Cincinnati Financial(CINF) - 2025 Q2 - Quarterly Report

Part I – Financial Information Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Cincinnati Financial Corporation as of June 30, 2025, and for the three and six-month periods then ended, prepared in conformity with U.S. GAAP, including balance sheets, statements of income, comprehensive income, shareholders' equity, cash flows, and accompanying notes Condensed Consolidated Balance Sheets Total assets increased to $38.84 billion from $36.50 billion, driven by investments, while liabilities grew to $24.54 billion and shareholders' equity rose to $14.30 billion Condensed Consolidated Balance Sheets (June 30, 2025 vs. Dec 31, 2024) | (Dollars in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments | $29,569 | $28,378 | | Total assets | $38,842 | $36,501 | | Total liabilities | $24,541 | $22,566 | | Total shareholders' equity | $14,301 | $13,935 | Condensed Consolidated Statements of Income Net income surged to $685 million in Q2 2025 due to investment gains, but decreased to $595 million for H1 2025 compared to the prior year, primarily from lower net investment gains Condensed Consolidated Statements of Income (Q2 & H1 2025 vs 2024) | (Dollars in millions, except per share data) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $3,248 | $2,544 | $5,814 | $5,479 | | Net Income | $685 | $312 | $595 | $1,067 | | Net income — diluted (per share) | $4.34 | $1.98 | $3.77 | $6.77 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $1.05 billion for H1 2025, with $614 million used in investing and $425 million in financing, resulting in a $12 million increase in cash and equivalents Condensed Consolidated Statements of Cash Flows (Six months ended June 30) | (Dollars in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,051 | $1,095 | | Net cash used in investing activities | $(614) | $(740) | | Net cash used in financing activities | $(425) | $(491) | | Net change in cash and cash equivalents | $12 | $(136) | | Cash and cash equivalents at end of period | $995 | $771 | Notes to Condensed Consolidated Financial Statements (unaudited) This section provides detailed disclosures supporting the condensed consolidated financial statements, covering accounting policies, investment portfolio, fair value measurements, loss reserves, and segment information - The company's investment portfolio is primarily composed of fixed-maturity and equity securities, with fair values of $17.08 billion and $11.65 billion, respectively, at June 30, 2025[15] - For the six months ended June 30, 2025, the company experienced $154 million of favorable development on prior accident year property casualty loss reserves[47] - The company operates in five reporting segments: Commercial lines insurance, Personal lines insurance, Excess and surplus lines insurance, Life insurance, and Investments[89] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and operations, covering corporate highlights, segment results, investment performance, liquidity, and the significant impact of catastrophe losses on property and casualty underwriting Corporate Financial Highlights Net income surged to $685 million in Q2 2025 but fell 44% to $595 million for H1 2025 due to lower investment gains and underwriting income, while the value creation ratio decreased to 4.6% and the quarterly dividend increased to $0.87 per share Key Financial Highlights (H1 2025 vs H1 2024) | (Dollars in millions, except per share data) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Earned premiums | $4,824 | $4,227 | 14% | | Net income | $595 | $1,067 | (44%) | | Net income per share—diluted | $3.77 | $6.77 | (44%) | - The value creation ratio, a primary performance metric, decreased to 4.6% for H1 2025 from 8.2% in H1 2024, primarily due to reduced net gains from the investment portfolio and an underwriting loss in insurance operations[109] - The board of directors increased the regular quarterly dividend to $0.87 per share, setting the stage for the 65th consecutive year of increasing cash dividends[107] Financial Results This section details segment operating results, highlighting a $170 million consolidated property and casualty underwriting loss in H1 2025 due to increased catastrophe losses, while Commercial lines remained profitable, Life insurance profit declined, and Investments saw income growth offset by lower gains Consolidated Property Casualty Insurance Highlights P&C operations recorded a $170 million underwriting loss in H1 2025, a significant shift from a $166 million profit in H1 2024, primarily due to $904 million in catastrophe losses, pushing the combined ratio to 103.8% Consolidated P&C Insurance Results (Six months ended June 30) | (Dollars in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Earned premiums | $4,661 | $4,067 | | Underwriting profit (loss) | $(170) | $166 | | Combined ratio | 103.8% | 96.1% | | Catastrophe loss ratio | 18.4% | 8.6% | - The H1 2025 underwriting loss was driven by a $501 million increase in current accident year catastrophe losses, mostly from the January 2025 wildfires in southern California[119] - Net written premiums grew 11% in H1 2025, driven by a 15% increase in agency renewal premiums, reflecting continued price increases[128][129] Commercial Lines Insurance Results The Commercial Lines segment's underwriting profit grew to $184 million in H1 2025, with the combined ratio improving to 92.4%, driven by premium growth, lower catastrophe losses, and favorable reserve development Commercial Lines Results (Six months ended June 30) | (Dollars in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Earned premiums | $2,391 | $2,189 | | Underwriting profit | $184 | $49 | | Combined ratio | 92.4% | 97.9% | - Average renewal price increases in Q2 2025 were in the high-single-digit range for commercial casualty and property, and mid-single-digits for commercial auto[147] Personal Lines Insurance Results The Personal Lines segment incurred a $371 million underwriting loss in H1 2025, with the combined ratio deteriorating to 124.9% due to catastrophe losses, despite 17% growth in net written