CINCINNATI FINANCIAL CORP

Consolidated financial results primarily reflect the results of our five reporting segments. These segments are defined based on financial information we use to evaluate performance and to determine the allocation of assets.

We report as Other the noninvestment operations of the parent company and its noninsurer subsidiary, CFC Investment Company. In addition, Other includes the financial results of our reinsurance assumed operations, known as Cincinnati Re®, and our London-based global specialty underwriter, known as Cincinnati Global Underwriting Ltd. SM (Cincinnati Global).

We measure profit or loss for our commercial lines, personal lines, excess and surplus lines and life insurance segments based upon underwriting results (profit or loss), which represent net earned premium less loss and loss expenses, or contract holders’ benefits incurred, and underwriting expenses on a pretax basis. We also evaluate results for our consolidated property casualty insurance operations. That is the total of our standard market segments (commercial lines and personal lines), our excess and surplus lines insurance segment, Cincinnati Re and Cincinnati Global. For analysis of our consolidated property casualty insurance results, it is important to include the earned premiums, loss and loss expenses and also underwriting expenses reported as Other. Underwriting results and segment pretax operating income are not substitutes for net income determined in accordance with GAAP.

For our consolidated property casualty insurance operations as well as the insurance segments, statutory accounting data and ratios are key performance indicators that we use to assess business trends and to make comparisons to industry results, since GAAP-based industry data generally is not as readily available.

Investments held by the parent company and the investment portfolios for the insurance subsidiaries are managed and reported as the investments segment, separate from our underwriting business. Net investment income and net investment gains and losses for our investment portfolios are discussed in the Investments Results.

The calculations of segment data are described in more detail in Item 8, Note 18, of the Consolidated Financial Statements. The following sections provide analysis and discussion of results of operations for each of the five segments.

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Consolidated Property Casualty Insurance Results

Earned and net written premiums for our consolidated property casualty operations grew in 2023, reflecting average renewal price increases, a higher level of insured exposures and strategic initiatives for targeted growth. A key measure of property casualty profitability is underwriting profit or loss. Profit increased in 2023, reflecting improved overall insured loss experience before catastrophe effects, as price increases helped to offset elevated losses reflecting economic or other forms of inflation that increased our uncertainty regarding ultimate losses. Our 2023 underwriting profit of $401 million was $261 million more than in 2022, including a $31 million unfavorable effect from a higher amount of catastrophe losses, mostly caused by severe weather. Prior accident year loss experience before catastrophes during 2023 was more favorable than in 2022, and represented $81 million of the 2023 underwriting profit increase. We continue working to improve underwriting profitability, such as through higher pricing and our ongoing initiatives to improve pricing precision and loss experience related to claims and loss control practices. Underwriting profit trends are discussed further below.

The table below highlights property casualty results, with analysis and discussion in the sections that follow. That analysis and discussion includes sections by segment.

Performance highlights for consolidated property casualty operations include:

•Premiums – Agency renewal written premiums rose $596 million or 11% in 2023 and continued to contribute to growth in earned premiums and net written premiums that rose in each of our property casualty insurance segments. The renewal premium increase was largely due to average renewal price increases and a higher level of insured exposures. Price increases with enhanced precision continue to benefit operating results.

New business written premiums produced through agencies increased $145 million in 2023, compared with 2022. Agents appointed during 2023 or 2022 produced a 2023 increase in standard lines new business of $65 million.

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Growth initiatives also favorably affect growth in subsequent years, particularly as newer agency relationships mature over time.

Cincinnati Re produced $558 million of 2023 net written premiums and had a negative contribution of $27 million to growth in other written premiums, compared with 2022. Cincinnati Re assumes risks through reinsurance treaties and in some cases cedes part of the risk and related premiums to one or more unaffiliated reinsurance companies through transactions known as retrocessions. In 2023, earned premiums for Cincinnati Re totaled $529 million.

Cincinnati Global had a positive contribution to the increase in other written premiums. Net written premiums were $280 million in 2023, and contributed $50 million of the growth in other written premiums, compared with 2022. In 2023, earned premiums for Cincinnati Global totaled $266 million.

Other written premiums also include premiums ceded to reinsurers as part of our ceded reinsurance program. An increase in ceded premiums, other than Cincinnati Re and Cincinnati Global premiums, reduced net written premium growth by $18 million in 2023.

The table below analyzes premium revenue components and trends.

•Combined ratio – The combined ratio improved by 3.2 percentage points in 2023, compared with 2022, including a 0.5 percentage-point decrease in the ratio for catastrophe losses. The 2023 ratio for current accident year losses and loss expenses before catastrophes decreased by 1.8 percentage points. That ratio improvement included an increase of 1.9 points for the IBNR portion and a decrease of 3.7 points for the case incurred portion. Price increases and other underwriting efforts have helped to offset losses that have elevated significantly since 2021 due to inflation effects discussed below, as earned premiums in 2023 grew faster than those losses and loss expenses. The remainder of the 2023 combined ratio improvement included 0.9 percentage points more benefit in the ratio for prior accident year losses and loss expenses before catastrophes. We further discuss ratios related to reserve development in the sections that follow the Catastrophe Losses Incurred table below.

Elevated inflation since 2021 has resulted in higher losses and loss expenses as costs have increased significantly to repair damaged autos or other property that we insure. We also experienced higher losses for liability coverages for some of our lines of business. Higher losses and loss expenses for various lines of business reflect increased uncertainty of estimated ultimate losses. Until longer-term paid loss cost trends become more clear, we intend to remain prudent in reserving for estimated ultimate losses. We believe future property casualty underwriting results will continue to benefit from price increases and our ongoing initiatives to improve pricing precision and loss experience related to claims and loss control practices.

Our statutory combined ratio was 94.6% in 2023 compared with 97.7% in 2022 and 87.9% in 2021. The estimated statutory combined ratio for the property casualty industry, with the industry’s ratio excluding its mortgage and financial guaranty lines of business and based on industry data reported through the first nine months of 2023, was 103.4% in 2023, 104.0% in 2022 and 100.0% in 2021. The contribution of catastrophe losses to our statutory combined ratio was 8.8 percentage points in 2023, 8.9 percentage points in 2022 and 7.6 percentage points in 2021, compared with industry estimates of 9.8, 6.8 and 7.4 percentage points, respectively, with 2023 representing industry data reported through the first nine months of 2023. Components of the combined ratio are discussed below.

Catastrophe loss trends are an important factor in assessing trends for overall underwriting results. Our 10-year historical annual average contribution of catastrophe losses to the combined ratio was 7.7 percentage points at December 31, 2023. Our five-year average was 8.8 percentage points.

