Cincinnati Financial(CINF) - 2024 Q2 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Cincinnati Financial Corporation, including balance sheets, income statements, cash flow statements, and detailed notes on accounting policies and reserves Condensed Consolidated Balance Sheets Total assets increased by 6.1% to $34.802 billion, driven by investments, while total liabilities and shareholders' equity also rose | Metric | June 30, 2024 (Millions) | December 31, 2023 (Millions) | Change (%) | |:---|:---|:---|:---| | Total Assets | $34,802 | $32,769 | 6.1% | | Total Investments | $26,684 | $25,357 | 5.2% | | Total Liabilities | $22,025 | $20,671 | 6.6% | | Total Shareholders' Equity | $12,777 | $12,098 | 5.6% | - Fixed maturities at fair value increased to $14,409 million from $13,791 million, and equity securities at fair value increased to $11,634 million from $10,989 million[5] - Loss and loss expense reserves increased to $9,555 million from $9,050 million, and unearned premiums increased to $4,826 million from $4,119 million[5] Condensed Consolidated Statements of Income Q2 2024 net income decreased by 41.6% due to lower investment gains, while H1 2024 net income increased by 40.6% from higher gains and earned premiums | Metric (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total Revenues | $2,544 | $2,605 | (2.3%) | $5,479 | $4,846 | 13.1% | | Net Income | $312 | $534 | (41.6%) | $1,067 | $759 | 40.6% | | Diluted EPS | $1.98 | $3.38 | (41.5%) | $6.77 | $4.80 | 41.0% | - Earned premiums increased by 11% for Q2 2024 and 9% for H1 2024, while investment income, net of expenses, increased by 10% for Q2 2024 and 13% for H1 2024[168] - Net investment gains and losses decreased significantly by 68.4% in Q2 2024 but increased by 38.7% in H1 2024[168] Condensed Consolidated Statements of Comprehensive Income Comprehensive income decreased by 34.7% in Q2 2024 but increased by 38.1% in H1 2024, influenced by investment gains/losses and life policy reserves | Metric (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Net Income | $312 | $534 | (41.6%) | $1,067 | $759 | 40.6% | | Other Comprehensive Income (Loss) | $(28) | $(99) | 71.7% | $(35) | $(12) | (191.7%) | | Comprehensive Income | $284 | $435 | (34.7%) | $1,032 | $747 | 38.1% | - Change in unrealized gains and losses on investments, net of tax, was a loss of $58 million in Q2 2024 and $102 million in H1 2024[169] - Change in life policy reserves, reinsurance recoverable and other, net of tax, contributed $29 million in Q2 2024 and $66 million in H1 2024[169] Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $12.777 billion at June 30, 2024, driven by net income and paid-in capital, despite other comprehensive loss and treasury stock acquisitions | Metric (Millions) | June 30, 2024 | December 31, 2023 | |:---|:---|:---| | Common Stock | $397 | $397 | | Paid-in Capital | $1,466 | $1,437 | | Retained Earnings | $13,897 | $13,084 | | Accumulated Other Comprehensive Loss | $(470) | $(435) | | Treasury Stock | $(2,513) | $(2,385) | | Total Shareholders' Equity | $12,777 | $12,098 | - Retained earnings increased by $813 million from December 31, 2023, to June 30, 2024, reflecting net income less dividends declared[5][14] - Treasury stock at cost increased by $128 million, indicating share repurchases during the period[5][14] Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $1.095 billion in H1 2024, driven by higher net income and changes in reserves, while investing cash outflow decreased and financing cash outflow increased | Cash Flow Activity (Millions) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---| | Net cash provided by operating activities | $1,095 | $825 | 32.7% | | Net cash used in investing activities | $(740) | $(920) | 19.7% | | Net cash used in financing activities | $(491) | $(421) | (16.6%) | | Net change in cash and cash equivalents | $(136) | $(516) | 73.6% | | Cash and cash equivalents at end of period | $771 | $748 | 3.1% | - Operating cash flow benefited from a $505 million increase in loss and loss expense reserves and a $707 million increase in unearned premiums in H1 2024[215] - Investing activities included $1,623 million in purchases of fixed maturities and $256 million in purchases of equity securities in H1 2024[215] - Financing activities included $241 million in cash dividends and $121 million for share repurchases in H1 2024[215] Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide detailed disclosures on accounting policies, investments, fair value measurements, insurance reserves, deferred acquisition costs, reinsurance, income taxes, and segment information NOTE 1 — Accounting Policies This note outlines the basis of presentation, adherence to GAAP, and details pending accounting updates (ASU 2023-07 and ASU 2023-09) not expected to materially impact financials - ASU 2023-07 (Segment Reporting) will require disclosure of significant segment expenses and CODM information, effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024[173] - ASU 2023-09 (Income Taxes) will enhance income tax disclosures by requiring specific categories within rate reconciliation and disaggregation of income taxes paid, effective for annual reporting periods beginning after December 15, 2024[17][217] NOTE 2 – Investments The investment portfolio's fair value increased, with fixed-maturity securities showing higher unrealized losses due to rising yields, while equity securities, especially Microsoft, performed strongly | Investment Type (Millions) | June 30, 2024 | December 31, 2023 | |:---|:---|:---| | Fixed Maturities, Fair Value | $14,409 | $13,791 | | Equity Securities, Fair Value | $11,634 | $10,989 | | Total Investments | $26,684 | $25,357 | - Net unrealized investment losses in the fixed-maturity portfolio increased at June 30, 2024, primarily due to an increase in U.S. Treasury yields[187] - Microsoft Corporation was the largest single equity holding, with a fair value of $1,001 million at June 30, 2024, representing 8.9% of the publicly traded common equities portfolio[177] | Investment Income (Millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |:---|:---|:---|:---|:---| | Interest | $173 | $147 | $342 | $287 | | Dividends | $69 | $70 | $141 | $136 | | Total Investment Income, Net | $242 | $220 | $487 | $430 | | Total Investment Gains and Losses, Net | $137 | $434 | $749 | $540 | NOTE 