Cincinnati Financial CINF · USD

Segment InformationWe operate primarily in two industries, property casualty insurance and life insurance. Our CODM is the chief executive officer who regularly reviews our reporting segments to make decisions about allocating resources and assessing performance. Our five reporting segments are:•Commercial lines insurance•Personal lines insurance•Excess and surplus lines insurance•Life insurance•InvestmentsWe 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.Revenues come primarily from unaffiliated customers:•All four insurance segments record revenues from insurance premiums earned. •Fee revenues for the commercial, personal and excess and surplus insurance segments primarily represent installment fees. Fee revenues for the life insurance segment represent separate account investment management fees.•Our investments’ revenues consist of pretax net investment income and investment gains and losses.•Other revenues are primarily finance income and earned premiums of Cincinnati Re and Cincinnati Global.Income or loss before income taxes for each segment are reported based on the nature of that business area’s operations:•Income or loss before income taxes for the insurance segments is defined as underwriting profit or loss.◦For commercial lines, personal lines and excess and surplus lines insurance segments, we calculate underwriting profit or loss as premiums earned and fee revenue minus loss and loss expenses and underwriting expenses incurred.◦For the life insurance segment, we calculate underwriting profit or loss as premiums earned and fee revenue, minus contract holders’ benefits and expenses incurred, plus investment interest credited to contract holders.•Income or loss before income taxes for the investments segment is net investment income plus investment gains and losses for investments of the entire company, minus investment interest credited to contract holders of the life insurance segment.•Income or loss before income taxes for the Other category is primarily due to Cincinnati Re and Cincinnati Global premiums earned minus loss and loss expenses and underwriting expenses incurred. It also includes interest expense from debt of the parent company as well as operating expenses of our headquarters.

Commitments and Contingent LiabilitiesThe 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 third-party claims brought against insureds and as an insurer defending against coverage claims. 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.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. 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.On a quarterly basis, we review these outstanding matters. Under current accounting guidance, we establish accruals when it is probable that a covered 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.

Long-Term Debt and Lease ObligationsThis table summarizes the principal amounts of our long-term debt excluding unamortized discounts, none of which are encumbered by rating triggers:(Dollars in millions) Book valuePrincipal amount Interest rate Year of issue At December 31,At December 31, 20252024202520246.900%1998Senior debentures, due 2028$27 $27 $28 $28 6.920%2005Senior debentures, due 2028391 391 391 391 6.125%2004Senior notes, due 2034372 372 374 374 Total$790 $790 $793 $793 The finance lease term for equipment and autos is generally three to six years while the operating lease term for real estate properties is typically five years. Lease obligations totaled $71 million and $60 million in 2025 and 2024, respectively. Below are the lease obligations we expect to pay through 2031 and thereafter, including $8 million of interest for finance and operating leases:(Dollars in millions)Years ended December 31, 202620272028202920302031 and thereafterFinance lease obligations$18 $15 $13 $10 $6 $3 Operating lease obligations3 3 2 2 2 2 Total lease obligations$21 $18 $15 $12 $8 $5 The following table provides lease cost and other information:(Dollars in millions)Years ended December 31,202520242023Lease cost: Finance lease cost$18 $16 $14 Operating lease cost3 3 3 Total lease cost$21 $19 $17 Other information finance leases: Finance cash outflows $18 $17 $16 Weighted average discount rate5.06%4.88%4.35%Weighted average remaining lease term in years3.873.963.89Other information operating leases: Operating cash outflows $4 $3 $3 Weighted average discount rate5.21%4.44%4.66%Weighted average remaining lease term in years4.063.474.

Income TaxesThe significant components of deferred tax assets and liabilities included in the consolidated balance sheets at December 31 were as follows: (Dollars in millions)At December 31,20252024Deferred tax assets: Unearned premiums$210 $193 Loss and loss expense reserves168 141 Net operating loss on international earnings13 19 Foreign tax credits34 23 Other62 80 Total gross deferred tax assets487 456 Deferred tax liabilities: Investment gains and other, net 1,783 1,434 Deferred acquisition costs229 212 Life policy reserves86 96 Deferred international earnings77 56 Investments56 55 Other89 79 Total gross deferred tax liabilities2,320 1,932 Net deferred income tax liability$1,833 $1,476 Deferred tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount recognized for tax purposes.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 of taxable income in the carryback and carryforward periods as permitted by law, we believe 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 at December 31, 2025 and 2024, for our U.S. domestic operations.For financial reporting purposes, income before income taxes includes the following components: (Dollars in millions)For the years ended December 31,202520242023United States$2,890 $2,766 $2,195 International90 92 81 Total income before income taxes$2,980 $2,858 $2,276 The provision for income taxes consists of: (Dollars in millions)For the years ended December 31,202520242023Provision for income taxes:Current – United States$296 $445 $209 International8 4 1 Total current304 449 210 Deferred – United States271 101 216 International12 16 7 Total deferred283 117 223 Total provision for income taxes$587 $566 $433 The differences between the 21% statutory federal income tax rate and our effective income tax rate were as follows:(Dollars in millions)Years ended December 31,202520242023Tax at statutory rate:$626 21.0 %$600 21.0 %$478 21.0 %Increase (decrease) resulting from: Nontaxable or nondeductible itemsTax-exempt income from municipal bonds(23)(0.8)(21)(0.7)(21)(0.9)Dividend received exclusion(21)(0.7)(22)(0.8)(22)(1.