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Effective June 1, 2023, we restructured our reinsurance program for Cincinnati Re that included property catastrophe excess of loss coverage. The restructured treaties are for a period of one year and provide $40 million of coverage for various combinations of occurrences for business written in North America on a direct basis and by Cincinnati Re. Cincinnati Global catastrophe losses are not applicable to the treaty. There is a per occurrence limit of $20 million for Cincinnati Re catastrophe losses in excess of $80 million per event. The remaining coverage is for business written by Cincinnati Re and on a direct basis that applies to catastrophe losses in excess of $600 million per event. During 2023, there was no recovery from reinsurers for losses pertaining to these treaties.

The following table shows catastrophe losses incurred for the past two calendar years, net of reinsurance, as well as the effect of loss development on prior period catastrophe reserves. We individually list declared catastrophe events for which our incurred losses reached or exceeded $25 million.

Catastrophe Losses Incurred

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Consolidated Property Casualty Insurance Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses as well as the associated loss expenses. For all property casualty lines of business in aggregate, net loss and loss expense reserves at December 31, 2023, were $682 million higher than at year-end 2022, including $634 million for incurred but not reported (IBNR) reserves. The $682 million reserve increase raised year-end 2022 net loss and loss expense reserves by 9%, compared with a 10% increase in 2023 earned premiums.

Most of the incurred losses and loss expenses shown in the consolidated property casualty insurance results three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since less than half of our consolidated property casualty current accident year incurred losses and loss expenses represents net paid amounts, the majority represents reserves for our estimate of ultimate losses and loss expenses. These reserves develop over time, and we re-estimate previously reported reserves as we learn more about the development of the related claims. The table below illustrates that development. For example, the 70.4% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 2.0 percentage points to 68.4% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2023. Accident years 2022 and 2021 have both developed favorably, as indicated by the progression over time for the ratios in the table.

Catastrophe loss trends, discussed above, accounted for some of the movement in the current accident year loss and loss expense ratio for 2023, compared with 2022. Catastrophe losses added 9.3 percentage points in 2023, 10.2 points in 2022 and 9.1 points in 2021 to the respective consolidated property casualty current accident year loss and loss expense ratios in the table above.

The 58.4% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 decreased 1.8 percentage points compared with the 60.2% accident year 2022 ratio measured as of December 31, 2022. The decrease included a 0.3 percentage-point decrease in the ratio for current accident year losses of $2 million or more per claim, shown in the table below.

Reserve development on prior accident years continued to net to a favorable amount in 2023, and was primarily due to less-than-anticipated loss emergence on known claims. We recognized $215 million of favorable development in 2023, compared with $159 million in 2022 and $428 million in 2021. Of the $56 million increase in 2023, compared with 2022, $45 million was attributable to our commercial auto and personal auto lines of business. Approximately 80% of our net favorable reserve development on prior accident years recognized during 2023 occurred in our workers' compensation, commercial property and homeowner lines of business. In 2022, our workers' compensation and homeowner lines of business were responsible for approximately 74% of the favorable reserve development. As discussed in Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves, Property Casualty Insurance Development of Estimated Reserves by Accident Year, commercial casualty and workers' compensation are considered long-tail lines with the potential for revisions inherent in estimating reserves. Favorable development recognized during 2021 was primarily from our commercial casualty, commercial property and workers’ compensation lines of business. Development by accident year is further discussed in Liquidity and Capital Resources, Property Casualty Insurance Development of Estimated Reserves by Accident Year.

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Consolidated Property Casualty Insurance Losses by Size

In 2023, total large losses incurred increased by $71 million, or 23%, net of reinsurance, primarily due to an increase for our commercial lines insurance segment. The corresponding 2023 ratio increased 0.5 percentage points, compared with 2022. The large loss data included in the table above does not include Cincinnati Re and Cincinnati Global. Our analysis of large losses incurred indicated no unexpected concentration of these losses and reserve increases by geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility of aggregate loss experience for our portfolio of larger policies is greater than that of our portfolio of smaller policies, and we continue to monitor the volatility in addition to general inflationary trends in loss costs.

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Consolidated Property Casualty Insurance Underwriting Expenses

Consolidated property casualty commission expenses rose $119 million, or 9%, in 2023, with profit-sharing commissions for agencies increasing by $10 million. The 2023 ratio of commission expenses as a percent of earned premiums decreased by 0.3 percentage points, compared with 2022. The 2023 ratio for other underwriting expenses increased by 0.3 percentage points, compared with 2022. Earned premiums rose at a slower pace than other underwriting expenses during 2023, and we continued to carefully manage expenses while also making strategic investments that include enhancement of underwriting expertise.

Commission expenses include our profit-sharing commissions, which are primarily based on one-year and three-year profitability of an agency’s business. The aggregate profit trend for agencies that earn these profit-based commissions can differ from the aggregate profit trend for all agencies reflected in our consolidated property casualty results.

Salaries, benefits and payroll taxes for our associates account for approximately half of our property casualty other underwriting expenses. Most of our associates either provide direct service to the property casualty portion of our agencies’ businesses or provide support to those associates.

Discussions below of our property casualty insurance segments provide additional details about our results.

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Commercial Lines Insurance Results

Performance highlights for the commercial lines insurance segment include:

•Premiums – Earned premiums and net written premiums rose in 2023, including a $204 million, or 6%, increase in renewal written premiums that continued to include higher average pricing and a higher level of insured exposures. New business written premiums in 2023 decreased $16 million, or 3%, compared with 2022, reflecting pricing discipline in a highly competitive environment.

•Combined ratio – The 2023 combined ratio improved by 3.0 percentage points compared with 2022, despite a 0.2 percentage-point increase in the ratio component for catastrophe losses. Development on prior accident years loss and loss expense reserves before catastrophes during 2023 was 1.3 percentage points more favorable than in 2022. The 2023 combined ratio also improved by 2.1 points due to a lower ratio for current accident year loss and loss expenses before catastrophe losses, compared with 2022. That ratio improvement included an increase of 2.4 points for the IBNR portion and a decrease of 4.5 points for the case incurred portion. Price increases and other underwriting actions have helped offset losses that have elevated significantly since 2021 due to inflation effects, as earned premiums in 2023 grew faster than those losses and loss expenses.

When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends for inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company. Elevated inflation since 2021 has resulted in higher losses and loss expenses as costs have increased significantly to repair damaged business property or autos that we insure, in addition to higher losses for liability coverages for some of our lines of business. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear.

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Commercial umbrella coverages are part of our commercial casualty line of business that help protect businesses against liability from occurrences such as accidents or injuries. Following a significantly unfavorable effect on our 2022 ratios for losses and expenses, commercial umbrella contributed a favorable decrease of approximately 2.2 percentage points to the commercial lines segment 2023 ratio for loss and loss expenses decrease of 3.2% shown in the table above. Incurred losses and loss expenses for commercial umbrella coverages of $346 million in 2023 decreased $70 million, or 17%, compared with 2022, including an increase in net paid losses of $7 million. The $70 million decrease in losses and loss expenses included a decrease of $39 million or 24% for the IBNR portion, while earned premiums of $502 million increased 1%. The estimated combined ratio for commercial umbrella for 2023 was 98%, compared with an estimated 112% for 2022, and its 2023 earned premiums represented approximately 34% of our commercial casualty premiums. Severe losses from commercial auto accidents were the primary source of our commercial umbrella claims during 2023 and also in recent years.