3 – Fair Value Measurements Financial instruments are categorized into a three-level fair value hierarchy, with most assets in Level 1 or 2, and fair value disclosures are provided for assets and liabilities not carried at fair value - The fair value hierarchy prioritizes quoted prices in active markets (Level 1) and uses unobservable market inputs (Level 3) as the lowest priority[22] | Asset Type (Millions) | Level 1 (June 30, 2024) | Level 2 (June 30, 2024) | Level 3 (June 30, 2024) | Total (June 30, 2024) | |:---|:---|:---|:---|:---| | Fixed Maturities | $186 | $14,223 | $0 | $14,409 | | Common Equities | $11,283 | $0 | $0 | $11,283 | | Total | $11,546 | $15,456 | $0 | $27,002 | | Long-Term Debt (Millions) | Level 1 (June 30, 2024) | Level 2 (June 30, 2024) | Level 3 (June 30, 2024) | Total (June 30, 2024) | |:---|:---|:---|:---|:---| | Note payable | $0 | $25 | $0 | $25 | | Senior debentures, due 2028 | $0 | $443 | $0 | $443 | | Senior notes, due 2034 | $0 | $390 | $0 | $390 | | Total | $0 | $858 | $0 | $858 | NOTE 4 – Property Casualty Loss and Loss Expenses The company experienced $40 million favorable development on prior accident years in Q2 2024, primarily in commercial lines, offset by personal and excess & surplus lines, with H1 2024 showing $140 million favorable development | Prior Accident Year Development (Millions) | Q2 2024 | H1 2024 | |:---|:---|:---| | Total Favorable Development | $40 | $140 | | Commercial Lines Favorable Development | $29 | $67 | | Personal Lines Unfavorable Development (Q2) / Favorable Development (H1) | $(6) | $27 | | Excess & Surplus Lines Unfavorable Development (Q2) / No Net Development (H1) | $(3) | $0 | - In Q2 2024, commercial lines saw favorable development in workers' compensation ($28 million) and commercial property ($21 million), partially offset by unfavorable development in commercial casualty ($28 million)[29] - In H1 2024, commercial lines had favorable development in commercial property ($44 million), workers' compensation ($40 million), and commercial auto ($11 million), partially offset by commercial casualty ($29 million)[197] NOTE 5 – Life Policy and Investment Contract Reserves Total life policy and investment contract reserves decreased to $2.966 billion at June 30, 2024, primarily due to increased market value discount rates, with details on reserve components and interest rates | Reserve Type (Millions) | June 30, 2024 | December 31, 2023 | |:---|:---|:---|\n| Life Policy Reserves | $1,538 | $1,597 | | Investment Contract Reserves | $1,428 | $1,471 | | Total | $2,966 | $3,068 | - The weighted-average duration of net life policy reserves was 11-15 years at June 30, 2024[35][203] | Product | Interest Accretion Rate (June 30, 2024) | Current Discount Rate (June 30, 2024) | |:---|:---|:---|\n| Term | 5.22% | 5.24% | | Whole life | 5.90% | 5.67% | NOTE 6 – Deferred Policy Acquisition Costs Consolidated deferred policy acquisition costs (DPAC) increased to $1.229 billion at June 30, 2024, driven by higher capitalized costs in property casualty and life segments, partially offset by amortization | DPAC (Millions) | Q2 2024 (End) | Q2 2023 (End) | H1 2024 (End) | H1 2023 (End) | |:---|:---|:---|:---|:---| | Property Casualty DPAC Asset | $878 | $771 | $878 | $771 | | Life DPAC Asset | $351 | $338 | $351 | $338 | | Consolidated DPAC Asset | $1,229 | $1,109 | $1,229 | $1,109 | - Capitalized DPAC for property casualty was $475 million in Q2 2024 and $882 million in H1 2024, while amortized DPAC was $393 million and $753 million, respectively[42] - No premium deficiencies were recorded, indicating that anticipated losses and expenses did not exceed unearned premiums and anticipated investment income[73] NOTE 7 – Separate Accounts Separate accounts balances increased to $948 million at June 30, 2024, reflecting interest credited and other adjustments, partially offset by benefit payments | Metric (Millions) | Q2 2024 (End) | Q2 2023 (End) | H1 2024 (End) | H1 2023 (End) | |:---|:---|:---|:---|:---| | Balance, beginning of period | $927 | $899 | $925 | $892 | | Interest credited before policy charges | $11 | $10 | $21 | $20 | | Benefit payments | $(3) | $(1) | $(3) | $(3) | | Balance, end of period | $948 | $911 | $948 | $911 | - Cash surrender value for separate accounts was $932 million at June 30, 2024[72] NOTE 8 – Reinsurance Net written premiums for property casualty insurance increased by 14% in Q2 2024 and 13% in H1 2024, with earned premiums up 11% and 10% respectively, as the company uses reinsurance to manage risk | Property Casualty Premiums (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Net Written Premiums | $2,459 | $2,150 | 14.4% | $4,707 | $4,169 | 12.9% | | Earned Premiums | $2,075 | $1,863 | 11.4% | $4,067 | $3,704 | 9.8% | | Incurred Loss and Loss Expenses | $1,412 | $1,262 | 11.9% | $2,682 | $2,579 | 4.0% | | Life Insurance Premiums (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Earned Premiums | $81 | $80 | 1.3% | $160 | $157 | 1.9% | | Contract Holders' Benefits Incurred | $68 | $78 | (12.8%) | $147 | $159 | (7.5%) | - The allowance for uncollectible property casualty premiums increased to $18 million at June 30, 2024, from $16 million at December 31, 2023[85] NOTE 9 – Income Taxes The provision for federal income taxes was $74 million for Q2 2024 and $272 million for H1 2024, with effective tax rates of 19.2% and 20.3%, influenced by investment gains/losses and underwriting income | Income Tax Metric (Millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |:---|:---|:---|:---|:---| | Provision for Income Taxes | $74 | $132 | $272 | $175 | | Effective Tax Rate | 19.2% | 19.8% | 20.3% | 18.7% | - Tax-exempt income from municipal bonds and dividend received exclusion contributed to a decrease in the effective tax rate[104] - The company believes all deferred tax assets on U.S. domestic operations and Cincinnati Global will be realized, with no valuation allowance recorded[86] NOTE 10 – Net Income Per Common Share Diluted net income per common share was $1.98 for Q2 2024 and $6.77 for H1 2024, with dilution primarily stemming from equity-based awards | EPS Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |:---|:---|:---|:---|:---| | Net Income—basic and diluted (Millions) | $312 | $534 | $1,067 | $759 | | Basic weighted-average common shares outstanding (Millions) | 156.3 | 157.0 | 156.6 | 157.1 | | Diluted weighted-average shares (Millions) | 157.5 | 158.0 | 157.7 | 158.3 | | Basic EPS | $1.99 | $3.40 | $6.82 | $4.83 | | Diluted EPS | $1.98 | $3.38 | $6.77 | $4.80 | - The number of anti-dilutive share-based awards was 1.2 million for Q2 2024 and 1.3 million for H1 2024[105] NOTE 11 – Employee Retirement Benefits Net periodic benefit for pension plans was $0 for Q2 2024 and $(1) million for H1 2024, with matching contributions of $7 million to 401(k) and Top Hat savings plans in Q2 2024 and $16 million in H1 2024 | Pension Benefit (Millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |:---|:---|:---|:---|:---| | Service cost | $2 | $2 | $3 | $3 | | Total non-service benefit | $(2) | $(3) | $(4) | $(11) | | Net periodic benefit | $0 | $(1) | $(1) | $(8) | - Matching contributions to 401(k) and Top Hat savings plans were $7 million in Q2 2024 and $16 million in H1 2024[90] - No contributions were made to the qualified pension plan during the first six months of 2024[107] NOTE 12 – Commitments and Contingent Liabilities The company faces claims litigation, including COVID-19 business interruption lawsuits with significant uncertainties, though most have been dismissed or ruled favorably, and current accruals for probable losses are deemed reasonable - COVID-19 business income coverage lawsuits involve uncertainties such as the number of claims, class certification, and the size/scope of classes, making loss estimation difficult[94] - Appellate decisions to date have generally been favorable for the insurance industry regarding COVID-19 business interruption claims[94] - The company maintains that it has no coverage obligations for COVID-19 business income losses based on policy terms requiring direct physical loss or damage[109] NOTE 13 – Segment Information The company operates in property casualty and life insurance, with five reporting segments, where the Investments segment remains the primary source of pretax and after-tax profits - The five reporting segments are Commercial lines insurance, Personal lines insurance, Excess and surplus lines insurance, Life insurance, and Investments[96] | Segment Income Before Income Taxes (Millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |:---|:---|:---|:---|:---| | Commercial lines insurance | $10 | $33 | $49 | $31 | | Personal lines insurance | $(42) | $(36) | $(5) | $(93) | | Excess and surplus lines insurance | $8 | $11 | $20 | $24 | | Life insurance | $22 | $13 | $32 | $21 | | Investments | $348 | $624 | $1,174 | $910 | | Other | $40 | $21 | $69 | $41 | | Total Income Before Income Taxes | $386 | $666 | $1,339 | $934 | - Identifiable assets for Investments were $26.285 billion at June 30, 2024, compared to $24.999 billion at December 31, 2023[113] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, condition, and key influencing factors, including corporate highlights, value creation drivers, financial strength, segment results, liquidity, and capital resources Safe Harbor Statement This statement outlines risks and uncertainties that could cause actual results to differ from forward-looking statements, including COVID-19 litigation, catastrophe losses, inflation, market declines, and regulatory actions - Risks include ongoing COVID-19 business interruption litigation, potential future pandemics, and unusually high levels of catastrophe losses due to various causes[126] - Other factors include interest rate fluctuations, economic instability, ineffective information technology systems, data security breaches, and intense competition in the insurance market[123] - Regulatory actions, adverse litigation outcomes, and the inability to attract and retain personnel are also identified as potential risks[124] Corporate Financial Highlights Q2 2024 net income decreased by 42% due to lower investment gains, while H1 2024 net income increased by 41% from higher gains and improved underwriting, with the company increasing its quarterly dividend | Metric (Millions, except per share data) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Earned premiums | $2,156 | $1,943 | 11% | $4,227 | $3,861 | 9% | | Net income | $312 | $534 | (42%) | $1,067 | $759 | 41% | | Net income per share—diluted | $1.98 | $3.38 | (41%) | $6.77 | $4.80 | 41% | | Cash dividends declared per share | $0.81 | $0.75 | 8% | $1.62 | $1.50 | 8% | - Total revenues decreased by $61 million in Q2 2024 but increased by $633 million in H1 2024, driven by higher earned premiums and investment income[135] - Shareholders' equity increased 6% and book value per share increased 6% during the first six months of 2024, with the debt-to-total-capital ratio decreasing to 6.0%[143][137] Drivers of Long-Term Value Creation Long-term value creation is driven by premium growth, a favorable combined ratio, and strong investment contributions, with H1 2024 showing 13% property casualty net written premium growth, a 96.1% GAAP combined ratio, and 13% pretax investment income growth - Consolidated property casualty net written premium year-over-year growth was 13% for the first six months of 2024, exceeding the industry's projected 9%[160] - The GAAP combined ratio for H1 2024 was 96.1%, including 9.9 percentage points of catastrophe losses and 3.4 percentage points of favorable loss reserve development[160] - Pretax investment income for H1 2024 was $487 million, up 13% compared to the same period in 2023[160] Financial Strength The company maintains strong financial strength ratings, with all insurance subsidiaries rated 'Superior' (A+) by A.M. Best, supported by prudent reinsurance, a diversified investment portfolio, and a low debt-to-total-capital ratio of 6.0% | Rating Agency | Property Casualty Subsidiaries Rating | Life Insurance Subsidiary Rating | Outlook | |:---|:---|:---|:---| | A.M. Best Co. | A+ Superior | A+ Superior | Stable | | Fitch Ratings | A+ Strong | A+ Strong | Stable | | Moody's Investors Service | A1 Good | - | Stable | | S&P Global Ratings | A+ Strong | A+ Strong | Stable | - At June 30, 2024, the company held $5.002 billion of cash and invested assets at the parent-company level, with 92.8% in common stocks[161] - The debt-to-total-capital ratio was 6.0% at June 30, 2024, and the property casualty net written premiums to statutory surplus ratio was 1.1-to-1 for the 12 months ended June 30, 2024[161] Consolidated Property Casualty Insurance