOCI, end of period $ ( 16 ) $ ( 4 ) $ ( 12 ) $ ( 248 ) $ ( 52 ) $ ( 196 )
Summary of AOCI:
AOCI, beginning of period $ ( 782 ) $ ( 168 ) $ ( 614 ) $ 820 $ 172 $ 648
Cumulative effect of change in accounting for long duration insurance contracts — — — ( 445 ) ( 93 ) ( 352 )
Adjusted AOCI, beginning of period ( 782 ) ( 168 ) ( 614 ) 375 79 296
Investments OCI 163 35 128 ( 746 ) ( 157 ) ( 589 )
Pension obligations OCI ( 6 ) ( 1 ) ( 5 ) — — —
Life policy reserves, reinsurance recoverable and other OCI ( 45 ) ( 9 ) ( 36 ) 196 41 155
Total OCI 112 25 87 ( 550 ) ( 116 ) ( 434 )
AOCI, end of period $ ( 670 ) $ ( 143 ) $ ( 527 ) $ ( 175 ) $ ( 37 ) $ ( 138 )

Investment gains and losses, net, and other investment gains and losses, net, are recorded in the investment gains and losses, net, line item in the condensed consolidated statements of income. Amortization on pension obligations is recorded in the insurance losses and contract holders' benefits and underwriting, acquisition and insurance expenses line items in the condensed consolidated statements of income.
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NOTE 8 – Reinsurance
Primary components of our property casualty reinsurance assumed operations include involuntary and voluntary assumed as well as contracts from our reinsurance assumed operations, known as Cincinnati Re. Primary components of our ceded reinsurance include a property per risk treaty, property excess treaty, casualty per occurrence treaty, casualty excess treaty, property catastrophe treaty and retrocessions on our reinsurance assumed operations. Management’s decisions about the appropriate level of risk retention are affected by various factors, including changes in our underwriting practices, capacity to retain risks and reinsurance market conditions.

The table below summarizes our consolidated property casualty insurance net written premiums, earned premiums and incurred loss and loss expenses:
(Dollars in millions) Three months ended March 31,
2023 2022
Direct written premiums $ 1,859 $ 1,703
Assumed written premiums 244 263
Ceded written premiums ( 84 ) ( 67 )
Net written premiums $ 2,019 $ 1,899
Direct earned premiums $ 1,760 $ 1,561
Assumed earned premiums 159 121
Ceded earned premiums ( 78 ) ( 64 )
Earned premiums $ 1,841 $ 1,618
Direct incurred loss and loss expenses $ 1,299 $ 895
Assumed incurred loss and loss expenses 76 73
Ceded incurred loss and loss expenses ( 58 ) ( 12 )
Incurred loss and loss expenses $ 1,317 $ 956

Our life insurance company purchases reinsurance for protection of a portion of the risks that are written. Primary components of our life reinsurance program include individual mortality coverage, aggregate catastrophe and accidental death coverage in excess of certain deductibles.

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The table below summarizes our consolidated life insurance earned premiums and contract holders' benefits incurred:
(Dollars in millions) Three months ended March 31,
2023 2022
Direct earned premiums $ 96 $ 93
Ceded earned premiums ( 19 ) ( 18 )
Earned premiums $ 77 $ 75
Direct contract holders' benefits incurred 97 103
Ceded contract holders' benefits incurred ( 16 ) ( 27 )
Contract holders' benefits incurred $ 81 $ 76
The ceded benefits incurred can vary depending on the type of life insurance policy held and the year the policy was issued.

The allowance for uncollectible property casualty premiums was $ 13 million at both March 31, 2023, and December 31, 2022. The allowances for credit losses on other premiums receivable and reinsurance recoverable assets were immaterial at March 31, 2023, and December 31, 2022.
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NOTE 9 – Income Taxes
The differences between the 21 % statutory federal income tax rate and our effective income tax rate were as follows:
(Dollars in millions) Three months ended March 31,
2023 2022
Tax at statutory rate: $ 56 21.0 % $ ( 74 ) 21.0 %
Increase (decrease) resulting from:
Tax-exempt income from municipal bonds ( 5 ) ( 1.9 ) ( 5 ) 1.4
Dividend received exclusion ( 5 ) ( 1.9 ) ( 5 ) 1.4
Other ( 3 ) ( 1.2 ) ( 1 ) 0.4
Provision (benefit) for income taxes $ 43 16.0 % $ ( 85 ) 24.2 %
The provision (benefit) for federal income taxes is based upon filing a consolidated income tax return for the company and its domestic subsidiaries.

We continue to believe that after considering all positive and negative evidence of taxable income in the carryback and carryforward periods as permitted by law, it is more likely than not that all of the deferred tax assets on our U.S. domestic operations will be realized. As a result, we have no valuation allowance for our U.S. domestic operations at March 31, 2023, and December 31, 2022. As more fully discussed below, we do carry a valuation allowance on the deferred tax assets related to Cincinnati Global Underwriting Ltd. SM (Cincinnati Global).

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

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

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

Cincinnati Financial Corporation First-Quarter 2023 10-Q
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NOTE 10 – Net Income (Loss) Per Common Share
Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share are computed based on the weighted average number of common and dilutive potential common shares outstanding using the treasury stock method. The table shows calculations for basic and diluted earnings per share:
(In millions, except per share data) Three months ended March 31,
2023 2022
Numerator:
Net income (loss)—basic and diluted
$ 225 $ ( 266 )
Denominator:
Basic weighted-average common shares outstanding 157.2 160.4
Effect of share-based awards:
Stock options 0.8 —
Nonvested shares 0.5 —
Diluted weighted-average shares 158.5 160.4
Earnings (loss) per share:
Basic $ 1.43 $ ( 1.66 )
Diluted $ 1.42 $ ( 1.66 )
Number of anti-dilutive share-based awards 1.0 2.3

The above table shows the number of anti-dilutive share-based awards for the three months ended March 31, 2023 and 2022. In accordance with Accounting Standards Codification 260, Earnings per Share , the assumed exercise of share-based awards was excluded from the computation of diluted loss per share for the three months ended March 31, 2022, because their exercise would have anti-dilutive effects. See our 2022 Annual Report on Form 10-K, Item 8, Note 17, Share-Based Associate Compensation Plans, Page 170, for information about share-based awards.

NOTE 11 – Employee Retirement Benefits
The following summarizes the components of net periodic benefit for our qualified and supplemental pension plans:
(Dollars in millions) Three months ended March 31,
2023 2022
Service cost $ 1 $ 2
Non-service (benefit) costs:
Interest cost 3 3
Expected return on plan assets ( 5 ) ( 6 )
Amortization of actuarial loss and prior service cost ( 1 ) —
Other ( 5 ) —
Total non-service benefit ( 8 ) ( 3 )
Net periodic benefit $ ( 7 ) $ ( 1 )

See our 2022 Annual Report on Form 10-K, Item 8, Note 13, Employee Retirement Benefits, Page 163, for information on our retirement benefits. The net periodic benefit is allocated in the same proportion primarily to the underwriting, acquisition and insurance expenses line item with the remainder allocated to the insurance losses and contract holders' benefits line item on the condensed consolidated statements of income for both 2023 and 2022.

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

We m ade no con tributions to our qualified pension plan during the first three months of 2023.
Cincinnati Financial Corporation First-Quarter 2023 10-Q
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NOTE 12 – Commitments and Contingent Liabilities
The company, through its insurance subsidiaries, is involved in claims litigation arising in the ordinary course of conducting its business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The company accounts for such activity through the establishment of unpaid loss and loss expense reserves. Subject to the uncertainties discussed in Note 4, Property Casualty Loss and Loss Expenses, and in the discussion in the balance of this Note, we believe that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses, costs of defense, and reinsurance recoveries, is immaterial to our consolidated financial position, results of operations and cash flows.

Beginning in April 2020, like many companies in the property casualty insurance industry, the company’s property casualty subsidiaries, were named as defendants in lawsuits seeking insurance coverage under commercial property insurance policies issued by the company for alleged losses resulting from the shutdown or suspension of their businesses due to the COVID-19 pandemic. Although the allegations vary, the plaintiffs generally seek a declaration of insurance coverage, damages for breach of contract in unspecified amounts for claim denials, interest and attorney fees. Some of the lawsuits also allege that the insurance claims were denied in bad faith or otherwise in violation of state laws and seek extra-contractual or punitive damages.

The company denies the allegations in these lawsuits and intends to continue to vigorously defend the lawsuits. The company maintains that it has no coverage obligations with respect to these lawsuits for business income allegedly lost by the plaintiffs due to the COVID-19 pandemic based on the terms of the applicable insurance policies. Although the policy terms vary, in general, the claims at issue in these lawsuits were denied because the policyholder identified no direct physical loss or damage to property at the insured premises, and the governmental orders that led to the complete or partial shutdown of the business were not due to the existence of any direct physical loss or damage to property in the immediate vicinity of the insured premises and did not prohibit access to the insured premises, as required by the terms of the insurance policies. Depending on the individual policy, additional policy terms and conditions may also prohibit coverage, such as exclusions for pollutants, ordinance or law, loss of use, and acts or decisions. The company’s standard commercial property insurance policies generally did not contain a specific virus exclusion.

In addition to the inherent difficulty in predicting litigation outcomes, the COVID-19 pandemic business income coverage lawsuits present a number of uncertainties and contingencies that are not yet known, including how many policyholders will ultimately file claims, the number of lawsuits that will be filed, the extent to which any class may be certified, and the size and scope of any such classes. The legal theories advanced by plaintiffs vary by case as do the state laws that govern the policy interpretation. These lawsuits are at various stages of litigation, including several that continue to be amended; many that have been dismissed; several that may be refiled; and others that have been dismissed by trial courts and appealed. While appellate decisions issued to date generally have been favorable for the insurance industry and the company, many remain to be decided. In some jurisdictions, many cases have been stayed pending appellate decisions in their state or federal circuit. Accordingly, little discovery has occurred on pending cases. In addition, business income calculations depend upon a wide range of factors that are particular to the circumstances of each individual policyholder and, here, virtually none of the plaintiffs have submitted proofs of loss or otherwise quantified or factually supported any allegedly covered loss. Moreover, the company’s experience shows that demands for damages often bear little relation to a reasonable estimate of potential loss. Accordingly, management cannot now reasonably estimate the possible loss or range of loss, if any. Nonetheless, given the number of claims and potential claims, the indeterminate amounts sought, and the inherent unpredictability of litigation, it is possible that adverse outcomes, if any, in the aggregate could have a material adverse effect on the company’s consolidated financial position, results of operations and cash flows.

The company and its subsidiaries also are occasionally involved in other legal and regulatory proceedings, some of which assert claims for substantial amounts. These actions include, among others, putative class actions seeking certification of state or national classes. Such proceedings have alleged, for example, improper depreciation of labor costs in repair estimates. The company’s insurance subsidiaries also are occasionally parties to individual actions in which extra-contractual damages, punitive damages or penalties are sought, such as claims alleging bad faith handling of insurance claims or writing unauthorized coverage or claims alleging discrimination by former or current associates.

Cincinnati Financial Corporation First-Quarter 2023 10-Q
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On a quarterly basis, we review these outstanding matters. Under current accounting guidance, we establish accruals when it is probable that a loss has been incurred and we can reasonably estimate its potential exposure. The company accounts for such probable and estimable losses, if any, through the establishment of legal expense reserves. Based on our quarterly review, we believe that our accruals for probable and estimable losses are reasonable and that the amounts accrued do not have a material effect on our consolidated financial position, results of operations and cash flows. However, if any one or more of these matters results in a judgment against us or settlement for an amount that is significantly greater than the amount accrued, the resulting liability could have a material effect on the company’s consolidated financial position, results of operations and cash flows. Based on our most recent review, our estimate for any other matters for which the risk of loss is not probable, but more than remote, is immaterial.