Pricing precision and other initiatives to improve commercial lines underwriting profitability complement our business practices that continue to leverage the local presence of our field associates. Field marketing representatives meet with local agencies to assess each risk, determine limits of insurance and establish appropriate terms and conditions. They underwrite new business, with collaboration and expertise from headquarters associates as needed, while field loss control, machinery and equipment and claims representatives conduct on-site inspections. Field claims representatives also assist underwriters by preparing full reports on their first-hand observations of risk quality.

Our commercial lines statutory combined ratio was 95.6% in 2023, compared with 98.5% in 2022 and 83.2% in 2021. The contribution of catastrophe losses to our commercial lines statutory combined ratio was 7.2 percentage points in 2023, 7.0 percentage points in 2022 and 3.4 percentage points in 2021.

Commercial Lines Insurance Premiums

We continue to refine our use of predictive analytics tools to improve pricing precision as we further segment commercial lines policies, emphasizing identification and retention of policies we believe have relatively stronger price adequacy. These tools better align individual insurance policy pricing to risk attributes, providing our underwriters with enhanced abilities to target profitability and to discuss pricing impacts with our agencies. We also continue to leverage our local relationships with agents through the efforts of our teams that work closely with them. We believe our field focus is unique and has several advantages, including providing us with quality intelligence on local market conditions. We seek to maintain appropriate pricing discipline for both new and renewal business as management continues to emphasize the importance of our agencies and underwriters assessing account quality to make careful decisions on a case-by-case basis whether to write as new business or renew a policy. Premium rate credits may be used to retain renewals of quality business and to earn new business, but we do so selectively in order to avoid commercial accounts that we believe have insufficient profit margins.

Our 6% increase in 2023 agency renewal written premiums included higher average pricing. We measure average changes in commercial lines renewal pricing as the rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies. In 2023, our standard commercial lines policies averaged an estimated pricing change at a percentage near the low end of the high-single-digit range. Our average commercial lines pricing change includes the flat pricing effect of certain coverages within package policies written for a three-year term that were in force but did not expire during the period being measured. Therefore, the average commercial lines pricing change we report reflects a blend of policies that did not expire and other policies that did expire during the measurement period.

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For only those commercial lines policies that did expire and were then renewed during 2023, we estimate that the average price increase was at a percentage in the high-single-digit range. During 2023, we continued to further segment our commercial lines policies, emphasizing identification and retention of policies we believed had relatively stronger price adequacy. Conversely, we continued to seek more aggressive renewal terms and conditions on policies we believed had relatively weaker pricing, in turn retaining fewer of those policies.

Our 2023 increase of 6% for the commercial lines segment's agency renewal written premiums also included a higher level of insured exposures, in addition to other factors such as changes in policy retention rates or changes in mix of business that can cause variation in average premiums per policy. Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged commercial structures. We use building valuation software to automate much of that underwriting process and may also manually adjust premiums to reflect property costs.

Changes in the economy can affect insured exposures that directly relate to premium amounts charged for some policies. For commercial accounts, we usually calculate initial estimates for general liability premiums based on estimated sales or payroll volume, while we calculate workers’ compensation premiums based on estimated payroll volume. A change in sales or payroll volume generally indicates a change in demand for a business’s goods or services, as well as a change in its exposure to risk. Policyholders who experience sales or payroll volume changes due to economic factors may also have other exposures requiring insurance, such as commercial auto or commercial property. Premium levels for these other types of coverages generally are not linked directly to sales or payroll volumes.

Premiums resulting from audits of actual sales or payrolls that confirmed or adjusted initial premium estimates are part of net written premiums and earned premiums. The contribution to our commercial lines earned premiums was $157 million, $127 million and $47 million in 2023, 2022 and 2021, respectively. The contribution on a net written premium basis was $136 million, $101 million and $44 million in 2023, 2022 and 2021, respectively. These net written premium amounts are included with agency renewal written premiums in the Commercial Lines Insurance Premiums table above.

In 2023, our commercial lines new business premiums written by our agencies decreased $16 million, or 3%, compared with 2022, reflecting pricing discipline in a highly competitive environment. New business premium volume in recent years has been significantly influenced by new agency appointments. Agencies appointed since the beginning of 2022 produced commercial lines new business written premiums of $47 million, in aggregate, during 2023, up $34 million from what they produced during 2022. All other agencies contributed the remaining $537 million, down $50 million from the $587 million they produced in 2022.

For new business, our field associates are frequently meeting with our agents to: help judge the quality of each account; emphasize the Cincinnati value proposition; call on sales prospects with those agents; and provide appropriate quotes after carefully evaluating risk exposures. Some of our new business comes from accounts that are not new to the agent. We believe these seasoned accounts tend to be priced more accurately than business that is new to us and the agency. As we appoint new agencies who choose to move accounts to us, we report these accounts as new business to us.

Other written premiums primarily consist of premiums that are ceded to reinsurers and lower our net written premiums. An increase in ceded premiums reduced net written premium growth by $11 million in 2023.

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Commercial Lines Insurance Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses as well as the associated loss expenses. Most of the incurred losses and loss expenses shown in the commercial lines insurance segment three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since less than half of our commercial lines insurance segment current accident year incurred losses and loss expenses represents net paid amounts, the majority represents reserves for our estimate of ultimate losses and loss expenses. These reserves develop over time, and we re-estimate previously reported reserves as we learn more about development on the related claims. The table below illustrates that development. For example, the 70.5% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 1.7 percentage points to 68.8% due to claims settling for less than previously estimated, or due to updates to reserve estimates for unpaid claims, as of December 31, 2023. Accident years 2022 and 2021 for the commercial lines insurance segment have both developed favorably, as indicated by the progression over time of the ratios in the table.

Catastrophe losses, as discussed in Consolidated Property Casualty Insurance Results, explain some of the movement in the current accident year loss and loss expense ratio for accident year 2023, compared with 2022. Catastrophe losses added 7.4 percentage points in 2023, 7.6 points in 2022 and 4.6 points in 2021 to the respective commercial lines current accident year loss and loss expense ratios in the table above.

The 60.8% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 decreased 2.1 percentage points compared with the 62.9% accident year 2022 ratio measured as of December 31, 2022. The decrease included an increase in large losses incurred, described below including a table with corresponding ratios for new losses above $2 million, with a 0.2 percentage-point decrease in the 2023 ratio. Other contributions to the ratio decrease of 2.1 percentage points included inflation effects that were offset by the favorable impact from various initiatives, such as those to improve pricing precision, risk selection and loss experience related to claims and loss control practices.