Highlights Consolidated property casualty operations generated an underwriting profit of $35 million for Q2 2024 and $166 million for H1 2024, with the combined ratio improving by 3.1 percentage points in H1 due to lower catastrophe losses and improved current accident year loss experience | Metric | Q2 2024 | Q2 2023 | Change (Pt. Change) | H1 2024 | H1 2023 | Change (Pt. Change) | |:---|:---|:---|:---|:---|:---|:---| | Underwriting Profit (Millions) | $35 | $47 | (26%) | $166 | $37 | 349% | | Combined Ratio | 98.5% | 97.6% | 0.9 | 96.1% | 99.2% | (3.1) | | Current Accident Year before Catastrophe Losses Ratio | 57.8% | 60.5% | (2.7) | 59.5% | 60.8% | (1.3) | | Catastrophe Losses Ratio | 12.2% | 12.7% | (0.5) | 9.9% | 13.2% | (3.3) | - The H1 2024 underwriting profit increase of $129 million was primarily due to a $109 million favorable decrease in catastrophe losses[154] - Net favorable development on prior accident year reserves benefited the combined ratio by 3.4 percentage points in H1 2024, compared with 4.3 percentage points in H1 2023[352] Consolidated Property Casualty Insurance Premiums Consolidated property casualty net written premiums grew by $309 million in Q2 2024 and $538 million in H1 2024, driven by agency renewal and new business growth, including price increases, with contributions from Cincinnati Re and Cincinnati Global | Premiums (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Agency renewal written premiums | $1,843 | $1,643 | 12% | $3,526 | $3,178 | 11% | | Agency new business written premiums | $407 | $303 | 34% | $753 | $554 | 36% | | Net written premiums | $2,459 | $2,150 | 14% | $4,707 | $4,169 | 13% | | Earned premiums | $2,075 | $1,863 | 11% | $4,067 | $3,704 | 10% | - New agency appointments in 2024 and 2023 led to a $52 million increase in standard lines new business for H1 2024[362] - Net written premiums for Cincinnati Re increased by $30 million in Q2 2024 and $2 million in H1 2024[368] Consolidated Property Casualty Insurance Catastrophe Losses and Loss Expenses Incurred Catastrophe losses and loss expenses contributed 11.2 percentage points to the combined ratio in Q2 2024 and 8.6 percentage points in H1 2024, a decrease from the prior year, with specific events detailed - Catastrophe losses contributed 11.2% to the combined ratio in Q2 2024 (down from 12.0% in Q2 2023) and 8.6% in H1 2024 (down from 12.4% in H1 2023)[364] | Catastrophe Event (Millions, net of reinsurance) | Q2 2024 Total | H1 2024 Total | |:---|:---|:---| | Mar. 31 - Apr. 4 (Midwest, Northeast, South) | $36 | $36 | | May 6-10 (Midwest, South) | $47 | $47 | | May 25-26 (Midwest, South) | $66 | $66 | | Development on 2023 and prior catastrophes | $(21) | $(53) | | Calendar year incurred total | $233 | $350 | Consolidated Property Casualty Insurance Losses Incurred by Size Total large losses incurred (claims $2 million or more) decreased by 24% in Q2 2024 and 25% in H1 2024, contributing to a lower total large loss ratio, while IBNR losses increased significantly in Q2 2024 | Loss Category (Millions, net of reinsurance) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total large losses incurred | $74 | $97 | (24%) | $118 | $157 | (25%) | | Losses incurred but not reported | $165 | $96 | 72% | $416 | $324 | 28% | | Other losses excluding catastrophe losses | $741 | $675 | 10% | $1,418 | $1,267 | 12% | | Catastrophe losses | $228 | $217 | 5% | $339 | $444 | (24%) | | Total losses incurred | $1,208 | $1,085 | 11% | $2,291 | $2,192 | 5% | - The total large loss ratio decreased by 1.7 percentage points in Q2 2024 compared to Q2 2023[226] - Losses incurred but not reported (IBNR) ratio increased to 8.0% in Q2 2024 from 5.2% in Q2 2023[224] Financial Results by Segment This section details financial performance for Commercial, Personal, Excess and Surplus, Life, Investments, and Other segments, covering premiums, underwriting results, loss experience, and investment contributions Commercial Lines Insurance Results Commercial lines insurance generated an underwriting profit of $10 million in Q2 2024 and $49 million in H1 2024, with the combined ratio improving by 0.7 percentage points in H1 due to higher earned premiums and improved current accident year loss experience | Metric | Q2 2024 | Q2 2023 | Change (Pt. Change) | H1 2024 | H1 2023 | Change (Pt. Change) | |:---|:---|:---|:---|:---|:---|:---| | Underwriting Profit (Millions) | $10 | $33 | (70%) | $49 | $31 | 58% | | Combined Ratio | 99.1% | 96.9% | 2.2 | 97.9% | 98.6% | (0.7) | | Current Accident Year before Catastrophe Losses Ratio | 60.0% | 60.3% | (0.3) | 61.5% | 62.1% | (0.6) | | Catastrophe Losses Ratio | 10.0% | 11.6% | (1.6) | 8.5% | 10.8% | (2.3) | - Net favorable reserve development on prior accident years for commercial lines was $29 million in Q2 2024 and $67 million in H1 2024, lower than the prior year[260] - Commercial lines underwriting expense ratio increased due to higher profit-sharing commissions and employee-related expenses[260] Commercial Lines Insurance Premiums Commercial lines earned premiums grew by 4% in Q2 2024 and 3% in H1 2024, driven by agency renewal and new business growth, including higher average pricing, with renewal pricing near the low end of the high-single-digit range | Premiums (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Agency renewal written premiums | $1,023 | $985 | 4% | $2,099 | $2,026 | 4% | | Agency new business written premiums | $193 | $149 | 30% | $375 | $283 | 33% | | Net written premiums | $1,186 | $1,106 | 7% | $2,409 | $2,247 | 7% | | Earned premiums | $1,107 | $1,066 | 4% | $2,189 | $2,122 | 3% | - Estimated renewal price increases for commercial casualty, commercial property, and commercial auto lines were in the high-single-digit range, while workers' compensation saw a mid-single-digit decrease[374] - New business written premiums increased by $44 million in Q2 2024 and $92 million in H1 2024[374] Commercial Lines Insurance Losses Incurred by Size Commercial lines total large losses incurred (claims $2 million or more) decreased by 15% in Q2 2024 and 28% in H1 2024, contributing to a lower total large loss ratio, while IBNR losses increased significantly in Q2 2024 | Loss Category (Millions, net of reinsurance) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total large losses incurred | $64 | $75 | (15%) | $87 | $120 | (28%) | | Losses incurred