NOTE 13 – Segment Information
We operate primarily in two industries, property casualty insurance and life insurance. Our chief operating decision maker regularly reviews our reporting segments to make decisions about allocating resources and assessing performance. Our reporting segments are:
• Commercial lines insurance
• Personal lines insurance
• Excess and surplus lines insurance
• Life insurance
• Investments

We report as Other the noninvestment operations of the parent company and its noninsurer subsidiary, CFC Investment Company. We also report as Other the underwriting results of Cincinnati Re and Cincinnati Global. See our 2022 Annual Report on Form 10-K, Item 8, Note 18, Segment Information, Page 173, for a description of revenue, income or loss before income taxes and identifiable assets for each of the five segments.

Cincinnati Financial Corporation First-Quarter 2023 10-Q
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Segment information is summarized in the following table:
(Dollars in millions) Three months ended March 31,
2023 2022
Revenues:
Commercial lines insurance
Commercial casualty $ 377 $ 336
Commercial property 299 274
Commercial auto 213 205
Workers' compensation 74 67
Other commercial 93 80
Commercial lines insurance premiums 1,056 962
Fee revenues 1 1
Total commercial lines insurance 1,057 963
Personal lines insurance
Personal auto 166 152
Homeowner 232 195
Other personal 66 55
Personal lines insurance premiums 464 402
Fee revenues 1 1
Total personal lines insurance 465 403
Excess and surplus lines insurance 127 112
Fee revenues — 1
Total excess and surplus lines insurance 127 113
Life insurance premiums 77 75
Fee revenues 2 1
Total life insurance 79 76
Investments
Investment income, net of expenses 210 185
Investment gains and losses, net 106 ( 666 )
Total investment revenue 316 ( 481 )
Other
Premiums 194 142
Other 3 2
Total other revenues 197 144
Total revenues $ 2,241 $ 1,218
Income (loss) before income taxes:
Insurance underwriting results
Commercial lines insurance $ ( 2 ) $ 76
Personal lines insurance ( 57 ) 65
Excess and surplus lines insurance 13 16
Life insurance 8 7
Investments 286 ( 508 )
Other 20 ( 7 )
Total income (loss) before income taxes $ 268 $ ( 351 )
Identifiable assets: March 31,
2023 		December 31,
2022
Property casualty insurance $ 5,229 $ 5,178
Life insurance 1,529 1,518
Investments 22,805 22,133
Other 911 903
Total $ 30,474 $ 29,732
Cincinnati Financial Corporation First-Quarter 2023 10-Q
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Item 2.    Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion highlights significant factors influencing the condensed consolidated results of operations and financial position of Cincinnati Financial Corporation. It should be read in conjunction with the consolidated financial statements and related notes included in our 2022 Annual Report on Form 10-K. Unless otherwise noted, the industry data is prepared by A.M. Best Co., a leading insurance industry statistical, analytical and financial strength rating organization. Information from A.M. Best is presented on a statutory basis for insurance company regulation in the United States of America. When we provide our results on a comparable statutory basis, we label it as such; all other company data is presented in accordance with accounting principles generally accepted in the United States of America (GAAP).
As discussed in Item 1, Note 1, Accounting Policies, Page 8, effective January 1, 2023, we adopted ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. We adjusted applicable financial statements. Related financial data shown in Management's Discussion and Analysis of Financial Condition and Results of Operations also have been adjusted.

We present per share data on a diluted basis unless otherwise noted, adjusting those amounts for all stock splits and dividends. Dollar amounts are rounded to millions; calculations of percent changes are based on dollar amounts rounded to the nearest million. Certain percentage changes are identified as not meaningful (nm).
SAFE HARBOR STATEMENT
This is our “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2022 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 32.
Factors that could cause or contribute to such differences include, but are not limited to:
• Effects of the COVID-19 pandemic that could affect results for reasons such as:
◦ Securities market disruption or volatility and related effects such as decreased economic activity and continued supply chain disruptions that affect our investment portfolio and book value
◦ An unusually high level of claims in our insurance or reinsurance operations that increase litigation-related expenses
◦ An unusually high level of insurance losses, including risk of legislation or court decisions extending business interruption insurance in commercial property coverage forms to cover claims for pure economic loss related to the COVID-19 pandemic
◦ Decreased premium revenue and cash flow from disruption to our distribution channel of independent agents, consumer self-isolation, travel limitations, business restrictions and decreased economic activity
◦ Inability of our workforce, agencies or vendors to perform necessary business functions
• Ongoing developments concerning business interruption insurance claims and litigation related to the COVID-19 pandemic that affect our estimates of losses and loss adjustment expenses or our ability to reasonably estimate such losses, such as:
◦ The continuing duration of the pandemic and governmental actions to limit the spread of the virus that may produce additional economic losses
◦ The number of policyholders that will ultimately submit claims or file lawsuits
◦ The lack of submitted proofs of loss for allegedly covered claims
◦ Judicial rulings in similar litigation involving other companies in the insurance industry
◦ Differences in state laws and developing case law
◦ Litigation trends, including varying legal theories advanced by policyholders
◦ Whether and to what degree any class of policyholders may be certified
◦ The inherent unpredictability of litigation
• Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns (whether as a result of global climate change or otherwise), environmental events, war or political unrest, terrorism incidents, cyberattacks, civil unrest or other causes
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• Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance, due to inflationary trends or other causes
• Inadequate estimates or assumptions, or reliance on third-party data used for critical accounting estimates
• Declines in overall stock market values negatively affecting our equity portfolio and book value
• Interest rate fluctuations or other factors that could significantly affect:
• Our ability to generate growth in investment income
• Values of our fixed-maturity investments, including accounts in which we hold bank-owned life insurance contract assets
• Our traditional life policy reserves
• Domestic and global events, such as Russia's invasion of Ukraine and recent disruptions in the banking and financial services industry, resulting in capital market or credit market uncertainty, followed by prolonged periods of economic instability or recession, that lead to:
◦ Significant or prolonged decline in the fair value of a particular security or group of securities and impairment of the asset(s)
◦ Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities
◦ Significant rise in losses from surety or director and officer policies written for financial institutions or other insured entities
• Our inability to manage Cincinnati Global or other subsidiaries to produce related business opportunities and growth prospects for our ongoing operations
• Recession, prolonged elevated inflation or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies
• Ineffective information technology systems or discontinuing to develop and implement improvements in technology may impact our success and profitability
• Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our or our agents' ability to conduct business; disrupt our relationships with agents, policyholders and others; cause reputational damage, mitigation expenses and data loss and expose us to liability under federal and state laws
• Difficulties with our operations and technology that may negatively impact our ability to conduct business, including cloud-based data information storage, data security, cyberattacks, remote working capabilities, and/or outsourcing relationships and third-party operations and data security
• Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products
• Delays, inadequate data developed internally or from third parties, or performance inadequacies from ongoing development and implementation of underwriting and pricing methods, including telematics and other usage-based insurance methods, or technology projects and enhancements expected to increase our pricing accuracy, underwriting profit and competitiveness
• Intense competition, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which we operate, could harm our ability to maintain or increase our business volumes and profitability
• Changing consumer insurance-buying habits and consolidation of independent insurance agencies could alter our competitive advantages
• Inability to obtain adequate ceded reinsurance on acceptable terms, amount of reinsurance coverage purchased, financial strength of reinsurers and the potential for nonpayment or delay in payment by reinsurers
• Inability to defer policy acquisition costs for any business segment if pricing and loss trends would lead management to conclude that segment could not achieve sustainable profitability
• Inability of our subsidiaries to pay dividends consistent with current or past levels
• Events or conditions that could weaken or harm our relationships with our independent agencies and hamper opportunities to add new agencies, resulting in limitations on our opportunities for growth, such as:
◦ Downgrades of our financial strength ratings
◦ Concerns that doing business with us is too difficult
◦ Perceptions that our level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace
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◦ Inability or unwillingness to nimbly develop and introduce coverage product updates and innovations that our competitors offer and consumers expect to find in the marketplace
• Actions of insurance departments, state attorneys general or other regulatory agencies, including a change to a federal system of regulation from a state-based system, that:
◦ Impose new obligations on us that increase our expenses or change the assumptions underlying our critical accounting estimates
◦ Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations
◦ Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business
◦ Add assessments for guaranty funds, other insurance‑related assessments or mandatory reinsurance arrangements; or that impair our ability to recover such assessments through future surcharges or other rate changes
◦ Increase our provision for federal income taxes due to changes in tax law
◦ Increase our other expenses
◦ Limit our ability to set fair, adequate and reasonable rates
◦ Place us at a disadvantage in the marketplace
◦ Restrict our ability to execute our business model, including the way we compensate agents
• Adverse outcomes from litigation or administrative proceedings, including effects of social inflation and third-party litigation funding on the size of litigation awards
• Events or actions, including unauthorized intentional circumvention of controls, that reduce our future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002
• Unforeseen departure of certain executive officers or other key employees due to retirement, health or other causes that could interrupt progress toward important strategic goals or diminish the effectiveness of certain longstanding relationships with insurance agents and others
• Our inability, or the inability of our independent agents, to attract and retain personnel in a competitive labor market, impacting the customer experience and altering our competitive advantages
• Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location or work effectively in a remote environment
Further, our insurance businesses are subject to the effects of changing social, global, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. We also are subject to public and regulatory initiatives that can affect the market value for our common stock, such as measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.

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CORPORATE FINANCIAL HIGHLIGHTS
Net Income and Comprehensive Income Data
(Dollars in millions, except per share data) Three months ended March 31,
2023 2022 % Change
Earned premiums $ 1,918 $ 1,693 13
Investment income, net of expenses (pretax) 210 185 14
Investment gains and losses, net (pretax) 106 (666) nm
Total revenues 2,241 1,218 84
Net income (loss) 225 (266) nm
Comprehensive income (loss) 312 (700) nm
Net income (loss) per share—diluted 1.42 (1.66) nm
Cash dividends declared per share 0.75 0.69 9
Diluted weighted average shares outstanding 158.5 160.4 (1)

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

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

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

The first-quarter 2023 decrease in property casualty underwriting income also included higher insured loss experience before catastrophe effects, partly from elevated paid losses reflecting economic or other forms of inflation that are increasing our uncertainty regarding ultimate losses. Until longer-term paid loss cost trends become more clear, we intend to remain prudent in reserving for estimated ultimate losses. As a result, incurred losses for the first three months of 2023 for several lines of business were higher than in prior periods and are discussed in Financial Results by property casualty insurance segment.

Performance by segment is discussed below in Financial Results. As discussed in our 2022 Annual Report on Form 10-K, Item 7, Executive Summary, Page 48, there are several reasons why our performance during 2023 may be below our long-term targets.
The board of directors is committed to rewarding shareholders directly through cash dividends and through share repurchase authorizations. Through 2022, the company had increased the annual cash dividend rate for 62 consecutive years, a record we believe is matched by only seven other U.S. publicly traded companies. In January 2023, the board of directors increased the regular quarterly dividend to 75 cents per share, setting the stage for our 63 rd consecutive year of increasing cash dividends. During the first three months of 2023, cash dividends declared by the company increased 9% compared with the same period of 2022. Our board regularly evaluates relevant factors in decisions related to dividends and share repurchases. The 2023 dividend increase reflected our strong operating performance and signaled management's and the board's positive outlook and confidence in our outstanding capital, liquidity and financial flexibility.

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Balance Sheet Data and Performance Measures
(Dollars in millions, except share data) At March 31, At December 31,
2023 2022
Total investments $ 23,123 $ 22,425
Total assets 30,474 29,732
Short-term debt 50 50
Long-term debt 789 789
Shareholders' equity 10,741 10,562
Book value per share 68.33 67.21
Debt-to-total-capital ratio 7.2 % 7.4 %
Total assets at March 31, 2023, increased 2% compared with year-end 2022, and included a 3% increase in total investments that reflected net purchases and higher fair values for many securities in our portfolio. Shareholders' equity increased 2% and book value per share also increased 2% during the first three months of 2023. Our debt-to-total-capital ratio (capital is the sum of debt plus shareholders' equity) decreased compared with year-end 2022.