Commercial lines reserve development on prior accident years of $123 million in 2023 continued to net to a favorable amount and provided a larger benefit than the $76 million recognized in 2022. The $47 million net increase in 2023, compared with 2022, included $28 million and $11 million from our commercial auto and commercial property lines of business, respectively. Most of our commercial lines net favorable reserve development on prior accident years recognized during 2023 occurred in our workers’ compensation and commercial property lines of business. Favorable development recognized during 2022 was mostly from our workers’ compensation and commercial property lines of business and during 2021 it was mostly from our commercial casualty, commercial property and workers' compensation lines of business. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable historical paid loss patterns are a key assumption used to make projections necessary for estimating IBNR reserves. Development by accident year and other trends for commercial lines loss and loss expenses and the related ratios are further discussed in Liquidity and Capital Resources, Property Casualty Insurance Development of Estimated Reserves by Accident Year.

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Commercial Lines Insurance Losses by Size

In 2023, total large losses incurred increased by $73 million, or 33%, net of reinsurance. The corresponding 2023 ratio increased 1.3 percentage points, compared with 2022. The 2023 increase on a dollar basis was primarily due to an increase of $71 million for our commercial property line of business. In 2022, total large losses incurred and the corresponding ratio were lower than in 2021, largely due to lower amounts of large losses for our workers' compensation and commercial property lines of business. Our analysis indicated no unexpected concentration of these losses and reserve increases by geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility of aggregate loss experience for our portfolio of larger policies is greater than that of our portfolio of smaller policies, and we continue to monitor the volatility in addition to general inflationary trends in loss costs.

Commercial Lines Insurance Underwriting Expenses

Commercial lines commission expenses as a percent of earned premiums decreased slightly in 2023, compared with 2022. The ratio for 2022 decreased compared with 2021, reflecting a decrease in the ratio for profit-sharing commissions for agencies. In 2023, other underwriting expenses as a percent of earned premiums increased, compared with 2022, as earned premiums rose at a slower pace than other underwriting expenses. In 2022, other underwriting expenses as a percent of earned premiums decreased, compared with 2021, reflecting ongoing expense management efforts and premium growth outpacing growth in expenses.

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Commercial Lines Insurance Outlook

Renewal and new business pricing for commercial risks continues to experience significant inflationary and competitive pressure, and we continue to respond with enhanced pricing analytics and careful risk selection. Despite challenging market conditions, we believe we can successfully manage our business and execute strategic initiatives to offset market pressures and profitably grow our commercial lines insurance segment.

We intend to grow our commercial lines segment through additional agency appointments, expansion of our local field presence, enhanced expertise and product expansion that meets the needs of an even larger percentage of our agencies' total commercial portfolio. Our goal is to provide flexibility in our process so that we can deliver an industry-leading agency experience to all of our agents as we work to be the first and last solution when they are considering business placement.

We intend to keep marketing our products to a broad range of business classes with a total account approach, while also continuing improvement of our pricing precision and further segmentation among commercial lines policies. Underwriters continue to emphasize underwriting discipline and careful management of rate levels as well as our programs that seek to accurately match exposures with appropriate premiums. We work to evaluate each risk on a policy-by-policy basis, making decisions about rates, terms and conditions based on each account’s individual characteristics. We believe that our initiatives to improve pricing precision and lower loss costs will continue to benefit commercial lines profitability during 2024, and that recent-year premium growth initiatives will produce profitable commercial lines premium growth.

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Personal Lines Insurance Results

Performance highlights for the personal lines insurance segment include:

•Premiums – Earned premiums and net written premiums continued to grow in 2023, due to increases in new business written premiums and renewal written premiums that included higher average pricing and a higher level of insured exposures. Renewal written premiums rose $356 million, or 22%, in 2023, compared with 2022, while new business written premiums rose $120 million, or 41%. Cincinnati Private Client SMnet written premiums, included in the personal lines insurance segment, rose $338 million, or 37%, to approximately $1.257 billion in 2023, representing 54.6% of the segment's 2023 net written premiums. Cincinnati Private Client net written premiums included excess and surplus lines homeowner policies with premiums totaling $109 million in 2023 and $63 million in 2022.

•Combined ratio – The 2023 combined ratio increased by 1.2 percentage points, compared with 2022, including a 3.7 percentage-point increase in the ratio for catastrophe losses. Development on prior accident years’ loss and loss expense reserves before catastrophes during 2023 matched 2022. The 2023 combined ratio improved by 2.3 points due to a lower ratio for current accident year loss and loss expenses before catastrophe losses, compared with 2022. That ratio improvement included an increase of 2.2 points for the IBNR portion and a decrease of 4.5 points for the case incurred portion. Price increases and other underwriting efforts have helped to offset losses that have elevated significantly since 2021 due to inflation effects, as earned premiums in 2023 grew faster than those losses and loss expenses.

When estimating the ultimate cost of total loss and loss expenses, we consider many factors, including trends for inflation, historical paid and reported losses, large loss activity and other data or information for the industry or our company. Elevated inflation since 2021 has resulted in higher losses and loss expenses as costs have increased

Cincinnati Financial Corporation - 2023 10-K - Page 74 significantly to repair damaged autos or homes that we insure, in addition to higher losses for liability coverages for some of our lines of business. Due to increased uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear.

We have increased our pricing precision and implemented numerous rate increases in recent years to improve our personal lines insurance segment results. In addition, we have made greater use of higher minimum loss deductibles and enhanced our property inspection processes to verify condition and insurance to value. We have worked to improve our geographic diversification by expanding our personal lines operation to several states less prone to catastrophes.

Our personal lines statutory combined ratio was 98.3% in 2023, compared with 97.7% in 2022 and 93.5% in 2021. The contribution of catastrophe losses to our personal lines statutory combined ratio was 15.1 percentage points in 2023, 11.4 percentage points in 2022 and 13.7 percentage points in 2021.

Personal Lines Insurance Premiums

Personal lines insurance is a strategic component of our overall relationship with most of our agencies and is an important component of our agencies’ relationships with their clients. We believe agents recommend our personal insurance products to their clients who seek to balance quality and price and who are attracted by our superior claims service and the benefits of our package approach. We also believe our continuing efforts to improve pricing precision are helping us attract and retain more of our agencies’ preferred business, while also obtaining higher rates for more thinly priced business.

The 22% increase in agency renewal written premiums in 2023 included the effect of various rate changes. We estimate that premium rates for our personal auto line of business increased at an average of approximately 10% during 2023, with some individual policies experiencing lower or higher rate changes based on enhanced pricing precision enabled by predictive models that consider characteristics of specific risks. For our homeowner line of business, we estimate that rate increases during 2023 averaged near the high end of the mid-single-digit range. Similar to our personal auto line of business, that average varied widely by state, and some individual policies experienced lower or higher rate changes based on pricing precision and current rate level indications that helped determine appropriate premium rates.