but not reported | $92 | $29 | 217% | $248 | $154 | 61% | | Catastrophe losses | $101 | $115 | (12%) | $165 | $221 | (25%) | | Total losses incurred | $641 | $603 | 6% | $1,252 | $1,214 | 3% | - The total large loss ratio for commercial lines was 1.3 percentage points lower in Q2 2024 compared to Q2 2023[261] - The decrease in commercial lines large losses for H1 2024 was primarily due to the commercial property line of business[261] Personal Lines Insurance Results Personal lines insurance reported an underwriting loss of $42 million in Q2 2024 and $5 million in H1 2024, with the combined ratio improving by 9.4 percentage points in H1 due to increased earned premiums and decreased catastrophe losses | Metric | Q2 2024 | Q2 2023 | Change (Pt. Change) | H1 2024 | H1 2023 | Change (Pt. Change) | |:---|:---|:---|:---|:---|:---|:---| | Underwriting Loss (Millions) | $(42) | $(36) | (17%) | $(5) | $(93) | 95% | | Combined Ratio | 106.9% | 107.6% | (0.7) | 100.6% | 110.0% | (9.4) | | Current Accident Year before Catastrophe Losses Ratio | 54.9% | 58.9% | (4.0) | 56.2% | 59.4% | (3.2) | | Catastrophe Losses Ratio | 21.8% | 21.9% | (0.1) | 17.2% | 25.8% | (8.6) | - Net reserve development on prior accident years for personal lines was unfavorable by $6 million in Q2 2024 but favorable by $27 million in H1 2024[390] - The personal lines underwriting expense ratio decreased due to premium growth outpacing expense growth[390] Personal Lines Insurance Premiums Personal lines earned premiums grew by 28% in Q2 2024 and 27% in H1 2024, driven by increased agency new business and renewal written premiums, including higher average pricing, with Cincinnati Private Client net written premiums significantly increasing | Premiums (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Agency renewal written premiums | $681 | $541 | 26% | $1,175 | $929 | 26% | | Agency new business written premiums | $163 | $106 | 54% | $285 | $185 | 54% | | Net written premiums | $819 | $629 | 30% | $1,414 | $1,077 | 31% | | Earned premiums | $631 | $493 | 28% | $1,219 | $957 | 27% | - Cincinnati Private Client net written premiums totaled approximately $472 million in Q2 2024 and $802 million in H1 2024[377] - Premium rates for personal auto increased in the low-double-digit range, and for homeowner in the high-single-digit range, during H1 2024[389] Personal Lines Insurance Losses Incurred by Size Personal lines total large losses incurred (claims $2 million or more) decreased by 65% in Q2 2024 and 24% in H1 2024, leading to a lower total large loss ratio, while catastrophe losses increased in Q2 but decreased in H1 | Loss Category (Millions, net of reinsurance) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total large losses incurred | $8 | $23 | (65%) | $29 | $38 | (24%) | | Losses incurred but not reported | $31 | $26 | 19% | $53 | $53 | 0% | | Catastrophe losses | $129 | $93 | 39% | $179 | $206 | (13%) | | Total losses incurred | $424 | $336 | 26% | $748 | $678 | 10% | - The personal lines total large loss ratio was 3.3 percentage points lower in Q2 2024 compared to Q2 2023[379] - The decrease in personal lines total large losses incurred for H1 2024 was primarily for the homeowner line of business[391] Excess and Surplus Lines Insurance Results Excess and surplus lines insurance generated an underwriting profit of $8 million in Q2 2024 and $20 million in H1 2024, with the combined ratio increasing by 3.2 percentage points in Q2 and 2.6 percentage points in H1 due to unfavorable prior accident year reserve development | Metric | Q2 2024 | Q2 2023 | Change (Pt. Change) | H1 2024 | H1 2023 | Change (Pt. Change) | |:---|:---|:---|:---|:---|:---|:---| | Underwriting Profit (Millions) | $8 | $11 | (27%) | $20 | $24 | (17%) | | Combined Ratio | 95.4% | 92.2% | 3.2 | 93.7% | 91.1% | 2.6 | | Current Accident Year before Catastrophe Losses Ratio | 64.0% | 69.7% | (5.7) | 64.8% | 69.5% | (4.7) | | Catastrophe Losses Ratio | 1.4% | 1.4% | 0.0 | 1.2% | 1.4% | (0.2) | - Net reserve development on prior accident years was unfavorable by 2.1% of earned premiums in Q2 2024 and less than 0.1% in H1 2024, compared to favorable development in 2023[267] - The underwriting expense ratio increased due to higher profit-sharing commissions and employee-related expenses[267] Excess and Surplus Lines Insurance Premiums Excess and surplus lines earned premiums grew by 14% in Q2 2024 and 12% in H1 2024, driven by increases in both agency renewal and new business written premiums, with renewal pricing in the high-single-digit range | Premiums (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Agency renewal written premiums | $139 | $117 | 19% | $252 | $223 | 13% | | Agency new business written premiums | $51 | $48 | 6% | $93 | $86 | 8% | | Net written premiums | $180 | $156 | 15% | $326 | $292 | 12% | | Earned premiums | $151 | $132 | 14% | $290 | $259 | 12% | - Excess and surplus lines policy renewals experienced estimated average price increases in the high-single-digit range for both 2024 periods[392] Excess and Surplus Lines Insurance Losses Incurred by Size Excess and surplus lines total large losses incurred (claims $2 million or more) increased in Q2 2024 and H1 2024, contributing unfavorably to the total large loss ratio, while catastrophe losses increased in Q2 but remained stable in H1 | Loss Category (Millions, net of reinsurance) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total large losses incurred | $2 | $(1) | nm | $2 | $(1) | nm | | Losses incurred but not reported | $17 | $20 | (15%) | $47 | $47 | 0% | | Catastrophe losses | $3 | $2 | 50% | $4 | $3 | 33% | | Total losses incurred | $73 | $66 | 11% | $141 | $122 | 16% | - The excess and surplus lines total ratio for large losses was 1.7 percentage points higher in Q2 2024 compared to Q2 2023[416] Life Insurance Results The life insurance segment reported a profit of $22 million in Q2 2024 and $32 million in H1 2024, primarily due to favorable impacts from unlocking actuarial assumptions, with revenues increasing from higher earned premiums | Metric (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total revenues | $83 | $83 | 0% | $163 | $162 | 1% | | Life insurance segment profit | $22 | $13 | 69% | $32 | $21 | 52% | | Contract holders' benefits incurred | $68 | $78 | (13%) | $147 | $159 | (8%) | - Net in-force life insurance policy face amounts