Our value creation ratio is our primary performance metric. That ratio was 3.1% for the first three months of 2023, and was more than the same period in 2022 primarily due to a higher amount in overall net gains from our investment portfolio. Book value per share increased $1.12 during the first three months of 2023 and contributed 2.0 percentage points to the value creation ratio, while dividends declared at $0.75 per share contributed positive 1.1 points. Value creation ratios by major components and in total, along with calculations from per-share amounts, are shown in the tables below.
Three months ended March 31,
2023 2022
Value creation ratio major components:
Net income before investment gains 1.3 % 1.9 %
Change in fixed-maturity securities, realized and unrealized gains 1.2 (4.5)
Change in equity securities, investment gains 0.7 (4.1)
Other (0.1) (0.2)
Value creation ratio 3.1 % (6.9) %
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(Dollars are per share) Three months ended March 31,
2023 2022
Book value change per share
Book value as originally December 31, 2022 $ 67.01
Cumulative effect of change in accounting for long-duration
insurance contracts, net of tax 		0.20
Book value as adjusted December 31, 2022 $ 67.21
Value creation ratio:
End of period book value*- as originally reported $ 68.33 $ 75.43
Less beginning of period book value - as originally reported 67.01 81.72
Change in book value - as originally reported 1.32 (6.29)
Dividend declared to shareholders 0.75 0.69
Total value creation $ 2.07 $ (5.60)
Value creation ratio from change in book value** 2.0 % (7.7) %
Value creation ratio from dividends declared to shareholders*** 1.1 0.8
Value creation ratio 3.1 % (6.9) %
* Book value per share is calculated by dividing end of period total shareholders' equity by end of period shares outstanding
** Change in book value divided by the beginning of period book value
*** Dividend declared to shareholders divided by beginning of period book value

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

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

• Premium growth – We believe our agency relationships and initiatives can lead to a property casualty written premium growth rate over any five-year period that exceeds the industry average. For the first three months of 2023, our consolidated property casualty net written premium year-over-year growth was 6%. As of March 2023, A.M. Best projected the industry's full-year 2023 written premium growth at approximately 8%. For the five-year period 2018 through 2022, our growth rate exceeded that of the industry. The industry's growth rate excludes its mortgage and financial guaranty lines of business.
• Combined ratio – We believe our underwriting philosophy and initiatives can generate a GAAP combined ratio over any five-year period that is consistently within the range of 95% to 100%. For the first three months of 2023, our GAAP combined ratio was 100.7%, including 13.8 percentage points of current accident year catastrophe losses partially offset by 3.2 percentage points of favorable loss reserve development on prior accident years. Our statutory combined ratio was 99.6% for the first three months of 2023. As of March 2023, A.M. Best projected the industry's full-year 2023 statutory combined ratio at approximately 102%, including approximately 6 percentage points of catastrophe losses and a favorable effect of approximately 1 percentage point of loss reserve development on prior accident years. The industry's ratio again excludes its mortgage and financial guaranty lines of business.
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• Investment contribution – We believe our investment philosophy and initiatives can drive investment income growth and lead to a total return on our equity investment portfolio over a five-year period that exceeds the five-year return of the Standard & Poor's 500 Index. For the first three months of 2023, pretax investment income was $210 million, up 14% compared with the same period in 2022. We believe our investment portfolio mix provides an appropriate balance of income stability and growth with capital appreciation potential.

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

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

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

At April 26, 2023, our insurance subsidiaries continued to be highly rated.
Insurer Financial Strength Ratings
Rating
agency 		Standard market property casualty insurance subsidiaries Life insurance
subsidiary 		Excess and surplus lines insurance subsidiary Outlook
Rating
tier 		Rating
tier 		Rating
tier
A.M. Best Co.
ambest.com
A+ Superior 2 of 16 A+ Superior 2 of 16 A+ Superior 2 of 16 Stable
Fitch Ratings
fitchratings.com
A+ Strong 5 of 21 A+ Strong 5 of 21 - - - Stable
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Cincinnati Financial Corporation First-Quarter 2023 10-Q
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CONSOLIDATED PROPERTY CASUALTY INSURANCE HIGHLIGHTS
Consolidated property casualty insurance results include premiums and expenses for our standard market insurance segments (commercial lines and personal lines), our excess and surplus lines segment, Cincinnati Re ® and our London-based global specialty underwriter Cincinnati Global Underwriting Ltd. SM (Cincinnati Global).
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Earned premiums $ 1,841 $ 1,618 14
Fee revenues 2 3 (33)
Total revenues 1,843 1,621 14
Loss and loss expenses from:
Current accident year before catastrophe losses 1,123 947 19
Current accident year catastrophe losses 253 50 406
Prior accident years before catastrophe losses (41) (20) (105)
Prior accident years catastrophe losses (18) (21) 14
Loss and loss expenses 1,317 956 38
Underwriting expenses 536 500 7
Underwriting profit (loss) $ (10) $ 165 nm
Ratios as a percent of earned premiums: Pt. Change
Current accident year before catastrophe losses 61.0 % 58.5 % 2.5
Current accident year catastrophe losses 13.8 3.1 10.7
Prior accident years before catastrophe losses (2.2) (1.2) (1.0)
Prior accident years catastrophe losses (1.0) (1.3) 0.3
Loss and loss expenses 71.6 59.1 12.5
Underwriting expenses 29.1 30.8 (1.7)
Combined ratio 100.7 % 89.9 % 10.8
Combined ratio 100.7 % 89.9 % 10.8
Contribution from catastrophe losses and prior years reserve development 10.6 0.6 10.0
Combined ratio before catastrophe losses and prior years reserve development 90.1 % 89.3 % 0.8
Our consolidated property casualty insurance operations generated an underwriting loss of $10 million for the first quarter of 2023. Compared with a first-quarter 2022 underwriting profit of $165 million, the first-quarter 2023 change of $175 million included an unfavorable increase of $206 million in losses from catastrophes, mostly caused by severe weather. The first-quarter 2023 change in underwriting profitability also included higher current accident year loss and loss expenses before catastrophe losses that were partially offset by higher amounts of favorable reserve development on prior accident years.

Elevated inflation was a driver of higher losses and loss expenses in 2023 as costs have increased significantly to repair damaged autos or other property that we insure. We also experienced higher losses for liability coverages for some of our lines of business. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear. The higher loss experience is discussed in Financial Results by property casualty insurance segment. We believe future property casualty underwriting results will continue to benefit from price increases and our ongoing initiatives to improve pricing precision and loss experience related to claims and loss control practices.
For all property casualty lines of business in aggregate, net loss and loss expense reserves at March 31, 2023, were $271 million, or 3%, higher than at year-end 2022, including an increase of $266 million for the incurred but not reported (IBNR) portion.

We measure and analyze property casualty underwriting results primarily by the combined ratio and its component ratios. The GAAP-basis combined ratio is the percentage of incurred losses plus all expenses per each earned premium dollar – the lower the ratio, the better the performance. An underwriting profit results when the combined
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ratio is below 100%. A combined ratio above 100% indicates that an insurance company's losses and expenses exceeded premiums.

Our consolidated property casualty combined ratio for the first quarter of 2023 rose by 10.8 percentage points, compared with the same period of 2022, including an increase of 11.0 points from higher catastrophe losses and loss expenses. Other combined ratio components that increased are discussed below and in further detail in Financial Results by property casualty insurance segment.
The combined ratio can be affected significantly by natural catastrophe losses and other large losses as discussed in detail below. The combined ratio can also be affected by updated estimates of loss and loss expense reserves established for claims that occurred in prior periods, referred to as prior accident years. Net favorable development on prior accident year reserves, including reserves for catastrophe losses, benefited the combined ratio by 3.2 percentage points in the first three months of 2023, compared with 2.5 percentage points in the same period of 2022. Net favorable development is discussed in further detail in Financial Results by property casualty insurance segment.
The ratio for current accident year loss and loss expenses before catastrophe losses increased in the first three months of 2023. That 61.0% ratio was 2.5 percentage points higher, compared with the 58.5% accident year 2022 ratio measured as of March 31, 2022, including a decrease of 1.1 points in the ratio for large losses of $2 million or more per claim, discussed below. The ratio increase of 2.5 percentage points included an increase of 9.2 points for the IBNR portion and a decrease of 6.7 points for the case incurred portion.
The underwriting expense ratio decreased for the first quarter of 2023, compared with the same period a year ago, primarily due to a decrease in profit-sharing commissions for agencies. The ratio also included ongoing expense management efforts and higher earned premiums.

Consolidated Property Casualty Insurance Premiums
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Agency renewal written premiums $ 1,535 $ 1,397 10
Agency new business written premiums 251 244 3
Other written premiums 233 258 (10)
Net written premiums 2,019 1,899 6
Unearned premium change (178) (281) 37
Earned premiums $ 1,841 $ 1,618 14
The trends in net written premiums and earned premiums summarized in the table above include the effects of price increases. Price change trends that heavily influence renewal written premium increases or decreases, along with other premium growth drivers for 2023, are discussed in more detail by segment below in Financial Results.
Consolidated property casualty net written premiums for the three months ended March 31, 2023, grew $120 million compared with the same period of 2022. Our premium growth initiatives from prior years have provided an ongoing favorable effect on growth during the current year, particularly as newer agency relationships mature over time.

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

Net written premiums for Cincinnati Re, included in other written premiums, decreased by $24 million for the three months ended March 31, 2023, compared with the same period of 2022, to $230 million. Cincinnati Re assumes
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risks through reinsurance treaties and in some cases cedes part of the risk and related premiums to one or more unaffiliated reinsurance companies through transactions known as retrocessions.
Cincinnati Global is also included in other written premiums. Net written premiums increased for Cincinnati Global by $13 million for the three months ended March 31, 2023, compared with the same period of 2022, to $64 million.

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

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

The reinsurance program for Cincinnati Re that provides retrocession coverage on an excess of loss basis has a total available aggregate limit of $30 million in excess of $100 million per loss. Losses estimated for Hurricane Ian, as of March 31, 2023, resulted in an estimated reinsurance recovery of $14 million, compared with $19 million as of December 31, 2022. Reserve estimates are inherently uncertain as described in our 2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 53, and Item 1A, Risk Factors, Page 32.

