10-Q 1 cinf-20220331.htm 10-Q cinf-20220331
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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, 2022.
       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 classTrading Symbol(s)Name of each exchange on which registered
Common stockCINFNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Nonaccelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes No
As of April 22, 2022, there were 160,355,247 shares of common stock outstanding.



CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED March 31, 2022
 
TABLE OF CONTENTS
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 

Cincinnati Financial Corporation First-Quarter 2022 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,
20222021
Assets  
Investments  
Fixed maturities, at fair value (amortized cost: 2022—$12,330; 2021—$12,230)
$12,376 $13,022 
Equity securities, at fair value (cost: 2022—$4,167; 2021—$4,121)
10,675 11,315 
Other invested assets348 329 
Total investments23,399 24,666 
Cash and cash equivalents987 1,139 
Investment income receivable147 144 
Finance receivable92 98 
Premiums receivable2,248 2,053 
Reinsurance recoverable556 570 
Prepaid reinsurance premiums79 78 
Deferred policy acquisition costs979 905 
Land, building and equipment, net, for company use (accumulated depreciation:
   2022—$309; 2021—$303)
203 205 
Other assets657 570 
Separate accounts903 959 
Total assets$30,250 $31,387 
Liabilities  
Insurance reserves  
Loss and loss expense reserves$7,366 $7,305 
Life policy and investment contract reserves3,027 3,014 
Unearned premiums3,560 3,271 
Other liabilities952 1,092 
Deferred income tax1,460 1,744 
Note payable49 54 
Long-term debt and lease obligations841 843 
Separate accounts903 959 
Total liabilities18,158 18,282 
Commitments and contingent liabilities (Note 12)
Shareholders' Equity  
Common stock, par value—$2 per share; (authorized: 2022 and 2021—500 million
   shares; issued: 2022 and 2021—198.3 million shares)
397 397 
Paid-in capital1,354 1,356 
Retained earnings12,241 12,625 
Accumulated other comprehensive income 59 648 
Treasury stock at cost (2022—38.0 million shares and 2021—38.0 million shares)
(1,959)(1,921)
Total shareholders' equity12,092 13,105 
Total liabilities and shareholders' equity$30,250 $31,387 
 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2022 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,
20222021
Revenues  
Earned premiums$1,690 $1,544 
Investment income, net of expenses185 174 
Investment gains and losses, net(666)504 
Fee revenues4 3 
Other revenues2 2 
Total revenues1,215 2,227 
Benefits and Expenses  
Insurance losses and contract holders' benefits1,039 1,003 
Underwriting, acquisition and insurance expenses519 439 
Interest expense13 13 
Other operating expenses4 4 
 Total benefits and expenses1,575 1,459 
Income (Loss) Before Income Taxes(360)768 
Provision (Benefit) for Income Taxes  
Current41 36 
Deferred(128)112 
Total provision (benefit) for income taxes(87)148 
Net Income (Loss)$(273)$620 
Per Common Share  
Net income (loss)—basic$(1.70)$3.85 
Net income (loss)—diluted(1.70)3.82 
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2022 10-Q
Page 4


Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Dollars in millions)Three months ended March 31,
20222021
Net Income (Loss)$(273)$620 
Other Comprehensive Income (Loss)  
Change in unrealized gains and losses on investments, net of tax (benefit) of $(157) and $(41), respectively
(589)(155)
Amortization of pension actuarial loss and prior service cost, net of tax of $0 and $1, respectively
 3 
Change in life deferred acquisition costs, life policy reserves and other, net of tax of $0 and $2, respectively
 8 
Other comprehensive income (loss)(589)(144)
Comprehensive Income (Loss)$(862)$476 
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Cincinnati Financial Corporation First-Quarter 2022 10-Q
Page 5


Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
(Dollars in millions)Three months ended March 31,
20222021
Common Stock
   Beginning of period$397 $397 
   Share-based awards  
   End of period397 397 
Paid-In Capital
   Beginning of period1,356 1,328 
   Share-based awards(14)(16)
   Share-based compensation11 9 
   Other1 1 
   End of period1,354 1,322 
Retained Earnings
   Beginning of period12,625 10,085 
   Net income (loss)(273)620 
Dividends declared (111)(102)
   End of period12,241 10,603 
Accumulated Other Comprehensive Income
   Beginning of period648 769 
   Other comprehensive loss(589)(144)
   End of period59 625 
Treasury Stock
   Beginning of period(1,921)(1,790)
   Share-based awards9 12 
   Shares acquired - share repurchase authorization(45)(28)
   Shares acquired - share-based compensation plans(2)(3)
   End of period(1,959)(1,809)
      Total Shareholders' Equity$12,092 $11,138 
(In millions, except per common share)
Common Stock - Shares Outstanding
   Beginning of period160.3 160.9 
   Share-based awards0.4 0.4 
   Shares acquired - share repurchase authorization(0.4)(0.3)
   End of period160.3 161.0 
Dividends declared per common share$0.69 $0.63 
Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2022 10-Q
Page 6