increased 1% to $83.219 billion at June 30, 2024[270] - The life insurance subsidiary reported net income of $24 million in Q2 2024 and $43 million in H1 2024, including investment income and gains/losses[272] Life Insurance Premiums Net earned premiums for life insurance increased by 1% in Q2 2024 and 2% in H1 2024, primarily from term life insurance, while fixed annuity deposits decreased year-over-year | Premiums (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Term life insurance | $59 | $58 | 2% | $116 | $114 | 2% | | Whole life insurance | $13 | $13 | 0% | $26 | $25 | 4% | | Net earned premiums | $81 | $80 | 1% | $160 | $157 | 2% | - Fixed annuity deposits received were $10 million in Q2 2024 and $19 million in H1 2024, down from $15 million and $25 million respectively in 2023[270] Investments Results The Investments segment is the primary source of pretax and after-tax profits, with pretax investment income growing by 10% in Q2 2024 and 13% in H1 2024, driven by higher interest income, though total investment gains and losses varied | Metric (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total investment income, net of expenses | $242 | $220 | 10% | $487 | $430 | 13% | | Investment gains and losses, net | $137 | $434 | (68%) | $749 | $540 | 39% | | Investments profit, pretax | $348 | $624 | (44%) | $1,174 | $910 | 29% | - Interest income increased by $26 million in Q2 2024 and $55 million in H1 2024 due to net purchases of fixed-maturity securities and higher bond yields[398] - The average pretax yield-to-amortized cost for total fixed-maturity securities acquired in H1 2024 was 5.92%, higher than the 4.60% average yield of the portfolio at year-end 2023[249][400] Investment Income Pretax investment income grew by 10% in Q2 2024 and 13% in H1 2024, primarily driven by an 18% increase in interest income in Q2 and 19% in H1, with dividend income showing mixed trends | Investment Income (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Interest | $173 | $147 | 18% | $342 | $287 | 19% | | Dividends | $69 | $70 | (1%) | $141 | $136 | 4% | | Investment income, pretax | $242 | $220 | 10% | $487 | $430 | 13% | - The average pretax yield on invested assets plus cash and cash equivalents was 3.48% in Q2 2024 and 3.54% in H1 2024[250] - The average pretax yield for fixed-maturity returns was 4.64% for both Q2 and H1 2024[250] Total Investment Gains and Losses Total investment gains and losses reported in net income decreased by 68% in Q2 2024 but increased by 39% in H1 2024, primarily driven by unrealized gains and losses on equity securities still held | Investment Gains/Losses (Millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |:---|:---|:---|:---|:---| | Equity securities: Unrealized gains and losses on securities still held, net | $142 | $459 | $747 | $568 | | Fixed-maturity securities: Change in allowance for credit losses, net | $(16) | $(3) | $(25) | $(3) | | Total investment gains and losses reported in net income | $137 | $434 | $749 | $540 | - The allowance for credit losses on fixed-maturity securities increased by $25 million in H1 2024[252] - No fixed-maturity securities were written down to fair value due to an intention to be sold in H1 2024[252] Other The 'Other' segment, including noninvestment operations and underwriting results of Cincinnati Re and Cincinnati Global, saw total revenues increase in H1 2024, driven by earned premiums from both entities, which generated underwriting profits | Metric (Millions) | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | |:---|:---|:---|:---|:---|:---|:---| | Total revenues | $190 | $174 | 9% | $376 | $371 | 1% | | Total other income | $40 | $21 | 90% | $69 | $41 | 68% | | Loss and loss expenses | $75 | $81 | (7%) | $157 | $183 | (14%) | - Cincinnati Re generated an underwriting profit of $70 million on $273 million of earned premiums in H1 2024[278] - Cincinnati Global generated an underwriting profit of $32 million on $96 million of earned premiums in H1 2024[278] Taxes The company's tax strategy involves investing in tax-advantaged securities to minimize tax liability, with the effective tax rate for H1 2024 at 20.3%, influenced by investment gains/losses and underwriting income - Approximately 75% of interest from tax-advantaged fixed-maturity investments and 40% of dividends from qualified equities are exempt from federal tax for property casualty subsidiaries[255] - The effective tax rate for H1 2024 was 20.3%, compared to 18.7% for H1 2023, primarily due to changes in net investment gains and losses[279] Liquidity and Capital Resources The company maintains strong liquidity through operating cash flow, investment income, and subsidiary dividends, with robust capital resources, a low debt-to-total-capital ratio, and available credit, using cash for operations, investments, and shareholder returns Sources of Liquidity Primary liquidity sources include cash receipts from property casualty and life insurance premiums and investment income, which cover claims, operating expenses, and dividends, with flexibility to adjust investing activities or sell liquid assets - Cash flow from property casualty underwriting increased by 68% in Q2 2024 and 82% in H1 2024[406] - Investment income received increased by 18% in Q2 2024 and 15% in H1 2024[406] - Parent company obligations can be funded by investment income or sales of securities in its portfolio, minimizing reliance on subsidiary dividends[427] Subsidiary Dividends The lead insurance subsidiary declared $290 million in dividends to the parent company in H1 2024, with approximately $729 million available for dividends without regulatory approval for full-year 2024 - Lead insurance subsidiary declared $290 million in dividends to the parent company in H1 2024, up from $284 million in H1 2023[282] - Total dividends available for payment to the parent company without regulatory approval for full-year 2024 are approximately $729 million[282] Investing Activities After meeting operating requirements, cash flows are invested in fixed-maturity and equity securities to achieve portfolio objectives, balancing near-term income generation and long-term book value growth - Cash flows from underwriting, investment, and other corporate activities are continuously invested in fixed-maturity and equity securities[432] - The investment strategy aims to balance near-term