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

Consolidated Property Casualty Insurance Catastrophe Losses and Loss Expenses Incurred
(Dollars in millions, net of reinsurance) Three months ended March 31,
Comm. Pers. E&S
Dates Region lines lines lines Other Total
2023
Mar. 1-4 Midwest, Northeast, South $ 30 $ 34 $ 1 $ — $ 65
Mar. 23-28 Midwest, Northeast, South 13 27 1 — 41
Mar. 30 - Apr. 1 Midwest, Northeast, South 42 24 — — 66
All other 2023 catastrophes 21 55 — 5 81
Development on 2022 and prior catastrophes 4 (25) (1) 4 (18)
Calendar year incurred total $ 110 $ 115 $ 1 $ 9 $ 235
2022
2022 catastrophes $ 16 $ 28 $ 1 $ 5 $ 50
Development on 2021 and prior catastrophes (3) (21) — 3 (21)
Calendar year incurred total $ 13 $ 7 $ 1 $ 8 $ 29
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The following table includes data for losses incurred of $2 million or more per claim, net of reinsurance.
Consolidated Property Casualty Insurance Losses Incurred by Size
(Dollars in millions, net of reinsurance) Three months ended March 31,
2023 2022 % Change
Current accident year losses greater than $5 million $ 36 $ 23 57
Current accident year losses $2 million - $5 million 15 39 (62)
Large loss prior accident year reserve development 9 9 —
Total large losses incurred 60 71 (15)
Losses incurred but not reported 179 36 397
Other losses excluding catastrophe losses 641 651 (2)
Catastrophe losses 227 24 nm
Total losses incurred $ 1,107 $ 782 42
Ratios as a percent of earned premiums: Pt. Change
Current accident year losses greater than $5 million 1.9 % 1.4 % 0.5
Current accident year losses $2 million - $5 million 0.8 2.4 (1.6)
Large loss prior accident year reserve development 0.5 0.6 (0.1)
Total large loss ratio 3.2 4.4 (1.2)
Losses incurred but not reported 9.7 2.2 7.5
Other losses excluding catastrophe losses 34.9 40.2 (5.3)
Catastrophe losses 12.3 1.5 10.8
Total loss ratio 60.1 % 48.3 % 11.8
We believe the inherent variability of aggregate loss experience for our portfolio of larger policies is greater than that of our portfolio of smaller policies, and we continue to monitor the variability in addition to general inflationary trends in loss costs. Our analysis continues to indicate no unexpected concentration of large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. The first-quarter 2023 property casualty total large losses incurred of $60 million, net of reinsurance, was lower than the $77 million quarterly average during full-year 2022 and the $71 million experienced for the first quarter of 2022. The ratio for these large losses was 1.2 percentage points lower compared with last year's first quarter. We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $2 million. Losses by size are discussed in further detail in results of operations by property casualty insurance segment.
FINANCIAL RESULTS
Consolidated results reflect the operating results of each of our five segments along with the parent company, Cincinnati Re, Cincinnati Global and other activities reported as "Other." The five segments are:
• Commercial lines insurance
• Personal lines insurance
• Excess and surplus lines insurance
• Life insurance
• Investments

Cincinnati Financial Corporation First-Quarter 2023 10-Q
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COMMERCIAL LINES INSURANCE RESULTS
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Earned premiums $ 1,056 $ 962 10
Fee revenues 1 1 0
Total revenues 1,057 963 10
Loss and loss expenses from:
Current accident year before catastrophe losses 674 588 15
Current accident year catastrophe losses 106 16 563
Prior accident years before catastrophe losses (36) (15) (140)
Prior accident years catastrophe losses 4 (3) nm
Loss and loss expenses 748 586 28
Underwriting expenses 311 301 3
Underwriting profit (loss) $ (2) $ 76 nm
Ratios as a percent of earned premiums: Pt. Change
Current accident year before catastrophe losses 63.9 % 61.2 % 2.7
Current accident year catastrophe losses 10.0 1.7 8.3
Prior accident years before catastrophe losses (3.4) (1.6) (1.8)
Prior accident years catastrophe losses 0.4 (0.3) 0.7
Loss and loss expenses 70.9 61.0 9.9
Underwriting expenses 29.5 31.3 (1.8)
Combined ratio 100.4 % 92.3 % 8.1
Combined ratio 100.4 % 92.3 % 8.1
Contribution from catastrophe losses and prior years reserve development 7.0 (0.2) 7.2
Combined ratio before catastrophe losses and prior years reserve development 93.4 % 92.5 % 0.9
Overview
Performance highlights for the commercial lines segment include:
• Premiums – Earned premiums and net written premiums for the commercial lines segment grew during the first quarter of 2023, compared with the same period a year ago, reflecting renewal written premium growth that continued to include higher average pricing and a higher level of insured exposures. The table below analyzes the primary components of premiums. We continue to use predictive analytics tools to improve pricing precision and segmentation while leveraging our local relationships with agents through the efforts of our teams that work closely with them. We seek to maintain appropriate pricing discipline for both new and renewal business as our agents and underwriters assess account quality to make careful decisions on a policy-by-policy basis whether to write or renew a policy.
Agency renewal written premiums increased by 7% for the first three months of 2023, compared with the same period of 2022, including price increases. During the first quarter of 2023, our overall standard commercial lines policies averaged estimated renewal price increases at percentages near the high end of the mid-single-digit range. We continue to segment commercial lines policies, emphasizing identification and retention of those we believe have relatively stronger pricing. Conversely, we have been seeking stricter renewal terms and conditions on policies we believe have relatively weaker pricing, thus retaining fewer of those policies. We measure average changes in commercial lines renewal pricing as the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for the respective policies.
Our average overall commercial lines renewal pricing change includes the impact of flat pricing for certain coverages within package policies written for a three-year term that were in force but did not expire during
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the period being measured. Therefore, our reported change in average commercial lines renewal pricing reflects a blend of three-year policies that did not expire and other policies that did expire during the measurement period. For commercial lines policies that did expire and were then renewed during the first quarter of 2023, we estimate that our average percentage price increases were in the high-single-digit range for commercial property and commercial auto and near the high end of the mid-single-digit range for commercial casualty. The estimated average percentage price change for workers' compensation was a decrease in the low-single-digit range.
Our first-quarter 2023 increase for the commercial lines segment's agency renewal written premiums also included a higher level of insured exposures. Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged commercial structures. We use building valuation software to automate much of that underwriting process and may also manually adjust premiums to reflect property costs.
Renewal premiums for certain policies, primarily our commercial casualty and workers' compensation lines of business, include the results of policy audits that adjust initial premium amounts based on differences between estimated and actual sales or payroll related to a specific policy. Audits completed during the first three months of 2023 contributed $35 million to net written premiums, compared with $21 million for the same period of 2022.
New business written premiums for commercial lines decreased $22 million during the first three months of 2023, compared with the same period of 2022. Trend analysis for year-over-year comparisons of individual quarters is more difficult to assess for commercial lines new business written premiums, due to inherent variability. That variability is often driven by larger policies with annual premiums greater than $100,000.
Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program. For our commercial lines insurance segment, an increase in ceded premiums reduced net written premiums by $7 million for the first three months of 2023, compared with the same period of 2022.

Commercial Lines Insurance Premiums
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Agency renewal written premiums $ 1,041 $ 970 7
Agency new business written premiums 134 156 (14)
Other written premiums (34) (30) (13)
Net written premiums 1,141 1,096 4
Unearned premium change (85) (134) 37
Earned premiums $ 1,056 $ 962 10
• Combined ratio – The first-quarter 2023 commercial lines combined ratio increased by 8.1 percentage points, compared with the first quarter of 2022, including an increase of 9.0 points in losses from catastrophes. The first-quarter combined ratio also increased 2.7 points from current accident year loss and loss expenses before catastrophe losses, including an increase of 11.1 points in the IBNR portion and a decrease of 8.4 points for the case incurred portion. Underwriting results also included a higher level of favorable reserve development on prior accident years and favorable effects from the underwriting expense ratio, as discussed below. The current accident year ratios were measured as of March 31 of the respective years and included a first-quarter 2023 decrease of 1.6 percentage points in the ratio for large losses of $2 million or more per claim, discussed below.
When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends for inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company. Elevated inflation was a driver of higher losses and loss expenses as costs have increased significantly to repair damaged business property or autos that we insure, in addition to higher losses for liability coverages for some of our lines of business. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear.
Commercial umbrella coverages, part of our commercial casualty line of business that help protect businesses against liability from occurrences such as accidents or injuries, contributed approximately 1 percentage point of the commercial lines segment three-month 2023 ratio for loss and loss expenses increase of 9.9% shown in the table above. For the first three months of 2023, incurred losses and loss expenses for commercial umbrella
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coverages of $89 million increased $19 million or 27%, compared with the same period of 2022, including an increase of $15 million or 33% for the IBNR portion, while earned premiums of $127 million rose 10%. The first-quarter 2023 estimated combined ratio for commercial umbrella was 98%, compared with an estimated 90% for first-quarter 2022.
Commercial umbrella paid loss experience is inherently variable. The profile of coverage limits for policies in force at the end of 2022 included 43% with $1 million of coverage per policy, 91% with $5 million or less and 99% with $10 million or less of coverage. Our commercial umbrella insurance coverages have a strong record of profitability for us, including an estimated combined ratio averaging below 85% for the five years ending in 2022.
Catastrophe losses and loss expenses accounted for 10.4 percentage points of the combined ratio for the first three months of 2023, compared with 1.4 percentage points for the same period a year ago. Through 2022, the 10-year annual average for that catastrophe measure for the commercial lines segment was 5.5 percentage points, and the five-year annual average was 6.2 percentage points.
The net effect of reserve development on prior accident years during the first three months of 2023 was favorable for commercial lines overall by $32 million, compared with $18 million for the same period in 2022. For the first three months of 2023, our workers' compensation and commercial property lines of business were the main contributors to the commercial lines net favorable reserve development on prior accident years. The net favorable reserve development recognized during the first three months of 2023 for our commercial lines insurance segment was primarily for accident years 2022 and 2021 and was primarily due to lower-than-anticipated loss emergence on known claims. Reserve estimates are inherently uncertain as described in our 2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 53.
The commercial lines underwriting expense ratio decreased for the first quarter of 2023, compared with the same period a year ago. The decrease was primarily due to a decrease in profit-sharing commissions for agencies. The ratio also included ongoing expense management efforts and higher earned premiums.

Commercial Lines Insurance Losses Incurred by Size
(Dollars in millions, net of reinsurance) Three months ended March 31,
2023 2022 % Change
Current accident year losses greater than $5 million $ 30 $ 16 88
Current accident year losses $2 million - $5 million 12 37 (68)
Large loss prior accident year reserve development 3 7 (57)
Total large losses incurred 45 60 (25)
Losses incurred but not reported 125 38 229
Other losses excluding catastrophe losses 335 362 (7)
Catastrophe losses 106 11 nm
Total losses incurred $ 611 $ 471 30
Ratios as a percent of earned premiums: Pt. Change
Current accident year losses greater than $5 million 2.8 % 1.7 % 1.1
Current accident year losses $2 million - $5 million 1.1 3.8 (2.7)
Large loss prior accident year reserve development 0.3 0.7 (0.4)
Total large loss ratio 4.2 6.2 (2.0)
Losses incurred but not reported 11.8 4.0 7.8
Other losses excluding catastrophe losses 31.9 37.5 (5.6)
Catastrophe losses 10.0 1.2 8.8
Total loss ratio 57.9 % 48.9 % 9.0

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

PERSONAL LINES INSURANCE RESULTS
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Earned premiums $ 464 $ 402 15
Fee revenues 1 1 0
Total revenues 465 403 15
Loss and loss expenses from:
Current accident year before catastrophe losses 277 221 25
Current accident year catastrophe losses 140 28 400
Prior accident years before catastrophe losses (6) (13) 54
Prior accident years catastrophe losses (25) (21) (19)
Loss and loss expenses 386 215 80
Underwriting expenses 136 123 11
Underwriting profit (loss) $ (57) $ 65 nm
Ratios as a percent of earned premiums: Pt. Change
Current accident year before catastrophe losses 59.9 % 55.0 % 4.9
Current accident year catastrophe losses 30.1 6.9 23.2
Prior accident years before catastrophe losses (1.3) (3.2) 1.9
Prior accident years catastrophe losses (5.4) (5.2) (0.2)
Loss and loss expenses 83.3 53.5 29.8
Underwriting expenses 29.2 30.4 (1.2)
Combined ratio 112.5 % 83.9 % 28.6
Combined ratio 112.5 % 83.9 % 28.6
Contribution from catastrophe losses and prior years reserve development 23.4 (1.5) 24.9
Combined ratio before catastrophe losses and prior years reserve development 89.1 % 85.4 % 3.7