The 22% increase in agency renewal written premiums in 2023 also included a higher level of insured exposures and other factors such as changes in policy deductibles or mix of business. Part of the insured exposure increase reflects our response to inflation effects that increase the cost of building materials to repair damaged homes.

Personal lines new business written premiums grew by $120 million, or 41%, during 2023, compared with 2022, including approximately $42 million from Cincinnati Private Client policies and $78 million from middle-market policies. We believe we maintained underwriting and pricing discipline across all personal lines markets as we expanded use of enhanced pricing precision tools. Some of what we report as new business came from accounts that were not new to our agents. We believe our agents’ seasoned accounts tend to be priced more accurately than business that may be less familiar to them.

Other written premiums primarily consist of premiums that are ceded to reinsurers and lower our net written premiums. An increase in ceded premiums reduced net written premium growth by $8 million in 2023.

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Personal Lines Insurance Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses as well as the associated loss expenses. Most of the incurred losses and loss expenses shown in the personal lines insurance segment three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since approximately two-thirds of our personal lines current accident year incurred losses and loss expenses represent net paid amounts, the remaining one-third represents reserves for our estimate of ultimate losses and loss expenses. These reserves develop over time, and we re-estimate previously reported reserves as we learn more about the development on the related claims. The table below illustrates that development. For example, the 72.7% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 2.7 percentage points to 70.0% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2023. Accident years 2022 and 2021 for the personal lines insurance segment have both developed favorably, as indicated by the progression over time for the ratios in the table.

Catastrophe losses, as discussed in Consolidated Property Casualty Insurance Results, explain some of the movement in the current accident year loss and loss expense ratio for accident year 2023, compared with accident year 2022. Catastrophe losses added 17.3 percentage points in 2023, 14.0 points in 2022 and 14.2 points in 2021 to the respective personal lines current accident year loss and loss expense ratios in the table above. Personal lines catastrophe losses for 2023 resulted in a ratio higher than our 10.6% 10-year annual average for personal lines. Personal lines catastrophe losses are inherently volatile, as discussed above and in Consolidated Property Casualty Insurance Results.

The 56.4% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 decreased 2.3 percentage points compared with the 58.7% accident year 2022 ratio measured as of December 31, 2022. The decrease included a decrease in large losses incurred, described below, and the corresponding ratios for new losses above $2 million, with a 0.8 percentage-point decrease in the 2023 ratio. Other contributions included inflation effects that were offset by the favorable impact from various initiatives, such as those to improve pricing precision, risk selection and loss experience related to claims and loss control practices.

Personal lines loss and loss expense reserve development on prior accident years recognized in 2023 was favorable by $64 million, in aggregate, compared with $61 million in 2022. The 2023 net favorable reserve development included $53 million for our homeowner line of business and $15 million for our personal auto line of business. The 2022 net favorable reserve development included $54 million for our homeowner line of business. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable historical paid loss patterns are a key assumption used to make projections necessary for estimating IBNR reserves. Development by accident year and other trends for personal lines loss and loss expenses and the related ratios are further discussed in Liquidity and Capital Resources, Property Casualty Insurance Development of Estimated Reserves by Accident Year.

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Personal Lines Insurance Losses by Size

In 2023, personal lines total large losses incurred increased by $2 million, or 2%, net of reinsurance. The corresponding 2023 ratio decreased 0.8 percentage points, compared with 2022. The 2023 increase was primarily due to a higher amount for our homeowner line of business. In 2022, total large losses increased, compared with 2021, primarily due to higher amounts for both our homeowner line of business and umbrella coverage in our other personal line of business. Our analysis indicated no unexpected concentration of these losses and reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility of aggregate loss experience for our portfolio of larger policies is greater than that of our portfolio of smaller policies, and we continue to monitor the volatility in addition to general inflationary trends in loss costs.

Personal Lines Insurance Underwriting Expenses

Personal lines commission expense as a percent of earned premiums decreased slightly in 2023, compared with 2022, as earned premiums rose at a faster pace than commission expenses. The ratio for 2022 increased compared with 2021, primarily due to an increase in commissions for agencies other than profit-sharing commissions. In both 2023 and 2022, other underwriting expenses as a percent of earned premiums matched the prior year, reflecting ongoing expense management efforts, as the pace of premium growth was in line with growth in other expenses.

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Personal Lines Insurance Outlook

The U.S. property casualty industry continued to experience challenges in 2023, including elevated inflation, increasing loss costs and pricing pressures as insurers pursued rate adequacy. Our response continues to include rate increases, pricing precision for individual risks and use of inflation factors that respond to higher costs to repair property. We believe we can continue to profitably grow premiums in our personal lines insurance segment through new agency appointments and an ongoing focus on diversification of product and geography. We serve middle market, mass affluent and high net worth clients, helping us grow across the U.S. and spreading our catastrophe risk. Drivers of profitable growth for our Cincinnati Private Client business also include selectively using non-admitted insurance property forms and rates in certain catastrophe-prone states and geographies.

Our high net worth initiative, along with various other actions to improve performance in our personal lines insurance segment, is discussed in greater detail in Personal Lines Insurance Results and also in Item 1, Our Business and Our Strategy, Strategic Initiatives and Our Segments, Personal Lines Insurance Segment.

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Excess and Surplus Lines Insurance Results

Our excess and surplus lines insurance segment includes results of The Cincinnati Specialty Underwriters Insurance Company and CSU Producer Resources Inc. Performance highlights for this segment include:

•Premiums – Earned premiums and net written premiums continued to grow during 2023, including higher renewal written premiums that included average renewal estimated price increases in the high-single-digit range. New business written premiums rose 30% in 2023, compared with 2022, and also contributed significantly to premium growth.

•Combined ratio – The combined ratio increased by 0.2 percentage points in 2023, driven by an increase underwriting expenses. Approximately 91% of our 2023 earned premiums for the excess and surplus lines insurance segment provided commercial casualty coverages for various insured liability claims that have experienced higher losses reflecting elevated inflation. Due to uncertainty regarding ultimate losses, we intend to remain prudent in reserving for estimated ultimate losses until longer-term loss cost trends become more clear. The 2023 ratio for current accident year loss and loss expenses before catastrophe losses was 0.2 percentage points higher, compared with the 65.7% accident year 2022 ratio measured as of December 31, 2022, including an increase of 5.7 points for the IBNR portion and a decrease of 5.5 points for the case incurred portion. The 2023 ratio for prior accident year loss and loss expenses before catastrophe losses was slightly more favorable than in 2022. In 2022, the ratio for current accident year loss and loss expenses before catastrophe losses increased significantly, reflecting incurred losses and loss expenses for excess and surplus lines commercial casualty coverages of $302 million in 2022 that increased $69 million or 30%, compared with 2021, while earned premiums rose 23%.