income generation and long-term book value growth[405] Uses of Liquidity Primary uses of cash include contractual obligations, operational commitments, and enhancing shareholder return through cash dividends and share repurchases, with 81 cents per share declared in Q1 2024 and $241 million used for dividends in H1 2024 - Cash dividends declared were 81 cents per share for Q1 2024, setting an annual rate of $3.24 per share[297] - The company used $241 million to pay cash dividends to shareholders during the first six months of 2024[297] - Commissions paid were $934 million and noncommission underwriting expenses paid were $489 million in H1 2024[431] Capital Resources The company's debt-to-total-capital ratio was 6.0% at June 30, 2024, well below the 35% covenant threshold, with $275 million available on its revolving short-term line of credit and an additional $300 million accordion feature - Debt-to-total-capital ratio was 6.0% at June 30, 2024, with $790 million in long-term debt and $25 million on the short-term line of credit[285] - $275 million was available on the revolving short-term line of credit, with an additional $300 million accordion feature[285] - The unsecured letter of credit for Cincinnati Global's obligations at Lloyd's was $94 million at June 30, 2024, with no amounts drawn[285] Off-Balance Sheet Arrangements The company confirms no use of special-purpose financing vehicles or undisclosed off-balance sheet arrangements likely to materially affect its financial condition, results, liquidity, or capital resources - The company holds no fair-value contracts for which a lack of marketplace quotations would necessitate the use of fair-value techniques[286] Property Casualty Insurance Loss and Loss Expense Reserves Total gross property casualty reserves increased by $519 million to $9.494 billion at June 30, 2024, driven by IBNR loss reserves and contributions from commercial casualty, commercial property, homeowner lines, and excess and surplus lines | Reserve Type (Millions) | June 30, 2024 | December 31, 2023 | |:---|:---|:---|\n| Case reserves | $3,695 | $3,662 | | IBNR reserves | $4,144 | $3,699 | | Loss expense reserves | $1,655 | $1,614 | | Total gross reserves | $9,494 | $8,975 | - IBNR loss reserves increased by $445 million, while case loss reserves increased by $33 million and loss expense reserves by $41 million[445] - The increase was primarily due to commercial casualty, commercial property, homeowner lines of business, and the excess and surplus lines insurance segment[445] Life Policy and Investment Contract Reserves Gross life policy and investment contract reserves decreased to $2.966 billion at June 30, 2024, from $3.068 billion at year-end 2023, mainly due to increased market value discount rates - Gross life policy and investment contract reserves decreased by $102 million to $2.966 billion at June 30, 2024[289] - The decrease was primarily attributed to an increase in market value discount rates[289] Other Matters Management reviews significant accounting policies and estimates with the audit committee, referring to the 2023 Annual Report on Form 10-K for detailed discussions on critical accounting estimates - Management reviews estimates and assumptions for significant accounting policies with the audit committee of the board of directors[290] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is its well-diversified investment portfolio, which experienced increased unrealized losses in fixed-maturity securities due to rising U.S. Treasury yields, with risks mitigated by monitoring interest rate sensitivity and credit quality Overview The company's greatest market risk exposure is its investment portfolio, susceptible to economic forces, with fair value increasing to $26.043 billion at June 30, 2024, and most assets classified as Level 1 or Level 2 - Market risk is the potential for a decrease in securities' fair value due to inflation, economic growth or recession, interest rates, world political conditions, or other unpredictable events[307] - The fair value of the investment portfolio was $26.043 billion at June 30, 2024, an increase of $1.263 billion from year-end 2023[308] - Substantially all of the consolidated investment portfolio is classified as Level 1 or Level 2 in the fair value hierarchy[309] Investment Portfolio Composition The investment portfolio comprises taxable fixed maturities, tax-exempt fixed maturities, common equities, and nonredeemable preferred equities, with common equities representing 43.3% and taxable fixed maturities 40.7% of fair value | Investment Type | Fair Value (June 30, 2024, Millions) | Percent of Total Fair Value (June 30, 2024) | |:---|:---|:---| | Taxable fixed maturities | $10,584 | 40.7% | | Tax-exempt fixed maturities | $3,825 | 14.7% | | Common equities | $11,283 | 43.3% | | Nonredeemable preferred equities | $351 | 1.3% | | Total | $26,043 | 100.0% | - Other invested assets included $507 million of private equity investments and $81 million of real estate at June 30, 2024[300] Fixed-Maturity Securities Investments The fair value of the fixed-maturity portfolio increased due to net purchases but was partially offset by increased net unrealized losses from rising U.S. Treasury yields, maintaining a high investment-grade rating and diversification - The fixed-maturity portfolio's fair value was 95.4% of its amortized cost at June 30, 2024, down from 96.0% at December 31, 2023[311] - Investment-grade fixed-maturity securities represented 96.6% of the portfolio at June 30, 2024[302] | Attribute | June 30, 2024 | December 31, 2023 | |:---|:---|:---| | Weighted average yield-to-amortized cost | 4.64% | 4.60% | | Weighted average maturity | 8.5 yrs | 7.9 yrs | | Effective duration | 4.4 yrs | 4.3 yrs | Taxable Fixed Maturities The taxable fixed-maturity portfolio, valued at $10.584 billion, primarily consists of investment-grade corporate bonds (69.0% of fair value), with the financial sector being the heaviest concentration (37.2%), and also includes asset-backed securities | Taxable Fixed Maturity Type (Millions) | Fair Value (June 30, 2024) | |:---|:---| | Investment-grade corporate | $7,308 | | Government-sponsored enterprises | $1,607 | | Asset-backed | $247 | | United States government | $186 | | Foreign government | $33 | | Total | $10,584 | - Investment-grade corporate bonds had an average