CINCINNATI FINANCIAL CORP

Our value creation ratio, defined above, is our primary performance target. VCR trends are shown in the table below.

We are targeting an annual value creation ratio averaging 10% to 13% over the next five-year period. At 19.8% for 2024, our performance was above the high end of that range. It was below the low end of the range for the three-year period and at the high end of the range for the five-year period, both that ended in December 2024.

The table below shows the primary contributors of our value creation ratio on a percentage basis. Analysis of the contributors aids understanding of our financial performance. Our financial results are further analyzed in the Corporate Financial Highlights section below.

The 2024 value creation ratio improved by 0.3 percentage points, compared with 2023, and again included a significant contribution from operating results, as shown in the table above, that was 0.8 percentage-points higher than last year. The 2024 ratio improvement from operating results was partially offset by a reduction in overall net gains from our investment portfolio and other items, including a reduction of 2.5 percentage points from our fixed-maturity securities investment portfolio. The increase in 2023, compared with 2022, was primarily due to an increase in overall net gains from our investment portfolio.

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We believe our value creation ratio is a useful measure. The table below shows calculations for VCR.

• Book value per share is calculated by dividing end of period total shareholders' equity by end of period shares outstanding

** Change in book value divided by the beginning of year book value

*** Dividend declared to shareholders divided by beginning of year book value

When looking at our longer-term objectives, we see three primary performance drivers for our value creation ratio:

•Premium growth – We believe over any five-year period our agency relationships and initiatives can lead to a property casualty written premium growth rate that exceeds the industry average. The compound annual growth rate of our net written premiums was 10.9% over the five-year period 2020 through 2024, exceeding the 7.9% estimated growth rate for the property casualty insurance industry, with 2024 representing industry data reported through the first nine months of 2024. The industry’s growth rate excludes its mortgage and financial guaranty lines of business.

•Combined ratio – We believe our underwriting philosophy and initiatives can drive performance to achieve our underwriting profitability target of a GAAP combined ratio over any five-year period that consistently averages within the range of 92% to 98% in the future. Our GAAP combined ratio averaged 94.6% over the five-year period 2020 through 2024, within the performance target range. Performance as measured by the combined ratio is discussed in Consolidated Property Casualty Insurance Results. Our statutory combined ratio averaged 94.0% over the five-year period 2020 through 2024, compared with an estimated 100.7% for the property casualty industry, with 2024 representing industry data reported through the first nine months of 2024. The industry’s ratio again excludes its mortgage and financial guaranty lines of business.

•Investment contribution – We believe our investment philosophy and initiatives can drive investment income growth and lead to a total return on our equity investment portfolio over a five-year period that exceeds the five-year total return of the S&P 500 Index.

◦Investment income growth, on a pretax basis, had a compound annual growth rate of 9.7% over the five-year period 2020 through 2024.

◦Over the five years ended December 31, 2024, our equity portfolio compound annual total return was 12.2% compared with a compound annual total return of 14.5% for the Index. Our equity portfolio favors larger-capitalization, high-quality, dividend-growing stocks with a slight value orientation. For the year 2024, our equity portfolio total return was 16.5%, compared with 25.0% for the Index.

The board of directors is committed to rewarding shareholders directly through cash dividends and share repurchase authorizations. Through 2024, the company has increased the annual cash dividend rate for 64 consecutive years, a record we believe is matched by only seven other publicly traded U.S. companies.

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In addition to regular dividends, strong capital and excellent company performance has provided opportunities to further reward shareholders. The board regularly evaluates relevant factors in dividend-related decisions, and the 2024 increase to the regular dividend reflected confidence in our outstanding capital, liquidity and financial flexibility, as well as progress of our initiatives to improve earnings performance while growing insurance premium revenues. We discuss our financial position in more detail in Liquidity and Capital Resources.

Our view of the shareholder value we can create over the next five years relies largely on three assumptions – each highly dependent on the external environment. First, we anticipate our property casualty average insurance prices will increase in proportion to, or in excess of, our loss cost trends. Second, we assume that the economy can maintain a long-term growth track. Third, we assume that valuations of our marketable securities will vary within a typical range over time, based on historical trends. If those assumptions prove to be inaccurate, we may not be able to achieve our performance targets even if we accomplish our strategic objectives.

We discuss in Item 1A, Risk Factors, many potential risks to our business and our ability to achieve our qualitative and quantitative objectives.

