Cincinnati Financial : 2023 Annual Letter to Shareholders

2023 ANNUAL LETTER TO SHAREHOLDERS

Cincinnati Financial Corporation stands among the 25 largest property casualty insurers in the nation, based on net written premiums. A select group of independent agencies actively markets our business, home and auto insurance in 46 states. Within this select group, we also seek to become the life insurance carrier of choice and to help agents and their clients - our policyholders - by offering leasing and financing services.

Three competitive advantages distinguish your company, positioning us to build shareholder value and long-term success:

1. Commitment to our network of professional independent insurance agencies and to their continued success
2. Operating structure that supports local decision making, showcasing the strength of our field claims service, field underwriting and field support services
3. Financial strength to fulfill our promises and be a consistent market for our agents' business, supporting stability and confidence

Learn more about where we are today and where we are headed by reviewing our publications on cinfin.com/investors.

TABLE OF CONTENTS

1-8 Letter to Shareholders

1. Condensed Balance Sheets and Income Statements
2. Five-YearSummary Financial Information
3. Safe Harbor Statement
4. Subsidiary Officers and Directors
5. Directors and Officers
6. Shareholder Information

2023 Annual Letter to Shareholders

Steven J. Johnston, Chairman and Chief Executive Officer

TO OUR SHAREHOLDERS, ASSOCIATES AND FRIENDS:

FINANCIAL HIGHLIGHTS

2022 was a challenging year for the insurance industry and for Cincinnati Financial Corporation. We faced rising inflation, declining stock and bond markets, Midwest tornadoes, a Category 4 hurricane and a winter storm that impacted 44 states and Washington, D.C. Confident in our financial strength, we remained focused on our strategies for the profitable growth

of our insurance business. Our experienced associates shone as they paid claims with fair, fast and empathetic service and crafted

insurance solutions to help our agents manage the risks of the clients in their communities.

Working together with our premier, independent agency network, new business surpassed $1 billion for the first time ever. Once again outpacing the industry, we achieved 13% growth in total property casualty net written premiums compared with 2021 - our best result since 2001. A.M. Best Co., a leading insurance rating agency, estimates full-year industry growth at 8.8%.

Understanding that our growth must be profitable, we continued to focus on pricing sophistication and segmentation to exercise underwriting discipline. Our full-year 2022 combined ratio of

98.1% was within our long-term target of 95% to 100% and marked 11 consecutive years of underwriting profit. On a statutory basis our

When their community was devastated by a tornado, independent insurance agents and brothers Roy and Keith Riley weren't sure what to expect when the dust settled. But the one thing they could be certain of was Cincinnati's fast and empathetic response: to their clients' claims - and their own.

Insurance is a relationship business. The Riley brothers know and trust the Cincinnati associates who serve their clients. That's why Roy and Keith chose a Cincinnati Insurance policy for themselves and why they recommend us to their clients.

Our national TV and digital advertising campaign includes the Rileys' story and those of other independent agents who also recommend Cincinnati Insurance as a top carrier. Turn to Page 5 of this letter to read more.

Policyholders and independent agents Roy and Keith Riley of Peel & Holland Insurance, a HUB International agency.

Where the agents you trust

Scan the QR code

to watch our national TV commercial.

Learn More

Cincinnati Financial Corporation

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2022 Consolidated Revenues

(in millions)

61.4%
	Commercial Lines
	$4,028
	Personal Lines
	$1,693
	Excess and Surplus
	Lines $487
	Life Insurance $299
	Investment Income
	$781
	Net Investment
	Gains and Losses
25.8%	and Other -$731
Total: $6,557
	million
	11.9%
7.4%
	4.6%
	-11.1%

Total Investments

At fair value (in billions)

			$24.7
	$21.5		$22.4
	$19.7
$16.7
18	19	20	21	22

Net Income (Loss) and Non-GAAP Operating Income (per share)

Net Income

Non-GAAP Operating Income

		$18.10
	$12.10	$6.41
	$4.20	$7.49
	$3.28		$4.24
$1.75
$3.35				-$3.06
18	19	20	21	22

• The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures are in our quarterly news releases, which are available at cinfin.com/investors.

Consolidated revenues in 2022 of $6.6 billion decreased 32%, compared with 2021, primarily due to a reduction in net investment gains. Earned premiums rose 11% and total investments came in at $22.4 billion reflecting net purchases of securities that were offset by a decrease in our securities portfolio valuation. Pretax investment income grew 9% for the year, reaching a record high $781 million and resulting in the ninth consecutive year of increasing investment income.