Cincinnati Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
 (Dollars in millions)Three months ended March 31,
20222021
Cash Flows From Operating Activities  
Net income (loss)$(273)$620 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization29 23 
Investment gains and losses, net674 (501)
Share-based compensation11 9 
Interest credited to contract holders12 11 
Deferred income tax expense(128)112 
Changes in:  
Investment income receivable(3)2 
Premiums and reinsurance receivable(182)(166)
Deferred policy acquisition costs(68)(49)
Other assets(20)(33)
Loss and loss expense reserves61 204 
Life policy and investment contract reserves17 15 
Unearned premiums289 221 
Other liabilities(136)(80)
Current income tax receivable/payable(85)(34)
Net cash provided by operating activities198 354 
Cash Flows From Investing Activities  
Sale of fixed maturities55 30 
Call or maturity of fixed maturities296 300 
Sale of equity securities56 65 
Purchase of fixed maturities(460)(467)
Purchase of equity securities(90)(78)
Investment in finance receivables(3)(12)
Collection of finance receivables9 8 
Investment in building and equipment(4)(5)
Change in other invested assets, net(21)6 
Net cash used in investing activities(162)(153)
Cash Flows From Financing Activities  
Payment of cash dividends to shareholders(99)(95)
Shares acquired - share repurchase authorization(45)(28)
Changes in note payable
(5)3 
Proceeds from stock options exercised4 4 
Contract holders' funds deposited18 27 
Contract holders' funds withdrawn(32)(33)
Other(29)(32)
Net cash used in financing activities(188)(154)
Net change in cash and cash equivalents(152)47 
Cash and cash equivalents at beginning of year1,139 900 
Cash and cash equivalents at end of period$987 $947 
Supplemental Disclosures of Cash Flow Information:  
Income taxes paid121 66 
Noncash Activities  
Equipment acquired under finance lease obligations$2 $3 
Share-based compensation16 16 
Other assets and other liabilities10 44 
 Accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
Cincinnati Financial Corporation First-Quarter 2022 10-Q
Page 7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 1 — Accounting Policies
The condensed consolidated financial statements include the accounts of Cincinnati Financial Corporation and its consolidated subsidiaries, each of which is wholly owned. These statements are presented in conformity with accounting principles generally accepted in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in consolidation.
 
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Our actual results could differ from those estimates. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been condensed or omitted.
 
Our March 31, 2022, condensed consolidated financial statements are unaudited. We believe that we have made all adjustments, consisting only of normal recurring accruals, that are necessary for fair presentation. These condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our 2021 Annual Report on Form 10-K. The results of operations for interim periods do not necessarily indicate results to be expected for the full year.

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

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

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

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

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

Cincinnati Financial Corporation First-Quarter 2022 10-Q
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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 unrealizedFair value
At March 31, 2022gainslosses
Fixed maturity securities:    
Corporate $7,131 $184 $166 $7,149 
States, municipalities and political subdivisions4,780 106 76 4,810 
Commercial mortgage-backed267 1 2 266 
United States government113  1 112 
Foreign government25   25 
Government-sponsored enterprises 14   14 
Total$12,330 $291 $245 $12,376 
At December 31, 2021    
Fixed maturity securities:    
Corporate $7,043 $467 $13 $7,497 
States, municipalities and political subdivisions4,768 330 3 5,095 
Commercial mortgage-backed 264 9  273 
United States government121 2  123 
Foreign government26   26 
Government-sponsored enterprises8   8 
Total$12,230 $808 $16 $13,022 
 
The decrease in net unrealized investment gains in our fixed-maturity portfolio at March 31, 2022, is 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, 2022, and December 31, 2021.