Share-Based Associate Compensation PlansFour equity compensation plans currently permit us to grant various types of equity awards. We currently grant incentive stock options, nonqualified stock options, service-based restricted stock units and performance-based restricted stock units to associates, including some with market-based performance objectives under our shareholder-approved plans. We also have a Holiday Stock Plan that permits annual awards of one share of common stock to each full-time associate for each full calendar year of service up to a maximum of 10 shares. One of our equity compensation plans permits us to grant stock to our outside directors as a component of their annual compensation. We used treasury shares for share-based compensation award issues or exercises during 2025 and 2024.Share-based compensation cost after tax was $37 million, $37 million and $32 million for the years ended December 31, 2025, 2024 and 2023, respectively. The related income tax benefit recognized was $9 million,$9 million and $8 million for the years ended December 31, 2025, 2024 and 2023, respectively. Options exercised during the years ended December 31, 2025, 2024 and 2023, had intrinsic value of $26 million, $32 million and $14 million, respectively. Intrinsic value is the market price less the exercise price. Options vested during the years ended December 31, 2025 and 2024 had total intrinsic value of $18 million and $12 million, respectively. Options vested during the year ended December 31, 2023 had no intrinsic value because the weighted average exercise price was greater than the market price on the reporting date. As of December 31, 2025, we had $44 million of unrecognized total compensation cost related to nonvested stock options and restricted stock unit awards. That cost will be recognized over a weighted-average period of 1.7 years. Stock OptionsStock options are granted to associates at an exercise price equal to the fair value as determined by the average high and low sales price reported on the Nasdaq Global Select Market for the grant date and are exercisable over 10-year periods. The stock options generally vest ratably over a three-year period. In determining the share-based compensation amounts, we estimate the fair value of each option granted on the date of grant using the Black Scholes pricing model.

Deferred Policy Acquisition CostsExpenses 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. No premium deficiencies were recorded in the consolidated statements of income in 2025, 2024 and 2023, 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.

GovernanceCybersecurity matters are an important part of reporting to our board of directors, executive management team, risk committee and disclosure committee. From a board perspective, the audit committee oversees the company's cybersecurity efforts along with additional oversight from the entire board. Two members of the audit committee have obtained certifications in cybersecurity oversight. Each quarter, the chief information officer and chief information security officer report to the audit committee on cybersecurity risks and controls. Also occurring each quarter, the entire board, and our senior executive team, as appropriate, receives a comprehensive report from the chief risk officer on the status and management of risk and other metrics relative to identified tolerances and limits, risk assessments and risk plans. Additionally, the chief risk officer has direct access to all members of the board of directors and presents in person at board meetings twice each year.At the executive management and management levels, the chief information security officer leads the process of assessing and managing material risks from cybersecurity threats. Our chief information security officer has over 25 years of experience as a technology professional with in-depth knowledge of IT management processes and holds multiple degrees and professional designations, including as a certified information systems security professional (CISSP). The chief information security officer also works in collaboration with our chief information officer and chief risk officer and is supported by a cross-functional group of qualified and experienced professionals across various committees and functions. On a quarterly basis, the chief information officer provides a cybersecurity update to the disclosure committee and, on a monthly basis, the information security office team delivers a cybersecurity report to members of the senior executive team. Also refer to Item 10, Directors, Executive Officers and Corporate Governance, for additional qualification, experience and responsibility details.Associates involved in this area stay informed of industry trends and evolving threats using various resources including government authorities, peers, continuous education, industry publications, news outlets and other external parties that provide pertinent information.

Investments The following table provides amortized cost, gross unrealized gains, gross unrealized losses and fair value for our fixed-maturity and short-term investments:(Dollars in millions)AmortizedcostGross unrealized FairvalueAt December 31, 2025gainslossesFixed-maturity: Corporate $9,750 $164 $203 $9,711 States, municipalities and political subdivisions5,065 35 181 4,919 Government-sponsored enterprises2,360 3 4 2,359 Asset-backed793 12 8 797 United States government312 2 1 313 Foreign government24 — — 24 Total fixed-maturity18,304 216 397 18,123 Short-term148 — — 148 Total fixed-maturity and short-term investments$18,452 $216 $397 $18,271 At December 31, 2024 Fixed-maturity: Corporate $8,652 $61 $333 $8,380 States, municipalities and political subdivisions4,976 15 270 4,721 Government-sponsored enterprises2,282 1 9 2,274 Asset-backed 567 1 17 551 United States government228 — 2 226 Foreign government30 — — 30 Total fixed-maturity16,735 78 631 16,182 Short-term298 — — 298 Total fixed-maturity and short-term investments$17,033 $78 $631 $16,480 The decrease in net unrealized investment losses in our fixed-maturity portfolio at December 31, 2025, is primarily due to a decrease in U.S. Treasury yields and a slight tightening of corporate credit spreads. Our asset-backed securities had an average rating of Aa2/AA and Aa1/AA at December 31, 2025 and 2024, respectively.