premiums from rate increases Personal Lines Results (Six months ended June 30) | (Dollars in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Earned premiums | $1,502 | $1,219 | | Underwriting loss | $(371) | $(5) | | Combined ratio | 124.9% | 100.6% | | Catastrophe loss ratio | 40.0% | 15.0% | - Reinsurance reinstatement premiums related to the California wildfires negatively impacted the segment by $64 million in H1 2025[170] Excess and Surplus Lines Insurance Results The E&S segment's underwriting profit increased 80% to $36 million in H1 2025, with the combined ratio improving to 89.8%, driven by 13% premium growth and favorable reserve development E&S Lines Results (Six months ended June 30) | (Dollars in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Earned premiums | $336 | $290 | | Underwriting profit | $36 | $20 | | Combined ratio | 89.8% | 93.7% | - New business written premiums grew 25% in H1 2025 compared to H1 2024[182] Life Insurance Results The Life Insurance segment's profit decreased to $28 million in H1 2025 due to actuarial assumption changes, despite a 2% increase in earned premiums to $163 million and a 1% rise in net in-force policy face amounts to $85.5 billion Life Insurance Results (Six months ended June 30) | (Dollars in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Earned premiums | $163 | $160 | | Life insurance segment profit | $28 | $32 | Investments Results The Investments segment's pretax profit fell 23% to $908 million in H1 2025, as a 16% increase in investment income was offset by a 46% decrease in net investment gains, though new fixed-maturity purchases yielded 5.82% Investments Results (Six months ended June 30) | (Dollars in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Total investment income, net of expenses | $565 | $487 | | Investment gains and losses, net | $406 | $749 | | Investments profit, pretax | $908 | $1,174 | - The average pretax yield on new fixed-maturity securities acquired in H1 2025 was 5.82%, compared to an average yield of 4.98% on securities expected to mature through 2027[199][201] Liquidity and Capital Resources The company maintained a strong liquidity and capital position with $14.3 billion in shareholders' equity and a 5.4% debt-to-total-capital ratio, supported by positive operating cash flow and ample dividend capacity from its lead insurance subsidiary - The debt-to-total-capital ratio was 5.4% at June 30, 2025, significantly below the 35% covenant threshold[225] - Cash flow from property casualty underwriting was $506 million for H1 2025, down from $723 million in H1 2024, reflecting higher loss payments[223] - The company paid $258 million in cash dividends to shareholders during the first six months of 2025[234] Quantitative and Qualitative Disclosures about Market Risk This section details the company's market risk exposure through its $28.8 billion investment portfolio, primarily interest rate risk for fixed maturities and market price risk for equities, with a hypothetical 100 basis point interest rate increase decreasing fixed-maturity fair value by 5.5% Investment Portfolio Composition (Fair Value) | (Dollars in millions) | At June 30, 2025 | At December 31, 2024 | | :--- | :--- | :--- | | Taxable fixed maturities | $13,166 | $12,243 | | Tax-exempt fixed maturities | $3,911 | $3,939 | | Common equities | $11,309 | $10,836 | | Nonredeemable preferred equities | $340 | $349 | | Short-term investments | $100 | $298 | | Total | $28,826 | $27,665 | Interest Rate Sensitivity on Fixed-Maturity Portfolio | (Dollars in millions) | -100 bps | Current Fair Value | +100 bps | | :--- | :--- | :--- | :--- | | At June 30, 2025 | $17,985 | $17,077 | $16,093 | - At June 30, 2025, the fixed-maturity portfolio had net unrealized losses of $458 million, an improvement from $553 million at year-end 2024, primarily due to a decrease in U.S. Treasury yields[266][274] Controls and Procedures The company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during Q2 2025 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[277] - No changes in internal controls over financial reporting occurred in Q2 2025 that have materially affected, or are reasonably likely to materially affect, these controls[277] Part II – Other Information Legal Proceedings The company reports that neither it nor any of its subsidiaries are involved in any litigation believed to be material, other than ordinary, routine litigation that is incidental to the nature of its business - The company is not involved in any material litigation outside of ordinary course of business[280] Risk Factors The company's risk factors have not materially changed from its 2024 Form 10-K, though recent international trade policy changes and tariffs could impact inflation, supply chains, loss costs, and premiums - Risk factors have not materially changed from the 2024 Form 10-K[281] - A recent risk consideration is the impact of international trade policy changes and tariffs on inflation and supply chains, which could affect loss costs and premiums[282] Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell unregistered equity securities or repurchase shares in Q2 2025, with 5,314,506 shares remaining available for purchase under existing authorization Share Repurchases in Q2 2025 | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | April 1-30, 2025 | — | $ — | | May 1-31, 2025 | — | $ — | | June 1-30, 2025 | — | $ — | - As of June 30, 2025, 5,314,506 shares may yet be purchased under the company's repurchase programs[283] Other Information The company discloses that neither the company nor any of its officers or directors adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the most recent fiscal quarter - No officer or director adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[285] Exhibits This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Articles of Incorporation, certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002, and Interactive Data Files (XBRL) - Filed exhibits include Amended and Restated Articles of Incorporation, CEO/CFO certifications (SOX 302 and 906), and XBRL data files[287]