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Excess and Surplus Lines Insurance Premiums

The $36 million increase in 2023 renewal premiums largely reflected higher renewal pricing. Average renewal estimated price increases were in the high-single-digit range during 2023. We measure average changes in excess and surplus lines renewal pricing as the rate of change in renewal premium for the new policy period compared with the premium for the expiring policy period, assuming no change in the level of insured exposures or policy coverage between those periods for respective policies.

New business written premiums in 2023 grew by $41 million, or 30%, compared with 2022, as we continued to carefully underwrite each policy in a highly competitive market. Other written premiums in 2023 reduced net written premium growth by $9 million more than in 2022 and are primarily premiums that are ceded to reinsurers and therefore reduce our net written premiums.

Excess and Surplus Lines Loss and Loss Expenses

Loss and loss expenses include both net paid losses and reserve changes for unpaid losses, as well as the associated loss expenses. The majority of the total incurred losses and loss expenses shown above in the three-year highlights table are for the respective current accident years, with reserve development on prior accident years shown separately. Since less than 20% of our excess and surplus lines current accident year incurred losses and loss expenses represents net paid amounts, a large majority represents reserves for our estimate of unpaid losses and loss expenses. These reserves develop over time, and we update our estimates of previously reported reserves as we learn more about the development on the related claims. The table below illustrates that development. For example, the 66.7% accident year 2022 loss and loss expense ratio reported as of December 31, 2022, developed favorably by 3.4 percentage points to 63.3% due to claims settling for less than previously estimated, or due to updated reserve estimates for unpaid claims, as of December 31, 2023. Accident year 2021 for this segment developed unfavorably by less than $1 million during 2023, after developing unfavorably during 2022, as indicated by the progression over time of the ratios in the table.

Catastrophe losses, as discussed in Consolidated Property Casualty Insurance Results, explain some of the movement among components of the current accident year loss and loss expense ratio for accident year 2023, compared with 2022. Catastrophe losses added 0.7 percentage points in 2023, 1.0 percentage point in 2022 and 0.6 percentage points in 2021 to the respective excess and surplus lines current accident year loss and loss expense ratios in the table above.

The 65.9% ratio for current accident year loss and loss expenses before catastrophe losses for 2023 increased by 0.2 percentage points compared with the 65.7% accident year 2022 ratio measured as of December 31, 2022. The increase included a 0.4 percentage-point decrease in the ratio for current accident year losses of $2 million or more per claim, shown in the table below.

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Excess and surplus lines reserve development on prior accident years was a net favorable $11 million for 2023 and $9 million for 2022. The net favorable amount for 2023 was primarily for accident year 2022 and was due primarily to lower-than-anticipated loss emergence on known claims.

We believe the loss and loss expense reserves for our excess and surplus lines business are adequate. The amount of outstanding reserves for our excess and surplus lines operation can be seen in a table in Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves. One indication of how long it takes for most of the outstanding reserves to be settled is to measure outstanding reserves by accident year at different points in time, using Item 8, Note 4 of the Consolidated Financial Statements. For example, for accident years 2016, 2015 and 2014, in aggregate, after subtracting cumulative paid amounts from incurred amounts at December 31, 2016, reserves for estimated unpaid losses, plus the portion of loss expenses known as ALAE, equaled $193 million. For those same accident years, at December 31, 2023, the reserve estimate for the remaining unpaid amount equaled $11 million. As discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves, stable historical paid loss patterns are a key assumption used to make projections necessary for estimating IBNR reserves. The inherent uncertainty in estimating reserves is discussed in Liquidity and Capital Resources, Property Casualty Insurance Loss and Loss Expense Obligations and Reserves. Development trends by accident year are further discussed in Property Casualty Insurance Development of Estimated Reserves by Accident Year.

Excess and Surplus Lines Insurance Losses by Size

In 2023, total large losses decreased by $4 million, net of reinsurance. The ratio for 2023 large losses as a percent of earned premiums decreased by 0.7 percentage points, compared with 2022. That ratio for 2022 increased by 0.4 points, compared with 2021. Our analysis indicated no unexpected concentration of these losses and reserve increases by risk category, geographic region, policy inception, agency or field marketing territory. We believe the inherent volatility of aggregate loss experience for our portfolio of larger policies is greater than that of our portfolio of smaller policies, and we continue to monitor the volatility in addition to general inflationary trends in loss costs.

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Excess and Surplus Lines Insurance Underwriting Expenses

Excess and surplus lines commission expense as a percent of earned premiums for 2023 increased compared with 2022, including increases in the ratios for reinsurance commissions and profit-sharing commissions for agencies. The ratio for 2022 decreased compared with 2021, largely due to a decrease in the ratio for profit-sharing commissions for agencies. The ratio for other underwriting expenses increased slightly in 2023 and decreased in 2022, and continued to reflect ongoing expense management efforts and changes in the pace of premium growth.

Excess and Surplus Lines Insurance Outlook

The excess and surplus lines market is expected to see the magnitude of rate increases moderate for risks that are casualty-driven, according to industry publications. For property risks involving catastrophe exposures, premium rates in the foreseeable future are expected to be firm. New business opportunities are expected to increase as standard market insurance companies continue to re-underwrite business they previously took from the excess and surplus lines market and as larger excess and surplus lines companies re-underwrite their business with an emphasis on underwriting profitability.

Industry reports continue to suggest that there are opportunities for profitability and growth through greater use of technology. Technology and data are also being used by excess and surplus lines insurance companies to identify new exposures in emerging businesses that need insurance protection or other value-added services.

As we continue to execute our strategy of providing superior service, we expect another year of profitable growth for our excess and surplus lines insurance segment despite challenging market conditions. Our experienced excess and surplus lines underwriters in the field intend to carefully select and price risks, providing prompt delivery of insurance quotes and policies, as they work with other local field associates who provide outstanding claims and loss control service while also handling standard lines business for their assigned agencies. These local representatives are supported by headquarters underwriters and claims managers who specialize in excess and surplus lines.

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Life Insurance Results

Performance highlights for the life insurance segment include:

•Revenues – Earned premiums increased 4% for the year 2023, as shown in the table below that includes details by major line of business. Our largest life insurance product line, term life insurance, rose 3%. Net in-force policy face amounts rose 2% to $82.361 billion at year-end 2023 from $80.482 billion at year-end 2022 and $77.493 billion at year-end 2021.

•Profitability – Our life insurance segment typically reports a smaller profit compared with the life insurance subsidiary because profits from investment income spreads are included in our investments segment results. We include only investment income credited to contract holders (including interest assumed in life insurance policy reserve calculations) in life insurance segment results. A profit of $41 million for our life insurance segment in 2023, compared with $27 million in 2022, was primarily due to increased earned premiums and fee revenues along with favorable mortality experience. A profit of $27 million in 2022 compared with $12 million in 2021 was primarily due to more favorable impacts from the unlocking of interest rate and other actuarial assumptions.