Book Value	Cash Dividend Declared	Value Creation Ratio
Per common share	Per common share

		$81.72
		$67.04		$67.01
$60.55
$48.10
18	19	20	21	22

				$2.76
		$2.40$2.52
$2.12	$2.24
18	19	20	21	22

	30.5%
			25.7%
		14.7%
				-14.6%
-0.1%
18	19	20	21	22

Book value per share decreased 18% to $67.01 at December 31, 2022, compared with year-end 2021's record high, resulting in a negative 14.6% value creation ratio. On a five-year average basis our value creation ratio was 11.2% - in line with our target range. The board of directors' January decision to increase the cash dividend demonstrates their confidence in the future success of our strategies and sets the stage for a 63rd consecutive year of increasing regular annual dividend.

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2023 Annual Letter to Shareholders

combined ratio was 97.7%, comparing favorably with A.M. Best's industry estimate of 104%.

Steady cash flow from our profitable insurance operations allowed us to expand our investment portfolio and increase pretax investment income 9% to a record-high $781 million.

To return capital to shareholders, we continue to favor cash dividends, increasing them in each of the past 62 years. Your company returned a total of $833 million to shareholders in 2022, paying out $2.70 per share in regular dividends and repurchasing nearly four million shares. Already in January 2023, the board of directors expressed their confidence in our future, declaring a regular quarterly cash dividend of 75-cents-per-share, an increase of 9%. This increase sets the stage for a 63rd consecutive year of rising dividend payments, a record we believe is matched by only seven other publicly traded U.S. companies.

Our primary performance target is an annual value creation ratio averaging 10% to 13% over any five-year period. For the five years ending with 2022, our VCR averaged 11.2%. We continue to believe the value creation ratio is an appropriate metric because it captures the results of our insurance business and investment operations, considering our ability to increase the book value of our company and pay shareholder dividends to you. In 2022, the ratio was negative 14.6%, reflecting a decrease in after-tax property casualty underwriting profit compared with 2021 and a reduction in overall net gains in our investment portfolio.

A clearly articulated vision to be the best company serving independent agencies defines our initiatives and strategies for profitable underwriting growth and helps us to move forward even when there are bumps along the way. We manage our business with the intent to achieve good results through all economic and insurance cycles, being a stable, trustworthy and reliable carrier that our agents can confidently recommend to their best clients and even choose for their own insurance needs.

READY TO MEET CHALLENGES

While our industry and our company may have more challenges to overcome in 2023, we are approaching the future with confidence in our initiatives and an enthusiastic belief that our winning strategy will create value for shareholders, associates, agents and policyholders alike.

Meeting inflation and interest rate challenges

The costs of goods and services have risen sharply and rapidly over the past few years. If you look back from January 1, 2021, through

December 31, 2022, the overall consumer price index has increased by 13.9% - an abrupt change after the previous 10-year average of approximately 2% per year.

This rapid increase in the inflation rate presents a challenge for insurers. The insurance industry is unique in the fact that we don't know the ultimate cost of our products until long after they are sold. However, we do know that the rising costs of building materials and auto parts mean it will cost us more to repair damages when claims occur. We can keep ahead of these trends by considering both pricing and exposure growth.

In 2022, we increased commercial lines net written premiums by 9%, including higher average pricing and higher levels of insured exposures on policies we renewed. We use building valuation software to automate some of the underwriting process that adjusts for those exposures and may also manually adjust premiums to reflect property costs. For our commercial property line of business, premium adjustments for such costs during 2022 were about double the level they were for the same period a year ago.

Changes in the economy can also affect insured exposures that directly relate to premium amounts charged for some policies. For example, on commercial accounts we usually calculate initial estimates for general liability premiums based on estimated sales or payroll volume. At the end of the year, we review the business' actual sales or payroll volume and adjust the premium to an adequate level to meet the actual exposure. The contribution from audit premium to our 2022 commercial lines net written premium was $101 million in 2022, up from $44 million in 2021.

Rising interest rates and economic uncertainty led to increased volatility for both the stock and bond markets. We position our portfolio with consideration to both the low interest rate environment that has prevailed in recent years as well as the potential for a continuation of the 2022 spike in inflation and yields.

Our diversified, laddered bond portfolio lets us be an active buyer of bonds. Yields on new fixed-maturity securities we purchased were higher than the average yield of bonds in the portfolio, helping to raise our book yield. The weighted average yield-to-amortized cost for fixed-maturity securities acquired during 2022 was 5.01%, higher than the 4.22% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2022.

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

Cincinnati Financial Corporation

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