rating of Baa1 by Moody's or BBB+ by S&P Global Ratings[313] - The financial sector represented 37.2% of the investment-grade corporate bond portfolio, followed by energy and utility sectors at 10.8% each[314] Tax-Exempt Fixed Maturities The tax-exempt fixed-maturity portfolio was valued at $3.825 billion at June 30, 2024, with an average rating of Aa2/AA, and is well-diversified among approximately 1,800 municipal bond issuers, focusing on general obligation and essential services issues - The tax-exempt fixed-maturity portfolio had a fair value of $3.825 billion at June 30, 2024[316] - The portfolio had an average rating of Aa2/AA by Moody's and S&P Global Ratings[316] - No single municipal issuer accounted for more than 0.5% of the tax-exempt fixed-maturity portfolio[316] Interest Rate Sensitivity Analysis The fixed-maturity portfolio has an effective duration of 4.4 years, with a hypothetical 100 basis point yield curve shift potentially causing an approximately 4.5% change in fair value, but the company believes it is adequately positioned for rising interest rates - The effective duration of the fixed-maturity portfolio was 4.4 years at June 30, 2024, up from 4.3 years at year-end 2023[319] - A hypothetical 100 basis point increase in interest rates could decrease the fair value of the fixed-maturity portfolio by approximately 4.5%[306][319] - The company's strategy is to buy and hold fixed-maturity investments to maturity, mitigating the impact of adverse economic factors through diversification[301][317] Equity Investments Equity investments, totaling $11.634 billion, primarily consist of common stock from dividend-paying companies, with Microsoft as the largest single holding, and the portfolio diversified across various industry sectors, with Information Technology being the largest concentration - Equity investments totaled $11.634 billion at June 30, 2024, with $11.283 billion in common stock[345] - Microsoft was the largest single common stock holding with a fair value of $1.001 billion, representing 8.9% of the publicly traded common stock portfolio[346] | Sector | Percent of Common Stock Portfolio (June 30, 2024) | |:---|:---| | Information technology | 36.3% | | Financial | 13.1% | | Industrials | 11.9% | | Healthcare | 10.7% | | Consumer staples | 6.8% | | Consumer discretionary | 6.6% | | Energy | 4.3% | | Materials | 4.2% | | Utilities | 2.7% | | Real estate | 2.1% | | Telecomm services | 1.3% | | Total | 100.0% | Unrealized Investment Gains and Losses The fixed-maturity portfolio had a net unrealized loss position of $700 million at June 30, 2024, an increase from year-end 2023, primarily due to rising U.S. Treasury yields, though these losses are not credit-related, and the allowance for credit losses increased by $25 million in H1 2024 - Net unrealized loss position in the fixed-maturity portfolio was $700 million at June 30, 2024, primarily due to increased U.S. Treasury yields[330] - At June 30, 2024, 3,784 of 4,916 fixed-maturity securities had fair values below amortized cost, representing $767 million in unrealized losses[331] - The allowance for credit losses on fixed-maturity securities increased by $25 million during the first six months of 2024[321] Unrealized Investment Losses At June 30, 2024, 3,784 fixed-maturity securities were in an unrealized loss position, totaling $767 million, with the majority having fair values between 90% and 100% of amortized cost due to interest rate factors, and principal payments are expected upon maturity - 3,784 fixed-maturity securities had fair values below amortized cost at June 30, 2024, representing $767 million in unrealized losses[331] - 2,806 holdings had fair value between 90% and 100% of amortized cost, accounting for $276 million in unrealized losses, largely due to interest rate factors[331] - 16 fixed-maturity holdings had fair value below 70% of amortized cost, accounting for $17 million in unrealized losses, but are expected to pay interest and principal upon maturity[332] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2024, concluding they provide reasonable assurance for timely and accurate financial reporting, with no material changes in internal control during the quarter - Disclosure controls and procedures were deemed effective in ensuring information required by the Exchange Act is recorded, processed, summarized, and reported timely[258] - No material changes in internal controls over financial reporting occurred during the three months ended June 30, 2024[258] Part II – Other Information Item 1. Legal Proceedings The company and its subsidiaries are not involved in any material litigation beyond ordinary, routine business-incidental proceedings - No material litigation beyond ordinary course of business[335] Item 1A. Risk Factors The company's risk factors have not materially changed since their description in the 2023 Annual Report on Form 10-K - Risk factors have not materially changed since the 2023 Annual Report on Form 10-K[335] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell unregistered shares in H1 2024, and its share repurchase program had 5,651,785 shares available, with 395,000 shares repurchased in April and May - No unregistered shares were sold during the first six months of 2024[337] - The share repurchase program had 5,651,785 shares available for purchase at June 30, 2024[337] | Period | Total Shares Purchased | Average Price Paid Per Share | |:---|:---|:---| | April 1-30, 2024 | 108,834 | $115.47 | | May 1-31, 2024 | 286,166 | $116.66 | | June 1-30, 2024 | — | — | | Totals | 395,000 | $116.33 | Item 5. Other Information Neither the company nor its officers or directors adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the last fiscal quarter - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated during the last fiscal quarter[339] Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including organizational documents, amendments to savings plans, Sarbanes-Oxley Act certifications, and XBRL taxonomy documents - Exhibits include Amended and Restated Articles of Incorporation, Code of Regulations, First Amendment to Top Hat Savings Plan, and Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[341] - XBRL Taxonomy Extension documents (Schema, Calculation, Definition, Label, Presentation Linkbase) and Cover Page Interactive Data File are also included[341]