Earned premiums increased $12 million in 2023, primarily due to a $7 million increase in term life insurance earned premiums, as shown in the table below.

Products we market include term, whole and universal life insurance and also fixed annuities. In addition, we offer term and whole life insurance to employees at their worksite. These products provide our property casualty agency force with excellent cross-serving opportunities for both commercial and personal accounts.

Over the past several years, we have worked to maintain a portfolio of simple, yet competitive, products. Our product development efforts emphasize death benefit protection and guarantees. Distribution expansion within our property casualty insurance agencies remains a high priority. Our 37 life field marketing representatives work in partnership with our property casualty field marketing representatives. Approximately 61% of our term and other life insurance product premiums were generated through our property casualty insurance agency relationships.

Life insurance segment expenses consist principally of:

•Contract holders’ benefits incurred (net of investment interest credited to contract holders), related to traditional life and interest-sensitive products, accounted for 78.4% of 2023 total benefits and expenses compared with 78.3% in 2022 and 79.8% in 2021. Total contract holders’ benefits increased slightly in 2023, compared with 2022, largely due to less favorable impacts from the unlocking of interest rate and other actuarial assumptions. Total contract holder benefits decreased in 2022 compared with 2021 due to more favorable unlocking impacts.

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Mortality experience was more favorable in 2023, compared with 2022, and net death claims were below our mortality projections.

•Underwriting expenses incurred, net of deferred acquisition costs, accounted for 21.6% of 2023 total benefits and expenses compared with 21.7% in 2022 and 20.2% in 2021. Expenses in 2023 increased 4%, compared with 4% growth in earned premiums. Expenses in 2022 increased 6%, compared with 2% growth in earned premiums. The 2023 increase in underwriting expenses, compared with the same period a year ago, was largely due to higher general insurance expense levels and increased amortization of deferred policy acquisition costs. The 2022 increase in underwriting expenses was largely due to the same factors as impacted the 2023 increase.

Life insurance segment profitability depends largely on premium levels, the adequacy of product pricing, underwriting skill and operating efficiencies. This segment’s results include only investment interest credited to contract holders (interest assumed in life insurance policy reserve calculations). The remaining investment income is reported in the investments segment results. The life investment portfolio is managed to earn target spreads between earned investment rates on general account assets and rates credited to policyholders. We consider the value of assets under management and investment income for the life investment portfolio as key performance indicators for the life insurance segment. We seek to maintain a competitive advantage with respect to benefits paid and reserve increases by consistently achieving better than average claims experience due to skilled underwriting.

We recognize that assets under management, capital appreciation and investment income are integral to evaluation of the success of the life insurance segment because of the long duration of life products. On a basis that includes investment income and investment gains or losses from life insurance-related invested assets, our life insurance subsidiary reported net income of $75 million in 2023, compared with $65 million in 2022 and $66 million in 2021. The life insurance subsidiary portfolio had after-tax net investment losses of $7 million in 2023 and $2 million in 2022 and after-tax net investment gains of $8 million in 2021. Investment gains and losses are discussed under Investments Results. We exclude most of our life insurance company investment income from investments segment results.

Life Insurance Outlook

We believe the life insurance market remains attractive. With life insurance ownership still low compared to historical levels, we will see more opportunities for growth as our property casualty agency footprint continues to expand. Our expertise with large face amount cases has allowed us to increase our average premium and face amount per policy. As more of our agencies uncover business insurance opportunities, we expect this trend to continue.

Merger and acquisition activity in the independent agency channel can disrupt our ability to get consistent life insurance sales from affected agency relationships. We counter this by following the property casualty lead in assigning a local field representative to every relationship, and a sales leader to every national account. We are confident that our focus on building and strengthening these relationships will continue to lead to long-term profitable growth in the years ahead, despite any short-term disruptions.

The rising interest rate environment has benefited us. The higher yields available in the fixed income market have allowed us to reinvest securities at attractive rates, boosting our investment income. We will be paying close attention to any signals the Federal Reserve may send regarding the potential for rate cuts in 2024. A decision to significantly lower the overnight lending rate would likely lead to lower investment income for us over time.

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Investments Results

Investments Results

The investments segment contributes investment income and investments gains and losses to results of operations. Investment income is generally our primary source of pretax and after-tax profits.

•Investment income – Pretax investment income grew $113 million, or 14%, in 2023, due to increases from both interest income and dividends. Interest income grew 18% in 2023, compared with 2022, as net purchases of fixed-maturity securities in recent years and higher average yields for bonds are working to generally offset effects of the low interest rate environment for several years prior to 2022. Dividend income grew 3% in 2023, reflecting dividend rates that generally have increased, although more slowly than in prior years, minor asset allocation adjustments in our equity portfolio and net purchases of equity securities from available funds. Pretax investment income rose 9% in 2022, including increases in interest and dividend income. Average yields in the investment income table below are based on the average invested asset and cash amounts indicated in the table using fixed-maturity securities valued at amortized cost and all other securities at fair value.

•Investment gains and losses – We reported an investment gain in 2023 and 2021, primarily due to favorable changes in fair values of equity securities even though we continue to hold the securities or as otherwise required by GAAP. We reported an investment loss in 2022, due to unfavorable changes in fair values of equity securities.

We believe it is useful to analyze our overall investment performance by using total investment return over several years. Total investment return considers changes in unrealized gains and losses that are not included in net income, in addition to net investment income and investment gains and losses that are included in net income. Changes in unrealized gains and losses shown in the table below include other invested assets. Considering total investment gains and losses over several years helps evaluate performance since gains and losses may experience typical variability during shorter periods of time.

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The table below shows total return based on assumptions that simplify cash flow timing that is commonly used in total return measures. This simplified calculation uses data shown in our consolidated financial statements or notes to those statements. Added to invested asset amounts from our consolidated balance sheets are 50% of annual amounts pertaining to invested asset categories included in net cash used in investing activities from our consolidated statements of cash flows. The cash flow amounts are reduced by net gains from investment portfolio securities sales or called bonds, with the net result reduced by 50% to represent estimated new cash invested during each respective year. All new cash is assumed to be invested at the midpoint of the year.

Total investment return of 9.9% in 2023 was significantly more than the negative 9.2% return in 2022. The 2023 contribution from the investment income component was enhanced by the net favorable effect of the investment gains and losses components. Comparing contributions for 2023 with 2022, investment income rose $113 million, investment gains increased by $2.594 billion and the invested assets net change in unrealized gains and losses increased by $1.916 billion. The base component of the return calculation, annual average invested assets, was down 8% in 2023. For 2022 compared with 2021, total investment return of negative 9.2% in 2022 was significantly less than the positive return of 13.1% in 2021, as the 2022 contribution from the investment income component was offset by the net unfavorable effect of the investment gains and losses components. The base component of the return calculation, annual average invested assets, increased 14% in 2022.