Overview
Performance highlights for the personal lines segment include:
• Premiums – Personal lines earned premiums and net written premiums continued to grow during the first three months of 2023, including increased new business and renewal written premiums that included higher average pricing. Cincinnati Private Client SM net written premiums included in the personal lines insurance segment results totaled approximately $233 million for the first quarter of 2023, compared with $176 million for the same period of 2022. Included in Cincinnati Private Client net written premiums for the respective periods were $19 million and $15 million from excess and surplus lines homeowner policies. The table below analyzes the primary components of premiums.
Agency renewal written premiums increased 17% for the first three months of 2023, reflecting rate increases in selected states, a higher level of insured exposures and other factors such as higher policy retention rates and
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changes in policy deductibles or mix of business. Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged homes.
We estimate that premium rates for our personal auto line of business increased at average percentages in the mid-single-digit range during the first three months of 2023. We plan to increase rates more aggressively in future quarters and we expect full-year 2023 written premiums will include an average rate increase of approximately 10% for our personal auto line of business. For our homeowner line of business, we estimate that premium rates for the first three months of 2023 increased at average percentages in the mid-single-digit range. For both our personal auto and homeowner lines of business, some individual policies experienced lower or higher rate changes based on each risk's specific characteristics and enhanced pricing precision enabled by predictive models.
Personal lines new business written premiums increased $27 million or 52% for the first quarter of 2023, compared with the same period of 2022. Approximately $13 million of the increase was from Cincinnati Private Client policies. We believe we maintained underwriting and pricing discipline in Cincinnati Private Client markets and in other personal lines markets as we expanded use of enhanced pricing precision tools.
Other written premiums include premiums ceded to reinsurers as part of our reinsurance ceded program. For our personal lines insurance segment, an increase in 2023 ceded premiums reduced net written premiums by $9 million for the first three months, compared with the same period of 2022.
Personal Lines Insurance Premiums
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Agency renewal written premiums $ 388 $ 333 17
Agency new business written premiums 79 52 52
Other written premiums (19) (11) (73)
Net written premiums 448 374 20
Unearned premium change 16 28 (43)
Earned premiums $ 464 $ 402 15
• Combined ratio – Our personal lines combined ratio for the first quarter of 2023 increased by 28.6 percentage points, compared with first-quarter 2022, including an increase of 23.0 points in losses from catastrophes. The first-quarter 2023 combined ratio also included an increase of 4.9 percentage points from current accident year loss and loss expenses before catastrophe losses, with our personal auto and other personal lines of business each representing approximately 2 points. Those current accident year ratios were measured as of March 31 of the respective years and included a three-month decrease of 0.3 points in the ratio for large losses of $2 million or more per claim, discussed below.
When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends in inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company. Elevated inflation was a driver of higher losses and loss expenses as costs have increased significantly to repair damaged autos or homes that we insure. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear. For example, for the first three months of 2023, personal auto incurred loss and loss expenses before catastrophe losses increased $24 million or 22%, compared with the same period of 2022, in part due to paid losses increasing $15 million or 18% while earned premiums rose 9%.
Catastrophe losses and loss expenses accounted for 24.7 percentage points of the combined ratio for the first three months of 2023, compared with 1.7 points for the same period a year ago. The 10-year annual average catastrophe loss ratio for the personal lines segment through 2022 was 10.6 percentage points, and the five-year annual average was 12.0 percentage points.
In addition to the average rate increases discussed above, we continue to refine our pricing to better match premiums to the risk of loss on individual policies. Improved pricing precision and broad-based rate increases are expected to help position the combined ratio at a profitable level over the long term. In addition, greater geographic diversification is expected to reduce the volatility of homeowner loss ratios attributable to weather-related catastrophe losses over time.
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The net effect of reserve development on prior accident years during the first three months of 2023 was favorable for personal lines overall by $31 million, compared with $34 million of favorable development for the same period of 2022. Our homeowner line of business was the primary contributor to the personal lines net favorable reserve development for the first three months of 2023. The net favorable reserve development was primarily due to lower-than-anticipated loss emergence on known claims. Reserve estimates are inherently uncertain as described in our 2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 53.
The personal lines underwriting expense ratio decreased for the first three months of 2023, compared with the same period a year ago. The decrease was primarily due to a decrease in profit-sharing commissions for agencies. The ratios also included ongoing expense management efforts and higher earned premiums.
Personal Lines Insurance Losses Incurred by Size
(Dollars in millions, net of reinsurance) Three months ended March 31,
2023 2022 % Change
Current accident year losses greater than $5 million $ 6 $ 7 (14)
Current accident year losses $2 million - $5 million 3 2 50
Large loss prior accident year reserve development 6 2 200
Total large losses incurred 15 11 36
Losses incurred but not reported 27 (14) nm
Other losses excluding catastrophe losses 187 176 6
Catastrophe losses 113 6 nm
Total losses incurred $ 342 $ 179 91
Ratios as a percent of earned premiums: Pt. Change
Current accident year losses greater than $5 million 1.3 % 1.7 % (0.4)
Current accident year losses $2 million - $5 million 0.6 0.5 0.1
Large loss prior accident year reserve development 1.4 0.5 0.9
Total large loss ratio 3.3 2.7 0.6
Losses incurred but not reported 5.9 (3.6) 9.5
Other losses excluding catastrophe losses 40.2 44.0 (3.8)
Catastrophe losses 24.3 1.4 22.9
Total loss ratio 73.7 % 44.5 % 29.2

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

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EXCESS AND SURPLUS LINES INSURANCE RESULTS
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Earned premiums $ 127 $ 112 13
Fee revenues — 1 (100)
Total revenues 127 113 12
Loss and loss expenses from:
Current accident year before catastrophe losses 88 70 26
Current accident year catastrophe losses 2 1 100
Prior accident years before catastrophe losses (8) (5) (60)
Prior accident years catastrophe losses (1) — nm
Loss and loss expenses 81 66 23
Underwriting expenses 33 31 6
Underwriting profit $ 13 $ 16 (19)
Ratios as a percent of earned premiums: Pt. Change
Current accident year before catastrophe losses 69.2 % 61.8 % 7.4
Current accident year catastrophe losses 1.5 1.5 0.0
Prior accident years before catastrophe losses (6.2) (4.6) (1.6)
Prior accident years catastrophe losses (0.3) (0.4) 0.1
Loss and loss expenses 64.2 58.3 5.9
Underwriting expenses 25.7 27.6 (1.9)
Combined ratio 89.9 % 85.9 % 4.0
Combined ratio 89.9 % 85.9 % 4.0
Contribution from catastrophe losses and prior years reserve development
(5.0) (3.5) (1.5)
Combined ratio before catastrophe losses and prior years reserve development 94.9 % 89.4 % 5.5
Overview
Performance highlights for the excess and surplus lines segment include:
• Premiums – Excess and surplus lines net written premiums continued to grow during the first three months of 2023, compared with the same period a year ago, primarily due to an increase in agency renewal written premiums. Renewal written premiums rose 13% for the three months ended March 31, 2023, compared with the same period of 2022, largely due to higher renewal pricing. For the first three months of 2023, excess and surplus lines policy renewals experienced estimated average price increases at percentages in the high-single-digit range. We measure average changes in excess and surplus lines renewal pricing as the percentage rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies.
New business written premiums produced by agencies increased by 6% for the first three months of 2023 compared with the same period of 2022, as we continued to carefully underwrite each policy in a highly competitive market. Some of what we report as new business came from accounts that were not new to our agents. We believe our agents' seasoned accounts tend to be priced more accurately than business that may be less familiar to them.
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Excess and Surplus Lines Insurance Premiums
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Agency renewal written premiums $ 106 $ 94 13
Agency new business written premiums 38 36 6
Other written premiums (8) (6) (33)
Net written premiums 136 124 10
Unearned premium change (9) (12) 25
Earned premiums $ 127 $ 112 13
• Combined ratio – The excess and surplus lines combined ratio increased by 4.0 percentage points for the first quarter of 2023, compared with the same period of 2022, primarily due to higher current accident year loss and loss expenses before catastrophe losses. The ratio for current accident year loss and loss expenses before catastrophe losses was 7.4 percentage points higher, compared with the 61.8% accident year 2022 ratio measured as of March 31, 2022, including an increase of 13.1 points for the IBNR portion and a decrease of 5.7 points for the case incurred portion.
Excess and surplus lines net reserve development on prior accident years, as a ratio to earned premiums, was a favorable 6.5% for the first three months of 2023, compared with 5.0% for the first three months of 2022. The $9 million of net favorable reserve development recognized during the first three months of 2023 was primarily for accident year 2022. The favorable reserve development was due primarily to lower-than-anticipated loss emergence on known claims. Reserve estimates are inherently uncertain as described in our 2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, Page 53.

The excess and surplus lines underwriting expense ratio decreased for the first three months of 2023, compared with the same period of 2022, largely due to ongoing expense management efforts and premium growth outpacing growth in expenses.
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Excess and Surplus Lines Insurance Losses Incurred by Size
(Dollars in millions, net of reinsurance) Three months ended March 31,
2023 2022 % Change
Current accident year losses greater than $5 million $ — $ — nm
Current accident year losses $2 million - $5 million — — nm
Large loss prior accident year reserve development — — nm
Total large losses incurred — — nm
Losses incurred but not reported 27 12 125
Other losses excluding catastrophe losses 28 36 (22)
Catastrophe losses 1 1 0
Total losses incurred $ 56 $ 49 14
Ratios as a percent of earned premiums: Pt. Change
Current accident year losses greater than $5 million — % — % 0.0
Current accident year losses $2 million - $5 million — — 0.0
Large loss prior accident year reserve development (0.3) — (0.3)
Total large loss ratio (0.3) — (0.3)
Losses incurred but not reported 21.3 10.6 10.7
Other losses excluding catastrophe losses 22.2 31.3 (9.1)
Catastrophe losses 1.1 1.1 0.0
Total loss ratio 44.3 % 43.0 % 1.3
We continue to monitor new losses and case reserve increases greater than $2 million for trends in factors such as initial reserve levels, loss cost inflation and claim settlement expenses. Our analysis continues to indicate no unexpected concentration of these large losses and case reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. In the first quarter of 2023, the excess and surplus lines total ratio for large losses, net of reinsurance, was 0.3 percentage points lower than last year's first quarter. We believe results for the three-month period largely reflected normal fluctuations in loss patterns and normal variability in large case reserves for claims above $2 million.

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LIFE INSURANCE RESULTS
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Earned premiums $ 77 $ 75 3
Fee revenues 2 1 100
Total revenues 79 76 4
Contract holders' benefits incurred 81 76 7
Investment interest credited to contract holders (30) (27) (11)
Underwriting expenses incurred 20 20 0
Total benefits and expenses 71 69 3
Life insurance segment profit $ 8 $ 7 14
Overview
Performance highlights for the life insurance segment include:
• Revenues – Revenues increased for the three months ended March 31, 2023, compared with the same period a year ago, driven by higher earned premiums from term life insurance, our largest life insurance product line.
Net in-force life insurance policy face amounts increased 1% to $81.057 billion at March 31, 2023, from $80.482 billion at year-end 2022.
Fixed annuity deposits received for the three months ended March 31, 2023, were $10 million, compared with $8 million for the same period of 2022. Fixed annuity deposits have a minimal impact to earned premiums because deposits received are initially recorded as liabilities. Profit is earned over time by way of interest rate spreads. We do not write variable or equity-indexed annuities.
Life Insurance Premiums
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Term life insurance $ 56 $ 54 4
Whole life insurance 12 11 9
Universal life and other 9 10 (10)
Net earned premiums $ 77 $ 75 3
• Profitability – Our life insurance segment typically reports a small profit or loss on a GAAP basis because profits from investment income spreads are included in our investment segment results. We include only investment income credited to contract holders (including interest assumed in life insurance policy reserve calculations) in our life insurance segment results. A profit of $8 million for our life insurance segment in the first three months of 2023, compared with a profit of $7 million for the same period of 2022, was primarily due to more favorable mortality experience, partially offset by less favorable impacts from the unlocking of market value discount rate assumptions associated with no-lapse guarantees.

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

Underwriting expenses for the first three months of 2023 were consistent with the same period a year ago.

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

INVESTMENTS RESULTS
Overview
The investments segment contributes investment income and investment gains and losses to results of operations. Investments traditionally are our primary source of pretax and after-tax profits.
Investment Income
Pretax investment income grew 14% for the first quarter of 2023, compared with the same period of 2022. Interest income increased by $17 million for the first quarter, as net purchases of fixed-maturity securities in recent quarters and rising bond yields are working to generally offset effects of the low interest rate environment of the past several years. Although dividend rates generally are increasing more slowly, our minor asset allocation adjustments in our equity portfolio and net purchases of equity securities in recent quarters helped dividend income to grow by $1 million for the three months ended March 31, 2023.