Cincinnati Financial Corporation First-Quarter 2022 10-Q
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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 months12 months or moreTotal
At March 31, 2022Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Fixed maturity securities:      
Corporate $2,603 $157 $78 $9 $2,681 $166 
States, municipalities and political subdivisions977 72 21 4 998 76 
Commercial mortgage-backed128 2 10  138 2 
United States government72 1   72 1 
Foreign government7    7  
Government-sponsored enterprises10  3  13  
Total$3,797 $232 $112 $13 $3,909 $245 
At December 31, 2021      
Fixed maturity securities:      
Corporate $861 $13 $15 $ $876 $13 
States, municipalities and political subdivisions105 2 2 1 107 3 
Commercial mortgage-backed10  11  21  
United States government48    48  
Foreign government16    16  
Government-sponsored enterprises7    7  
Total$1,047 $15 $28 $1 $1,075 $16 

Contractual maturity dates for fixed-maturities securities were:
(Dollars in millions)Amortized
cost
Fair
value
% of fair
value
At March 31, 2022
Maturity dates:   
Due in one year or less$686 $690 5.6 %
Due after one year through five years3,636 3,690 29.8 
Due after five years through ten years3,460 3,525 28.5 
Due after ten years4,548 4,471 36.1 
Total$12,330 $12,376 100.0 %

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

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


The following table provides investment income and investment gains and losses, net:
(Dollars in millions)Three months ended March 31,
20222021
Investment income:
Interest$123 $118 
Dividends65 58 
Other 1 2 
Total189 178 
Less investment expenses4 4 
Total$185 $174 
Investment gains and losses, net:  
Equity securities:  
Investment gains and losses on securities sold, net$8 $4 
Unrealized gains and losses on securities still held, net(683)487 
Subtotal(675)491 
Fixed maturities:  
Gross realized gains4 3 
Gross realized losses(1) 
Subtotal3 3 
Other6 10 
Total$(666)$504 
 
The fair value of our equity portfolio was $10.675 billion and $11.315 billion at March 31, 2022, and December 31, 2021, respectively. At March 31, 2022, and December 31, 2021, Apple Inc. (Nasdaq:AAPL), an equity holding, was our largest single investment holding with a fair value of $848 million and $862 million, which was 8.3% and 7.9% of our publicly traded common equities portfolio and 3.7% and 3.5% of the total investment portfolio, respectively.

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

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

Cincinnati Financial Corporation First-Quarter 2022 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, 2021, and ultimately management determines fair value. See our 2021 Annual Report on Form 10-K, Item 8, Note 3, Fair Value Measurements, Page 137, for information on characteristics and valuation techniques used in determining fair value.

Fair Value Disclosures for Assets
The following tables illustrate the fair value hierarchy for those assets measured at fair value on a recurring basis at March 31, 2022, and December 31, 2021. We do not have any liabilities carried at fair value.
(Dollars in millions)Quoted prices in
active markets for
identical assets
(Level 1)
Significant other
observable inputs (Level 2)
Significant
unobservable
inputs
(Level 3)
Total
At March 31, 2022
Fixed maturities, available for sale:    
Corporate $ $7,149 $ $7,149 
States, municipalities and political subdivisions 4,810  4,810 
Commercial mortgage-backed  266  266 
United States government112   112 
Foreign government 25  25 
Government-sponsored enterprises 14  14 
Subtotal112 12,264  12,376 
Common equities10,245   10,245 
Nonredeemable preferred equities 430  430 
Separate accounts taxable fixed maturities 887  887 
Top Hat savings plan mutual funds and common
   equity (included in Other assets)
70   70 
Total$10,427 $13,581 $ $24,008 
At December 31, 2021
Fixed maturities, available for sale:    
Corporate $ $7,497 $ $7,497 
States, municipalities and political subdivisions 5,095  5,095 
Commercial mortgage-backed  273  273 
United States government123   123 
Foreign government 26  26 
Government-sponsored enterprises 8  8 
Subtotal123 12,899  13,022 
Common equities10,862   10,862 
Nonredeemable preferred equities 453  453 
Separate accounts taxable fixed maturities  948  948 
Top Hat savings plan mutual funds and common
  equity (included in Other assets)
64   64 
Total$11,049 $14,300 $ $25,349 
 
Cincinnati Financial Corporation First-Quarter 2022 10-Q
Page 12


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

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 valuePrincipal amount
Interest
rate
Year of 
issue
 March 31,December 31,March 31,December 31,
 2022202120222021
6.900%1998Senior debentures, due 2028$27 $27 $28 $28 
6.920%2005Senior debentures, due 2028391 391 391 391 
6.125%2004Senior notes, due 2034371 371 374 374