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Investment Income

The primary drivers of investment income are highlighted below, followed by additional details of our investment results.

•Interest income increased by $90 million, or 18%, in 2023, compared with 2022. The average fixed-maturity pretax yield increased by 34 basis points in addition to a larger fixed-maturity portfolio that rose 8% on an average amortized cost basis. Interest income in 2022 increased by $33 million, compared with 2021, when that yield decreased by less than 1 basis point while the portfolio rose 7% on an amortized cost basis.

•Dividend income rose $7 million, or 3%, in 2023, after rising 12% in 2022. The increases include dividend rates that generally have increased and minor asset allocation adjustments in our equity portfolio. An increase in funds invested in that portfolio during both 2023 and 2022 also favorably affected dividend income.

In 2023, we continued to invest available cash flow in both fixed income and equity securities in a manner that we believe balances current income needs with longer-term invested asset growth goals. As bonds in our generally laddered portfolio mature or are called over the near term, we reinvest with a balanced approach, keeping in mind our long-term strategy and pursuing attractive risk-adjusted after-tax yields. 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 continually perform fundamental analysis of both industry and company-specific opportunities as well as the potential impact from changes in the interest rate environment and the potential for elevated inflation.

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The table below summarizes pretax yield to amortized costs excluding any book value adjustments due to impairment for bonds in our fixed-maturity portfolio by various maturity periods.

The average pretax yield of 6.13% for fixed-maturity securities acquired during 2023, shown in the table below, was higher than the 4.60% average yield-to-amortized cost of the fixed-maturity securities portfolio at the end of 2023.

We discussed our portfolio strategies in Item 1, Investments Segment. We discuss risks related to our investment income and our fixed-maturity and equity investment portfolios in Item 7A, Quantitative and Qualitative Disclosures About Market Risk.

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Total Investment Gains and Losses

Investment gains and losses are recognized on the sales 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 is reported in net income, as disclosed in Note 1, Summary of Significant Accounting Policies. Total investment gains and losses in 2023 included $1.168 billion of net gains from the recognition of fair value changes of equity securities still held that prior to 2018 would have been reported in other comprehensive income (OCI) instead of net income. Change in unrealized gains or losses for fixed-maturity securities are included as a component of OCI. Accounting requirements for the allowance for credit losses and impairment charges for write-downs of impaired securities in the fixed-maturity portfolio are disclosed in Item 8, Note 1, Summary of Significant Accounting Policies. The factors we consider when evaluating impairments are also discussed in Critical Accounting Estimates, Asset Impairment.

The timing of gains or losses from sales can have a material effect on results in any given period. However, such gains or losses usually have little, if any, effect on total shareholders’ equity because most equity and fixed-maturity investments are carried at fair value.

As appropriate, we buy, hold or sell both fixed-maturity and equity securities on an ongoing basis to help achieve our portfolio objectives. We generally purchase fixed-maturity securities with the intention to hold until maturity. If they no longer meet our investment criteria, they are divested. Sales of fixed-maturity securities are usually due to a change in credit fundamentals. Pretax total investment gains in 2023 and 2021 were largely due to favorable changes in fair values of equity securities, even though we continue to hold the securities, as shown in the table below. In 2022, the pretax total investment loss was due to unfavorable changes in fair values of equity securities and a net unfavorable change in unrealized gains or losses for fixed-maturity securities. Additional information about investment gains or losses is included in Item 8, Note 2 of the Consolidated Financial Statements.

The table below summarizes total investment gains and losses, before taxes.

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Write-downs of impaired securities from the investment portfolio by the asset classes we described in Item 1, Our Segments, Investments Segment, are summarized below:

Additional details regarding write-downs of impaired securities from the investment portfolio are summarized below:

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Investments Outlook

The pace and magnitude of Federal Reserve actions in 2023 softened as many of the economic data points (except labor measures) showed a slowdown from 2022 levels. Credit spreads tightened but the 10-year treasury yield remained unchanged year over year. A late year-end rally led to positive returns across most asset classes.

We continued to take advantage of interest rates that were higher than rates from maturing bonds during 2023 but maintained a balanced approach to our allocation between bonds and stocks. We will continue our focus on near-term income generation with an eye to long-term book value growth within the framework of our corporate liquidity as well as adherence to insurance department regulations and rating agency commentary. We discuss our portfolio strategies in Item 1, Our Segments, Investments Segment.

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Other

Total revenues in 2023 and 2022 for our Other operations increased, compared with the respective prior-year periods, primarily due to higher earned premiums from Cincinnati Re and Cincinnati Global in total. Other also includes noninvestment operations of the parent company and its commercial leasing and financial services subsidiary, CFC Investment Company. Total expenses for Other decreased in 2023 but increased in 2022, with the change for both years primarily due to losses and loss expenses and underwriting expenses from Cincinnati Re and Cincinnati Global.

Other income or loss in the table below represents profit or losses before income taxes. For 2023, Other income was driven by underwriting profit for Cincinnati Re and Cincinnati Global. For 2022 and 2021, Other loss was largely driven by interest expense from debt of the parent company. Net results for the combination of Cincinnati Re and Cincinnati Global were an underwriting profit of $183 million in 2023 and $36 million in 2022 and an underwriting loss of $8 million in 2021.

Cincinnati Re represented 67% of Other earned premiums in 2023 and 64% of underwriting profit. Earned premiums in 2023, compared with 2022, grew 2%. The mix of 2023 earned premiums for Cincinnati Re by primary type of insured exposures included 49% for casualty, 31% for property and 20% for specialty. Cincinnati Re in total generated an underwriting profit of $118 million in 2023 and $13 million in 2022 and had an underwriting loss of $32 million in 2021.

Cincinnati Global represented 33% of Other earned premiums in 2023 and 36% of underwriting profit. In 2023, earned premiums rose 29%, compared with 2022. Underwriting profit for Cincinnati Global was $65 million in 2023, $23 million in 2022 and $24 million in 2021.

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Taxes

We had a $433 million income tax expense in 2023, compared with an income tax benefit of $207 million in 2022 and income tax expense of $730 million in 2021. The corporate effective tax rate for 2023 was 19.0% compared with 29.8% in 2022 and 19.7% in 2021.

The changes in our effective tax rate between periods were primarily due to large changes in our net investment gains and losses included in income for the periods, and changes in underwriting income and investment income.

Historically, we have pursued a strategy of investing some portion of cash flow in tax-advantaged, fixed-maturity securities and some in equity securities to minimize our overall tax liability and maximize after-tax earnings. See Item 1, Our Segments, Fixed-Maturity Securities Investments, 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.

Our effective tax rate reconciliation is found in Item 8, Note 11 of the Consolidated Financial Statements.

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