Investments Results
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Total investment income, net of expenses $ 210 $ 185 14
Investment interest credited to contract holders (30) (27) (11)
Investment gains and losses, net 106 (666) nm
Investments profit (loss), pretax $ 286 $ (508) nm
We continue to consider the low interest rate environment that prevailed in recent years as well as the potential for a continuation of both elevated inflation and higher bond yields as we position our portfolio. As bonds in our generally laddered portfolio mature or are called over the near term, we will reinvest with a balanced approach, keeping in mind our long-term strategy and pursuing attractive risk-adjusted after-tax yields. The table below shows the average pretax yield-to-amortized cost associated with expected principal redemptions for our fixed-maturity portfolio. The expected principal redemptions are based on par amounts and include dated maturities, calls and prefunded municipal bonds that we expect will be called during each respective time period.
(Dollars in millions) % Yield Principal redemptions
At March 31, 2023
Fixed-maturity pretax yield profile:
Expected to mature during the remainder of 2023 4.00 % $ 559
Expected to mature during 2024 4.47 1,176
Expected to mature during 2025 4.65 1,321
Average yield and total expected maturities from the remainder of 2023 through 2025 4.46 $ 3,056

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The table below shows the average pretax yield-to-amortized cost for fixed-maturity securities acquired during the periods indicated. The average yield for total fixed-maturity securities acquired during the first three months of 2023 was higher than the 4.22% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2022. Our fixed-maturity portfolio's average yield of 4.25% for the first three months of 2023, from the investment income table below, was also higher than the 4.22% yield for the year-end 2022 fixed-maturities portfolio.
Three months ended March 31,
2023 2022
Average pretax yield-to-amortized cost on new fixed-maturities:
Acquired taxable fixed-maturities 6.55 % 3.79 %
Acquired tax-exempt fixed-maturities 4.20 2.71
Average total fixed-maturities acquired 6.18 3.64

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

The table below provides details about investment income. Average yields in this table are based on the average invested asset and cash amounts indicated in the table, using fixed-maturity securities valued at amortized cost and all other securities at fair value.
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Investment income:
Interest $ 140 $ 123 14
Dividends 66 65 2
Other 7 1 600
Less investment expenses 3 4 (25)
Investment income, pretax 210 185 14
Less income taxes
34 29 17
Total investment income, after-tax $ 176 $ 156 13
Investment returns:
Average invested assets plus cash and cash
equivalents 		$ 24,649 $ 24,677
Average yield pretax 3.41 % 3.00 %
Average yield after-tax 2.86 2.53
Effective tax rate 16.1 15.6
Fixed-maturity returns:
Average amortized cost $ 13,171 $ 12,280
Average yield pretax 4.25 % 4.01 %
Average yield after-tax 3.52 3.33
Effective tax rate 17.3 17.0
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Total Investment Gains and Losses
Investment gains and losses are recognized on the sale of investments, for certain changes in fair values of securities even though we continue to hold the securities or as otherwise required by GAAP. The change in fair value for equity securities still held are included in investment gains and losses and also in net income. The change in unrealized gains or losses for fixed-maturity securities are included as a component of other comprehensive income (OCI). Accounting requirements for the allowance for credit losses for the fixed-maturity portfolio are disclosed in our 2022 Annual Report on Form 10-K, Item 8, Note 1, Summary of Significant Accounting Policies, Page 127.
The table below summarizes total investment gains and losses, before taxes.
(Dollars in millions) Three months ended March 31,
2023 2022
Investment gains and losses:
Equity securities:
Investment gains and losses on securities sold, net $ (1) $ 8
Unrealized gains and losses on securities still held, net 106 (683)
Subtotal 105 (675)
Fixed maturities:
Gross realized gains 1 4
Gross realized losses (1) (1)
Subtotal — 3
Other 1 6
Total investment gains and losses reported in net income 106 (666)
Change in unrealized investment gains and losses:
Fixed maturities 163 (746)
Total $ 269 $ (1,412)

Of the 4,606 fixed-maturity securities in the portfolio, 26 securities were trading below 70% of amortized cost at March 31, 2023. Our asset impairment committee regularly monitors the portfolio, including a quarterly review of the entire portfolio for potential credit losses. We believe that if liquidity in the markets were to significantly deteriorate or economic conditions were to significantly weaken, we could experience declines in portfolio values and possibly increases in the allowance for credit losses or write-downs to fair value.

There were no fixed-maturity securities written down to fair value due to an intention to be sold and less than $1 million in changes in the allowance for credit losses for the first three months of 2023. Fixed-maturity securities written down to fair value due to an intention to be sold and changes in the allowance for credit losses were each less than $1 million for the first three months of 2022.
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OTHER
We report as Other the noninvestment operations of the parent company and a noninsurance subsidiary, CFC Investment Company. We also report as Other the underwriting results of Cincinnati Re and Cincinnati Global, including earned premiums, loss and loss expenses and underwriting expenses in the table below.

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

Other profit in the table below represents profit or losses before income taxes. For the first three months of 2022, total other loss was driven by interest expense from debt of the parent company.
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Interest and fees on loans and leases $ 2 $ 1 100
Earned premiums 194 142 37
Other revenues 1 1 0
Total revenues 197 144 37
Interest expense 14 13 8
Loss and loss expenses 102 89 15
Underwriting expenses 56 45 24
Operating expenses 5 4 25
Total expenses 177 151 17
Total other income (loss) $ 20 $ (7) nm
TAXES
We had $43 million of income tax expense for the three months ended March 31, 2023, compared with $85 million of income tax benefit for the same period of 2022. The effective tax rate for the three months ended March 31, 2023, was 16.0% compared with 24.2% for the same period last year. The change in our effective tax rate between periods was primarily due to large changes in our net investment gains and losses included in income for the periods and changes in underwriting income.

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

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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2023, shareholders' equity was $10.741 billion, compared with $10.562 billion at December 31, 2022. Total debt was $839 million at March 31, 2023, matching December 31, 2022. At March 31, 2023, cash and cash equivalents totaled $955 million, compared with $1.264 billion at December 31, 2022.

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

SOURCES OF LIQUIDITY
Subsidiary Dividends
Our lead insurance subsidiary declared dividends of $142 million to the parent company in the first three months of 2023, compared with $504 million for the same period of 2022. For full-year 2022, our lead insurance subsidiary paid dividends totaling $729 million to the parent company. State of Ohio regulatory requirements restrict the dividends our insurance subsidiary can pay. For full-year 2023, total dividends that our insurance subsidiary can pay to our parent company without regulatory approval are approximately $651 million.
Investing Activities
Investment income is a source of liquidity for both the parent company and its insurance subsidiaries. We continue to focus on portfolio strategies to balance near-term income generation and long-term book value growth.
Parent company obligations can be funded with income on investments held at the parent-company level or through sales of securities in that portfolio, although our investment philosophy seeks to compound cash flows over the long term. These sources of capital can help minimize subsidiary dividends to the parent company, protecting insurance subsidiary capital.

For a discussion of our historic investment strategy, portfolio allocation and quality, see our 2022 Annual Report on Form 10-K, Item 1, Investments Segment, Page 24.
Insurance Underwriting
Our property casualty and life insurance underwriting operations provide liquidity because we generally receive premiums before paying losses under the policies purchased with those premiums. After satisfying our cash requirements, we use excess cash flows for investment, increasing future investment income.
Historically, cash receipts from property casualty and life insurance premiums, along with investment income, have been more than sufficient to pay claims, operating expenses and dividends to the parent company.
The table below shows a summary of the operating cash flow for property casualty insurance (direct method):
(Dollars in millions) Three months ended March 31,
2023 2022 % Change
Premiums collected $ 1,842 $ 1,714 7
Loss and loss expenses paid (1,046) (890) (18)
Commissions and other underwriting expenses paid (710) (711) —
Cash flow from underwriting 86 113 (24)
Investment income received 147 128 15
Cash flow from operations $ 233 $ 241 (3)
Collected premiums for property casualty insurance rose $128 million during the first three months of 2023, compared with the same period in 2022. Loss and loss expenses paid for the 2023 perio d increased $156 million. Commissions and other underwriting expenses pai d remained relatively unchanged compared with 2022.
We discuss our future obligations for claims payments and for underwriting expenses in our 2022 Annual Report on Form 10-K, Item 7, Obligations, Page 96.
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Capital Resources
At March 31, 2023, our debt-to-total-capital ratio was 7.2%, considerably below our 35% covenant threshold, with $789 million in long-term debt and $50 million in borrowing on our revolving short-term line of credit. At March 31, 2022, $250 million was available for future cash management needs as part of the general provisions of the line of credit agreement, with another $300 million available as part of an accordion feature. Based on our capital requirements at March 31, 2023, we do not anticipate a material increase in debt levels exceeding the available line of credit amount during the year. As a result, we expect changes in our debt-to-total-capital ratio to continue to be largely a function of the contribution of unrealized investment gains or losses to shareholders' equity. We have an unsecured letter of credit agreement which provides a portion of the capital needed to support Cincinnati Global's obligations at Lloyd's. The amount of this unsecured letter of credit agreement was $94 million at March 31, 2023, with no amounts drawn.

On March 23, 2023, we amended our line of credit agreement to replace LIBOR with SOFR plus a credit spread adjustment.
We provide details of our three long-term notes in this quarterly report Item 1, Note 3, Fair Value Measurements. None of the notes are encumbered by rating triggers.
Four independent ratings firms award insurer financial strength ratings to our property casualty insurance companies and three firms rate our life insurance company. Those firms made no changes to our parent company debt ratings during the first three months of 2023. Our debt ratings are discussed in our 2022 Annual Report on Form 10-K, Item 7, Liquidity and Capital Resources, Long-Term Debt, Page 95.
Off-Balance Sheet Arrangements
We do not use any special-purpose financing vehicles or have any undisclosed off-balance sheet arrangements (as that term is defined in applicable SEC rules) that are reasonably likely to have a current or future material effect on the company's financial condition, results of operation, liquidity, capital expenditures or capital resources. Similarly, the company holds no fair-value contracts for which a lack of marketplace quotations would necessitate the use of fair-value techniques.
USES OF LIQUIDITY
Our parent company and insurance subsidiary have contractual obligations and other commitments. In addition, one of our primary uses of cash is to enhance shareholder return.
Contractual Obligations
We estimated our future contractual obligations as of December 31, 2022, in our 2022 Annual Report on Form 10-K, Item 7, Contractual Obligations, Page 96. There have been no material changes to our estimates of future contractual obligations since our 2022 Annual Report on Form 10-K.

Other Commitments
In addition to our contractual obligations, we have other property casualty operational commitments.
• Commissions – Commissions paid were $497 billion in the first three months of 2023. Commission payments generally track with written premiums, except for annual profit-sharing commissions typically paid during the first quarter of the year.
• Other underwriting expenses – Many of our underwriting expenses are not contractual obligations, but reflect the ongoing expenses of our business. Noncommission underwriting expenses paid were $213 million in the first three months of 2023.
There were no contributions to our qualified pension plan during the first three months of 2023.
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Investing Activities
After fulfilling operating requirements, we invest cash flows from underwriting, investment and other corporate activities in fixed-maturity and equity securities on an ongoing basis to help achieve our portfolio objectives. We discuss our investment strategy and certain portfolio attributes in this quarterly report Item 3, Quantitative and Qualitative Disclosures About Market Risk.
Uses of Capital
Uses of cash to enhance shareholder return include dividends to shareholders and shares acquired under our repurchase program. In January 2023, the board of directors declared regular quarterly cash dividends of 75 cents per share for an indicated annual rate of $3.00 per share. During the first three months of 2023, we used $106 million to pay cash dividends to shareholders.