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Corporate Financial Highlights

In addition to the value creation ratio discussion and analysis in the Executive Summary, we further analyze our financial results in the sections below.

Balance Sheet Data

Total investments increased by 12% during 2024 on a fair value basis. Entering 2025, we believe the portfolio continues to be well diversified and is well positioned to withstand short-term fluctuations. We discuss our investment strategy in Item 1, Investments Segment, and results for the segment in Investments Results. Total assets increased by 11%, compared with year-end 2023. Shareholders’ equity increased by 15% and book value per share increased by 16%, for reasons discussed in the preceding Executive Summary.

The amount of our debt obligations at year-end 2024 matched year-end 2023. Our 5.5% ratio of debt to total capital (debt plus shareholders’ equity) at year-end 2024 decreased by 0.8 percentage points compared with the prior-year ratio.

Income Statement and Per Share Data

Net income rose by $449 million in 2024, compared with 2023, including a $204 million increase in net investment gains on an after-tax basis. The improved 2024 net income also included an increase in property casualty underwriting income of $141 million after taxes, as discussed below, and a $104 million increase in investment income after taxes. Our investment operation’s performance is discussed further in Investments Results. Net income of $1.843 billion in 2023, representing a $2.330 billion increase compared with net income for 2022, included a $2.050 billion increase in net investment gains after taxes. The improved 2023 net income also included an increase in property casualty underwriting income of $206 million after taxes and a $91 million increase in investment income after taxes.

During 2024, 2023 and 2022, there were no material changes to our estimates for incurred losses and expenses related to the pandemic related to SARS-CoV-2, also known as COVID-19. Factors used in estimating reserves for business interruption losses or legal expenses related to the pandemic included estimates for attorney fees associated with the defense of such lawsuits filed against the company; litigation trends of such cases, including responding to amended and replead cases and cases on appeal; and trends in judicial decisions in cases filed

Cincinnati Financial Corporation - 2024 10-K - Page 49 against the company and other insurers. Loss experience for our insurance operations is influenced by many factors, as discussed in Critical Accounting Estimates, Property Casualty Insurance Loss and Loss Expense Reserves. Also, there could be losses or legal expenses that increase due to inflation, pandemic effects or other factors.

Contribution from Insurance Operations

Property casualty net written premiums grew 15% and earned premiums grew 12% in 2024. The growth reflected average renewal price increases, premium growth initiatives and a higher level of insured exposures, including a contribution to net written premium growth of 1 percentage point from Cincinnati Re and Cincinnati Global in total. Growth in 2023 net written premiums and earned premiums was driven by factors similar to 2024. Trends and related factors are discussed in Commercial Lines, Personal Lines and Excess and Surplus Lines Insurance Results.

Our property casualty insurance operations generated an underwriting profit for each of the three years ending in 2024. Underwriting results improved in both 2024 and 2023, compared with the respective prior-year period. For both years, the underwriting profit increase included 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. Loss experience is discussed further in Financial Results for our property casualty business and related segments. The $179 million increase in 2024 underwriting profit, compared with 2023, included a $66 million increase in losses from natural catastrophe events and $27 million less benefit from net favorable reserve development on prior accident years before catastrophe losses. The $261 million increase in 2023, compared with 2022, included a $31 million increase in losses from catastrophe events and $81 million more benefit from net favorable reserve development on prior accident years before catastrophe losses.

We measure property casualty underwriting profitability primarily by the combined ratio. Our combined ratio measures the percentage of each earned premium dollar spent on claims plus all expenses related to our property casualty operations, all on a pretax basis. A lower ratio indicates more favorable results and better underlying performance. A ratio below 100% represents an underwriting profit.

Initiatives to improve our combined ratio are discussed in Item 1, Our Business and Our Strategy, Strategic Initiatives. In 2024, 2023 and 2022, favorable development on reserves for claims that occurred in prior accident years helped offset other incurred losses and loss expenses. Reserve development is discussed further in Property Casualty Loss and Loss Expense Obligations and Reserves. Losses from weather-related catastrophes are another important item influencing the combined ratio and are discussed along with other factors in Financial Results for our property casualty business and related segments.

Our life insurance segment reported a profit of $57 million in 2024, $41 million in 2023 and $27 million in 2022. We discuss results for the segment in Life Insurance Results. Most of this segment’s investment income is included in our investments segment results. In addition to investment income, investment gains and losses from the life insurance investment portfolio are also included in our investments segment results.

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