PROPERTY CASUALTY INSURANCE LOSS AND LOSS EXPENSE RESERVES
For the business lines in the commercial and personal lines insurance segments, and in total for the excess and surplus lines insurance segment and other property casualty insurance operations, the following table details gross reserves among case, IBNR (incurred but not reported) and loss expense reserves, net of salvage and subrogation reserves. Reserving practices are discussed in our 2022 Annual Report on Form 10-K, Item 7, Property Casualty Loss and Loss Expense Obligations and Reserves, Page 97.
Total gross reserves at March 31, 2023, increased $290 million compared with December 31, 2022. Case loss reserves increased by $88 million, IBNR loss reserves increased by $145 million and loss expense reserves increased by $57 million. The total gross increase was primarily due to our commercial casualty, commercial property and homeowner lines of business and also our excess and surplus lines insurance segment.

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Property Casualty Gross Reserves
(Dollars in millions) Loss reserves Loss expense reserves Total gross reserves
Case reserves IBNR reserves Percent of total
At March 31, 2023
Commercial lines insurance:
Commercial casualty $ 1,117 $ 1,046 $ 746 $ 2,909 33.7 %
Commercial property 427 191 69 687 8.0
Commercial auto 430 282 138 850 9.9
Workers' compensation 449 517 90 1,056 12.2
Other commercial 99 18 131 248 2.9
Subtotal 2,522 2,054 1,174 5,750 66.7
Personal lines insurance:
Personal auto 215 79 68 362 4.2
Homeowner 227 148 49 424 4.9
Other personal 91 97 5 193 2.3
Subtotal 533 324 122 979 11.4
Excess and surplus lines 306 282 208 796 9.2
Cincinnati Re 148 686 6 840 9.7
Cincinnati Global 155 103 3 261 3.0
Total $ 3,664 $ 3,449 $ 1,513 $ 8,626 100.0 %
At December 31, 2022
Commercial lines insurance:
Commercial casualty $ 1,163 $ 938 $ 722 $ 2,823 33.9 %
Commercial property 301 256 71 628 7.5
Commercial auto 449 258 131 838 10.1
Workers' compensation 434 521 85 1,040 12.4
Other commercial 98 16 125 239 2.9
Subtotal 2,445 1,989 1,134 5,568 66.8
Personal lines insurance:
Personal auto 222 64 64 350 4.2
Homeowner 189 138 49 376 4.5
Other personal 99 86 5 190 2.3
Subtotal 510 288 118 916 11.0
Excess and surplus lines 302 256 195 753 9.0
Cincinnati Re 156 639 6 801 9.6
Cincinnati Global 163 132 3 298 3.6
Total $ 3,576 $ 3,304 $ 1,456 $ 8,336 100.0 %
LIFE POLICY AND INVESTMENT CONTRACT RESERVES
Gross life policy and investment contract reserves were $3.059 billion at March 31, 2023, compared with $3.015 billion at year-end 2022, reflecting continued growth in life insurance policies in force and a decrease in market value discount rates. We discussed our life insurance reserving practices in our 2022 Annual Report on Form 10-K, Item 7, Life Insurance Policyholder Obligations and Reserves, Page 103, and updated that disclosure in this quarterly report Item 1, Note 1, Accounting Policies.
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OTHER MATTERS
SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are discussed in our 2022 Annual Report on Form 10-K, Item 8, Note 1, Summary of Significant Accounting Policies, Page 127, and updated in this quarterly report Item 1, Note 1, Accounting Policies.
In conjunction with those discussions, in the Management's Discussion and Analysis in the 2022 Annual Report on Form 10-K, management reviewed the estimates and assumptions used to develop reported amounts related to the most significant policies. Management discussed the development and selection of those accounting estimates with the audit committee of the board of directors.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Our greatest exposure to market risk is through our investment portfolio. Market risk is the potential for a decrease in securities' fair value resulting from broad yet uncontrollable forces such as: inflation, economic growth or recession, interest rates, world political conditions or other widespread unpredictable events. It is comprised of many individual risks that, when combined, create a macroeconomic impact.
Our view of potential risks and our sensitivity to such risks is discussed in our 2022 Annual Report on Form 10-K, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, Page 112.
The fair value of our investment portfolio was $22.645 billion at March 31, 2023, up $672 million from year-end 2022, including a $546 million increase in the fixed-maturity portfolio and a $126 million increase in the equity portfolio.
(Dollars in millions) At March 31, 2023 At December 31, 2022
Cost or
amortized cost 		Percent
of total 		Fair value Percent
of total 		Cost or
amortized cost 		Percent of total Fair value Percent
of total
Taxable fixed maturities $ 9,367 53.0 % $ 8,749 38.6 % $ 9,020 52.2 % $ 8,299 37.8 %
Tax-exempt fixed maturities 3,995 22.6 3,929 17.4 3,959 22.9 3,833 17.4
Common equities 3,862 21.9 9,589 42.3 3,851 22.3 9,454 43.0
Nonredeemable preferred
equities 		449 2.5 378 1.7 443 2.6 387 1.8
Total $ 17,673 100.0 % $ 22,645 100.0 % $ 17,273 100.0 % $ 21,973 100.0 %

At March 31, 2023, substantially all of our consolidated investment portfolio, measured at fair value, is classified as Level 1 or Level 2. See Item 1, Note 3, Fair Value Measurements, for additional discussion of our valuation techniques.
In addition to our investment portfolio, the total investments amount reported in our condensed consolidated balance sheets includes Other invested assets. Other invested assets included $352 million of private equity investments, $60 million of real estate through direct property ownership and development projects in the United States, $36 million in Lloyd's deposits and $30 million of life policy loans at March 31, 2023.
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FIXED-MATURITY SECURITIES INVESTMENTS
By maintaining a well-diversified fixed-maturity portfolio, we attempt to reduce overall risk. We invest new money in the bond market on a regular basis, targeting what we believe to be optimal risk-adjusted, after-tax yields. Risk, in this context, includes interest rate, call, reinvestment rate, credit and liquidity risk. We do not make a concerted effort to alter duration on a portfolio basis in response to anticipated movements in interest rates. By regularly investing in the bond market, we build a broad, diversified portfolio that we believe mitigates the impact of adverse economic factors.

In the first three months of 2023, the increase in fair value of our fixed-maturity portfolio reflected net purchases of securities and a decrease in net unrealized losses, primarily due to a decrease in U.S. Treasury yields that was partially offset by a widening of corporate credit spreads. At March 31, 2023, our fixed-maturity portfolio with an average rating of A2/A was valued at 94.9% of its amortized cost, compared with 93.5% at December 31, 2022.
At March 31, 2023, our investment-grade and noninvestment-grade fixed-maturity securities represented 80.4% and 4.1% of the portfolio, respectively. The remaining 15.5% represented fixed-maturity securities that were not rated by Moody's or S&P Global Ratings.

Attributes of the fixed-maturity portfolio include:
At March 31, 2023 At December 31, 2022
Weighted average yield-to-amortized cost 4.39 % 4.22 %
Weighted average maturity 7.6 yrs 7.4 yrs
Effective duration 4.6 yrs 4.7 yrs
We discuss maturities of our fixed-maturity portfolio in our 2022 Annual Report on Form 10-K, Item 8, Note 2, Investments, Page 134, and in this quarterly report Item 2, Investments Results.
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TAXABLE FIXED MATURITIES
Our taxable fixed-maturity portfolio, with a fair value of $8.749 billion at March 31, 2023, included:
(Dollars in millions) At March 31, 2023 At December 31, 2022
Investment-grade corporate $ 6,579 $ 6,369
States, municipalities and political subdivisions 820 789
Noninvestment-grade corporate 512 500
Government-sponsored enterprises 387 183
Commercial mortgage-backed 225 234
United States government 195 191
Foreign government 31 33
Total $ 8,749 $ 8,299
Our strategy is to buy, and typically hold, fixed-maturity investments to maturity, but we monitor credit profiles and fair value movements when determining holding periods for individual securities. With the exception of United States agency issues that include government-sponsored enterprises, no individual issuer's securities accounted for more than 1.3% of the taxable fixed-maturity portfolio at March 31, 2023. Our investment-grade corporate bonds had an average rating of Baa1 by Moody's or BBB by S&P Global Ratings and represented 75.2% of the taxable fixed-maturity portfolio's fair value at March 31, 2023, compared with 76.7% at year-end 2022.
The heaviest concentration in our investment-grade corporate bond portfolio, based on fair value at
March 31, 2023, was the financial sector. It represented 42.2% of our investment-grade corporate bond portfolio, compared with 42.7% at year-end 2022. The energy sector represented 11.1% and was 10.8% at year-end 2022. No other sector exceeded 10% of our investment-grade corporate bond portfolio.

As discussed in our 2022 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 32, investments in the financial sector include various risks. See risk factors entitled “Financial disruption or a prolonged economic downturn could materially and adversely affect our investment performance” and “Our ability to achieve our performance objectives could be affected by changes in the financial, credit and capital markets or the general economy”.

Our taxable fixed-maturity portfolio at March 31, 2023, included $225 million of commercial mortgage-backed securities with an average rating of Aa2/AA-.
TAX-EXEMPT FIXED MATURITIES
At March 31, 2023, we had $3.929 billion of tax-exempt fixed-maturity securities with an average rating of Aa2/AA by Moody's and S&P Global Ratings. We traditionally have purchased municipal bonds focusing on general obligation and essential services issues, such as water, waste disposal or others. The portfolio is well diversified among approximately 1,700 municipal bond issuers. No single municipal issuer accounted for more than 0.6% of the tax-exempt fixed-maturity portfolio at March 31, 2023.

INTEREST RATE SENSITIVITY ANALYSIS
Because of our strong surplus, long-term investment horizon and ability to hold most fixed-maturity investments until maturity, we believe the company is adequately positioned if interest rates were to rise. Although the fair values of our existing holdings may suffer, a higher rate environment would provide the opportunity to invest cash flow in higher-yielding securities, while reducing the likelihood of untimely redemptions of currently callable securities. While higher interest rates would be expected to continue to increase the number of fixed-maturity holdings trading below 100% of amortized cost, we believe lower fixed-maturity security values due solely to interest rate changes would not signal a decline in credit quality. We continue to manage the portfolio with an eye toward both meeting current income needs and managing interest rate risk.
Our dynamic financial planning model uses analytical tools to assess market risks. As part of this model, the effective duration of the fixed-maturity portfolio is continually monitored by our investment department to evaluate the theoretical impact of interest rate movements.
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The table below summarizes the effect of hypothetical changes in interest rates on the fair value of the fixed-maturity portfolio:
(Dollars in millions) Effect from interest rate change in basis points
-200 -100 — 100 200
At March 31, 2023 $ 13,866 $ 13,268 $ 12,678 $ 12,082 $ 11,485
At December 31, 2022 $ 13,300 $ 12,714 $ 12,132 $ 11,548 $ 10,974
The effective duration of the fixed-maturity portfolio as of March 31, 2023, was 4.6 years, down from 4.7 years at year-end 2022. The above table is a theoretical presentation showing that an instantaneous, parallel shift in the yield curve of 100 basis points could produce an approximately 4.7% change in the fair value of the fixed-maturity portfolio. Generally speaking, the higher a bond is rated, the more directly correlated movements in its fair value are to changes in the general level of interest rates, exclusive of call features. The fair values of average- to lower-rated corporate bonds are additionally influenced by the expansion or contraction of credit spreads.
In our dynamic financial planning model, the selected interest rate change of 100 to 200 basis points represents our view of a shift in rates that is quite possible over a one-year period. The rates modeled should not be considered a prediction of future events as interest rates may be much more volatile in the future. The analysis is not intended to provide a precise forecast of the effect of changes in rates on our results or financial condition, nor does it take into account any actions that we might take to reduce exposure to such risks.

EQUITY INVESTMENTS
Our equity investments, with a fair value totaling $9.967 billion at March 31, 2023, included $9.589 billion of common stock securities of companies generally with strong indications of paying and growing their dividends. Other criteria we evaluate include increasing sales and earnings, proven management and a favorable outlook. We believe our equity investment style is an appropriate long-term strategy. While our long-term financial position would be affected by prolonged changes in the market valuation of our investments, we believe our strong surplus position and cash flow provide a cushion against short-term fluctuations in valuation. Continued payment of cash dividends by the issuers of our common equity holdings can provide a floor to their valuation.

The table below summarizes the effect of hypothetical changes in market prices on fair value of our equity portfolio.
(Dollars in millions) Effect from market price change in percent
-30% -20% -10% — 10% 20% 30%
At March 31, 2023 $ 6,977 $ 7,974 $ 8,970 $ 9,967 $ 10,964 $ 11,960 $ 12,957
At December 31, 2022 $ 6,889 $ 7,873 $ 8,857 $ 9,841 $ 10,825 $ 11,809 $ 12,793

At March 31, 2023, Apple Inc. (Nasdaq:AAPL) was our largest single common stock holding with a fair value of $758 million, or 7.9% of our publicly traded common stock portfolio and 3.3% of the total investment portfolio. Forty-one holdings among nine different sectors each had a fair value greater than $100 million.
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Common Stock Portfolio Industry Sector Distribution
Percent of common stock portfolio
At March 31, 2023 At December 31, 2022
Cincinnati
Financial 		S&P 500 Industry
Weightings 		Cincinnati
Financial 		S&P 500 Industry
Weightings
Sector:
Information technology 29.3 % 26.1 % 26.5 % 25.7 %
Healthcare 13.1 14.2 15.0 15.8
Financial 12.6 12.9 13.6 11.7
Industrials 12.6 8.7 11.9 8.7
Consumer staples 8.7 7.2 8.8 7.2
Consumer discretionary 7.3 10.1 7.7 9.8
Energy 4.9 4.6 5.0 5.2
Materials 4.8 2.6 5.0 2.7
Utilities 2.9 2.9 2.9 3.2
Real estate 2.4 2.6 2.3 2.7
Telecomm services 1.4 8.1 1.3 7.3
Total 100.0 % 100.0 % 100.0 % 100.0 %
UNREALIZED INVESTMENT GAINS AND LOSSES
At March 31, 2023, unrealized investment gains before taxes for the fixed-maturity portfolio totaled $92 million and unrealized investment losses amounted to $776 million before taxes.
The $684 million net unrealized loss position in our fixed-maturity portfolio at March 31, 2023, decreased in the first three months of 2023, primarily due to a decrease in U.S. Treasury yields that was partially offset by a widening of corporate credit spreads. The net loss position for our current fixed-maturity holdings will naturally decline over time as individual securities approach maturity. In addition, changes in interest rates can cause rapid, significant changes in fair values of fixed-maturity securities and the net loss position, as discussed in Quantitative and Qualitative Disclosures About Market Risk.

For federal income tax purposes, taxes on gains from appreciated investments generally are not due until securities are sold. We believe that the appreciated value of equity securities, compared with the cost of securities that is generally used as a tax basis, is a useful measure to help evaluate how fair value can change over time. On this basis, the net unrealized investment gains at March 31, 2023, consisted of a net gain position in our equity portfolio of $5.656 billion. Events or factors such as economic growth or recession can affect the fair value and unrealized investment gains of our equity securities. The five largest holdings in our common stock portfolio were Apple, Microsoft (Nasdaq:MSFT), Broadcom Inc. (Nasdaq:AVGO), UnitedHealth Group Inc. (NYSE:UNH), and AbbVie Inc. (NYSE:ABBV), which had a combined fair value of $2.411 billion.

Unrealized Investment Losses
We expect the number of fixed-maturity securities trading below amortized cost to fluctuate as interest rates rise or fall and credit spreads expand or contract due to prevailing economic conditions. Further, amortized costs for some securities are revised through write-downs recognized in prior periods. At March 31, 2023, 2,900 of the 4,606 fixed-maturity securities we owned had fair values below amortized cost, compared with 3,272 of the 4,521 securities we owned at year-end 2022. The 2,900 holdings with fair values below amortized cost at March 31, 2023, represented 39.9% of the fair value of our fixed-maturity investment portfolio and $776 million in unrealized losses.
• 1,905 of the 2,900 holdings had fair value between 90% and 100% of amortized cost at March 31, 2023. These primarily consist of securities whose current valuation is largely the result of interest rate factors. The fair value of these 1,905 securities was $6.595 billion, and they accounted for $240 million in unrealized losses.
• 969 of the 2,900 fixed-maturity holdings had fair value between 70% and 90% of amortized cost at
March 31, 2023. We believe the 969 fixed-maturity securities will continue to pay interest and ultimately pay
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principal upon maturity. The issuers of these 969 securities have strong cash flow to service their debt and meet their contractual obligation to make principal payments. The fair value of these securities was $2.394 billion, and they accounted for $511 million in unrealized losses.
• 26 of the 2,900 fixed-maturity holdings had fair value below 70% of amortized cost at March 31, 2023. We believe these fixed-maturity securities will continue to pay interest and ultimately pay principal upon maturity. The fair value of these securities was $49 million, and they accounted for $25 million in unrealized losses.

The table below reviews fair values and unrealized losses by investment category and by the overall duration of the securities' continuous unrealized loss position.
(Dollars in millions) Less than 12 months 12 months or more Total
At March 31, 2023 Fair value Unrealized
losses 		Fair value Unrealized
losses 		Fair
value 		Unrealized
losses
Fixed-maturity securities:
Corporate $ 3,910 $ 158 $ 2,273 $ 368 $ 6,183 $ 526
States, municipalities and political subdivisions 1,287 48 890 178 2,177 226
Government-sponsored enterprises 263 3 7 1 270 4
Commercial mortgage-backed 107 5 116 11 223 16
United States government 121 1 52 3 173 4
Foreign government 10 — 2 — 12 —
Total $ 5,698 $ 215 $ 3,340 $ 561 $ 9,038 $ 776
At December 31, 2022
Fixed-maturity securities:
Corporate $ 5,651 $ 412 $ 661 $ 168 $ 6,312 $ 580
States, municipalities and political subdivisions 2,600 274 77 29 2,677 303
Government-sponsored enterprises 123 3 3 — 126 3
Commercial mortgage-backed 215 13 14 3 229 16
United States government 146 3 41 2 187 5
Foreign government 25 1 4 — 29 1
Total $ 8,760 $ 706 $ 800 $ 202 $ 9,560 $ 908
At March 31, 2023, applying our invested asset impairment policy, we determined that the total of $776 million, for securities in an unrealized loss position in the table above, was not the result of a credit loss.

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

During the full year of 2022, we wrote down three securities and recorded $5 million in impairment charges. At December 31, 2022, 3,272 fixed-maturity securities with a total unrealized loss of $908 million were in an unrealized loss position. Of that total, 49 fixed-maturity securities had fair values below 70% of amortized cost.

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The following table summarizes the investment portfolio by severity of decline:
(Dollars in millions) Number
of issues 		Amortized
cost 		Fair value Gross unrealized
gain (loss) 		Gross investment income
At March 31, 2023
Taxable fixed maturities:
Fair valued below 70% of amortized cost 19 $ 57 $ 38 $ (19) $ 1
Fair valued at 70% to less than 100% of amortized cost 1,935 8,215 7,563 (652) 90
Fair valued at 100% and above of amortized cost 306 1,095 1,148 53 16
Investment income on securities sold in current year — — — — 1
Total 2,260 9,367 8,749 (618) 108
Tax-exempt fixed maturities:
Fair valued below 70% of amortized cost 7 17 11 (6) —
Fair valued at 70% to less than 100% of amortized cost 939 1,525 1,426 (99) 11
Fair valued at 100% and above of amortized cost 1,400 2,453 2,492 39 21
Investment income on securities sold in current year — — — — —
Total 2,346 3,995 3,929 (66) 32
Fixed-maturities summary:
Fair valued below 70% of amortized cost 26 74 49 (25) 1
Fair valued at 70% to less than 100% of amortized cost 2,874 9,740 8,989 (751) 101
Fair valued at 100% and above of amortized cost 1,706 3,548 3,640 92 37
Investment income on securities sold in current year — — — — 1
Total 4,606 $ 13,362 $ 12,678 $ (684) $ 140
At December 31, 2022
Fixed-maturities summary:
Fair valued below 70% of amortized cost 49 $ 91 $ 61 $ (30) $ 3
Fair valued at 70% to less than 100% of amortized cost 3,223 10,377 9,499 (878) 392
Fair valued at 100% and above of amortized cost 1,249 2,511 2,572 61 92
Investment income on securities sold in current year — — — — 23
Total 4,521 $ 12,979 $ 12,132 $ (847) $ 510
See our 2022 Annual Report on Form 10-K, Item 7, Critical Accounting Estimates, Asset Impairment, Page 58.

Item 4.        Controls and Procedures
Evaluation of Disclosure Controls and Procedures – The company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)).
Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The company's management, with the participation of the company's chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of the company's disclosure controls and procedures as of March 31, 2023. Based upon that evaluation, the company's chief executive officer and chief financial officer concluded that the design and operation of the company's disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to ensure:
• that information required to be disclosed in the company's reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and
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• that such information is accumulated and communicated to the company's management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting – During the three months ended March 31, 2023, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II – Other Information
Item 1.    Legal Proceedings
Neither the company nor any of our subsidiaries are involved in any litigation believed to be material other than ordinary, routine litigation incidental to the nature of our business.
Item 1A.    Risk Factors
Our risk factors have not changed materially since they were described in our 2022 Annual Report on Form 10-K filed February 23, 2023. Investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.


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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any of our shares that were not registered under the Securities Act during the first three months of 2023. Our repurchase program does not have an expiration date. On January 26, 2018, an additional 15 million shares were authorized, which expanded our current repurchase program. We have 7,124,911 shares available for purchase under our programs at March 31, 2023.
Period Total number
of shares
purchased 		Average
price paid
per share 		Total number of shares purchased as part of
publicly announced
plans or programs 		Maximum number of
shares that may yet be
purchased under the
plans or programs
January 1-31, 2023 — — — 7,326,785
February 1-28, 2023 201,874 $ 123.84 201,874 7,124,911
March 1-31, 2023 — — — 7,124,911
Totals 201,874 123.84 201,874
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Item 6.    Exhibits
Exhibit No. Exhibit Description
3.1
3.2
10.1
31A
31B
32
101.INS
The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CINCINNATI FINANCIAL CORPORATION
Date: April 27, 2023
/S/ Michael J. Sewell
Michael J. Sewell, CPA
Chief Financial Officer, Executive Vice President and Treasurer
(Principal Accounting Officer)
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TABLE OF CONTENTS
Part I Financial InformationprintItem 1. Financial Statements (unaudited)printNote 1 Accounting PoliciesprintNote 2 InvestmentsprintNote 3 Fair Value MeasurementsprintNote 4 Property Casualty Loss and Loss ExpensesprintNote 5 Life Policy and Investment Contract ReservesprintNote 6 Deferred Policy Acquisition CostsprintNote 7 Accumulated Other Comprehensive IncomeprintNote 8 ReinsuranceprintNote 9 Income TaxesprintNote 10 Net Income (loss) Per Common ShareprintNote 11 Employee Retirement BenefitsprintNote 12 Commitments and Contingent LiabilitiesprintNote 13 Segment InformationprintItem 2. Management S Discussion and Analysis Of Financial Condition andprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 6. Exhibitsprint

Exhibits

3.1 Amended and Restated Articles of Incorporation of Cincinnati Financial Corporation (incorporated by reference to the company's Quarterly Report on Form 10-Q for the quarter ended September30,2017, Exhibit 3.1) 3.2 Amended and Restated Code of Regulations of Cincinnati Financial Corporation, as of May 5, 2018 (incorporated by reference to the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, Exhibit 3.2) 10.1 Fifth Amendment of the Amended and Restated Credit Agreement by and among Cincinnati Financial Corporation, CFC Investment Company, PNC Bank, N.A., as Administrative Agent, PNC Capital Markets, LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A. as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A. as Documentation Agents, dated March 23, 2023 (incorporated by reference to Exhibit 10.1 filed with the companys Current Report on Form 8-K dated March 23, 2023 31A Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002 ChiefExecutive Officer 31B Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002 ChiefFinancialOfficer 32 Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002